Looking South and Acting East

Saheli Chattaraj

Though not the first of its kind, Taiwan’s New Southbound Policy (NSP) — introduced by President Tsai Ing-wen when she came to power in 2016 — provides a comprehensive vision for strengthening Taiwan’s relationship with 18 primary target countries, including the 10 member states of the Association of Southeast Asian Nations (ASEAN), six South Asian states, Australia and New Zealand.

But unlike earlier Southbound Policies under Presidents Lee Teng-hui and Chen Shui-bian that focused on economic interdependence, Tsai’s NSP has a broader motive that also aims to strengthen people-to-people exchanges and further diversify its scope into educational exchanges and tourism to bolster Taiwan’s soft power in the region.

“The New Southbound Policy is Taiwan’s regional strategy for Asia. Its goals and ideals coincide with those of the Association of Southeast Asian Nations Outlook on the Indo-Pacific and India’s Act East Policy,” Tsai said, according to the online news magazine The Diplomat. “Working together, these initiatives can achieve mutual benefits with complementary economic and social successes.”

The NSP focuses on four main areas:

• Economic and trade collaboration. Forge new economic and trade partnerships by exporting infrastructure construction services, helping Taiwan’s small- and medium-sized enterprises expand in target countries and providing Taiwan firms with financial assistance. Also, connect more closely with supply chains and domestic demands in target countries and collaborate on infrastructure projects.
• Talent exchange. Share human resources and complement the strengths of partner countries by expanding exchange and training programs for young scholars, students and industry professionals. Initiatives include bilateral academic exchange programs, a New Southbound talent-matching website and an information platform for Taiwan companies to register their businesses and seek talent.
• Resource sharing. Create bilateral and multilateral cooperation opportunities by capitalizing on Taiwan’s soft power in culture, tourism, medical care, technology, agriculture, and small- and medium-sized enterprises. Strategies include promoting agricultural cooperation, increasing two-way tourism with other nations and attracting residents of New Southbound countries to Taiwan for quality health care.
• Regional connectivity. Enhance official and private exchanges, sign and renew trade agreements, institutionalize multilateral and bilateral cooperation with partner countries, and step up negotiations and dialogue.

NSP’s strategic importance for Taiwan

Only a dozen or so nations have formal diplomatic relations with Taiwan, with most countries recognizing the People’s Republic of China (PRC) instead. The Chinese Communist Party insists the PRC is the only sovereign state under the name China and that the self-governed island of Taiwan is part of it. Although the U.S., as part of its “one China” policy, does not have formal diplomatic relations with Taiwan, it enjoys a “robust unofficial relationship,” according to the U.S. State Department.

“Though the United States does not have diplomatic relations with Taiwan, we have a robust unofficial relationship … an abiding interest in peace and stability across the Taiwan Strait,” according to a U.S. State Department fact sheet, which references the 1979 Taiwan Relations Act that provides the legal basis for the relationship and enshrines the U.S. commitment to help Taiwan maintain defensive capability. Taiwan and the U.S. share similar values, deep commercial and economic links and strong people-to-people ties that form the bedrock of their friendship. 

The U.S. expects “cross-Strait differences to be resolved by peaceful means,” according to the fact sheet.

The NSP can also be seen as an initiative by Taiwan to build its relationships with neighboring countries in the spheres of business, trade, education, people-to-people exchange and tourism.

“It promotes a new model of economic development for the nation that reduces reliance on a single market … and avoids directly competing with China’s Belt and Road Initiative, which focuses on regional infrastructure,” according to a government document titled, “Moving the Vision forward: Taiwan’s New Southbound Policy.” “Taiwan’s projects are all about people and soft power, supporting tourism, education, healthcare, technology, small and medium enterprises and agriculture.”

India and the NSP

The India-Taiwan relationship has mostly walked in the shadows of India’s adherence to its one China policy. But changes in the geostrategic environment could lead to India becoming an attractive investment destination for Taiwan.

After the establishment of the PRC in 1949, India recognized and later established formal diplomatic ties with the PRC. In 1971, India further rendered its support to the PRC at the United Nations, which then expelled Taiwan from the U.N. General Assembly and Security Council in favor of the PRC and, thus, closed doors to India and Taiwan building cooperation. However, under the government’s 1992 Look East Policy, India once again started to pay more heed to its eastern neighborhood. In 1995, Taiwan and India established the Taiwan Economic and Cultural Centre (TECC) in New Delhi and the India Taipei Association (ITA) in Taipei. Both entities started to offer consulate services and also promoted economic, trade, educational and people-to-people exchanges.

Since then, India-Taiwan engagements have gradually strengthened. In the latter half of 2014, India further moved from its Look East Policy to an Act East Policy, placing greater emphasis on regional cooperation. Under the leadership of Prime Minister Narendra Modi, India began several initiatives to attract foreign direct investment through programs such as Make in India, which primarily encouraged foreign enterprises to set up manufacturing units in India. This initiative also made it easier for foreign enterprises to register in India. Also, with the goods and services unified tax system, it became more viable and easier for foreign entities to set up investment units in India. The Indian government also announced subsidies to attract investment, with states such as Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu and Uttar Pradesh offering subsidies in land, water and power.

The NSP also lets Taiwan shift some of its manufacturing base to India, an attractive investment destination given its skilled and cheap labor.

“Taiwan and India are reliable and natural partners to each other. Our two countries share fundamental essential values such as freedom, democracy, the rule of law and respect for human rights,” Baushuan Ger, Taiwan’s ambassador to India, told the Hindustan Times newspaper in November 2020. “Markedly, there is a vast intersection between India’s Act East Policy and Taiwan’s New Southbound Policy, which aims to enhance Taiwan’s relations with targeted 18 countries in Southeast Asia, South Asia and Oceania.”

To strengthen and elevate India-Taiwan industrial and trade ties, the TECC and ITA also signed an agreement to promote industry collaboration. Taiwan enterprises such as Foxconn and Maxxis have started manufacturing in India. Moreover, because Taiwan is culturally similar to East Asian nations, it can learn from the experiences and business models of Japan, Singapore and South Korea, as these nations have been operating in India for some time.

“We are witnessing the restructuring of global supply chains that have created a lot of opportunities for Taiwan and India to further enhance our links in the area of manufacturing,” Ger told the Hindustan Times. “We should, therefore, carefully appraise our respective positions and make policies to forge a stronger partnership.”

Taiwan has already expressed willingness to strengthen ties with India, which is one of the main target countries in the NSP’s directives. India also needs more partners to join its Make in India initiative to start manufacturing in India and selling not only in India but also exporting abroad. Additionally, in the background of the PRC’s increased influence in South Asia through its One Belt, One Road infrastructure scheme, as the Belt and Road Initiative is also known, and India’s trade deficit with the PRC, a broader business and cultural partnership between India and Taiwan could prove beneficial for both.

 “In the past 25 years, both Taiwan and India have greatly benefited from the ever-growing trade and investment, education exchanges and technological collaborations,” Ger told the Hindustan Times. “Now it is time for us to redefine our mutually beneficial objectives and the strategies to achieve them.”  

This article was originally published in the East-West Center’s Asia Pacific Bulletin and can be accessed at https://www.eastwestcenter.org/publications/india%E2%80%99s-act-east-and-taiwan%E2%80%99s-new-southbound-policy-are-win-win. It has been edited to fit FORUM’s format and includes additional reporting by FORUM staff.