As Taiwan’s Drone Budget Debate Drags on, Time Is Running out

Taiwan’s government proposed a NT$1.25 trillion (US$40 billion) special defense budget in November 2025 – including its first large-scale procurement of more than 210,000 drones. That was finally passed in May 2026, but with a substantial change: the opposition-led legislature removed all funding for domestically produced drones. In June 2026, the Ministry of National Defense (MND) advanced a NT$210 billion procurement proposal, which led to the introduction of competing bills by each party. 

The legislature finally completed committee review for the budget on July 27, but there was no agreement. The parties could not reach consensus on any provision in their competing bills, leaving all bills intact for further negotiations.

A floor vote could come as early as late August, but if the opposition majority’s version prevails, funding would not pass until early 2027 even under the most optimistic scenario. That means Taiwan could end 2026 without awarding a single new large-scale contract for domestically produced combat drones.

This delay exposes the central danger of the prolonged budget review: Taiwan is falling further behind China’s procurement pace and losing ground as its partners accelerate their own acquisition of uncrewed systems. China has reportedly ordered nearly 1 million drones for delivery by 2026; Ukraine plans to produce 7 million this year; the U.S. Army aims to acquire at least 1 million over the next two to three years; and Japan has allocated 277 billion yen (US$1.7 billion) to rapidly expand its drone arsenal. 

Taiwan’s military, by contrast, holds less than 5,000 drones. A second tranche of 2,032 U.S.-supplied ALTIUS systems has received executive and congressional approval in Washington but remains under contract negotiation, with delivery to Taiwan’s inventory still pending. In an era of drone warfare driven by mass production, testing, and data-enabled software iteration, a one-year procurement gap could prove fatal for Taiwan.

The Budget Debate: Special vs. Annual Budget

Looking back across the debate, one focal point of the dispute between Taiwan’s ruling and opposition parties has been the financing mechanism itself. The ruling Democratic Progressive Party (DPP) sought legislative approval for a five-and-a-half-year, NT$210 billion drone procurement program through a special budget, while the opposition parties proposed procurement through the regular annual budget, paired with additional oversight mechanisms. 

In May 2026, Taiwan’s Legislative Yuan passed the Executive Yuan’s proposed NT$1.25 trillion special defense budget act, but removed approximately NT$470 billion in domestically produced uncrewed-systems funding, cutting the budget to NT$780 billion. In total, 13 bills addressing the excluded programs have since cleared committee review and advanced to cross-party negotiation, but each one has fractured into three party-led versions: from the Executive Yuan/DPP, the Kuomintang (KMT), and the Taiwan People’s Party (TPP). The most consequential difference is timing: when each would allow procurement to begin. 

The Executive Yuan responded in June 2026 with a separate NT$210 billion special act covering August 2026 through 2031, designating the MND as competent authority and specifying the purchase of 208,200 littoral attack UAVs, 1,446 littoral surveillance UAVs, and 1,320 small one-way-attack uncrewed surface vessels (USVs). If enacted, this proposal could authorize procurement as early as the end of 2026. 

Opposition parties countered with annual budget alternatives framed around fiscal accountability and legislative oversight, relying on annual appropriations and assigning the Ministry of Economic Affairs (MOEA) the leading role. The KMT version sets a six-year ceiling of NT$240 billion, while the TPP version specifies neither an implementation period nor an overall ceiling. Neither bill identifies platform categories, quantities, or acquisition schedules, and both would push new procurement to 2027 at the earliest. 

Beyond procurement timing, the Executive Yuan separates military acquisition from industrial policy. Its MND-led special budget is built around prioritized operational requirements, while a separate NT$44.2 billion MOEA-led “integrated drone program” for 2025–2030 supports civilian-agency procurement and industrial development. By contrast, the KMT and TPP bills combine technology development, industrial policy, and military drone procurement under a single MOEA-led framework, without specifying how much of the earmarked budget would be allocated to procurement.

Both objectives – urgent procurement expansion and industrial development – are legitimate, but they operate on different timelines. Conflating them has further delayed procurement. 

Annual budget review is not, in most countries, an obstacle to timely defense acquisition. If acquisition plans are clearly defined in advance and the review process allocates funding on schedule rather than deferring it, it can support a country’s prompt procurement. Japan’s FY2026 drone budget was reviewed and passed within roughly two months. The United States’ FY2026 NDAA similarly authorized budgets for uncrewed systems, with congressional consideration completed in about six months.

Taiwan’s current experience illustrates the opposite outcome. Its opposition-controlled Legislative Yuan has created what President Lai Ching-te has called an impasse “unprecedented in Taiwan’s constitutional history.” Taiwan’s annual budget process normally begins with the Executive Yuan submitting its proposal to the Legislative Yuan by late August and concludes by December or January of the same year. Yet the 2026 general budget, submitted in August 2025, was blocked from review for seven months and remains unpassed more than 340 days later – far exceeding the previous record set during the last period of divided government, in 2007. Defense Minister Wellington Koo has therefore warned that the opposition’s use of the annual budget for drone procurement could reproduce this impasse.

If the opposition’s approach is adopted, even the most optimistic scenario – FY2027 budget approval by January – would allow the government to complete its first procurement only by mid-2027. Should FY2027 face the same exceptional obstruction as FY2026, that timeline could slip to late 2027.

Lessons from the U.S. and Japan

Reviewing the rapidly evolving U.S. and Japanese approaches to drone procurement in 2026 offers a useful comparison. They resemble the two models now debated in Taiwan: special budget funding (the United States) and annual budget funding (Japan). Yet the U.S. and Japan share a crucial feature: both operate under multi-year plans with clear procurement targets and rapid implementation, giving industry a more credible long-term demand signal.

In the United States, the Drone Dominance Program has become a flagship defense initiative. Launched under President Donald Trump’s June 2025 executive order, “Unleashing American Drone Dominance,” and Secretary of Defense Pete Hegseth’s subsequent directive, “Unleashing U.S. Military Drone Dominance,” the US$1.1 billion, two-year program uses a four-phase competitive process to procure and field approximately 340,000 small unmanned aircraft systems (sUAS), including more than 200,000 AI-enabled one-way attack drones by 2027.

This funding comes in addition to the regular annual defense authorization and appropriations process. It is backed by the One Big Beautiful Bill Act (OBBBA), a budget-reconciliation measure providing mandatory, multi-year defense appropriations. The law provided US$150 billion in additional defense funding, appropriated in FY2025 and available through September 30, 2029. OBBBA also specifies funding lines for a range of uncrewed capabilities – including small and long-endurance UAS, one-way attack UAS, small and medium USVs, and UUVs.

Why use this reconciliation-funded approach? Hegseth’s rationale was to use immediately available funding to accelerate procurement, create a stable demand signal, and allow industry to build production capacity. As he explained, once the program has strengthened supply chains and manufacturing capacity, “The military services should be able to purchase the drones they need, in the quantities they need and at affordable prices, through regular annual budgets.”

Japan’s drone push, by contrast, relies on annual budgets, but within a defined procurement strategy. Its approach rests on a five-year plan established in 2022, followed by clearly identified procurement programs for FY2026-FY2027 that provide industry with a credible demand signal.

In 2022, Japan adopted its FY2023-FY2027 Defense Buildup Program, which identifies uncrewed capabilities as a priority and envisages approximately 1 trillion yen in investment over five years. Japan’s FY2026 defense budget then allocated 100.1 billion  yen to establish the Synchronized, Hybrid, Integrated and Enhanced Littoral Defense (SHIELD) framework by FY2027, or March 2028. SHIELD covers attack and surveillance UAVs, small USVs and UUVs, and shared control systems, with ten distinct categories of uncrewed systems identified for acquisition.

Japan has also used flexible acquisition mechanisms to accelerate particular capabilities. Drawing on the demonstrated effectiveness of interceptor drones against small UAS in Ukraine, Japan’s Acquisition, Technology, and Logistics Agency launched its Rapid Interceptor Drone Acquisition Program in June 2026. Rather than creating a special legal authority, the program uses existing administrative channels and sets an approximately three-month timeline to select and acquire systems for demonstration trials; any subsequent mass-production procurement will be determined by the trial results.

Taiwan’s debate ultimately comes down to how to create a clear, long-term demand signal while preserving rapid procurement. The United States uses multi-year special funding; Japan uses annual budgets backed by a pre-established multi-year strategy and defined procurement targets. Both have enabled procurement to move quickly.

Both also support industrial development without subordinating military acquisition to it. OBBBA funds industrial capacity while enabling rapid procurement in parallel; Japan separates functions, with the Ministry of Defense leading procurement and the Ministry of Economy, Trade, and Industry leading industrial policy.

Taiwan need not choose between the two models. It should adopt their shared principle: timely procurement grounded in clear institutional responsibility. Time is running out.