Is North Macedonia Poised to Reboot Its ‘Taiwan Adventure?’

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Is North Macedonia Poised to Reboot Its ‘Taiwan Adventure?’

The nation’s brief recognition of Taiwan is a case study in corruption and checkbook diplomacy, leaving a black mark on public opinion. Can relations make a new start?

Is North Macedonia Poised to Reboot Its ‘Taiwan Adventure?’
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The “Taiwan adventure,” it was called. Or the “Taiwan billion.” Or – rather more prosaically – the “Taiwan loans case.” It all depends on who you ask.

“I guess the ‘Taiwan billion-dollar affair’ could be a working term,” said Filip Stojanovski. “Though maybe not so catchy.”

However it is remembered, the episode looms large in the collective memory of North Macedonians of a certain age. On several occasions during my three days in Skopje, North Macedonia’s capital, I was greeted with knowing smiles when I mentioned Taiwan.

“It’s associated with a sort of political adventurism in politics here,” explained Stojanovski, partnership and resource director of Metamorphosis Foundation, a Skopje-based NGO, which works to strengthen civil society and has tracked Chinese soft power influence in North Macedonia. “It symbolizes something reckless.”

Ana Krstinovska echoed this view. “I think it’s still in the mindset – not only of politicians but of the people,” said Krstinovska, founder and president of Estima, a think tank in North Macedonia that focuses on the EU, China, and the Western Balkans. “It’s associated with irresponsible politics.”

The origins of the “Taiwan billion” saga can be traced to an August 1997 meeting in Amsterdam between Taiwan’s representative to the Netherlands, Ku Chung-lien, who was a former navy vice admiral, and Macedonian academic Vasil Tupurkovski. On the face of it, Tupurkovski was then just a professor of international relations at the University of Skopje, acting in a private capacity. Yet, as Stojanovski noted, having served from 1989-1992 as the Macedonian member of the last Yugoslav Presidency – the collective head of state, which included representatives of each Yugoslav republic – Tupurkovski was already a seasoned politician.

The background to the Amsterdam meeting is unclear, but these informal talks were fruitful enough to earn Tupurkovski a meeting in Taipei with then-President Lee Teng-hui shortly thereafter. 

Having established and assumed chairmanship of the Democratic Alternative (DA) party in March 1998, Tupurkovski and his colleagues visited Taipei again that same month where they once more met Lee to tout the possibility of formalized relations between Taiwan and the Former Yugoslav Republic of Macedonia (FYROM), as it was then known. By this point, Taiwan’s representative office in Austria was serving as the conduit for these closed-door, but increasingly substantive, discussions. 

In a 2004 paper for The China Quarterly, political scientist Czeslaw Tubilewicz referred to a series of “Bondesque” meetings “conducted in secret locations in Macedonia, as well as at bars and restaurants in Amsterdam, Vienna, and The Hague.” It soon emerged that the purpose of these clandestine conferences was to seal a deal: economic “assistance” from Taipei in exchange for diplomatic recognition from the FYROM should the fledgling DA gain power in the upcoming elections of November 1998. 

On the eve of the elections, Tupurkovski declared that a billion dollars would come into the country if the DA were to be elected, though the source of the funds was not specified. When the party realized this ambition, as part of a coalition in which Tupurkovski was appointed vice premier, the stage was set. 

Several more exchanges ensued before Taiwan’s foreign minister, Jason Hu (also known as Hu Chih-chiang), arrived in Skopje the following January to sign an agreement on full diplomatic ties with his counterpart, Aleksandar Dimitrov of Tupurkovski’s DA. So secretive were these meetings that FYROM President Kiro Gligorov was apparently unaware of them. Stunned by the announcement, the pro-Chinese Gligorov railed against the decision on national television and demanded that it be rescinded. Several local media echoed these sentiments, and there was considerable public disquiet at the move. 

“I met a Taiwanese person who was working here at the time, and even they were not happy with how this progressed,” said Stojanovski. “When it was announced, they expected a backlash [against Taiwan] from China.”

Among the broadsides directed at the Macedonian leadership by Beijing, the most ominous was a threat to wield China’s Security Council veto to prevent the extension of the United Nations Preventive Deployment Force (UNPREDEP), which had been present in the FYROM since 1995. The force was credited with having prevented the violence of the Bosnian War from reaching the FYROM’s borders. Now, with conflict in neighboring Kosovo raging, the possible withdrawal of the UNPREDEP should have been of grave concern to all Macedonians. 

To the dismay of Western observers, and many inside the FYROM, the coalition government dismissed the threats, naively believing that Beijing would not jeopardize regional stability in the Balkans over such a “trifling” issue. The leadership would have done well to heed recent history in this regard: Just two years earlier, China had vetoed the dispatch of a U.N. peacekeeping force to Guatemala over its ties with Taiwan, jeopardizing efforts to end the Central American nation’s 36-year civil war. 

At the very least, Western officials suggested, confirmation of the new relationship might be delayed until after the U.N. vote on February 25. But even this eminently sensible advice was rejected, and formal ties between Taiwan and the FYROM were established on February 8, 1999. Just over two weeks later, the inevitable happened, and China blocked the UNPREDEP extension. The 1,100-strong force departed Macedonia, leaving the country vulnerable.   

Floundering in the wake of this bombshell, the DA declared that recognition of Taiwan had been contingent on a promise of substantial economic assistance – the billion dollars that Tupurkovski had touted ahead of the election. It later transpired that the putative sum was also to have included funds from Greece, but the recognition fiasco meant that the sum was henceforth destined to be “the Taiwan billion” in the public imagination.  

“Most of this is now preconceptions and prejudices – shortcuts,” said Stojanovski. “You say ‘Taiwanese billion’ and it means something bad, without people knowing the full story.” He echoes Tubilewicz and other commentators in asserting that the full story may never be known.  

While precise details may have evaporated into the mists of time, Tubilewicz wrote that Taiwan’s promises “must have been sufficiently enticing and sincere for the opposition leaders to consider them seriously.”

A figure of $1.6 billion was touted in Taiwanese media, which the Lee administration dismissed as “unlikely.” The language here was admittedly unconvincing but, as Tubilewicz noted, such an amount would have been more than 2.5 times the budget of Taiwan’s official development agency for that year. Of course, Lee’s “flexible diplomacy” – which often amounted to dollar diplomacy – means that this was not impossible, but Taipei’s subsequent actions suggest they had a different notion of what economic assistance entailed.  

An initial sum of $15 million for small and medium-sized enterprises, channeled through the European Bank for Reconstruction and Development, was the only explicit pledge in the joint communique announcing the normalization of relations. This was soon upgraded to $235 million in government-to-government support, with a further $1 billion in commercial investment. Private enterprises were also to get support, through $10 million in revolving credit with the same amount offered to boost Macedonia’s foreign reserves. A technical mission was to be established, as was a training program in Taipei for Macedonian personnel, and eight investment projects were proposed, to the tune of $163 million. These, it was claimed, would provide 10,000 jobs. 

Meanwhile, the Kosovo crisis afforded Taipei an opportunity for “humanitarian diplomacy,” which included $4 million to assist with the resettlement of Kosovar refugees in Macedonia, and a pledge of $300 million for postwar reconstruction. Although this sum was officially to be donated to Macedonia’s beleaguered neighbor, it would actually be used to pay for Kosovar imports from the FYROM. (In the event, the proposal collapsed under pressure from Beijing.)

Alas, all of this still fell far short of Macedonian expectations. When Gligorov declined to accept the accreditation letters of the incoming ambassador Peter Cheng in April 1999, and Taipei responded by rejecting the credentials of Cheng’s counterpart, Ver Modanu, in June, the writing was on the wall. Taipei pinned its flagging hopes on Tupurkovski claiming the presidency in October elections, but he didn’t even make the runoff vote, held a month later, in which Boris Trajkovski of the Organization-Democratic Party for Macedonian National Unity prevailed. 

The next two years were messy, with Tupurkovski and his DA colleagues ousted from the coalition in November 2000 and then excluded from a national unity government that was formed in May 2001 on the back of an ethnic-Albanian insurgency. With the DA sidelined and a pro-Chinese party controlling foreign affairs, an announcement in June 2001 that ties with Beijing would resume was unsurprising. 

The dalliance had sputtered to an ignominious denouement. But the repercussions resonated for years. 

In April 2009, Tupurkovski and a former aide were sentenced to three years for embezzlement of Taiwanese economic aid. The sentence was overturned on appeal, but the stain of the “Taiwan billion” lingered. 

As for the “Taiwan billion,” while it appears that nothing close to that amount ever changed hands, no one is sure exactly what happened to portions of the money that were received.

“Tupurkovski just disappeared from the political scene,” said Krstinovska, who previously served as a state secretary for EU affairs. “We never really knew what happened to the money,” she added.

“Someone knows,” Stojanovski pointed out. “But much research would now be needed to get all the facts because much of the public memory is not retained. If it was in newspaper or TV form, it wasn’t digitized.”  

The debacle may well explain the reluctance of officials in North Macedonia – as it is now known – to discuss the specifics of a recent major investment in the country’s technological industrial development zones (TIDZ) by Taiwanese electronic component manufacturer Yageo Corporation.

Yageo, the world’s third-largest supplier of multi-layer ceramic capacitors, and an important supplier for Apple, announced the deal in April this year. The agreement would see $225 million injected into TIDZs on the outskirts of Skopje and the eastern city of Štip over the course of a decade. The funding, which represents the largest greenfield investment in North Macedonia since the country’s independence in 1991, will begin next year and support the construction of manufacturing plants. It is projected to put almost 4,000 local people into work. 

The deal received coverage in Taiwanese and Macedonian media, with both Yageo and TIDZ representatives talking up its potential at a signing ceremony in Taipei. Prime Minister of North Macedonia Dimitar Kovachevski spoke via video link about the “stable investment climate” the cooperation would help foster.  

Media inquiries about details of the investment have been welcomed by Yageo, whose representatives have highlighted the mutual benefits of the arrangement. They also stress that this is just the latest round of a “long-term strategic investment” in North Macedonia for Yageo that began in 2011 – a fact that was conspicuously absent from many news reports.   

“We’ve actually been there for more than 10 years,” said Andy Sung, a spokesman and investor relations manager for Yageo. “Last year we built our second factory, and the prime minister [Kovachevski] attended the grand opening.” The plants, which produce capacitors for electric vehicles, are operated by Yageo subsidiary KEMET, which also maintains an R&D center at the Skopje TIDZ.  

Sung noted that reporters from Macedonian TV stations and newspapers attended the Taipei event and were also taken on a “technical tour” of Yageo’s factory in the southern city of Kaohsiung. He said that conversations with Skopje about further long-term investments are ongoing and that the investment environment in North Macedonia has become increasingly attractive. In addition to the tax exemptions offered by the TIDZ, Sung highlighted the stability of the country, a “qualified, professional workforce” and “competitive labor costs.”

There are also logistical considerations. “It’s quite a strategic, convenient location for us to build a base to serve European customers or even North America,” said Sung. “We’re hoping to expand our manufacturing resources in North Macedonia with some potential logistics hub consolidation.” 

While Sung stressed that Yageo’s enlarged presence in North Macedonia is based on its own specific requirements and the company’s previous “positive investment experience,” Taiwanese trade officials are increasingly optimistic about the potential of Central and Eastern European countries in general (CEECs) to facilitate market access to the rest of Europe. “I think the CEECs can definitely be a gateway to the European Union,” said Felix Chiu, executive director of the market development department of the Taiwan External Trade Development Council – the quasi-governmental trade promotion agency. 

The Balkans may have traditionally been viewed as peripheral to this goal, but recent developments have provided renewed impetus for Taiwan’s expansion in the region. Pushback against Chinese soft power incursion into CEECs has been a factor. The Balkan countries are unlikely to emulate Estonia, Latvia, and Lithuania any time soon in quitting the China-CEEC platform, but there is widespread dissatisfaction at a lack of tangible benefits from the initiative. 

In several countries, the 14+1 – as it is now known, following the withdrawal of the Baltic nations – is considered little more than a malign influence operation by Beijing. Such concerns were reflected by the passage of legislation in Romania that limits foreign direct investment by non-EU countries. While this amendment does not explicitly target China, the Trump administration’s Clean Network initiative, which has been signed by every Balkan country, cites the prevention of “intrusions by malign actors, such as the Chinese Communist Party” as its guiding principle. 

Marc Cheng, executive director of the EU Center in Taiwan – part of an international network of university-based institutions funded by the European Commission – believes countries in the region have become wary of the ulterior motives behind the 14+1. “Of course, FDI might help the local economy,” he said. “But if it’s not greenfield investment, if it’s like China’s ‘Africa model’ where they just grab resources, then move to the next place, what’s left for local companies and governments?”

In contrast to Yageo’s keenness to promote its latest investment, TIDZ officials have been less responsive to queries about the deal. A week before to my trip to Skopje, I contacted the TIDZ and had an encouraging conversation with a representative responsible for international investment relations. A meeting was proposed before the lines of communication suddenly went cold. E-mails and phone calls went unanswered, and it became clear that the proposed meeting had been nixed from higher up. 

Then, while walking to Metamorphosis’ office on Skopje’s Franklin Ruzvelt road – coincidentally, a major Taipei thoroughfare also bears the former U.S. president’s name – I spotted the sign for the TIDZ office and decided to pop in. After some confusion, a manager appeared and agreed to contact me to set a meeting for the following day. When this didn’t happen, I returned to the office the next morning to try again. This time, a nervous-looking receptionist told me there was no one available to talk to me. Subsequent calls, emails, and WhatsApp messages were ignored. 

Quite what informed this stand-offishness is hard to say, but I had to wonder if concerns over public memories of the “Taiwan billion” played a part. 

“There has been a lot of chatter about [the investment], regarding the previous experience with Taiwan,” said Stojanovski. “I’m not sure whether this is a factor.”

More recently, Taiwan – or at least Taiwanese nationals – garnered negative press when Macedonian police broke up a crime ring that had lured 39 Taiwanese workers to North Macedonia with promises of legal employment, only to force them to participate in telecommunications fraud. The racket, which targeted people in Taiwan, was exposed thanks to a tip-off from authorities in Taipei. A Macedonian interpreter who assisted with police interviews expressed surprise at the nationality of the criminals. 

“I had expected them to be Chinese as I thought it was easier to trick them into going abroad,” she said. “But Chinese need visas [to enter North Macedonia] and Taiwanese don’t, so maybe that explains it.”

Yet, for all the negativity publicity associated with Taiwan over the years, most Macedonian observers point the finger at their own leaders. 

“We cannot blame Taiwan or their politicians for corruption here,” said Bojan Blazevski, a journalist with Metamorphosis. Blazevski has covered China’s presence in North Macedonia, including a huge corruption scandal over the construction of a pair of highways by a Chinese state-owned enterprise. Multiple instances of graft were exposed, and the revelations helped bring down the government of former Prime Minister Nikola Gruevski in 2016.   

“It’s the Macedonian politicians who are responsible,” continued Blazevski. “They’re the ones making promises in political campaigns and later, from these promises, the result is corruption scandals.” 

Krstinovska made a similar point in a 2019 article on the “highways scandal” for China Observers in Central and Eastern Europe (CHOICE), a multinational consortium that monitors Beijing’s influence in the CEECs. She believes that the reputational damage from the “Taiwan billion” episode might best be addressed by Taipei.

“It could be time for Taiwan to clear its reputation and say, ‘We did our part of the deal and paid the money. Why don’t you prosecute the corrupt politicians that stole it?,’” she said. “It’s stuck in people’s minds that we recognized Taiwan, and it was for nothing but personal gain.”

As for whether private investment and economic assistance can ever translate into closer political ties between Taiwan and North Macedonia, most analysts are not overly hopeful. 

“Probably the only way we can envisage some sort of cooperation is at the insistence of the U.S.,” said Krstinovska. “But even this interaction would have very strong limits. Even the Social Democrats, who are currently in power, try to remain on good terms with China.”

Stojanovski believes Serbia’s cozy relationship with China is also a factor, as Belgrade continues to exert a strong influence on North Macedonian politics. 

“The role of China cannot be just viewed at a country level,” he said. “It must also be understood at a regional level through Serbia and through the interplay of NATO, the EU, and other forces in the Balkans.”