With a once-in-a-generation opportunity, Taiwan should up its soft power game

As the People’s Republic of China faces a global backlash over its handling of COVID-19, Taiwan needs to project both hard and soft power. The Taiwanese government should take advantage of the post-pandemic moment through six concrete steps: increasing its defense spending, rethinking its development aid agenda, engaging with international organizations, rebuilding supply chains, promoting quality infrastructure, and improving its public diplomacy.

After mainland China suppressed early information about the virus, the Communist party leadership has taken a hit in terms of global opinion: 66 percent of Americans now have an unfavorable view of China, up from 47 percent only three years ago. Over 100 countries backed a World Health Organization resolution, against the PRC’s wishes, to investigate the origins of COVID-19. Communist party officials are worried. In April, an internal report for the Beijing government found that worldwide anti-China sentiment is at its highest since the 1989 Tiananmen Square Massacre. 

While China faces a second wave of COVID-19 cases, Taiwan has now lasted three months with only one local infection. Transparency, accountable institutions, and a free press have bolstered Taiwan’s response. President Tsai Ing-wen, who won a landslide re-election victory in January, has a strong mandate to advance Taiwan’s goals internationally.

First, Taiwan should continue to increase its defense spending. After years of underinvestment by her predecessor’s government, Tsai Ing-wen has increased the 2020 military budget to around 2.3 percent of Taiwan’s GDP. This figure places Taiwan among the top defense spenders in the world as a fraction of GDP, but continued investment is needed to deter a country as large as China.

Second, the government in Taipei should increase and rethink its approach to official development assistance (ODA). Last year, Taiwan channeled $302 million towards ODA. Sweden, a slightly smaller country in terms of gross national income (GNI), allocated $5.4 billion for assistance. As a percentage of GNI, Taiwan’s aid ranks lowest among all donor countries tracked by the OECD. If Taiwan aims to be a global actor, it needs to start acting like one, putting $1 billion toward ODA each year at the very least.

Beyond increasing its aid spending, Taiwan should rethink its recipients. Currently, most of Taiwan’s aid goes to a small group of sympathetic countries, particularly its 15 diplomatic allies. In the developing world, China and Taiwan have engaged in bidding wars, offering trade, investments, and aid in exchange for diplomatic recognition. Given its relative size, Taiwan can rarely outspend the Chinese government; since 2016, five countries have decided to drop recognition of Taipei in favor of Beijing. Rather than targeting aid at a small group of diplomatic allies, Taiwan should integrate its aid spending with its New Southbound Policy, enhancing relationships with its neighbors in the Indo-Pacific.

Taiwan should also reconsider how it supports development. Every member of the G7 has its own development finance institution (DFI), leveraging private capital to complement its ODA. In 2019, the United States launched a new DFI, the U.S. Development Finance Corporation. Even more recently, the International Finance Corporation, the private sector arm of the World Bank, announced a $5.5 billion capital increase. Official aid alone cannot solve the world’s development challenges, and Taiwan should consider creating its own DFI.

The COVID-19 pandemic demonstrates how Taiwan’s aid can be a force for good. As China emerged from lockdown, it began shipping personal protective equipment (PPE) to other countries. Many of the masks were defective and some of the test kits were unreliable, prompting EU foreign policy chief Josep Borrell to criticize Beijing’s “politics of generosity.” Now that China is entering a new period of domestic coronavirus infections, it is unclear how much it can contribute to the world. Taiwan can fill the gap. The island nation has already ramped up its production of PPE, shipping over 10 million masks to the U.S., Europe, and its diplomatic allies under the slogan “Taiwan can help.” Taiwan can also contribute to the next stage of the coronavirus response, adjusting from masks to vaccines once more research is complete.

Third, Taiwan should increase its role in multilateral institutions. Given the country’s success in combatting Coronavirus, Taiwan’s membership in the World Health Organization is long-overdue. After showing its economic resilience in the face of the pandemic, Taiwan should also push for accession to the OECD, shares in the World Bank, and membership in the IMF. Given its existing status as a member in the Asian Development Bank, the country should obtain a non-borrowing share in the Inter-American Development Bank and a non-regional membership with the African Development Bank. If denied participation, the Tsai administration should cut a check toward their development efforts, putting international organizations in the uncomfortable position of refusing a donation or explaining why they will accept Taiwan’s money but not their membership.

Fourth, the Taiwanese government must lead the shift to resilient supply chains and reliable technology. Global supply chains will not cease to exist because of the pandemic, but they will move as firms take risk into account when choosing where to source their imports. Taiwan should use its aid to build up factories and infrastructure throughout Africa, Latin America, and Asia. It should also foster shipping routes to connect manufacturers in the developing world to output markets. This approach would provide better opportunities to low-wage workers, strengthen diplomatic ties, and diversify supply chains beyond their traditional reliance on mainland China. At the same time, Taiwan, which leads the world in semiconductor manufacturing, can use its aid to promote 5G alternatives to Huawei.

Fifth, Taiwan should become a leader in quality infrastructure. In 2019, the U.S., Japan, and Australia founded the Blue Dot Network, aiming to certify global infrastructure projects for transparency, sustainability, and developmental impact. The network provides an alternative to the Chinese Belt and Road Initiative, which lacks accountability and is riddled with corruption. However, it needs capital to compete. Taipei should contribute to the Blue Dot Network, promoting quality infrastructure standards and distinguishing itself from Beijing.

Finally, Taiwan can improve its public diplomacy efforts. Just as the Qatari government funds Al Jazeera to influence world opinion in its favor, Taiwan should fund its own media agency. A Taipei-backed broadcaster would be able to highlight democracy, human rights, and respect for minorities, offering a clear contrast with the Chinese Communist Party’s domestic repression. Funding for the broadcaster could be partially provided by the government, but private shareholders and advertising revenue could be an additional source of revenue for the media outlet. Through programs in English, Spanish, French, Portuguese, Indonesian, Japanese, Korean, and Tagalog, Taiwan’s message would reach global audiences.

Taiwan’s public diplomacy should also prioritize culture and education to create a pro-Taiwan constituency among the world’s future leaders. The Taiwan Scholarship is an existing program that funds about 2,000 students from around the world each year to study at Taiwanese universities. This is a tiny fraction of an estimated 58,000 foreign students who are granted scholarships annually to study in mainland China. Taiwan should seek to expand its scholarship program to at least a third of the size of the PRC program over the next several years. Culture can be an additional draw. Taiwan shares thousands of years of history with the PRC, but it offers free expression and an ability to hear differing viewpoints on the past. The Taiwanese Ministry of Culture has done excellent work promoting Taiwan’s history and its creative industries to global audiences, but it should receive more funding.

The PRC’s historic error in responding to the Coronavirus offers Taiwan a once-in-a-generation opportunity. Not since Tiananmen Square has global sentiment turned so sharply against Beijing. By contesting China’s growing role in the development sector, Taiwan can show the world that a well-governed democracy is the strongest engine for global prosperity.

Daniel F. Runde is a senior vice president and William A. Schreyer chair in Global Analysis at the Center for Strategic and International Studies. He previously worked for the U.S. Agency for International Development, the World Bank Group, and in investment banking, with experience in Africa, Asia, Europe, Latin America, and the Middle East.