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In response to media reports that "the supporting sub-laws to the National Defense Industry Development Regulations are seemingly beneficial to domestic manufacturers, but unrealistic in practice in terms of their benefits as they lack system integration, making manufacturers prone to resort to foreign agents and directly making use of foreign equipment", "there is a gap between the incentives and R&D expenses, resulting in overly high manufacturer financial risks", and "it is advisable that a hierarchical system be adopted for safety inspections of manufacturer employees, rather than them all being in a position of control and management", the Ministry of National Defense (MND) has clarified as follows today (30th):
- The "Defense Industry Development Act" (hereinafter referred to as the Regulation) and eight supporting regulations are mainly stipulated to support domestic legal representatives, institutions, and organizations established in accordance with the laws of our country. These legal representatives that are in conformity to safety inspection are eligible to strive for opportunities to participate in military product research and development, and production and maintenance based on their areas of expertise following an A, B, or C level grading appraisal. In addition, when manufacturers undergo an evaluation, several categories, such as domestic system development performance, technological standards, capital scale, plant equipment and production capacity, are included. When these manufacturers take part in military procurement tenders later on, they must all follow the stipulations of the "Government Procurement Act", while the Procurement Office of National Defense lists the ratios of domestic national production value, bonus credit for levels of vendor manufacturers, and reasonable cost analysis, etc., into the selection and allocation criteria., following which the office should decide, based on the most favorable bid, who is awarded the tender. Therefore, there won’t be such a scenario when foreign agents are resorted to, foreign equipment be directly utilized, nor domestic manufacturers with production capacity be unable to win a bid.
- Furthermore, there will be first-class, second-class, and third-class military products to be stipulated and scheduled by the regulations, which include requirements for research and development, production and maintenance, etc. If a "R&D construction project" is needed, it will be carried out in accordance with the "Operations and Rules for Military Investment Projects" by the Armed Forces, with relevant R&D budgets appropriated. It will also work with the Ministry of Economic Affairs to first conduct domestic R&D capacity assessments before hosting business solicitation activities. As such, once the manufacturer wins a bid, it is able to support the R&D budget year by year according to the contract period. The winning manufacturers can also apply for a preferential financing interest rate based on the incentive package measures so there won’t be a R&D finding gap for manufacturers.
- As for relevant regulations regarding safety inspections of manufacturers, the contents of safety inspections are well-stipulated, and include inspections of personnel, facilities (preparations) and information systems. The Political Warfare Bureau of the MND has also placed the Armaments Bureau and Office of the Deputy Chief of Staff for Communications and Electronic Information together, the purpose of which is to check personnel backgrounds, primary operation offices and branches, factories, offices and other premises, facilities (equipment) and information networks, security protection measures for personal operation systems and other software and hardware in relation to the "execution of defense-related tasks” by manufacturers. In addition, it will also implement regular and ad-hoc security checks to ensure the security of defense technology and confidentiality. Therefore, it won’t place all company employees or facilities uninvolved in defense affairs under control and management.
- After the eight supporting regulations of the Regulations were formulated and promulgated in September 2020, the MND published them on the National Defense Law Database website, and sponsored two sessions of briefings for domestic defense manufacturers in September and November 2020. Meanwhile, legal seminars will be hosted every six months. As for relevant suggestions by domestic defense manufacturers on each of the supporting laws of the Regulations, the MND very much welcomes them, and manufacturers can always consult the relevant MND divisions for inquiries.
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