Taiwan overcomes political barriers to build economic ties with South Asia

Though its very existence as a sovereign country is challenged by its giant neighbour, the Peoples’ Republic of China (PRC),Taiwan, formally called the Republic of China (ROC) has emerged as a major economic power in Asia. Its technological abilities backed by native Chinese inventiveness and commitment to excellence has enabled Taiwan to dominate world’s electronics with its computer chips. A single Taiwanese company - the Taiwan Semiconductor Manufacturing Company or TSMC - has over half of the world’s market.

The Taiwan External Trade Development Council (TAITRA) works to promote trade and businesses with even those countries which have no diplomatic relations with Taiwan. TAITRA has established overseas offices in Dhaka (Bangladesh), Kolkata (India), and Tehran (Iran).

Mainland China

Despite the acrimonious relationship with mainland China (PRC), Taiwan has a booming trade with the latter. In 2010, PRC and Taiwan signed the Economic Cooperation Framework Agreement (ECFA), a Free Trade Agreement (FTA) to reduce tariffs and commercial barriers as well as improve cross-strait relations. Buoyed by the ECFA, bilateral trade and Taiwan’s private investment in the PRC grew rapidly. By 2019, bilateral trade was US$ 228 billion and Taiwanese investment in mainland China was US$ 1.58 billion. But later, the PRC levelled charges against Taiwan and restricted Taiwanese exports to it to US$ 152.2 billion.

Taiwan has been expanding its trade and investments in South East Asia and South Asia though most of the countries in the region swear by the “One China” policy and do not have diplomatic relations with Taiwan. Countries which have no diplomatic relations with Taiwan nevertheless allow Taiwanese trade representatives to function. And that is not objected to by Beijing because Beijing itself trades massively with Taiwan.

India

India is wedded to the “One China” policy and its bilateral trade with China amount to US$ 118.4 billion. India’s exports to China rose by 8.7 percent to $16.67 billion, while imports increased by 3.24 percent to US$ 101.7 billion. All this despite a war with China in 1962 and long standing border dispute with it involving 4,500 sq km in the Ladakh region.

However, after the violent clash at Galwan in 2020, in which 20 Indian soldiers were killed, there is a heightened interest in New Delhi to cultivate Taiwan. And Taiwan has shown keenness to reciprocate.

Taiwan’s recently elected President, Lai Ching-te, was among the first to congratulate Indian Prime Minister Narendra Modi on June 9 when he took oaths as Prime Minister for the third time in a row. Modi responded by calling “mutually beneficial economic and technological partnership.”

Beijing promptly protested to India, seeing a political dimension in the pleasantries exchanged between Modi and Lai. To Beijing, Lai is a separatist and “troublemaker through and through”.

India and Taiwan have been inching closer in recent years, driven by their geopolitical opposition to the PRC as well as technologies such as semiconductor chips and mobile phone manufacturing.

In 2023, the total bilateral trade between Taiwan and India amounted to approximately US$ 8.2 billion. Taiwan’s exports to India reached US$ 6 billion US dollars, marking a 13% growth. Taiwan imported goods worth US$ 2.2 billion from India.

Taiwanese firms have invested over US$ 2.3 billion in India. As of the end of February 2024, more than 200 Taiwanese businesses have made investments in India, primarily in the electronics, information and communication technology, petrochemicals, steel, shipping, footwear manufacturing, automotive and motorcycle components, finance, and construction sectors. Collaboration of small and medium enterprises is another focal area.

Taiwan’s Foxconn, which assembles a big chunk of the world’s iPhones, has significantly expanded its manufacturing base in Chennai. Taiwan’s Powerchip Semiconductor Manufacturing Corp (PSMC) is building a chip-making plant in partnership with the Tatas in Gujarat.

Both sides have strengthened cooperation in important areas of policy sharing, technological assistance, innovation, entrepreneurship and business incubation, market development, as well as capacity and capability building. India and Taiwan have signed an agreement to bring Indian migrant workers to Taiwan to ease the island’s long-standing labour shortage.

Despite a formal adherence to the “One China” policy, India has been ramping up its political ties with Taiwan, says Rishi Iyengar in the June edition of Foreign Policy. He points out that when Tsai Ing-wen first won the Taiwanese Presidential election in 2016, India’s ruling party, the Bharatiya Janata Party (BJP), sent an official to attend her inauguration. That year, New Delhi’s Raisina Dialogue — a forum co-organised by the Indian foreign ministry — featured a former Taiwanese Foreign Minister as one of its speakers. However, for New Delhi, the economic component of its engagement with Taiwan is more important.

Bangladesh

Like India, Bangladesh is wedded to the “One China” policy” and has many projects being executed by mainland Chinese companies. But it has business relations with Taiwan too. In 2022, Bangladesh exported US$ 83.8 million worth of goods to Taiwan. Over the past 5 years the exports of Bangladesh to Taiwan have increased at an annualised rate of 47.4%, from U$ 12 million in 2017 to US$ 83.8 million in 2022.

The main products that Bangladesh exported to Taiwan are Knit T-shirts, Non-Knit Men’s Suits and Ammonia, crabs, shrimps, copper, clothing and shoes. The main export products from Taiwan to Bangladesh are petroleum, stain steel, synthetic fibre, vinyl chloride, polyacetal, epoxy, cloth and sewing machines.  

There are over 40 Taiwanese companies investing in Bangladesh, the largest categories are clothing manufacture, shoe manufacture, aquaculture and furniture manufacture. The biggest Taiwanese investor in Bangladesh is Run Xing Textile Company, and the second is Pou Chen Corporation, which makes running shoes for Nike, Adidas and Puma.

After wages increased in China and 2014 Vietnam anti-China protests, many of Taiwanese companies have decided to move their factories to Bangladesh for lower payment and stable environment.

Sri Lanka

Again, like India and Bangladesh, Sri Lanka is wedded to the “One China” policy. But there is bilateral trade between Sri Lanka and Taiwan. Taiwan’s exports to Sri Lanka had reached US$ 340 million and imports amounted to US$ 71 million.

Taiwanese companies in Sri Lanka invested around US$ 7 million. The main sectors of investment include the textile industry, garment manufacturing, food manufacturing, and transportation facilities manufacturing and repairing.

Pakistan

Taiwan has had great difficulty building closer economic and trade relations with Pakistan due to Beijing’s great influence over Pakistan. However, according to the Taiwan External Trade Development Council (TAITRA) data, Pakistan’s imports from Taiwan totalled US$ 626 million in 2019. In the same year, its exports to Taiwan were worth US$ 100 million.

Even before Taiwan floated its “New Southbound Policy” Taiwanese businesses were interested in Pakistan’s emerging market. The South Asian country has a young population, large middle class, and a growing consumer market.

The Taiwan External Trade Development Council has emerged as the main semi-official Taiwanese entity conducting regular outreach to Pakistani industry counterparts on commercial matters. TAITRA has signed memorandums of understanding (MOUs) with the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and the Lahore Chamber of Commerce and Industry (LCCI) to strengthen economic and trade exchanges. Lahore is the centre of Pakistan’s software industry and has a growing local computer assembly industry.