At the opening ceremony of his national campaign headquarters on Jan. 2, Vice President Lien Chan (
For all that, there has been heated debate between the ruling and opposition parties over the definition of "party-owned enterprises" and the actual method by which the KMT's assets can be cleared up. Finding a solution will be a great boost to the realization of true democracy in Taiwan.
The KMT's failure in controlling commodity prices and financial management in China resulted in the imposition of strict government control over the financial system and currency policy after it came to Taiwan. The private sector seldom had the opportunity to run banks or other financial businesses. Under the KMT's authoritarian rule, the chairman of the party's financial committee always held the governorship of the Central Bank of China.
In this way, the KMT held a monopoly on the operation of financial enterprises through a number of state-run enterprises. For example, financing and margin trading in the early days of KMT rule in Taiwan was monopolized by Fuh-hwa Securities (
Taking advantage of its ruling party position, the KMT also en-tered into joint ventures with state-owned enterprises and co-operated with government agencies, including the Chinese Petroleum Corp, Bank of Taiwan, the Executive Yuan's Development Fund and the Vocational Assistance Commission for Retired Servicemen. As a result, KMT-run businesses swelled from a single business, Chiloo Industries Inc (
In response to the new pattern of political competition that emerged after the election for the second legislature, in 1993 the KMT established its Business Management Committee, headed by Liu Tai-ying (
Recently, the KMT has also extended its tentacles to various major BOT projects such as the Taipei International Financial Center and Kaohsiung City's mass rapid transit system.
The focus of the KMT business model has also gradually shifted from business operations to investment, while the party's relationship with consortiums has changed from that of patronage to partnership. As a result, a colossal body of shared interests that span the political and business spheres was created.
Party-run businesses also make overseas investments in coordination with Taiwan's policy of informal diplomacy. Some of the better-known examples are a fishery processing joint venture with the Alaska state government, the Palau Asia Hotel in Palau, the Taiwan Trade Center in Tokyo and trade between Yu Tai Industrial Corp (
Following the increase in the scale of its businesses, the KMT's net assets soared from NT$55.83 billion from 1993 to NT$147 billion in 1998, while the after-tax revenue of its businesses rose from NT$5.27 billion to NT$12.1 billion. These profits have become the KMT's most important financial resources for expanding its activities and imaintaining its hold on power.
Another aspect of the KMT's corporate development was the spread of corruption and "black gold" politics, as the party wielded the power of its massive business empire in election campaigns. Party-run businesses have become the biggest obstacle in creating a level playing field for all parties. It is also the biggest drawback in Taiwan's march toward normal democracy -- a situation long criticized by the opposition. As the KMT lacked the will and the opposition lacked the power to cut this malignant cancer from Taiwan's body politic, democratic development continued to be seriously undermined.
At the National Development Conference of 1996, the ruling and opposition parties reached a consensus on "four no's," setting some initial regulations on party-run businesses. However, no consensus was reached on the definition of what constitutes a party-run business. To share the profits from party-run businesses with the public, KMT Chairman Lee Teng-hui (
Lien's announcement about putting the party's assets in trust presents a ray of hope in the search for a solution to this situation. The KMT, as Taiwan's sole political party for so many years, relied extensively on its business revenues. Now it is necessary to establish a environment in which political parties can compete fairly.
In doing this, it will be important to ensure domestic political stability. Banning political parties from involvement in business operations and putting KMT assets in a trust can stop the KMT-run business empire from expanding further. How to handle trust revenues is the key to setting up an environment for fair political competition.
The concrete methodology should be compatible with the principles of fairness and justice. One possibility is to follow the German model in handling the assets of the East German communist party after unification. The ruling and opposition parties could set up a committee to register KMT-owned businesses and compile a list of the KMT's assets. The portions taken illegally from the people and the state should then be returned and the remainder put in trust.
Next, over a period of time, the allocation of trust revenues should be shifted gradually from the KMT to a proportional allocation system based on the number of votes garnered by each party. In other words, revenues generated from KMT assets in the trust should become, over a period of time, a development fund for all the political parties. At the same time, the Legislative Yuan should ban all political parties from operating or investing in business enterprises, removing this huge obstacle to Taiwan's democratization. This could be the KMT's biggest contribution to democratic politics in Taiwan.
Kenneth Lin is a professor of economics at National Taiwan University.
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