Sun, Feb 24, 2008 - Page 1 News List

Defense chief quits over arms dispute

TAIWAN GOAL Vice Minister Michael Tsai took over after Lee Tien-yu resigned to take responsibility for the controversy over the founding of the arms dealing firm

By Shih Hsiu-chuan and Rich Chang  /  STAFF REPORTERS

Former minister of national defense Lee Tien-yu speaks on Jan. 29.


Minister of National Defense Lee Tien-yu (李天羽) resigned yesterday morning amid mounting controversy over the establishment of a private arms firm.

Lee, who assumed the post in May last year, expressed "deep regret" over the controversy surrounding the founding of Taiwan Goal, in which the Ministry of National Defense (MND) is the largest stakeholder at 45 percent.

As the minister of national defense, Lee said he was devoted to carrying out the nation's defense policy, promoting national security and caring for military personnel and their family.

However, he decided to resign to take responsibility for failing to smoothly carry out an order to establish an arms company, incurring doubts and controversy along the way, he said.

Premier Chang Chun-hsiung (張俊雄), who tried to dissuade Lee from leaving, later approved his resignation and appointed former vice minister of national defense Michael Tsai (蔡明憲) as his successor, Cabinet Secretary-General Chen Chin-jun (陳景峻) said.

"Lee insisted he had to take full responsibility for failing to properly deal with the Taiwan Goal matter," Chen told a press conference yesterday afternoon. "Everyone has his own career plan. We should all respect Lee's decision."

Tsai, 67, who has a doctorate from the California Western School of Law, served as a legislator for two terms and as a deputy representative to the US.

The premier confirmed the existence of Taiwan Goal on Feb. 15 following a report by the Chinese-language China Times that it had been established.

Since then, Chinese Nationalist Party (KMT) lawmakers have accused the government of seeking to make a profit from the arms trade.

Opposition lawmakers also alleged that Vice Premier Chiou I-jen (邱義仁) was involved in the firm, which was founded under the order of President Chen Shui-bian (陳水扁), and that Wu Nai-jen (吳乃仁), a Democratic Progressive Party (DPP) stalwart, was appointed company president to reward him for his dedication to the party.

The Cabinet has defended the establishment of such a national defense management, production and trading firm, saying it would resolve many obstacles the country faces when procuring arms from abroad given its sensitive political status.

Taiwan Goal registered with the Ministry of Economic Affairs on Jan. 28 as a private company, with capital of NT$1 billion (US$31.15 million) and paid-in capital totaling NT$80 million.

Chen Chin-jun said the government had acted in accordance with the National Defense Act (國防法) and the Organic Statute of the Armaments Bureau (軍備局組織條例) to cooperate with private enterprises to develop the defense industry.

At the press conference yesterday, Chen Chin-jun also announced the premier's decision prohibiting government investment in any private national defense company.

"The establishment of Taiwan Goal and the government's policy to develop the defense industry have been slurred," he said. "As such, the premier has decided that government funds will no longer be used to invest in the private defense industry."

That could mean Taiwan Goal might have difficulty sourcing its initial capital of NT$200 million.

The company's plan was to source 45 percent of its capital from the defense ministry; 15 percent from Yao Hua Glass Co (耀華玻璃), a company jointly owned by the defense ministry and the Ministry of Economic Affairs; 25 percent from China Steel Machinery Corp (中鋼機械公司), a subsidiary of China Steel (中鋼); and 15 percent from Chunghwa System Integration (中華系統整合公司), a subsidiary of Chunghwa Telecom (中華電信).

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