Southeast Asian Ties

Strategic Vision vol. 8, no. 40 (February, 2019)

Proactive engagement with region key to New Southbound Policy Success

Puo Sothirak

The Cambodian National Assembly reflects traditional Cambodian architecture.

photo: Io Herodotus

Taiwan’s new southbound Policy (NSP) has made considerable progress in the development of the island’s economic, cultural, and educational linkages, with notable increases in Taiwanese trade and investment across the region. Significant expansion in people-to-people exchanges, particularly in the areas of education and tourism, have also been observed. Distinct from previous Taiwanese efforts to increase engagement with Southeast Asia, the NSP appears—initially at least— to be making progress toward its primary goals.

Although the NSP has made some positive advancements in recent years, key challenges remain as the initiative moves forward. Some of these challenges are tied to Taipei’s own implementation of the initiative or the content of the initiative itself. These include internal issues such as resourcing and coordination in Taiwan among a full range of stakeholders, as well as external ones such as managing ties with Beijing and Southeast Asian states that are careful not to get embroiled in the Cross-Strait conflict. In addition, the regional environment in which the NSP is operating remains complex and difficult due to multiple external powers which are concomitantly stepping up their engagement with Southeast Asia, meaning stiffer competition for NSP to find suitable niche areas through which it can successfully engage the region.

The NSP is being implemented at a particularly delicate time in Southeast Asia. The post-Cold War security equilibrium of American unipolarity is shifting in the region toward a new reality of US- China bipolarity, with rising tensions among the two great powers, as depicted by the current US-China trade war which is likely to escalate in the near term. Washington’s Free and Open Indo-Pacific Strategy and the establishment of the minilateral “Quad” grouping of the United States, Japan, Australia, and India stand today in apparent competition with China’s Belt and Road Initiative and Beijing’s Lancang-Mekong Cooperation Mechanism. All countries in the region will be required to navigate their respective engagement with Taiwan’s NSP in this new, unstable context as well as within the delicate framework of the one China policy.

As the signature initiative in President Tsai’s foreign policy, the NSP’s firm commitment has been buttressed by the Republic of China (ROC) government’s allocation of significant resources to support the initiative, with the initial budget increased by 63 percent from US$131 million in 2017 to US$241 million in 2018. The largest portions of the budget are dedicated to the Ministry of Economic Affairs and Ministry of Education, with US$96.1 million and US$56.5 million respectively. Furthermore, in October 2017, the Tsai administration announced a US$3.5 billion financing plan to assist NSP countries initial three countries: Brunei, the Philippines, and with infrastructure development.

The Association of Southeast Asian Nations (ASEAN) is at the center of this new initiative. Although the NSP is part of a larger regional strategy, the real focus of engagement has been in Southeast Asia in trade and investment, tourism, and student exchange. To this end, NSP has begun to produce commendable results. Recent Taiwan government statistics indicate that there are increases in areas such as tourism and education. In some cases, gains have surpassed earlier targets, including the number of Southeast Asians traveling to Taiwan by air and enrolling in tertiary institutions. Trade and investment figures have also seen some improvement as well. Furthermore, initiatives such as inking of investment agreements with key Southeast Asian states, and advancements in areas such as regional connectivity and a greater emphasis on Southeast Asian languages, as well as the extension of the visa free trial period is also a notable development in this respect, even if it has not been expanded beyond the initial three countries: Brunei, the Philippines, and Thailand.

Global Panorama

China is continuing to more strongly encourage and incentivize states that recognize Beijing to maintain a strict adherence to the one China policy. Renewed great power competition in the region combined with China’s more aggressive stance toward Taiwan since President Tsai Ing-wen took office represents a distinct challenge to ASEAN states as they seek to engage with Taiwan through the NSP.

Wider collaboration

Renewed efforts are needed to restart engagement with the region as the aforementioned shifts in geopolitics and security may potentially hinder the advancement of the NSP. The obvious next step forward is for Taiwan to maintain as stable a relationship as possible with China as this condition is required for reinforcing closer ASEAN-Taiwan ties. In light of China’s renewed pressure on Taiwan and its diplomatic partners, this will undoubtedly be a challenge. Furthermore, to enjoy a deeper relationship with Southeast Asia, Taiwan must inculcate positive relations with all 10 ASEAN states with efforts gearing up to forge a wider collaboration with every ASEAN state, with a primary emphasis on economic and social-cultural issues.

About 25,000 Taiwanese tourists visit Angkor Wat each year. Last year, Cambodia Airways launched twice-weekly flights between Siem Reap and Taipei.

photo: Dean Karalekas

Cambodia and the ROC never enjoyed diplomatic relations. Semi-official relations between Cambodia and Taiwan took place when Taiwan established the Taipei Economic and Cultural Office in November 1995 in Phnom Penh to promote trade, investment and cultural exchange between Taiwan and Cambodia. This relationship was disrupted by the outburst of a political situation in Cambodia in July 1997, and the office was forced to shut down on 22 July, 1997. This unfortunate domestic event interrupted the ROC’s southward pursuit of economic engagement and overseas investment in post-conflict Cambodia, otherwise Taiwan might have been able to maintain its trade and cultural office in Cambodia through to the present day. The disruption should be treated as a lesson learned in the sense that the ROC’s trade and cultural office should not be perceived as becoming directly involved in domestic politics of the host country and that assessment of foreign political risk should be undertaken comprehensively to ensure politically appropriate engagement in a county like Cambodia, as well as to understand the strict adherence of the one China policy, as China is more than just a friend to Cambodia but rather a close strategic partner.

Cambodian Capt. Prum Sanghoun, a Royal Cambodian Armed Forces doctor, treats a patient with Staff Sgt. Erin Smith, a medic with the National Guard.

photo: Tony Vincelli

On a more positive note, for Cambodia, Taiwanese investment has been vital in the development of the garment industry, with hundreds of Taiwaneseowned factories employing tens of thousands of Cambodians producing garments and apparel for export. At the same time, Taiwan is the eighth-largest source of Cambodian imports, totaling over US$500 million in 2017. Taiwanese companies are attracted to Cambodia’s diverse advantages for factory relocation, which include duty-free access to major developed countries and regions including Japan and the European Union (EU); stable macroeconomic performance; and generous incentives to attract foreign direct investment (FDI). Despite possessing a significantly smaller population of about onesixth that of its neighbor, Cambodia outperformed Vietnam in 2015 on the basis of per-capita garment exports. Moreover, in light of the nationwide protests in Vietnam and their negative impacts on Taiwanese firms, several analysts have highlighted Cambodia as a safer location for Taiwanese overseas investment.

While the Taiwan External Trade Development Council has not been granted permission by the Royal Government of Cambodia to open an office in Phnom Penh, the Taiwanese business community is organized under the auspices of the Taiwan Commercial Association in Cambodia, and Taiwanese investment continues to flow into Cambodia, most recently in the Bavet Special Economic Zone located on the Cambodia-Vietnam border, together with the announcement earlier this year by Taiwanese shipping giant Evergreen that it had established a Cambodian subsidiary which is poised to be a major player in the development of the port of Sihanoukville. Finally, Prime Minister Hun Sen has previously stated that Cambodia does not discriminate against any investors, including Taiwan; thus Cambodia encourages increased trade and investment with Taiwan while adhering strictly to its one China policy.

Cambodia is mindful of the significant strength of Taiwan and its vibrant prosperity, for which it famously became known as one of East Asia’s “economic Tigers.” Taiwan has achieved enormous success in employing advanced technologies in the industrial sector, as well as in the manufacturing of high-tech products, medicine, agriculture, transportation, and infrastructure. These economically attractive aspects of Taiwan compliment Cambodia’s economy and could serve to enhance Cambodia’s priority to attract much-needed FDI and facilitate the transfer of advanced technologies, thereby accelerating economic development and creating much needed employment for the country’s growing population. As far as commerce is concerned, Taiwan registers a large volume of trade with other ASEAN countries. As Taiwan trades less with Cambodia than with other ASEAN members, there is considerable room for growth.

It would be beneficial if Cambodia could find a feasible way to engage with Taiwan on other aspect of cooperation, besides politics and diplomatic engagement, such as in the fields of education, technical training, agriculture, heath care, and academic exchange. Taiwan has had successful agricultural technical cooperation projects with Indonesia, Thailand, and Myanmar as Taiwan possesses advanced farming and irrigation techniques. Cooperation in agriculture is important to Cambodia and Taiwan could offer assistance in the development of agriculture and farming in villages throughout Cambodia, and help the country to eradicate poverty and achieve its targets within the framework of the UN Sustainable Development Goals.

For Taiwan to be successful in interacting with Cambodia, it will have to begin with the understanding that Taiwan would respect Cambodia’s decision to uphold the one China policy, and be willing to avoid this sensitive issue to engage Cambodia honestly in trade, investment, technical cooperation, and in various other fields deemed important to Cambodia’s national economic development as set out in the Royal Government’s National Development Plan, as well as to promote cultural ties and academic exchanges between the two sides. If successful in this endeavor, Taiwan could hope to have a better chance to engage more closely not only with Cambodia but with the ASEAN regional integration and enhance its soft power in Southeast Asia as whole.

Therefore, Cambodia and Taiwan should attempt to explore creative engagements and new initiatives based on mutual respect and understanding to enable necessary cooperation in the above-mentioned fields of cooperation, without breaking the one China policy.

Constructive partner

For the NSP to realize its full potential and achieve its intended goal in engaging with Southeast Asian nations, Taiwan needs to continue to implement the New Southbound Policy with fortitude by emphasizing its role as a constructive partner in the process of regional development. The ROC must make sure that its outward-looking strategy and strength remain prevalent factors in ensuring continuous growth for the entire region. Taiwan’s competitiveness—be it as a manufacturing powerhouse or as a provider of capital and technology—should be properly utilized to make Taiwan a new model of economic development for the Asia-Pacific region. In so doing, Taiwan needs to cultivate a strong foundation and favorable conditions for constructive engagement and collaboration with Southeast Asian countries for sound implementation of the NSP policy by maintaining its enduring commitment to seek comprehensive development which can override wide-ranging challenges that loom ahead in the formation of the economic community of shared prosperity with mutual respect and common understanding.

Another angle to look for in securing a bright future for the NSP is how Taiwan positions this initiative with respect to US-led initiatives, such as the aforementioned Indo-Pacific Strategy and the Quad, while engaging with Southeast Asia. The opening of the new Indo-Pacific Affairs section under the Department of East Asian and Pacific Affairs of the ROC Ministry of Foreign Affairs has been viewed by many as a signal that the NSP will develop into either a component of, or at least an important complement to, the Free and Open Indo-Pacific Strategy. If the NSP becomes widely perceived as part of a foreign policy framework which many in China and Southeast Asia understand as designed to contain China, it will place many ASEAN states in a very difficult position as regards engaging with the NSP and taking advantage of the economic and people-to-people exchanges that it supports, owing to the negative knock-on effects in their respective relations with China. At this point in time, greater clarity is required as to precisely how the NSP relates to the Indo-Pacific strategy and its trajectory related thereto in the short to medium term. If the NSP is to continue its track record of achievement, Southeast Asia requires such clarity in order to ensure the maintenance of mutually beneficial bilateral economic relations and continued peace and stability in the region.

And finally, with regard to Taiwan-Cambodia relations: However difficult it has been in the past to develop an economic and cultural relationship between the two sides, there should be more discussion on how we can promote better understanding of the realities of the political environment surrounding Cambodia’s interaction with the Republic of China. It will be useful to contemplate these wider options beyond political and diplomatic preferences, as noted in the above paragraphs, that can move the NSP forward so as to allow the correct engagement to materialize, which must be grounded in a spirit of mutual respect, sincere understanding, and reciprocal benefits acceptable to both Cambodia and the Republic of China.

Fishermen work the waters of the Tonle Sap, a freshwater lake and a popular tourist destination in Cambodia.

photo: Dean Karalekas

Pou Sothirak is executive director of the Cambodian Institute for Cooperation and Peace, an independent research institute that promotes dialogue on peace, democracy, conflict resolution, and national development.