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Taiwan's Pocketbook Diplomacy (Int'l Edition)

International -- Asian Business: TAIWAN


Taipei prods its companies to invest in Southeast Asia

Most foreign investors are steering a wide path around the blasted-out economies of Southeast Asia, where the continuing free fall in currency values indicates the crisis is worsening. Not the Taiwanese. On Jan. 11, a 60-member delegation of government officials and industrialists will embark on a 10-day swing through Indonesia, Malaysia, Thailand, and the Philippines to hunt for investments. Taiwan's central bank is chipping in $1.2 billion in cheap loans to support projects in the region.

What does Taipei see in Southeast Asia that the rest of the world is missing? Enormous political opportunity. With investments from South Korea and Japan drying up--and China keeping its markets closed to many imports--Taiwan sees a leadership vacuum. With $85 billion in foreign reserves and an economy growing at a 6% annual clip, it is one of the few Asian Tigers left that can assist its neighbors.

By extending a helping hand, the government of President Lee Teng-hui hopes to ease Taipei's diplomatic isolation in Southeast Asia and improve the island's leverage in conflicts with arch-rival Beijing. The government also hopes other Asian leaders will see Taiwan as a role model. After all, Taiwan is an electronics-export powerhouse led by thousands of small and midsize companies that keep their debts low and receive little official help. "We want to share our experience in policymaking as well as provide technical assistance," explains Chiang Pin-kung, chairman of the Council for Economic Planning & Development and leader of the mission to Southeast Asia.

On the diplomatic front, the strategy seems to be bearing fruit. In early January, Taiwanese Vice-President Lien Chan spent a four-day "vacation" in Singapore, where he dined and played golf with Prime Minister Goh Chok Tong, President Ong Teng Cheong, and Senior Minister Lee Kuan Yew. Politics clearly were on the agenda. In a similar gesture, Malaysian Prime Minister Mahathir Mohamad on Nov. 27 met with Taiwanese Premier Vincent Siew during a stopover at Taipei's airport. The meeting came soon after Taiwan offered $4 billion to assist in the formation of an Asian lending agency similar to the International Monetary Fund. Washington helped kill that idea. But Chiang says Taiwan still hopes to provide aid.

Taipei's hardest sell job, however, may be to its own industrialists. For years, President Lee has urged Taiwanese businesses to ease their dependence on China and "go South" by investing in nations such as the Philippines, Indonesia, and Vietnam. The China Development Corp., controlled by the ruling Kuomintang party, has led the effort. But among private manufacturers, interest in the region has waned.

That may change as Southeast Asia looks more like a bargain. Since last summer, the currencies of Indonesia, Thailand, Malaysia, and the Philippines have plunged around 50% against the dollar, while the Taiwan dollar has dipped just 14%. Meanwhile, the region's banks and tycoons are growing more desperate to pay their staggering debts. For once, the political ambitions and economic incentives are aligned so Taiwan can greatly expand its influence in Asia.By Jonathan Moore in Taipei

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