Taiwan should implement the “Economic Miracle” model in Somaliland to win Africa’s goodwill

The People’s Republic of China (PRC) has long held influence in Africa. Throughout the 1960s, the PRC supported anti-colonial movements then swiftly established diplomatic relations with newly independent African nations. These relations were predicated on a South-to-South solidarity that manifested itself in Chinese economic development aid for Africa as well as support for pan-Africanist initiatives and alliances. Over the same decade, the PRC was locked in a bitter dispute with the Republic of China (Taiwan) over which entity should be recognized in international affairs as “the central Chinese government.” The logic of the Cold War compelled countries to adopt the “One-China policy,” which meant recognizing the claims of only one of the two governments. International organizations followed this policy as well. The U.N. seated the Republic of China as a permanent member of the Security Council while excluding the PRC from all of its umbrella organizations, even though the Republic of China had been defeated and forced into exile during the Chinese Civil War. China’s representation to the U.N. changed in October 1971, when the U.N. General Assembly adopted Resolution 2758, which admitted the PRC and expelled the Republic of China. African nations, the majority of which were socialist and thus sympathetic to the PRC, provided the key votes toward the resolution’s passage.

With the One-China policy enshrined as a norm in international relations, China was emboldened to isolate Taiwan diplomatically by forcing international partners to choose between it and its rival. As a result, the number of countries recognizing China has increased from 48 in 1969 to 180 in 2019, while those recognizing Taiwan have decreased from 71 to just 15 over the same period. The erosion of Taiwan’s international and diplomatic stature is due to China’s aggressive “dollar diplomacy” with former communist and socialist countries in Asia and Africa in the post-Cold War period. Despite losing diplomatic ties with other countries, Taiwanese citizens can travel to 166 nations without visas, as opposed to the mere 20 countries that have waived visas for Chinese citizens.

“Taiwan Economic Miracle” and lessons for the Horn of Africa

Economically, Taiwan has thrived against all odds, transforming itself from a basket case into a powerhouse that generated average annual GDP growth of over 10 percent from 1960 to 1989. Building on the successes of the so-called “Taiwan Economic Miracle,” the country has expanded into advanced technological industries, innovation, and entrepreneurship since the 1990s. Taiwan’s technological prowess has even convinced China to become a trading partner — in fact, it is currently its most important one, accounting for almost 30 percent of the island’s exports. China’s trade deficit with Taiwan totals more than $120 billion, as opposed to just $320 million for the entire continent of Africa.

The “Taiwan Economic Miracle” was the result of unprecedented growth and rapid industrialization that occurred while Taiwan was transitioning from authoritarianism to democracy. Countries in the Horn of Africa can draw lessons from the Taiwanese because they are themselves attempting to make the same political transition, but have not yet achieved the needed reforms such as ensuring good governance, eradicating corruption, and developing economic self-reliance to reduce dependency on aid. Taiwan may not have the financial resources to win against the PRC’s checkbook-driven One-China policy in Africa, but it could overcome that disadvantage by convincing African nations that it can help them replicate the sustainable growth model of the “Taiwan Economic Miracle.” Taiwan’s recent diplomatic overtures in Somaliland seem like a step in that direction and could be a game-changer, not only for the Horn of Africa but for the continent as a whole.

China pursuit to derail Taiwan diplomatic relations with Somaliland

China echoed the current administration in Somalia, led by President Mohamed Abdullahi Farmajo, in its strong opposition to Taiwan’s diplomatic ties with Somaliland. Nevertheless, China’s ambassador to Somalia visited Somaliland in August for the third time in the past year to offer Somaliland President Muse Bihi Abdi development packages, including road and airport construction, provided he cut ties with Taiwan and adopt the One-China policy. President Bihi rejected the offer and turned China’s own rhetoric against it, saying, “Somaliland is ready to nurture friendly and cooperative relations with all countries based on the five principles of ‘peaceful co-existence,’” a reference to the doctrine that has guided China’s foreign policy since the 1955 Asian-African Conference in Bandung.

President Bihi’s defiance prompted Chinese Minister of Foreign Affairs Wang Yi to dispatch a high-level delegation to Somaliland for a second round of talks. However, this time, surprisingly, the delegates dropped their demand for the One-China policy, and instead both countries discussed strengthening trade and social cooperation. China may not have achieved its primary goal in this visit, but it has helped to establish new, unofficial relations with the Somaliland government that it can build on in seeking to lure Hargeisa away from Taiwan in the long term, as it has done elsewhere across Africa.

Maritime trade and a potential Gulf of Aden alliance

China sees the diplomatic relationship between Somaliland and Taiwan as a threat to its Silk Road Maritime project in the Horn of Africa. The Gulf of Aden (also known as the Gulf of Berbera), which borders Somaliland to north, is of vital strategic importance to the Chinese and world economies because vessels from Asia must pass through it to reach the Suez Canal. China thus has a long-term interest in securing the maritime lanes used for trade, logistics, and naval forces in those waterways.

China’s activities in the Gulf of Aden have caused tension between Beijing and Somaliland. Illegal, unreported, and unregulated fishing in the Gulf had already damaged Somaliland’s marine ecosystems and fisheries after the Somalia government granted 31 fishing licenses to China in late 2018. The agreement does not feature any monitoring plan and was finalized without consultation with the Somaliland government, which patrols the waters of the Gulf. Somaliland, concerned by the Chinese incursion, may seek Taiwan’s assistance to build a navy capable of protecting its territorial waters against the negative environmental and economic impacts of illegal fishing and toxic waste dumping.

The Gulf of Aden is a key transit route for global maritime trade and is especially important for food and energy security, but it faces a recurring threat from piracy. This has prompted the Chinese Navy to escort more than 6,600 vessels in the region since 2008, and in 2017 Beijing established a military base in Djibouti. There are growing concerns about the Chinese presence in the Gulf of Aden and the Red Sea, both within the region as well as in Washington. To counterbalance China, the nations of Somaliland, Taiwan, the United Arab Emirates (UAE), and perhaps India or Japan could form a regional alliance to escort and refuel vessels; combat terrorism, piracy, and illegal fishing; protect the maritime ecosystem; and provide humanitarian and disaster relief.

Beyond Taiwan-Somaliland diplomatic relations

In May 2018, the Kingdom of Eswatini (previously known as the Kingdom of Swaziland) became the only country in Africa that still maintains diplomatic relations with Taiwan after Burkina Faso ended a 24-year diplomatic relationship with Taiwan in favor of ties with the PRC. Burkina Faso’s switch angered Taiwanese President Tsai Ing-wen, who strongly condemned China for using dollar diplomacy to lure away her nation’s partners.

President Tsai, who won re-election by a wide margin in January, opposes unification with China and, unlike her predecessor, rejects the 1992 consensus that says that Taiwan and China are part of “one China.” During her inauguration, President Tsai promised the citizens of Taiwan that her government would leverage abroad its strength in digital technology and cybersecurity, and participate actively in the international arena. She also expressed her “hope that Taiwan can play a more active role in the peace, stability and prosperity of the Indo-Pacific region.” President Tsai has introduced the “New Southbound” policy to expand Taiwanese regional integration and to strengthen relations with the 10 member states of the Association of Southeast Asian Nations by leveraging Taiwan’s cultural, educational, agricultural, technological, and economic assets. Farther afield in Somaliland, Tsai hopes to implement a similar strategy of cooperation in agriculture, education, energy, fisheries, health, IT, and mining. Establishing relations with Somaliland was her first diplomatic win against China in the Horn of Africa and she hopes to capitalize on it.

Although Somaliland is not internationally recognized, it has more to offer than Taiwan’s other African partner, landlocked Eswatini, which largely depends on South Africa for trade (81.4 percent of imports and 67 percent of exports, as of 2016). In contrast, Somaliland is strategically located on the most valuable piece of real estate in the Horn of Africa, the Gulf of Aden, through which pass 10 percent of global maritime trade (worth $750 billion) and around 30 percent of Europe’s oil. This is why the Emirati port operator DP World, in partnership with Somaliland and Ethiopia, took a 51 percent stake in a $422 million, 30-year concession agreement that seeks to develop the Port of Berbera into a major hub for commercial trade between Gulf region and the Horn of Africa.

DP World had previously gotten burned in a 2004 deal with Djibouti to “design, build, and manage” the Doraleh Container Terminal. A mere two years after the ink dried, Djiboutian officials sought to renegotiate the terms before, in 2014, selling a significant equity stake to CMP, a Chinese state-owned conglomerate. In 2018, Djibouti rescinded its contract with DP World and seized the port’s assets. Djiboutian public debt, according to the IMF, equals 104 percent of GDP and 77 percent of it is held by Chinese financiers, so the sale to CMP was largely interpreted as a debt-equity swap, similar to the one that granted China a 99-year lease on Sri Lanka’s Hambantota Port. Djibouti’s penchant for placing Chinese interests over those of its other partners drove the UAE and Ethiopia to invest in alternative infrastructure in Somaliland.

As it develops, Somaliland is bound to attract maritime actors wishing to circumnavigate a Chinese sphere of influence in the Horn of Africa. This presents a huge opportunity for Taiwan to recreate a version of its own “Economic Miracle” in Somaliland. In so doing, it can counter China’s significant commercial and military presence in Djibouti. And Taiwan will not be the sole beneficiary. So, what are the lessons Africa could learn from Taiwan through Somaliland to achieve robust industrialization and economic growth?

Three keys to Taiwan’s success and how to adapt them for Somaliland

Taiwan-Somaliland relations are unique because of the many parallels between the two countries: Both are de facto autonomous but internationally unrecognized states that have experienced decades-long diplomatic aggression from larger neighboring states (Somalia and China respectively), yet both, through their grit and resilience, have thrived — achieving freedom, democracy, peace, and prosperity. To solidify their relationship and maneuver geopolitical and geo-economical challenges in the Horn of Africa, the two nations must work together to seed in Somaliland a “Taiwan Economic Miracle” that cultivates both domestic growth and strong regional integration. Success in this venture could make African leaders think twice before adhering to a One-China policy that delivers their nations into the hands of an extractive economy reminiscent of the colonial era.

There are alternative models for partnerships between Africa and the rest of the world. It is important to note, for example, that the “Taiwan Economic Miracle” would not have been possible without the U.S. government’s help, and Taiwan can play an analogous patronage role in Africa. Three developments, each fostered by the U.S., were crucial to Taiwan’s success and can be adapted for Somaliland.

1) Promoting import substitution by investing in physical and human infrastructure. Taiwan has invested heavily in education, building technical training schools to develop a skilled workforce that can locally produce products once imported from China. Somaliland can build similar institutions to supplement and feed into its universities in Hargeisa. A student exchange program with Taiwan could provide more than 100 scholarships for Somalilanders to study in Taiwanese universities, which would boost the proportion of Africans among the foreign university student population in Taiwan from the dismal current rate of 1.5 percent (as opposed to 38 percent from mainland China). There is certainly no shortage of talented students. Abaarso, a science and technology secondary school in Hargeisa, alone has graduated over 80 students who have gone on to pursue university abroad, including at Ivy League universities. Also, Taiwan could collaborate with USAID and the recently created U.S. International Development Finance Corporation, which partner with both the private sector and governments. Somaliland could similarly avail itself of private-public partnerships to finance industry and productive infrastructure. Investment could contribute to electricity generation, light manufacturing, and highway construction with the goal of improving value and supply chains, substituting imports, and boosting net domestic capital formation in productive sectors (livestock, agriculture, fisheries, etc.).

2) Introducing export-driven industrial development by establishing an export processing zone in Berbera, next to the expanded port currently managed by DP World. This will attract Taiwanese companies to set up export-driven industries that produce high-demand products for East Africa and Gulf countries (e.g. solar energy panels and electronics). These could compete against Chinese imports, create local jobs, and result in the transfer of technology to locals, thereby helping them to become self-reliant. Finally, by building high-tech abattoirs and processing plants for meat exportation throughout East Africa, Taiwan could transform the livestock industry in Somaliland, which is the country’s most important source of export revenue. At various points throughout the 21st century, the industry has fallen victim to draconian restrictions from Gulf countries that were encouraged by the Somali government as part of its economic campaign against Somaliland. The industry has proved resilient, and in 2014, 3.4 million of 5 million heads of livestock exported from Somalia/Somaliland passed through the Port of Berbera. This number is likely to increase if expanded infrastructure can boost the port’s existing capacity to hold 1 million animals in quarantine at any given time. To give a sense of the industry’s room for growth, demand for meat in neighboring Ethiopia is expected to increase from 4.6 billion metric tons in 2016 to 11.1 billion metric tons in 2030. In addition, livestock can also be a source of value beyond just meat by converting their waste into bioenergy, hides into leather products, and bones into beauty and hygiene products.

3) Developing computer-centered high-tech industries. Despite Taiwan’s continued dominance in chip manufacturing and the information and communications technology (ICT) sector, profit margins have diminished due to Chinese government subsidies and cheap labor. Somaliland’s reserve of unemployed youth (many of whom, tragically, die in the deserts of Libya while migrating to the EU) and abundant empty land could be assets for setting up factories to produce smartphones that fit local needs and can compete against China’s affordable smartphones in the African market.

Diplomatic relations between Taiwan and Somaliland mark a watershed, not only for the Horn of Africa, but also for the globe: an African lion cub and Asian tiger rebuffed intimidation from the Chinese dragon. If the “Taiwan Economic Miracle” proves adaptable to Africa, other countries on the continent may draw closer to the Republic of China. African countries must make diplomatic decisions based on economic calculations. Currently, they are stuck between a West that is investing less and less in Africa — the U.S. is a case in point — and a resurgent China willing to open its checkbook to those who accept the One-China policy and its other conditions. But China is an unforgiving creditor; it has refused to provide any debt forgiveness to African countries for fear that improved debt-to-GDP ratios would give them access to credit markets beyond China, threatening Beijing’s extraction economy in Africa.

Perhaps it is time for the U.N., U.S., and EU to abandon fruitless Somalia-Somaliland talks as we are past the point of reunification. Somaliland is ready to choose international partners that suit its own needs. Europe must rethink its approach not just toward Somaliland, but all of the Horn of Africa, as it has up until now supported a regional economic integration policy that has only produced more conflict and exacerbated the refugee crisis in Ethiopia. The international community should do what is right by Somaliland and by the region, which is to support the Somaliland-Taiwan partnership.

By Guled Ahmed

Guled Ahmed is a Non-Resident Scholar with MEI, renewable energy and water infrastructure expert, and an entrepreneur. The views expressed in this piece are his own.

Feature Photo by MUSTAFA SAEED/AFP via Getty Images

Source: Middle East Institute