Legislative Acts
Issue Summary
Problem
What We Proposed
How This Affects Me
Defense Self-Reliance and Unmanned Systems Industry Act
The essence of defense self-reliance lies in anchoring research, manufacturing, and logistical capabilities domestically in Taiwan. On August 27, 2026, the Legislative Yuan passed the Act to Strengthen Defense Self-Reliance and Develop the Unmanned Systems Industry at third reading. The legislation establishes an annual general budget framework—replacing the one-time special budget originally planned by the Executive Yuan—to allocate a total of NT$240 billion over six years (in principle NT$40 billion annually) to advance Taiwan’s domestic unmanned systems industry and defense procurement.
Built primarily upon the Kuomintang (KMT) caucus draft, the legislation is centered on three pillars: defense self-reliance, industrial upgrading, and fiscal discipline. By introducing structured parliamentary oversight and earmarked allocations, the framework channels military operational needs into growth momentum for Taiwan’s information and communications technology (ICT) and precision machinery sectors, strengthening both national defense and economic competitiveness.
Key Statutory Provisions
Passed at the 23rd sitting of the fifth session of the 11th Legislative Yuan on August 27, 2026, the act comprises 24 articles governing budget mechanisms, procurement scopes, supply-chain certifications, and legislative oversight:
1. Budget Framework and Allocation Mechanism
| Policy Area | Statutory Provisions | Articles |
|---|---|---|
| Budget Procedure | The central government shall allocate NT$240 billion over six consecutive years through regular annual budget procedures, in principle NT$40 billion per year. Both the annual and total allocations may be increased based on actual operational needs. | Article 4 |
| Competent Authorities | The Ministry of Economic Affairs oversees industry development; the Ministry of National Defense oversees military procurement matters. | Article 2 |
| Implementation Timeline | The act enters into force six months after promulgation; Article 4’s budget allocation provisions take effect immediately upon promulgation. | Article 24 |
By mandating regular annual budget procedures, the law ensures that public expenditures remain subject to periodic review by the legislature, while maintaining flexibility to expand appropriations as defense readiness and industrial needs dictate.
2. Industrial Support and Military Procurement
| Policy Area | Statutory Provisions | Articles |
|---|---|---|
| Scope of Systems | Covers unmanned systems across aerial, surface, underwater, and ground operating environments. Businesses engaged solely in agency, imports, assembly, or resale of government contracts are excluded from industry incentives. | Article 3 |
| Defense Procurement Items | The Ministry of National Defense must prioritize procuring, integrating, and training with Taiwan-made, low-cost, high-performance systems, explicitly listing coastal reconnaissance drones, coastal attack drones, and small one-way attack unmanned boats. | Article 17 |
| Core Technologies | Priority is given to autonomous flight, swarm coordination, anti-jamming navigation, modular design, and rapid mass production. The defense ministry shall deploy supporting satellite communications, data links, and dedicated networks. | Articles 14, 17 |
| R&D and Tax Incentives | Government support includes market expansion, subsidies, direct investment, preferential procurement, and financing. Eligible firms may apply for R&D, equipment, cybersecurity, and AI tax credits under relevant legislation. | Articles 15, 21 |
| Testing Infrastructure | At least three military-civilian shared test facilities must be established within one year of enforcement to support flight, maritime, anti-jamming, and tactical simulation evaluations. | Article 7 |
3. Supply-Chain Security and Parliamentary Oversight
| Policy Area | Statutory Provisions | Articles |
|---|---|---|
| Trusted Non-Red Supply Chains | Defense planning must follow distributed resilience principles. Public contracts prohibit suppliers from mainland China, Hong Kong, and Macao, bar execution personnel of those origins, and mandate full compliance with trusted supply-chain standards by 2027. | Article 6 |
| Tiered Certification | Military systems are certified by the Ministry of National Defense; commercial and public-service systems are certified by the Ministry of Economic Affairs. Defense certification lists are updated monthly, and domestic-content incentives require valid two-year certificates. | Articles 9, 13, 17 |
| Major Procurement Reporting | For single unmanned system procurement contracts exceeding NT$100 million, the competent authority must submit a written report to the Legislative Yuan within 30 days of contract award. | Article 11 |
| Annual Performance Reporting | Annual evaluations of domestic production value, technology employment, wages, and exports must be submitted to the legislature. A comprehensive implementation review is due each year by March 31. | Articles 8, 10 |
| Violations and Penalties | Firms obtaining incentives using uncertified or high-risk components face revocation of eligibility, full recovery of disbursed funds, and fines of one to three times the disbursed amount. Submitting false materials carries fines of NT$1 million to NT$5 million. | Article 19 |
KMT Policy Discourse
Defense Self-Reliance: Asymmetric Capabilities for National Resilience
The KMT caucus emphasizes that recent international conflicts demonstrate a global transition toward drone-centered asymmetric warfare. Taiwan possesses a world-leading and resilient semiconductor and IT supply chain, providing a strong foundation to become a global hub for unmanned systems engineering and production. Prioritizing domestic procurement anchors key technological capabilities within Taiwan, reinforcing national defense resilience.
Industrial Upgrading: Cultivating a Second “Guardian Mountain”
KMT Legislative Yuan Caucus Convener Fu Kun-chi noted that the legislation represents a cross-sector industrial policy rather than merely a military procurement program. The NT$240 billion investment is anticipated to create tens of thousands of technology jobs and tens of billions of US dollars in production value, extending applications across defense, agriculture, transportation, and smart education to establish a second major pillar of Taiwan’s technological economy alongside semiconductors.
Fiscal Discipline: Transparent Oversight Through Regular Budgets
In contrast to the special budget framework initially proposed by the executive branch, the KMT caucus insisted on regular annual appropriations. Earmarking funds within annual budgets ensures rigorous parliamentary scrutiny, while statutory reporting thresholds for major contracts and mandatory annual performance evaluations protect public spending and uphold fiscal discipline.
Primary Resources
Timeline
Legislative Yuan Passes Act at Third Reading
The Legislative Yuan passes the Act to Strengthen Defense Self-Reliance and Develop the Unmanned Systems Industry, establishing a six-year NT$240 billion annual budget framework with dedicated procurement and certification rules.
Legislative Yuan Submits Act for Promulgation
The Legislative Yuan officially transmits the bill to the President for promulgation, concluding congressional proceedings.
Next Steps: Budget Allocation and Industrial Implementation
Following the passage of the act, key priorities focus on execution:
- Faithful Annual Budget Allocation: The Executive Yuan must appropriate the baseline NT$40 billion annually in central government budgets starting from the upcoming fiscal year.
- Procurement and Tactical Integration: The Ministry of National Defense must accelerate procurement and testing for coastal reconnaissance, attack drones, and unmanned boats to ensure domestic systems meet operational standards.
- Shared Test Ranges and Trusted Supply Chains: The Ministry of Economic Affairs and Ministry of National Defense must finalize tiered certification rules within six months and designate three shared test facilities within one year to support global export competitiveness.