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Taiwan Plus One Strategy and New Southbound Policy
- DIRECTOR GENERAL TERESO O. PANGA, Philippine Economic Zone Authority (PEZA)
PASAY CITY — With the Taiwanese government’s resolve to further strengthen its New Southbound Policy, the current administration of President William Lai Ching-te is looking beyond cooperation and exchange between Taiwan and 18 countries in Southeast Asia, South Asia and Australasia.
As the original Southbound Policy was created to make Taiwan less dependent on mainland China particularly in manufacturing and supply chains, Taiwanese companies operating in China and even Taiwan have adopted the China+1 and Taiwan+1 strategies to de-risk global supply chain through establishment of alternative manufacturing sites, diversification of supply chains and improvement of domestic production.
In both business strategies, Taiwanese companies — while maintaining their domestic manufacturing in China and Taiwan — have been setting up offshore facilities mainly in ASEAN (Association of Southeast Asian Nations) to be able to avail themselves of zero- or lower-tariff on their exports particularly to the European Union and the United States. Just like the rest of the MNCs (multinational corporations) that have shifted production out of China to ASEAN, the other key objective apart from making ASEAN as their base for exports is to take advantage of the host economy’s growing domestic market and demand for imported products through domestic production (or import-substitution).
ASEAN is the third largest economy in Asia, and the fifth largest in the world after the US, China, Japan and Germany. In light of the protracted US trade war with China, ASEAN has become a connector between the United States and China, with ASEAN imports from China increasing and ASEAN exports to the United States increasing. In 2022, the United States and ASEAN had a total trade and investment of $520.3 billion. (HKTDC Research, January 2024)
The Philippines can leverage on the Indo-Pacific Framework, RCEP and other FTAs, Trilateral Agreement with US and Japan in support of the Luzon Growth Corridor, and the US CHIPS & Science Act to be able to channel these “ASEAN-connector trade and investments” into the Philippines.
We need to capture as well those MNCs that relocate their export-manufacturing facilities from China to ASEAN. This is where PEZA and other IPAs can make a bid for their ecozones that can provide among ASEAN for strategic location, effective business ecosystem and most generous fiscal incentives package for investors (particularly under the CREATE More regime).
“PEZA aims to target strategic and high-tech industries from Taiwan”
The Philippines’ proximity to Taiwan makes it central to Taiwan Plus One Strategy & New Southbound Policy. With our bigger landmass, natural and human resources, the Philippines can be an ideal alternative site for Taiwanese companies into domestic and export manufacturing. We can very well facilitate and support the growth of Taiwanese and other global investors with the Philippines being regarded as one of the best performing economies in the region and enjoying a demographic sweet spot and dividend with a young, English-proficient, highly skilled and trainable workforce.
Over the years, with Taiwan and Philippines signing a bilateral investment agreement, this has led to stronger cooperation in various sectors, including trade, investment, tourism, technology, agriculture, and education. Given Taiwan’s status as the 7th largest economy in Asia and 20th largest in the world by purchasing power parity, certainly the Philippines will benefit from its increased economic cooperation with Taiwan. Moreover, Taiwan is driven by a competitive manufacturing sector in the fields of electronics, machinery, petrochemicals, energy, and ICT products.
As such, PEZA aims to target strategic and high-tech industries from Taiwan that will provide for ecozone product sophistication, export diversification, labor-intensive and high-skilled jobs, knowledge transfer, enhanced local supply chain, and creation of industry clusters.
PEZA recently concluded an investment mission to Taiwan, which it co-organized with the MECO (Manila Economic Cooperation Office) under Chairman and Resident Representative Atty. Cheloy E. Velicaria-Garafil and PTIC Taipei under Director Anthony B. Rivera for Commercial Affairs.
Through the Philippine Investment Forum attended by 150 participants, and B2B meetings in Taipei and Kaohsiung, and the BDO-hosted networking dinner with select Taiwanese business and industry leaders — PEZA was able to generate FDI leads from prospective as well as existing Taiwanese investors into electronics manufacturing, EV transport, agro-processing, IT solutions, renewable energy, and real estate development. (First Part) — (/)