Why Taiwan’s most recent pivot to Southeast Asia is its best yet

Photo: Gunawan Kartapranata/CC BY-SA 3.0

Tsai Ing-wen’s New Southbound Policy picks up steam. Her novel approach is Taiwan’s best chance yet to emerge from China’s shadow.


2018 will be a pivotal year for Taiwan’s New Southbound Policy. Taiwan’s President Tsai Ing-wen launched the policy in 2016. She is striving to strengthen ties with the 10 ASEAN nations and six other South Asian countries.

It is not the first time Taiwan has attempted to step out of China’s shadow in this way

The policy is Taiwan’s latest attempt to offset its dependence on China. The Taiwanese economy depends on Chinese exports. It also finds itself under the political influence of China due to the “One China Policy”.

Source: BBC

In 1994, President Lee Teng-hui first tried to forge stronger ties with Southeast Asia. He came up with his “Go South Policy”. It centred on promoting Taiwanese manufacturing firms to create factories in Southeast Asia. But the policy had very limited success. Between 1991 and 2017, just 18.6% of Taiwan’s foreign investment went to ASEAN nations. 40.5% went to China and Hong Kong.

Stronger economic and political ties would benefit both parties

Tsai Ing-wen used her inaugural address to express concerns about overreliance on China. Many in ASEAN share these concerns for their own nations. Lee Kuan Yew famously warned the region about China’s economic dominance.

Both countries could reap the benefits of increased trade. ASEAN would benefit from Taiwan’s advanced agricultural technologies. Taiwan would also benefit from ASEAN’s young workforce.

Can Tsai Ing-wen overcome the obstacles her predecessors faced?

Tsai Ing-wen’s approach differs from the approaches taken by her predecessors. Firstly, she is allocating more funding to her New Southbound Policy. In 2017, she allocated NT$4.45 billion (US$148 million) to the initiative. This has soared to NT$7.19 billion (US$240 million) for 2018.

She is promoting a people-centric approach. She has allocated funds to promote ties in the education and tourism sectors. For 2018, NT$1.7 billion (US$57 million) will go to the Ministry for Education. She wants to increase the number of ASEAN students studying at Taiwanese universities. She will also relax work permit regulations. She hopes this will help Taiwan attract the top talent from ASEAN nations.

In the tourism sector, Tsai-Ing wen has already built on her predecessor’s legacy. Singaporean and Malaysian visitors already enjoyed visa-waiver programs. Tsai Ing-wen added to this strategy. She granted Thai and Bruneian visitors 30-day visa exemptions. She also extended the visa-free privileges to visitors from the Philippines.  This has already had an effect on the number of ASEAN visitors to Taiwan.

Source: NBR

Where next for the New Southbound Policy?

To ensure the policy keeps gaining momentum, Tsai Ing-wen must build on her successes. Making improvements to the halal food certification system would attract more Muslim visitors. The Taiwanese government could also promote the study of Southeast Asian languages. This will become increasingly essential for those working in the tourism sector.

Taiwan is enjoying success with its people-centric approach. It can use this as a foundation to build economic bridges. In 2016, ASEAN-Taiwan trade stood at US$92 billion, 4.1% of ASEAN’s total. Currently, Taiwan only has a free trade agreement with Singapore. The One China Policy makes it difficult to expand Taiwan’s trade agreements. However, there are other ways to increase ASEAN-Taiwan economic cooperation.

Taiwan can position itself to offer services which China does not. This will allow it to expand its trade with ASEAN nations without irking Beijing. Taiwan has strong agricultural technology, public health knowledge and disaster relief techniques. These would be beneficial to ASEAN nations.

Taiwan is also making inroads to ASEAN in the private sector. As of 2017, Taiwanese banks had 484 overseas banking institutions. 188 of these were in ASEAN nations.  The growing number of institutions will facilitate cooperation between private companies. Taiwan’s Foxconn Technology Group set up business partnerships on Vietnamese soil. Expanding cooperation must become a pillar of Taiwan’s economic policy.

China will be watching closely

The hardest part of expanding the New Southbound Policy will be managing Beijing. China has deep economic ties with individual ASEAN nations. China publicly criticised Singapore in 2016 for undermining its One China Policy. ASEAN’s leaders will not want to jeopardise their trade with China by doing business with Taiwan.

But this is the most coherent pivot to Southeast Asia Taiwan has ever undertaken. She knows that in a choice between China and Taiwan, ASEAN leaders will choose China. But by focusing on people, it takes the collaboration out of the hands of the government.

Banks are opening up in ASEAN nations. ASEAN students are studying at Taiwan’s universities. Holidaymakers are coming to its shores. But none of it is occurring at a governmental level within the framework of a free trade agreement.

The success of the New Southbound Policy depends on Taiwan’s ability to avoid irking Beijing. Tsai Ing-wen’s government is doing all it can to promote ties to ASEAN. But it will depend on universities, businesses and holidaymakers to make it a reality.

The pivot to Southeast Asia is a long-term commitment. Its success will reflect the tact and pragmatism in Tsai Ing-wen’s government. But if successful, the rewards to both ASEAN and Taiwan will be substantial.