Taiwan Seeks Kuomintang’s Fabled Riches

With Taiwan’s Kuomintang completely out of power following January elections, a government committee is being formed to try to get the state’s hands on the party’s fabulous wealth.

The Far Eastern Economic Review, in the mid-1990s, dubbed the party “the world’s richest.” It has allegedly been hiding assets in affiliated companies, think tanks, offshore banks or in dummy corporations for decades.

The passing by the Legislative Yuan of the awkwardly-named “Act Governing the Handling of Ill-gotten Properties by Political Parties and Their Affiliate Organizations” on July 25 became possible only after the KMT’s landslide defeat in presidential and legislative elections. That created a legislature that for the first time in history is not controlled by the KMT but by the Democratic Progressive Party (DPP).

“How Germany after unification handled the assets of the erstwhile masters of communist Germany, the SED, has always been seen as a model Taiwan should follow,” said Su Yen-Tu, a jurist at Taiwan’s Academia Sinica, who specializes in the law of democracy. “The act has long been overdue, as the KMT assets create unfair competition, with quite a few commentators calling them the ‘cancer of Taiwan’s democracy.”

Although the KMT gained assets taken from Taiwan’s expelled Japanese colonial masters at the end of WW2 and in the ensuing years when KMT and government money were not clearly delineated in a one-party system, it has never been clear how much money the KMT has and where it is.

It is unclear, for instance, what assets the onetime strongman Chiang Kai-shek moved to Taiwan when the party fled the mainland. But as the ruling party from 1949 to 2000, when the Democratic Progressive Party took over for the first time, the KMT is thought to have amassed an enormous web of banks, investment companies, petrochemical firms and media outlets, among other unknown assets.

Party officials have been talking down the size of the cash pile ever since it started to look like it could lose power. Former KMT Treasurer Liu Tai-ying in the 1990s estimated that the party held approximately NT$200 billion (US$6.2 billion at current exchange rates). However, former President Ma Ying-jeou, when he became KMT chairman in 2005, said the assets only totaled approximately NT$100 billion.

The KMT’s own most recent financial report filed to the Ministry of Interior stated the assets were merely NT$26.8 billion in 2015. By comparison, the DPP’s declared assets in 2015 were just NT$600 million. Allegations of KMT vote buying with what has been called “black gold” have long been rampant, fueled by the phenomenon that the KMT tends to lead markedly in elections at lower levels. The KMT enjoys particular strength in Aboriginal constituencies.

“It is obvious that the KMT had an advantage in elections because it could spend more hiring experts, campaigning and so on,” said John F Copper, the Stanley J. Buckman Distinguished Professor of International Studies emeritus at Rhodes College in Memphis, Tennessee, and author of countless books on Taiwan politics.

“But to what extent the KMT edge still exists is hard to say. In many ways it seems the DPP is not short of money, either, for example, in that it clearly spends more on foreign supporters, [such as writers and editors producing English-language party propaganda],” he added.

Under the Act, the KMT will have a year to audit its books. Meanwhile, the Committee will investigate and retroactively seize assets obtained by the KMT and its affiliates since Aug. 15, 1945 (the day of Japan’s surrender) unless they are party membership fees, political donations or government subsidies for electoral candidates. The Act also provides that all of the party’s wealth must be available for outside audit and freezes all assets from the moment of the Act’s promulgation.

Unsurprisingly, conspiracy theories have abounded ever since it became clear a change of power was in the wind. It certainly didn’t help the KMT that during the electoral run-up local newspaper advertisements for the sale of 26 plots of land in addition to shares of a hotel in Palau all had the same contact details leading to the KMT headquarters in Taipei.

When former President Ma in November flew to Singapore for his historic handshake with Chinese President Xi Jinping, a Singaporean political commentator speculated that Ma used the trip to personally carry some of the fortune abroad. When Taiwan’s state-owned Mega International Commercial Bank’s New York branch in mid-August was fined US$180 million by the New York State Department of Financial Services for not complying with money-laundering regulations, DPP legislators were quick to allege that the KMT had been laundering some of its riches through the bank.

KMT Deputy Secretary-General Lin Te-fu called the Act “illegal and unconstitutional.” Given the KMT’s weak position in the legislature, it will most likely take it to the courts. However, the chances of success are low, and it will undoubtedly become very difficult for the KMT to continue to use its hidden riches, if they indeed exist, for its political ends, as that would risk exposing them to the Committee.

The KMT may feel comforted by notion that electoral outcomes do not depend on the availability of money as the most determining factor.

“A party without a lot of money adapts its strategy and can come up with something more creative and effective, e.g., a successful mass campaign to raise small sums from individual voters [as done by the DPP in previous campaigns],” said Steve Tsang, director of the University of Nottingham’s China Policy Institute.

“With the benefit of hindsight I cannot see how the KMT would have won the recent presidential election regardless of what financial resources it had at the time, as a party that does not connect with the electorate cannot win,” he added.

Jens Kastner (kenslastner@googlemail.com) is a Taiwan-based journalist and regular contributor to Asia Sentinel