Unlike previous policies focused primarily on diversifying Taiwan’s economic ties, Taiwan’s leaders frame the Southbound Policy (NSP, 新南向政策) as a comprehensive political, diplomatic, and even social initiative to create a “regional strategy for Asia.” Taiwan should take advantage of similar efforts promoting regional connectivity in countries like South Korea (ROK) and India. Taiwan and South Korea are both technology leaders that want to develop vibrant startup sectors; deepening technology cooperation with India could help achieve the strategic and economic goals contained in their regional strategies. Both Taiwan and South Korea’s diversification plans emphasize a “bottom-up” approach to connectivity, including significant people-to-people components. That approach, especially relevant in the tech sector, offers a low-cost way to develop connections that will deliver long-term economic benefits.
Fears of economic dependence on the People’s Republic of China (PRC) loom large over Taiwan’s efforts to look south, as they do to a lesser extent in South Korea. China’s Belt and Road Initiative (BRI, 一帶一路) has sparked wider discussions throughout the region and in the United States over how to create alternative options to strengthen regional integration. Despite efforts by Japan and other countries to boost regional infrastructure development, realistically it is impossible to match China’s state-directed efforts to drive lending and investment in third countries. Given the legacy of some of the BRI projects, mimicking China’s approach does not seem smart, either. While it won’t deliver the type of immediate impact that appears in the latest trade and investment numbers, Taiwan and South Korea’s ability to expand technological partnerships with India could offer a more sustainable basis for regional integration that serve all three countries’ interests.
Taiwan and South Korea—The Two NSPs
Shared Visions
President Tsai announced the NSP in 2016, targeted at building Taiwan’s relationships with 18 countries including ASEAN nations, Australia, New Zealand, and India. While covering a range of activities, the NSP’s “four pillars” are comprised of:
1) strengthening economic ties,
2) enhancing people-to-people exchanges,
3) promoting resource sharing and cooperation on issues like healthcare and agriculture, and
4) strengthening regional and institutional links through, for example, Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs).
The strategy aims to use exchanges in a range of target fields to advance regional connectivity. In 2017, South Korean president Moon Jae-in also announced a “New Southern Policy” aimed at elevating ties with ASEAN countries and India, to bring them to the level of South Korea’s four strategic partners—the United States, China, Russia, and Japan. The Southern Policy focuses on three main components: 1) peace, 2) people, and 3) prosperity. The “peace” component refers to improving security cooperation with target countries, representing a more overt strategic component than can be found in Taiwan’s NSP. China’s economic retaliation against South Korea for installing the US-made Terminal High Altitude Area Defense (THAAD) system provided a catalyst for the ROK to try and diversify, economically and politically, away from traditional partners. Like Tsai, Moon has also outlined a broader positive vision for engagement with South and Southeast Asian countries beyond just mercantilist or realpolitik considerations. Similar to Taiwan’s NSP, South Korea’s New Southern Policy also underscores using a people-driven approach.
The Challenges
While both Taiwan’s and South Korea’s leaders have prioritized these policies compared to previous efforts by past governments, achieving the promised economic linkages with South and Southeast Asian countries faces major hurdles. Challenges range from institutional capacity and bandwidth issues to political resistance on topics like trade and immigration liberalization. Though governments in Seoul and Taipei have increased funding for these initiatives in recent years, the total amounts allocated remain relatively limited. [1] While investment into NSP countries has risen over the past several years overall, Taiwan’s investment in mainland China still exceeds its investment into NSP countries by roughly four times. Though increasing in countries like India in 2018, Taiwan’s investment overall in NSP countries actually fell from 2017 to 2018. Meanwhile, despite longer investment ties, navigating ASEAN’s diversity has challenged South Korea. While the country has developed a strong economic relationship with Vietnam (which is also the largest recipient of South Korean development assistance), there is, nonetheless, considerable space for South Korea to enhance its trade and investment with—and its understanding of—Southeast Asian countries.
Even measuring the strategies’ impact through economic indicators poses problems. It is difficult to separate the effect of these policies from wider market factors, like a slowdown in China, that could be leading to greater investment in South and Southeast Asia. In economies not dominated by state-owned entities, it is market conditions, not foreign policy interests, that ultimately drive the trade and investment decisions of private companies. Targeting developing countries, which lag behind in infrastructure and regulatory frameworks, becomes that much harder. For example, former President of Taiwan Lee Teng-hui’s “Go South Strategy” in the 1990s struggled when private companies were put off by underdeveloped infrastructure and regulation in Southeast Asian countries. Offsetting these costs in the short term by providing significant subsidies or financial incentives to companies is neither economically nor politically feasible. [2]
Finally, both South Korea and Taiwan have bandwidth limitations in pursuing their respective southern-focused policies. Each faces a dominant geopolitical challenge—China for Taiwan and North Korea for the ROK—which inevitably takes up the bulk of public and government focus. For example, South Korea had to delay the implementation of its New Southern Policy as engagements with North Korea ramped up. The historic focus on traditional foreign policy priorities also means that it will take both governments time to build up government capacity to engage in less familiar territory.
Potential Opportunities
Despite the challenge of diversifying economic partners in the short term, Taiwan and South Korea’s strategies can help create more organic, long-term linkages in critical areas. Both Taiwan’s and South Korea’s policies include a new focus on India, where Prime Minister Narendra Modi’s administration has tried implementing its own “Act East” policy. Taiwan, South Korea, and India all independently have strong technology sectors, and connectivity between them could act as an achievable initial step towards more interconnection. Taiwan’s NSP specifically emphasizes e-commerce, including plans to develop cross border e-commerce partnerships between Taiwan’s businesses and local providers in NSP countries. While South Korea’s policy lacks an explicit technology component, the country could leverage its strength as one of the world’s most technologically advanced nations as a means to engage India.
E-commerce has driven the internet economy in Asia, which now represents the largest e-commerce market in the world. Business-to-business e-commerce, which makes up a large majority of e-commerce sales in the region, could help connect small businesses in Taiwan, India, and South Korea, especially since Taiwan’s NSP also emphasizes engaging small and medium enterprises. For South Korean companies facing an increasingly competitive domestic consumer e-commerce market, cross-border business-to-business e-commerce could provide a valuable area of potential growth. Meanwhile, Taiwan’s relatively small domestic market can hinder startups’ ability to expand quickly, compared to places like the United States and China where large domestic markets help spur development. India’s 450 million internet users (though representing around only 35 percent internet penetration) could offer new customers and help offset these challenges for Taiwan and South Korea. For companies in India, where the country’s lower average income levels still pose a ceiling on how rapidly a startup can expand and the types of products and services that can be sold, access to higher-income markets like Taiwan and South Korea could help startups grow, as well.
In addition to providing new markets, tech sector cooperation can help spur domestic innovation. In Taiwan, President Tsai has advanced the Asian Silicon Valley (ASV) initiative, aimed at making Taiwan a major research and development center for internet of things (IoT) research. In South Korea, creating a successful startup ecosystem will help diversify the country’s economy away from overreliance on major conglomerates like Samsung and Hyundai. While both Taipei and Seoul have provided financial and infrastructure initiatives to spur startup development, promoting talent exchanges and programs offer a lower-cost, and potentially more effective, way of driving innovation. [3]
International networks are playing an increasingly critical role in promoting technology sector development, by creating “a thick web” of links through which entrepreneurs can exchange ideas and collaborate. Human networks matter more for developing successful startup sectors than the physical infrastructure that countries devote to creating “technology parks.” For example, roughly two-thirds of all new patents involve partnerships, while the average team size involved in a patent has doubled since the 1970s. Taiwan, South Korea, and India all have strong technology hubs in places like Taoyuan, the Pangyo Techno Valley, and Bangalore, respectively. As the role of international collaborations in patent production rises in importance, linking these technological centers could help create a wider community of tech entrepreneurship, accelerating innovation in all three locations. [4]
Taiwan’s government has already taken a forward-leaning stance on this issue, pursuing a New Economic Immigration Act that eases restrictions on foreign workers to attract international talent. While the issue of immigration remains far more sensitive in South Korea (as it does globally), Taiwan’s willingness to open its labor markets to skilled workers, including those potentially from South Korea and India, could eventually allow it to become a hub for experts across Asia to work together. The island already hosts AppWorks, which is the largest startup network in Asia and includes 351 startups. Increasing connections with foreign entrepreneurs and startups will not only help stimulate Taiwan’s local system, but will help Taiwan-based startups navigate foreign markets. Taiwan’s NSP recognizes this piece of the puzzle, noting that people-to-people exchanges could help Taiwan’s businesses “develop a deeper understanding of specific industries and economic areas in target countries, and to better identify niche areas for expanded cooperation.” Over the long term, becoming familiar with new markets through these connections can help companies (particularly small companies lacking resources) tackle challenges like cultural and compliance barriers, allowing the development of a more global product.
Given how politically fraught the issue of foreign workers can be, promoting international collaboration on science and technology could offer an easier first step for South Korea. The South Korean and Indian governments signed five joint memoranda of understanding in science and technology in 2018. Their aims include promoting talent exchanges and establishing a Future Vision Strategy Group that will conduct joint research in fields like artificial intelligence. The two countries could also leverage each other’s strengths: South Korea’s in commercializing technology and India’s in basic sciences research. Strengthening basic science will help the Moon government’s wider push for innovation outside the information and communication technology sector and drive the country’s growth. Despite being one of the highest spenders on research and development, South Korea’s levels of international partnership in science and technology remain relatively low, both in terms of academic research and in terms of patents. Given that returns to R&D investment are falling and technological breakthroughs are taking longer to materialize, pooling expertise through collaborative efforts is proving especially helpful in promoting innovation and advancement. Aside from government-led initiatives, academic reforms that avoid penalizing researchers for taking part in multi-author international studies could also help South Korea diversify and advance its tech sector.
Limitations
Increased technology sector cooperation certainly will not address the region’s wider development needs, including its vast infrastructure demands and job creation requirements. For Taiwan, South Korea, India, and other Asian countries, only internal economic reforms can drive economic growth. Other domestic policies, like India’s data localization initiatives, could further complicate developing technology partnerships with other countries. The Indian government’s repeated use of internet shutdowns (including the ongoing shutdown in Kashmir) not only damages the country’s democratic standing, but impacts digitally-dependent economic activity. Ultimately, the tendency of actors like Taiwan and South Korea to see themselves as economic competitors could undercut efforts to cooperate on technology-related opportunities.
However, cooperation in the tech sector can still provide clear benefits, to the extent that regional countries are willing to commit to it. The digital components of the BRI, which could allow China to export digital surveillance programs and set standards in areas like 5G, are potentially more concerning than the physical infrastructure projects connected with the initiative. On the other hand, US interest in shaping an alternative regional economic architecture—as well as its ability to do so—seems constrained, particularly after withdrawing from the Trans-Pacific Partnership. Other regional actors like Taiwan, South Korea, and Japan will instead need to shoulder more of the burden in driving sustainable regional economic integration. Advancing initiatives to boost ties in the tech sector will not only deliver economic benefits, but also ensure that democratic norms guide technological progress in the face of rising digital authoritarianism.
The main point: Despite policy divergences between the two, Taiwan’s New Southbound Policy and South Korea’s New Southern Policy both offer a shared vision of expanded cooperation with Southeast and South Asia. In particular, both place a strong emphasis on technological innovation, making nations such as India attractive targets for future investment.
[Editor’s note: The article was edited for style. The original version of the article is available here.]
[1] While funding for Taiwan’s NSP increased from USD $148 million in 2017 to USD $241 million in 2018. Meanwhile South Korea increased funding for its New Southern Policy from 1.6 billion Korean won in 2017 to 2.2 billion won in 2018.
[2] Conversations with Taiwan officials during the Taiwan-U.S. Policy Program highlighted difficulties in providing material support to companies seeking to invest in South and Southeast Asia, beyond providing additional information about target markets.
[3] The South Korean government in 2018 launched a USD $9 billion investment fund over three years to support startups. Taiwan’s government meanwhile has offered tax incentives, financial grants, and land contracts to boost its startup ecosystem.
[4] While the level of international collaboration in patents has doubled since the mid-2000s, it remains well below the level of international collaboration in scientific publications.
