Substantial India-Taiwan move

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By: Jayant Muralidharan

There has long been talk (albeit less action) about “IT” (India-Taiwan), a potential partnering of two sides, the first of which has established global leadership in computer software, while the other is a world beater in computer hardware. If the People’s Republic of China (PRC) is rapidly catching up with the US in advanced technologies, substantial credit goes to Taiwan. Since 1989, thousands of technology companies from that dynamic island have moved operations across the Taiwan Straits, generating within the PRC hundreds of billions of dollars in turnover and millions in jobs. Deng Xiaoping ensured that China provided a welcoming regulatory field for such a transmission of industrial power from across the straits, setting up free trade zones that had minimal regulatory requirements that combined with generous avenues for repatriation of profits and for recruitment of personnel from different locations. The close fit between Taiwanese technology companies and facilities located within the PRC has been predicated on a congruence of geopolitical interests between Washington and Beijing, a situation that ceased to exist more than a decade ago.

Since 2018, all pretense of conciliatory cooperation (and indeed cohabitation) between the US and the PRC ended with the declaration of the trade war between the two economies, a conflict that has such deep roots within the societies and economies of the two countries that a genuine reconciliation of interests in a manner that satisfies both sides is a distant objective. Taiwanese tech companies are, for the first time, having to choose between China and the US. Those closely networked to the former are unlikely to be welcome to operate freely in the latter. An increasing number will therefore have to relocate to countries other than the PRC, locations that are deemed to be friendly to the US rather than those that are designated as rivals or worse by the US Department of Defence in its published estimates and reports. Given changes in the regulatory and tax structure, as well as a level of efficiency that has eluded the bureaucracy in India for long, India in 2019 would be a far more attractive destination for relocation of Taiwanese technology companies than nearby competitors for investment such as Vietnam, Thailand and Indonesia. The human material available in India is on a scale and of a quality that any global company would be hard pressed to find elsewhere.

For the first time, there has been a sharp acceleration in the interest and investment of Taiwanese companies in India, with the levels of both in 2018 being greater than the total of the previous 51 years. Excellent leadership at both the India mission in Taipei as well as the Taiwan mission in Delhi has played a keystone role in such a development, as has the momentum given by Prime Minister Narendra Modi to the Make in India process. Building on this, a quantum leap needs to get made, such that Taiwanese investment in India gets across the $20 billion mark within two years and $50 billion by 2024. In common with entrepreneurs in several other countries, Taiwanese companies tend to follow the leaders in their field, and hence the convincing of such elements that India is the ideal location for them to move production and research facilities from China to India becomes a primary task. A substantial and systematic effort needs to be launched to connect with hundreds of technology companies in Taiwan, so that they may be incentivised to relocate to India.

A visit to the technology parks in Hsinchu or a stroll around the Taipei tech park would illustrate what manner of facilities need to be set up in different locations in India. An advanced Research & Development facility could be set up in Haryana within driving distance of the international airport. Production facilities by Original Equipment Manufacturers would need to be set up near ports, in view of the economies in costs of shipping finished products rather than getting ferried by air. While an R&D facility may be smaller, parks designed for production of components need to be on a substantial scale, as close to 10,000 acres as is feasible in Indian conditions. Such parks would be able to outbid substitute locations in Vietnam and elsewhere, were there to be a tax holiday for three years, with a taper period of two additional years before taxes on a regular scale get levied. Power and water need to be available on a 24/7 basis, as also the treatment of waste water.

Prime Minister Modi has frequently emphasised the advantages of hygiene and cleanliness in a manner that none of his predecessors attempted, and the proposed, technology parks set aside for Taiwanese units need to have high standards of cleanliness and maintenance of facilities. Given the problems faced by citizens in dealing with government agencies, investors in such facilities need to have access to a 24/7 helpline that would not simply be a PR exercise but would genuinely act as a channel through which issues cropping up can get resolved in a speedy manner.

Over the years, Taiwanese companies have developed an ecosystem suited to their needs in the PRC, and an integrated ecosystem needs to be created in India that ensures a high level of acceptance of the shift from China to India. While the 1980s were a period where it was difficult to locate a resident of Taiwan who could speak English, these days most educated youth are familiar with the language. Hence the “language advantage” that China once had for Taiwanese companies is much reduced in scale. However, the good news is that the number of Indian students in Taiwan is growing, assisted by the fact that the degrees of one side is recognised by the other.

Additionally, what is needed is for young Taiwanese to form a “Peace through Language Corps” and come to India for a year or two to teach Mandarin. Should the Taiwanese government encourage companies to treat such sojourns as unpaid leave, or accept such activities as the equivalent of mandatory military service, people-to-people linkages would grow through such a program. High-tech companies in Taiwan are increasingly having to choose between traditional markets such as the US and the EU and continuing the practice of concentrating production facilities in China. Such units may soon need to choose an alternative location, and it would be well within the capability of the Modi government to ensure through a suitable plan of action that this be India. INAV

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