Corruption hurts rating by Heritage

Taiwan's reputation as a place to do business has been tarnished as instances of corruption continue to come to light, a report by the Heritage Foundation, a US-based think tank, said.

"Corruption remains widespread despite the Chen [Shui-bian, 陳水扁] government's efforts to combat it," the 2002 Index of Economic Freedom report said.

The report was written in conjunction with the Wall Street Journal and published this week.

"The judiciary may be subject to corruption and political influence," the report said. "The effect of anti-corruption prosecutions over the past year should reflect considerable improvement during the coming year."

As a result of corruption, continued government interventions in the stock markets, a high government share of gross domestic product, and regulatory obstacles to free business, Taiwan's rating in comparison to other countries in the world fell from 20th last year to 29th. Taiwan's overall score covering 10 major economic policy areas worsened for the fourth year in a row to a figure higher than that in the early 1990s, the report showed.

However, authors of the report note that technical factors caused Taiwan's rating to drop even as the Chen administration was moving to liberalize economic and trade policies, partially in advance of WTO accession

The report takes into account the black market, based on the Global Corruption Report 2001. That report was compiled by Transparency International, an international anti-corruption organization financed largely by US and other Western governments and private foundations. The report ranked Taiwan 27th among 91 countries. That ranking actually improved from the previous year.

A series of new laws liberalizing business and trade activities in Taiwan were enacted during the summer, and the report did not reflect those changes, said John Tkacik Jr., of the Heritage's Asian Studies Center, one of the authors of the report. Changes include the relaxation of rules on foreign investment in the stock market and in real estate.

In addition, the government's crackdown on corruption was unearthing more corruption than was known to exist by report's authors in years past, Tkacik said.

"They didn't know how bad the problem was until the government began to lift up the rocks to expose hidden graft," he said.

As a result, Taiwan's "property rights score," which reflects judicial graft, dropped sharply this year.

Burdensome regulations also caused the "regulation score" to drop.

"The rule of law is not always strongly implemented, and both bureaucratic inefficiency and a lack of transparency can be troublesome," the report says.

The report quotes a US Trade Representative report that says there are a lack of arbitration mechanisms to settle contract disputes, adding that procedures for bidding on major procurement projects are inconsistent with international practices.

The report also quotes an American Chamber of Commerce statement issued in May, which said, "A number of recent scandals concerning legislators and high-ranking government officials have reinforced the need for the Chen administration's anti-corruption campaign, but success will obviously require considerable political will and long-term action."

One area that did improve was government's regulation of the banking and financial sector, in view of the privatization of previously state-owned banks and recent financial-sector reform legislation.

Chen's reforms may reap some rewards next year. "There's no doubt that next year there will be considerable improvements in trade and capital flows, as well as property rights, regulation and black-market scores," Tkacik said.