Defence

Taiwan's cabinet has approved a 16.4% increase in defence spending for 2008, with the bulk of the additional $10.3 billion to going towards air force projects. Most of the money, which will account for 20% of the government's overall budget next year, will be set aside for 12 Lockheed Martin P-3C Orion anti-submarine warfare aircraft and 66 Lockheed F-16C/D fighters.

The proposal must be passed by Taiwan's opposition-controlled parliament, which delayed its approval of the 2007 budget until June after opposition members refused to pass funding for a special defence procurement package. This was passed only after legislators approved a smaller deal including the Orions.

While Washington is likely to give a green light to the P-3 sale, it is expected to stall on the F-16 package until after Taiwan's presidential elections next March, and to demand that the fighter budget is passed before receiving its approval.

Taipei is boosting its military spending to keep pace with China, which has an official 2007 defence budget of $45 billion - up 17.8% from 2006. But the Pentagon believes that Beijing's actual defence budget could be double this figure.

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