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Abu Dhabi, UAEMonday 18 June 2018

Little Taiwan determined to stay out of China's clutches

The offshore island or "other China" tends to be eclipsed by its vast neighbour and yet it is determined to go its own way

Taiwan's capital, Taipei. Getty
Taiwan's capital, Taipei. Getty

Taiwan might be called "the little island that could" - to borrow a title from the children's classic The Little Engine that Could, about a train engine that was determined to overcome every obstacle in its path - and the determination is paying off.

"As a key segment of the global electronic and technology supply chains, Taiwan is a clear beneficiary of increasing global trade," Aidan Wang, an economist at Cathay Securities Investment Trust in Taipei, told Bloomberg .

In February, Taiwan projected 1.9 per cent growth for 2017, and that forecast was lifted to 2.05 per cent in May, and then 2.11 per cent in August.

Third-quarter growth was tweaked to 3.1 per cent from the government’s initial estimate of 3.11 per cent.

Taiwan is the offshore island or "other China" that tends to be eclipsed by its vast neighbour and yet it is determined to go its own way.

Established in mainland China in 1912, the Republic of China (ROC) relocated to Taipei (Taiwan's capital) in 1949 after the Chinese Communist Party took power and has since maintained an uneasy relationship with the People's Republic of China (PRC). There is only "one China" - not two - the PRC, China's, president Xi Jinping's government insists.

Faced with diplomatic isolation because of most nations' reluctance to challenge Bejing's assertion that there is only "one China" - and that Taiwan (or "Taipei, China" as its referred to in the world's second-largest economy) is part of it - the Taiwan government is nevertheless pursuing more independence in everything from trade and investment to energy self sufficiency.

The country is more important to the Middle East than is often realised because, as the minister for mainland Affairs Hsiao-Yueh Chang notes, most oil exported from the this region to Japan and Korea passes between Taiwan and mainland China via the Taiwan Straits.This gives the island great strategic importance internationally

It is one reason why the US remains committed to defending Taiwan to prevent it from being absorbed forcibly into a greater China that could choke off the vital sea lane if it so chose - and also why Japan (Taiwan's former colonial master form 1895 to 1945) retains a close interest in preserving its continuing independence.

Yet in order to survive Taiwan needs to be economically self-sufficient and that means exploring every avenue of economic development from information and communications (IC) technology and bio-technological research and products to developing new forms of renewable energy and other forms of innovation - as well as the promotion of tourism.

A sub-tropical island first discovered for the outside world by Portugese sailors (and named "Formosa", meaning "Beautiful Island") in the 17th century, and with a nowadays mainly Chinese population of 23 million people occupying a land area of just 36,000 square kilometres, Taiwan is already benefiting from strong tourism - not least from Middle East countries.

“The Middle East is a high-value source market for Taiwan and has the potential for vast growth," according to Eric Lin, the director of the Taiwan Tourism Organisation, who sees great potential for attracting more tourists from the Middle East with a population of around 1.7 billion.

Last year, international arrivals in Taiwan reached a record high of nearly 10.7 million, up from 10.4 million in 2015, according to the Tourism Bureau. That happened even as arrivals from China dropped more than 600,000, to 3.5 million, after Beijing urged tour group operators to reduce travel to Taiwan.

For Middle East visitors, there is a daily direct flight from Dubai to Taipei, the capital of Taiwan, which offers a whole range of Islam-compliant facilities and amenities to make life easy for Muslim travellers.

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“The State of the Global Islamic Economy 2016/17 report released by financial services firm Thomson-Reuters forecasts that spending by Muslim consumers worldwide will increase from $1.9 trillion in 2015 to $2.6 trillion by 2020. This is a potential market that we want to tap into,” At the headquarters of , Connie Chang, the director general of the department of overall planning at Taiwan’s National Development Council, told Al Arabiya last week.

The prospect of such supplements to national income is welcome with Mainland China (the bigest single source of visitors to Taiwan) restricting such flows now in order to exert pressure on Taiwan to tow China's "One Country" line, thereby increasing the island's reliance upon other tourist sources such as Japan, South Korea and Hong Kong.

The numbers are still small, though. Last year, only about 200,000 million tourists were Muslim. But according to current forecasts, the number of Muslim travellers — which reached 117 million or 10 per cent of the global figure — will grow to 168 million in 2020. Taiwan hopes to gain a sizeable share of it.

The country's president Tsai Ing-wen's objective is to reduce Taiwan's dependence heavy dependence upon China more generally, with efforts to diversify trade (where China is the biggest single partner) and investment (where China is the biggest investment destination for Taiwan businessmen). The key is seen as geographical as well as product diversification.

Taiwan is turning to South East Asia and beyond as part of this strategy to reduce its economic dependence upon China. It is pushing to strengthen ties with the 10 countries of the Association of Southeast Asian Nations (Asean) group and the European Union and to involve more of the nation's small and medium size enterprises (SMEs) in business to business contacts beyond China.

It also hopes to identify itself more closely with an emerging "Indo-Pacific" bloc of Asian economies, says Mr Tsai. Speculation about the emergence of an alternative to the growing China-led sphere of influence in Asia has mounted following the US president Donald Trump's swing recent through the region, which he referred to as the "Indo-Pacific"rather than the Asia-Pacific.This was seen as an endorsement of moves to create a counterbalance to fast-rising Chinese power in Asia.

Taiwan could "play an important role" in building such an alternative sphere of influence in the region, the country's Minister for Mainland Affairs, Hsiao-Yueh Chang told the Nikke Asian Review. "We would like to see more detailed substance of president Trump's Indo-Pacific alliance plan," she added.

The US, Japan, Australia and New Zealand, India and South East Asia "should work together to ensure that [Asia] is stable" and Taiwan can contribute, Ms Chang suggested. "We hope China can act as a stakeholder of peace and stability instead of trying to show a more assertive role."

Taiwan's drive to strengthen trade and investment links with the ten Asean countries, as well as with South Asian nations plus Australia and New Zealand, began last year when president Tsai's government launched a "New Southbound Policy." But recent events have added impetus to the move.

This is being driven by both push and pull factors, officials say. On the one hand, the Chinese president Xi Jinping's peceived strong-arm rule is making Taiwan officials and businessmen nervous about having too many eggs in the same basket so far as economic dependence on China is concerned.

At the same time, prospective new patterns of economic integration in Asia are exerting an attraction for Taipei. Japan has assumed effective leadership of the (renamed) Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP) following US withdrawal from the original TPP.

Earlier this year, Japan's chief cabinet secretary Yoshihide Suga mentioned the possibility that “various countries and areas, including Taiwan” could join the TPP (now CPTPP). And, Mr Trump's references to Indo-Pacific alliances have stirred hopes of renewed US interest.

Both developments appeal to Taiwan because the threatened collapse of the TPP after Mr Trump's rejection of the agreement appeared to leave the Regional Comprehensive Economic Partnership (RCEP) as the only viable regional pact and China was feared likely to veto Taiwan membership of that grouping.

Taiwan's priority, meanwhile, is to "preserve peace and stability across the Taiwan Straits", according to Ms Chang. The situation at present, she said, "is stable and with no sign that there will be any incident or confrontation". And recent US assurances of continued military and other support for Taiwan have added comfort.

But Taiwan is anxious nevertheless to reduce economic dependence upon China, she added. "We have a huge amount of investment from Taiwan to China and [Taiwan] business has played an enormous role in [China's] growth and development."

Ms Chang added, however, that China's "political system is different"

"We fear that expansion [in the Taiwan-China economic relationship] will be diverted into political influence. We want to safeguard our freedom, democracy and our way of life. If we can work together with others [to achieve that] it will be good."