Ahead of May 20, the anniversary of the presidential inauguration, the performance of the New Southbound Policy has again come under scrutiny. To defend its policy, the government released official figures showing that two-way trade last year with the target countries hit a record-high US$180.3 billion. Specifically, exports to those countries reached US$96.9 billion. The government is evidently hoping to counter some of the criticism of the policy with these glowing figures.
However, these data represent only part of the picture and do not truly reflect the trend of Taiwanese trade with these countries. Interestingly, the announcement did not include data about imports from these countries and the resultant trade surplus. The trade balance, a component of GDP, is a better indicator of its economic contribution to a country than the value of exports alone.
Taiwan’s trade surplus with the New Southbound countries dropped from US$22.6 billion in 2016 to US$13.4 billion last year, plunging about 40 percent. The ratio of the trade surplus to the nation’s GDP dipped from 4.17 percent of 2016 to 1.77 percent last year — falling below 2 percent for the first time — a decline of 60 percent.
In other words, as Taiwanese exports increased, its imports also increased. With the two offsetting each other, the policy’s contribution to the nation’s economy, as the trade surplus showed, was historically the worst. Ignoring this trend, the government chose to focus on the overall trade value as an indication of the policy’s achievements.
In fairness, the New Southbound Policy is not without merit. In particular, the quality and quantity of personnel exchanges between Taiwan and the New Southbound countries have grown significantly. In the 2006 academic year, the number of students from New Southbound countries who came to Taiwan to study for a degree was 25,268. In 2010, it jumped 1.6 times to 41,177; it could have increased even more if not for the impact of the COVID-19 pandemic.
The government has also established the Taiwan-Asia Exchange Foundation to bolster academic research with a national think tank, and organized track two dialogue mechanisms such as the Yushan Forum. Externally, the National Science and Technology Council set up overseas scientific research centers in the New Southbound countries, and domestically subsidizes the establishment of “Taiwan-India academic chains” and other projects. All these are the undeniable contributions of the New Southbound Policy.
However, there have been signs of a decline since the policy was implemented. For example, for its first budget allocation, the government set aside NT$2.11 billion (US$68.8 million). The following year represented its peak budget, with the government allocating NT$3.78 billion, but since then it has remained at about NT$3 billion.
Despite a record-high government budget for next year, the money allocated for the New Southbound Policy covering 18 countries is only NT$3.11 billion, which is lower than the period from 2018 to 2020; while the budget solely for supporting Ukraine is NT$1.8 billion.
Some administrative details also show that the government does not attach as much importance to the New Southbound Policy as before. For example, the Directorate-General of Budget, Accounting and Statistics has slashed daily expenses for business trips to Southeast Asia and South Asia this year, and the budget for business travel expenses to New Delhi have shrunk by 40 percent, while those for travel to Japan and South Korea have increased.
In 2017, the Ministry of Foreign Affairs listed the New Southbound Policy as one of the main research topics of the overseas stationing program for academics; the following year, it was listed as one of the subtopics. After that, New Southbound Policy was never included in the list, which is regrettable.
The New Southbound Policy was highly anticipated when it was first proposed, and armed with hindsight, considering the events that have happened since — the tense cross-strait relations, the US-China trade war, the spread of the COVID-19 pandemic — its importance is all the more apparent.
To put it bluntly, the New Southbound Policy is Taiwan’s risk-avoidance strategy. The idea is not problematic, and its key lies in the strength and sustainability of its implementation.
With the presidential election approaching, aside from cross-strait and US policies, candidates should propose a more innovative 2.0 version of the New Southbound strategy.
Fang Tien-sze is associate professor at National Tsing Hua University’s Center for General Education and deputy director of the Center for India Studies.
Translated by Lin Lee-kai
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