Wed, Mar 01, 2000 page9

• Will the KMT ever be separated from its business assets?

  Lien Chan's promise to put the KMT's vast business empire in trust has been widely shrugged off by the electorate as an election promise the ruling party will never deliver on. What needs to be done if the promise is to be kept

  • By Liu Shih-chung
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  Elections often compel politicians to make some unfulfillable promises to voters and this has been the case in the current presidential election campaign.

  In an effort to show voters how reform-minded he is, Vice President Lien Chan(連戰), the KMT's presidential hopeful, pledged on January 2 that the ruling party should put all the assets of its party-owned enterprises into trust, thus arguably -- since the method of the entrustment and the use of its funds has not been specified -- volunteering to deprive itself of the source of much of its power.

  Lien's move generated surprise, but also suspicion regarding the extent to which he could actually follow through on his promise. Subsequent opinion polls, in fact, showed that most voters considered Lien's announcement as nothing but an election ploy while debate over the relative laws governing party assets in the Legislative Yuan also gave the strong impression that the KMT was trying to get a name for reform while leaving the law relating to such matters conveniently ambiguous.

  This is the typical "Lien-speaks-first-while-his-subordinates-do-the-rest" trick of which Lien's camp has been playing repeat performances. This involves Lien's making promises to voters worth billions of dollars without telling those of us who are aware how tight the government's budget really is where the extra money is going to come from.

  The KMT is the only political party in Taiwan that owns and runs a huge business empire. It is also the richest political party in the world.

  Possession of the assets in itself is not a sin, but there are a great many questions as to how these assets have been acquired; whether, for instance, they involve the illegal transfer of money, property or commercial interests from the party to the government or vice versa.

  When the KMT moved to Taiwan in 1949 it had only one party-owned enterprise and less than US$1 million in cash. But after 55 years of rule in Taiwan, the KMT now owns seven stock-holding companies, 27 party-owned enterprises and more than 400 party-invested companies. The value of the KMT's assets is estimated to be between NT$200 billion and NT$500 billion. According to a new book published by Wealth Monthly (財訊月刊), the KMT's total assets amount to NT$600 billion.

  How did the party accumulate these assets? Usually by one of three methods.

  The first, which provided the basis of the KMT's financial stability in its early days in Taiwan was the simple takeover of property formerly owned by the Japanese government during the colonial period or the purchase of formerly Japanese government-owned assets at an artificially low price.

  In later years it benefitted from the symbiosis between the government, which awarded lucrative development contracts, and KMT companies which received them.

  More recently it has used its own financial power, along with its government connection, to manipulate Taiwan's financial markets via insider trading and rumor-mongering via the media. It is ironic that in its government role the KMT stresses financial market stability, whereas in its business dealing the KMT generates market instability -- sudden rises, sudden plunges -- through which it can earn huge profits as well as launder payouts for various favors

  What are the major implications of the KMT's possessing such vast wealth?

  For a start, it creates an unequal base for party competition. Since the KMT owns most political and economic resources, it is easy for the ruling party to use its financial power to engage in illegal activities such as vote-buying and campaign financial exchanges. The recent financial scandal related to independent presidential candidate James Soong (宋楚瑜), a former KMT heavyweight who split from the party, has demonstrated the lack of transparency in the party's operation of its businesses and the seriousness of illegal financial exchanges between the party and the government.

  Also, the KMT's business empire undermines Taiwan's political and economic base by enabling "crony capitalism," the corrupt collusion between government, party and local factions. Taiwan's "black-gold" politics is entirely the product of KMT's 55-year-old practice business run by the party.

  Earlier attempts to limit KMT business practices -- such as prohibiting part-owned companies from participating in bidding on government contracts -- have proved inadequate. The KMT contended that Lien's New Year's resolution reflected simply the consensus reached by the ruling party and the DPP in the National Development Conference (國發會) in 1996. The fact is, the KMT showed no real intention to implement the plan until Lien felt the urgent need to rejuvenate his flagging campaign. The KMT-dominated legislature played a major role in inhibiting any proposals unfavorable for itself that were initiated by the opposition camps.

  Lien's latest statement, however, forced the ruling party to face an issue that must be dealt with if it is to have a long-term hope of remaining in power. It also gave the opposition parties an opportunity to call for the enactment of the so called "sunshine laws" -- a legislative package including the Trust Enterprise Law, the Political Contributions Management Law and the Political Party Law.

  Lawmakers have agreed in principle that these bills will go through their second and the third readings as a package; if one is held up, none will pass. Nevertheless, there are major differences between the parties on the Political Party Law -- which specifically restricts political parties from both operating and investing in commercial enterprises.

  The KMT however, despite wanting to prohibit political parties to operate businesses, wants to allow political parties to be able to invest in them. What this means is that political parties would be prohibited from controlling company boards and forming partnerships with businesses, rather than banned from engaging in investment activities altogether.

  This, however, coincides with the pattern according to which the KMT has been remodelling its business activities in recent years, where the party has diversified ownership to such an extent that that it could no longer be said to own many companies while still retaining a controlling, albeit minority share in, literally, hundreds.

  What steps must be taken to divest the KMT of its assets and rid Taiwan of the political and economic distortions these assets cause?

  The most basic requirement is a transfer of power from the KMT to the opposition party. Judging by what the KMT has done to implement Lien's call's for reform, there is no hope of such reform as long as the party remains in power.

  But even if an opposition party wins the presidency on March 18 and can effectively wield executive power, it will probably take years to divest the KMT of its assets. To start with, an independent task force should be established to examine the source and contents of the KMT's assets. Then we will know the extent to which the KMT, during its many years of impunity under martial law and later, has pilfered from the people. Until this happens, talk by the KMT itself of serious political reform in this area is what the public thinks it is, a cheap and insincere campaign ploy.

  Liu Shih-chung is deputy director of the DPP's department of international affairs.
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