New Southern Strategy is an Impossible Strategy

New Southern Strategy is an Impossible Strategy 
China Times Editorial (Taipei, Taiwan, ROC) 
A Translation 
July 14, 2016

Executive Summary: The new regime is in a hurry to promote its New Southern Strategy. Unfortunately problems have arisen at the Formosa Plastics steel plant in Vietnam, and the China Steel steel plant in India. If this were not enough, the Philippines has demanded arbitration in the South China Sea, adding fuel to the fire. Clearly the New Southern Strategy is far more problematic and risky than the new regime imagined. The new regime must improve relations with the governments on its New Southern Strategy list. It must establish channels by which it can negotiate, solve problems, and sign agreements. Otherwise its New Southern Strategy will remain a pipe dream.

Full Text Below:

The new regime is in a hurry to promote its New Southern Strategy. Unfortunately problems have arisen at the Formosa Plastics steel plant in Vietnam, and the China Steel steel plant in India. If this were not enough, the Philippines has demanded arbitration in the South China Sea, adding fuel to the fire. Clearly the New Southern Strategy is far more problematic and risky than the new regime imagined. The new regime must improve relations with the governments on its New Southern Strategy list. It must establish channels by which it can negotiate, solve problems, and sign agreements. Otherwise its New Southern Strategy will remain a pipe dream.

The Formosa Plastics steel plant in Vietnam required nearly 10 years of planning and construction. Total investment approached 340 billion NTD. It finally began operations. But last month, on the eve of its opening, the Vietnamese government conducted a tax audit, and demanded an additional 70 million USD. Without any evidence, the Vietnamese government blamed Formosa Plastics for marine pollution that resulted in fish kills. This incited public outrage, and the  Vietnamese government fined Formosa Plastics 500 million USD.

Worse still, Formosa Plastics was forced to endure this mistreatment. Formosa Plastics Group Chairman Wang Wen-yuan and Vice President Wang Jui-hua went to Vietnam to deal with the matter, only to find themselves held for ransom. Unless they paid the 500 million USD, they would not be allowed to leave, and the plant would not be allowed to begin operations. Formosa Plastics was forced to pay out 500 million USD before the plant could begin operations.

China Steel factories in India also suffered a serious setback. The Indian government reneged on its agreement. Tariffs on hot-rolled steel raw materials were originally set at 5%. But the Indian government doubled the rate to 10%. By contrast, competitors Japan and South Korea only had to pay 1%. According to China Steel, its plant in India is probably unsustainable, and the company is already "expecting the worst".

The new regime is holding high its New Southern Strategy banner. It is trumpeting a new era of community with Southeast Asia, of trade with India and other nations in South Asia. It seeks to shift Taiwan investment on the Mainland to other parts of the world. Its primary purpose is "de-Sinicization" and increased diversification.

First consider de-Sinicization. Both academia and industry have criticized de-Sinicization as "unrealistic and impracticable".  The Mainland's economy is worth 10 trillion USD. It is the second largest economy in the world. Annual import volume is 2 trillion USD. After the United States, it is the second largest market in the world. By contrast, Southeast Asia's economy is worth 2.6 trillion USD. India's economy is worth 2.2 trillion USD, less than half that of the Mainland. Furthermore, Taiwan and the Mainland share the same culture and the same language. They have been doing business with each other for several decades. The new regime would replace the Mainland with nations in the south. But as objective data and hard reality show, that is simply impossible.

Now consider diversification. It makes sense not to put all one's eggs in one basket. Businesses need to avoid excessive reliance on only a few major customers. The same is true for nations. But when seeking alternatives, one must protect the markets one already has. The new regime's policy has turned cross-Strait relations into a Cold Peace. Attempting to reduce cross-Strait economic and trade relations, in order to shift them to the south is obviously a mistake, and the risk is obviously much too high.

If the new regime is determined to implement its New Southern Strategy and enable companies to invest in the south, it must improve bilateral economic and trade relations with these governments. In the short term this will help companies secure better conditions. In the event companies run into trouble, the government must come forward on their behalf and help them find solutions.

In the mid to long term, it must sign agreements with these countries in Southeast Asia, including investment agreements and tax treaties. It must seek preferential tariff treatment and investment protection. Businesses require government protection. Investments require legal protection. This will encourage companies to adopt the New Southern Strategy. Otherwise, the new regime's New Southern Strategy will remain a solo performance.

Many of those who advocate the New Southern Strategy say that investments on the Mainland are not protected by the rule of law. Guangxi rules, therefore investment risks are high. But the New Southern Strategy has the same problems. In fact, the problems are even more serious. Among the New Southern Strategy target nations, only Singapore boasts clean government and the rule of law. Other nations are plagued by official corruption and unclear laws. The Formosa Plastics steel plant in Vietnam, and the China Steel steel plant case in India, make that all too clear.

When Taiwan companies that have invested on the Mainland encounter problems, the two sides had channels for problem solving. Numerous agreements have been signed in recent years. Taiwan businessmen and Taiwan investments on the Mainland have been afforded protection and dispute resolution mechanisms. The Mainland even had a “pro-Taiwan” policy rooted in political considerations. It gave priority to problems encountered by Taiwan companies. Countries targeted by the New Southern Strategy lack such channels. This is apparent from the new regime's utter lack of response to Vietnam's mistreatment of Formosa Plastics and India's mistreatment of China Steel. The new regime has played dead and said nothing.

We would like to offer the new regime a bit of advice. Putting all one's eggs in one basket is of course inadvisable. But before spreading them all out, take care of the basket first. Otherwise one may wind up throwing good money after bad. To spread the risk by means of the New Southern Strategy, the new regime must first strengthen bilateral relations, and establish channels for problem solving. It must first sign safeguard agreements. Otherwise the New Southern Strategy will remain an Impossible Strategy.

蔡政府別讓新南向變新難向
2016/7/14 中國時報

新政府風風火火推新南向政策時，天外飛來一件台塑越南鋼鐵廠事件，接著又出現中鋼投資印度鋼鐵廠再出問題，而菲律賓提出的南海仲裁案更如雪上加霜。顯示新南向政策可能比新政府的想像與預期更難、風險更高，新政府如果無能強化與新南向政策相關各國政府的關係，建立對口單位、協商出解決問題的機制，簽署需要的各項協定，新南向政策終將成為鏡花水月。

台塑越南鋼鐵廠經過近10年的規畫、興建，總投資金額高達台幣3400億，終於要點火生產營運，但點火前夕，台塑越鋼上個月先被越南政府查稅，要求退還7000萬美元；接著在缺少證據的情況下，越南海域汙染導致魚群大量死亡、引發民眾憤怒一事，越南政府歸因台塑越鋼排放廢水不當，為此被罰款高達5億美元。

更離譜的是台塑不得不「吞下」苦果，原因是台塑集團總裁王文淵、副總裁王瑞華前往越南處理相關事項，結果人被扣住，如不賠出5億美元則恐怕無法離境、高爐點火亦遙遙無期，台塑不得不在點火前就賠出5億美元。

中鋼到印度設廠同樣嚴重受挫，印度政府推翻設廠前的協議，將原本承諾中鋼要進口的熱軋原料關稅從5%驟升至10%，但相較之下，日本、南韓等競爭國只要1%。根據中鋼的說法，印度廠恐怕難以為繼，「已經有最壞打算」。

新政府高舉新南向大旗，要增加與東南亞共同體、印度等南亞大陸國家的經貿往來，把台灣的對外投資從高度集中於大陸導向其他地區，主要目的一個是「去中國化」，一個是減少過分集中化。

對「去中」的目的，學界與業界已多所批評，認為「不切實際，難以達成」，因為大陸是規模10兆美元的全球第二大經濟體，每年進口數量有2兆美元，是全球僅次於美國的第二大市場。相較之下，東南亞共同體經濟規模2.6兆美元，加上印度的2.2兆美元，還不到大陸的一半。加上台灣與大陸文化、語言相同的優勢，及過去數十年的經營，新政府要以新南向取代大陸，坦白說，客觀數據與現實情況都可看出：不可能做到。

但對分散市場、避免集中化的目的，確有其必要。即使是一家企業，也必須避免訂單過分集中特定大客戶的風險，國家亦復如此。不過，開展其他市場商機的同時，也必須保護、維持與原有市場的關係。新政府政策讓兩岸關係陷入「冷對抗」，意圖以冷卻兩岸經貿關係成就新南向，在方法上明顯是錯誤，風險亦高。

如果新政府真心要落實新南向，讓企業願意前往投資、增加與強化雙方經貿關係，必須加強且做到者，最重要的就是政府能與各國政府加強關係，短期而言是幫企業爭取到更佳條件，而且一旦廠商出事，政府可代廠商出面與對方政府對口，協助廠商排除問題。

中長期而言，則是必須與各國或東南亞共同體簽署各項協議，從投資協定到租稅協定、爭取優惠關稅與投資保障等。企業在有政府為倚靠、投資有法律保障下，才可能增加追隨新南向政策的意願。否則，新南向終究只是政府自拉自唱的政策。

許多主張新南向者一直以來的說法是，大陸投資因為法律不落實、人治為主，投資風險很高；但同樣的問題也存在於新南向政策中，甚至更為嚴重。新南向對象國中，大概只有新加坡是政府清廉、法律明確、法治落實的國家，其他國家多存在著相當嚴重的政治不清明、官員貪腐、法治不落實等問題，這從台塑越鋼案與中鋼印度投資案已經非常明確地顯現。

甚至我們可以說，即使同樣存在著這些問題，但企業在大陸投資出問題時，過去兩岸都有對口單位、解決管道；近幾年更已簽署多項協定，對台商在大陸的投資與人身安全都有一定的保障與解決機制。甚至大陸官方過去基於「友台」的政治考量，對台商各項問題都有更高的重視。新南向政策中的國家，台灣顯然尚未建立類似管道與機制，這從政府對台塑越鋼、中鋼印度投資案等問題，毫無反應、不發一語的「裝死」態度即可看出。

我們還是要向新政府進一言，雞蛋過分集中於一籃子並不好，但在分散前要先看顧好這一籃雞蛋，否則可能賠了夫人又折兵；而要落實分散風險的新南向，政府就該先做到強化雙邊官方關係、建立解決問題機制、簽署保障協定等，否則，新南向政策，難矣！