A file photo shows Taiwanese President Tsai Ing-wen speaking at a dedication ceremony of a new homemade fighter series. Photo: Central News Agency of Taiwan

Defense research institutes and contractors in Taiwan are poised to reap profitable rewards as officials and lawmakers set out defense policy purchasing plans for 2019.

Taiwan’s defense chief Yen De-fa told the island’s Legislative Yuan on Monday that defense expenditure for 2019 will increase significantly.

Taiwan’s military budget for 2018 is NT$327.8 billion (US$10.7 billion), and President Tsai Ing-wen has vowed to boost defense and morale amid menacing moves by Beijing. Defense expenditure will increase by more than NT$18 billion next year, including NT$13.9 billion set aside for research and development.

As long as Washington approves further sales to the island nation, a military spending spree is expected to shore up the revenues of major US contractors and arms dealers. Increased spending on defense will also mean a business bonanza for Taiwan’s domestic defense industry.

Defense Chief Yen previously revealed that the National Chungshan Institute of Science and Technology, under the defense ministry’s Armaments Bureau, would see its business revenue soar to NT$50 billion in 2018, up 25% from this year’s NT$40 billion.

The Chungshan Institute, which is similar to the Pentagon’s Defense Advanced Research Projects Agency, is tasked with the R&D of new weaponry and dual use technologies. The institute is reportedly revving up its testing of a new fighter jet series modeled on the F-16B as well as new guided missile corvette programs.

The Taiwanese Army is entering a peak period of new procurements as the force phases out ageing machinery and equipment. Photo: Central News Agency of Taiwan

Yen told lawmakers that sourcing replacements from the island’s own defense industry and importing weapons from the US will be the two-pronged way forward.

He admitted that a growing portion of the army’s weapons systems and equipment are nearing the end of their service lives or running out of vital spare parts.

The defense ministry has already awarded contracts to a domestic shipbuilder for 11 Tuo Jiang-class anti-aircraft and anti-ship corvettes as well as four minelayers, all of which are designed by the Chungshan Institute.

The new minelayers will carry sea mines currently in development by Taiwanese defense researchers and contractors. They are designed for deployment in Taiwan’s littoral waters to shut down sea lanes and restrict maritime zones in the event of a war.