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Taiwan Under Lai Ching-Te Faces Uphill Battle in Advancing Southeast Asia Ties, Diverting From China

A display shows Taiwan's President-elect Lai Ching-te and his running mate Hsiao Bi-khim during a rally outside the headquarters of the Democratic Progressive Party (DPP) in Taipei on January 13, 2024, after Lai won the presidential election. Yasuyoshi CHIBA / AFP

Taiwan elected Vice President Lai Ching-te of the Democratic Progressive Party (DPP) as its next president on January 13th, giving the ruling DPP a historic third win in a row as the self-ruled island continues to engage with neighboring Southeast Asia and beyond to reduce its economic dependence on China. Lai won the poll at over 40% of the votes, defeating Hou Yu-ih of the opposition Kuomintang and Ko Wen-je of the smaller Taiwan People’s Party. 

Lai Ching-te, who is set to be sworn in this May, must continue carrying the difficult task of improving ties with Southeast Asia amid Beijing’s growing influence in the region. His predecessor’s New Southbound Policy has had some successes on that front, but he will still face unprecedented challenges to expand the strategy’s outreach further.

Taiwan’s Outreach to Southeast Asia

The NSP mostly works to connect Taiwan’s business community and Southeast Asians at the grassroots level. The NSP was designed to focus on economic and trade collaboration with eighteen countries. Ten of those states are ASEAN members — Indonesia, Malaysia, Singapore, Thailand, Vietnam, Philippines, Cambodia, Laos, Myanmar, and Brunei — while the remaining are in South Asia and Australasia.

Tsai Ing-wen had hoped the NSP could help Taiwan diversify its economy and reduce dependency on China. Traditionally, China is Taiwan’s largest export market and its largest source of imports, according to the island’s International Trade Administration

In 2023, Taiwan’s annual exports to China declined by around 20.9%, from more than $121 billion in 2022 to $95.7 billion. 

Though exports to China are declining, they are still dwarfing export numbers to Southeast Asia. Taiwan’s exports to Indonesia — Southeast Asia’s most populous economy — only reached more than $3 billion in 2023 and export value to the Philippines stood at over US$5 billion in the same year. 

Taiwan’s Diplomatic Alternative

In the absence of diplomatic relations with Southeast Asia, the NSP has effectively acted as an alternative bridge for Taiwan to establish some sort of exchange, though ties between governments remain limited. It covers a wide range of fields, including investments and banking. 

“Between 2016 and 2022, cumulative investment in Taiwan from New Southbound Policy countries amounted to 5.4 billion US dollars, with 2.1 billion US dollars in 2022 alone. In total, this is an eight-fold increase from 2016,” Tsai said in October during an opening address of the 2023 Yushan Forum.

“Taiwanese banks have also expanded their services in New Southbound Policy countries. As of this year, there are 339 branches and other types of establishments, up 70 percent from 2016,” she continued.

\\Taiwan is going to need even more time to get closer to Southeast Asian markets and beyond, given China’s rapidly growing influence in the region in recent years, experts believe.

“With Beijing’s growing economic influence and willingness to ‘punish’ states it sees as going against its interests, there has been a tendency to keep ties with Taiwan lowkey, regardless of how robust they are in practice,” said Chong Ja Ian, a non-resident scholar at Carnegie China, part of the Carnegie Endowment for International Peace think tank.

China’s economic influence in Southeast Asia is a force that has been growing since the 1990s, and will continue to be a difficult one to match by Taiwan, experts said. At the same time, Taiwanese still prefer to pay attention to Northeast Asia, North America, and Europe because the latter are lucrative markets for semiconductors.

What Lai Needs to Do

While it will be a tough battle for Lai, the president-elect can still have a chance to improve relations with Southeast Asia by helping clear hurdles by Taiwanese investors in these countries, according to Karl Chee Leong Lee, senior lecturer at the Institute of China Studies at Universiti Malaya in Malaysia.

By doing so, every public and private stakeholder would need to take their part in advancing Taiwan-Southeast Asia ties. More contact between governments –– even if technically unofficial –– could go a long way. Civil societies and Taiwanese people should also educate themselves about Southeast Asia, the experts continued.

Ratih Kabinawa, PhD candidate in international relations and Asian studies at the University of Western Australia, said that Lai would be willing to cooperate and promote dialogue with China so that Southeast Asian countries should not be too worried about improving their ties with Taiwan.

Increasing the number of Taiwanese students in Southeast Asia, encouraging language exchanges, and promoting labor rights and protection for migrant workers, are also important, Ratih said.

Pongphisoot ‘Paul’ Busbarat, Director of the Institute of Security & International Studies (ISIS Thailand), Chulalongkorn University, said Taiwan’s economic and people-to-people promotion should be maintained and doubled across the region as the island presents its democratic branding to the world.

“The areas in which Taiwan can play more of a role are education, the transfer of industrial and agricultural technology, promoting tourism, and more liberal policy for foreign workers from Southeast Asia in Taiwan,” he told CGSP.

In wielding the NSP, Lai must be careful. The NSP, as a tool at Taiwan’s disposal to advance its economic interests in Southeast Asia, may need to be “customized” for each country in the region. “Promoting democracy in the NSP may alienate some autocratic regimes in the region and trigger an offense to their rule,” Paul added.

Yet for Paul, “Taiwan’s presence and role in the region will offer an alternative tool for Southeast Asia to hedge against dependency on China and that will benefit the region.”

Randy Mulyanto is an independent journalist based in Jakarta.

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