Taiwan’s pivot to Southeast Asia

Taiwan's President Tsai Ing-wen waves while taking part in the National Day ceremony in Taipei on October 10, 2017. (AFP Photo.Sam Yeh)

Tsai Ing-wen launched the New Southbound Policy on 5 September, 2016. The New Southbound Policy was meant to “…realign Taiwan’s role in Asian development, seek new directions and momentum for the country’s new stage of economic development, and create future value.”

The Taiwanese policy aims to establish a relationship between Taiwan and the 10 ASEAN countries, as well as with six countries in South Asia including India, Australia and New Zealand. The Taiwanese government is looking to establish a mutually beneficial mode of cooperation which would include economic partnerships, foreign investments, talent exchanges and resources sharing.

Dependency on China

However, the emergence of such a policy could also come from Taiwan’s desire to step out of China’s shadow, both economically and politically.

Taiwan is looking to lower its dependency on China who is a major importer of Taiwanese goods. Taiwan’s economy is mostly dependent on its exports. In 2015, exports accounted for 53% of Taiwan’s Gross Domestic Product (GDP) while China accounted for 30% of that market. In 2016, their tech exports shrank further amid competition from growing tech companies in China, South Korea and China.

Furthermore, Taiwan is also looking to further distance itself from the influence of China’s government. Historically, Taiwan and China have a complicated history. While the Taiwanese government is self-governing, the Chinese government claims sovereignty over the country. China practices the “One China Policy”, a policy which recognizes Taiwan and mainland China as a single entity.

The relationship between the two heightened in 2016 when Tsai Ing-wen from the Democratic Progressive Party (DPP) won the presidential elections in Taiwan. The DPP are known for their pro-independence stance and their victory is revealing of Taiwanese attitudes towards China.

Source: Ministry of Economic Affairs, Taiwan

Pivot to South East Asia

One of the major markets Taiwan is looking to tap into to bolster their economic growth is Southeast Asia.

Among the consequences of increasing tensions between China and Taiwan following the DPP victory is a drop in Chinese tourists to Taiwan. To tackle this, the New Southbound policy features initiatives such as the relaxing of visa restrictions for visitors from Cambodia, Indonesia, Laos, Myanmar and Vietnam. Some countries were also granted visa-free travel to Taiwan.

Aside from that, according to a report by the National Bureau of Asian Research in January, 2018, Taiwan’s investments ever since the announcement of the New Southbound Policy have increased. Investments by Taiwanese companies in ASEAN countries reached a record of US$3.45 billion in 2016.

More recently, President Tsai Ing-wen pledged in October 2017 to establish a US$3.5 billion fund to help fund infrastructure projects in the region. Some might interpret this as a move to counterweigh China’s moves in the region, however, Tsai Ing-wen has insisted that there is no competition.

Overcoming China’s grip on Southeast Asia

As a result of increased tensions with China, Taiwan might have a hard time establishing a deeper relationship with Southeast Asia as China could be breathing down their necks. Things might be harder now as China is actively establishing deep economic ties with most of ASEAN countries.

China is also notorious for its ruthlessness with countries who don’t toe the line with its “One China Policy”. Last year, for example, China publicly urged Singapore to abide by its “One China Policy”.

With Chinese infrastructure projects mushrooming all over Southeast Asia and given how reliant the region’s economy is on Chinese investments, ASEAN countries might be hesitant when it comes to developing a deeper relationship with Taiwan. If it ever comes to choosing between the two, the choice looks obvious.

At the moment, the best-case scenario for ASEAN countries is to continue reaping the benefits of increased Taiwanese exports and investments without pursuing anything deeper such as bilateral trade agreements, for example. This way, Taiwan benefits from redirecting their exports and investments from China to Southeast Asia, while ASEAN reaps the rewards from both, China and Taiwan.