Divest or Die

KMT promises a historic divorce from its assets.

In the late 1920s and early 1930s, the Ministry of Education of the Republic of China twice held competitions for the words to a new national anthem, to replace the Kuomintang (KMT) party song used since 1928. Since it did not receive entries it deemed appropriate, the ministry in 1937 officially adopted the KMT song as the country’s national anthem, an indication of how thoroughly the party was embedded in the government.

KMT chairman and presidential hopeful Ma Ying-jeou might have told that story in Taipei on 23 August when he presented a historic report on the party assets, setting out their total value and how they had been managed by different chairmen since Chiang Kai-shek.

It showed the current value of the assets at NT$27.7 billion, down from a peak of NT$91.8 billion in 1998 as assets have increasingly been sold off.

“I promise to maintain a clear separation of party, state and government in the future,” Ma told a news conference. “This is our pledge and the first step to the KMT’s rebirth.”
Ma’s short-term goal was to defuse an issue that the ruling Democratic Progressive Party (DPP) is eager to exploit in the 2008 presidential election, which Ma is favoured to win.

In the longer term, the promise to separate the party from most of its assets marks a milestone in Taiwan’s progress toward a normal democratic system and away from the single-party-state model that existed there until 2000 and still exists in China, Vietnam, North Korea and several countries in central Asia.

The KMT was created even before the birth of the Republic of China, on August 25, 1911, six weeks before the uprising in Wuhan that overthrew the ailing Qing dynasty. It, and the Communist Party set up in Shanghai 10 years later, were modeled on the Soviet Communist Party, as the single national party presumed necessary to save the country from poverty, feudalism and foreign intervention.

Both argued that only a monopolistic revolutionary party could build a modern state in a country with almost no industry or technology, a population more than 90 percent illiterate, no common spoken language and a minimal transport infrastructure. Party and government were and should be one and the same.

The first example of a KMT company was in 1920, when a senior official named Chen Guofu set up Mao Hsin in Shanghai, to do trading of cotton and securities in response to an order from Sun Yat-sen, then the prime minister. The party also set up newspapers and radio stations as instruments for its propaganda—unfortunately largely unprofitable.

Over the next 20 years, under Chen’s energetic leadership, the party expanded into banking, property development, food processing and manufacture of machinery, glass, rubber and pharmaceuticals.

This empire included Tsingtao Beer, which remains today one of China’s few global brands and which had breweries in Shenyang, Tianjin and Jinan as well as Qingdao. The most important financial institutions were China Agriculture Bank, Central Co-operative Treasury and Chong-he Insurance.

On May 17, 1945, with victory over Japan imminent, the KMT held a national meeting in the wartime capital of Chongqing to set out policies for the development of its businesses.

The party, it said, should expand into a wide range of sectors, with the profits going to the national and provincial branches to offset their expenses—“the party should support the party.” Businesses should be established in line with the legal process and not carry the KMT name. With the exception of people whose special skills were needed, KMT firms should employ party members. It set out six preferred sectors—transport, agriculture and animal husbandry, banking and insurance, culture, films and co-operatives.

That set out the policy for the next 50 years, which even survived the catastrophe of losing the mainland—and its KMT companies—to the Communists in 1949.

Under martial law, which was not abolished until 1987, the KMT maintained its monopoly control of the government, allowing its business empire to grow and flourish. It grew modestly in the first two decades after 1949 but expanded rapidly in the 1970s into petrochemicals, finance, securities, cement, steel, real estate and electronics. By the end of martial law, it controlled nearly 300 companies, including seven large investment firms.

When Lee Teng-hui took over in 1988, the assets were worth NT$38.5 billion. During his 12 years in power, the party invested heavily in real estate and the stock market, bringing the assets to their peak of NT$91.8 billion.

Lee invested some of the money abroad for diplomatic purposes, including a US$120-million seafood factory in Alaska, in a goodwill gesture to then Senator Frank Murkowski. The factory later closed.

According to a Taiwan newspaper, Liu Tai-ying, the man Lee put in charge of the business empire, went to South Africa on a fake passport in the mid-1990s in an attempt to buy a diamond mine together with an Israeli merchant. They offered a bribe to then President Nelson Mandela but he refused and the mining project never materialized.

But the island’s democratization challenged the legality of the empire, with the opposition DPP using it as a potent election issue, a symbol of the privilege and unfair wealth of the KMT. It was one reason for DPP’s victory in the 2000 presidential election.

In 2000, Lien Chan took over as chairman of the party and its assets, then worth NT$80 billion, but lost the presidency and the privilege it had enjoyed since 1927. The government and public opinion forced it to downsize, selling assets and giving others to the government.

The most poignant symbol was the sale of its high-profile party headquarters in downtown Taipei in early 2006, by which time the total number of its staff had fallen from a high of 4,000 to 900. Next to go will be its Central Investment Corporation, its last remaining jewel, worth about NT$2.3 billion.

It has promised to put the money into a retirement fund for its workers. “We are willing to face up to history and reflect on our past actions. We sincerely apologise to the Taiwan people,” the report said. Ma promised to put the remaining assets into a trust.

But how about its twin brother on the other side of the straits, which has taken over from the KMT as the world’s richest political party?

The Chinese government, which is controlled by the Communist Party, owns or maintains majority control of industries in the most profitable sectors, such as telecommunications, tobacco, petrochemicals, aviation, automobiles, banking and insurance. Apart from the units of these firms that are listed and have to publish regular accounts, we know little about how the money earned in these companies is spent.

The fatal mistake of the Soviet Communist Party was not to realize that it could not remain in power without a growing economy. In 1978, Deng Xiaoping understood this and changed the party’s course, enabling it to survive and prosper until now. Will the day come when, like the public in Taiwan, the people on the mainland demand that the party return to it the assets it has amassed?

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