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Taiwan's 19.41 billion USD military budget increase and Sri Lanka's debt recovery conference

August 25-31, 2022 | Issue 17 - PACOM

Ashani Wijesuriya, Francesca Cavazzuti, PACOM Team

Manja Vitasovic, Senior Editor


Taiwanese Fighter Jets[1]


Date: August 25, 2022

Location: Taipei, Taiwan

Parties involved: Taiwan; Taiwanese government; Taiwanese President Tsai Ing-wen; Minister of the Directorate-General of Budget, Accounting and Statistics Chu Tzer-ming; China; Chinese government; People’s Liberation Army Air Force (PLAAF); People’s Liberation Army Navy (PLAN); US; US government; US House Speaker Nancy Pelosi

The event: President Ing-wen's Cabinet has proposed a 19.41 billion USD defense budget, a 13.9% increase from last year. The budget includes funds for new fighter jets, military equipment upgrades, and special funds for the defense ministry. According to Minister Tzer-ming, the budget increase will mostly be allocated to operational expenditures. The proposal comes weeks after China conducted large-scale military drills around Taiwan in response to Pelosi’s visit.[2]

Analysis & Implications:

  • Taiwan’s proposal very likely indicates an expansion of its military capabilities to respond to Chinese attacks, as a Taiwanese attack on China is unlikely. Taiwan’s defense will very likely rely on its air force, likely investing in new aircraft and pilot training. These are likely aimed at disrupting Chinese military operations, likely with prolonged air combat operations to strike critical Chinese targets, like air carriers. Taiwan will very likely deploy additional machine gun positions, coastal artillery, and warships in multiple strategic locations along its western coast, very likely to improve its flexibility and operational readiness against Chinese attacks.

  • Taiwan will very likely develop the weapons industry, likely investing in fighter aircraft and corvettes to improve its air attack responsiveness. Taiwan will likely continue to import specialized military equipment and components from the US, like missile detection systems and ground-based air surveillance radars. The US and Taiwan military collaboration will likely include technology exchange and the deployment of private contractors to assist the adoption of US-sourced armaments. The US will very likely continue to promote its military ties with Taiwan to further challenge China, likely to maintain its influence in the Asia-Pacific.

  • China will very likely invest in its Research & Development to improve the precision of its long and short-range missile systems, likely to maximize the weapon’s effectiveness. China will very likely aim to ensure its effectiveness in airborne, amphibious, and combined arms attacks. There is a roughly even chance that China will increase PLAN’s presence in the Taiwan Strait, including maritime and combat air patrols, likely to press its claims of the area as Chinese territory and showcase its determination, by demonstrating the capabilities of its air force and navy.

Date: August 26, 2022

Location: Japan

Parties involved: Japanese government; Sri Lankan government; Chinese government; Indian government; International Monetary Fund (IMF)

The event: Japan and other Sri Lanka creditors are organizing a conference to restructure its bilateral debt and resolve the growing economic crisis. Japan remains the second most invested of Sri Lanka’s creditors, totaling 3 billion USD in loans. It is unclear whether China, Sri Lanka’s top creditor, will join the conference.[3]

Analysis & Implications:

  • Japan is very likely to organize the conference to recover its loans and reach a mutual agreement among Sri Lanka’s creditors. The conference will likely accelerate loan assistance from international institutions, like the IMF, by coordinating the necessary assurances among Sri Lanka’s creditors about the country’s debt sustainability. Japan has likely escalated efforts to receive debt repayments due to the COVID-19-induced economic instability.

  • There is a roughly even chance that China will refuse to participate in the conference that Japan organizes, likely to avoid the reduction of its influence in the South Asia region. The attending countries will likely work on debt restructuring solutions, and will likely commit to providing debt relief assistance to Sri Lanka. There is a roughly even chance that relieving Sri Lanka’s debt will weaken China’s influence over Sri Lanka’s political and economic decision-making.

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[1]A US supplied F-16 fighter takes off from Chiayi Airbase in Southern Taiwan. These jets patrol the boundary in the strait across from China” by Al Jazeera English licensed under Creative Commons

[2] Taiwan aims for big rise in defense spending amid escalating China tension, Reuters, August 2022

https://www.reuters.com/business/aerospace-defense/taiwan-proposes-129-on-year-rise-defence-spending-2023-2022-08-25/

[3] Exclusive: Japan seeks to organise Sri Lanka creditors' meeting on debt crisis, Reuters, August 2022

https://www.reuters.com/markets/asia/exclusive-japan-seeks-organise-sri-lanka-creditors-meeting-debt-crisis-sources-2022-08-26/

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