Economic partnership and technological synergy: The evolving Taiwan-Saudi Arabia Partnership
Economic partnership and technological synergy: The evolving Taiwan-Saudi Arabia Partnership . By Nadeem Ahmed Moonakal The bilateral relationship between Taiwan and Saudi Arabia has a long-standing history of converging interests that have endured political challenges. This relationship over time has been flexible and adaptive, and the unique partnership remains largely underexplored. From a steadfast alliance grounded in anti-communist solidarity to a relationship overshadowed by Saudi Arabia’s […]
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Caribbean News Global
By Nadeem Ahmed Moonakal

The bilateral relationship between Taiwan and Saudi Arabia has a long-standing history of converging interests that have endured political challenges. This relationship over time has been flexible and adaptive, and the unique partnership remains largely underexplored. From a steadfast alliance grounded in anti-communist solidarity to a relationship overshadowed by Saudi Arabia’s shifting strategic priorities, the evolving ties between Taiwan and Saudi Arabia present an interesting case study in economic and technological diplomacy.

Early recognition and post-world war engagement

The Kingdom of Saudi Arabia recognized the Republic of China (ROC) soon after World War II and maintained close economic ties in the decades that followed. Saudi Arabia opened an embassy in Taiwan in 1968. Throughout the 1960s and 1970s, Saudi Arabia continued to enhance its economic diversification, which-significantly-required the transfer of industrial technology. Taipei had been responsive to the Kingdom’s developmental agenda and extended agricultural, industrial, and scientific cooperation, and Saudi Arabia benefitted from Taiwan’s technology-for-recognition exchange.

Also, Taiwan’s industrial and rapid economic growth led to more domestic energy demands that prompted it to import more oil from Saudi Arabia. The wars and conflicts in the Middle East in the 1970s and 1980s that led to the oil crises gradually shifted Saudi Arabia’s oil export focus from Europe to Asia as European countries started to diversify their energy sources. This eventually resulted in Taiwan as a key oil export partner, and Saudi oil consistently met about a third of Taiwan’s energy requirements. However, as the Chinese market grew exponentially and Chinese demand surged, China eventually became one of Saudi Arabia’s largest oil importers, surpassing Taiwan.

During the Cold War, Saudi Arabia and Taiwan remained a part of an anti-communist alliance as Saudi Arabia was concerned about China’s support for communist movements in Oman and South Yemen. This led the then-monarch of Saudi Arabia, King Faisal, to perceive Beijing as a regional threat to stability. By the early 1970s, Taiwan and Saudi Arabia deepened their ties, demonstrated by King Faisal’s historic visit to Taipei in 1971. During the meeting between King Faisal and Chiang Kai-Shek (蔣介石), both leaders agreed to increase bilateral cooperation, and in October 1971 Saudi Arabia was the only Arab country to vote against the UNGA Resolution 2758 that recognized the People’s Republic of China (PRC) as “the only legitimate representative of China to the United Nations.”

After the 1979 Iranian revolution that paved the way for protracted wars and conflicts, security concerns eclipsed Saudi foreign policy – which then allowed China to leverage its military support, including missile transfers, to gradually strengthen ties with Riyadh. This led ultimately to Saudi Arabia formalizing relations with China in 1990. Also, China’s strategic use of Islamic religious activities to engage effectively with the Arab and Islamic world changed Saudi Arabia’s perception that Islam and Communism are inherently incompatible.

However, Saudi-Taiwan ties were maintained through informal relations, especially as Saudi Arabia’s domestic developments created opportunities for industrial cooperation with Taipei. During these years the ROC and the PRC both adhered to a strict “One-China Policy.” Initially, Taiwan had an advantage, but over time several Arab countries started to recognize the PRC – a process that continued till the 1990s, when Saudi Arabia was the last Arab country to formally recognize the PRC.

Expanding economic and technological partnerships under Vision 2030

Saudi Arabia is now represented in Taipei by the Saudi Arabian Trade Office, while Taiwan operates its Taipei Economic and Cultural Representative Office in Riyadh, consolidating its services there after closing its Jeddah office in 2017. Although Taiwan faces significant trade deficits with Saudi Arabia, Taiwan continues to find lucrative economic opportunities in the region. Taiwanese firms like Taiwan Fertilizer Co. (台灣肥料公司), CTCI Corporation (中鼎工程股份有限公司), and TECO Electric and Machinery Co. (東元電機) have established a foothold in the kingdom, and the Taiwanese government continues to support small and medium enterprises in partnering with Saudi businesses.

In recent years Taiwan and Saudi Arabia have deepened their ties on the economic and technological fronts. The Taiwan International Cooperation and Development Fund (Taiwan ICDF, 財團法人國際合作發展基金會) has worked with Saudi enterprises in various domains including agriculture, fisheries, transportation, and trade. Saudi Arabia’s Vision 2030 program has paved the way for converging interests between Taiwan and Saudi Arabia, especially as the vision focuses on emerging technologies in which Taiwan has maintained a competitive advantage.

Saudi Arabia is Taiwan’s largest trading partner in the Middle East with an annual trade volume of over USD $12 billion. In 2020, Taiwan and Saudi Arabia signed a tax treaty that prevents double taxation. Effective in 2022, this agreement aims to streamline bilateral trade and reduce tax burdens for businesses operating in both countries. The Taiwan External Trade Development Council (中華民國對外貿易發展協會), with the support of the Bureau of Foreign Trade (經濟部國際貿易署), and the Ministry of Economic Affairs (經濟部), established the Taiwan Trade Center in Riyadh in 2023.

The center aims to increase economic opportunities between Taiwan and Saudi Arabia and foster public-private partnerships between Saudi and Taiwanese enterprises, primarily leveraging the opportunities arising from Saudi Arabia’s economic reforms. Taiwan’s strengths in key sectors like advanced technology, renewable energy, and healthcare align closely with the goals of Saudi Arabia’s Vision 2030, which has increased the prospects for collaboration between both. Saudi National Bank’s entry by issuing USD $500 million bond in Taiwan’s Formosa bond market, where foreign entities issue bonds in currencies other than the New Taiwan Dollar, reflects growing Saudi-Taiwan economic ties.

In 2021, Taiwan’s Master Transportation (成運汽車製造股份有限公司) signed a cooperation agreement with the Saudi International Industrial Village Company (SIIVC) to export electric buses to Saudi Arabia. In 2022, Saudi Arabia’s Public Investment Fund (PIF) announced the establishment of the kingdom’s first electric vehicle company, Ceer Motors which is a joint venture between the PIF and the Taiwanese multinational company Hon Hai Precision Industry Co. Ltd. (Foxconn, 富士康精密工業股份有限公司). Ceer is aiming for its debut in 2025, and is an example of Vision 2030’s continuous focus on clean technology.

In October 2024, Foxconn Interconnect Technology Limited announced a USD $100 million joint venture with Saleh Suleiman Alrajhi & Sons Co. to establish Smart Mobility in Saudi Arabia. Foxconn is also in talks with Saudi Arabia regarding the establishment of a large-scale manufacturing facility in the kingdom. These projects and deals enable Taiwan to deepen its technological footprint in Saudi Arabia, and highlight the potential for long-term cooperation in high-tech manufacturing and green energy sectors. Moreover, such partnerships also signal Taiwan’s broader interest in actively participating in the transformation of Saudi Arabia’s industrial sector in tandem with its Vision 2030 agenda.

Prospects in the semiconductor industry

Saudi Arabia and Taiwan in recent years have taken steps to accentuate their cooperation in the advanced technology sector, leveraging Taiwan’s expertise in renewable energy, smart cities, electronics, and the semiconductor industry. As US-China competition intensifies, the ripple effects can be particularly seen in the semiconductor industry. Amid the US restrictions on supplying semiconductor technology to China – primarily aimed at addressing national security concerns and preserving its competitive advantage – it has pushed countries like Saudi Arabia to enhance domestic capabilities and attract foreign investments to develop its local semiconductor manufacturing capabilities aligning with Vision 2030.

In recent years, Saudi Arabia has been heavily investing in the semiconductor sector to reduce dependency on foreign supply that remains volatile due to the US-China rivalry. For example, the USD $100 billion Alat project in Saudi Arabia, in collaboration with King Abdulaziz City for Science and Technology, aims to develop local talent and infrastructure that could establish at least 50 semiconductor design companies by 2030 in the kingdom, with the help of a deep tech venture capital fund exceeding USD $266 million. Saudi Arabia has also strengthened its collaboration with China in semiconductor development; however, the head of Saudi Arabia’s Alat has said that it would consider withdrawing its investments in China if US-China tensions escalate and Washington requests it to do so.

Taiwan holds a dominant position in the semiconductor industry, accounting for nearly 46 percent of global chips foundry capacity. In this context, Taiwan’s expertise in the semiconductor industry presents opportunities for future cooperation with Saudi Arabia despite the geopolitical limitations posed by possible Chinese pressure. As both countries intend to bolster their position in the global semiconductor market, Taiwanese companies could use their advanced manufacturing capabilities to partner with Saudi projects. This is particularly significant as very few countries have the technological ability to produce chips -and the relations between Saudi Arabia and Taiwan have continued to grow, despite Riyadh’s close engagement with Beijing.

China remains the largest market for Taiwan’s semiconductors, and Taiwan is keen to diversify its prospects. Recent trends have shown Taiwan’s interest in deepening its ties with Gulf countries. Saudi Arabia faces certain challenges regarding its workforce and technological expertise that could influence Taiwan’s investment strategies in the country. However, historically supply chain diversification has been influenced by US foreign policy – which has often required American support to be effective, and places Riyadh in a favorable position in Taiwan’s investment and partnership radar. While Saudi Arabia-Taiwan collaboration in semiconductor manufacturing is still in its early stages, there are significant prospects for collaboration in talent development, industrial partnerships, and joint research.

Conclusion

The historical ties between Saudi Arabia and Taiwan have adapted to both regional and global geopolitical realities, marked by initial economic and industrial collaboration as well as a shared stance against communism. Although Saudi Arabia formally recognized the People’s Republic of China in 1990, Riyadh and Taipei maintained informal relations, particularly in industrial cooperation and technological transfer. This evolving partnership has been further deepened by converging agendas and shared interests identified through Saudi Arabia’s national developmental agenda, which aims to achieve holistic domestic socio-economic reforms and to attract foreign investments, especially in the technological sector.

The main point: Despite Saudi Arabia’s deepening relations with China, Riyadh has continued to maintain its strong ties with Taiwan, a long-standing partner in Saudi Arabia’s industrial development. The continued engagement between Riyadh and Taipei illustrates their mutual interests in enhancing economic ties while navigating complex geopolitical landscapes. This shift reflects Riyadh’s foreign policy priorities that focus on mitigating risks associated with global geopolitical rivalries and technological competition, and Taiwan features prominently in this context.
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2024-11-14
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By Nadeem Ahmed Moonakal The bilateral relationship between Taiwan and Saudi Arabia has a long-standing history of converging interests that have endured political challenges. This relationship over time has been flexible and adaptive, and the unique partnership remains largely underexplored. From a steadfast alliance grounded in anti-communist solidarity to a relationship overshadowed by Saudi Arabia’s […]
The post Economic partnership and technological synergy: The evolving Taiwan-Saudi Arabia Partnership appeared first on Caribbean News Global.
Economic partnership and technological synergy: The evolving Taiwan-Saudi Arabia Partnership