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Thursday, 23 March, 2000, 18:45 GMT
Crunch time for Taiwan's KMT
protests in Taipei
The KMT's defeat sparked protests in Taipei
Taiwan's nationalist Kuomintang (KMT) party, which has ruled the island for 50 years, suffered a humiliating defeat in the presidential race, but their woes are far from over.

The man who won the election, Chen Shui-bian, is now threatening to break up the business empire that has made the KMT arguably the world's richest party and kept them at the top.

Chen Shui-bian
Chen Shui-bian wants to clean up politics
Contrary to what the West might think, the election was not fought over the island's future relations with Beijing.

The main issue for voters was ''black gold'', the combination of official corruption and organised crime that has flourished under the KMT since they fled China in 1949.

''The KMT has been widely accused of unsavoury links with underground crime, which is the 'black', and with business, which is the 'gold','' says Professor Wu Xu-shan of National Taiwan University.

''There is corruption from top to bottom. The majority of local council and assembly representatives have police records.

KMT protester
A KMT supporter shows his sadness
''Many people, especially the younger generation, are totally fed up with it. But [the KMT candidate] Lien Chan did not show a very credible resolve to clean up the mess.''

The result was that the majority of votes ended up split between Mr Chen of the Democratic Progressive Party (DPP) and the independent James Soong, leaving Mr Chan coming a dismal third.


Mr Chen's clean-up mission will not be easy. The KMT still controls Taiwan's parliament and members are unlikely to pass legislation that would eat into its fortunes.

President Lee Teng-hui
President Lee Teng-hui: Blamed for KMT defeat
Estimates of the party's wealth vary. KMT officials have said it is about $3bn, but a new book on the KMT says it has amassed an astonishing $20bn.

The party's enterprises span the globe, from investments across Asia to lobbying operations in Washington. Its businesses are said to include a farm in Israel, fishing plant in Alaska, five-star hotel on the Pacific island of Palau and shrimp plant in Australia.

Insider trading

Professor Wu says a major source of KMT wealth has been the stock market. Its access to insider information on many businesses has allowed it to reap handsomely from market fluctuations.

In addition, it has acquired a fortune from cosy contracts between the government and KMT backed companies.

James Soong
James Soong split the KMT vote
Mr Chen's party wants an investigation of the KMT's holdings and suggests any illegally obtained money be turned into a social welfare fund.

''They stole it, so they should return it,'' DPP legislator Cheng Pao-shing told the Washington Post recently. ''I'm not going to rest until society gets its money back.''

The DPP lacks enough votes to pass legislation targeting KMT assets, but reports suggest Mr Soong's allies would also back an investigation.


Mr Soong, a life-long member of the KMT, was kicked out after deciding to run against its official candidate.

A close second in the presidential race, he has since announced he is setting up his own party.

A lone protest outside the KMT's HQ
A protester shows his anger outside the KMT's HQ
Many KMT supporters appear poised to switch allegiance.

Dr Phil Deans, of the London School of Oriental and African Studies, says previous attempts to set up KMT breakaway parties have been unsuccessful.

But he says Mr Soong has immense charisma and could be the man to pull it off.


Whether he does or not could depend on a crisis brewing in the KMT-dominated National Assembly.

Chen supporters
Taiwanese are fed up with corruption
The assembly's members are supposed to be elected at the same time as the president, but last year they voted to extend their tenures.

If Taiwan's Supreme Court declares this extension unconstitutional, there will have to be an assembly election before Mr Chen's inauguration in May.

This would play right into Mr Soong's hand, enabling him to capitalise on the KMT's disarray and establish his party as a major force in Taiwan politics.


Analysts say the KMT is splitting into three camps, those that support Mr Soong, those loyal to outgoing president Lee Teng-hui and a reformist group which wants to turn the KMT into a more nationalist party, less concerned with relations with China.

Lien Chan:
Lien Chan is taking over as head of the KMT
Professor Wu says although the KMT will not survive in its present shape, it is certainly not about to disappear.

''It has been severely damaged,'' he adds. ''But it still has the money and it still has the organisation. It won't vanish.''

Dr Deans agrees: ''It survived defeat in the civil war in China and being stranded in Taiwan.

''It has been an incredibly resilient party, and its inherent wealth makes it a great prize which is why people will still want to be a part of it.''

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'Excellent' US-Chinese talks on Taiwan
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