[EDLING:1260] India is the cure to `China fever'

Francis M. Hult fmhult at DOLPHIN.UPENN.EDU
Mon Feb 20 15:51:26 UTC 2006

Taipei Times

India is the cure to `China fever'


By the Liberty Times editorial

Sunday, Feb 19, 2006,Page 8 

The Taiwan-India Cooperation Council was established in Taipei on Feb. 11 to 
promote commercial ties between India and Taiwan and to diversify Taiwan's 
investment options. This opens a new chapter in trade and economic relations 
between the two countries.
India's economy has performed impressively in recent years, with GDP growth 
rising to 8 percent toward the third quarter of last year, and its stock 
market soaring by 42.34 percent last year. According to a report commissioned 
by the Council of Economic Planning and Development, following a series of 
rigorous reforms affected by the Indian government over the past few years, 
ther are an estimated 300 million new middle-class consumers across India, 12 
million of which have an average annual salary of US$12,000.

As many Indians are fluent in English, Indian software engineers and 
managerial-level professionals are on a par with those of other advanced 
Western countries. Besides, India is now regarded as a market with great 
potential, as its auto, biotech and engineering industries have laid the 
foundations for the country's economic growth in recent years. 

India is not that remote from Taiwan. The distance between Taipei and Calcutta 
is shorter than that between Taipei and Jakarta, and is almost the same 
distance from Taipei to Singapore.

However, cumulative trade between Taiwan and India has amounted to less than 
US$3 billion. As of the end of last year, Taiwan's investment in India 
totalled less than US$20 million. When compared to the US$280 billion 
cumulatively invested in China since 1990 this only makes one despair.

Language and education dictate a nation's economic performance. In Taiwan, 
elementary school students grow up studying the splendor and greatness of 
ancient Chinese civilization in a systematic fashion. Each student is also 
required to learn ancient Chinese poetry by heart. Naturally, when these 
students grow up, they may harbor an illusion that China is an affluent 
country and that the Chinese live in fairyland. This is why so many Taiwanese 
are eager to jump on the "China fever" bandwagon.

In fact, in the 1980s, when Taiwan's China-bound investment was still severely 
restricted, the government's "Go South" policy was actually very successful. 
The policy motivated many Taiwanese investors to travel to Thailand, Malaysia, 
Vietnam and the Philippines and make investments there, which turned out to be 
quite successful.

However, in the 1990s, when the government sought to relax its restraints on 
China-bound investment, its efforts to encourage Taiwanese businessmen to 
invest in Southeast Asian countries came to a halt. Although some believe that 
China has cheaper labor and a huge potential market, against which other 
nations in Southeast Asia cannot compete, India also has cheap labor able to 
meet quality standards and a market of 1.1 billion people, which is only 
slightly smaller than that of China.

So we must seriously consider why Taiwanese businessmen prefer to invest in 
China and have only poured a meager US$20 million into the Indian market.

Minister of Economic Affairs Morgan Hwang (¶ÀÀç§ü) recently pointed out 
that "Taiwan and India can complement each other in the electronics and 
information technology sectors. Our two nations can create a win-win situation 
if Taiwan can seek to integrate its expertise in hardware with India's 
software resources."

While we are pleased to hear Hwang's views on this matter, we also want to 
remind him that if Taiwan cannot block the unrestricted flow of Taiwan's 
resources to China, then the only possible partner for Taiwan's hardware 
industry will be China. We might even inadvertently help to build China's 
software industry.

If this happens, the project aiming to enhance cooperation between Taiwan and 
India is doomed to fail in the same way as the "Go South" policy did.

The point at issue is: What is the blueprint for President Chen Shui-bian's 
(³¯¤ô«ó) "active management" policy? What are its goals? If Chen's policy for 
regulating cross-strait investment continues to be obstructed by the pan-blue 
camp, then the policy will exist in name only, and around 90 percent of the 
nation's outbound investment will keep flowing into China.

Even if the remaining 10 percent all goes to India, it will not change the 
Taipei-New Delhi relationship. The country's trade policy will only continue 
to tip in China's favor. Once Taiwan's high-tech industry begins to create a 
clustering effect in China, then all the talk of moving toward India will come 
to nothing.

There is no sound reason for Taiwanese businesses to miss out on the huge 
market in India. Nor should the government continue to play an inactive role. 
Besides, India is planning to sign a free trade pact with ASEAN by 2015. 

Faced with China's efforts to contain Taiwan on the economic front, including 
the inauguration of "ASEAN plus one" and "ASEAN plus three," the nation will 
need to count on India to break fresh ground in international affairs.

The question is: Will that effort succeed? We are almost certain that if the 
government is not determined to actively regulate and reduce China-bound 
investment, then this proposal will come to nothing.

Translated by Daniel Cheng 

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