KAS Young Voices: Fresh Insights from
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Keelung City, Taiwan. Photo Credit: TopPhotoImages

May 2024

Implications of the Taiwan Strait on
ASEAN Economies
Ung Angela Vichara Thida RothThe People’s Republic of China (PRC) had explicitly warned the Taiwanese voters against Lai Chin-te anddepicted him as a risk to their interests with immediate intention of declaring independence. The
candidate of Taiwan’s Democratic Progressive Party, however, is elected to take office and will beinaugurated in May. The persistent difference in perspectives raises concerns about potential tensions
in cross-strait relations and the status quo.

www. kas-japan.or.jp

Konrad-Adenauer-Stiftung e. V.
Implications of the Taiwan Strait on ASEAN Economies

May 2024

This paper aims to analyze the economic impact of the Taiwan Strait tensions on ASEAN economies under
two scenarios of escalation vis-à-vis a maintenance of the status quo: China quarantining Taiwan or China
invading Taiwan.
1.

The status quo refers to the continuation of the current situation with no official declaration of
independence nor factual control of Taiwan by the PRC with tensions remaining below thelevel of open conflict even despite systemic and constant provocation.

2.

A law enforcement led quarantine of Taiwan refers to the control of the air and sea border of
Taiwan by the Chinese government (with the help of non-military units such as the China Coast
Guard) with the goal of isolating Taiwan to prevent it from sending exports or receiving
imports. A quarantine could also serve as a precursor to more escalatory PRC military
campaigns such as a PLA-led blockade or a full invasion of Taiwan. A blockade differs from aquarantine as it would involve both commercial and military intervention led by the People’s
Liberation Army.

3.

An invasion of Taiwan refers to the amphibious or airborne assault or a combination of bothby China on Taiwan.

Taiwan's strategic importance in the global supply chain suggests that regional conflicts could greatly
affect the world economy. Despite the absence of formal diplomatic relations, Taiwan, and the
Association of Southeast Asian Nations (ASEAN) have strengthened their economic ties, with the regional
bloc emerging as Taiwan's second-largest trading partner. This cooperation has spurred economic
growth in both Taiwan and the ASEAN, positioning the latter to potentially become the fourth-largest
economy by 2030.
This study seeks to highlight the economic relationship between ASEAN and Taiwan by analyzing andcomparing trade data. Additionally, this paper will look at directions in which ASEAN nations can take tonavigate the tense cross-strait relations to mitigate economic repercussions. Maintaining the current
status quo will lead to economic development in the region. Nevertheless, ASEAN should exercise caution
and reinforce its supply chain resilience to address potential disruptions in the event of escalating
tensions or conflict.

Taiwan’s Strategy: Engaging with ASEAN and Disengaging with
China
Introduced in 2016 by President Tsai Ing-Wen, the New Southbound Policy (NSP) aims to “leverage
Taiwan’s cultural, educational, technological, agricultural, and economic assets to enhance Taiwan’s regional
integration and promote the broader development of the Indo-Pacific region”1. It is based on four principles:
economic collaboration, people-to-people exchanges, resource sharing and regional integration. The
policy aims to strengthen Taiwan’s ties with Southeast-Asia, South-Asia, Australia, and New-Zealand. By
2023, trade between Taiwan and the New South (+18 countries) totaled US$ 152,225.01 million, making
a remarkable 58.84% growth rate since 2016 (US$ 95, 832.77 million). Taiwan's exports to NSP countries
amounted to US$ 90,161.01 million while imports reached US$ 62,063.99 million. On a global scale,

CSIS. (2019, July). Taiwan’s New Southbound Policy: Deepening Taiwan’s Regional Integration. Center
for Strategic and International Studies. https://southbound.csis.org
1

2

Konrad-Adenauer-Stiftung e. V.
Implications of the Taiwan Strait on ASEAN Economies

May 2024

Taiwan’s trade surplus hit an all-time high of US$ 80,969.85 million reflecting the Taiwanese government’s
success in enhancing the local supply chain and boosting the economy overall.

62.06

80.00

76.28

100.00

90.16

1.07

-20.00

New South (18)ASEAN (10)Exports

South Asia (6)Imports

Australia-0.61-11.71

0.00

0.46

5.80

5.15

2.47

7.62

20.00

17.50

28.10

40.00

35.26

60.00

41.01

Milliarden

Table 1. Taiwan’s Trade Statistics with the New Southbound Countries (January - December 2023)

New Zealand

Surplus

Source: International Trade Administration, Ministry of Economic Affairs (MOEA) of Taiwan (ROC)
The New Southbound Policy also serves as Taiwan’s strategy to reduce economic dependence on China,
given China’s potential to exploit the increasing ties between them – “We foresee the means of economic
pressure from China will only increase and won't decrease”2. According to Taiwan’s Minister of Economic
Affairs (MOEA), Wang Mei-Hua, Taiwan’s increasing investment in Southeast Asia and South-Asia aims to
avoid “putting all your eggs in the same basket”3. In 2022, Taiwanese investments in Southeast-Asia andSouth-Asia (US$ 5.2 billion) exceeded those in China (US$ 5 billion) for the first time. Additionally, in 2023,
Taiwan’s export to China (including Hong Kong) constituted 35.25% of its total trade, marking the lowest
share in 21 years4.

Taiwan’s Trade and Investment in ASEAN
At US$ 3.6 trillion in 2022, the Association of Southeast Asian Nations (ASEAN) is currently the world’s
fifth largest economic bloc and third largest economy in Asia5. With a population of 690.6 million, ASEAN

2

Chau, T., Cheng, T.-F., & Li, L. (2023, November 29). Taiwan to continue shifting investment away from
China, minister says. Nikkei Asia. https://asia.nikkei.com/Editor-s-Picks/Interview/Taiwan-to-continueshifting-investment-away-from-China-minister-says
3
Ibid.
4

Ryugen, H. (2024, January 9). Taiwan’s export reliance on Chinese market falls to 21-year low. Nikkei
Asia. https://asia.nikkei.com/Economy/Trade/Taiwan-s-export-reliance-on-Chinese-market-falls-to-21year-low
5
ASEAN Statistical Highlights 2023

3

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Implications of the Taiwan Strait on ASEAN Economies

May 2024

is the world’s third largest consumer market. And, marked with a young population, supportive policies,
increased banking penetration and rapid digital adoption and connectivity6, ASEAN makes for an
attractive destination for foreign investment.
In 2021, Wang Mei-Hua, Taiwan’s Minister of Economic Affairs, emphasized the importance of directing
attention towards ASEAN for “future investments, talent cultivation and cooperation”. She noted that thereconfiguration of global supply chains due to US-China trade tensions have spurred Taiwanesecompanies to invest in ASEAN7.

Increasing Taiwanese Investment in the Semiconductor and EV Industries
In 2023, Taiwan’s foreign direct investment (FDI) in ASEAN reached US $5,226.82 million surpassing thatin China (US $3,036.81 million), just behind the United-States (US $9,690.03 million) whose share wasboosted by Taiwan Semiconductor Manufacturing Co.’s (TSMC) Investment in its factory in Arizona 8.
The rise in Taiwan’s FDI share in ASEAN can also be attributed, in part, to its increasing investment,
particularly in the electronics and optical products sector. In particular, the semiconductor and EV
industries are the direct beneficiaries of massive Taiwanese investment flows into ASEAN9. Key ASEAN
countries for Taiwanese investors include Singapore, Vietnam, Thailand, Malaysia, Indonesia, and thePhilippines.

6

J.P. Morgan. (2023, January). ASEAN is big ... and getting bigger in portfolios?. J.P. Morgan AssetManagement. https://am.jpmorgan.com/hk/en/asset-management/per/insights/investmentideas/asean-equity-potential/
7
Oung, A. (2021, September 8). ASEAN the clear choice for Taiwan, minister says. Taipei Times.
https://www.taipeitimes.com/News/biz/archives/2021/09/09/2003764031
8
Reuters. (2023, February 15). TSMC approves capital injection of $3.5 bln for Arizona factory.
https://www.reuters.com/technology/tsmc-boost-capital-arizona-factory-by-35-bln-2023-02-14/
9
Malaysian Investment Development Authority. (2023, August 3). ASEAN becoming a compellinginvestment destination. MIDA. https://www.mida.gov.my/mida-news/asean-becoming-a-compellinginvestment-destination/

4

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Implications of the Taiwan Strait on ASEAN Economies

May 2024

Table 2. Value of approved outward foreign direct investments (FDI) from Taiwan in 2023, byleading destination country or region

Source: Adapted from C. Textor. Statista
Notable investments in 2023 include Hon Hai Precision Industry Company, also known as Foxconn,establishing a subsidiary in Singapore with an investment of US$484 million10 and investing US$250m in
two manufacturing plants in Vietnam11. Indonesia is the world’s largest producer of nickel, a crucial raw
material used in manufacturing EV batteries. In 2022, Foxconn formed a joint venture with Indika Energy
to manufacture batteries and EVs12. These investments underscore the region’s significance and illustrate
the growing investment and collaboration opportunities in the region. In terms of promoting people-topeople exchange, the Ministry of Economic Affairs (MOEA) of Taiwan aims to recruit semiconductor
professionals from the Philippines, Malaysia, Indonesia, and Vietnam13.

Increasing Trade under Taiwan’s New Southbound Policy
Taiwan’s trade with ASEAN experienced significant growth, from US$ 78,433.58 million in 2016 to US$
117,291.02 million in 2023, marking a 49.55% increase. Exports from Taiwan to ASEAN reached US$
76,276.53 million, while imports into Taiwan amounted to US$ 41,014.48 million in 2023.

10

Focus Taiwan. (2023, July 18). Hon Hai subsidiary in Singapore aimed at EV: source. Focus Taiwan.
https://focustaiwan.tw/business/202307180006
11
Nitta, Y. (2023, July 3). Foxconn to invest $250m in Vietnam to produce EV parts. Nikkei Asia.
https://asia.nikkei.com/Spotlight/Supply-Chain/Foxconn-to-invest-250m-in-Vietnam-to-produce-EV-parts
12
Maulia, E. (2022, September 23). Foxconn forms Indonesian JV for EV and battery manufacturing.
Nikkei Asia. https://asia.nikkei.com/Business/Technology/Foxconn-forms-Indonesian-JV-for-EV-andbattery-manufacturing
13
Wang, F., & Liu, C. (2024, January 14). Taiwan to recruit semiconductor talent from Southeast Asian
countries - focus taiwan. Focus Taiwan. https://focustaiwan.tw/business/202401140018

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Konrad-Adenauer-Stiftung e. V.
Implications of the Taiwan Strait on ASEAN Economies

May 2024-0.01197
0.01830.00633-0.01540.278140.01274

0.102620.08006
0.13268

0.395530.16759
0.56312

Imports

0.79803
7.39
3.01

Exports

2.71
2.35
5.06

5.48
5.38
10.86

5.58
6.14
11.73

5.48
9.69
15.17

20.21
9.52

29.74

35.26
41.01

80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
-10.0076.28

Milliarden

Table 3. Breakdown of Taiwan’s Trade with ASEAN in 2023

Surplus

Source: International Trade Administration, Ministry of Economic Affairs (MOEA) of Taiwan (ROC)
Taiwan’s primary exports product comprised electrical machinery and equipment, accounting for 56.3%
of its total exports, followed by nuclear reactors, boilers, machinery, and mechanical appliances (13.3%),
mineral fuels, mineral oils (6.4%), plastics (3.5%) and iron and steel (2.7%). Conversely, the leading imports
products include electrical machinery and equipment (35.8%), nuclear reactors, boilers, machinery, andmechanical appliances (14.7%), mineral fuels, mineral (11.2%), iron and steel (6.5%) and optical,
photographic, cinematographic, medical, or surgical instruments (4.9%). Chien-Hsun (2023) notes that
there is an increasing trend towards intermediate goods in Taiwan’s export product to ASEAN whichindicates a vertical division of labor between Taiwan and ASEAN14.
Table 4. Taiwan’s Exports to ASEAN in 2023
42.95

Electrical machinery, equipment and parts
10.19

Nuclear reactors, boilers, machinery and…
Mineral fuels, mineral oils and products of…

4.95

Plastics and articles

2.67

Iron and steel

2.11
13.42

Others
0.00

20.00

40.00

Milliarden
AmountSource: International Trade Administration, Ministry of Economic Affairs (MOEA) of Taiwan (ROC)

14

Chen, C.-H. (2023). Is Taiwan’s New Southbound Policy Effective in the Global Supply Chain? Retrieved
February 26, 2024, from https://mpra.ub.uni-muenchen.de/id/eprint/116606

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Implications of the Taiwan Strait on ASEAN Economies

May 2024

Table 5. Taiwan’s Imports from ASEAN 2023
14.70

Electrical machinery and equipment
Nuclear reactors, boilers, machinery andmechanical appliances

6.05

Mineral fuels, mineral oils and products of
their distillation

4.60
2.69

Iron and steel
Optical, photographic, cinematographic,
medical or surgical instruments

2.02
11

Others
0.00

5.00

10.00

15.00

20.00

Milliarden
AmountSource: International Trade Administration, Ministry of Economic Affairs (MOEA) of Taiwan (ROC)
Malaysia and Singapore stand out as the only two ASEAN countries featured among Taiwan’s top 10
trading partners in 2023. Notably, both countries play active roles in the downstream section of thesemiconductor supply chain, which includes testing and packing for end-user products (known as OSATor Outsourced Semiconductor Assembly and Test).
With over 50 Taiwanese multinational semiconductor companies in the country, Malaysia emerges as thesixth-largest global exporter of semiconductors, contributing to approximately 25% of its GDP. Holding
7% of the market share and 13% of the global market for packing, assembly, and testing forsemiconductors, Malaysia leads ASEAN in the semiconductor industry15. Conversely, Singapore accounts
for 11% of the semiconductor market and hosts approximately 5% of the global wafer fabrication
capacity. It manufactures around one-fifth of the world’s semiconductor equipment, contributing toapproximately 7% of its GDP16. IFast Corporation notes that a combination of favorable policies, strategic
location, robust infrastructure, and a skilled and competitive labor force positions these two countries asprime destinations for global investors seeking to establish themselves in the semiconductor industry17.
15

Aziz, M., & Medina, A. F. (2024, February 15). Malaysia’s semiconductor sector beckons foreign
investors. ASEAN Briefing. https://www.aseanbriefing.com/news/malaysias-semiconductor-sectorbeckons-foreign-investors/
16
Diverse capabilities, infrastructure help drive chips industry in Singapore. EDB Singapore. (2022,
September 3). https://www.edb.gov.sg/en/business-insights/insights/diverse-capabilities-infrastructurehelp-drive-chips-industry-in-singapore.html
17
iFAST Research Team. (2023, November 7). The 5 semiconductor players in Singapore and Malaysia.
FSM One Singapore. https://secure.fundsupermart.com/fsmone/article/rcms281844/the-5semiconductor-players-in-singapore-and-malaysia

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Konrad-Adenauer-Stiftung e. V.
Implications of the Taiwan Strait on ASEAN Economies

May 2024

Table 6. Top 10 Trading Countries with Taiwan
China
United States
Japan
Hong Kong
Republic of Korea
Singapore
Malaysia
Australia
Germany
Netherlands

165.97116.85
75.77
58.00
46.62
39.26
24.85
23.30
22.03
20.38

0.00

50.00

100.00150.00200.00Milliarden
Export(From Taiwan)

Import(To Taiwan)

Source: International Trade Administration, Ministry of Economic Affairs (MOEA) of Taiwan (ROC)

Southeast-Asian Labor Migrants in Taiwan
In 2023, Taiwan hosted approximately 794,951 migrant workers, constituting over 93.35% of the foreign
population in Taiwan. A majority of these laborers come from four Southeast-Asian countries: Indonesia,
the Philippines, Thailand and Vietnam. According to the Ministry of Labor, almost a quarter of a million(234,305) were social workers (such as domestic workers, caregivers), representing 31.08% of all migrant
workers in Taiwan. The remaining workforce (519,125) work in productive industries such as
manufacturing and electronics, construction, fishing, and agriculture.
Migrant workers not only fill critical labor gaps in Taiwan but also benefit their home economies throughremittances. These remittances serve as a vital source of income for their families and contribute toimproving their living standards, healthcare, funding education, etc. Moreover, many migrant workers
acquire new skills and knowledge during their employment, which can contribute to the development ofvarious sectors in their home economies upon their return.
Taiwan’s increasing engagement in the region posits numerous benefits for both Taiwan and its ASEAN
counterparts. Taiwanese investments play a role in ASEAN’s economic growth by injecting capital,technology, and expertise into the region leading to the creation of new industries and job opportunities.
Furthermore, Taiwan's foreign direct investment (FDI) serves as an important channel for knowledgetransfer which enhances the industrial capabilities and competitiveness of ASEAN nations. Strengthened
economic ties increase trade opportunities, while the development of infrastructure, such as
manufacturing facilities and transportation networks, improves productivity and connectivity.

8

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Implications of the Taiwan Strait on ASEAN Economies

May 2024

Table 7. Foreign Workers in Productive Industries and Caregiving Industries

235,539

250,000

179,034

200,000

67,55393,821

100,000

122,210150,000

27,161

27,16150,000386

0Indonesia

Philippines

Foreign Workers in Productive Industries

Thailand

Vietnam

Foreign Workers in Caregiving Industries

Source: Workforce Development Agency, Ministry of Labor (MOL) of Taiwan (ROC)
From Taiwan’s perspective, investing in ASEAN provides a means of diversifying markets, reducing
dependence on any single market (mainland China), and mitigating economic risks. Moreover, Taiwan
faces challenges such as electricity18 and water19 scarcity, which are crucial for semiconductor chipproduction. Thus, tapping into ASEAN’s abundant natural resources and its workforce ensures stability,
resilience, and efficiency in the semiconductor supply chain. Moreover, such investments facilitate
cultural exchange, people-to-people ties, and contribute to the integration of regional economies into
global value chains. Taiwanese investment in ASEAN not only strengthens the economic landscape but
also promotes mutual regional stability through interdependence and shared interests.
From an economic security perspective, the outsourcing of manufacturing facilities to ASEAN offers apotential solution to address concerns raised by the United-States and Japan’s over-dependence on
semiconductors produced in Taiwan. Guarantee of a diversified and stable supply chain is imperative forsecuring their interest in maintaining Taiwan’s autonomy and support in the event of a Chinese
invasion20.
The conventional strategy, known as the “Silicon Shield”, entails Taiwan maintaining a significant level ofdomestic chip production to increase the material stakes of key allies. Theoretically this would incentivize

18

Li, L., & Cheng, T.-F. (2022, August 30). Taiwan’s frequent blackouts expose vulnerability of techeconomy. Nikkei Asia. https://asia.nikkei.com/Business/Technology/Taiwan-s-frequent-blackoutsexpose-vulnerability-of-tech-economy#
19
Zhong, R., & Chien, A. C. (2021, April 8). Drought in Taiwan pits chip makers against farmers. The
New York Times. https://www.nytimes.com/2021/04/08/technology/taiwan-droughttsmcsemiconductors.html?searchResultPosition=1
20

Hsueh, C. (2023, December 23). How Taiwan-ASEAN semiconductor cooperation can bolster Taipei’sNational Security. The Diplomat. https://thediplomat.com/2023/12/how-taiwan-asean-semiconductorcooperation-can-bolster-taipeis-national-security/

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Implications of the Taiwan Strait on ASEAN Economies

May 2024

countries to prioritize Taiwan due to their economic stakes in semiconductors. However, critics argue
that this approach “won’t protect Taiwan”21. If China remains undeterred, conflict could result in severe
economic disruptions which could potentially lead Taiwanese allies such as the United-States and Japanto prioritize domestic issues over defending Taiwan22.

Taiwan Strait Tension on ASEAN Economies
The year 2024 will be a critical year for Taiwan and cross-strait relations as China intensifies its politicaland military pressure on Taiwan. William Lai, the Taiwanese president elect, was labeled as a “dangerous
separatist”23 by China thus setting the stage for heightened tensions between China and Taiwan. A survey
conducted by the Center for Strategic and International Studies (CSIS) indicates that U.S experts foreseea potential escalation in the Taiwan Strait in response to Taiwan’s election. Most U.S. and Taiwan experts
agree that, in this scenario, Beijing is more likely to implement a law enforcement-led quarantine orblockade rather than a direct invasion within the next five years24.
The following section will explore the potential impact of three scenarios in Taiwan-China relations andtheir implications on ASEAN economies vis-à-vis a maintenance of the status quo. The growing economic
link and people-to-people ties between Taiwan and the region ensures that escalation in the Taiwan Strait
could potentially have significant consequences.

Maintenance of the Status-Quo
Before analyzing scenarios of escalation, this section examines the potential developments for amaintenance of the status quo. A survey conducted by the National Chengchi University’s Election Study
Center revealed that over 80% of Taiwanese citizens want to maintain the status quo with China. In
contrast, only 3.8% of respondents want immediate independence25. Maintaining the status quo wouldease concerns within ASEAN and involve continued diplomatic and economic relations with both China
and Taiwan.
Increasing Foreign Direct Investments and Trade
ASEAN countries would likely continue to attract foreign direct investment from Taiwan and China, while
maintaining robust economic ties. Taiwan’s ongoing commitment to its New Southbound Policy (NSP),
aimed at diversifying and reducing ties with China, ensures its continued engagement with ASEAN.

21

Miller, C. (2022, October 19). Global Fight for Chips: “The ‘Silicon Shield’ Won’t Protect Taiwan from a
Chinese Invasion.” American Enterprise Institute. https://www.aei.org/articles/global-fight-for-chips-thesilicon-shield-wont-protect-taiwan-from-a-chinese-invasion/
22
23

Ibid. Hsueh

Wingfield-Hayes, R. (2024, January 13). William Lai: Taiwan just chose a President China loathes. what
now?. BBC News. https://www.bbc.com/news/world-asia-67920530
24Lin, B., Hart, B., Chen, M.-C., Shen, M.-S., Lu, S., Tinsley, T., & Liao, Y.-J. G. (2024a). Surveying theExperts: U.S. and Taiwan Views on China’s Approach to Taiwan. Center for Strategic & International
Studies. Retrieved 2024, from https://www.csis.org/analysis/surveying-experts-us-and-taiwan-viewschinas-approach-taiwan
25Election Study Center, National Chengchi University. (2024). Taiwan Independence vs. Unification with
the Mainland (1994/12~2023/12). Retrieved March 26, 2024, fromhttps://esc.nccu.edu.tw/PageDoc/Detail?fid=7801&id=6963.

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Implications of the Taiwan Strait on ASEAN Economies

May 2024

Consequently, ASEAN member states can expect a rise in both FDI and trade as increased Taiwanesepresence in Southeast-Asian markets creates a high level of interconnectivity between both parties.
The region stands to benefit from investments across various sectors including manufacturing, EVrelated activities, the digital economy, infrastructure, and real estate. Trade relations would remain intact,with ASEAN countries continuing to engage in exporting and importing goods and services from both
Taiwan and China.
Particularly, Taiwanese investments in the semiconductor and EV industry will bolster the strategic
importance of ASEAN within the global supply chain. In the event of a Chinese invasion of Taiwan,
where G7 countries will most likely sanction China, ASEAN emerges as an attractive and vital alternative
to Taiwan as a semiconductor production hub.
Increasing Labor Migration
Labor migration patterns will not change significantly, with workers from ASEAN countries continuing toseek job opportunities in both China and Taiwan. Thus, if the status quo persists, we can anticipate a risein the number of migrant workers from ASEAN countries to Taiwan.
ASEAN migrant workers will play a significant role in contributing to the labor market in various sectors
including manufacturing and construction in China. In Taiwan, migrant workers are mainly employed in
productive industries like agriculture, fishing, and semiconductor factories. Additionally, many are
engaged in the caregiving industry and domestic work.
Aside from contributing positively to the economy of the hosts countries and filling shortages in criticalsectors, migrant workers serve as an important source of income and economic growth for their homecountries, effectively contributing to poverty reduction26.

First Scenario for Escalation – Law Enforcement Led Quarantine of Taiwan
According to a report by the Center for Strategic and International Studies (CSIS), a law enforcement led
quarantine involves non-military actors, such as the China Coast Guard or maritime militia, assuming
control over the air and see borders of Taiwan27.
Experts note that China’s goal for the quarantine is not to cut off food and supplies to Taiwan but toassert de facto sovereignty by controlling the air and maritime space surrounding the island. This would
mean that the Chinese government would implement a clearance operation to screen cargo deliveries,
ships, aircrafts, and people before granting them entry into Taiwan2829.

26

Cepla, Z. (2023, July 19). Labor mobility helps foreign workers and their families escape poverty.
Labor Mobility Partnerships (LaMP). https://lampforum.org/2020/10/26/labor-mobility-helps-foreignworkers-and-their-families-escape-poverty/
27
Ibid. CSIS
28

Martin, B., Gunness, K., DeLuca, P., & Shostak, M. (2022, May 23). Implications of a Coercive
Quarantine of Taiwan by the People’s Republic of China. RAND.
https://www.rand.org/pubs/research_reports/RRA1279-1.html
29Blackwill, R. D., & Zelikow, P. (2021). Three Scenarios for a Military Conflict over Taiwan. In The UnitedStates, China, and Taiwan: A Strategy to Prevent War (pp. 30–40). Council on Foreign Relations.
Retrieved March 26, 2024, from https://www.cfr.org/report/united-states-china-and-taiwan-strategyprevent-war

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According to a survey within the CSIS report, a majority of both US and Taiwanese experts agree that aquarantine of outlying Taiwanese islands was the “likeliest action if Beijing seeks to punish or coerce
Taiwan”30. Quarantine presents a flexible option for China as it does not want to escalate into kinetic
conflict. However, experts caution that quarantine could potentially precede more escalatory PRC military
campaigns such as a PLA-led blockade or a full-scale invasion of Taiwan. The potential scope of a blockade
varies significantly, ranging from targeted interdictions of commercial vessels to highly kinetic operations,which includes the destruction of port and airport facilities in Taiwan31.
Reduced Foreign Direct Investment and Trade
In this scenario, the Chinese government goal is to isolate Taiwan, preventing it from sending exports orreceiving imports. Even if ASEAN were to stay neutral, there would be significant impact on foreign direct
investment (FDI) from Taiwan to ASEAN as China may restrict outward and inward investment to Taiwan.
Moreover, ASEAN countries would likely experience disruption in trade with Taiwan, as quarantine
measures enforced by China could result in shipment delays, shortages of certain goods and an overall
reduction in trade volume.
Countries with substantial trade links to Taiwan, particularly in sectors such as electronics, such asSingapore, Malaysia, and Vietnam, are expected to experience some level of disruptions. A study by the
Rhodium Group indicates that approximately US $565 billion in Taiwanese value-added trade would be
at high risk of disruption from a blockade32.
Given that Taiwan produces over 92% of the world’s most advanced chips, China could potentially limit
or completely stop the export of semiconductors from Taiwan as a deterrent. On a global scale, RhodiumGroup’s study has found that in a blockade scenario, the disruption of supply chains particularly insemiconductors would adversely impact major chip-consuming sectors such as electronics, automotive,
and computing. This, in turn, affects industries that depend on goods and equipment that contain
Taiwanese chips (e-commerce, telecommunications, medical, etc.)33. This chain of event would havesignificant repercussions for the world economy and inadvertently affect ASEAN economies.
Heightened Precautions and Voluntary Repatriation
In response to escalating tensions, ASEAN countries are likely to issue early advisories cautioning theircitizens against all non-essential travel to Taiwan. Additionally, governments would issue notices to theircitizens and migrant workers in Taiwan, urging them to remain vigilant, monitor local developments, andmaintain regular communication with family, friends, and their respective representative offices.
Depending on the severity of the situation or if tensions escalate further, ASEAN countries may want torepatriate their citizens. There will be domestic pressure and requests from migrant workers in Taiwan
seeking repatriation. Consequently, ASEAN governments and their respective representative offices are
expected to coordinate chartered flights to facilitate the repatriation of those wishing to return home.
However, repatriation efforts would be contingent upon China, as it is the country imposing thequarantine or blockade, thus adding another layer of complexity to the situation.

30

Ibid. CSIS

31

Ibid. CSIS

32

Kratz, A., & Vest, C. (2023). Sanctioning China in a Taiwan Crisis: Scenarios and Risks. Rhodium Group.
Retrieved March 26, 2024, from https://rhg.com/research/sanctioning-china-in-a-taiwan-crisisscenarios-and-risks/
33
Ibid. Kratz & Vest, 2023

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Second Scenario for Escalation – Full Scale Invasion of Taiwan
A full-scale invasion of Taiwan by China could be executed in the following ways: a traditional siege andamphibious assault or an airborne/heliborne assault or a combination of both34. However, the Centre
for Strategic and International Studies (CSIS) report suggests that a full assault would be too complicated,thus lowering the likelihood of China launching an invasion35. If an invasion were to happen, theimplications would reverberate on a global scale. The entire Indo-Pacific region would face instability andthere would be large economic and security repercussions for ASEAN countries.
Stoppage of Trade and Foreign Investment
Foreign direct investment (FDI) from Taiwan would stop and ASEAN countries with large trade links to
Taiwan and in sectors like electronics such as Singapore, Malaysia and Vietnam will see major economic
disruptions. Moreover, regional instability stemming from the invasion would lead to a major decline in
FDI inflows from other countries. Investors would be deterred from committing capital to the region due
to the heightened geopolitical risks associated with the situation.
A military conflict would inflict severe disruptions on supply chains and trade flows in the region,
impacting ASEAN economies as both output and trade volume decline. Furthermore, such a conflict
would cause a semiconductor shortage, disrupting critical industries such as electronics andmanufacturing. This shortage would have major macroeconomic implications as chip shortage will drive
up the price of commodities not only within ASEAN but globally as well. ASEAN will also bear the brunt of
the conflict’s impact on the world economy.
ASEAN countries, particularly those with a stake in the South-China Sea issue may feel the need toincrease defense spendings in response to the conflict. The diversion of financial resources from
economic sectors to defense sectors could hamper economic output. Heightened tensions might push
the United-States to re-engage in the region by negotiating new defense ties with claimant countries
which could be seen as provocative actions by China, further heightening tensions.
However, a 2023 Democracy Perception Index survey has found that most Southeast-Asians would notwant their government to cut economic ties with China if the latter invaded Taiwan. Those against, also
include claimant countries such as Malaysia and Vietnam. The Philippines was equally divided on thequestion36. Other observers also argue that ASEAN’s main concern would be peace and stability, and as
a result “will not seek direct U.S. engagement due to the fear of becoming a proxy in a great powercompetition”37. Nevertheless, a spillover from the Chinese invasion of Taiwan in the region would force
countries to act, potentially putting more stress on an ever fragile “ASEAN Centrality”.
Emergency Repatriation of ASEAN Nationals Living in Taiwan
A sudden invasion by China would leave migrant workers stranded. While ASEAN can refer it’s the“Guidelines for the Provision of Emergency Assistance by ASEAN Missions in Third Countries”, significant
logistical and diplomatic obstacles remain. An article published in The Diplomat by Yaacob and Faizal
outlines three critical challenges ASEAN nations face when considering a contingency involving Taiwan:
determining the trigger point for repatriation, establishing safe evacuation routes, and coordinating
34

Ibid. Blackwill & Zelikow, 2021

35

Ibid. CSIS

36

Latana. (2023). Democracy Perception Index 2023. Alliance of
Democracies. https://www.allianceofdemocracies.org/initiatives/the-copenhagen-democracysummit/dpi-2023/
37

Kabinawa, R., & Chairil, T. (2022, August 26). ASEAN is bound to disappoint China on Taiwan. Nikkei
Asia. https://asia.nikkei.com/Opinion/ASEAN-is-bound-to-disappoint-China-on-Taiwan

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efforts among ASEAN member states38. Moreover, the coordination of repatriation efforts is further
complicated by the absence of diplomatic ties between ASEAN countries and Taiwan.
In such a scenario, there might be a possibility of multinational evacuation efforts. Dr. Jean-Loup Samaan,a Senior Research Fellow at the National University of Singapore's Middle East Institute, talking about therepatriation of ASEAN nationals in light of the Israel-Gaza conflict, highlighted in an interview the
likelihood of the United States or European nations facilitating mass evacuations, drawing parallels to theextensive evacuation efforts during the 2006 Lebanon War39.
A sudden invasion by China into Taiwan would be akin to that of the 2006 Lebanon war, where Israel
imposed a major air and naval blockade which compromised evacuation routes. Consequently, countries
negotiated with Israel to carry out mass evacuations under strict restrictions. Thus, we can anticipate thata similar case would play out in the event of a war between China and Taiwan.

Recommendations
This section aims to provide possible recommendations for ASEAN countries to alleviate the stress fromgeopolitical uncertainties, particularly in a Taiwan contingency.

Leveraging Stability for Development and Supply Chain Resilience
ASEAN benefits greatly from the current status-quo as relative peace in the region attracts trade andinvestment not only from China and Taiwan but from other countries around the world, fueling thedevelopment of the region. Sustaining regional peace and stability are prerequisites to development.
Thus, ASEAN should work to help maintain this stability as their increasing ties to both China and Taiwan
could potentially lead ASEAN to play a role in cross-strait dialogue. The grouping has expressed interestin being a mediator in the ASEAN Foreign Ministers Statement on the Cross Strait Development in 2022:“ASEAN stands ready to play a constructive role in facilitating peaceful dialogue between all parties including
through utilizing ASEAN-led mechanisms to de-escalate tension, to safeguard peace, security and developmentin our region.”40.
ASEAN should also aim to improve its supply chain resilience to minimize the impact of supply chain
disruptions. Governments should work on concluding free trade agreements, reducing trade barriers,
harmonizing customs procedures and regulations to facilitate cross-border trade and diversify sourcesof investment. It should also invest in infrastructure (transportation, communication, and logistics
network) to facilitate the flow of goods, further enhancing the efficiency of supply chains. Investing incapacity building and digitalization throughout the supply chain will make ASEAN an attractive place forinvestors. ASEAN should also aim to collaborate with countries such as the United-States and Japan totransfer technology and best practices, to engage in knowledge sharing and capacity building tostrengthen the supply chain.
38

Yaacob, A. R., & Faizal, M. (2023, July 8). ASEAN needs a repatriation plan for a Taiwan contingency.
The Diplomat. https://thediplomat.com/2023/07/asean-needs-a-repatriation-plan-for-a-taiwancontingency/
39
Haizan, R. Y. A., & Armandhanu, D. (2023, October 10). “bombed left and right”: Some southeast Asian
nationals seek to escape Israel-Hamas war but Journey Home challenging. CNA.
https://www.channelnewsasia.com/asia/gaza-israel-hamas-militant-southeast-asian-nationals-war3834596
40
ASEAN Foreign Ministers’ Statement on The Cross Strait Development. ASEAN. (2022, August 4).
https://asean.org/asean-foreign-ministers-statement-on-the-cross-strait-development/

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Moreover, many countries and businesses are seeking to adopt a “China Plus One” approach which is a
strategy to avoid investing only in China. This is an opportunity for ASEAN to capitalize on, particularly on
alleviating the stress from a global chip shortage in the event of a war between China and Taiwan4142.
ASEAN should cooperate with the US, EU, and Japan to strengthen semiconductor supply chain resilienceand promote sustainable growth. Due to ASEAN’s perceived neutrality and history with semiconductor
production, its semiconductor industry saw a boost from increasing FDIs, resulting in rising exports andintegration into global value chains. Currently, the region accounts for 22.5% of global chip exports, thesecond largest globally43. Countries such as Vietnam, Malaysia and Thailand are the top choices frommany investors due to the lower labor costs, access to new markets, etc. Smaller countries such as
Cambodia has seen a 698% growth in semiconductor devices exports to the United-States44 and exported
over $950 million in semiconductor devices in 2022 making it the 17th largest exporter in the world 45.

ASEAN Needs a Common Repatriation Plan
During periods of stability, ASEAN should formulate a common repatriation plan, specifically tailored tothe scenarios involving the Taiwan Strait. They can draw inspiration from the “Guidelines of the Provisionof Emergency Assistance by ASEAN Mission in Third Countries to Nationals of ASEAN Member Countries in Crisis
Situations”, the ASEAN Coordinating Centre for Humanitarian Assistance and the “ASEAN Militaries Ready
Group on Humanitarian Assistance and Disaster Relief” (AMRG on HADR). While the last two are mechanisms
for collaboration during emergencies and natural disasters, it could serve as a framework to facilitate
coordination among ASEAN member states during conflicts for the repatriation of ASEAN nationals
overseas. ASEAN countries should also prioritize establishing clear communication channels to keep
migrant workers and nationals informed about the situations and the evacuation procedure, including
contact points and shelter locations.
Furthermore, ASEAN, either collectively or individually, could explore the possibility of establishing abilateral agreement or arrangements with Taiwan regarding the protection and repatriation of ASEAN
nationals, despite the absence of diplomatic relations. However, such initiation might be risky as it could
irk China.
In the event of heightened tensions and escalation, in addition to issuing travel advisories and alerts to
inform citizens about potential risks and safety measures, ASEAN countries should schedule chartered
flights for citizens that want to leave. A trigger point for evacuation should be set (for example when
China mobilizes its forces near Taiwan or during Chinese attempts to impose a quarantine/blockade of
Taiwanese islands) to ensure that a timely mass repatriation is made before more escalations.

41

Hsueh, C. (2023a, December 1). ASEAN holds the key to reducing US dependence on Taiwan’s Chip
Industry. – The Diplomat. https://thediplomat.com/2023/12/asean-holds-the-key-to-reducing-usdependence-on-taiwans-chip-industry/42
Englund, K. (2022, February 9). When Semiconductor chip supply is down, ASEAN could be theanswer to the crunch. EY. https://www.ey.com/en_us/technology-sector/when-semiconductor-chipsupply-is-down-asean-could-be-the-answer-to-the-crunch
43
Ibid. Hsue, Englund
44

Four Asian nations, including Cambodia lead US chip diversification move. Khmer Times . (2023, April
6). https://www.khmertimeskh.com/501269708/four-asian-nations-including-cambodia-lead-us-chipdiversification-move/45
Semiconductor devices in Cambodia. The Observatory of Economic Complexity. (2022).
https://oec.world/en/profile/bilateral-product/semiconductor-devices/reporter/khm

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In the event of a conflict, the immediate priority for ASEAN countries would be to ensure the safety andsecurity of their migrant workers and nationals in Taiwan. ASEAN governments should collaborate closelywith their representative offices in Taiwan to monitor the situation and provide necessary assistance.
Negotiations with China for establishing a humanitarian corridor should start as early as possible tominimize casualties.
Each ASEAN country has their own repatriation protocols and mechanisms for handling crises andfacilitating the repatriation of their nationals from abroad. For instance, the Philippines has its “Joint
Manual of Operations in Providing Assistance to Migrant Workers and Overseas Filipinos,” while Thailand
operates its “Rapid Response Center”. In past crises like the civil unrest in Libya, Vietnam facilitatedrepatriations through the “Overseas Employment Support Fund” managed by the Ministry of Labor, Invalids,
and Social Affairs. However, as noted in the article by Yaacob and Faizal, logistical challenges may arise
due to Taiwan’s island geography which makes it harder to conduct evacuations as some ASEAN memberstates military forces lack amphibious capabilities. In such cases, ASEAN should seek assistance frominternational organizations such as the agencies and bodies within the United Nations (UN), theInternational Organization for Migration (IOM), the World Health Organization (WHO), among others.

Conclusion
In recent years Taiwan’s increasing engagement with ASEAN can be attributed to its efforts to reduce
economic dependence on China. It invests and trades with ASEAN countries particularly in sectors likeelectronics and semiconductors. ASEAN’s increasing ties with Taiwan has both advantages, anddisadvantages. The analysis presented in this paper underscores the potential implications of three
scenarios in the Taiwan Strait on ASEAN economies and offers recommendations to mitigate risk andenhance resilience.
The maintenance of the status quo provides a conducive environment for ASEAN to continue benefitingfrom economic ties with both Taiwan and China. Strengthening regional stability is key and ASEAN canpotentially play a role in fostering cross-strait dialogue. Moreover, investment in supply chain resilienceshould be prioritized to minimize the impact of supply chain and trade disruptions. The prevalence of the“China Plus One” approach provides an opportunity for ASEAN countries to become key players in the
global supply chain. During said period of stability, ASEAN should also work on formulating a common
repatriation plan for migrant workers for a timely evacuation during escalation of tensions or duringconflict.
In the event of a law enforcement-led quarantine of Taiwan, ASEAN would face some level of disruptions
in trade and investment flows from and into Taiwan. Quarantine measures by China could lead toshipment delays and shortages of certain goods. Countries with higher trade ties with Taiwan, particularlyin the electronics sector, such as Singapore, Malaysia, and Vietnam will be the most impacted by this.
Moreover, ASEAN countries are likely to issue early advisories cautioning their citizens against all nonessential travel to Taiwan and possibly negotiate with China to allow chartered flights to repatriate theircitizens if tensions were to increase.
Lastly, a full-scale invasion of Taiwan by China would pose severe economic and security challenges for
ASEAN countries. There would be severe disruptions on supply chains and trade flows and regional
instability would deter investors from committing capital to the region. Furthermore, a Sino-Taiwanese
conflict would cause a semiconductor shortage which would have major macroeconomic implications,driving up the price of commodities globally. At this stage, emphasis would be placed on repatriating
ASEAN nationals in Taiwan. ASEAN would have to negotiate with China to establish a humanitarian

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corridor for evacuation. However, due to capacity and logistical challenges, ASEAN should enlist the helpof international organizations.
From a security standpoint, ASEAN countries with a stake in the South-China Sea would be on higher
guard and possibly increase their defense spendings. They might also shift closer to the United-States.
However, an increased presence of the United-States in the region could further escalate tensions.
Nevertheless, according to some observers, ASEAN countries may choose to distance themselves from
Taiwan to avoid damaging their relationship with China as trade in ASEAN remains very China centered.
Despite ASEAN’s stance of neutrality, its balancing act between Washington and Beijing will be put to thetest as claimant countries in the South China Sea may prioritize their national security and side with theUnited-States. This would push an already stressed “ASEAN Centrality” to a possible breaking point.
In essence, the recommendations outlined aim to strengthen ASEAN’s resilience in the face of geopoliticaluncertainties in the region. By adopting a multifaceted approach, ASEAN can mitigate risks and capitalize
on opportunities for sustainable economic growth amidst ever evolving cross-strait dynamics.

About the author
Ung Angela Vichara Thida Roth is an upcoming policy management graduate from Keio University
Japan, originally from Phnom Penh, Cambodia. She is interested in international and economic security
and aspires to contribute to Cambodia's future development.

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