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Further Southbound: Taiwan Expands Pan-Asia Building Initiative

With the addition of five new flagship programmes and plans to target the cross-border e-commerce, tourism and infrastructure development sectors, Taiwan has a lot riding on the success of Tsai Ing-wen's New Southbound Policy.

Photo: Taiwan: Southbound in search of newly-unbound business opportunities. (Shutterstock.com/beeboys)
Taiwan: Southbound in search of newly-unbound business opportunities.
Photo: Taiwan: Southbound in search of newly-unbound business opportunities. (Shutterstock.com/beeboys)
Taiwan: Southbound in search of newly-unbound business opportunities.

Since becoming Taiwan's president in May 2016, Tsai Ing-wen's priority has been to open-up additional overseas markets for the territory's export / investment-oriented businesses, with the New Southbound Policy (NSP) – a revival of a successful 1990's initiative – her key strategy. Intended to build links between Taiwan and 18 target countries across Asia and Australasia, it is said to have played a key role in boosting exports to Australia, New Zealand, India and the ASEAN bloc.

Looking to build on this, in August last year, Taiwan's Office of Trade Negotiations announced five further flagship programmes and three additional priority sectors, while also reaffirming the NSP's long-term strategic objectives. The five flagship programmes are centred around regional agricultural development, medical and public health cooperation, industrial chain development and industrial talent cultivation, NSP forums / youth exchange platforms and industrial innovation / cooperation. By contrast, the three priority sectors are cross-border e-commerce, tourism and infrastructure development.

The success of the NSP has led to a number of Taiwanese semi- and non-governmental organisations and businesses expanding their overseas activities. The quasi-governmental Taiwan External Trade Development Council (TAITRA), for instance, has organised commercial showcases in Indonesia, the Philippines, Malaysia, India, Vietnam and Thailand.

For its part, the Chinese National Federation of Industries, one of Taiwan's most important industrial and commercial organisations, was one of the prime movers, alongside the Ministry of Economic Affairs, in the March 2017 launch of the Asia-Pacific Industrial Co-operation Promotion Committee. The prime role of the Committee has been to handle NSP-related inquiries from the industrial and academic sectors, while also helping to build closer ties with designated organisations and businesses throughout Asia.

Different Countries, Different Strategies

With more than a dozen South Asian and Southeast Asian countries now within the remit of the NSP, there have been calls for Taiwan to customise its approach to each overseas market in line with their prevailing social conditions and overall development level. In line with this, back in January this year, Rock Hsu, Chairman of the Chinese National Federation of Industries, said: "It's crucial that NSP investment is aligned with the priorities of any target country's key industrial sector."

Indeed, it is not hard to identify such priorities. The Vietnamese government, for instance, has made no secret of its commitment to the textiles sector, while the Philippines is equally focused on electronic information, automotive-related manufacturing and the nurturing of new science park zones. In the case of Indonesia, it shares the Philippines' enthusiasm for the automotive sector, while Thailand is pinning its hopes on food-processing and catering. Malaysia, for its part, is looking to further develop its already-robust electronic parts and components industry, with a number of Taiwanese manufacturers also intending to establish tyre-production facilities in the country.

Photo: Taiwan Expo: TAITRA’s cross-Asia business-matching roadshow.
Taiwan Expo: TAITRA's cross-Asia business-matching roadshow.
Photo: Taiwan Expo: TAITRA’s cross-Asia business-matching roadshow.
Taiwan Expo: TAITRA's cross-Asia business-matching roadshow.

Past Glories

As a sign of the likelihood of sustaining the success of the strategy, several of the Taiwanese companies that invested in Southeast Asia during the 1990s, when the first incarnation of the Southbound Policy was active, have continued to reap the benefits ever since. In Vietnam, for instance, several Taiwanese companies that invested nearly 30 years ago – including the Phu My Hung real estate development group, the food giant Vedan International and the Sanyang Motor motorcycle manufacturer – are all now major players on the local industry scene.

It's a similar story in Indonesia where the Ko's Group has become established as the largest producer of civet coffee and Top in Style is now a market leader in the halal textiles sector. Among the Taiwanese companies still benefitting from their Thai connections are the marine freight giant Dimerco, the cookware manufacturer First Enamel and Green River Holdings, a leading wood and timber business.

Second Southbound Wave

This time round, as well as major manufacturers, many of the companies looking to follow the example of their 30-years-ago forebears are leading services companies. To date, a huge number of them are said to have benefitted from the supportive environment created by the adoption of the NSP, as well as from many of the ongoing cross-border initiatives.

One company that has already enjoyed considerable success as a result of the NSP is the New Taipei-based Hon Hai technology group. In June last year, FIH Mobile, the group's dedicated smartphone manufacturing subsidiary, linked up with a local partner company to jointly develop a Sharp smartphone assembly facility in Batam, one of Indonesia's key industrial hubs. With approval already secured, the project is expected to result in 1,000-2,000 new jobs being created.

Together with Taipei-based Compal Electronics, Hon Hai has also invested heavily in developing laptop and non-phone manufacturing facilities in Vietnam, a move seen as likely to attract several electronic parts and components companies to open their own plants in the country. Staying in the electronics sector, New Taipei City's New Kinpo Group has invested US$300 million in the Philippines, where it's non-mobile-phone manufacturing facilities are expected to employ up to 15,000 people.

Looking beyond the hi-tech industries, the Taiwan Water Corporation, as part of a joint initiative with TAITRA, has established the Aqua A-Team Taiwan, a consortium of 26 upstream / downstream water industry service companies. With Indonesia its first priority, the hope is that this joint operation will find a lucrative niche in working with many of the region's poorly water-resourced nations, notably the Philippines, Myanmar and Vietnam.

Photo: Aqua A-Team Taiwan: Drought-busting consortium delivering H2O to-go.
Aqua A-Team Taiwan: Drought-busting consortium delivering H2O to-go.
Photo: Aqua A-Team Taiwan: Drought-busting consortium delivering H2O to-go.
Aqua A-Team Taiwan: Drought-busting consortium delivering H2O to-go.

On the logistics front, the Taiwan International Ports Corporation and the Yang Ming Marine Transport Corporation have jointly invested NT$200 million (US$6.7 million) in the re-development of Surabaya, Indonesia's second largest port. With the project having gone live in May this year, it is hoped that it will both boost skill levels at the port, while also driving increased freight throughput via improved connections with Kaohsiung, Taiwan's busiest port.

In terms of improved technology and staff exchanges – two other NSP priorities – Tatung, the Taipei-based electronics group, has signed a cooperative agreement with Thailand's Oriental Institute of Technology. This will see the two look to jointly cultivate skilled staff, while also carrying out industrial exchanges in the fields of R&D, design, management and production.

Not to be left out, Taiwan's financial sector has also capitalised on the opportunities emerging from the NSP. Over the past two years, a number of the territory's major players – including CTBC Financial Holdings, Cathay Financial Holdings, First Financial Holdings, the Taiwan Co-operative Bank, the Bank of Taiwan, the Hua Nan Bank and the Taiwan Business Bank – have all found considerable success throughout Southeast Asia. As well as working with local companies, many of these institutions have also leveraged on their overseas locales to provide financial services to export-oriented Taiwanese businesses.

The success of the NSP, though, is far from just anecdotal. According to Taiwan's Office of Trade Negotiations, 2017 saw a 15.61% upturn in trade between the territory and many of the NSP-targeted Asian nations, with the total of all such activity valued at $110.9 billion, up 15.61% from 2016. Overall, in the same year, 133 Taiwan-backed projects went live across the region, representing a total investment of $3.68 billion, a year-on-year increase of 54.51%. Putting this into perspective, this equates to nearly a third (31.8%) of Taiwan's total outbound investment for the year in question.

Robert Kang, Special Correspondent, Taipei

Content provided by Picture: HKTDC Research
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