TAIWAN SEEKING TO COUNTER THE PRC IN INDIA

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001325 SIPDIS SIPDIS E.O. 12958: DECL: 04/13/2016 TAGS: ASEC PGOV PINR PREL TW XR SUBJECT: TAIWAN SEEKING TO COUNTER THE PRC IN INDIA (C-AL6-00293) REF: STATE 47515 Classified By: AIT Deputy Director David J. Keegan, Reason 1.4 (b/d) ¶1. (C) The following is in response to questions posed in C-AL6-00293 (reftel) on Taiwan's efforts to enhance bilateral ties with India. ¶2. (C) Summary: Taiwan is pursuing closer economic ties with India to bolster its political relationship and counter a growing reliance on the PRC economy. While welcoming Taiwan investment, particularly in the high-tech sector, New Delhi has made it clear that it has no interest in relations with Taipei outside of the economic sector. Indian diplomats in Taipei also privately criticize Taiwan's strategy as too aggressive and short-sighted, warning that Taiwan risks provoking PRC retaliation. End summary. Taiwan Eager For Closer Ties -------------- ¶3. (C) Taiwan government officials are eager to enhance bilateral ties with India to counter Taipei's growing dependence on the PRC economy. Taipei authorities, in cooperation with the pro-government Taiwan Think Tank, established the Taiwan-India Cooperation Council (TICC) in February as part of an ambitious new strategy to encourage companies to invest in the Indian market. Taiwan Think Tank's Lai I-chung laid the groundwork for TICC and called the Indian market "untapped" for Taiwan businesses. He told AIT that Taipei wants Taiwan firms to invest in India instead of the PRC to reduce Taipei's economic reliance on Beijing. Lai also noted that Democratic Progressive Party (DPP) Secretary-General Yu Shyi-kun's appointment as TICC Chairman SIPDIS highlights the importance the Chen Shui-bian administration places on TICC and the India relationship. ¶4. (C) Taiwan officials also believe stronger economic ties will strengthen Taipei's political relationship with New Delhi. Ministry of Foreign Affairs (MOFA) Section Chief for South Asia Ben Chen told AIT that if Taiwan pushes economic ties, a political relationship will naturally follow. Taiwan Think Tank's Lai separately agreed, arguing that investment will lead to better bilateral ties. Chen also noted that Taipei is promoting cultural and educational exchanges to give Indians a better understanding of Taiwan. The primary goal of reaching out to the Indian market, Chen explained, is to counterbalance Taiwan's growing economic dependence on the PRC. Taipei's biggest problem in this effort, he said, is PRC pressure on New Delhi and India's fear of alienating Beijing. India Views Taiwan Goals As Unrealistic -------------- ¶5. (C) Indian diplomats in Taipei told AIT that Taiwan officials have unrealistic expectations for India-Taipei relations. India-Taipei Association (ITA) Director-General Vijay Gokhale stressed that India welcomes Taiwan investment, particularly in the high-tech sector, and that he believes the two economies are highly complementary with many areas for mutual cooperation and development. He noted, however, that Taiwan officials are living in a dream world with their inflated expectations for India-Taiwan relations and belief that Taiwan can use India to counterbalance the PRC. Gokhale bluntly stated that New Delhi has no interest in relations with Taipei outside of the economic sector. ¶6. (C) Gokhale also sees Taiwan's current India strategy as short-sighted. He told AIT that Taiwan officials are overzealous in pushing closer economic ties and have not developed a long-term policy. From his point of view, Taiwan is simply trying to throw millions of dollars in investment for short-term political gain. Gokhale argued that Taiwan's failure to focus on a particular sector or industry mutually beneficial to both governments is not a solution for TAIPEI 00001325 002 OF 002 improving bilateral ties. A carefully focused strategy on an industry that India wants to develop, such as the computer chip or software industry, he explained, would be more practical and promote closer ties. ¶7. (C) Taipei's zeal to promote better ties with New Delhi could backfire. Gokhale argued that the PRC will likely take notice of Taiwan's loud publicity highlighting its "new" relationship with India. Beijing could retaliate against Indian and Taiwan firms, he explained, many of which also do business with the PRC. Gokhale worried that Taiwan officials are ignoring India's refusal to go beyond limited economic contacts and still believe they can use economic ties to develop a political relationship with New Delhi. Without a more discreet or practical policy, he said, the strategy will backfire because India is not willing to jeopardize ties with the PRC. Can Taiwan Convince Firms to Invest? -------------- ¶8. (C) Taiwan also faces challenges in convincing Taiwan companies to invest in India instead of the PRC. In a survey of Taiwan business leaders, some remarked that the government can try to urge them to invest in certain places, but ultimately, it is market forces that drive their decisions. They added that the PRC market is appealing because of the large contact base of over one million Taiwanese PRC residents, as well as familiar culture and language. ITA's Gokhale also noted that while the Indian market looks very tantalizing at first glance, it has much government red-tape, a unique culture, and a language barrier for many Taiwan businesses. Taipei, he argued, is overly optimistic if it believes Taiwan companies will rush to invest in India. Bio Note -------------- ¶9. (C) Vijay Gokhale, the Director-General of the India-Taipei Association, is an experienced diplomat with previous service in the PRC. He has made clear on several occasions his strong personal sympathy for Taiwan and its international difficulties. Comment: More Caution Needed -------------- ¶10. (C) Taiwan has much to offer India in the field of technology as well as a source of direct investment capital. New Delhi, however, has made it clear that it has no intention of risking its delicate relations with the PRC over economic and political ties with Taiwan. Furthermore, Taipei has been warned that it must tread lightly with its India strategy or risk alienating Beijing, which could result in retaliation against Indian and Taiwan firms. So far, Taiwan officials seem to only hear what they want to hear and continue to push forward very aggressively. If Taipei fails to pursue a more cautious and pragmatic relationship, it risks damaging future India-Taiwan relations. YOUNG