Indian Decade

India’s Taiwan Snub

India shows little interest in ties with Taiwan. Its mandarins are too nervous about China.

On April 23, Taiwanese Prime Minister Wu Den-yih announced that the KMT government wanted to make India and Indonesia priorities for manufacturing investment. Although Taiwan has thus far invested about US$ 310 billion in China, US$ 57 billion in South-east Asia and only US $ 1 billion in India (mostly through small enterprises), the announcement was ignored by India's economist-led government.

Except for the six years when the BJP was in office (1998-2004) and an effort to reach out by the Narasimha Rao-led team in 1993 (which ironically was rebuffed by Taipei), all governments in India have kept Taiwan at arms length, afraid of annoying Beijing.

Even today, while countries such as Singapore and Malaysia (neither of which could be termed hostile to China) allow the Taiwanese diplomatic ‘representative’ in their capitals to meet even with cabinet ministers, in India the Taiwanese have to remain satisfied with meetings at a much lower level–a joint secretary to the Indian government (a position four rungs lower than the highest in the civil service, which itself ranks below the most junior ministerial position). In contrast, the Indian representative in Taipei has access even to President Ma Ying-jeou, should he be given permission by nervous mandarins in Delhi.

Although a Double Taxation Agreement has been discussed by both sides for six years (dating from when the BJP was in office), and was initialled two years ago, thus far it hasn’t actually been signed due to fears in South Block (the home of the External Affairs Ministry) that China would look askance at the development (one senior official told me disgustedly that it will likely only get signed after China and Taiwan sign the Economic Cooperation Framework Agreement).

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Another essential policy action (for enhancing investment) that has remained on the back burner for five years is the Taiwanese request that a branch of their mission be opened in Chennai, a southern city where the bulk of Taiwanese investment in India has been clustered, and preferably also in Ahmedabad, the capital of a BJP-run state whose chief minister (Narendra Modi) has made Taiwanese investment a priority.

South Block has also ignored promptings that a second office of the Indian mission be opened in the Taiwanese manufacturing city of Kaohsiung so as to attract more investment into India. According to another official, this is unlikely unless the Chinese ‘informally’ give their consent. Interestingly, despite its importance as a production hub, authorities in India have discouraged Indian delegations from venturing to Kaohsiung, even though both chemical and petrochemical units there are looking at setting up plants in India. Here the reason seems to be the hold that some Indian corporates have on Indian policymakers.

Although Taiwan has a well-developed banking and finance industry, thus far only the Chinatrust Bank has been allowed to set up an office in Delhi, and it hasn’t been able to venture elsewhere, although all but two of its fifty officers are Indian citizens, including the country head. This is in contrast to the favoured treatment shown by the Reserve Bank of India (an institution known for its Anglophile ways) to Western banks, many of whom have become involved in the financing of speculative activities.

Only the Education Ministry is fighting the policy of ignoring Taiwan. It has recently allowed Indian universities to recognize Taiwanese degrees, thus opening the door to the tens of thousands of Indian students who want a foreign education but can’t afford to go to the US or the UK. Sadly, despite Taiwan's attractiveness as a gateway to the west coast of the US, thus far the Ministry of Civil Aviation has ignored Taipei (as it has the fact that flights from Europe to India are priced higher than those from Europe to East Asia). Indeed, the only airline flying directly to Taiwan from India, China Airlines, prices a Delhi-Taipei ticket more expensively than it does one from Taipei to Los Angeles.

During the period (2004-2009) when the Manmohan Singh government depended on the two (very pro-Beijing) communist parties for its majority, this placing of the relationship with Taiwan on hold could be explained away as a reaction to pressure from pro-China parties. However, since the last general election that excuse no longer holds, as the government has a majority.

Clearly, those seeking a relationship between India and Taiwan that parallels the relationship between the island and the South-east Asian tigers may need to wait until the Chinese leadership finally gives permission to South Block to engage vigorously with Taipei.