OBOR AND THE ROLE OF TAIWAN IN SOUTHEAST ASIA Mag.Dr. Alfred Gerstl, MIR

Department of East Asian Studies/ East Asian Economy and Society (EcoS)

SINGAPORE, NOVEMBER 2015

TAIWANESE-PHILIPPINE TENSIONS

• May 2013: Philippine navy kills Taiwanese fisherman in disputed waters

• Taipei: threat of expulsion of Filipino guestworkes; tradenegatively impacted

• August: Manila´s „official apology“

OVERVIEW

• Introduction: The context (1)

• Taiwan´s relations with SEA andASEAN (1): 1959–1990

• The context (2): ASEAN´srelations with China

• Taiwan´s relations with SEA andASEAN (2) • Lee

• Chen

• Ma

• Tsai

• OBOR and South China Sea• Whose norms?

• Case Study: Taiwan´s relationswith Singapore

• Conclusion: Taiwan´s futurerelations with SEA

THE CONTEXT (1): ENGAGING WITH SOUTHEAST ASIA

• Japan, Russia, EU • No comprehensive

strategy

• Australia: Asia Pacific Century

• India: Look => Act East Policy

• USA: (previously?) Pivot toAsia

• China: One Belt, OneRoad

• Taiwan: Go South => New Southbound Policy

Strategic Gaming I: The South China Sea

Strategic Gaming II: The East China Sea

REGIONAL ORDER: INCENTIVES & CONSTRAINTS FOR TAIWAN

• Sino-US relations

• Quality of Cross-Strait relations• One China principle

• Pan-Blue vs Pan-Green

• Sino-ASEAN relations

• Security and

• economic needs andopportunities in EA

• South China Sea

• OBOR

TAIWAN & SEA (1)

• Only brief period of autonomy for

Taiwan-SEA relations (Leifer 2001)

• Decolonialization

• Cold War

• *1967 ASEAN• Indo, Mal, Phil, SG, Thai • Strict anti-Communist

• US relations logic

• Vietnam War

• Taiwan´s relations – formal

• Until mid-1970s: diplomatic relations withPhilippines, Thailand South Vietnam; consularrelations Malaysia

• Informal

• Non-official SEA offices in Taipei

• Links to Chinese (business) communities in SEA

• 1971 PRC UNSC seat• 1978 reform policy• 1979 Sino-US diplomatic relations• 1980s democratization process in Taiwan

• 1989/91 end of Cold War

TAIWAN & SEA

• 1959 first FDI in SEA (X. Chen 1996)

• Cement factory Mal

• 1959–1980: SEA major FDI spot• Mal, Thai

• 1960s, 1970s labor-intensive – cluster-oriented• Food, beverages, textiles, rubber, electronics

• KL, Penang, BK, Jakarta, Bandung, Manila

• 1959–1993: US$ 16.1 in total – similar to FDI in China

• Politically: quasi-diplomatic relations with ASEAN-5

.

TAIWAN & SEA

• 1980s closer and upgraded economiccooperation

• Tai: FDI, know how• Technology, agriculture

• Political relations improved

• SEA: economic logic

• Wish to upgrade economy and infrastructure, market liberal reforms, closer ASEAN cooperation

• 1992 AFTA

• Risks:

• Authoritarian regimes

• shift to capital-intensive production base –higher wages

• infrastructure deficits

• cultural, language barriers

• Indo, Phil, Mal, Thai, SG

• Capital-intensive: Petrochemicals, electricaland microelectronics manufacturing

• Smaller cities, Subic Bay, Batam island, HCMC – export processing zones

• 1988 trade mission in Hanoi

• Leading investor early 1990s

• 1990s small FDI Laos, Cambodia, Burma

• Only with SG, Indo security relations

• Increasing number of Taiwanese companiesin SEA, China part of regional production, divison of labor networks• Overseas Taiwanese/Chinese in SEA

THE CONTEXT (2): CHINA´S RISE

• 1989 Tiananmen: Isolation in Western world

• 1990/91 normalisation with East Asia• Indonesia, Singapore, South Korea

• Deng: „low profile“ in international politics• 1992 Southern tour

• Early 1990s „China´s rise“ and „China threat“ • Economic• strategic rivalries

• J. Mearsheimer: Offensiv Realism

• Mid-1990s: Multilateralism

ARF, APT • „Harmonious society“ • Soft power

• 1992 Consensus

• HOWEVER unilateralism in SCS, upgrade navy

• 1995 Mischief Reef• First confrontation with ASEAN member

• 1995/96 Cross-Strait crisis

• 2001 WTO membership

RELATIONS CHINA-ASEAN• Cold War

• Split Moscow – Beijing

• Vietnam War

• 1979 border war China - Vietnam

• Chinese minorities in SEA

• „Fifth column“ – Indo

• After 1989/91 socializing and befriendingChina

• Integration in ASEAN structures: comprehensive

• 1994 ARF

• 1997 ASEAN+3

• 2005 East Asia Summit

• 2002/2010 CAFTA

• 2002 ASEAN-China Declaration on SCS

• Acceptance of ASEAN Way, norms, institutions – andASEAN´s centrality

• Rule based, open, cooperative order, dialogue, consensus

• South China Sea? OBOR?

• New China threat debate

.

TAIWAN & SEA (2): LEE TENG-HUI

• 1988–2000

• High growth rates, major investor

• 1994 Go South Policy

• Pragmatic, economically oriented foreignpolicy• Bilateral approach

• Reducing dependency on China • 1992 huge FDI increase at SEA expense

• 1994–1996 peak: US$4 bio/year

• 1993: Top investor in VN, no. 2 Mal, no. 3 Indo, no. 4 Thai, no. 5 Phil

• 1994 Tai Exports to China: US$ 12.6 bio – SEA: 11.4 bio.

• Since 2000 more FDI in China than SEA

• Political contacts intensified

• 1989 in SG • “President from Taiwan”

• Personal relationship with Lee Kuan Yew

• 1993/94 “inspection tour” of Minister for Economics Indo, Phil

• 1994 vacation diplomacy: Lee meetings with King Bhumibol, Ramos (Phil), Suharto, Habibie (Indo)

• 1997 clashes in Cambodia • 1000 Taiwanese to be evacuated

• Difficult logistic situation – limits

• SEA guestworkers

LEE TENG-HUI

.

• Key events:

• 1994 Go South

• June 1995 Lee´s speech at Cornell Uni

• 1995/96 Taiwan Straits Crisis

• 1997/98 AFC

• Economic crisis in SEA

• 2000 election Ma

TAIWAN & SEA

• 1997 AFC: turning point

• Since then decline of Taiwan´sinfluence in SEA • Taipei: US$1.2 bio. deposit in SEA

Central Banks, support for Taiwanese banks in SEA

• 11/1997 Goh, Mahathir in Taipei

• ASEAN plus Three: Institutionalization without Taiwan

• 1999 AMM: re-affirmation of OneChina

• No ASEAN observer status for Taiwan • => more uniform SEA pattern towards

Taipei • Today: significant differences towards

PRC

• Taiwanese FDI => PRC

CHEN SHUI-BIAN

• 2000–2008

• Confrontational, pro-independence stance

• but initially China FDI focus

• Beijing critical of Taiwanese influence in SEA

• Decline of economic relations with and politicalinfluence in SEA

• 2002: revival of Go South

• 2002 VP Lu in Indo, Brunei Trade and TourismOffice in Taipei, 2002/03 Minister of Economics in SEA, SEA politicians in Taiwan

• 2003 FDI in Thai, Mal, Phil, Indo, SG, VN, Cambonly US$937 mio. • To China US$7.7 bio

• 2005/06 two Chen trips to Indo

• Criticism from business• Lack of committment from government, less information

on SEA, cultural, language barriers (M. Chen 2004)

• 2007: SEA second largest export destination

• Taiwan-SEA restricted to economics

• Criticism on „scorched earth diplomacy“, evenfrom SG • No FTA („Taiwan“)

• SEA perspective:

• Unwillingness to accept high-ranking politicians

• Deeper cooperation with China

• Regionalism => EAS

MA YING-JEOU

• 2008–2016

• Better relations with China: “viable diplomacy” • 2008 SEF - ARATS, travel agreement• 2010 Economic Cooperation Framework Agreement

(ECFA)

• Global economic crisis – also in Tai, SEA

• Initially ASEAN focus – ASEAN: economics, no politics, security => bilateralism • But TPP, RCEP

• Production chains

• Exports to ASEAN: 14 => 18% (2015) • 3rd FDI in Thai, 4th Mal, VN • Vietnam increasingly attractive

• Lower wages than China

• Foxconn, Compal

• Trade, development offices in Myanmar

• 2013 FTA with SG and NZ • Visit to SG 2015 after Lee Kuan Yew´s death

• Visa waiver with SG, Indo, Mal

• 10% tourists SEA • PRC: 41%

• ASEAN Department within MOFA • 2009 Taiwan ASEAN Studies Center

• 2014 Sunflower Movement: obstacle fortrade agreements

SCS – Territorial Claims

• Same arguments as Beijing

• History: discovery, navigation, contacts, maps• 90% of SCS – U-line

• Concrete claims:

– Nansha (Spratlys) – Hsisha (Paracels) – Chungsha, Pratas

• First nation that occupied islands, notablyTaiping (Itu Aba)

– Also claimed by China, Phil, VN – Navy (600), radar station, small power station– 1932 seized by France – WWII: Japan – 1946 China – 1956 occupied by Taiwan

• Patterns:

– Low key actor since 1990s – Track two diplomacy

– 2015 SCS Peace Initiative – Resource sharing, cooperation

– 2012 East China Sea Peace Initiative

– KMT: Good relations with Beijing, Washington and ASEAN

– Senkaku/Diaoyu Islands: int. arbitration – but not for SCS

– „Taiping Island is an island“

TSAI ING-WEN

• 2016 –

• New Southbound Policy

• Announced prior to campaign

• Strengthening of economic, cultural ties with SEA, South Asia, Aus, NZ

• New Southbound Policy “(…) is similar but more strategic than the policies of Lee and Chen. Like its forerunners, Tsai’s policy seeks to lessen the mainland’s dominance of Taiwan’s trade, but it is more comprehensive and emphasizes building an extensive network of cultural and interpersonal relationships throughout the region” (Glaser, Funaiole andJin 2017)

• ASEAN 2nd largest trade partner

• Tai 3rd largest investor in Thai, 4th in Mal, VN

• Tourism: 13% SEA – 41% China

• “In the end, any policy that facilitates people-to-people exchanges will promote mutual understanding between Asean and Taiwan - a necessary step for Taiwan to effectively "go south" and join the regional integration” (Bao-chiun 2016)

• Growing consumer markets – middle classes in India, Indo, Phil, VN

• China, Jap, South Korea – trade agreements with ASEAN

NEW SOUTHBOUND POLICY

• Key goals

• 1) Long-term • „New cooperation mode“

• „Mutual benefits and win-win situations“

• „Sense of economic community“

• 2) Short- to mid-term goals• „Two-way“ exchanges – economics, trade,

investment, tourism, culture, talentpromotion

• Grantships, job training, internships, integration

• Foster support among citizens

• Overseas Taiwanese networks

• Implementation

• Strategic partnerships• Institutionalized bi-, multilateral economic

cooperation

• Soft power • (Economic) role model

• Medical care, education, technology, and agricultural cooperation and small and medium enterprises

• Supply chains• Coordination, internet-of-things

• Infrastructure

• Linking regional markets

• People-to-peole• Tourism, culture, education

NEW SOUTHBOUND POLICY

• Self-description: comprehensive

• Old Southbound Policy: commerce, business and investments oriented

• Including South Asia, Oceania

• OBOR infrastructure focused

• Very, very vague

• Realistic???

• Obstacles:

• One China

• ASEAN´s centrality

ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN)

OBOR

• Silk Road Economic Belt concept • 9/2013: Xi Jingping (Kaz)

• 21st Century Maritime Silk Road – Asian Infrastructure Investment Bank (AIIB) • 10/2013 Xi (Indo)

• Silk Road Development Fund• November 2014 Xi (APEC)

• 40 bio. USD

• For-profit entity

• “(…) work in progress rather than a fully drawn up master plan” (Arase 2015: 26)

• Official aims:

• Policy coordination • Trust building => economic collaboration

• Interconnectivity between Northeast, Southeast and South Asia, the Middle East and Europe • Interconnectivity within these subregions

• Trade facilitation

• Monetary cooperation • Yuan-Renminbi

• People-to-people contacts

• Development of Chinese (inland) provinces

• Win-win partnership: “community of commondestiny” • Neighbours

CHINESE MOTIVES

• Import of resources

• Export of products

• New export markets• Steel

• Money to finance large infrastructure

• 2014: Xi in Africa, Europe, SEA – 140 bioUSD

• Nairobi – Mombassa: high-speed railway(3.8 bio. USD)

• Thessaloniki, Piraeus (5 bio. USD)

• Germany (18.1 bio. USD)

• Russia (10 bio. USD)

• Myanmar (8 bio. USD)

• ASEAN (10 bio. USD)

• …

Source: EY (2015)

• 2015 c. 150 bio. USD FDI • 3 trio. foreign exchange reserves

• Know how: highways, railways, ports, airports – construction andmanagement

• Workforce

• Security

ASEAN COMMUNITY

• *1967 ASEAN

• 1990s: Enlargement anddeepening

• 10 members

• 650 mio. inhabitants

• Globally 3rd biggest labor force

• 2,5 bio. USD GDP andtrade• 7th largest economy

• 136 bio. FDI

MAGIC TERM „CONNECTIVITY“

Infrastructure requirements

60 bio. USD/year

ADB-ASEAN Fund: 485 mio. USD

China:

– Silk Road Development Fund: 40 bio. USD

– AIIB: 100 bio. USD (26% China)

– PRC-ASEAN Investment Fund: 10 bio. USD

STREETS AND PORTS

ASEAN Single Shipping Market

(ASSM)

OBOR – A MASTERPLAN?

Current problems

• Different institutions,, e.g. ASEAN, ADB, UNESCAP

• Difficult coordination routes, standards

• Infrastructure gaps• South- - Southeast Asia• Within SEA

• Lack of investments, loans

.

.

.

OBOR AND TAIWAN – FDI IN SEA

• Role as regional hub • Investment, trade, finance

• But competition with SG, HK

• Sub-contractors• Low wages in Vietnam, Myanmar

• Social, environmental • Formosa Plastics in Vietnam: toxic

waste

• Political issues

• 2010 CAFTA in force• RCEP?

TRADE 2016

.

TRADE

.

OBOR AND TAIWAN

• Excluded from trans-regional infrastructure, trade project

• Norms and rules based order• No TPP – but RCEP?

• Who sets rules?

• Policies of other actors• US, Japan, India …

• Niches?

• Competition China – Japan – India

• Global manufacturing supply chains, FDI, knowledge

• Citizens´ concern: impact on national security and use of force(Hsueh 2016)

• OBOR: 3/2015 Ma: participation in AIIB as founding member• China´s aims???

• Lack of consensus• Pan-Blue vs Pan-Green

• Better relations with China, Asia• Dependency, „Taiwan“

• PRC: via own Finance Ministry

.

JAPAN

Source: MOFA (2015)

• Security Pact USA

• Re-interpretation Art. 9

• Taiwan – collective self-defense

• Strategic partner ASEAN

• ODA, loans, FDI

• Close cooperation Vietnam, Philippines

• Australia, India

JAPANESE-CHINESE COMPETITION

STRUGGLE FOR INFLUENCE IN SEA

. „Hedging“

??

WHY SINGAPORE?

• April 1993: Meeting heads of SEF and ARATS

• „Chinese country“

• Logistics

• No demonstrations

• Close relations with both – and US

• Taiwan: economics, security• 1975 Operation Starlight

• 1990s: up to 15,000 SG soldiers

• China: economics• Critical of Beijing´s ambitions

SINGAPORE: TAIWAN & CHINA (1)

• 2002 designated PM Lee in Taiwan – strong criticism fromBeijing • Lee: peaceful relations PRC-Tai key

for stability in AP • Against Tai independence

• Pragmatic (opportunistic) foreign policy

• E.g. military facilities• US: P8 • Open for China?

• Increased pressure

• SCS

• Diplomatic relations with China: 1990 • FDI in PRC – initial negative

experiences• Beijing: SG neutral, facilitator• Now: viewed closer to US

• 2000: after Chen´s election PM Goh, Lee Kuan Yew in PRC and Tai: pragmatism, moderation

SINGAPORE: TAIWAN & CHINA (2) • Political, economic, security

relations with Taiwan • Lee Kuan Yew close with both

Presidents Chiang

• 1975 Project Starlight

• 2013 FTA

• Cultural • Hokkien dialect

• Armed vehicles in HK –demonstration of Beijing´swill to isolate Tsai• Pressure on SG: end of honest

broker role?

CONCLUSION

• OBOR comprehensive – global strategic, political, economic and security impacts

• Infrastructure, trade: win-win

• But: economic political dependency on China?

• OBOR: Masterplan for new Chinese regionalism/ hegemony or acceptance of existing order?

• Complementary or competitive regionalisms?

• ASEAN´s centrality?

• Mediator or forced to sideline with China or US?

• Reactions of US, Japan, India?

• Reality check: SCS

CONCLUSION

• Neorealist explanation of Taiwan´s, ASEAN´s, member states´behavior

• Taiwan: niche player in SEA • „Limited autonomy“ in Taiwanese-SEA relations (Leifer 2001)

• What can it offer ASEAN and members?

• Economic

• Security: very limited, practical, e.g. SG collaboration

• ASEAN: no security benefits for Taiwan (excluded in ARF)

• Soft power

• Education, technology, culture, tourism

• „Engage with international society“ (Leifer 2001: 173)

• China defines explicitly and implicitly ASEAN´s leeway towardsTaiwan • Fear in SEA: being instrumentalized by Taipei against Beijing (or vice

versa)