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New Southbound Policy

China remains Taiwan’s largest trading partner and largest source of foreign direct investment. Taiwan’s continued economic reliance on China makes it vulnerable to political pressure from Beijing and susceptible to fluctuations in China’s economy. To help reduce this dependence, President Tsai is pursuing an agenda, referred to as the New Southbound Policy, to diversify Taiwan’s economic ties, particularly with Southeast Asia, Australia, India, New Zealand, and other South Asian countries. Complementary approaches to regional engagement include Japan’s Free and Open Indo Pacific concept, Australia’s Indo-Pacific concept, India’s Security and Growth for All Regions policy, the Republic of Korea’s New Southern Policy, and the Association of Southeast Asian Nations’ (ASEAN) Outlook on the Indo-Pacific.

In 2016, the Tsai Administration initiated the “New Southbound Policy” to strengthen trade, investment, people-to-people, and other links with the countries of Southeast Asia, South Asia, and Oceania. In part, Taipei hopes the policy will help Taiwan further diversify its economic ties beyond China. The policy aims to enhance economic collaboration through initiatives such as the opening of “Taiwan Desks” in these countries to conduct research on local business conditions and help Taiwan businesspeople establish business clusters in these countries. The policy also seeks to bring more foreign students to Taiwan’s universities, encourage professionals to work in Taiwan, promote cooperation in the healthcare sector, expand cultural exchanges and attract more tourists, and promote technology collaboration and agricultural technology assistance.

During a meeting with the US China Commission in May 2017, President Tsai said Taiwan companies, in collaboration with the Taiwan government, have prepared 5,000 vacancies for Southeast Asian citizens to work or study in Taiwan, and will largely cover the expenses of these students and interns. She added that the students will be able to stay in Taiwan for a few years after graduation. She explained that Taiwan’s companies need young and skilled labor, and Southeast Asian countries are looking for training and educational opportunities for their citizens. According to President Tsai, the New Southbound Policy is different from China’s “One Belt, One Road initiative” because it prioritizes human capital-intensive programs related to education, training, high technology, agriculture, and innovation, rather than infrastructure. She said this approach will benefit Taiwan’s small and medium enterprises.

In a meeting with the US China Commission in May 2017, the American Chamber of Commerce in Taipei explained that Taiwan companies had already been operating in Southeast Asia before the launch of the New Southbound Policy, searching for lower labor costs and attractive markets. With the implementation of the New Southbound Policy, Taiwan’s government seeks to integrate Taiwan firms with New Southbound Policy target countries’ supply chains, link Taiwan’s domestic industries to foreign markets, and develop bilateral infrastructure projects. Taipei has budgeted over $130 million for the Southbound Policy in 2017, along with plans to work with local governments, private firms, and nongovernmental organizations for additional funding.

The 18 countries included in the New Southbound Policy are the Association of Southeast Asian Nations (ASEAN) members, Australia, Bangladesh, Bhutan, India, Nepal, New Zealand, Pakistan, and Sri Lanka. Most of the 18 countries covered in the policy are developing economies with a rising middle class, making them attractive markets for Taiwan businesses. According to International Monetary Fund estimates, annual growth rates of Southbound Policy target countries will far outpace global growth, which was expected to increase around 3.5 percent year-on-year in 2017. The Philippines, Vietnam, and Indonesia, for instance, were forecast to experience GDP growth of 6.8 percent, 6.5 percent, and 5.1 percent, respectively, in 2017. Additionally, India’s GDP was expected to grow 7.2 percent, which would make it the world’s fastest growing economy.

One area in which the policy has already yielded success is tourism. Between October 2016 and March 2017, the number of tourists visiting Taiwan from the New Southbound Policy countries increased by 28.6 percent over the same period the year before. This rise in tourists from Southeast Asia has partially offset the recent reduction in tourists from China.

Taiwan will continue to deepen cooperation with the US and other like-minded countries, contributing to peace and stability in the Taiwan Strait and promoting development and prosperity in the Indo-Pacific region. Article 141 of the ROC Constitution states that “the foreign policy of the Republic of China shall, in a spirit of independence and initiative and on the basis of the principles of equality and reciprocity, cultivate good-neighborliness with other nations, and respect treaties and the Charter of the United Nations, in order to protect the rights and interests of Chinese citizens residing abroad, promote international cooperation, advance international justice and ensure world peace.”




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Page last modified: 06-10-2021 12:15:16 ZULU