New Policy brings Taiwan closer to us

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Under the New Southbound Policy, Taiwan is working to strengthen relations across the board with South Asia, Southeast Asia, Australia and New Zealand.

Ben Lee, chief executive officer of Taipei-based Planetpop International Corp has a lofty ambition; to transform his company’s popcorn brand into the biggest in the world. It may seem improbable, but over the past five years, Lee has made steady progress toward achieving this goal, expanding sales of his firm’s products to more than 10 countries, including several in Southeast Asia.

Going Global

“I want to use the region as a springboard to major global markets. Taiwan is culturally and geographically closer to Southeast Asia than to Europe and the U.S., which means Taiwan companies face lower market entry costs and fewer operational challenges,” the 35-year-old businessman said.

Planetpop began its overseas expansion in 2011 by setting up a store in Malaysia. Since then, the company has made successful inroads into Brunei, Indonesia, Singapore and Thailand, in addition to India and several markets in East Asia, via brick-and-mortar establishments and online sales channels.

Lee said that since operating costs, the quality of telecommunications infrastructures as well as consumer preferences and purchasing power vary across Southeast Asia, firms should localise their products and promotional strategies for individual markets. Other key factors to consider, he added, include the availability of reliable partners and sales channels.

“In Indonesia, for example, where there are plenty of shopping malls, we have established 13 physical outlets through our local agent. While in Singapore, which has well-developed online payment systems but high labor and rental costs, we operate as an e-commerce business,” Lee said.

Aggressive expansion

Planetpop is among the growing number of Taiwan companies aggressively expanding their presence in Association of Southeast Asian Nations (ASEAN) member states. Eager to cultivate the nation’s business links with countries across the region, the administration of President Tsai Ing-wen is working to support these enterprises by aiding in areas like market information, talent development and trade promotion.

The measures form part of the government’s New Southbound Policy, a comprehensive initiative that seeks to elevate the scope and diversity of Taiwan’s export economy.

Lackluster China

In the past few years, as mainland China has started to lose its luster as a manufacturing center due to rising labor costs and high employee turnover rates, growing numbers of Taiwan businesses have been exploring opportunities in Southeast Asia. According to data from the Ministry of Economic Affairs (MOEA), Taiwan firms invested a combined total of about US$ 3.4 billion in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam last year, a significant increase from the figure of US$ 1.1 billion in 2014.

Statistics compiled by the relevant authorities in ASEAN countries show that to date more than 11,000 Taiwan companies have invested about US $88 billion. Taiwan-funded projects largely focus on labor-intensive manufacturing industries such as bicycles, footwear, garments and metal processing.

Trade with ANZ

With regard to the inclusion of Australia and New Zealand in the New Southbound Policy, Elliott Y  L  Charng, Director-General of the Department of East Asian and Pacific Affairs at the Ministry of Foreign Affairs, said the enhancement of ties between Taiwan and the two countries would prove mutually beneficial due to their complementary economic structures.

Taiwan primarily exports information and communications technology (ICT) products and machinery parts to the nations, while importing raw materials and agricultural goods.

Charng, who served as Taiwan’s representative to New Zealand from 2011 to 2014, will take up the post of representative to Australia in October, said the complementarity of Taiwan and New Zealand’s economies as well as the common pursuit of export and import diversification enabled the countries to smoothly conclude an economic cooperation pact in 2013.

The accord marked a significant step forward in Taiwan’s bid for greater participation in regional integration, he noted.

“Australia and New Zealand both possess advanced economies, cultural diversity and political stability. In addition to trade and investment, Taiwan can boost cooperation with them in such areas as culture, especially regarding indigenous peoples, disaster prevention, environmental protection, health care, technology and tourism.”

Sensible Approach

Wu Fu-cheng, Deputy Director of the Emerging Market Development Research Center at the Taipei-based Taiwan Institute of Economic Research, said that the New Southbound Policy is a sensible economic strategy, especially considering the growth in private consumption across ASEAN and India.

“Possessing abundant natural resources, demographic dividends, large market sizes and emerging middle classes, South and Southeast Asia have become hot spots for global investors,” he said, adding that the establishment in late 2015 of the ASEAN Economic Community (AEC), which envisions a single market characterized by the free flow of capital, goods, labor and services, will further boost the region’s competitive edge.

Wu suggested Taiwan enterprises examine the strategic integration measures outlined in the AEC Blueprint 2025 report to identify investment opportunities. Several fields in which Taiwan possesses competitive advantages, including E-Commerce, energy, health care, ICT and transportation, are listed as priorities.

He also cautioned, however, that companies should not underestimate the challenges of operating in the region. “ASEAN countries have diverse economic structures … and non-tariff barriers still exist,” he said. “Besides, competition is intensifying as large numbers of Japanese, mainland Chinese and South Korean companies are establishing footholds in Southeast Asia.”

Lin Por-fong, chairman of the Taipei-based Chinese National Association of Industry and Commerce, Taiwan, similarly said that Taiwan enterprises should expand their presence in ASEAN.

“The New Southbound Policy is focused in the right direction, but the government must come up with appropriate supporting measures to facilitate greater Taiwan investment in the region,” he said.

Taiwan has signed an Economic Partnership Agreement with Singapore as well as bilateral investment accords and double taxation pacts with India, Indonesia, Malaysia, Singapore, Thailand and Vietnam, although Lin said that the protection for investors is still inadequate.

It is therefore important, he added, for the nation to join economic integration mechanisms such as the Trans-Pacific Partnership (TPP) and Regional Comprehensive Economic Partnership (RCEP).

“As it promotes the New Southbound Policy, the government should strive to gain admission to the TPP and RCEP, which would make it easier for Taiwan businesses to enter ASEAN markets,” the chairman said. Currently, four member states, namely Brunei, Malaysia, Singapore and Vietnam, are TPP members and several others have expressed interest in joining the pact, which has yet to enter into force.

Overall, Lin expressed support for the government’s trade diversification strategy.

“We hope the policy will lead to improved operating conditions for Taiwan enterprises in South and Southeast Asia so they can maintain their international competitiveness and seize new business opportunities throughout these regions.”

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