After All Those Years...A Look at the KMT's Track Record in Taiwan

Since 1949, when the ROC government officially relocated to Taiwan, right up until the election on March 18 this year, the term "ruling party" has been synonymous with the KMT. Even some DPP members were taken aback to find their party in power this early in its development.

In the half century that the KMT governed Taiwan, the party has, in the words of its central committee secretary-general Lin Fong-cheng, taken the island "from poverty to prosperity and from war to peace, bringing Taiwan democracy, economic development and social stability." Lin, the former minister for transportation who is now in charge of re-structuring the party, says: "Without the KMT, today's exchange of power between the parties wouldn't be taking place."

Closing down the hotel

Lin's comments are far from new. During the past few elections the KMT has continually emphasized its track record as the party of the economic miracle, political democratization and social stability. But by one of the quirks of history the public doesn't seem very grateful to the party that successfully led Taiwan through crises such as the shelling of Kinmen in 1958, derecognition by the US in 1979, and the recent Asian economic crash. On the contrary: "When the hotel shuts down, the staff must go," says lifelong KMT member and former head of the Control Yuan Wang Tso-yung, quoting wartime leader Winston Churchill-who was unceremoniously dumped by the electorate in 1945 after leading Britain to victory over Hitler. Voters are cruel and forgetful. They are more concerned about immediate problems like the crushing level of repayments on their mortgages, and resent the sudden wealth of those who are profiting from corruption and cronyism. "People had a bad taste in their mouths, something which they needed to get off their chests," says Wang.

So how come the KMT, this century-old political establishment, lost its grip on power? The pundits have a variety of theories, but most blame the split in the party and the dispute over whether to follow an indigenous" or a "China" line-problems which surfaced following Lee Teng-hui's assumption of the presidency in 1988.

"The KMT lost because it was divided and because of the 'black gold' issue, and not on account of its administrative track record," says KMT legislator Chen Shei-saint. Viewed alongside the performance of the world's other perennial ruling parties, the KMT's record has been pretty good, with brisk economic growth in spite of environmental protests and the difficulties of industrial upgrading. A particularly testing time was the Asian financial crisis, starting in July 1997, when the economy stumbled and the stock market index collapsed to 5000 points. The government responded by immediately cutting corporate taxes in the financial sector. This helped the industry to overcome bad debts, triggered a rebound on the stock market, and enabled the banking sector to provide relief for businesses, thus enabling Taiwan to ride out the worst of the storm.

Asian financial crisis

"How could a government that successfully negotiated the perils of the financial crisis, lose power?" lamented premier Vincent Siew after the election. "Maybe the KMT government didn't understand how publicity works," says Chen Shei-saint, "or else the public didn't realize the importance of the party's administrative work. What the public cares most about is why rice wine or garlic is in short supply."

Chen Shei-saint judges that voters are more exacting in their requirements of the KMT. "Did public order in Kaohsiung improve after the DPP's Frank Hsieh became mayor? Last year the number of muggings in the city topped 50,000, but people still don't blame Hsieh," says Chen. "Instead they say it's 'the rotten legacy of the previous KMT administration.' Meanwhile in Taipei, Mayor Ma Ying-jeou has done a pretty good job with law and order, but everyone gives the credit to [Ma's predecessor as mayor] Chen Shui-bian, saying that he laid the groundwork with his crackdowns on illegal businesses."

"When you've been in charge for a long time, people naturally get sick of you," remarks Wang Tso-yung. But in spite of the KMT administration having successfully negotiated the challenge of the Asian economic crisis, there are a variety of interpretations of the party's political accomplishments. "We need to look at how things are affected in the long-term," says Barry Chen, manager of Asian Pacific Finance Ltd. When the government intervenes in the financial sector to help relieve pressure on businesses there is a danger that this may ultimately weaken national competitiveness, because "using methods that do not square with the free market mechanism to avert a crisis, may cover up serious flaws in the financial system."

Ma Kai, a research fellow at the Chung-Hua Institution for Economic Research, explains that a surplus of capital and increasingly high land and labor costs at home, prompted Taiwanese businesses to begin shifting their production bases to neighboring countries, so as to benefit from low-cost land and labor and gain access to those markets. "Taiwan today is in the same relation with respect to Southeast Asia and mainland China as Japan was once with respect to Taiwan," says Ma, who notes that although this new state of affairs is Taiwan's greatest competitive advantage, it is one that the government has not helped private enterprise to take advantage of. "In terms of expanding Taiwan's economic domain and moving towards internationalization-for example in managing the movements of international capital and facilitating direct transportation links with the mainland-the KMT administration has unfortunately not done enough."

Due to geographical proximity and cultural affinity, Taiwanese businesses have naturally made mainland China their priority overseas investment location in recent years. According to statistics from the Ministry of Economic Affairs (MOEA), as of November 1999 there were over 20,000 Taiwanese firms with investments in mainland China, and Taiwan's trade surplus with the mainland was US$13 billion last year. Were it not for the mainland market Taiwan's foreign trade balance would be in the red.

In September 1996, the government initiated its "keeping the roots in Taiwan" program, to prevent Taiwan from becoming economically over-reliant on the mainland, and introduced the "no haste, be patient" policy. Investments in the mainland worth over US$50 million in internationally competitive high-tech industries were strongly discouraged, as were investments in major infrastructure projects such as railways and power plants.

How to "keep the roots in Taiwan"

Ma Kai believes that the "no haste" policy now exists in name only, given that it has proved so difficult to restrain the commercial instincts of Taiwan enterprises, and also now that big corporations like Formosa Plastics and Evergreen Corp have gone ahead with major projects on the mainland.

Many take the view that if the government really wants to reduce the risk for Taiwanese firms in mainland China, the best way is to start a dialogue with Beijing as soon as possible, drawing up an agreement that provides guarantees for cross-strait investments. As to "keeping the roots in Taiwan," it is not enough to exhort businesses to bear in mind the political risks on the mainland and the issue of Taiwan's national security. Ma Kai feels that there is still a fundamental need to strengthen the economic environment within Taiwan itself, helping to improve things in terms of labor, land and utility resources. In this way Taiwan can, like Japan, keep its industry's R&D centers and key products at home. The KMT government's approach was to tell big corporations to stay in Taiwan, but without helping them to deal with problems like environmental and labor protests. So the corporations naturally shifted abroad, one after another.

Let the market handle it

Certain statistics illustrate Taiwan's economic success-the KMT government's proudest boast-and show what kind of situation the new ruling party is taking charge of. For example, annual economic growth for the first quarter of this year reached 7.93%, the highest in nine years, while the growth forecast for the whole year has been revised upward to 6.73%, which would be the highest in six years and the fifth highest in the world. Taiwan's GNP is now close to NT$10 trillion, and per capita income is up to US$14,636.

But a flip side to economic growth, something the new administration needs to address, is the worsening problem of unemployment. In the first quarter of this year the number of unemployed climbed to 270,000 people, and narrowly-defined unemployment rose to a new high of 2.8%. Under the combined pressures of industrial upgrading, internationalization and liberalization, Taiwan's economy is still facing a number of difficult challenges.

One major problem that has come to light is the chaotic state of Taiwan's financial system. The KMT government was forever being criticized for allowing the intrusion of politics into the financial arena-the collusion between big money, organized crime, and political forces that is referred to as "black and gold ruling in tandem." As Hsia Chen points out, the KMT needed votes so it formed a symbiotic relationship with the financial apparatus at the local level: "Give me your votes, and you can suckle here in return." Bank directors are often involved with local factions, and operate as influential "vote captains" at election time, so it's difficult for political forces not to get involved whenever a problem crops up.

Following the March 18 election, a string of financial institutions, including Chung Shing Bank and the Taiwan Development and Trust Corporation were hit by mass deposit withdrawals. KMT secretary-general Lin Fong-cheng stresses that these were purely "problems concerning the operation of individual banks, and nothing to do with politics." But given the cozy relationship between the former KMT administration and figures such as Chung Shing bank chairman Wang Yu-yun, many see a link with the KMT's presumed loss of influence over the banking sector following its electoral defeat.

The problems plaguing Taiwan's financial sector are particularly widespread at the local level, among agricultural associations and credit cooperatives. Difficulties multiplied during the 1980s with the widespread opening of new banks, leaving Taiwan with a non-performing loan ratio of 8%, reaching 10% among local-level institutions. For many years now, the KMT's attitude has been: "Banks mustn't be allowed to collapse, otherwise there'll be a domino effect throughout society." Wang Tso-yung believes that if the financial sector is not rectified some day soon, "there's going to be an explosion." The Ministry of Finance has already instituted the necessary regulatory framework backed up with sufficient legislation, but the system still awaits effective implementation pending the removal of political interests from the equation.

"Two states" proposal

The biggest challenge that the new government inherits from Lee Teng-hui's administration, is the issue of cross-strait relations.

In 1987, before Chiang Ching-kuo opened the way for Taiwanese people to visit family on the mainland, government policy was to have no truck with the "insurgent regime," and was dominated by the "Three Noes": no contact, no negotiation, no compromise. Cross-strait relations entered a new phase with President Lee's termination of the Temporary Provisions for Suppression of the Communist Rebellion in 1991, along with the establishment of the National Unification Council, the Mainland Affairs Council and the Straits Exchange Foundation, and the formulation of the Guidelines for National Unification. The Cross-Strait Relations Statute in 1992 enshrined the principle, acceptable to both sides, of "one China, with differing interpretations." The relationship slumped to new lows, however, following President Lee's 1995 visit to Cornell University and his 1998 assertion of "special state-to-state relations" between the two sides of the Taiwan Strait.

Deputy chairman of the Mainland Affairs Council Lin Chong-pin described President Lee's "special state-to-state" formula as providing a clear account of Taiwan's position, depicting the cross-strait situation as it stands. And according to Professor Liu Pi-jung of Soochow University's politics department, the "special state-to-state" formula can be seen as Lee's masterstroke, a proposal pitched between the alternatives represented by "one country, two systems" and "Taiwan independence," with the ultimate objective of moving towards a confederation.

Pragmatic diplomacy

But others prefer to view Lee Teng-hui's mainland China policy in terms of the overall picture of his presidency. According to Wang Tso-yung, who has known the former president for decades, Lee's policy of indigenization and his call for people to identify themselves as "new Taiwanese" plainly amount to "Taiwan not wanting to reunify with the mainland."

Cross-strait relations is the most explosive issue left over from Lee Teng-hui's presidency, a cold war dispute that persists in the form of an international diplomatic struggle. Beijing's determined efforts to stamp out Taiwan's international presence resulted in the island's number of official allies dropping from more than 60 before the 1971 withdrawal from the UN, to a one-time low of just 23.

As president, Lee Teng-hui vigorously promoted the notion of "pragmatic diplomacy." Lin Cheng-yi, director of the Institute of European and American Studies at the Academia Sinica explains that Lee Teng-hui's foreign affairs philosophy is founded on "the fact of Taiwan's existence," and the idea that "where there's existence there's hope," so striking down Beijing's claim that the ROC ceased to exist from 1949.

Despite pressure from Beijing, President Lee vigorously worked to heighten Taiwan's international profile. "Lee Teng-hui managed to travel to 15 countries during his presidency, in spite of the difficulties entailed," says Lin Cheng-yi. "Even the mainland's test-firing of missiles after Lee's visit to Cornell University in 1995, failed to deter him two years later from attending the Canal Convention in Panama." Also, the fruits of pragmatic diplomacy can be seen from fact that Taiwan retained its membership in the ADB (Asian Development Bank) and APEC during Lee's presidency, and continued to seek admission to the WTO, even at the price of adopting alternative names.

According to Chao Chien-min, director of National Chengchi University's Sun Yat-sen Graduate Institute of Social Sciences and Humanities, pragmatic diplomacy gave the ROC more international breathing room and upgraded relations between Taiwan and the US. Meanwhile, the Lee administration's active development of "track two" channels of communication gave substance to Taiwan's relations with a number of other countries. But China's unrelenting pressure left both sides competing for allies. "Many countries were able to take advantage of this situation," notes Chao, hence the oft-voiced criticisms of Taiwan's "dollar diplomacy" and "big shot diplomacy."

The ROC's diplomatic plight is probably unparalleled anywhere in the world. As Chao Chien-min points out: "The cross-strait relationship is the biggest single variable in this situation," and this in turn depends to a large degree on the role played by the US. "The US policy on cross-strait relations has been one of concern rather than intervention, and our position too is that we do not wish the US to intervene. There are just two things that the US can do: abide by its commitment towards peace in the Taiwan Strait, and encourage communication across the Taiwan Strait."

Onwards and upwards?

In the aftermath of last year's disastrous earthquake, non-government bodies mobilized huge amounts of energy and resources while the government appeared in contrast to have been caught flat-footed. In particular, government relief efforts were stymied by the prevalence of "black gold" corruption at the local level. Academia Sinica president Lee Yuan-tseh, who oversaw the disbursement of privately donated relief funds, remarked: "Corrupt habits like budget-skimming, bid-rigging and kickbacks will continue to be a problem." It was Lee Yuan-tseh who, when the election campaign was coming to a head, delivered a timely speech on the topic of "Crossing the Fault-Line," in which he called on people to recognize that Taiwan was at a crucial point in its development, from which it could either "move onwards and upwards, or else sink into the mire." His speech turned out to be one more nail in the coffin for the divided KMT.

The emergence of the "black gold" issue has a lot to do with the "indigenization" of the KMT that began in the Lee Teng-hui era. Wang Tso-yung believes that today's black-gold phenomena-such as organized crime bosses reinventing themselves as elected officials, and government policies and appointments reflecting pressure from big business-did not occur during Chiang Ching-kuo's time due to the absence of full-scale elections. Attempts were made to eradicate the influence of organized crime in politics during Lee Teng-hui's presidency, but the party also needed votes and had to nurture local factions. As Wang points out: "Several ministers of finance were forced out of office for raising taxes. No wonder the public tends to regard the KMT as 'rich but uncouth,' and as having allowed 'black and gold to rule in tandem.'"

Lin Fong-cheng points out, however, that the KMT did make efforts to remedy the black gold problem, introducing a number of pieces of legislation governing the activities of political parties, requiring public officials to report their assets, and covering political donations. But laws passed by the Executive Yuan got bogged down and abandoned in the Legislature," says Lin. The KMT tried, but circumstances were not in its favor. Chen Shui-bian's administration is going to have to fight the same tough battles against black gold as its predecessor.

Integrating resources

On the subject of social welfare, Taipei County deputy commissioner Lin Wan-yi (DPP) believes that the KMT "has made a lot of progress" since the 1990s, and cites the passage of laws and amendments covering youth welfare, the handicapped, old people, prevention of sexual harassment, and domestic violence.

But Lin also points out that the KMT has yet to resolve the issue of the uneven allocation of resources between the central and local levels. Different levels of county and city government in Taiwan (some administered through the central government and some, like Taichung City, through the provincial government) draw different levels of funding for personnel and other expenditures. As an example, says Lin: "The allowance for low-income households in Taipei City is four times what it is for those in Taipei County, while the rank of the director of the department of social affairs in Taipei County is at least two grades lower than for the equivalent posting in Taipei City."

Social welfare is a "labor intensive" sector, requiring support in terms of both funding and personnel. If resources are distributed in a way that leaves some people feeling like "second-class citizens," then the policy is clearly flawed. Lin Wan-yi feels that these problems ultimately need to be tackled by long-term planning via the Division of Financial Revenues and Expenditure Law, and with a more balanced distribution of power between the central and local levels of government.

A few years back Taiwan was rocked by a succession of high-profile murders, including the killings at the residence of Taoyuan County commissioner Liu Pang-yu, and the brutal murders of Peng Wan-ju and Pai Hsiao-yen. Recently came the news that there were 50,000 muggings in Kaohsiung last year. Law and order is an issue that increasingly worries people in Taiwan. But as some point out, there is relatively little crime in Taiwan compared to other countries, especially given the range and scale of the island's nightlife.

Huang Fu-yuan, associate professor at the Central Police University, believes that Lee Teng-hui was determined to crack down on crime, and notes that Lee was the first president to set up a law and order consultation body under the umbrella of the National Development Conference, thereby placing the issue alongside other topics of national significance such as the economy and foreign affairs.

Wang Tso-yung divides the KMT's half-century of rule into two eras, on either side of Lee Teng-hui's assumption of the presidency. In Wang's view, before Lee Teng-hui took over, the KMT was preoccupied with both the external threat and the many demands of domestic reconstruction, and while it held back the reins of power from local Taiwanese and was slow about democratization, it none the less managed, through caution and deliberation, to secure Taiwan's existence and develop the economy. Therefore, says Wang, "it deserved 80 out of 100 for its performance in government." When Lee Teng-hui took office he successfully promoted democratization, yet only as far as the introduction of direct presidential elections. On the other hand, public order deteriorated, the democratic culture failed to take firm root, and ethnic tensions became exacerbated. Furthermore, the black gold problem grew worse and Taiwan was pushed to the brink of war with the mainland. And after all that, the party was booted out of office. So Wang only gives the KMT 55 out of 100-a failing grade-for its performance under Lee Teng-hui.

But of course were it not for Lee, there probably wouldn't be many people bold enough to pass judgement in such a manner.

So how would you score the KMT's performance?

p.20

What would Chiang Kai-shek, the KMT's first-generation strongman leader in Taiwan, have made of the party's internal divisions and electoral defeat?

(photo by Diago Chiu)

p.22

After his last Executive Yuan meeting as premier on May 18, Vincent Siew bids farewell to his cabinet. Among those members of the KMT's new generation, only Ma Ying-jeou remains "in power." (photo by Pu Hua-chih)

p.23

Outspoken former Control Yuan president Wang Tso-yung says the KMT lost the election because it was in power for too long and the people wanted a change, as well as because of internal divisions and the "black gold" problem. (photo by Pu Hua-chih)

p.23

Lin Fong-cheng, the KMT secretary-general, wants the party restructured on the basis of "top quality democracy." The party will make a priority of democratizing itself, and will be particularly cautious in the future when nominating election candidates.

(photo by Jimmy Lin)

p.24

Taipei by night is a glittering, vibrant spectacle. Taiwan's economic prosperity is to the credit of the KMT administration.

(photo by Pu Hua-chih)

p.25

Foreign aid was an important component of Lee Teng-hui's efforts to promote pragmatic diplomacy and participate in the international community. Here, former foreign minister Jason Hu is shown presiding at a ground-breaking ceremony at the Marshall Islands' airport. (photo by Diago Chiu)

p.25

After decades of development, Taiwan is at the stage where many of its industries have shifted their production bases overseas. Mainland China is the number-one location for overseas investment by Taiwanese business. The picture shows an electronics production line in the Dongguan region, where Taiwanese firms are concentrated.(photo by Diago Chiu)

p.26

The KMT created an economic miracle in Taiwan during its fifty years in charge, but recently there has been a widening of the gap between rich and poor. While many ordinary people find it impossible to afford their own homes, there are plenty of unoccupied apartments-kept that way by wealthy landlords and construction firms trying to pump up property values. (photo by Pu Hua-chih)

p.27

There is still a lot of reconstruction needed in the wake of last year's disastrous earthquake, and the former government came in for a lot of criticism over its handling of the task. The picture shows members of a charitable organization visiting quake victims in Hsinyi Township earlier this year. (photo by Hsueh Chi-kuang)

p.28

Acting KMT chairman Lien Chan, addressing a conference of party representatives from northern Taiwan, exhorted the party to overcome its difficulties in a just and honorable way. (photo by Yu Chia-jui)

After his last Executive Yuan meeting as premier on May 18, Vincent Siew bids farewell to his cabinet. Among those members of the KMT's new generation, only Ma Ying-jeou remains "in power." （photo by Pu Hua-chih）

Outspoken former Control Yuan president Wang Tso-yung says the KMT lost the election because it was in power for too long and the people wanted a change, as well as because of internal divisions and the "black gold" problem. （photo by Pu Hua-chih）

Lin Fong-cheng, the KMT secretary-general, wants the party restructured on the basis of "top quality democracy." The party will make a priority of democratizing itself, and will be particularly cautious in the future when nominating election candidates.（photo by Jimmy Lin）

Taipei by night is a glittering, vibrant spectacle. Taiwan's economic prosperity is to the credit of the KMT administration.（photo by Pu Hua-chih）

Foreign aid was an important component of Lee Teng-hui's efforts to promote pragmatic diplomacy and participate in the international community. Here, former foreign minister Jason Hu is shown presiding at a ground-breaking ceremony at the Marshall Islands' airport. （photo by Diago Chiu）

After decades of development, Taiwan is at the stage where many of its industries have shifted their production bases overseas. Mainland China is the number-one location for overseas investment by Taiwanese business. The picture shows an electronics production line in the Dongguan region, where Taiwanese firms are concentrated.（photo by Diago Chiu）

The KMT created an economic miracle in Taiwan during its fifty years in charge, but recently there has been a widening of the gap between rich and poor. While many ordinary people find it impossible to afford their own homes, there are plenty of unoccupied apartments-kept that way by wealthy landlords and construction firms trying to pump up property values. （photo by Pu Hua-chih）

There is still a lot of reconstruction needed in the wake of last year's disastrous earthquake, and the former government came in for a lot of criticism over its handling of the task. The picture shows members of a charitable organization visiting quake victims in Hsinyi Township earlier this year. （photo by Hsueh Chi-kuang）

Acting KMT chairman Lien Chan, addressing a conference of party representatives from northern Taiwan, exhorted the party to overcome its difficulties in a just and honorable way. （photo by Yu Chia-jui）