John Chen, a representative of the Taipei Economic and Trade Office, or TETO, said on Tuesday (11/07) that Indonesia is on the top list of priority countries within Taiwan’s new Southbound Policy, which aims to deepen relations with regional partners through mutually beneficial collaborations. (JG Photo/Sheany)

Taiwan’s New Southbound Policy: What It Is and What It Means for Indonesia

BY : SHEANY

JULY 13, 2017

Jakarta. John Chen, a representative of the Taipei Economic and Trade Office, or TETO, said on Tuesday (11/07) that Indonesia is on the top list of priority countries within Taiwan’s new Southbound Policy, which aims to deepen relations with regional partners through mutually beneficial collaborations.

The New Southbound Policy was launched in September 2016 as part of Taiwanese President Tsai Ing-wen’s initiative to expand and reinvigorate Taiwan’s economy. The policy aims to promote economic and trade collaboration, encourage resource exchanges, focus on talent cultivation and forge regional connectivity.

Within its framework the policy targets a total of 18 countries, comprising all 10 member states of the Association of Southeast Asian Nations (Asean) and six South Asian countries, as well as Australia and New Zealand.

"Asean has become Taiwan’s second largest export market and investment destination [...] As a leading country among Asean states, Indonesia is the most important one among them," Chen said during a presentation at the Habibie Center in Jakarta.

In particular, Taiwan is focusing on cooperation in agriculture, aquaculture, education, healthcare, vocational training, shipbuilding, tourism and infrastructure development that will mutually benefit both states.

However, the new policy may take more time to fully expand; not only in Indonesia but in the region as a whole.

Indonesia-Taiwan Relations

Indonesia and Taiwan enjoy strong bilateral relations in many different aspects. Indonesia is Taiwan’s 14th largest trading partner, while both states shared a total trade volume of $7 billion in 2016; Indonesia was on the surplus side with more than $1.5 billion.

Furthermore, Indonesia is also Taiwan’s number one source of migrant workers, and ranks third as a source of foreign students in Taiwan.

Chen said that Taiwan’s new policy corresponds with President Joko "Jokowi" Widodo’s priorities for Indonesia, which emphasize increasing foreign investments to the country, building infrastructure, increasing tourism, improving self-sufficiency on energy and food and elevating education and vocational standards.

In less than a year since its establishment, Chen noted that many achievements have already been made, including the promotion of two-way tourism, which saw Taiwan ease visa regulations for Indonesians and work to promote halal-friendly facilities on its shores.

However, some challenges persist as both states seek to strengthen cooperation.

For example, Indonesia and Taiwan can potentially improve partnerships in the steel industry, as Indonesia imports around 6 million steel products to meet its national demand.

According to Chen, Taiwan’s largest steel maker, China Steel, invests more in Vietnam than Indonesia because of high taxation in the archipelago nation.

"To my knowledge, to invest in factories in this category, the overall cost would be 27 percent higher in Indonesia compared to Vietnam," Chen said.

He emphasized the importance of added incentives from the Indonesian side to attract more Taiwanese investors, especially considering the large market demand.

"Indonesia must remove existing obstacles to become a regional hub," Chen added.

Taiwan-China Relations

Due to the complex nature of its relationship with mainland China, Taiwan’s diplomatic relations with other countries have continued to pose challenges.

In Indonesia, TETO exists as a recognition of the Taiwanese government as a representative of China and not an official embassy, despite functioning like one.

According to Luh Nyoman Ratih, a lecturer at Binus University’s department of international relations, the new policy does not pose a reason for concern in terms of diplomatic relations.

"Taiwan is actually seeking a people-to-people oriented approach, and since the collaborations involves no governmental channels, there shouldn’t be a problem," Ratih said, adding that both states can work together and complement each other in their respective goals and priorities.

Chen also said that the New Southbound Policy is minutely distinct from China’s One Belt One Road (OBOR) Initiative.

"OBOR is a hard policy, and it is focused on infrastructure and transportation. Whereas the New Southbound Policy is a soft policy, focusing on a more comprehensive approach that builds on people-to-people relations," Chen said.

He added that there is no conflict between the two and conveyed Taiwan’s willingness to work together with China if they are also willing to do the same.

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