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In turning to S-E Asia, Taiwan has to keep China in mind

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02 Jun In turning to S-E Asia, Taiwan has to keep China in mind

Taiwan’s new President, Ms Tsai Ing-wen, has her sights set on South-east Asia and plans to woo the region during her term.

Announcing her intention to “elevate the scope and diversity of Taiwan’s external economy”, Ms Tsai wants to provide Taiwanese businesses with an investment-destination alternative to China.

The new Democratic Progressive Party (DPP) government’s effort to actively reach out to the Association of South-east Asian Nations (Asean) is part of its plan to overhaul and stimulate the island’s stagnating economy.

This is the third time that Taiwanese leaders are looking to South-east Asia as a crutch to reduce its economy’s overdependence on China. The first attempt was made in the 1990s by then-President Lee Teng Hui of Kuomintang (KMT), whose push towards the South saw investments gain momentum but then retreat in the wake of the Asian financial crisis. Thereafter, China, offering abundant labour, low-cost manufacturing and a huge market, soaked up the attention and investment from Taiwanese businesses.

The next attempt was in 2002, under the DPP presidency of Chen Shui-bian. This got nowhere because more than 60 per cent of Taiwanese foreign investments had roots in China by that time, and the push to South-east Asia — a region farther away and less familiar to most Taiwanese businessmen — was seen as commercially unattractive.

But the economic winds have shifted. China’s growth is slowing and business costs have increased considerably. These factors have made Taiwanese businesses more willing to look for more affordable alternative markets, and the allure of South-east Asia is strong. Several Asean countries are also making it clear that they welcome a wave of Taiwanese investment.

Ms Tsai is determined to use this window of opportunity to restart engagement with South-east Asia. Even before her inauguration as President, she made sure to establish a high-level special task force called the New Southbound Office. The office, headed by former Foreign Minister James Huang, will help set the tone and direction of Taiwan’s overall strategy for South-east Asia across ministries.

Ms Tsai is also anxious to differentiate her own South-east Asian pivot from the largely unsuccessful attempts of her predecessors.

Earlier this week, Mr Huang announced that Taiwan’s third push south would take on a more “people-centric” economic strategy instead of being overly focused on traditional investments and trade. This means strengthening Taiwan’s appeal as a destination for tourism, higher learning and work among those in South-east Asia. It is expected that such people-to-people exchanges will help Taiwan and its companies learn more about the region.

IMPLICATIONS FOR ASEAN OF CROSS-STRAIT RELATIONS

There are economic and political factors that could buoy or sink Ms Tsai’s latest push south.

The first relates to the so-called 1992 Consensus, where both Taiwan and the mainland agree that there is only one China, with each having its own interpretation of what that means. This has provided a common political basis for Taiwan and mainland China to promote peace and prosperity on both sides of the straits.

There was some expectation from Beijing that Ms Tsai would clarify her views and expressly adopt the 1992 Consensus after her inauguration to keep cross-strait relations on an even keel after eight years of warm ties under her predecessor, Mr Ma Ying-jeou. But her persistent ambiguity on the issue has raised rumblings of disapproval in Beijing. China has said that it will “resolutely contain any Taiwan independence separatist acts or plots”, and there is a real possibility that cross-strait relations could turn frosty under Ms Tsai.

If Beijing is discomfited, it is unlikely that ties with Asean members will prosper. Asean countries do not wish to be caught in the middle when Taiwan and China squabble, and this sentiment is perhaps stronger today, as Asean’s economic interdependence with China has grown significantly since the early 2000s.

The launch of Beijing’s One Belt One Road and Asian Infrastructure Investment Bank initiatives also focuses attention on keeping win-win ties with China. The key, therefore, is for Taiwan to pursue a “southbound policy” in tandem with stable, cross-strait ties with Beijing.

Whenever Taipei tries to seek recognition as a state, Beijing counters. As such, rather than over emphasising government-to-government relations, Asean ties with Taipei should pursue a multi-pronged approach in which the promotion of business ties and people-to-people exchanges should be prioritised. Research, business and investment links should be re-established and strengthened.

Such networks will be important in helping Taiwan understand the region’s political and economic nuances, and in so doing, carve out a niche economic strategy on how best to engage with the region without going head to head with China. For example, instead of dealing with central governments, Taiwan’s construction and heavy machinery businesses can engage with regional governments to explore the building of industrial or economic zones for smaller-scale investment and development.

The Taiwanese private sector should also play a key role in Taiwan’s new southbound initiative, and establish partnerships with local companies. For example, Taiwan’s Foxconn Technology Group is a key investor in Vietnam and has managed to set up local business partnerships in the country.

Opportunities are abundant. While it is noteworthy that the Tsai administration wishes to deepen relations with Asean, there will be caution until the tenor of cross-strait relations is clearer. If ties between Beijing and Taipei can be managed, there is much that can be done with Asean to deepen the relationships without setting off diplomatic alarm bells. Otherwise, Asean countries adhere to a one-China policy and this will continue, if push comes to shove.

As such, Ms Tsai’s New Southbound Policy is contingent on the nature of its cross-strait relations, which will determine if it will be a success or another failure.

ABOUT THE AUTHORS:

Simon Tay and Cheryl Tan are, respectively, chairman and deputy director (ASEAN) of the Singapore Institute of International Affairs. This commentary was published in TODAY on 2 Jun 2016. An earlier version of the article was also featured in The Japan Times on 1 Jun 2016 under the title “Renewing Taiwan’s ‘pivot’ to Southeast Asia”.

Photo Credit: MiNe (sfmine79) / CC BY 2.0