
The 22 generally small, impoverished countries that extend official diplomatic recognition to Taiwan in return for aid are back in the spotlight. The president of one of these so-called “diplomatic allies,” Manuel Pinto da Costa of Sao Tome and Principe, caused a stir in Taiwan with his recent visit to China. There was speculation that China had decided to cancel the tacit agreement to not poach Taiwan’s diplomatic allies that it had made with the current Taiwan government headed by Ma Ying-jeou. But the China-leaning Ma and his party, the KMT, remain much more important partners for Beijing than a tiny island state of the African coast, and China has no intention of encouraging Sao Tome and Principe to immediately break-off relations with Taiwan. Beijing has even sought to reduce the domestic political problem the visit presents for Ma, making a public statement downplaying it as private “trade and business activity.”

Still, as both Beijing and Taipei are well aware, the visit is a blow for Ma. It is clear that China’s substantive relations with Taiwan’s diplomatic allies are growing, with Pinto da Costa’s visit just the latest example. On the other hand, Taiwan has made little headway in improving relations with potential diplomatic allies in China’s camp, and its relations with at least some of its own allies appear to be getting worse. So, even as the “diplomatic truce” with China holds, Taiwan’s official diplomatic relationships are steadily being hollowed out. The issue with Sao Tome and Principe is an embarrassment for the Ma administration because it very publicly highlights this situation, and the inability or unwillingness of the government to do much about it.

To understand why, we need to look back at the situation under Taiwan’s previous president, the DPP’s Chen Shui-bian. The Chen administration was initially ambivalent about the diplomatic allies it inherited from President Lee Teng-hui. Chen’s foreign aid policy priorities were asserting a Taiwan identity, improving Taiwan’s reputation as a donor, and – above all –being frugal with public money after the excesses of the Lee era. Many in the DPP had struggled against the China identity Chiang Kai-shek and the KMT had imposed on Taiwan during the dictatorial period, and paying small, impoverished countries to diplomatically recognize the “Republic of China” seemed increasingly anachronistic. Significant players in the DPP would much rather have seen countries across the globe recognizing a democratic “Republic of Taiwan” without any need for monetary inducement.

But this view changed as Beijing began to punish Chen for being unwilling to move towards unification through luring away diplomatic allies. Unfortunately for Chen, Taiwan’s public were much less sanguine about the need for diplomatic allies than DPP policymakers, and the dwindling numbers of countries recognizing Taiwan became a significant policy issue. Faced with a hostile KMT-dominated legislature and with no public appetite for raising the foreign affairs budget to outbid China, the Chen administration panicked. Money was channeled into increasingly risky, even scandalous, tactics. In one episode, two middlemen stole $30 million allocated to establish relations with Papua New Guinea. Such incidents and tactics angered both Taiwan’s voters and influential Western countries such as Australia, and could only slow the steady decline in the number of diplomatic allies.

Meanwhile, the KMT was developing an increasingly friendly relationship with Beijing based on their shared opposition to “Taiwan independence” and the DPP. This relationship saw the two sides establish a “diplomatic truce,” tacitly agreeing to stop going after the other side’s diplomatic allies.

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This dramatically changed the equation on diplomatic allies and foreign aid for the incoming Ma Ying-jeou administration. Taiwan’s diplomatic allies could no longer switch to China. The Ma government used this leverage to reform some aspects of how it handles aid to its allies. Although these reforms actually fall short of international OECD standards, simply halting the churn of diplomatic allies—and the associated controversies and scandals—have significantly improved Taiwan’s reputation. The Taiwan government has also used the opportunity presented by the agreement with China to further reduce the amount spent on diplomatic allies. The foreign aid budget is now reportedly less than 0.09 percent of GNI, much lower than the average 0.3 percent aid effort of the OECD donor countries in 2013.

The Ma administration assumed that the diplomatic allies would have no choice but to accept these changes. But Gambia’s decision to break off relations with Taiwan last year showed that the diplomatic truce could only stop allies from recognizing China; it could not force them to recognize Taiwan. Other allies have used less dramatic ways to express their discontent. Panama’s president, for example, waited six months before he would accept the credentials of Taiwan’s ambassador.

Even so, the dramatic slowdown in the number of diplomatic allies lost – one over the six years of the Ma administration vs. six over the eight years under Chen – means the public has become largely indifferent to the issues of diplomatic allies and foreign aid. Ma has avoided being caught between maintaining the number of diplomatic allies, international pressure, and a shrinking aid budget. In this narrow respect, then, the policy has undoubtedly been a success.


But whether or not it is good policy is far less certain. An unknown though presumably significant fraction of Taiwan’s diplomatic allies now continue to recognize Taiwan only because China says they must. Beijing will cancel the diplomatic truce if or when it grows sufficiently dissatisfied with Taiwan’s progress towards unification. True, there are some incentives for China to maintain the truce. For example, it saves Beijing money and it may be somewhat reluctant to further alienate Taiwan’s voters through a return to diplomatic competition. Yet China’s plan for unification is so unpalatable to the vast majority of Taiwan’s people that a break down in the truce at some point seems quite likely – especially if the next president is from the DPP. If or when it does break down, the Taiwan government of the day will be presented with a flood of defections, and there is the very strong possibility that Taiwan will be worse off than it was before.

If history is a guide, the Taiwan government will scramble to hold onto its allies with whatever means at its disposal. This will undo all of the gains that have accrued to Taiwan’s international reputation, and Taiwan may well be left more stigmatized as a donor than it was under Chen Shui-bian. These frantic efforts will only have limited success, and the number of diplomatic allies will plateau at a significantly lower level than now. The president of the day will bear the blame, even though it will have been a direct consequence of Ma’s policies.

The one hope for the hapless president who finds him or herself in this situation is that Taiwan’s electorate is now mature enough to understand that trying to maintain a high number of diplomatic allies comes at significant cost to Taiwan in terms of both money and reputation. If Taiwan’s voters can’t stomach spending more money on foreign aid, then perhaps they can be convinced that having fewer diplomatic allies is preferable to the scandals and international controversies that inevitably come with trying to hold onto allies on the cheap.

The DPP has the most to lose over this issue, and needs to start preparing now. If China withdraws the truce from a DPP president, the KMT will do whatever it can to make sure that the DPP feels the hurt domestically. It will use its influence in the media and the legislature to disrupt any rational discussion of the costs and benefits involved in trying to maintain a high number of diplomatic allies. It will also use the legislature to reduce the resources a DPP president has to deal with issue, and sensationalize the administration’s foreign affairs activities to maximize scandal and controversy. So, rather than engaging in political opportunism and trying to scare voters about the hollowing out of Taiwan’s official diplomatic relations under Ma, the DPP should begin a conversation with the electorate about how fragile the situation has become under Ma, and the hard choices that will have to be made.

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While difficult, it may also be possible for both the current administration and the DPP to find ways to strengthen relationships with diplomatic allies even while improving Taiwan’s credentials as donor. For example, Taiwan could explore directly transferring cash to individual citizens below the poverty line in diplomatically allied countries. Such “cash transfers” as they are known, are receiving strong support from influential development researchers, and would put Taiwan at the cutting edge of development aid practice. Cash transfers would also give ordinary citizens a direct stake in their country’s relationship with Taiwan. Most importantly, they would avoid much of the corruption and waste that comes with delivering aid directly into allied government budgets, while at the same time allowing allied governments to claim popular credit for maintaining the relationship with Taiwan.

Whatever approach Taiwan decides to take, the time to start thinking about it is now. As Pinto da Costa’s visit to China shows, neither Beijing nor Taiwan’s remaining diplomatic allies are standing still on this issue. If Taiwan’s policymakers wait until China withdraws the diplomatic truce to start coming up with a plan, it will already be too late.

Dr. Joel Atkinson is a Research Fellow at South Korea’s leading university-based development and poverty research institute, IPAID, where he researches East Asian foreign aid policies. He is managing editor of the institute’s English language peer reviewed-journal, the Journal of Poverty Alleviation and International Development (JPAID). This article draws on research published in The Pacific Review. The views express here are the writer’s own, and do not represent the views of his employer.