Engage Taiwan

The case for a robust India-Taiwan economic partnership

Japan fell through the cracks. Relations with Taiwan, in comparison, remain in India’s diplomatic blind spot. Though its wisdom is debatable, there is an argument against pursuing closer open political relations with Taiwan for fear of offending China. There is no reason, however, for neglecting greater economic intercourse with Taiwan, one of Asia’s top economies. Even China has realised the need for, and benefited from, economic relations with its ‘renegade province’.

While Japanese, South Korean and even mainland Chinese firms have invested in India, Taiwanese firms are conspicuous by their absence. Similarly, while Indian firms, especially in the IT sector, have ventured into China and Japan, Taiwan is largely off their business radars. One reason for this is that the institutional arrangements for bilateral commercial diplomacy consists of intentionally innocuous sounding outfits — the India Taipei Association (ITA) in Taipei, and Taiwan Taipei Economic and Cultural Centre (TECC) in New Delhi. The lack of status and consequent diplomatic underinvestment implies that there is no one steering the course of India-Taiwan economic ties.

Yet deeper engagement can provide substantial benefits to both countries. Firstly, greater economic exchange will help Taiwan diversify its global trade and investment risks. India stands to benefit from partnering Taiwan’s globally competitive manufacturing sector, especially in high-technology areas like computer hardware and semiconductor technology.

Secondly, like Japan, Taiwan faces the challenge of the greying population. While it may be able to secure low-cost labour from East Asian countries, it can take advantage of India’s relatively young manpower through outsourcing and offshoring of many activities, including healthcare. Besides, it can enhance the financial security of its aged citizens by investing its pension assets (projected to be about US$150 billion by 2015) in India.

Deeper engagement then, holds out the promise of substantial benefits to both sides. The governments can help this process by qualitatively and quantitatively strengthening their trade missions. Travel must be made easier. The costs of business transactions and tourist travel must be reduced. Linkages between academic, research and cultural institutions must be nurtured. The governments must greater encourage the exchange of business and trade delegations so that a greater cross-section of businessmen have opportunities to smell out opportunities.

In India the tendency for politics to dominate the foreign policy agenda is causing the economic potential of links with Taiwan to be ignored. Ironically, strong economic links with Taiwan can help India politically in its engagement of China.

This post was written in collaboration with Prof Mukul G. Asher

3 thoughts on “Engage Taiwan”

  1. Dear Nitin,
    Appreciate the focus on what India needs to do to forge economic ties with the tigers of the East.Hope the Taiwan piece is a first step. From your vantage seat in that part of the world, hope you can shed light as to how the Malays developed ” expertise” in constructing highways and airports per ” New Millenium” international standards. Was Mr. Sam Velu key in Malaysian companies getting involved in the Golden Quad highway projects in India + the new Hyderabad Int’l Airport?
    Are the Malaysian companies that are involved in deshi projects largely Bhumiputra companies ?


  2. While I understand the post is primarily about economic issue, which I support completely, I think you may be completely dismissing the strategic benefit to India by engaging with Taiwan.

    I don’t see China not supplying Pakistan with nuclear weapon designs and parts, and missiles that can hit all corners of India, and now actively trying to sabotage India-US non-strategic nuclear deal (it’s another matter that we can kill the deal ourselves – both India and US) by providing nuclear reactors to Pakistan (and breaking the NPT law that China signed on to) and by providing a powerful ammunition to non-proliferation mullahs in US who are looking for ways to kill the Indo-US deal (one of my occasional blog is on this: http://gudem.blogspot.com/2006/01/chinese-acting-to-derail-budding-us.html)

    Granted Taiwan is under US security umbrella (or at least is perceived to be). But India can create lot of leverage when dealing with China with respect to Pakistan and our border issues by having close strategic relationship with Taiwan.

    I can never understand the thought of not trying to offend a foe that is actively working against our, not just peripheral issues but, national security. It’s indefensible.

  3. There’s definitely a lot of room for cooperation between India and Taiwan in the IT space. Taiwanese ODMs and OEMs like Compal, Quanta, Acer, Benq, and TSMC started out doing contract manufacturing and making low-cost knockoffs of PCs, cell phones, digital cameras, servers, semiconductors, etc. (and they still do a lot of that stuff), but have gradually been moving up the value chain. Likewise, Indian software companies started out doing rote work, but are now increasingly doing value-added software development and semiconductor design. Taiwan’s achilles heel is software, owing to language difficulties, while India’s is manufacturing, owing to the country’s infrastructure and labor laws. Combine the two countries’ strengths, and you can make a lot of progress in creating low-cost alternatives to Japanese and American products.

    Chandra, you’re right about it being indefensible, considering how much China’s given to Pakistan, but like I mentioned before, when it comes to China, the Indian foreign policy establishment still appears to be traumatized by the events of 1962.

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