End of the Line for Taiwan’s Political Star?

It was a scenario devoutly to be hoped for come Taiwan’s March 2008 presidential election ‑ Kuomintang candidate Ma Ying-jeou winning comfortably and taking office as a savvy, cosmopolitan leader who ends the threat of war with China and refurbishes Taiwan’s relations with Washington.

Presumably, Washington, Beijing and a majority of the Taiwanese electorate then breathe a huge sigh of relief, after eight years of erratic and ideological politics made conflict with China ever more likely.

That was until last Tuesday, when the Taiwan High Court indicted Ma for diverting NT$11 million (US$333,091) from his mayoral expenses to a private account. The crime carries a minimum sentence of seven years. Now all bets are off and the presidential race has become as chaotic and crowded as that in the United States.

Relentless media coverage, personal rivalries and, a rarity in Chinese history, an independent judiciary are making politics in Taiwan increasingly unpredictable.

Ma’s indictment may – not inevitably will – put an end to the career of a man who was perceived as a new kind of Taiwanese politician and a favorite in Washington.

“I intend to seek the presidency and also defend my innocence as a member of the Kuomintang Party,” a defiant Ma said at the time of his indictment. Last November he announced that he would donate to charity NT$15 million, the equivalent of half of the public funds he received over eight years as mayor of Taipei.

Born into the family of a senior Kuomintang official in Hong Kong in 1950, Ma moved to Taiwan when he was a one-year old. He received his doctoral degree at Harvard and was almost immediately appointed deputy chief of the Presidential Office’s First Bureau in 1981. He served as the English secretary to President Chiang Ching-Kuo in 1982. He soon made his way up through the ranks to senior KMT posts, either in the government or the party.

As justice minister, he publicly cracked down on so-called “black gold,” or bribe-taking, not only in the Taiwanese government but his own party. He was elected Taipei’s mayor in 1998 and was re-elected handily in 2002. He then was elected chairman of the Kuomintang in 2005. With a reputation as a technocrat, he pushed Taipei to become a completely wired city and he backed environmental issues. He regularly leads trips to Taiwan’s badly polluted rivers and demands their cleanup. He also advocates direct trade, transport and postal links with China.

Because he says he will continue to run for the presidency despite his indictment, however, that could pave the way for an unlikely victory by the candidate of the ruling Democratic Progressive Party (DPP) despite the blunders and allegations of corruption that have dogged President Chen Shui-bian.

Now, instead of having one strong candidate, the Kuomintang is likely to have two. Although Ma has announced his resignation as party chairman, he also said he would fight the charges against him and run on his own. As Taipei mayor he retains considerable clout with the electorate despite his missteps. He is expected to face the official party candidate, likely to be Wang Jin-ping, the speaker of the Legislative Assembly.

With the two splitting the Kuomintang vote, the DPP would have an excellent chance of repeating its victory in 2000, when Chen won with 39.3 per cent of the popular vote, against two feuding KMT opponents. Attempts by Lien Chan, the losing KMT candidate in 2004 and now the party’s honorary chairman, to persuade the two to agree on a single candidate have so far failed.

The issue of slush funds in Taiwan goes a long way beyond Ma Ying-jeou. It first burst into public view in November, when Eric Chen, the same public prosecutor, indicted Wu Shu-jen, Chen Shui-bian’s wife, and others on charges including embezzlement, forgery of documents and perjury involving NT$14.8 million over the mishandling of a secret office fund. That in turn has brought to light the existence of state funds paid for decades not only to the president but to about 6,500 civil servants. The money, disbursed under an executive order in the 1950s, is not included in official salaries, is not subject to tax and can be spent on official expenses, like inviting people for meals and giving presents. Most simply regarded the slush funds as personal piggy banks for their own use

The vast majority of Taiwanese were unaware of the existence of the funds until the scandal broke. Complicating the issue further is that Chen is contemplating investigating all 6,500 officials, who include presidential hopefuls of all the major parties. It is likely that very few have any records of how the money has been spent. A Taipei court started hearing the case on December 15 against Wu Shu-jen.

While they respect the independence of the prosecutor, most Taiwanese are dismayed by the partisanship, name-calling and triviality of their politicians, which they consider unworthy of a country of such wealth and development. They are also angry at how President Chen is perceived to have needlessly antagonized Beijing during his seven years in office by flirting with outright independence.

What’s worse, the political infighting obscures serious issues that should be center-stage during the presidential election. The rapid relocation of large parts of Taiwan’s manufacturing to the mainland, referred to as the “hollowing-out” of the economy, means that domestic investment has stalled, causing long-term high unemployment and an increasing wealth gap. Taiwan firms have long been among the leading foreign investors in China, with total cumulative investment of US$150 billion. In 2005, 71 percent of Taiwan’s outward FDI went to China.

The business community is pressing for more liberal regulations on mainland investment, saying that it is the only hope of structural recovery for Taiwan, one of the slowest-growing economies in the region after Japan. They complain about a ban on investing more than 40 percent of net assets in the mainland and the lack of direct flights, saying the DPP’s refusal to allow such flights does nothing to hurt the mainland but handicaps Taiwanese business. With a Shanghai-Taipei route, they could fly for a meeting in the morning and return in the evening and have less reason to re-locate to the mainland.

They argue that the market, and not the government, should decide how much to invest in China.

In response to this pressure, Taipei announced in December that it would allow chipmakers to upgrade their China plants to use mainstream 0.18 micron technology, which most of their Chinese competitors already have.

Since Chen Shui-bian took power in 2000, the balance of economic advantage has tilted increasingly in Beijing’s favor. Its companies are more competitive, its economy and diplomatic and military power immeasurably stronger.

The business community fears that another four years of DPP policies would leave Taiwan companies more uncompetitive in China and more marginalized in the new Asian economic order.

In addition, there are large domestic issues common to most developed economies, like an ageing population that requires major pension and health insurance reform and has become a heavy burden on government coffers. Another is long-overdue consolidation of Taiwan’s overcrowded banking sector.

As president, Ma would be less ideological and more pragmatic than Chen. He has proposed a peace treaty, under which Beijing promises not to attack Taiwan in exchange for a promise not to declare independence.

He has wisely declined invitations to visit the mainland, aware that the handshake of a smiling Communist leader could cost him votes. So he occupies the middle ground between the independence advocates of the DPP and those on the KMT right who are moving toward the ‘one country, two systems’ formula. It is this middle ground where a majority of the electorate belongs.

But none of that may matter if he can’t beat the rap.

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Taiwan’s Golden Boy Could Be History , Nov. 29, 2006

Taiwan’s Two Steps Forward, One Step Back Democracy Nov. 24, 2006

Taiwan’s Golden Boy Stumbles, Sept. 15, 2006