Recently "money diplomacy" has become a target of public criticism. The critics claim the government should not spend so much on maintaining diplomatic relations with tiny states, particularly in times of economic recession. For example, Haiti has requested US$50 million in aid over the next five years.
Whether in cross-strait or international relations, negotiation requires terms and conditions. China is now a strong adversary in our diplomatic relations. The fact that NT$150 billion had been transferred to China in the past 10 years means that China can, in turn, pursue money diplomacy to strike a blow against us. Therefore, when we criticize money diplomacy we must also examine our tactics regarding overseas investment.
Taiwan's foreign exchange reserve funds amount to US$120 billion, plus US$10 billion in foreign exchange surplus each year in the past 10 years. Failure to preserve relations with our allies may lead to a dramatic drop in the number of countries allied with us or thus cause domino effects. In the end, when the number of allies becomes a single digit number, the public will lose their confidence here at home and abroad. Industries will move abroad, while foreign exchange reserve funds will outflow and unemployment will rise. Under such circumstances, what foothold can Taiwan have to negotiate in international market?
To maintain diplomatic relations with 27 countries, economic aid only adds up to 0.14 percent of gross national product. The aid is worthy if we equate such diplomatic expenditures with national security costs. In my view, even doubling diplomatic expenditure is justifiable.
"Money diplomacy" and "economic diplomacy" are interchangeable. Taiwanese investments in foreign countries total US$200 billion, mostly in countries -- China and Southeast Asia in particular -- that do not have diplomatic ties with us. Cheap labor, short distance, and the lack of language barriers are just a few factors for consideration. Excellent incentives, therefore, must be offered to Taiwanese investors for overseas investment in our allies.
Our current allies are situated mostly in Africa, and in Central and South America. Africa is considered a virgin land yet to evolve its socio-economic system. Together with development plans and preferential measures from the US, Africa is indeed a region worthy of development. Central and South America, in close proximity to the US, is also a good destination for investment.
Pure money diplomacy plus economic diplomacy may help Taiwan compete for international allies on one hand and assist Taiwanese investors in financing on the other. Taiwan thus can move forward, dispersing risks and becoming less dependent on China.
The Ministry of Foreign Affairs now offers credit reserve funds to Taiwanese businesspeople who intend to invest in Taiwan's diplomatic allies. I suggest the government should allocate another NT$500 million to NT$1 billion to the funds. Together with the International Cooperation and Development Fund's incentives to each firm, investors are able to receive credit loans of six times more than the current total. Investors can then build 100 to 200 factories with each employing 500 workers. Instead of pursuing money diplomacy, why not invest in our businesspeople and create a win-win solution?
Although already an international practice, money diplomacy, if it can simultaneously promote domestic economic growth, is certainly the course to take in the long term.
Day Sheng-tong is the chairman of the National Association of Small and Medium Enterprises.
Translated by Grace Shaw
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