The New Southbound Policy

January 19, 2018

In a concerted effort to expand Taiwan’s presence across the Indo-Pacific, President Tsai Ing-wen has introduced the New Southbound Policy (NSP) to strengthen Taipei’s relationships with the 10 countries of ASEAN, six states in South Asia (India, Pakistan, Bangladesh, Nepal, Sri Lanka, and Bhutan), Australia, and New Zealand. The policy is designed to leverage Taiwan’s cultural, educational, technological, agricultural, and economic assets to deepen its regional integration. This report tracks the ongoing implementation of the NSP and assesses what has been achieved since Tsai was elected in January 2016.

The Guidelines for the New Southbound Policy issued by the Tsai administration detail that the policy is designed to (1) forge a “sense of economy community” by fostering links between Taiwan and the 18 NSP target countries; and (2) establish mechanisms for wide-ranging negotiations and dialogues, and to “form a consensus for cooperation” with NSP target countries. In the short and medium term, the Guidelines identify four goals: (1) use national will, policy incentives, and business opportunities to spur and expand “two-way” exchanges with NSP target countries; (2) encourage industry to adopt “a New Southbound strategy” in their planning; (3) cultivate more people with the skills needed to support the NSP; and (4) expand multilateral and bilateral negotiations and dialogues to enhance economic cooperation and resolve disputes and disagreements.¹

The NSP follows from similarly named policies initiated under Presidents Lee Teng-hui and Chen Shui-bian, which were aimed at diversifying Taiwan’s outbound investment away from Mainland China and into Southeast Asia. Since these prior efforts had only a limited impact, skeptics often mischaracterize the NSP as the latest iteration of a failed policy. Such naysayers fail to appreciate, however, that Tsai’s approach is both more strategic and more comprehensive than those of her predecessors. While diversifying and reinvigorating Taiwan’s economy remain fundamental to the NSP, the policy also outlines mechanisms for more effectively integrating Taiwan into the region through cultivating interpersonal connections. Moreover, the NSP is being implemented at a time of slowing growth and rising wages in Mainland China, while investment opportunities are booming in Southeast Asia and South Asia.

The core economic goals of the NSP include institutional initiatives, such as updating and expanding economic agreements with targeted countries. At the same time, Taiwan is seeking to encourage small and medium enterprises (SMEs) to explore opportunities overseas. Taipei has also identified avenues for improving bilateral ties by engaging with the general publics of NSP target countries, as well as with government officials and business executives. As such, Taiwan has invested heavily in expanding cultural and educational exchanges to help promote a deeper under- standing of South and Southeast Asian cultures, languages, and business practices among the people of Taiwan. These “people-centered” exchanges serve to realize Taipei’s twin goals of strengthening Taiwan’s integration with the region and facilitating its economic diversification.

It is too early to determine whether the NSP will ultimately achieve its ambitious goals, and it may take years before the Tsai government’s investment will start paying dividends. Furthermore, the NSP should be carefully examined by both the countries targeted by Tsai and partners further afield—including the United States. Many of these countries have a vested interest in bolstering the mechanisms available for Taiwan to contribute to the peaceful development of Asia. These countries may find that the goals of the NSP overlap with their own objectives in the region, and therefore may be eager to lend additional support to the endeavor.

Selected Policy Recommendations for the United States

The United States has a profound interest in the success of Taiwan’s New Southbound Policy. Taiwan has been a long-standing partner of the United States. Its democracy and free society are a beacon of liberal values in the region, while its economic development model has been admired and studied for decades by nations in Asia and beyond.

To date, the United States does not appear to have given much thought or expended much effort to support the NSP within Asia. We suggest the United States consider actively supporting the NSP. We recommend the following specific actions:

• The assistant secretary of state for East Asian and Pacific affairs should coordinate with his/ her counterpart in the South and Central Asia division to create an internal working group to consider how the U.S. government can support the NSP.
• The U.S. government should engage Japan, Australia, and India, the other members of the “quad,” in support of the NSP.
• The U.S. government should continue to support Taiwan’s inclusion and active participation in international and regional initiatives where statehood is not required.
• U.S. nongovernmental organizations (NGOs), particularly those with programs in NSP target countries, should consider partnerships with NGOs in Taiwan to integrate their work where appropriate in support of the NSP.
• The Commerce Department’s U.S. Commercial Service should engage with American industry associations and companies, and explore potential avenues of collaboration be- tween American and Taiwan industry in NSP target countries.
• The United States should consider bilateral (U.S.-Taiwan) cultural initiatives that may be brought to third countries in Asia.
• The United States should include Taiwan youth in relevant regional programs and networks.

Selected Policy Recommendations for Taiwan

Continued high-level attention, effective planning and coordination, as well as greater resources will be essential for the NSP to achieve its goals. Not only must more work be done domestically to support the NSP, but Taipei must also strive to better communicate the shared benefits of the NSP with its friends and partners overseas. Additionally, Taipei must support Taiwan companies as they navigate the complex and dynamic global marketplace.

We propose the following recommendations for Taiwan’s policymakers:

• To ensure greater U.S. attention to and creative support for the NSP, Taipei should take more initiative to explain the nature and purpose of the policy to both official and unofficial American audiences.
• Taiwan should offer ideas and incentives to various relevant U.S. players, including American companies, to assist the island in meeting its NSP goals.
• Taiwan should seek to partner with the United States through its bilateral platform, the Global Cooperation Training Framework (GCTF), to hold joint training programs in NSP target countries.
• Taiwan should promote three-way exchanges between think tanks, youth, and academics from NSP and non-NSP target countries.
• Leveraging Taiwan’s advantages in soft power is central to the success of the NSP. Taiwan should actively promote its diverse heritage and unique status as the world’s only culturally Chinese democracy.
• Taiwan’s policymakers should seek to more fully understand what Taiwan’s companies need to expand their business opportunities, and how greater trade and investment with NSP target countries fit with those goals.
• Taipei should consider creating an NSP advisory board composed of a range of companies and industry groups, which can be consulted on a regular basis.
• The Taiwan External Trade Development Council (TAITRA) and sectoral associations should redouble their efforts to assist SMEs in entering new and unfamiliar markets in the region.
• Taiwan should effectively utilize other large economic partners and global industry associations in which its companies are active members to help its industry make headway in the NSP target countries.
• Taiwan’s officials need to develop policy linkages between their various domestic economic policies and the NSP.
• Clear economic benchmarks should be established for the NSP that are rooted in commercial results for Taiwan’s businesses, including sales, exports, outward and inward investment, employment, and value-added created.

[1] “The Guidelines for New Southbound Policy,” Taipei Economic and Cultural Office in Brunei Darussalam, August 23, 2016,http://www.ROC-taiwan.org/bn_en/post/644.html.