Diversifying partners: the New Southbound Policy
The New Southbound Policy (NSP), a flagship initiative of President Tsai when she took office in 2016, is a strategic response to these evolving regional relations – and to Beijing’s actions to restrict and close down Taiwan’s international space. The NSP builds on the ‘Go South’ policies of previous administrations, and continues Taiwan’s efforts to find a solution to the perennial problem of how to balance its economic interests – which depend so much on relations with China – with its security interests – which evidently do not. One notable difference is that the NSP takes a ‘people-centric’ approach that, in addition to economic collaboration, focuses on developing a shared identity between Taiwan and primarily its Southeast and South Asian neighbours. The aim is to forge links in sectors such as technology, innovation, healthcare, agriculture, culture and tourism. The NSP was allocated a budget of $241 million in 2018, up from $131 million in 2017.
Taiwan has made some progress under the NSP. For example, an updated bilateral investment agreement was signed with the Philippines in December 2017, and an updated bilateral investment protection treaty was concluded with India in December 2018. However, while Taiwan’s exports to, and foreign direct investment in, target countries have increased, overall trade flows have remained relatively modest, and current levels of bilateral trade are generally not unprecedented (see Figure 1). And of course China looms large in international trade, offering strong competition. For Taiwan’s potential partners, the challenge remains how to balance the potential benefits of NSP projects against any possible detrimental impact on relations with China.
Figure 1: Value of Taiwan’s total trade in goods with NSP target countries (2000–18)*
Taiwan’s attempts to upgrade and diversify relations with regional partners are also a response to domestic demographic changes. Its population is ageing, and the country has one of the lowest birth rates in the world. Moreover, stagnant wages have been a major incentive for young Taiwanese to seek opportunities abroad. China in particular offers many of them better job opportunities and earnings potential. To further increase its attractiveness to Taiwan’s companies and professionals, China’s ‘31 Measures’, launched in February 2018, ease restrictions for Taiwanese entities seeking to invest in China (specifically in those industries that were previously highly protected), and aim to allow equal educational and professional opportunities to migrants from Taiwan. The new measures essentially allow them access to the same policies and benefits as their local counterparts. While this provides new opportunities and market access for Taiwanese businesses, it has also added to state concerns about accelerated losses of Taiwanese talent in the domestic labour force.
Demographic changes, coupled with the need to fill gaps in skilled labour, have meant that Taiwan has had to address the issue of immigration. There were estimated to be more than 700,000 foreign workers in Taiwan in late 2018; the majority come from NSP target countries in Southeast Asia, and are employed mainly as care workers, in factories or in construction. Although migrant workers have become an increasingly accepted part of Taiwanese society, they still frequently encounter barriers to social integration and also suffer discrimination – and, in some cases, are vulnerable to abuse of their safety and rights by their employers or employment agencies. Domestic public opinion divides between strong support for some forms of skilled immigration, but weak support for unskilled migrants and for those who come predominantly from Southeast Asia. While changes to the Employment Service Act in November 2018 have led to some improvements in protection for migrant workers, including eligibility for paid leave and tougher rules and penalties for employers and employment agencies, the NSP needs to do more to ensure more equitable treatment of Taiwan’s existing Southeast Asian community and improve people-to-people interaction at this most basic level.
Recent amendments to the Nationality Act for the first time allow selected, highly qualified professionals the opportunity to obtain dual citizenship
The NSP may be heading in the right direction, but there remains a contradiction in its ambitions to build ties and forge a shared identity with Southeast Asia while often disregarding the social capital offered by the Southeast Asian community that already sits within its borders. The NSP has nevertheless been working to put policies in place to address some of the issues that it is facing with regard to immigration. The most radical shift has been the recent amendments to the Nationality Act, which for the first time allow selected, highly qualified professionals the opportunity to obtain dual citizenship.
The approval of a draft New Economic Immigration Law by the Executive Yuan in November 2018 is also indicative of the Tsai administration’s efforts to realize the implicit narrative within the NSP of an open, dynamic relationship between Taiwan and its region. In addition to boosting recruitment of skilled professionals, the draft legislation should make it easier for mid-level technical personnel and foreign students to live and work in Taiwan as permanent residents. Although not the same as granting citizenship, the new law represents a positive step forward, given that it includes provisions for the continued employment of migrant workers who have reached a medium-level qualification in industry and social care and have been employed in Taiwan for a period of six years. The proposed changes would, at least, offer incentives and security to a group of people who work in key sectors from healthcare to retail and service industries. The law also offers a vision for what it means to be ‘global Taiwanese’ – Taiwanese of hybrid identity, and with roots reaching out not just into mainland China, but across and beyond the Asian region.
The NSP is a highly aspirational project. To implement it will take long-term commitment, and will require a reconceptualization of Taiwan’s place in the world, and of its main trading and investment partners. And if immigration is to be encouraged, this will have a deep impact on national identity. Currently, 95 per cent of Taiwanese say they are of Han ethnicity (immigration in recent history has been overwhelmingly from mainland China), so this homogeneity – culturally, linguistically and ethnically – would be challenged. Finding new markets and trading partners has potential, but these are unlikely to grow at the rate that Taiwan would like to see in order to reduce its reliance on China.
Moreover, if it is to be successful, the NSP will need to be sustained across successive – and ideologically different – administrations. To counter the risk of the NSP figuring as the flagship of just one administration, only to be neglected by an eventual successor, Taiwan must make an institutional, cultural and political commitment – critically, with bipartisan support – for this policy to become a fundamental feature of Taiwanese economic life. With Taiwan’s labour force having already shown itself to be adaptable to challenging economic circumstances, this is now a question of scale, and of just how fast, sustainably and pragmatically the aspirations underpinning the NSP can be achieved.