COLUMN ONE : Targeting Taiwan for Arms Deals : The industrial powers flock to this small but wealthy nation in the post-Cold War push to sell weapons. Competition has produced a bounty of riches but also charges of corruption, even murder.

Early one morning last December, a fisherman found Capt. Yin Ching-feng’s body floating in the sea off Taiwan’s northeastern coastline, a huge wound disfiguring his head.

Investigators concluded that Yin had been murdered, and they soon found out why: As chief of the arms procurement office for Taiwan’s navy, he had threatened to expose a pattern of bribery in which arms dealers and retired Taiwan military officials, representing European companies, paid active-duty officers for help in winning weapons contracts.

In the wake of the homicide, eight Taiwan naval officials have been arrested, and officers as high as former vice commander in chief have been implicated.

Yin’s murder underscores the intensity of competition here, and the growing importance of arms sales in the post-Cold War world, as the leading industrial powers battle for exports and contracts.

Nowhere is that competition more fierce than in Taiwan, whose $87 billion in foreign exchange reserves make it one of the world’s richest nations. Moreover, its government remains transfixed by the need to defend the island from invasion from the Chinese mainland.

Selling advanced weaponry to such eager buyers as Taiwan has become an important element of foreign policy for the United States and other industrial countries. Arms sales make up a big part of post-Cold War dollar diplomacy--and franc, mark, lira, pound and ruble diplomacy too.

Freed of the need to join ranks against the Soviet Union and facing declining defense budgets at home, U.S. and European defense companies are competing to sell warplanes and frigates, tanks and submarines. And their governments, having overcome whatever reluctance they might have had about spreading deadly conventional weapons around the world, are lending a helping hand.

“The Cold War system ended, and the defense companies in the West faced shrinking defense budgets,” said Ding Shou-chung, a prominent member of Taiwan’s legislature. “Their markets at home were shrinking. Before, there were limits on selling weapons to Taiwan. But the companies pressured their governments to reduce the limits.”

While Yin’s murder may be unique, the broader procurement scandal is not. South Korea’s armed forces, for example, have been in the midst of similar upheavals, beset by allegations of corruption and waste in contracts for foreign weapons systems.

The competition to sell arms has raised questions about whether governments such as Taiwan’s are being persuaded to buy more than they need.

“I went to France, and they received me royally,” said Wei Yung, chairman of the Taiwanese legislature’s foreign affairs committee. “The Mirage is a beautiful aircraft. But it’s too expensive. They cost $50 million apiece. . . . For every aircraft, you could start a new university on Taiwan.”

Taiwan is even being urged to buy new tanks, although it is an island whose only potential threat comes from the air or water. Taiwan’s armed forces would probably either repel an invasion at the outset or lose the war.

For decades, Taiwan relied almost entirely upon the United States for its arms. Military officials received U.S. supplies and training and even many perks that American officers enjoy.

But in 1979, the United States severed diplomatic ties and broke its mutual defense treaty with Taiwan.

Throughout the 1980s, Taiwan coped and tried to diversify, but other countries were willing to sell it only a limited amount of military hardware.

No one, including the United States, wanted to offend the People’s Republic of China.

In 1982, President Ronald Reagan, whom Taiwan had considered its strongest friend in U.S. politics, signed a communique with Beijing in which the United States pledged to phase out its arms sales to Taiwan, which had reached a high of $830 million in 1980.

Taiwan’s star rose again as China’s fell in 1989. After the deadly crackdown on pro-democracy demonstrations at Tian An Men Square, Beijing’s ties to Western countries became frosty, and governments in Europe and the United States imposed restrictions on military sales to China.

“Tian An Men gave Western countries the excuse to have a freer hand” in selling arms to Taiwan, one Taiwan defense source said. And, he noted, Taiwan’s ability to buy arms overseas was given an even bigger boost by the breakup of the Warsaw Pact and the disintegration of the Soviet Union, which reduced the market for advanced weaponry in the West.

In Taiwan, which spent about $8 billion, or 5% of its gross domestic product, on defense in 1989, top military leaders hurriedly switched the focus of their strategy--de-emphasizing research and development of Taiwan’s own weapons systems and stressing instead the procurement of advanced hardware from overseas.

France became the pioneer in launching the new era.

By 1991, French officials were making frequent visits to Taipei.

They broke the ice with a multibillion-dollar contract to sell six Lafayette-class light frigates to the Taiwan navy. And France offered other advanced weapons systems up to and including the Mirage jet fighter, a plane far more sophisticated than any being used at the time by Taiwan’s air force.

A French source said the change in France’s arms policy was approved by top-level officials in Paris, with Dassault, the company that makes the Mirage, actively lobbying for permission to sell to Taiwan.

Other Europeans followed suit. The Germans offered minesweepers, and the Belgians hawked rocket guidance and propulsion systems. British, Italian and even Russian military officials and contractors began prospecting in Taipei.

Taiwan was flattered by the attention.

“For decades, the United States was the only supplier of weapons to our country,” said Huang Huang-hsiung, an opposition legislator on the legislature’s defense committee. “Sometimes, I felt the United States’ attitude was very harsh, very tough. With the European countries, we felt more respected and friendly.”

The Europeans were a bit more cynical about it.

Defense contractors began to offer “commissions” for weapons sales. This was particularly the case, one European businessman confided, in instances where the military need for a company’s wares was not so obvious and where Taiwan military officials could help get the required defense budget allocations.

The European arms dealer said he believed that Taiwan was becoming as corrupt as “Shanghai in the 1940s. . . . It’s so easy (to sell arms) now. And sometimes it doesn’t even take money. All it takes is some girls in Paris.”

Europeans are not constrained by the U.S. Foreign Corrupt Practices Act, which makes it illegal for U.S. companies to pay commissions or other fees to land contracts. In Taiwan, some defenders of this system of cash payments insist that it is the normal way of doing business on the island.

“If you’re in the military and I win a contract, I may give you something as a gift--some money,” explained a Taiwan employee of a Western defense contractor, who spoke on the condition that he not be identified. “It’s not a bribe. That’s just the way it is here.”

Taiwan’s Nationalist government would not permit anyone in its National Defense Ministry to be interviewed for the record on the procurement scandal.

Because officials in Taiwan had relied for so long on the United States as their sole arms supplier, they had little experience in handling competition for arms sales. And because most Western governments do not recognize Taiwan, it would have had a difficult time setting up a formal, government-to-government military procurement system even if it had tried.

So a shadowy subculture emerged in Taipei of foreign defense companies and retired Taiwan military officials, all working on arms deals.

“The value of (arms) procurement became higher and higher, and so did the profits,” one retired Taiwan general explained. “That’s why people retired” from the military.

Taiwan’s legislature was in no position to serve as a restraint on this procurement system. Only recently has it had any power. Until three years ago, many of its legislators were elderly retainers holding permanent seats that--in a weird fiction Taiwan has since abandoned--claimed to represent districts on the Chinese mainland, which they had not seen since the 1940s.

Even after the legislature was strengthened and made democratic, Taiwan’s elected legislators found it impossible to scrutinize arms procurement.

“What we saw on the budget books was a name (of an arms deal) and a number,” Ding said. “Anything more than that, the Defense Ministry said was secret.”

From 1990 until today, Taiwan spent about $10 billion on weapons procurement, Ding estimated.

“We have been getting quite a lot of defense items,” Taiwan Foreign Minister Frederick Chien said in a recent interview. “When everything is in place, our defense position will be one that is quite adequate.”

The purpose, Chien said, is to assure investors that Taiwan has the capacity to defend itself.

Taiwan’s burst of spending for arms had a significant impact on the behavior of foreign governments. In 1992, about half of all French arms sales overseas went to Taiwan. And by that year, the pressure from France and other European competitors helped to bring about a major change in U.S. policy.

In the midst of his reelection campaign, President George Bush announced that his White House was opening the way for the sale of 150 American F-16 warplanes to Taiwan, a transaction worth about $6 billion for General Dynamics (now Lockheed).

Over the previous decade, Taiwan had repeatedly sought permission to buy those planes, only to be turned down on grounds that the sale might violate Reagan’s 1982 agreement with China.

Bush Administration officials argued that the sale did not violate the agreement because the F-16s merely replaced Taiwan’s increasingly outmoded airplanes. But later that year, Taiwan bought 60 French Mirages, thus reducing its reliance upon the United States.

U.S. companies, spurred on by the F-16 sale, have been urging Congress to adopt a new provision sponsored by Sen. Frank H. Murkowski (R-Alaska) that would guarantee that U.S. arms sales to Taiwan would not be restricted by the agreement between the Reagan Administration and China.

The provision, which has already been adopted by the Senate, would open the way for unlimited U.S. arms sales to Taiwan.

“The Soviet Union is no longer a threat, and the defense industry doesn’t have what it used to,” said David Laux, head of the U.S. trade group that promotes business links with Taiwan. “Here’s this one rich customer, Taiwan, and we can’t sell them what we want because we have to please this pariah, the People’s Republic of China. . . . It just doesn’t make sense.”

The widely publicized sales of the F-16s and Mirages attracted still more arms dealers to Taipei, offering more commissions and putting more retired generals and admirals on their payrolls.

“This corruption problem is universal,” one retired Taiwan general said, sighing. “Everyone wants to buy something for themselves.”

He added hastily, “Of course, I hate corruption.”

So did Yin, the Taiwan navy captain, who last fall had apparently decided to do something about it. He was, by all accounts, a sincere, dedicated officer, high-ranking enough to be chosen last fall to testify at a legislative hearing about changing the way Taiwan buys its weapons.

His murder is still under investigation, but prosecutors here believe that he was killed as he was preparing to expose a system of covert payments for arms sales.

In January, prosecutors found an audiocassette made by Yin discussing the payments and showing that he was not involved.

Taiwan’s Defense Ministry announced last month that it had uncovered a series of bribes paid to navy officers in the purchase of weapons systems from French and German companies.

One navy captain who was a colleague of Yin’s has admitted taking a bribe of about $360,000 from a Taiwan arms dealer who was the agent for the French defense contractor Thomson, the Defense Ministry said. Seven other navy officers and four Taiwan arms dealers, three of them former navy officials, have also been arrested in what is by far the most serious scandal to hit Taiwan’s national security apparatus since 1985, when top-ranking intelligence officials were implicated in the California murder of writer Henry Liu.

In the wake of the arrests, Taiwan is scrutinizing all its arms purchases, and legislators such as Ding and Huang are pressing for a complete overhaul of the country’s arms procurement.

Yin’s murder “is not a single case. This case is the tip of the iceberg,” Ding said. “The procurement procedures are the same for the navy, army and air force.”

A few weeks ago, seven Taiwan generals appeared at a news conference to apologize to the people for the procurement scandal.

Asserted Gen. Shih Tsuo-ching: “The corrupt deals have not only dealt a serious blow to the image of the military, but have also hurt our national interests.”

Mann was recently on assignment in Taiwan.

Next: The link between arms sales and lucrative civilian projects.