Speaking at the annual meeting of the Asian Taiwanese Chamber of Commerce on Monday, President Chen Shui-bian (陳水扁) once again raised the "Invest in Southeast Asia" policy, saying China is only one of many markets for Taiwanese businesses. Chen also promised that the government would provide the strongest support possible to Taiwanese firms investing in Southeast Asia. The Ministry of Economic Affairs then immediately announced that the minister would lead a delegation to Southeast Asia to look at the investment environment there. The "Go South" policy seems to have become an important economic and trade policy for the government.
From a strategic viewpoint, the government's policy of encouraging business investment in Southeast Asia in order to offset the business exodus to China is absolutely correct. However, business investments follow profits, not politics. Of the investors who followed the government's "Go South" policy when it was first proposed by then president Lee Teng-hui (李登輝) ten years ago, very few have survived the political and security difficulties in Southeast Asia and the 1998 Asian financial crisis. Unless the government can come up with effective incentives this time, few entrepreneurs will run after the government's political bugle.
The investment environment in Southeast Asia has changed considerably over the past ten years. After massive capital outflow to China, Taiwanese capital is no longer as robust as it was ten years ago and business investors now tend to be more cautious. If the call to "go south" is merely a moral one, few businesses will follow.
But if "go south" is an official policy, the government will have to take both moral and political responsibility toward the Taiwanese businesses investing in that region. If the government wants to promote the policy, then it should fully grasp the advantages of collective investment. It should also utilize the WTO's trade-negotiation mechanisms, seek better investment conditions from Southeast Asian countries and ensure that the interests of Taiwanese investments are protected. Only then can it begin to create an investment incentive stronger than that of China. This will counter China's economic unification war while at the same time allowing Taiwanese businesses to make money.
Taiwan's free-trade and investment talks with Southeast Asian nations are currently making no progress except for those with Singapore. Even inside ASEAN's territory, Taiwan may still have to face challenges from arrangements of "ASEAN plus one" (i.e. China) and "ASEAN plus three" (China, South Korea and Japan). With plans to complete free-trade talks within ten years, China is already a step ahead of Taiwan in economic relations with ASEAN. Taiwan can only try to reach bilateral agreements with individual ASEAN members before "ASEAN plus one" fully takes shape. China's massive population and market also gives it an advantage over Taiwan. On the other hand, China and ASEAN are very similar in terms of their capital demand and technology levels. In other words, they also compete with each other. Taiwan has an advantage over China in this respect, leading the giant in the areas of technology and capital. Taiwan and ASEAN can have complementary relations.
China will inevitably use formats such as "ASEAN plus one" and "ASEAN plus three" to exclude Taiwan from the regional economy. If Taiwan wants to break through such a blockade, it must utilize collective investment and take advantage of collective negotiations. As a foundation for all this, the government needs to have an all-round investment plan and a close-knit organization to link offshore investments to their parent companies in Taiwan. The government needs to provide good "after-sale services" to investors, instead of simply leaving them to fend for themselves overseas.
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