Second Chance to Boost Ties in Tsai’s Second Term

Tsai Ing-wen’s return to power in Taiwan in January 2020 means that her flagship New Southbound Policy (NSP) is here to stay. President Tsai’s long-term vision to integrate Taiwan with the most dynamic countries in Asia, extending all the way to South Asia, and her comeback, offers a renewed opportunity to boost Indo-Taiwan relations. Her previous stint showed the potential of cooperation especially in economics. With India’s recent disappointing economic growth news, the country stands to gain even more from a deeper relationship with Taiwan’s economy since the two economies hold important complementarities.

Taiwan’s NSP also offers a range of cooperative areas beyond trade and investment, including human capital, smart cities, agricultural development and health care, all high on Indian prime minister Narendra Modi’s agenda. On healthcare, Taiwan is proving to be a standout model in the way the current coronavirus pandemic has been handled and seemingly abated on its soil. While geopolitics and foreign policy mindsets continue to limit New Delhi, India’s prospects to boost relations in Tsai’s second term may be higher as historic obstacles seem to be loosening.

The China factor

China is commonly understood as posing the single biggest hurdle for India in its relations with Taiwan. Beyond the sheer geopolitical concern of not provoking China, lies an Indian foreign policy mind-set that shirks from changing the status quo policy orientation of slow gradualism. In terms of India’s priorities, there are good reasons to maintain the government’s cautious approach to Taiwan, ranging from economic opportunities in China to the need to maintain regional stability. Since the launch of the NSP, however, there are a growing number of policy analysts in India and outside calling for New Delhi to engage more with Taipei. This is a new development in the Indian policy context where open support for such a posture has been historically rare.¹

In 2019, a scholar from the prestigious Indian Institute of Technology Madras, Joe Karackattu, compiled a comprehensive report that concludes “It is time for India and Taiwan to shed some of the self-imposed caution that has characterized their bilateral interactions to date.” ² With economics as the bedrock of their relations, Karackattu argues, it would help India delink from any deterioration in China-Taiwan cross strait relations. The Vivekananda International Foundation, a think tank widely known for its closeness to the Modi government, published a report on the New Southbound Policy and India-Taiwan Relations in April 2019. The author, Teshu Singh, surmises that “India-Taiwan relations are no more under the radar…the New Southbound Policy is a pragmatic policy that will help Taiwan not to be isolated and maintain its relevance.”³ Saheli Chatteraj from Jamia Millia University in Delhi in another 2019 report opines that “…in the background of Mainland China’s increased influence in South Asia through the Belt and Road Initiative and India’s huge trade deficit with the Mainland, a broader business and cultural partnership between India and Taiwan could prove to be a win-win for both.”⁴ In the past, Taiwan rarely held such importance, and such opinions were likely to be expressed off the record and behind the scene.⁵

There are fewer, but still important, voices that see the increasing value of greater ties with Taiwan from a geopolitical perspective. Foremost among them is C. Raja Mohan, one of India’s most highly regarded Indian strategic analysts. He praises the Modi government’s steps to enhance the bilateral relationship since 2014 but declares that it is now time for Delhi to take a “fresh look at Taiwan and replace its current incrementalism with a more ambitious policy.”⁶ He points out that most other major states have significant cooperation with Taiwan without giving it diplomatic recognition. Citing the importance of Taiwan in the geopolitics of East Asia, Raja Mohan argues that what happens to Taiwan will impact India’s Act East Policy and its ambitions in the Indo-Pacific. At the Brookings Institution, Tanvi Madan has called on the United States to facilitate India-Taiwan cooperation on the Indo-Pacific, even if modestly.⁷ In 2018, Taiwan’s Ministry of Foreign Affairs created the Indo-Pacific Affairs Section as a part of the NSP. The same year, India and Taiwan participated in the “Quad-Plus Dialogue” in Tokyo with Taiwan as the Dialogue’s Plus Partner. This is a 1.5 initiative of four think tanks from the main Quad countries of Japan, US, India, and Australia.⁸ Symbolically at least, this kind of step is telling.

No serious Indian observer questions the benefits for India from a stable and sensible relationship with China. India steadfastly adheres to China’s core One China policy in connection with Taiwan, but since 2010, there has been some weakening at the rhetorical level. This came in reaction to perceived Chinese provocation on Kashmir with Beijing  not issuing a visa to an Indian military commander stationed in Indian Kashmir (territory that Pakistan disputes), and by issuing “stapled visas” instead of normal stamped visas to Kashmiri residents.⁹ The first ever India-China joint statement without reference to India’s affirmation of the One China Policy came under the previous Congress government in 2010, and has continued under Modi with even more pointed language, suggesting that China accept a “One India Policy” vis-à-vis Kashmir. Some reports in late 2018 have suggested that Beijing stepped up pressure on New Delhi on the One China Policy at a time when India was trying to subtly expand its ties with Taiwan.¹⁰

Tsai’s NSP arguably provides a pragmatic pathway for India to circumvent the China obstacle. The NSP’s emphasis on economic, educational, and cultural relations makes it harder to argue against since the ostensible goal is to promote development across the region. Presumably, the Tsai administration will pump more money into NSP and continue to devote attention to it. In this era of shrinking economic resources and rising protectionism globally, Tsai’s gambit stands out as an exception. While Indo-Taiwan relations have been on the upswing over the last several years, the gap between reality and possibility is huge.

Economics as the leading edge

India and Taiwan are Asia’s third and tenth largest economies respectively.¹¹ In Tsai’s NSP, Taiwan leaders have characterized India as the “jewel in the crown” in relation to the other South and Southeast Asian countries. Yet trade and investment figures show potential rather than reality, with India lagging way behind countries such as Vietnam, Indonesia, Thailand, and Malaysia on investments from Taiwan. In 2018, India and Taiwan signed a promising landmark Bilateral Investment Treaty to promote investment flow. It protects Taiwanese investments in line with international standards and the safety and rights of Taiwanese investors in India.¹² On trade, bilateral levels are on the rise increasing from $2 billion in 2006 to $7 billion in 2019, registering a 250% growth.¹³

Moreover, Taiwan holds a special allure for India, which is struggling to increase its manufacturing with Modi’s “Make in India” promise sputtering. Taiwan boasts 47 “corporate giants” (India has 58),¹⁴ many of which are concentrated in areas in which India desperately needs investment such as information and communications technologies, electronics, healthcare, advanced food processing, and solar power. In electronic hardware for example, projected Indian demand versus production are proving to be way off earlier targets, and the Modi government last year announced the National Electronic Policy 2019. The new target of $400 billion in domestic demand is clearly not going to be met by the recent level of domestic production at just $59 billion. This gap represents an enormous opportunity for Taiwan to help meet Indian demand at the same time it accelerates its own exports.¹⁵

Taiwan is also a leader in 21st century smart cities design, which India has also announced as a priority. In 2018, top industry officials from the vibrant Indian state of Tamil Nadu visited Taiwan and subsequently are charting out a plan to replicate the model of the successful Hsinchu Science Park. Tamil Nadu wants to woo information and communication technology companies (for manufacturing and research) and expects Taiwanese companies to invest in a range of products in next generation electronics and hardware.¹⁶

Taiwan’s global giants like Foxconn and Wistron are already involved in India, but more can be done to ensure their presence and increased investment. In January 2020 Foxconn had to deny a report that it was cancelling a new factory for consumer electronic production in India over a dispute with Apple, a report that the Indian Industries Minister had apparently prematurely announced.¹⁷ Taiwanese companies came much later to India than their Japanese and Korean counterparts and do not have the same level of experience in dealing with India’s still daunting regulatory regimes, markets, distribution networks and politics for that matter. Latecomer Taiwan may get some new advantages though. The World Bank’s Ease of Doing Business index shows a marked improvement for India: in 2016 India ranked 130 of 190 countries, then jumped to 100 in 2017, and in 2019 rose to 63. But being a newcomer, Brand Taiwan does not enjoy the same exposure as Japanese and South Korean brands. This could see some change thanks to some bold and non-traditional thinking on the part of Taiwan’s government.

Changing the game

In 2017, Taiwan Excellence, run by the Taiwan Bureau of Foreign Trade, became a sponsor of Mumbai Indians, one of the most popular cricket teams in the Indian Premier League. It is owned by Mukesh Ambani, the richest Indian. Brand sponsorship in cricket is huge business and is awarded to the highest bidders. In the world of cricket business, India is a superpower. Taiwan Excellence represents the image of Taiwan’s most competitive and innovative industries and the tie up with the Mumbai Indians franchise is a way to create greater popular awareness of Taiwan in India. Michael Lin, director of the Taipei World Trade Centre Liaison Office in Mumbai declared that “Just as the Mumbai Indians are hot favorites and one of the best teams in the IPL, Taiwan Excellence too is one of the most celebrated technology producers in the world. This partnership means an amalgamation of two of the greatest teams in the business.”¹⁸

Several top Indian cricketers from the Mumbai Indians were even brought to Taiwan for a high-profile visit in 2018 to try out Taiwan-made virtual reality games. The Indian cricket stars were cheered on by a large crowd as they played a virtual reality cricket game.¹⁹ Taiwan Excellence’s linking up of cricket-crazy India and baseball-crazy Taiwan just represents one way to bring economic and cultural soft power together in a winning strategy for both sides.  

Since 2018, Brand Taiwan is also gaining recognition through Taiwan Expos conducted in important target countries, such as India, under the NSP. Last year, the high visible event brought about 150 exhibitors to New Delhi, with green products, smart living solutions, tourism, medical equipment, and bubble tea comprising some of the most popular pavilions. In just the first two days, the Expo attracted nearly 40,000 visitors.²⁰

Looking ahead

The Indian view tends to be that in order to move the needle on bilateral cooperation, Taiwan needs to take the lead. The business elite’s opinion is that Taiwan stands to gain more from India than the other way around.²¹ Whichever way the relative gains question is answered, what is clear is that there is strong complementarity in many sectors to the benefit of both countries. Recent developments only make this logic even more compelling.

The attempt by Taiwan to diversify its economic partnerships and reduce dependency on China through the NSP came well before the US-China trade wars and the current devastating pandemic, which is challenging the wisdom of global supply chains being so heavily concentrated in one country like China. The rapidly spreading deadly Covid-19 virus is also putting the global spotlight on China and its handling of the initial outbreak in Wuhan. Whatever the merits of the criticism of Beijing for suppressing information on the spread and the delay on the human transmission question, it is hard to miss the steep rise in Indian distrust and criticism of China. 

Social media in India has been rife with accusations of Chinese misinformation and cover up, even speculating that the World Health Organization (WHO) has been acting to protect China’s reputation. One of India’s iconic film stars, Amitabh Bachchan, tweeted to his nearly 40 million followers a meme showing the chief of WHO blindfolded with a Chinese flag. Bachchan quickly deleted the tweet. Samir Saran, president of the well-known Delhi think-tank Observer Research Foundation received wide publicity for saying that “The Chinese are very good at manufacturing. They are not very good at manufacturing consent.”²²  In contrast, Indian officials have scrupulously avoided finding fault with Beijing, with External Affairs Minister S. Jaishankar tweeting on March 24 after speaking to his Chinese counterpart Wang Yi  that they talked about “our working together in combatting #COVID 19” and agreeing to build on bilateral efforts.²³ A senior former Indian diplomat, G. Parthasarthy, praised New Delhi for not criticizing China publicly as President Donald Trump has done, but believes “China would have to work very hard to persuade the world it will contribute positively and generously in dealing with the challenges the world faces today.”²⁴ China’s efforts to stem negative public opinion in India, whether by highlighting donations of test kits by Alibaba Foundation or by exhortations of bilateral solidarity in this 70th anniversary year of diplomatic relations, are unlikely to achieve much given the current atmosphere of suspicion.

In comparison, the Indian media has been highly laudatory of measures taken by other Asian states like Taiwan, Singapore, and South Korea to contain the virus. In the past few days, the crisis has led some sections of the media to specifically question why Taiwan is shut out of WHO, which led to a public spat between the Indian media and the Chinese government.²⁵ Ji Rong, spokesperson at China’s embassy in New Delhi, launched a broadside against the media to refute Indian articles advocating Taiwan’s participation in WHO. Rong pointed out that the articles “seriously violated the One-China principle and sent wrong signals to Indian people” and that the Chinese embassy in India “expresses its strong dissatisfaction and resolute opposition.” The Indian media are unlikely to let go of the Taiwan-WHO controversy given the high health stakes (and geopolitics), especially after their report that Taiwan’s Ministry of Foreign Affairs had issued an advisory as early as December 31 about an unusual virus outbreak in Wuhan ahead of other countries.

Apart from the sheer human toll—the coronavirus is creating unprecedented havoc in the global economy—with the disruption of critically important supply chains demonstrating huge vulnerability in the current system centering on China, there also appears to be growing international frustration with China’s lack of transparency on the pandemic, with Indian opinion one of the least muted in this regard.  For Taiwan, these developments will  force it  to speed up the move of its huge manufacturing hubs from China, with India as the largest and one of the most attractive alternative destinations and markets. For India to reap such new and unexpected benefits, Modi needs to steer the country back to a more stable and inclusive internal environment, apart from all the chaos and uncertainty unleased by the pandemic. Otherwise, his own second term could be lost in domestic controversy at the cost of international opportunities, including those to be gained from Tsai’s second term.