Taiwanese businesses have invested over $80 billion US dollars in the South Asia and Southeast Asia region over the past seven decades, and Taiwan President Tsai’s hallmark New Southbound Policy aims to increase Taiwan’s business, education, and cultural connection with the region. Yet despite this renewed focus on South and Southeast Asia, there have been incidents over the past decades where Taiwanese businesses were forced to abandon their factories and storefront investments in the face of anti-Han protests in Indonesia and Vietnam, which included looting and burning of factory buildings owned by people of Han ethnic descent, many of them from Taiwan. These incidents were often caused by misunderstandings when locals accidentally channeled anti-People’s Republic of China (PRC) sentiment toward Taiwan businesses. Anti-Han sentiment is difficult to overcome since it is largely out of Taiwan’s control, as many protests result from broader regional political trends unrelated to Taiwan. Past anti-Han sentiment is a risk for Taiwan’s businesses in the region, but Taiwan’s New Southbound Policy could promote understanding through communication and differentiation of a Taiwan brand, and thereby ameliorate Taiwan’s business risk in the region in the future.
Anti-Han sentiment in the region has had an impact on Taiwanese businesses in some Southeast Asian countries. In May 2014, to protest against China stationing an oil rig near Vietnam in the South China Sea, a mob of 1,000 Vietnamese rioters stormed a Taiwanese steel mill in central Vietnam and chased out its employees. Five Vietnamese workers and 16 others described as “Chinese” were killed, and an additional 90 people were injured in the attack. Two days before the attack on the steel mill, Vietnamese mobs burned and looted Taiwanese and South Korean factories in southern Vietnam, perhaps incorrectly believing they were Chinese-run.
According to an eyewitness, the protesters appeared to target companies with Chinese characters on their logos or signs. This is an issue of misperception and may explain why anger toward China could be mistakenly directed at Taiwan. To address this problem, Taiwan’s Ministry of Foreign Affairs printed thousands of stickers that read “I am Taiwanese” in both Vietnamese and English and distributed them to local Taiwanese business owners. There are, however, instances when anti-Taiwan sentiment and protest should be expected, such as when Formosa Plastics recently released toxic waste water killing fish along Vietnam’s coastline. The primary concern for businesses is when Taiwan’s businesses are harmed due to anti-Han protests against the ethnic Chinese diaspora in the region, or anti-Chinese protests against the PRC-owned businesses on the politics of the day. Taiwan’s New Southbound Policy may be effective in bringing greater awareness of Taiwan to the region and differentiating Taiwan’s businesses from the PRC’s factories, drawing a clearer line between the New Southbound Policy and China’s Belt and Road Initiative.
Indonesia—another key target country of the New Southbound Policy—also carries risks to Taiwan’s businesses based on anti-Han sentiment.There were two major instances of anti-Han activity in Indonesia. The anti-Han massacre on September 30, 1965—with no evidence that it affected Taiwan people or businesses—was part of an anti-Chinese movement. In May 1998, Indonesian mobs took to the streets over two days to attack ethnic Han they believed were the cause of the economic downturn during the Asian financial crisis. Ethnic Han control much of the country’s commerce and have been the targets of violence in Indonesia for years. In this instance, rioters attacked, burned or looted 40 large shopping centers, over 4,000 shops and over 1,000 private homes. Many ethnic Han have fled Indonesia since the riots. There is no evidence that Taiwan’s factories were affected by these protests in Indonesia. However, any recurrence of these events from two decades ago and five decades ago would be a significant risk for Taiwan companies in conducting business in the country.
Strong Taiwanese business activity and investment in Vietnam and Indonesia continue despite the risks. They are the two top recipients in Southeast Asia of Taiwan’s business investment, and have large Taiwanese business communities. In Vietnam, Taiwanese businesses have invested $30 billion in the textile, shoe, and bicycle industries over the past seven decades; and there is currently a local Taiwanese business community of around 60,000 people there. In Indonesia, Taiwanese businesses have invested $17 billion, mostly in the furniture, textile, and shoe industries; and the country hosts a local business population of 10,000 Taiwanese people. As Taiwan’s businesses continue to work in these countries because of the low labor costs and close proximity to Taiwan, they may be successful in differentiating themselves from other regional investors—through stickers, or flying local flags, or removing Chinese characters from signage—and avoid being accidentally targeted by political protests aimed at other actors.
Taiwan’s New Southbound Policy could diminish these risks that arise from a history of anti-Han sentiment. Better insight from all sides about how engaging with civil societies and the people-to-people aspect might mitigate ethnic tensions.his difficult history does not have to be a predictor of the future.
For its part, Taiwan is putting up Herculean efforts to promote sharing resources, talent, and markets with South and Southeast Asia. Former Taiwan Foreign Minister James Huang (黃志芳) stressed that the New Southbound Policy is different than previous efforts in part because of the focus on “two-way exchanges”. In addition to Vietnam and Indonesia, Malaysia has a distant history of racial conflict between the Malays and Chinese that occurred in 1957, 1959, 1964, and 1967. As previously mentioned, countries like Indonesia and Vietnam have repeatedly experienced anti-Han protests—a sign that cultural concerns can be persistent and challenging to overcome. As Taiwan continues to invest in the region, it should be mindful of this tense history while calculating business risks. Particularly, the New Southbound Policy should seek to distinguish Taiwanese businesses from PRC businesses to avoid risks from protests against the latter for reasons such as skirmishes with the PRC in the South China Sea.
The main point: The isolated incidents of anti-Han sentiment in the South Asia and Southeast Asia region is at once a business risk to Taiwanese companies expanding to the region in line with the New Southbound Policy, but also an area where the New Southbound Policy might help overcome such ethnic tension to build mutual understanding and better differentiate Taiwan’s businesses from others in the future.
 Donald L. Horowitz, The Deadly Ethnic Riot (Berkeley: University of California Press, 2003), 255.