Taiwan Remains A Strategic Partner For Malaysia – Analysis


With the 112th anniversary of Taiwan’s National Day on 10 October, future prospects remain bullish and important for Malaysia-Taiwan ties, in developing new frontiers of economic and critical technology cooperation in chips, as well as in forging a more dependable energy and food security that will ensure regional stability and a two-way assurances of energy and food security based on the decades of trust and sincerity forged.

Taipei and Kuala Lumpur continue to reap the returns of mutually beneficial and vital ties, especially in the future indicators of critical economic development pillared on high technology and the semiconductor industry.

Conventional ties that have been shaped by robust traditional factors including trade and investment and people to people relations, are now in strategic need of a new phase of future driven technology and geostrategic dependence.

People to people ties have been the main bedrock of the affirmation of close ties driven by tourism and education and the generally robust interest, awareness and appreciation of one another’s unique cultural offerings.

A growing destination for Muslim friendly facilities, Taiwan currently ranks third in the global Muslim travel index for popular travel destinations and first among Asean countries.

The bilateral cultural connections remain rich, especially in the potential of the cultural exchanges and development in the arena of film, music, literature and the pop culture which form a major part of Taiwan’s identity with established progress and capacity.

More than 13,000 Malaysian students are currently pursuing their studies in Taiwan, making up a total of more than 100,000 Malaysians who have pursued higher education in Taiwan.

Apart from the established people to people connections and flourishing cultural diplomacy, trade and economic partnership remains of the next critical importance.

Taiwan is Malaysia’s fifth largest trading partner, and Malaysia is Taiwan’s eighth largest. Trade for this year has reached a historical high of US$36.6 billion (RM172.4 billion), a 36% increase compared with last year. Taiwan has been the country’s eight largest investor, investing a total of US$14 billion at the end of 2022.This symbolises the enduring competitiveness as a strategic source of investment location for high end investors from Taiwan especially in the realm of manufacturing and services industries.

More than 1,700 Malaysian companies are operating in Taiwan, enjoying the supportive climate of investment in Taiwan and the spillover impact to both parties.

The semiconductor industry remains the most critical geopolitical prime asset that gives the most reassuring returns to both parties and with that, serving as the vital influencing card in dictating regional and global security and power parity in decades to come.

As Malaysia is now scrambling to regain its lost lustre in the semiconductor industry with the new lure and added investments of chips giants including Infineon and Intel, Taiwan’s existing and leading expertise in the chips industry must be strategically tapped into and being moulded in a two-pronged stable and trusted supply chain security in a complementing symbiosis.

Taiwan has strategic future gains in tapping into Malaysia’s future potential and boom in the semiconductor domain. The growing focus in the country for the next phase of advancement in the chipmaking sphere provides a strategic second front fallback for Taiwan and its dominant chips industry. The $7bn facility in Kedah that will eventually be Infineon’s and the world’s largest production site for silicon carbide chips, remains a testimony of the future potential of the country’s advantage in high tech industrialization, alongside other critical minerals including rare earths.

Malaysia was an early leader in Asian chipmaking by attracting many foreign chipmakers in the 1970s, earning the nickname of “the Silicon Valley of the east”. Eventually, we lost ground to South Korea and Taiwan, with the rise of Samsung Electronics and Taiwan Semiconductor Manufacturing Company (TSMC) in the 1990s.

Near the Kulim Industrial Park that houses Infineon, Intel is building its biggest site for advanced 3D chip packaging in Bayan Lepas, a new domain emerging as the next battleground arena that will make more powerful chips.
Malaysia approved a $15.25bn investment in the first quarter of 2023, and is already a major hub for the final steps of the chipmaking process.

It controls 13 per cent of the global market for packaging, assembly and testing services and are the sixth-biggest semiconductor exporter. However, it still relies heavily on foreign chip companies to sustain this industry, with the likes of Intel, NXP, Infineon, Texas Instruments and Renesas.

Growing calculations project that Malaysia is now one of three major production hubs in Asia, along with Taiwan and South Korea. Our asset remains our strategic supply chain and production location and ease of logistics, with other supportive tools internally.

These are the areas where Taiwan can fully capitalize on, and to increase strategic tie-up in this industry as a trusted and stable secondary front for its giant chips making capacity led by TSMC. While competitiveness has exponentially grown in the scramble to lure top technology investments in the region with growing peer competition, Malaysia remains the best bet for external choices and for Taiwan to leverage, based on these factors of existing and new policies on green and digital energy and economic postures and existing historical and cultural connections.

Risks remain high for a future potential conflict with Taiwan’s China dilemma, and the repercussions reverberate far and wide including a direct fallout on Malaysia’s economic and geostrategic vulnerabilities and security.

Malaysia has the greatest potential in semiconductor investment in ASEAN, and there are more than 50 Taiwanese multinational semiconductor enterprises in Malaysia. The oil and gas sector and green and renewable energy, alongside food and energy security, remain the crux of the new underpinnings of deeper economic and investment connections between Taipei and Kuala Lumpur that provide massive new ripple and spillover effects.

While some have argued that Malaysia is poised to benefit the most from the exodus of top firms from China, with Vietnam, India and Indonesia as regional rivals in further bolstering the high-tech and chips sectors, existing internal capacities and readiness in providing the capital and tax support, quality workforce and systemic investment supportive tools and a long term stabilising political and economic climate alone will not ensure a resilient and externally compatible structural chain of geostrategic returns from these new industries.

It will need a complementing and trust based mutual compatibility of needs, contextual common risks and a fellow capable power denominator in ensuring that the long term returns from the development of these industries provide the yearned security and economic competitiveness objectives and benefits.

As Representative Phoebe Yeh has argued, combining Taiwan’s upstream production of chemicals and silicon wafers, and Malaysia’s downstream testing and packaging services, will create high end win-win returns in developing Malaysia’s high technology landscape with the right support and injection of technical expertise from Taipei.

Taiwan’s New Southbound Policy presents a new strategic opening for Malaysia to fully reap its mutual benefits. The policy seeks to lessen Taiwan’s economic dependence and exposure with mainland China, and to seek a new growth engine, economic development and influence in this region for the future of Taiwan’s resilience and prosperity. A prosperous and stable Southeast Asia remains vital for Taiwan’s future progressive growth and stability and as a frontier of economic and security support.

The New Southbound Policy, launched in 2016 under the Tsai Ing-wen administration,provides incentivisation of efforts for local enterprises to invest and trade more in Southeast Asian countries, and Malaysia is best positioned to ensure this policy provides the needed returns to both.This complements Taiwan’s status as one of the top 20 outward foreign direct investment (OFDI) countries.

In targeting the region for its economic and trade returns, the Policy also engages extensively with the new potential of the halal industry, as evident in the ramping up of Muslim friendly support and facilities in Taiwan for tourism, with nearly 200 halal certified eateries and hotels, and working with JAKIM to gain halal certification for Taiwanese businesses, food, and other products. Other areas of high returns include capitalising on one another’s strength, including on health, education, research and scientific advancement.

Malaysia’s traditional Look East Policy has long been fixated with the model of Tokyo and Seoul’s rapid industrialisation and cultural and work ethics, but Taiwan now presents the vital missing link in the entire spectrum of strategic and wise balance of productive efficiency and efficacy of the systemic and structural human capital investment with targeted long term resilience of technology and infrastructure advancement in a concerted all of nation approach.

The enduring ties based on mutual assistance remain vital to both sides, and openings for future growth remain wide open. Support and assistance have been provided to Malaysia during the 1997 Asian Financial Crisis and the great haze during the same year. Both Taiwan and Malaysia are now at the forefront of regional and global geopolitical importance especially in energy and resource security and stability in supply chain. Both stand to gain more from deeper partnerships in existing and new areas.

In transiting towards a more strategic partnership away from the traditional domains of trade and investment and economic partnership, the sphere of peace and stability with both moral and technical support and unwavering affiliation for the rules-based order and the values based normative approach of the international system and rule of law remain the highest pillar that forms the bulwark of regional and global stability.

Both Taiwan and Malaysia are prime examples and models of regional progressive hallmarks of democracy and freedom. Taiwan also remains a beacon of unyielding resolve in staunchly standing up for the rule of law and progressive societal advancement that upholds human rights across the spectrum, with future driven socio-economic policies that promote stability and peace. These are the primary pillars in which both Taipei and Kuala Lumpur remain steadfastly and positively intertwined, and both must be wise and strategic in preserving this ever crucial relationship that will define a new era of economic and power parity in the region and beyond.

Collins Chong Yew Keat

Collins Chong Yew Keat has been serving in University of Malaya, the top university in Malaysia for more than 9 years. His areas of interests include strategic and security studies, American foreign policy and power analysis and has published various publications on numerous platforms including books and chapter articles. He is also a regular contributor in providing op-eds for both the local and international media on various contemporary global issues and regional affairs since 2007.

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