The COVID-19 Epidemic and Taiwan’s Future

The COVID-19 outbreak could effect changes in Taiwan's economic growth, international recognition, and the U.S.-Taiwan relationship. Photo: Martti Chen

In recent weeks, Western media outlets have given considerable attention to speculation about the impact the COVID-19 crisis might have on Chinese governance once the situation has been brought under control. Few, if any, however, have looked at the consequences for Taiwan. With its isolation from much of the international community, including such crucial organizations such as the World Health Organization, Taiwan finds itself playing a tenuous role as it seeks to position itself as an important player in the fight against COVID-19.

Shelley Rigger, Brown Professor of Political Science at Davidson College and author of Why Taiwan Matters: Small Island, Global Powerhouse, posits that what happens in China will be a major factor in determining how the Taiwan economy emerges from the crisis. While the PRC continues to be an important manufacturing hub for export to world markets, she says it may be more significant to focus on China’s large domestic market when discussing the potential impact of the COVID-19 virus.

“The service sector is now the largest sector in China, and it largely relies on people actively seeking out something that they probably can live without, at least temporarily,” says Rigger. “So, you can tell businesses to open back up, but you can’t make people go to those businesses.” Recent photos of empty shops, entertainment centers, and public areas suggest that it could be a while before Chinese consumption habits return to their previous highs.

At the same time, a growing number of multinational companies are concluding that China may no longer be the ideal place to establish or maintain a regional headquarters.

Rigger sees those developments as a possible opportunity for Taiwan. “Taiwan had lots of regional headquarters until just the last 10 years or so, when many companies moved over to the mainland because they thought that was where the future was,” she says. “Well, if the mainland is no longer feeling like the future, Taiwan still has a great reputation. Executives like to live there, and it has good IPR protection and lots of banking options.”

COVID-19 may alter the talent market in Taiwan as well, as professionals who previously preferred to seek out opportunities in major Chinese cities begin viewing Taiwan as a better, safer option. Alan McIvor, practice leader with executive search firm Paul Wright Group, says that he has been receiving more inquiries from China-based senior Taiwanese professionals about job opportunities that would permit them to relocate to Taiwan.

“Previously the major push factors for a return to Taiwan revolved around young children and aging or sick parents, but the salary cut involved in returning to work in Taiwan was often prohibitive,” says McIvor. “However, it seems like the coronavirus has altered the balance of the pros and cons of returning home.”

In the year preceding the COVID-19 outbreak, a steady influx of returning Taiwanese investment from China had begun to take place due to the uncertainties and reduced revenues caused by U.S.-Chinese trade tensions. Under a government program designed to attract such investment, over US$23 billion has been pledged so far. Foreign direct investment into Taiwan totaled US$11.2 billion in 2019, the fourth-highest amount on record.

Darson Chiu, a research fellow at the Taiwan Institute of Economic Research, cautions that if the prediction that the coronavirus situation could knock a percentage point off of China’s GDP for 2020 comes true, that could shave up to .29% off Taiwan’s own growth, given that China (including Hong Kong) accounts for some 40% of Taiwanese export sales. On the other hand, much of the negative effect on Taiwan’s economy could be offset by the diversion of further investment to Taiwan due to the COVID-19 epidemic.

International implications

Besides the broad economic ramifications, the crisis may benefit Taiwan’s international image, considering how deftly it has dealt with containing the spread of the virus on the island. Taiwan can also point to its efforts to come up with possible treatment options and a vaccine for COVID-19, and how willing it has been to cooperate closely with international institutions and other countries in the region if they let it.

To make that case effectively, University of Canterbury political science professor Alex C. Tan urges Taiwan to become more skillful at effectively marketing its contributions to the international community beyond Taiwan’s status as a liberal democracy.

“Taiwan’s leaders need to be more creative in expressing their ‘value proposition,’” Tan says, using a marketing term that describes a feature of a product that makes it attractive to consumers. “They tend to appeal to emotion by saying that because Taiwan is a democracy, and because other democracies share their values, more countries should be on their side,” he adds. “But really, this virus situation has shown that germs won’t stop at anyone’s borders, and Taiwan can really contribute. They need to better emphasize that.”

An example of Taiwan’s key role during the global crisis has been its cooperation with U.S. biopharmaceutical company Gilead Sciences in quickly making available an antiviral treatment option for COVID-19. In early February, it was reported that a research team at Gilead led by Dr. Taiyin Yang, the company’s Taiwanese-born executive vice president of pharmaceutical development and manufacturing, has developed an experimental drug that has shown promise in treating the MERS and SARS coronaviruses, which are structurally similar to COVID-19. According to Gilead’s website, the antiviral Remdesivir, which was previously tested to treat Ebola, is still undergoing clinical trials in China, and the company is working with governments and regulatory authorities to approve compassionate use of the drug in patients with severe symptoms.

In an emailed statement, Gilead said that Dr. Yang’s department has been critical in the effort to respond to the COVID-19 outbreak. The statement added that Gilead “is working to accelerate manufacturing Remdesivir in anticipation of potential future product supply needs,” and that the company is “pursuing multiple strategies in parallel to increase available product supply, expanding our external network of manufacturing partners around the world to increase capacity and production, and supplementing with internal manufacturing of Remdesivir.”

Gilead is careful to note, however, that because of the urgency of the situation, it is “driving these efforts forward before knowing whether Remdesivir is safe and effective to treat” COVID-19.

On February 21, Taiwan’s Central News Agency reported that two separate research teams in Taiwan had synthesized Remdesivir. One team, at Academia Sinica’s Institute of Chemistry, was able to produce 100 mg of the drug at 97% purity, despite having started from scratch and encountering difficulty finding raw materials.

The other team was organized under the semi-governmental, nonprofit National Health Research Institutes, which also produced a synthesis of Remdesivir at 97% purity. This development raises hopes that Taiwan could have a possible treatment option available in the near future, and that Taiwan could gain recognition as a viable center of biomedical research and a valuable contributor to international health-related organizations.

Some observers also note that the COVID-19 outbreak may have the effect of bolstering international support for Taiwan’s participation in the World Health Organization, which has blocked Taiwan from holding even observer status in the organization’s decision-making body, due to PRC opposition to according any international recognition to Taiwan.

In the weeks following the first news of the outbreak and after a representative for Taiwan was refused entry to an emergency meeting of the WHO in Geneva on January 22, several world leaders – including Prime Minister Shinzo Abe of Japan, Canadian Prime Minister Justin Trudeau, and prominent members of the U.S. Congress – spoke out publicly in favor of allowing Taiwan’s participation in the WHO. Many of them cited Taiwan’s importance as a frontline defender in the fight against infectious diseases, as well as its status as a regional transport hub.

Tan of the University of Canterbury sees these developments as potentially a net positive for the U.S.-Taiwan relationship. “It at least consolidates the relationship,” he says. “Regardless of whether it’s a Republican or Democratic administration in the White House, the fact is that the U.S. and China are competitors, and Taiwan plays a part in that competition.”

Although Taiwan has been commended for keeping the number of infections within its borders low, the recent spike in the number of cases in South Korea and Japan has shown that without extreme vigilance, the total confirmed cases in Taiwan could also increase significantly within a short time frame.

“You don’t want to have your international relationships or your political reputation riding on your ability to do successfully something that, like containing a pathogen, is very hard to do,” Davidson’s Rigger concludes.

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