CHAPTER 5 ANALYSIS ON TAIWAN’S AID IN CENTRAL AMERICA
5.1 Findings
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CHAPTER 5 ANALYSIS ON TAIWAN’S AID IN CENTRAL AMERICA
This section focuses on the analysis of Taiwan’s aid in the Central American region. It has been divided into three sub-sections: the first one, includes main findings from the research, the second section, is the discussion of the findings and finally, an evaluation of the research and limitations. (For the detailed information on the interviews carried out please refer to the appendix).
5.1 Findings
Spanish-speaking scholar’s viewpoint
Scholars claimed some of the main reasons why Central America nations still recognized Taiwan are: 1) friends since the cold war with a common ideology, 2) creation of personal relations between Taiwan’s embassy officials and local politicians combined with invitations from Taiwan to local politicians to visit Formosa. Taiwan provides those nations with a special treatment they wouldn’t receive elsewhere 3) Development cooperation is the most important and crucial reason, 4) commerce and investment activities and 5) Taiwan’s assistance in the regional integration process.
Taiwan is an active participant in the process. One Spaniard author claimed that Taiwan’s development cooperation is the reason for Central American nations to favor recognizing Taiwan, while more developed nations will favor China for its market opportunities.
The debate on China’s appeal in Central America differs greatly between Costa Rican author and non-Costa Rican authors. Central America and Spaniards authors believed that there’s not much benefit for Central America in switching to China, while Costa Rican author believed that other Central American nations haven’t seen the potential, market and investment opportunities the giant offers to the region.
As per the recipient’s perspective, aid is classified in a very different way from the donors. Central American nations categorize Taiwan’s aid as: refundable and non-refundable. Moreover, Taiwan’s aid is well received in Central America, even if the quantity is not big as other donors.
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Taiwan’s Aid
Since 2013 to 2015, Taiwan’s Official Development Assistance was around US$270million per year. Taiwan’s ODA was at the highest amount (according to data available in this research) in 2008 with US$430 million. From 2002 to 2008, there was a 51% increase of foreign aid from US$285 million to US$430million. This number went down by 40% during President Ma term to US$278 in 2015. The sector that received the most of Taiwan’s foreign aid from 2009-2015 is social infrastructure and services it received on average 44% of total aid. This includes assistance in the following sectors: education, government and civil society, health and medical, water supply and sanitation. The second sector is economic infrastructure and services with an average of 19%, followed by others with a 17% and last production with a 17% of Taiwan’s total ODA.
Taiwan ICDF general strategies have greatly changed since its establishment. In 1998, the strategy was to solve the poverty problem in developing nations but by 2014 the strategy had changed to following the international development trends based on Taiwan’s competitive advantage. Taiwan ICDF aid elements have broaden from only lending and investment and technical cooperation to humanitarian and education. The industries and sectors it provided assistance also increased from agriculture and fisheries to marketing, IT sector, environmental protection, sustainable development and access to Taiwan’s satellite imagining. It also shifted from only being bilateral and multilateral to involving private Taiwanese companies and Non-governmental Organizations (NGOs). Latin America (including the Caribbean) since 1998 have been the region that received most of technical cooperation expenditure and an approximate total average expense for the past 5 years was US$2.114million. From 1998 to 2003 the most expenditure of commissioned missions by MOFA went to Africa (40% of total commissioned projects). However, the situation had changed by 2010 the most expenditure went to Latin America and the Caribbean (47% of total commissioned projects expenditure). An approximate of the total commissioned projects by MOFA for the past 5 years was US$36million in average.
As Taiwan’s aid elements and sectors have broadened, they’ve also done so in the Central America. At the beginning, Taiwan ICDF strategy in Central America was the development of small and medium enterprise and vegetable research activities. Later, Taiwan’s strategies started to increase in scope from not only focusing on the
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production part but expanding into the creation of agribusiness. Central America target sectors also expanded to environment protection, ICT and satellite imaging. Taiwan started providing scholarship to Central America since 2001and has continued do so for the past 16 years. In 2013, mandarin centers were opened in allied countries to expand the cultural interaction between Central America and Taiwan. The last few years, Taiwan has aided Central American nations with pest control. Since 1998, funds have been created to promote investment in Central America. One of those is ROC-CAEDF established in 1998, in which Taiwan committed itself to provide US$20million annually over a 12-year period. This fund was in charge of funding the CATO operations and providing Taiwan ICDF scholarships for Central American students, among other activities. This fund was also used to finance the construction of the SICA building in San Salvador.
Case Study-Guava
Taiwan started providing technical assistance of guava production first to Costa Rica and later to Honduras and El Salvador. The technical assistance provided was seedling, trainings and agricultural supplies. In some countries, Taiwan grouped the farmers, helped them establish an association and also, provided support for the legal creation of the association. In the case of Honduras, Taiwan helped open up the sales channels to the largest supermarkets in the country. In Costa Rica, the most successful case has been Proguata. Proguata, even 10 years after Taiwan broke diplomatic relations with Costa Rica, continued to produce and depend on Taiwanese guava as a source of income. Another association in Costa Rica that still depends on guava as source of income is asocanjelito, however, its facing problems with the commercialization of the fruit. A third association in Costa Rica, asofrul since 2004 changed from commercializing guava to mango. The reason for changing was the oversaturation of guava in the market and business became unsustainable for them. Two other associations in Costa Rica that were created during the time Taiwan ICDF was providing technical assistance might no longer exist as they are not included on MAG Costa Rica report (2014) of Guava production.
In Honduras, the most successful case has been in Comayagua in which 64 producers depend solely on guava as a source of income and the association has made use of the profits to increase its assets by investing on their own delivery truck.
Comayagua is selling in the largest supermarkets in Honduras. However, for the second
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region that received Taiwan ICDF technical assistance, Olancho, no information is available.
The two successful cases (Comayagua and Proguata) have at some point exported their products to regional markets. Both, after receiving Taiwan’s assistance, continued to participate on development assistance projects with their local government. Both continued trying to expand their selling channels and diversifying their products.
Proguata is diversifying to producing papaya and Comayagua is expanding to guava derivate such as: pre-cut guava and guava jam.
For the case of guava in El Salvador, production of guava has seen an increase in the last two years. However, contrast to Costa Rica and Honduras, no successful association was established. The farmers in Nueva Concepcion, Chalatenango claimed they never received any support for establishing a guava producing association or in commercialization activities. Each farmer works independently, selling to intermediaries who later sell to traditional markets or to the largest supermarket chain in El Salvador. Farmers in Nueva Concepcion were also introduced to other fruits such as: wax apple and jujube. This differs from the projects in Honduras and Costa Rica in which a group of farmers was only introduced one fruit. In a report from CNAF, in a study carried out only 8% of farmers in a sample had received any training from government institutions before 2009.
During the research, we were able to talk with two associations, one in which the project was not successful and the other one, in which it was. Asofrul in Costa Rica claimed that they stopped commercializing guava due to the over saturation of in the market, it was no longer profitable for the association. Comayagua association, on the other hand, is extremely grateful for Taiwan’s technical assistance but they made the suggestion that Taiwan’s technicians should be more accessible or more in contact with the farmers.
Interviews
Most interviewees concur on the importance of aid recipient’s government.
Ambassador of Guatemala claimed that “each country has to look for its own development” and that Guatemala and Taiwan relations are not only about development but a bilateral relation that includes many more aspects. The representative of El Salvador ‘s embassy agreed with ambassador of Guatemala in that when carrying out a cooperation project Taiwan ICDF-El Salvador, it should be El Salvador the one who
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establishes its own high and perhaps unachievable goals. It is not Taiwan ICDF responsibility to replicate the project but the recipient. Dr. Kung mentioned how in many of Taiwan’s allies the total budget that is negotiated every presidential term government to government is never fully used.
Taiwan ICDF director of technical cooperation shared his experience in what is the difference between a successful project or as he labelled satisfactory project versus a non-successful project or needs improvement project. That is the level of involvement of aid recipient’s government. If there is high involvement during project execution, when the project is passed on they are able to sustain it. On the other hand, if there is less involvement, in the long term they are unable to sustain it.
Dr. Kung, director of Latin America studies in Tamkang University, mentioned that Taiwan ICDF in the past few years has become more efficient in the usage of limited resources. Before that Taiwan ICDF would provide technical cooperation without a clear objective or deadline. Now projects have a deadline of 3 or 6 years and after that the cooperation is over. The number of technicians have also changed to only two per projects, before there would be 20 technicians for several projects. Dr. Kung claims that in spite of being more efficient, the part of being more in contact with the citizens of that nation has been lost as technicians only go there for 2 or 3 years to do their work and then leave. The embassy of El Salvador claims that Taiwan ICDF changed in the past years by putting a deadline to projects and is a very efficient institution as it “makes use very effectively of limited resources”.
Taiwan ICDF loan and investment director instead commented that one of the difficulties for that department is the internal political situation of a country. As getting the approval for a loan requires an agreement in the congress and in a polarized political environment is difficult to obtain an agreement. Technical Cooperation Director agreed on this problem as when projects are being carried out and there’s a change in the ruling political party, the national development goals also change and Taiwan ICDF projects must be renegotiated. The embassy in El Salvador would agree to this statement as the high rotation level within the government leads to skills that have been learned to be lost and have to be retaught. In sum, as the Loan and Investment Director shared from her vast years of experience in Taiwan ICDF the importance of having a good governance to establish successful project.
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5.2 Discussion
The main objective of this research was to determine whether Taiwan’s foreign aid was effective in Central America. In order to do so, it was necessary to evaluate different viewpoints of Taiwan’s foreign aid in Central America. It started with views from the international community. This was followed by Spanish language scholarship, which confirmed the importance of Taiwan’s development cooperation for the Central American region. Central American nations (not including Costa Rica) continue to recognize Taiwan because of its development cooperation and not because the amount of aid provided. Except for one Costa Rican author, scholars say they believe Central America’s best option is to continue recognizing Taiwan because there’s no clear idea of how the region would benefit from recognizing China. It would be a great loss for Central America to give up so many years of development cooperation, building commercial relations and Taiwan’s participation and assistance in the regional integration process. Taiwan’s aid is well received in Central America. This was confirmed by the manager of the Comayagua Association and an employee at CENTA and a local guava grower in El Salvador. In interviews they expressed gratitude for Taiwan’s technical assistance. In addition, embassy staff interviewed for this paper mentioned the importance of Taiwan’s relations to their government.
Taiwan’s aid in comparison to DAC countries is small. In 2015 ODA was US$277.91 millions and an approximate of Taiwan ICDF expenditure (excluding investment and lending) was US$42.5 million, representing 15% of Taiwan’s total ODA (note that the percentage will be higher when including investment and lending).
This confirms the statement of the Taiwan ICDF deputy secretary that Taiwan ICDF receives around 10% to 15% of Taiwan’s foreign aid. During 2002 to 2008 there was a 51% increase in ODA and this contradicts Chen & Erikson (2007) who claimed that during Chen administration the total amount of foreign aid decreased and for this reason diplomatic allies were lost. From 2008 to 2015 there was a 40% decrease in foreign aid expenditure which might be an indication that the fierce diplomatic fight between Taiwan and China was actually over as claimed by Huang (2016) and Staillings (2017).
The sector that received most of Taiwan’s foreign aid was social Infrastructure and services with agriculture in third place. This confirms Taiwan ICDF operations prioritize focusing on development of the areas in which they have competitive
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advantages such as: agriculture, public health, education, information and technology.
This fact was also confirmed by Taiwan ICDF technical cooperation director and representative of El Salvador’s embassy, who both said a project is executed only if Taiwan can make use of its competitive advantage.
Central America is an important region to Taiwan ICDF and most of its foreign aid goes to the region. Taiwan ICDF strategies in Central America have expanded to many different sectors such as IT and satellite imaging. This is a great opportunity for Central America as it lags behind in Internet access and technological progress. The technical cooperation director mentioned that ICT is his department’s future strategy in Central America. This is a great opportunity to the region to learn as much as possible. Also, the region doesn’t have its own satellite thus having Taiwan’s assistance offers a clear advantage to the region. It will help to lessen the region’s over dependence on the United States. An advantage for Taiwan is that changing its strategy from reducing poverty to following international community development goals allows it to work through CABEI in cooperation with other nations that share the same objectives.
Technical cooperation is one of the most important aspects of Taiwan’s foreign aid and it is for this reason that guava was chosen as a case study. In addition, the fruit market is a great opportunity for Central America; it has seen an increase in exports and imports in the past few years. The Taiwanese guava is a fruit that is relatively new in the Central American region. Taiwan ICDF’s guava project successfully established two cooperatives: one in Costa Rica called Proguata and one in Honduras located in Comayagua. Both associations have continued participating in development assistance projects with their local government. This would confirm the Taiwan ICDF technical cooperation director’s statement that a successful project is one in which there’s a high level of involvement by government institutions that can later take over the project.
Both associations are or have at some point exported their products to regional markets. They also continue trying to expand their sales channels and diversifying their products. The members of the association depend on guava as a source of income and their quality of life has risen because of this project. These facts contradict Moyo’s (2009) claim that development assistance slows down growth and hinders it and Easterly’s (2003) claim that aid as it has been currently given by aid agencies has not helped at all. However, even within the same country there are differences. Let’s take Costa Rica as an example -- the rest of cooperative established were not able to take off
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on its own. In the case of ASOCANJELITO one observation made by MAG Costa Rica was that the farmers would sell most of the product independently and only when visiting a fair would they sell as an association. There is a lack of integration among the members. Also, commercialization strategies are not present within the association.
In the case of ASOFRUL, they claimed there was an overproduction of guava in the country and it was no longer sustainable to continue growing it. Further study will be required to determine the specific issues in each country.
Guava was introduced to El Salvador at around the same time as Honduras. For some unknown reason in this country no guava producing association was formed.
Independent farmers are selling guava through intermediaries, leading to them getting a much lower price than intermediaries can get. A CENTA employee and farmer said that at the beginning only a few guava producers joined the project and when asked about Taiwan ICDF technical cooperation in this project in El Salvador, he said that market share is a big problem for a small country such as El Salvador. More research is required to confirm El Salvador’s guava production situation and to establish the differences in the assistance received between El Salvador, Honduras and Costa Rica and the difference in the government’s involvement. Time restrictions meant this study could not cover this.
One interesting difference between El Salvador and Canjelito, Costa Rica stands out – that is land ownership. In Costa Rica the Institute of Agricultural Development (IDA) in 1995 bought a plantation and proceeded to parcel out the land.
Later, in 2000 the local government carried out guava project with the objective of providing a different source of income to the farmers in that area (MAG Costa Rica, 2014). This contrasts with the lack of ownership for most farmers in El Salvador and the difficulty they face in forming associations due to the distance between one farmer and the other. This problem would relate more to the country’s policies than to Taiwan’s foreign aid as more or less the same type of assistance was provided in those
Later, in 2000 the local government carried out guava project with the objective of providing a different source of income to the farmers in that area (MAG Costa Rica, 2014). This contrasts with the lack of ownership for most farmers in El Salvador and the difficulty they face in forming associations due to the distance between one farmer and the other. This problem would relate more to the country’s policies than to Taiwan’s foreign aid as more or less the same type of assistance was provided in those