Taiwan will invest T$3bn ($92.55m) over the next four years into a domestic diesel-electric submarine programme.
The Asian nation has been discussing plans to build submarines domestically since the early 2000s when negotiations to purchase eight diesel-electric submarines from the USA collapsed because of technical and political constraints.
The T$3bn investment, the first into the project, covers only the contract design phase of what is expected to become a decades-long programme. The investment is part of the defence ministry’s T$321.7bn budget for 2016, which accounts for 16.1 per cent - the biggest share - of the central government's overall expenditures, Reuters reported.
Although its military is generally modern, Taiwan currently operates only four ageing submarines, two of which date back to the World War Two.
Taiwan's Ship and Ocean Industries R&D Center (SOIC), a government-backed ship designer and technical consultant, is expected to select a consortium to lead the contract design phase, according to military and industry sources in Taiwan.
As Taiwan lacks submarine design skills, it will have to rely on support from western companies as well as on transfer of some submarine-manufacturing technologies.
Taiwan’s defence ministry believes that by carrying out the first phase, Taiwan will deepen its vessel design capabilities, develop its industry and acquire intellectual property.
The submarine plan has support in parliament which will be reviewing the budget later this month.
The plan comes as other navies in the regional expand their submarine fleets in part to create a strategic deterrent against China's growing naval assertiveness in Asian waters.
China, which has about 70 submarines, along with dozens of surface ships and a refurbished aircraft carrier, considers Taiwan its renegade province and opposes any form of military technology transfers or weapons sales to Taiwan.