Culture : Illicit Behavior : A giant underground economy makes Taiwan a land of scofflaws.

Hsu Ke-wei doesn’t look like much of a threat to society. A slim 25-year-old wearing a rust sweater and matching pants, Hsu is a soft-spoken college graduate, only three months out of the army.

Yet today, like every day, he is breaking the law, illegally selling skirts and jackets from a downtown Taipei sidewalk. Vendors like him hawk luggage, shoes, books, sporting goods,snacks and toys from every major street in town, blithely ignoring government-posted signs urging citizens to “Say No to Vendors!”

Hsu cannot understand the fuss. “In Taiwan, law is not so important,” he says. “And besides, look at all the bigger businesses that are breaking the law.”

He could be talking of Hung Sheng Enterprise Co. Ltd., the largest cable television company in Taiwan. In the company’s new headquarters in suburban Taipei, Cheng Wen-chiuan, the 34-year-old chairman of the company, proudly leads a retinue of vice presidents into the control room, where 10 young women staff a bank of computers and phones to serve Hung Sheng’s 50,000 customers.

The office has everything--except the broadcasting equipment, which is kept elsewhere. “For safety’s sake, we can’t have that here,” explains Cheng, who has been in the cable television business for 18 years. Having broadcasting equipment in sight during a police raid might make for an awkward situation, he says, since Taiwan has yet to legalize cable television. Both Hsu and Cheng are part of a giant underground economy that reaches all corners of society and which has given Taiwan a reputation as an island of scofflaws.

Ku Ling, one of the country’s most prolific writers, says that Taiwanese people like to “toy with the law. . . . Whenever any law is announced, the reaction of the great majority of people is not how to obey it, but how to get away with not obeying it,” he writes in “The Ugly Taiwanese,” a collection of his essays published in November.

Illegal businesses extend to everything from transportation and housing to hotels and television.

A recent fire dramatized the extent of the problem. In the early hours of Nov. 21, a blaze in an illegal karaoke club killed 16 people, including a policeman. The latest in a series of fires at illegal clubs, the disaster prompted government pledges of a crackdown on Taiwan’s unlicensed nightspots.

The government is not lacking targets:

* Along Linsen North Road in Taipei, there are 322 bars and clubs. Only 30 are legal, says Wu Pei-li, director of the city’s investigation bureau.

* The Tourism Bureau says that one-fourth of the 4,000 hotels are illegal.

* The Department of Transportation estimates that 40% of the long-distance bus trips are with illegal bus companies.

* And Taipei’s government has given up trying to count the number of apartment buildings built illegally on rooftops.

Disregard for the law is something Taiwan inherited from China, says sociologist Hsin-huang (Michael) Hsiao, a fellow at Academia Sinica, the government’s premier research institute in Taipei. Mainland Chinese traditionally placed law behind human relationships and rational thinking as a way to solve problems, and Hsiao says that Taiwanese still put little importance on law. “The law is for reference, not for obeying,” he says.

Hsiao also notes that Taiwan was run for 40 years under a martial-law regime that seemed more concerned with political than economic crimes. While martial law ended in 1987, the sense of distance created during those earlier years between the government and the governed still contributes to a lackadaisical attitude toward the law, the researcher says.

Hsiao estimates that illegal businesses amount to anywhere from 20% to 40% of Taiwan’s economy.

Some businessmen insist they do not want to break the law but that the government leaves them no option. Hsu Feng-lin, director of an association representing 250 of Taiwan’s 400 illegal cable television companies, says that Taiwan’s leaders have been too slow in responding to the growth of new businesses and technology. The first legal cable companies may finally be introduced in 1994, although about half a million households are already illegally wired. “The government’s process of passing laws can’t keep up with the speed of the economy’s growth,” he says.

Wu, of the city’s investigation bureau, agrees that government should accept some of the blame for not revising outdated zoning regulations that prohibit many businesses from obtaining licenses. But Wu rejects claims that illegal businesses are faultless: “We are now a country of laws. People need to obey them.”

Many still don’t, resorting to bribery or intimidation, says Fang Chi-wen, a planner with the Ministry of Transportation who has studied the illegal buses (affectionately dubbed “wild chicken buses”) that roam Taiwan’s highways.

Cable television operator Cheng, tired of keeping a low profile, seems increasingly confident about operating his illegal business in public. To celebrate the move to the new headquarters, he has decided to hold an opening ceremony.

“We’re just waiting for an auspicious day,” he says. And, hoping to receive the government’s blessing to operate legally, Cheng presents his company as a model corporate citizen: Following regulations, he pays royalties for the U.S. movies his station broadcasts.

“Of all the cable television operators,” he boasts, “we are the most law-abiding.”