Building Bridges: An Overdue Update on Taiwan’s ODA Policy

Building Bridges: An Overdue Update on Taiwan’s ODA Policy

ForeignAid Mast
Building Bridges: An Overdue Update on Taiwan’s ODA Policy

Zoe Weaver-Lee is a program assistant at the Global Taiwan Institute.

Following its transition from aid recipient to donor in the 1960s, Taiwan, which is formally known as the Republic of China (ROC), faced a severe diplomatic challenge after Chiang Kai-shek’s representatives withdrew from the United Nations (UN) in 1971. The competition with the People’s Republic of China (PRC) for diplomatic allies subsequently took on even greater urgency for Taipei’s foreign policy, and many official relationships developed and withered alongside the level of economic aid. In 1988, the Ministry of Economic Affairs (MOEA, 中華民國經濟部) set up the International Economic Cooperation Development Fund (IECDF)—which later became the International Cooperation Development Fund (ICDF)—with the intention of streamlining development loans and technical assistance to “developing nations.” Since then, Taiwan’s official development assistance (ODA) policy has slowly transformed to include both diplomatic partners and non-official allies, while also focusing increasingly on longer-term oriented projects.

Despite the significant changes in Taiwan’s ODA on the ground—namely, a shift from lending to technical assistance, as well as a de-prioritization of seeking or maintaining official diplomatic relationships— there has surprisingly not been an update to its overall policy since the publication in 2009 of the Ministry of Foreign Affairs’ (MOFA, 中華民國外交部) white paper on foreign aid policy. In light of the nature of Taiwan’s current international situation, as well reports that an update to the 2009 white paper is in progress, a comprehensive review of Taiwan’s ODA strategy should assess the value of its aid to the development of long-term partnerships with both allies and non-allies.

The Evolution of Taiwan’s ODA Policies

The most recent official update to Taiwan’s ODA goals and policies was published during the Ma Ying-jeou (馬英九) Administration. Guided by a theme of “Taiwan’s journey from recipient to donor,” the 2009 white paper Partnerships for Progress outlined the five key goals of MOFA’s ODA policy at the time, as outlined in section headings: 1) “Promoting Friendly Relations with Diplomatic Allies;” 2) “Fulfilling Taiwan’s Responsibilities as a Member of the International Community;” 3) “Safeguarding Human Security;” 4) “Giving Back to the International Community;” and 5) “Developing Humanitarianism.” The majority of Taiwan’s aid work at this time was categorized as infrastructure construction, which included a broad variety of assistance types. Its medical missions, which consisted of a force of 165 workers, included 13 countries (all of which were official diplomatic allies) and over USD $1.8 million in contributions. 

The white paper’s section titled “New Approaches to Foreign Aid under Flexible Diplomacy” states that “President Ma Ying-jeou has called on government officials to adhere to appropriate motives, due diligence and effective practices when offering assistance.” As indicated by MOFA, the goals of Taiwan’s ODA policies are to seek “ways to promote partnerships for progress with Taiwan’s diplomatic allies and friendly countries so as to advance their sustainable development.” In what was perhaps the most significant element of this strategy, MOFA also stipulated that future ODA policies should include greater cooperation with international organizations such as the International Monetary Fund (IMF), the World Bank (WB), and the United Nations Development Programme (UNDP). Notably, this strategy places little emphasis on bilateral partnerships with non-allies.

Information regarding the use of loans as ODA is somewhat unclear, as this form of aid appears to have been included in other categories. For example, the 2009 white paper indicates that vocational training programs in The Gambia, El Salvador, Guatemala, Honduras, and Nicaragua were funded through loans. Furthermore, the 2009 white paper’s only mention of micro-lending schemes—now a central part of Taiwan’s support of small and medium enterprises (SMEs)—indicates that “Taiwan will eventually provide these farmers and micro-businesses with short- and medium-term loans.” It is worth noting that regulations governing such transactions were not introduced until 2011, thereby explaining why details regarding loans and investments under the ICDF umbrella have been limited up to the present time.

While MOFA’s 2009 white paper outlined broad goals on how Taiwan could play a larger role in the global foreign aid system, a need for a more formalized system for allocating funds and oversight resulted in the International Cooperation and Development Act (ICDA) in 2010, which laid out the central goals of Taiwan’s international development assistance policies. Perhaps most notably, the first two of these six goals were “to promote diplomatic relations” and “to enhance friendly relations with countries that do not have diplomatic ties with the ROC.”

In the 2000s, criticisms of Taiwan’s ODA practices began to surface significantly, namely accusations of bribery, embezzlement, and ill-gotten funds, which led to the passage of the ICDA. ODA expenditures of this era and from the past also funded so-called “checkbook diplomacy” operations, including the case of former Guatemalan President Alfonso Portillo, who admitted to taking USD $2.5 million in bribes from Taiwan—earmarked originally for the construction of several libraries—in exchange for maintaining diplomatic ties.

Taiwan’s Current ODA Strategy

While diplomatically motivated ODA continues to make up a significant portion of its programs, Taiwan’s inclusion of non-allies and implementation of mutually beneficial assistance programs indicates a greater focus on improving the international image of Taiwan among non-allies and building trustworthy relationships, as well as committing to an altruistic vision of humanitarianism. 

In 2020, Taiwan’s ODA budget increased .051 percent from the previous year, with the greatest share of its program funding contributing to social infrastructure and services (47.2 percent). Among its wide variety of programs were micro-credit schemes, electric power grid maintenance, COVID-19 personal protective equipment (PPE) donations, and small business funds. In general, its programs were primarily focused on South and Central America, as well as the Pacific Islands, but were not limited to these regions. As of 2022, Taiwan has active bilateral projects with 37 countries, many of which are not official diplomatic allies. Perhaps most significantly, a structure is already in place for Taiwan’s ODA programs in Europe. Specifically, its programs that focus on small business investment and green energy technology have been largely successful in Romania, Bulgaria, and Bosnia & Herzegovina. These programs could thus serve as a template for expanding operations to EU countries and the United States.

At the same time, however, its project partnerships do not seem to extend to former diplomatic partners. For example, following Nicaragua’s official shift of diplomatic recognition from Taiwan to China, an agricultural infrastructure project based in the country cited in the 2020 report has since been halted. The same is true for the projects with other former allies, including the Solomon Islands and the Dominican Republic. 

Despite the obvious diplomatic motivation behind many of Taiwan’s ODA programs, the projects themselves do hold value and are not predatory in nature. Key indicators of predatory ODA practices would be the length and consistency of aid, the nature of the donation, and the terms and conditions attached to loans or investments. Contrasting aid from previous administrations, the ICDF’s most recent report distinguishes loans from other forms of assistance and notes that they only make up .02 percent of the total annual ODA expenditure. In general, Taiwan’s current ODA is focused on donations and volunteer programs rather than loan schemes, partially demonstrated by the fact that the ICDF has 166 active projects in the technical cooperation department and only 59 in the lending and investment department. 

In the case of Somaliland, for example, Taiwan has three active bilateral projects: an agricultural development training program, a maternal healthcare training and infrastructure program, and an IT enhancement program for government agencies. Training programs can provide long-term benefits that far outlast the end of the program, and the installation of key IT equipment and infrastructure for government agencies can benefit the recipient at the societal level as well. If MOFA can continue such programs to foster long-term relationships between the Taiwan government, the Somaliland government, and the people of Somaliland, both nations can benefit regardless of diplomatic status—a strategy that would starkly contrast with the tactics of Beijing in the region. 

The impact of non-predatory ODA is significant, although not necessarily as it relates to diplomatic outcomes. In South and Central America, Taiwan’s focus on sustainable agriculture programs, SME support through credit and training programs, and medical aid have contributed to strong, long-term relationships between Taiwanese officials, local NGOs, and citizens. [1] Similarly, Taiwan’s recent campaign to disperse critical medical supplies and training to countries severely affected by the COVID-19 pandemic has led to calls for its inclusion in the World Health Organization (WHO) and greatly elevated its recognition as a critical player in the international community. 

Possible Areas of Focus for Taiwan’s New ODA Era

As argued by researchers at the RAND Corporation, “China’s deeper pockets means that Taipei has to spend smarter.” [2] Considering the significant changes in China’s ODA policy since 2009 and Taiwan’s ever-evolving role in the international community, it is important to recognize that Taiwan is not in a position to rely purely on financial means to maintain allies. Instead, it can use its ODA to foster stronger relationships and positive recognition. It seems that the benefits of such cooperation have not been lost on the ICDF, as its final section of the 2020 annual report stated: 

Due to our limited budget, we will continue to seek external resources, step up cooperation with similar international organizations or NGOs, increase the number and scale of cooperation projects, and use financial tools and consultancy services to provide partner countries with loans and technical assistance, which will create greater benefits and expand our international participation. 

Considering the assessment that Taiwan’s current ODA programs tend to follow non-predatory strategies of implementation and focus on building long-term relationships with non-allies, an updated ODA strategy should include: 

  • A shifted focus from international organizations and official allies to non-official partnerships and local NGOs: The ICDF’s shifted focus from engaging international organizations to assist in the implementation of their programs, as well as its increased engagement with non-allies, indicates a change in priorities. An update to Taiwan’s ODA policy should thus de-prioritize strengthening partnerships with current diplomatic allies through ODA. Instead, Taiwan should utilize MOFA’s current aid infrastructure to reach strategic partners such as the EU, the United States, and nations that are frequent targets of China’s economic coercion. Despite Taiwan’s continued exclusion from major international organizations, its aid programs may be more effective in achieving its goals when not doing so through large, bureaucratic institutions.
  • The implementation of non-predatory programs that build long-term friendships: Taiwan’s engagement with countries that are not diplomatic partners should focus on the quality—not quantity—of the relationships. To do so, ODA must be well-managed, well-directed, and focused on tangible outcomes rather than conditional support. Instead of placing emphasis on conditional lending, large sums of monetary donations, or haphazard infrastructure construction, Taiwan’s ODA programs should include micro-loans featuring long grace periods, training programs, equipment donations, and medical assistance. As indicated in this assessment, the nature of Taiwan’s ODA policy has already laid the foundation for such relationships.

The main point: Considering the nature and scope of Taiwan’s official development aid policies in recent years, a significant update is needed to Taiwan’s overall ODA policy priorities to further emphasize non-predatory programs, and the inclusion of countries beyond the list of its official diplomatic partners.

[1] Scott W. Harold, Lyle J. Morris, Logan Ma, “Countering China’s Efforts to Isolate Taiwan Diplomatically in Latin America and the Caribbean: The Role of Development Assistance and Disaster Relief,” RAND, 2019.

[2] Ibid.