Taiwan Quotient: Taipei is extending the hand of friendship, will New Delhi be bold enough to shake it?

In a recent interaction with the Press here, the vice-chairman of Taiwan External Trade Development Council (TAITRA) Liu Shih-Chung emphasised the growing interest of Taiwanese businesses towards India. In fact, according to Liu there are two main driving forces for this. One, Taiwan’s New Southbound Policy that looks to enhance Taiwan’s connections with 18 countries, including those in the ASEAN grouping and India. And two, the ongoing US-China trade war. In the first case, Taiwan is looking to diversify its economy and structurally upgrade to escape an upper-middle-income trap.

Taiwan finds itself in this tricky position because of an over-reliance on the Chinese market and growing automation in manufacturing. Hitherto, Taiwanese businesses have successfully used China as a manufacturing base. But China itself has been taking its own manufacturing to the next level through initiatives like the Red Supply Chain and Made in China 2025. This directly impacts Taiwanese supply chains manufacturing in China. Therefore, Taiwanese businesses have to go up the value chain themselves by leveraging R&D and automation, and looking for new destinations for production, testing and markets.

This is where the ongoing US-China trade war comes as a further impetus for Taiwanese businesses to relocate out of China. According to Liu, more than 130 Taiwanese companies have applied to return to Taiwan from China, bringing back nearly $20 billion with them. While these Taiwanese companies are being re-embraced by the Taiwanese government, they are still looking for foreign destinations to shift a part of their production bases and exploit new markets.

Plus, the thousands of Taiwanese businesses that continue to remain in China, they too are looking to diversify their production bases as a hedge against the uncertainties engendered by the US-China trade war. Then there is the growing political tension in China-Taiwan ties. Currently, Beijing has cut off all official ties with Taipei over the latter’s refusal to accept the 1992 Consensus and its one China principle – that both China and Taiwan are part of one unified entity. However, the current Taiwanese dispensation says that there was no such formal agreement between the two sides and that the term 1992 Consensus was itself made up by a former Taiwanese official. And with the current Beijing administration not being shy of taking hard positions, tensions in Cross-Taiwan Strait relations have started impacting Taiwanese business.

This is where India with its huge market and massive resources can be a perfect fit for Taiwanese businesses. The latter, in fact, are keen to participate in industrial clusters, incubate research and development, and serve as a force multiplier for Indian production. Liu pointed out that Taiwanese businesses are looking at Indian sectors such as smart cities, electric vehicles, renewable energy and petro-chemicals. Another area where Taiwan can really assist India is farming. Taiwanese drone technology can be used to better manage agriculture farms and increase outputs.

Thus, Taiwanese businesses stand ready to partner with India. However, doing business in India is still cumbersome. While India has made impressive progress in ease of doing business rankings, issues related to tax, multiplicity of authorities, land and labour pose high barriers for Taiwanese businesses. Whittling them down will certainly boost Taiwanese investments into India. Overall, what is required is political will on India’s part. New Delhi is still cautious about taking ties with Taipei to the next level, and is constantly looking over its shoulder at Beijing. China after all is India’s immediate land neighbour. Still, there is no reason why New Delhi should be wary of boosting economic, research and people-to-people ties with Taipei. At a time when China itself is pushing and redefining the boundaries of geopolitics, there is no reason why India and Taiwan can’t pursue closer practical cooperation. The moment is now.