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New costs bring India and Taiwan closer

world Updated: Jun 18, 2010 00:10 IST
Reshma Patil

As the cost of a made-in-China label rises with nationwide wage hikes, American luxury brands such as handbag retailer Coach are considering moving partial production to ‘lower-cost geographies’ like India and Vietnam, reported the Wall Street Journal on Tuesday.

The biggest push in forging new factory ties with India is coming from Taiwan, China’s largest foreign investor. Industry experts in the US and Europe caution that Indian infrastructure is not ready to rival Chinese factory cities, but Taiwan says that India’s consumer market makes it worth moving in.

Taipei is lobbying New Delhi with a marketing pitch that joint ventures to produce hi-tech goods in India will make Taiwanese technology cheaper for Indian consumers.

In April, Taiwan’s premier Wu Den-yih reportedly instructed his Cabinet that Taiwan should invest more in India to ‘manage and diversify risk’ in China. An official estimate by Taipei says that one per cent diversification by Taiwanese companies out of China would equal Rs 13,000 crore invested in India.

“The PM’s remarks came at a right time when rising cost and prevalent labour disputes in China have become serious problems for most foreign investors,’’ said the Taipei Economic and Cultural Centre in a statement in May.

In May, Taipei and New Delhi industrialists exchanged their highest-level visits so far. At the same time in China’s Shenzhen, Taiwanese giant Foxconn that makes Apple products was battling a series of staff suicides that led to a 66 per cent wage hike this month.

Gujarat and Andhra Pradesh are sending delegations to Taiwan in June and July. “India and Taiwan are willing to work closely at a time when Taiwan is actively contemplating hedging its investment risk in China,” said the Taipei statement.

India and Taiwan will try to delicately balance new trade ties without upsetting their bigger stakes in China. Indian manufacturing needs access to China’s market. And this week, China and Taiwan announced new Shanghai-Taipei flight connections and discussed a major free trade agreement to break down barriers to hundreds of goods.

Beijing considers self-ruled Taiwan a ‘renegade’ and both militaries mistrust each other. But when it comes to business, the investment of 70 Taiwanese companies in India is under 0.3 per cent of Taiwanese investment in China. The India-Taiwan trade target is 10 billion dollars by 2013-2015 compared to the 60 billion dollar India-China trade target for 2010.