The government last week announced a budget of NT$4.2 billion (US$132.54 million) to carry out the “new southbound policy,” which is regarded as President Tsai Ing-wen’s (蔡英文) signature policy in terms of Taiwan’s external economic strategy. The policy is aimed at enhancing Taiwan’s economic relationships with ASEAN members and South Asian nations, as well as Australia and New Zealand, and hopes to “forge a new mutually beneficial model of cooperation” and “a sense of economic community” in the long term.
The emergence of the policy should be comprehended from political and economic rationales.
Politically, former president Ma Ying-jeou’s (馬英九) China-leaning policy orientation elicited dramatic backlash domestically and led his party to suffer two election fiascoes in 2014 and this year. The election setbacks of the Chinese Nationalist Party (KMT) suggest that the Taiwanese electorate was generally dissatisfied with the Ma administration’s rash rapprochement toward Beijing and deeply concerned about the political risk of Taiwan’s excessive economic dependence on China.
On the other hand, due to China’s economic slowdown and an increasingly severe investment environment, many multinational corporations have gradually moved their production bases from China to other developing nations. In contrast with China’s latest decline in foreign direct investment, many ASEAN members and India have experienced rapid surges in foreign direct investment in recent years, revealing that the international business community broadly holds optimistic views on their economic future and puts huge stakes on their robust consumer markets.
Since China alone accounts for 40 percent of Taiwan’s total exports, a sneeze from China is likely to trigger a terrible cold in Taiwan’s economy. Taiwan’s latest unprecedented prolonged export decline has unveiled the vulnerability of its economic structure, which corresponds with China’s recent economic downturn. As a result, properly alleviating Taiwan’s asymmetrical economic dependence on China became a vital challenge for the Tsai administration.
The unique characteristics of the policy make it distinctive from Taiwan’s previous ill-fated “go south” policies, and provide more promising appeal and better odds of success.
Noticeably, to distinguish the policy from previous “go south” policies, which merely focused on shifting Taiwan’s trade and investment from China to Southeast Asian nations, the Tsai administration has the long-term goal of facilitating “a sense of economic community,” and it intends to forge comprehensive and mutually beneficial partnerships with these “new southbound nations” by expanding cooperation from existing economic fields to other unexplored areas, such as education, culture, technology, human resources and tourism.
The political implications of this policy are profound and significant for two reasons.
First, by advocating the concept of building “a sense of economic community” with the “new southbound nations,” the Tsai administration has overturned Taiwan’s typical thinking of these nations from “exploitable economic targets” to the equal standing of “mutually beneficial partners.” Furthermore, the policy also reveals a concealed intention of navigating Taiwan away from the danger of being engulfed by China’s economic eddy.
Hence, by promoting comprehensive relations with these nations, the Tsai administration hopes to reshape Taiwan’s role as an indispensable partner in the Asia-Pacific region.
Second, the policy symbolizes an important milestone from the earlier “go south” policies in terms of its ideological mindset. Irrefutably, after decades of political mantra in preaching Chinese culture imposed by the KMT government, most Taiwanese might have passively received Sino-centrism and unconsciously perceived themselves as a “more superior and civilized” group, while looking down on people from other developing Asian nations.
The consequences of this twisted prejudice and cultural arrogance might make most Taiwanese unwilling and incapable of building sincere and lasting friendships with people from other Asian nations.
This biased mindset had also contributed to Taiwan’s previous “go south” policies that were prone to seeing neighboring nations as no more than economic targets with exploitable resources, utilizable cheap labor and profitable markets, rather than as equal and collaborative companions, which are worth the effort of building long-term partnerships.
Although the policy might provide more promising prospects, there are some risks and weaknesses.
First, the policy is officially defined as “part of Taiwan’s overall external economic strategy,” despite that its content has gone beyond economic aspects. Nevertheless, it is certainly not qualified to be Taiwan’s “grand strategy” and is expected to provide very limited support to Taiwan’s political survival.
Given that the majority of the “new southbound nations” are medium and small nations in terms of national power, it is difficult to expect that any of them could provide substantial support to Taiwan at the critical juncture of contingency, whether diplomatically or physically.
In other words, the merit of the policy might be constructive for guiding Taiwan to explore a new economic frontier and seek a driving force to revitalize Taiwan’s economy, but it could not provide Taiwan with sufficient strategic leverage to safeguard its security and political system.
Another potential hazard of the policy might be that the Tsai administration ignores, or deliberately waters down, the risk of the “China factor” in the policy’s implementation. It does not mean that any of Taiwan’s external policies need to gain permission or approval from Beijing. Nevertheless, an objective reality is that China is more influential and has more resources in the “new southbound nations” than Taiwan does. For example, Beijing has initiated the so-called “One Belt, One Road” project by providing favorable loans, financial incentives and various assistance to related nations to help build roads, highways, harbors, dams, infrastructure, etc. to facilitate the physical connectivity with China.
Although officials in the Tsai administration argue that the “new southbound policy” is not intended to compete with China’s “One Belt, One Road,” it certainly cannot downplay the potential risk that China can utilize its political leverage and economic resources to sabotage or undermine Taiwan’s efforts in strengthening relations with the “new southbound nations.”
Taking the potential threat of the “China factor” into account and preparing various corresponding contingency plans would likely improve the odds of the policy’s success, while minimizing possible costs of its failure.
Finally, another hidden hazard of the policy is the limited time frame for policy implementation. There is no need to remind the Tsai administration that it has less than four years to carry out this comprehensive policy. So far, the guidelines and action plan for the policy are occupied with rather abstract concepts and vague visions, but lacking concrete numbers and achievable goals. The prospects of the policy might be worrisome, since no one has a clear picture about what exact performance and outcomes the policy would achieve for voters’ examination in the next presidential election in 2020.
If the policy neither boosts the economy nor considerably reduces Taiwan’s economic reliance on China, then only emphasizing the statistical results in culture, tourism or personnel exchanges derived from the policy might make it a hard sell to Taiwanese voters. Hence, it would be sagacious for the Tsai administration to prudently strike a balance between the long-term vision and short-term reality, so as to carefully calibrate feasible policy deliverables with reasonable resource arrangement to ensure that the promise of this policy can be effectively realized.
Then, the policy might lay a solid groundwork for reshaping Taiwan’s role in the global arena of economic competition.
Eric Chiou is an assistant professor at National Chiao Tung University who specializes in international political economy and international relations.
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