Beyond Economics: The Value and Meaning of the New Southbound Policy

Written by Alan H. Yang and Tung Cheng-Chia.

Image credit: 10.13 總統接見「玉山論壇」主題演講人及外國學者專家團,期盼與會者未來能持續支持新南向政策 by 總統府/Flickr, license: CC BY 2.0

Great power competition between the United States and China has intensified under the backdrop of the Covid-19 pandemic. Whether in the World Health Organization or the United Nations, this intensification is compelling states to reorient their political alignment. Taiwan needs to reflect on and strategically reposition itself in this geopolitical tug-of-war. A top priority for the island-nation is to strengthen its links and influence in Asia.

In 2016, the Tsai Ing-wen government set out a series of policies, under the umbrella of the New Southbound Policy (NSP), to enhance bilateral cooperation with South and Southeast Asian nations. The five flagship programs of the NSP are aiming at expanding and deepening the partnership between Taiwan and these neighboring countries in the fields of agriculture, medicine and public health, talent cultivation, innovative industries, and youth exchange and policy forums. These programs are expected to bring fundamental changes to the relationships between Taiwan and its partner countries in South and Southeast Asia by providing opportunities and support for them to improve the wellbeing of their people. Not only does Taiwan aim to be an important trading partner – it also plans to be a contributor that proactively shares resources, experiences, and expertise.

Despite the need for Taiwan to diversify its partnerships, a more conservative perspective persists within Taiwan which demands immediate economic returns, and views South and Southeast Asian partners as nothing more than replacements for the Chinese market. Recently, an opposition member of Taiwan’s Legislative Yuan quoted a news piece from The China Times which painted a critical picture of the preliminary results of Tsai’s NSP. According to this report, Taiwan’s exports to China (including Hong Kong) made up 41.5% of all exports during the period between January and May 2020, while exports to countries belonging to the Association of Southeast Asian Nations (ASEAN) totaled 15.9% over the same period. The opposition member in question declared the NSP a failure based on these figures, and suggested the government reformulate in policies and seek other alternatives to expand Taiwan’s regional presence.

However, such an assessment is problematic for several following reasons.

Firstly, in recent years, international organizations and financial experts have projected the rise of India and ASEAN countries as future emerging markets that would contribute to the growth of the global economy. With Taiwan’s geographical proximity and historical partnership with New Southbound countries, it also has a stake in the development of the region. As a result of the U.S-China trade war and the ramifications of the pandemic, multinational corporations have been relocating their factories and supply chains to diversify risks. This is prompting capital investments and production bases to continue to shift to ASEAN nations. Since Taiwan’s economic development relies heavily on foreign trade, it must respond to the changing economic landscape and prepare in advance. The NSP is a policy that can fulfill this strategic objective on account of its tenet of deepening Taiwan’s regional roots. It is also important to note that policy-wise, the NSP’s current plans and policy vision take into account future market projections. Any hasty judgment of the policy’s failures based solely on immediate returns ignores current and forecasted international economic trends.

Yet if one is to emphasise the economic size and market demand of ASEAN nations in contrast with China, it is important to note that on this metric also, the export value to ASEAN nations is statistically competitive. According to recent figures from ASEAN, China’s economy is currently the second-largest in the world and is at the moment four-times larger than that of ASEAN, which explains the discrepancy in export volumes between the two markets. Furthermore, it must be remembered that Taiwan’s export aggregates towards China and ASEAN have experienced relatively extreme peaks and troughs over the last, tumultuous twelve months. An argument based on trends over a short timeframe can lead to cherry-picking data, resulting in dubious conclusions. For example, earlier this year, Taiwan’s exports towards China hit a one-year low of 37.8% of total exports, while exports to ASEAN hit a yearly high of 17.9%. With a lower starting point, Taiwan’s export to China showed a higher growth rate from January until May. But due to the pandemic, most ASEAN countries entered into lockdown over that same period, and demands from European and North American markets also shrank, which explains the plummet in total exports to ASEAN nations. Nevertheless, in relative terms compared with other regional competitors, although Taiwan’s growth rate is experiencing a decline, its exports towards ASEAN nations are still faring better than those of South Korea and Japan, which showcases the effectiveness of the NSP and the competitiveness of Taiwan’s products in that market.

This shows the limitation of assessing a policy with reference to short-term trade growth statistics. National economic policy should be adjusted following the global and regional political and economic prospects and be gradually converted into a market-oriented trade strategy. The trade relationship between Taiwan and New Southbound countries still has considerable room for widening and deepening, which only highlights the necessity of giving precedence to developing the NSP and exploiting its potential, rather than underestimating the market potential of its target nations based on cherry picked data.

Moreover, beyond prioritizing economic cooperation, the NSP has been promoting partnerships that extend beyond trade and investment. In the past four years, joint-projects in the field of medicine, education, and agriculture have been gradually put into effect and have transformed into a new partnership model for regional development. For example, since 2016, over 200 medical personnel from New Southbound countries have received medical training in Taiwan each year, creating a partnership between the trainees and Taiwan’s medical centres. In terms of educational partnerships, the number of students from New Southbound countries pursuing higher education in Taiwan increased from 28,000 to 59,000 over the last five years. Deepening cooperation in the area of technology makes the NSP all the more relevant to New Southbound countries’ development. In 2018, Taiwan’s Council of Agriculture signed an agreement with the Ministry of Agriculture of Indonesia to establish Taiwan’s first agricultural demonstration zone in Karawang, West Java. The Council later established a mushroom demonstration farm in Baguio in the Philippines. In each of these example, partnerships were transparent and public, echoing the US Free and Open Indo-Pacific Strategy by respecting the willingness and need of the recipient communities.

The NSP has been aiming to build more diverse regional links to intensify economic cooperation, facilitate resource sharing, and promote talent exchange since 2016. The NSP should also be seen as part of Taiwan’s strategy of strengthening resilience against the backdrop of rapid global transformations triggered by the confrontation between major powers and the pandemic, rather than being merely a response to problems with its relationship with Beijing. For the time being, with the NSP, Taiwan can continue to deepen and diversify partnerships with neighboring countries and strengthen its institutional cooperation with like-minded countries and organizations; together, both Taiwan and New Southbound countries can safeguard their future in this tumultuous time.

Alan H. Yang is the Executive Director of the Taiwan-Asia Exchange Foundation (TAEF). He also serves as Deputy Director of the Institute of International Relations (IIR) and Executive Director of the Center for Southeast Asian Studies (CSEAS) at National Chengchi University, Taiwan.

Tung Cheng-Chia serves as an assistant research fellow in the Taiwan-Asia Exchange Foundation (TAEF). His research interests cover human rights, political theory (with a specialisation in the just war theory), and theories of international relations. He received his B.A. in Diplomacy from National Chengchi University and his MSc in International Political Theory from the University of Edinburgh.

This article is written with the support of Mr. Wei Hung who serves as a summer intern in the Taiwan-Asia Exchange Foundation (TAEF)

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