The Debate

Taiwan’s Rash Decision to Join AIIB

How Taiwan’s bid to join AIIB could potentially threaten its sovereignty.

Taiwan’s Rash Decision to Join AIIB
Credit: flickr/ billy1125

One year after the Sunflower Movement, hundreds of protestors again rallied in front of the Presidential Office on the night of March 31. This time the issue was not the questionable approval process of the Cross-Strait Service Trade Agreement (CSSTA) in the Legislative Yuan, but the Ma administration’s unilateral announcement that Taiwan will join the China-led Asia Infrastructure Investment Bank (AIIB).

On March 30, after Executive Yuan spokesperson Sun Lih-Chyun emphasized that the process of Taiwan’s joining in any international organization, including AIIB, would be transparent, the government unilaterally announced the decision to join AIIB through the mainland’s Taiwan Affairs Office (TAO). The decision was made after a national security meeting held by President Ma on the same date. The government’s action was widely criticized; the Legislative Yuan passed a resolution that the application to join AIIB should be submitted directly through the bank’s preparatory office, not through TAO. But the Executive Yuan still submitted the letter of intent to TAO via Taiwan’s Mainland Affairs Council, triggering the protests.

What are the implications of this action? First of all, the government set another example of “black box” policymaking by bypassing the supervision of the legislature. The Ma administration said its evaluation had been ongoing since last November, with the Ministry of Finance, Ministry of Foreign Affairs, Mainland Affairs Council, Central Bank, and Ministry of Economic Affairs all taking part. However, the Legislative Yuan was never consulted. In other countries considering joining the AIIB such as Australia, Austria and Japan, the governments tried to reach consensus in their cabinets (notably, these countries adopt or lean toward a Parliamentary system in which the executive and legislative branches are not separated). By contrast, Taiwan’s legislative branch, which is authorized by the Constitution to balance the executive branch in Taiwan’s government system, was never able to approve this application or review the evaluation reports and proposals. The legislature’s resolution to submit the letter of intent directly through AIIB’s preparatory office was also disregarded by the Ma Administration.

Secondly, the decision to join the AIIB taken by the Ma administration is essentially a concession to Beijing. China has long claimed Taiwan as part of its territory and the TAO observes this principle. Instead of applying directly through the preparatory office of AIIB, submitting through TAO indirectly admits that TAO can act as an agent of China on Taiwanese affairs, conceding Taiwan as a part of China. In the case of Taiwan’s World Trade Organization (WTO) application, the president assigned the Ministry of Foreign Affairs to submit the application directly. In the current case, AIIB is also a multilateral organization and the application should be able to follow a similar path. TAO had even said that dealing with Taiwan’s application to AIIB is not within its scope of responsibility. Therefore, this unnecessary action might compromise Taiwan’s sovereignty.

Furthermore, the specific name that Taiwan used in its application, a matter that of great concern to the Taiwanese people, has not been made public. This will reduce the people’s trust in their government. Most likely the public will not accept a name that will damage Taiwan’s sovereignty, especially after the 2014 local elections, in which the ruling Kuomintang (KMT) failed mainly due to public discontents with the consequences of Ma’s pro-China policies and concerns about the threat to Taiwan’s sovereignty posed by mainland China.

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In the case of Asian Development Bank (ADB), even though ADB is led by the U.S. and Japan, Taiwan was still forced to change its membership name from the “Republic of China” to  “Taipei, China” in 1986 when the PRC joined. As China is leading AIIB, it is not possible for Taiwan to join as an independent country under the name of the Republic of China. The spokesperson of China’s Foreign Ministry, Hua Chunying, already said that Taiwan should avoid “problems like ‘two Chinas’ or ‘one China, one Taiwan'” in applying to AIIB. Whether Taiwan can use “Chinese Taipei” (as it does in the Olympics and APEC) or the “Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu” (the name used in the WTO) remains at the discretion of China. The result may seriously harm Taiwan’s sovereignty in the international community as well as Taiwanese confidence in the government.

Lastly, Taiwan’s investment may strengthen China’s diplomatic power, which could ultimately work against Taiwan. China has been known to utilize overseas investment and aid to motivate developing countries to act in favor of China (i.e. these countries are more reluctant to criticize China for human rights issues) by waiving compliance requirements or obligations. By joining the AIIB, Taiwan is helping the sole threat to its national security. Taiwan’s capital injection could be used to “buy” other countries’ cooperation in suppressing Taiwan’s self-governance. Meanwhile, as the Chinese government will have a strong influence on the awarding of infrastructure projects, Taiwanese businesses’ reliance on China could grow even further, enhancing China’s bargaining power over Taiwan in any economic or political negotiation.

According to Taiwan’s Central Bank, the benefits to businesses from joining the ADB was only roughly$18.57 million per year from 2006 to 2012. Meanwhile, the total capital contribution of Taiwan is as high as $1.78 billion as of 2013, meaning approximately only a 1 percent return on investment. In the case of the AIIB, Taiwan has to face numerous risks — to its national security, constitutionality, and government-public relations — for possibly only minimal returns. Is this indeed a wise decision?

Ricky Yeh is an alumnus of Johns Hopkins University’s School of Advanced International Studies. He formerly worked as an Economic Analyst at the Japan Center For International Finance and is currently employed as a business strategy consultant.