Taiwan’s vice premier quits post

Taiwan’s vice premier announced Monday that he would quit his job and resign from the ruling party, taking responsibility for a widening scandal in which $30 million worth of secret diplomatic funds has gone missing.

Chiou I-jen’s resignation followed his disclosure late last week that he helped transfer the money to a Taiwanese middleman as part of an attempt to convince Papua New Guinea to drop its official recognition of China in favor of Taiwan.

Since then, the middleman and the money have disappeared.

“I feel deeply ashamed in the face of my country and people,” Chiou said in a brief statement Monday. Prosecutors have blocked the presidential aide from leaving Taiwan pending a corruption investigation.

Rivals Taiwan and China have for decades competed fiercely to lure and retain countries in their diplomatic camps using aid, trips, infrastructure deals and other incentives, a process sometimes referred to as “checkbook” or “sugar daddy” diplomacy.

In 2006, Taiwan mounted an all-out effort to lure into its camp Papua New Guinea, which has had diplomatic relationships with China since 1976. According to local reports, senior members of Taiwanese President Chen Shui-bian’s administration, including Chiou, authorized the middleman, named Ching Chi-ju, and an ethnic Chinese named Wu Shih-tsai to route the $30 million to Papua New Guinea for “technical aid programs.” The money was deposited into a Singapore bank account held jointly by Wu and Ching.

Taiwan and Papua New Guinea were not able to agree on terms, leading to a breakdown in negotiations within months. But the $30 million reportedly never made it to Papua New Guinea and was never recovered.

Wu has been blocked from leaving Taiwan and faced questioning. Press reports this week indicated there is only about $2,000 remaining in the Singapore account. The loss was only disclosed after a Singapore newspaper reported that legal proceedings were underway to recover the assets.

The scandal has provoked anger and outrage.

“This is a ridiculous situation involving a huge amount of money,” said Lin Li-chen, 35, a clerk in Taipei. “There are lots of back-door practices, so I am not surprised this happened. But it’s a sad story for Taiwan.” While it’s unclear whether Chiou’s resignation will dampen the public fury, analysts said the scandal reveals deep-seated problems in Taiwan’s government structure.

The system concentrates too much power in the hands of the president, allowing him to bypass ministries when setting and carrying out policy, some said. Chen, due to step down this month, and his scandal-hit ruling party have been sharply criticized for the scandal. With two weeks more in power, some analysts said, Chen may decide to ride out the term rather than accept Chiou’s resignation as vice premier.

“Under Taiwan’s Constitution, diplomacy is set out by the president,” said Ruan Ming, an advisor at the Taiwan Research Institute in Taipei. “In this case, the president took the advice of irresponsible people, so he’s to blame.”

Those involved also apparently failed to follow basic safeguards, said Chen Chien-jen, former minister of foreign affairs.

In the past, money wasn’t wired into personal accounts or to a country before the official relationship was established, Chen said. “This shouldn’t have happened,” he added.

Others said the awkward Cold War diplomatic standoff between Taiwan and China has left Taiwan increasingly isolated, leading it to take greater risks.

“In the past eight years, we’ve lost seven countries,” said Chao Chien-min, a professor with the National Chengchi University in Taipei. “I think this was a desperate attempt by the Ministry of Foreign Affairs to recover some ground.”

Even as some defended the payment system as a necessary step, others condemned it, expressing hope that President-elect Ma Ying-jeou would overhaul the approach to international relations.

“Taiwan tries to buy the loyalty of small countries with lots of money, only to see them blackmail or extort Taiwan for more,” said Ruan. “It’s meaningless and doesn’t help Taiwan’s sovereignty, international recognition or status.”

As China’s wealth and diplomatic clout have grown in recent years, its international pressure tactics against Taiwan have been more successful. This has left the island with just 23 diplomatic partners, mostly small nations in Latin America, Africa and the South Pacific, compared with some 170 for China, including the U.S. and Japan. China is a permanent member of the United Nations Security Council

China has claimed Taiwan as part of its territory since the end of a civil war in 1949 and pledged to bring the island back under its control by force if necessary.

Africa provides a case in point of China’s growing clout. During the 1960s, Taiwan aggressively targeted countries on the continent with aid packages in a bid to retain its United Nations seat, which it ultimately lost to China in 1971. At the peak, Taiwan was recognized by 20 African nations.

Over the last decade, however, China has convinced several countries to switch sides as its aid, infrastructure and trade ties have expanded. In January, Malawi switched sides after recognizing Taiwan for 41 years, reportedly because Taipei couldn’t match the $6- billion aid package Beijing was offering. That has left Taiwan with just four diplomatic allies on the continent.

“I guess the chance to get the money back is tiny,” said Lo Chih-cheng, a professor at Taipei’s Soochow University and a former planning official with the Foreign Ministry. “But we need to try and stop the money from ending up in anyone’s personal pocket and to figure out who is responsible.”

 mark.magnier@latimes.com

Special correspondent Tsai reported from Taipei and Times staff writer Magnier from Beijing.