Sun, Aug 18, 2002 page8

• It's time to heed the `go south' call

  • By the Liberty Times Editorial
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  In the face of China's ruthless machinations, President Chen Shui-bian (陳水扁) has apparently changed his cross-strait policy of the past two years. He will no longer send out goodwill unilaterally and will instead take Taiwan down "its own path." So the question is, how should Taiwan walk its own path?

  Politically, Taiwan should firmly adopt the position that there is "one country on each side" of the Taiwan Strait, refuse to accept "one country, two systems" and hold a public referendum to prevent any change to the status quo.

  In terms of the economy, the nation should redirect its economic and trade policies which currently lean too far toward China. As indicated by Chen, a pragmatic approach is to see the Chinese market as simply part of our global market, rather than Taiwan's sole export market. In formulating global strategy, Taiwanese businesspeople should focus more on investing in Southeast Asia.

  If businesses keep their roots in their motherland and seek to continue to develop themselves, the domestic employment rate will improve, stimulating consumer demand. This is, of course, the best way to go. As globalization continues apace, however, Taiwan's businesses must become globalized as well if they are to achieve sustainable operations and growth. Foreign investments by businesses are in essence a component of their expansion strategy, as well as an extension of of the economic prowess of their mother country.

  Taiwan's China fever of recent years, however, should not be mistaken for globalization. It is in fact an irrational economic malaise, wrapped in the banner of Chinese nationalism. It is the fever alone that prompts businesses to jump on the bandwagon to China, pouring money into the country and leaving debts in Taiwan, irrespective of whether they actually need to make foreign investments. This has caused a hollowing out of Taiwan's industries. Also infected by the bug, members of the general public take whatever little sums of money they may have and blindly follow each other's footsteps into the whirlpool that is China. The most egregious aspect of all this is that the two sides of the Taiwan Strait remain in a state of hostility. The relationship between China and Taiwan can in no way be compared to the relations between other states. The sinicization of Taiwan is therefore not globalization at all. Rather, it is collective self-destruction on the part of Taiwan society.

  Any rational person can see perfectly clearly that sinicization is not globalization. In Taiwan's twisted and abnormal environment, however, pro-unification politicians and the media do their best to beautify everything related to China. The prospects of the Chinese market are particularly exalted by these individuals. China is depicted as a paradise with gold to be discovered everywhere. Any policy proposal by the Taiwan government to find substitutes for the Chinese market invites immediate attack from the pro-unification camp and becomes the target of malicious and twisted interpretations.

  The government's "go south" policy is a classic example. The policy was first proposed by Lee Teng-hui (李登輝) when he was president in 1994. It was made in consideration of the fact that Southeast Asia has a population of 500 million, constituting an enormous market. Plus, the cost of labor and land there are even cheaper than in China. Geographical proximity was also a factor. It was therefore perceived as the ideal substitute for China. It cannot be denied that, in addition to economic considerations, the government had a political agenda in promoting the policy, which was the hope of establishing close ties with countries in the region. Unfortunately, however, the policy came under fire from the pro-unification camp. Then as fate would have it, the Asian financial crisis struck the region in 1997, affecting many countries in the region very badly and ruining many Taiwanese businesses there. Thereafter, the "go south" policy was labeled a failure.

  Was the "go south " policy really a failure, though? If it was such a mistake, what is causing Chen to return to the southbound path? Obviously, while the policy suffered some setbacks, it was not a failure. The public's negative impression was deliberately created by a certain group of people who took advantage of the public's lack of information.

  Former chairman of the Council for Economic Planning and Development and current chairman of the Taiwan Thinktank (台灣智庫), Chen Po-chih (陳博志), is extremely worried about China's duplicitous policies, which, on the one hand, lure Taiwanese businessmen to China, and, on the other, suppress Taiwan's room for survival within international organizations. Chen Po-chih thinks that, in terms of its economy, Taiwan should try not to rely on China too much. As early as 1991, Chen Po-chih proposed an economic strategy under which Taiwan would increase its investments in, and trade with, Southeast Asia. Three years later, President Lee officially declared the "go south" policy.

  Chen Po-chih pointed out that many publicly traded companies that had invested in Southeast Asia had enjoyed great success. These businesses were located in Vietnam, Indonesia, Malaysia, and the Philippines. Their products ranged from traditional goods, such as paper products, foods and textiles, to electronic products and financial goods and services. But the people of Taiwan were not told of such successes. The information was suppressed.

  Now President Chen has once again endorsed the "go south" policy. By now, most Southeast Asian countries have put the financial crisis behind them, and some of their economies are performing better than ever. Economic growth in Vietnam and the Philippines for example, represents a drastic improvement over the past. In particular, 10 Southeast Asian countries are gradually forming a free trade area.

  Since Taiwan's initial launch of the "go south" policy, the nation has signed agreements with most countries in the region to protect Taiwanese investments there and to avoid dual taxation. Taiwanese businesspeople investing there not only enjoy the protection of the law, but are also in a favorable position to target the entire regional market, benefiting from various forms of preferential treatment, and the convenience of the free flow of capital and personnel. This can help Taiwan to avoid marginalization in the Southeast Asian market.

  More to the point, however, now is a most opportune time to rehabilitate the "go south" policy. To do so would not be to produce a stale rehash of old policies. From the point of view of diversification of investment risk, as pointed out by Mainland Affairs Council (MAC) Chairwoman Tsai Ing-wen (蔡英文), the "go south" policy is a balancing of foreign investments. Taiwan, a former net importer of capital, is now a net exporter. But, while Taiwanese investments in China amount to more than US$100 billion, those in Southeast Asia are in the tens of billions. Taiwan's over-dependency on China in foreign investments has jeopardized its own national security and economic development. If the government continues to refuse to lead businesses to divert their investments, Taiwan will be headed for disaster.

  Neither "go south" nor "go west," however, will revive Taiwan's economy. Only the removal of investment barriers and improvements in the investment environment in Taiwan can make businesses willing to keep their roots in Taiwan. This is the way to ensure Taiwan's survival.

  When businesses have to make overseas investments out of sheer operational need, they should develop global strategies, rather than carelessly overlooking political and market risks and recklessly going west, placing all of Taiwan's assets in the hands of a hostile country. This is tantamount to political and economic suicide.

  Rational people do not place all their eggs in one basket. While the "go south" policy may have its limitations, it can create diversity in Taiwan's investments, and counter China's leverage over Taiwan's economy. The government's call to head south comes just at the right time. It truly demands the business sector's reflection and consideration.
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