Regional Economic Integration and Taiwan’s Unofficial Relations with the Philippines

Although the Philippines ended formal diplomatic ties with Taiwan in June 1975, Taiwan has maintained unofficial relations with the country for five decades, underpinned by expanding regional economic networks and deepening people-to-people exchanges. This commentary examines the trajectory of bilateral economic relations and argues that Taiwan’s ongoing southbound engagement—together with the Philippines’ growing willingness to cooperate on economic and advanced technological fronts—will further strengthen both sides’ stake in preserving peace and stability across the Taiwan Strait.

Taiwan’s Southbound Initiatives toward the Philippines

The Philippines has long been one of Taiwan’s priority target countries under its southbound initiatives, primarily due to geographic proximity and its vibrant labor market. The initial Go South Policy, introduced by the Lee Teng-hui administration in late 1993 with the goal of diversifying trade and investment away from mainland China and Hong Kong, focused on incentivizing Taiwanese businesspeople (Taishang) to establish factories in the Philippines, taking advantage of the country’s relatively low-cost labor and land. One of the flagship measures was the co-development of the Subic Bay Industrial Park (now the Subic Bay Gateway Park), which helped transform the former U.S. naval base into a freeport zone. Another key strategy was the negotiation of a double taxation avoidance agreement with the Philippine government (although it has yet to take effect), following the signing of the bilateral investment agreement in February 1992.

As the middle class in the Philippines expanded and the broader Association of Southeast Asian Nations (ASEAN) region became more economically integrated, Taipei adapted its strategies toward its southern neighbors. Although the Ma Ying-jeou administration did not prominently use the term “go south,” it increasingly emphasized tapping into ASEAN’s growing consumer markets, including the Philippines. Under President Tsai Ing-wen’s signature New Southbound Policy (NSP), Taiwan sought to build four key types of links with its Indo-Pacific partners: soft power, supply chains, regional markets, and people-to-people connectivity. Among the eighteen target countries, the Philippines was designated as one of six priority partners, with investment and collaboration efforts focusing on industries such as automobiles, semiconductors, automated machinery, agricultural technology, and services. The Taiwan Expo—a flagship NSP initiative showcasing “made in Taiwan” products and service providers—was held in Manila in 2017 and 2019 and is scheduled to return in September 2025, underscoring the Philippines’ importance as a commercial partner for Taiwan.

The Taiwanese government sees significant potential to strengthen trade and investment ties with the Philippines and further diversify Taiwan’s trade portfolio. In 2024, Taiwan was the Philippines’ tenth-largest trading partner and thirteenth-largest source of foreign direct investment.[1] By contrast, the Philippines ranked as Taiwan’s seventeenth-largest trading partner—behind ASEAN neighbors such as Singapore (6th), Malaysia (7th), Vietnam (8th), Thailand (11th), and Indonesia (14th).[2] Given the two countries’ regional proximity, this ranking remains relatively modest.

Taiwan’s Ministry of Economic Affairs, however, identifies new opportunities stemming from the Philippines’ sustained economic growth and young demographic profile. For example, in 2024 the Philippines recorded a real GDP growth rate of 5.6%—second only to Vietnam’s 7.1% in the ASEAN region.[3] The country also had a median age of 25.7, the second-youngest in the region, just slightly higher than Laos (25.4).[4] These favorable conditions—combined with a population of around 115 million and a rapidly expanding consumer market—have prompted the Taiwanese government to devote more attention and resources to enhancing bilateral economic ties.[5] In December 2017, Taipei and Manila renewed their bilateral investment agreement, adding another layer of protection for businesses from both sides.

Banking and Business Prospects

In response to the pull factors outlined above, Taiwanese banks have in recent years proactively expanded their presence in the Philippines. As of the end of 2024, nine banks had established a total of 34 overseas units—including subsidiary banks, branches, and representative offices—across the country.[6] The majority of these (26 units) belong to CTBC Bank, which operates one subsidiary bank and 25 branches.[7] CTBC Bank established its subsidiary in the Philippines as early as 1998 and has since developed a competitive financial network nationwide. The bank serves both Taishang and local clients, offering a full range of retail and corporate banking services. Leveraging its cross-border capabilities, CTBC Bank has also supported major Philippine firms in offshore financing and risk management.[8]

Among the other eight Taiwanese banks operating in the Philippines, two are privately owned: Cathay United Bank (entered in 2015) and Yuanta Bank (1997). The remaining six are government-backed—Bank of Taiwan (2019), Chang Hwa Bank (2018), First Bank (2016), Hua Nan Bank (2017), Mega International Commercial Bank (1995), and Taiwan Cooperative Bank (1999)—with the first four having been established under the NSP initiative. Like CTBC Bank, these institutions serve both Taishang and local Filipino individuals and corporations. Notably, Taishin International Bank, another privately owned Taiwanese bank, joined this group by opening a representative office in Manila in 2025. The growing presence of Taiwanese banks and the expanding footprint of Taishang in the Philippines are mutually reinforcing: the former gain access to profitable financial opportunities, while the latter benefit from improved access to corporate financing.

The Philippines’ domestic Build Better More (BBM) program and its international collaboration with the United States and Japan to develop the Luzon Economic Corridor (LEC) offer clear incentives and opportunities for Taiwanese banks and Taishang more broadly. BBM is the flagship development initiative of the Ferdinand Marcos Jr. administration, aimed at addressing the Philippines’ long-standing infrastructure gaps. It has attracted funding primarily from the Asian Development Bank, as well as from the governments of China, Japan, and South Korea. The LEC—launched under the G-7’s Partnership for Global Infrastructure and Investment—seeks to strengthen connectivity among Subic Bay, Clark, Manila, and Batangas. Both the BBM and LEC programs aim to catalyze coordinated investment in high-impact infrastructure, including railways, ports, and airports; clean energy and semiconductor supply chains; and agribusiness development.

Given Taiwan’s long-standing commercial presence in Subic Bay and its strengths in finance, smart-city solutions, semiconductors, and agriculture, the island is well positioned to contribute to these development initiatives. Accordingly, the Taiwanese government has expressed strong interest in the LEC and has begun engaging with relevant stakeholders to explore avenues for collaboration.[9]

Further People-to-People Ties for Closer Integration

Traditionally, people-to-people ties have been shaped primarily by the presence of around 600 Taishang companies in the Philippines and more than 164,000 Filipino workers in Taiwan.[10] In recent years, however, tourism has played an increasingly important role in fostering bilateral connectivity. Since November 2017, Taiwan has granted Philippine citizens fourteen-day visa-free entry on a trial basis, despite the absence of reciprocal measures from the Philippine government. The policy nearly doubled the number of Filipino visitor arrivals—from 290,784 in 2017 to 509,519 in 2019.[11] As Covid-19 restrictions eased, arrivals rebounded from 64,038 in 2022 to 467,157 in 2024, making the Philippines the largest source of visitors to Taiwan from the ASEAN region. The number of Taiwanese visitors to the Philippines also recovered significantly, rising from 29,027 in 2022 to 225,716 in 2024. Recognizing the post-pandemic growth potential of Filipino outbound tourism, Taiwan’s Tourism Bureau established an information center in Manila in December 2024 to promote targeted and localized marketing campaigns.

The strong growth outlook of the Filipino travel market, combined with Taiwan’s visa facilitation, has also encouraged Taiwanese airlines to expand air connectivity between the two countries. EVA Air launched a Taipei-Clark route in March 2023, complementing its existing services to Manila and Cebu. The airline now operates 35 weekly flights between Taiwan and the Philippines. In July 2023, China Airlines expanded its codeshare agreement with Philippine Airlines to include eight routes serving key destinations across northern, central, and southern Philippines. Starlux Airlines—a newer carrier that began operating flights to Manila in 2021—further expanded its footprint with the addition of routes to Cebu and Clark in 2023. These developments not only facilitate service trade and people-to-people exchanges but also enable Taiwanese carriers to capture a larger share of transit traffic between Southeast Asia and North America—enhancing their competitiveness and boosting revenue potential.

Taiwan Strait Stability and Regional Economic Security

As economic ties between Taiwan and the Philippines deepen, maintaining peace and stability across the Taiwan Strait has become a vital interest for both democracies. In a recent address at the Yushan Forum, President Lai Ching-te formally introduced NSP+, pledging to work with like-minded partners to promote regional stability in Taiwan and the broader Indo-Pacific. Building on this foundation, the NSP+ prioritizes collaboration in smart technologies and artificial intelligence (AI), particularly in their application to healthcare, transportation, and the semiconductor industry—areas that closely align with the BBM and LEC programs.

President Marcos has also become more vocal on Taiwan Strait issues in recent years. In his keynote address at the Shangri-La Dialogue in May 2024, he emphasized that the Philippines has a legitimate interest in cross-strait relations due to geographic proximity and the presence of Filipino nationals in Taiwan.[12] He noted that Filipinos “have a long history of fraternal bonds” with both mainland Chinese and Taiwanese and that “peace and stability must prevail.” A similar message appeared in the joint statement Marcos issued with New Zealand prime minister Christopher Luxon in May 2024, in which both leaders recognized the importance of peace and stability across the Taiwan Strait.[13] The Philippines stands to benefit from sustained economic collaboration with Taiwan, particularly given the active investment of Taishang in the region and their critical role in global supply chains for semiconductors and AI technologies.

The Marcos administration’s recent decision to ease restrictions on official exchanges with Taiwan in economic affairs could unlock new commercial opportunities for both sides. A new directive—Memorandum Circular no. 82, signed in April 2025—amends the implementation of Executive Order no. 313 (1987), which had prohibited all Philippine government officials from visiting Taiwan in an official capacity or formally receiving Taiwanese delegations. Under the revised policy, bilateral visits by officials for trade and investment purposes are now permitted. However, the travel ban remains in place for the president, vice president, and the secretaries of foreign affairs and national defense, signaling that Manila remains cautious in upholding its one-China policy, which governs its unofficial relations with Taipei.

Despite the Philippines’ ongoing acceptance of the one-China policy, pragmatic engagement with Taiwan in the economic realm is expected to grow, given the clear political will and gestures of goodwill from both sides across the Bashi Channel. As Taiwan and the Philippines deepen their unofficial ties through trade, finance, and people-to-people exchanges, both are increasingly bound by shared interests in economic cooperation and regional stability.

Jing Bo-jiun is a Senior Research Fellow in the Oxford Taiwan Studies Programme at the Oxford School of Global and Area Studies at the University of Oxford.

Endnotes

[1] Taipei Economic and Cultural Office in the Philippines, “Economic Division,” March 21, 2025, https://www.roc-taiwan.org/ph_en/post/62.html.

[2] International Trade Administration (Taiwan), Trade Statistics, https://publicinfo.trade.gov.tw/cuswebo.

[3] McKinsey and Company, “Southeast Asia Quarterly Economic Review: Steady amid Uncertainty,” March 14, 2025, https://www.mckinsey.com/featured-insights/future-of-asia/southeast-asia-quarterly-economic-review.

[4] CIA, World Factbook, https://www.cia.gov/the-world-factbook/field/median-age/country-comparison.

[5] World Bank, Data360, https://data.worldbank.org/indicator/SP.POP.TOTL?locations=PH.

[6] Financial Supervisory Commission (Taiwan), “Table 3: Number of Overseas Branches of Domestic Banks,” https://www.banking.gov.tw/webdowndoc?file=/stat/bas/31030.xlsx.

[7] Financial Supervisory Commission (Taiwan), “Table 14: Listing of Overseas Branches of Domestic Banks,” https://www.banking.gov.tw/webdowndoc?file=/stat/bas/31140.xlsx.

[8] Yu-hsiang Tai, “Global Geopolitical Risks Are Rapidly Changing: Banks Expand in the Philippines with Over 30 Branches,” Economic Daily News, April 21, 2025, https://money.udn.com/money/story/5613/8687184.

[9] “Taiwan Mulls Joining Luzon Economic Corridor Project,” Focus Taiwan, October 22, 2024, https://focustaiwan.tw/business/202410220006.

[10] Ministry of Foreign Affairs (Taiwan), 2023 Diplomatic Yearbook (Taipei, 2023), 108, https://www.mofa.gov.tw/News_Content.aspx?n=245&s=118901; and Ministry of Labor, Labor Statistics Database, https://statfy.mol.gov.tw/index12.aspx.

[11] Ministry of Transportation and Communications (Taiwan), Tourism Statistics Database, https://stat.taiwan.net.tw.

[12] “President of the Philippines Ferdinand R. Marcos, Jr Delivers Keynote Address,” International Institute for Strategic Studies, May 31, 2024, https://www.iiss.org/events/shangri-la-dialogue/shangri-la-dialogue-2024/plenary-sessions/keynote-address.

[13] “Joint Statement for the Official Visit of New Zealand Prime Minister Christopher Luxon,” April 20, 2024, available at https://www.beehive.govt.nz/sites/default/files/2024-04/PH-NZ%20Joint%20Statement%20-%2018%20April%202024.pdf.