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

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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
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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

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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

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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?
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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
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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
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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