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Aid in Taiwan's foreign policy: putting Ma Ying-

jeou's aid reforms in historical perspective

Joel Atkinson

To cite this article: Joel Atkinson (2014) Aid in Taiwan's foreign policy: putting Ma Ying-
jeou's aid reforms in historical perspective, The Pacific Review, 27:3, 409-431, DOI:
10.1080/09512748.2014.909524

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The Pacific Review, 2014
Vol. 27, No. 3, 409–431, http://dx.doi.org/10.1080/09512748.2014.909524

Aid in Taiwan’s foreign policy: putting

Ma Ying-jeou’s aid reforms in historical
perspective

Joel Atkinson

Abstract Taiwan’s foreign aid policy is largely a response to its China-imposed

international isolation. Taiwan provides aid without stringent accountability
conditions to countries in Africa, the Americas, and the South Pacific in order to
maintain official diplomatic relations in the face of Chinese opposition. Often at
odds with this is Taiwan’s interest in seeking western support through being seen as
a responsible aid donor. Domestic political constraints on Taiwan’s aid budget
accentuate the tension between these two interests. Taiwan’s aid program can be
seen as the product of these three competing and enduring pressures – maintaining
the count of official diplomatic relationships, improving its international
reputation, and containing aid spending.
Taiwan President Ma Ying-jeou’s tacit ‘diplomatic truce’ with China – part of a
wider warming of intergovernmental relations across the Taiwan Strait – has
reduced significantly the squeeze between these three pressures on Taiwan’s foreign
aid policy. It has allowed the Ma administration to improve Taiwan’s reputation,
while maintaining or even reducing its aid expenditure, and still retain the same
number of official diplomatic relationships. Nevertheless, the Ma administration has
not wanted to alienate recipient governments while the prospects for the diplomatic
truce with China remain uncertain. There remains considerable continuity with past
practices, and the government’s handling of aid as a foreign policy tool is still largely
opaque and unaccountable.

Keywords ODA; aid; diplomacy; development; China; cross strait.

Introduction
China claims Taiwan as its territory, and denies Taiwan’s statehood. The
Chinese Government employs a mix of carrots and sticks to compel other
countries not to maintain official diplomatic relations with Taiwan. In most

Joel Atkinson is a research fellow at the Institute for Poverty Alleviation and International
Development (IPAID), based at Yonsei University in South Korea. Work on this article was
completed while he was a lecturer in Taiwan Studies at Monash University in Melbourne,
Australia.
Current address. IPAID, Yonsei University, 316 Jeong-eui Hall, 1 Yonseidae-gil, Wonju,
Gangwon-Do, South Korea. E-mail: Joel.Atkinson@yonsei.ac.kr

Ó 2014 Taylor & Francis

410 The Pacific Review

cases, Taiwan lacks the wherewithal to counteract this pressure and settles
for ‘unofficial’ relations with foreign governments. However, Taiwan is
able to secure diplomatic recognition from small, impoverished countries
in Africa, the Americas, and the South Pacific. As stated in a Taiwan Gov-
ernment White Paper, Taiwan’s foreign aid policy is ‘based mainly on the
need to maintain and strengthen relations’ with these countries, which it
terms ‘diplomatic allies’ (MOFA 2009a: 9). The Taiwan Government does
not disclose what percentage of its aid goes to these diplomatic allies; how-
ever, the author has been told in interviews conducted in Taiwan that they
receive the vast majority. This reverses the power asymmetry typical of
donor–recipient relationships (see for example Elgstrom 1990: 147), mak-
ing Taiwan’s foreign aid remarkable in many respects.
At the same time, Taiwan has a vital interest in seeking Western support
through inter alia conforming ‘with global [aid] trends and play[ing] the
role of responsible stakeholder in the international community’ (MOFA
2009b: 4). Previously, these donor trends converged on promoting eco-
nomic growth in aid recipients, and more recently, poverty reduction
(Fukuda-Parr and Hulme 2009).
During the Lee Teng-hui (1988–2000) and Chen Shui-bian (2000–2008)
presidencies there was considerable tension between these two interests
where Taiwan’s ‘aid diplomacy’ brought it into conflict with Western aid
donors. Taiwan could have maintained its diplomatic relationships and sat-
isfied its foreign critics through providing additional aid funding to com-
pensate for that aid being delivered in line with Organization for
Economic Cooperation and Development (OECD) norms rather than
according to the preferences of the recipient governments. This would
have meant either greatly increasing Taiwan’s aid budget or reducing the
number of its diplomatic allies. Neither of these was feasible within
Taiwan’s domestic political context.
The tacit ‘diplomatic truce’ between Taiwan and China that started
when Ma Ying-jeou became president in May 2008 increased Taiwan’s
leverage over its diplomatic allies significantly. This empowered Taiwan to
bring its aid practices more in line with western countries while maintain-
ing or even reducing its aid expenditure, and still retain the same number
of diplomatic allies.
This article examines how Taiwan’s use of aid in its foreign policy has
arrived at this important moment, and its evolution under the Ma Ying-
jeou administration. It draws on off-the-record interviews conducted in
Taiwan and recent policy documents and media reports.
The article argues that Taiwan’s aid program must be understood as the
product of domestic and international politics, and more specifically, three
competing and enduring pressures – maintaining the count of official diplo-
matic allies, containing aid spending, and maintaining a good international
reputation. The current Ma Ying-jeou administration does not represent a
break with this history. Rather, President Ma’s aid reforms represent a
 J. Atkinson: Aid in Taiwan’s Foreign Policy 411

tuning and rebranding of Taiwan’s aid policy made possible by the prevail-
ing circumstances in relations across the Taiwan Strait. The Ma Ying-jeou
administration has reduced aid funding, improved management of aid
programs, and demands a higher level of accountability from recipient
governments. However, oversight and accountability of the Taiwan Gov-
ernment itself remains limited.

The Chinese nationalist regime’s search for legitimacy through

overseas aid
The origin of Taiwan’s aid policy was the US intervention in the Taiwan
Strait following the start of the Korean War in 1950. This denied the Chi-
nese communists a complete victory over Chiang Kai-shek’s Chinese
Nationalist (or Kuomintang (KMT)) authoritarian regime. With the sup-
port of the USA, this Republic of China (ROC) government in Taiwan
continued to contend with Beijing for international recognition as the sole
government of China.
Foreign aid was part of this effort. First, the ROC hosted small numbers
of technical personnel from the Philippines, Thailand, and South Vietnam
in the mid-1950s. This was funded by the United States (Lee 1999: 20).
More significant was the subsequent program of agricultural technical
teams and technical training starting in 1959, and designated ‘Operation
Vanguard’ (xianfeng’an) from 1961. In addition to what the ROC’s Minis-
try of Foreign Affairs (MOFA) called ‘cultivating sentiments’ in recipient
countries, this technical aid aimed to showcase the superiority of the
KMT’s model of development over their Chinese Communist Party (CCP)
rivals on the mainland. The ROC Government sent the first agricultural
technical mission to anti-communist friend South Vietnam in 1959. How-
ever, Africa would become the most important destination for ROC aid
during this early period as Beijing and Taipei vied for the diplomatic recog-
nition of newly independent African countries and their support within the
UN. Between 1961 and 1971, over 100 agricultural technical missions were
carried out in 24 African countries. Each mission typically consisted of a
15-member team dispatched from Taiwan. During roughly the same
period, 583 mostly African foreign personnel participated in the parallel
technical training program in Taiwan (Cheng 1994: 172).
The USA played a significant role in this early ROC foreign aid.
Taiwan’s agricultural sector had benefited from US advice, and in part,
these teams were demonstrating what Taiwan had learned putting this
American expertise into practice. Moreover, much of the financing for this
foreign aid came from the USA (Lee 1993: 44; Sim 1971: 21). According to
Chuan-yu Ko (2003: 137), the USA funded two-thirds of the cost, and the
ROC the remaining third. Taiwan itself continued to receive substantial
American aid up to 1965 (Chan 1997: 40).
412 The Pacific Review

This technical assistance program coincided with a surge in the ROC’s

official diplomatic relationships in Africa – from 8 in 1960 to 24 in 1969.
However, the role of Operation Vanguard in this was probably limited.
The missions showed varying degrees of success (Sim 1971: 22). And ulti-
mately, this aid proved ineffective in securing Taipei’s position in its com-
petition with Beijing for the China seat in the UN, and the ROC
delegation walked out in 1971 (see Bush 2004: 120).
The list of countries officially recognizing the ROC as the Government
of China dwindled, as did the number of agricultural technical missions.
The USA halted its remaining funding of ROC agricultural teams from
1975 (Lee 1999: 22). By 1979, the ROC had official relations with only five
African states and was conducting only seven agricultural missions. The
ROC then shifted its foreign aid focus to other areas, in particular Latin
America, but at a reduced scale (Cheng 1994: 172–175; Chien, Yang, and
Wu 2010: 1189).

Foreign aid expands as the ROC Taiwanizes and democratizes

The ROC had relied on support from the USA rather than its small foreign
aid efforts to shore up its international position. This became increasingly
untenable as Sino–US relations improved dramatically in the second half
of the Cold War. In contrast to this growing diplomatic isolation, Taiwan’s
booming economy was becoming increasingly integrated and important to
the world. Taiwan’s economic power allowed the government to leverage
greatly expanding foreign aid expenditure into diplomatic recognition from
small developing countries. In the late 1980s Taiwan also came under pres-
sure from the United States, as well as development agencies such as the
Asian Development Bank, to provide more foreign aid (Chan 1997: 142).
In addition to increasing the amount of aid, Taiwan changed the form
this aid took. Most still went to diplomatic allies. However, from 1980 loans
and grants replaced technical assistance as the main component (Cheng
1994: 175). If used effectively, grants and concessional loans could have a
substantial impact on development and alleviating poverty. However,
members of recipient polities could also use this cash to buy votes, support
patron–client networks – or simply steal it. All of which made this
expanded aid program an effective tool in securing official recognition
from such diplomatic allies.
Different actors within the Taiwan Government handled parts of this aid
program for diverse foreign policy and institutional purposes. Most aid,
including direct grants to diplomatic allies, passed through MOFA. The
International Economic Cooperation Development Fund (IECDF) estab-
lished in 1988 played a smaller role, providing loans and technical assis-
tance. The state-run Export–Import Bank (EXIM) extended large
concessional loans to foreign governments. Other bodies such as the
 J. Atkinson: Aid in Taiwan’s Foreign Policy 413

Ministry of Economic Affairs also played a role. The Committee of Inter-

national Technical Cooperation (CITC) inherited the legacy of Operation
Vanguard. Taiwan also began capital grants to international organizations
as a way to gain or maintain membership (Cheng 1994: 176).
This supersized aid program was undoubtedly effective in expanding the
list of diplomatic allies. The strength of Taiwan’s economic resources rela-
tive to China’s was waxing, and the Chinese Government struggled to stem
a growing list of defections from its campaign to isolate Taiwan (Newnham
2000: 273). The number of states recognizing Taiwan peaked at 31 between
January and August 1996, the highest number since the mid-1970s. To a cer-
tain extent this helped cushion the blow of losing Taiwan’s two most impor-
tant remaining official relationships, South Korea in 1992 and South Africa
in 1997, both of which were ideology-based carryovers from the Cold War.
Despite this success in raising the ally count, debate emerged in the early
1990s in a rapidly democratizing Taiwan over whether the benefits of this
list of diplomatic allies justified the drain on the public purse (Lee 1993: 55–
56). Official figures valued Taiwan’s aid expenditure at only 0.02% of GDP.
The budget was secret and decided on by a few top officials (Cheng 1994:
179–180), and the actual figure was somewhat higher. Nevertheless, in inter-
national terms, the cost in dollar terms to Taiwan was undoubtedly very low.
The blackening of Taiwan’s reputation by money diplomacy was another
emerging concern. Taiwan’s democratization was continuing to draw sig-
nificant international praise through the 1990s, especially as the contrast
was so stark with the massacre of pro-democracy demonstrators around
Tiananmen Square in Beijing on 4 June 1989. This and Taiwan’s economic
power had been the major factors driving the growing list of western coun-
tries greatly expanding intergovernmental contact with Taipei. Such con-
tact included the reciprocal establishment of representative offices that
were embassies in all but name, and the exchange of ministerial-level visits.
This list of ‘unofficial’ diplomatic relationships was much more important
to Taiwan than its official diplomatic count. Up to this point money diplo-
macy directed at small developing countries had been compatible with
democratic and economic diplomacy directed at developed countries; how-
ever, Taiwan would now increasingly be forced to choose between the two.
A final factor driving the debate was the complex issue of national iden-
tity in Taiwan. The authoritarian regimes of Chiang Kai-shek and his son,
Chiang Ching-kuo, were essentially colonial governments, with mainland
Chinese maintaining the fiction of one China while suppressing the political
voice of the majority Taiwanese (see Jacobs 2008). Democratization under
the ROC’s first Taiwanese president, Lee Teng-hui, saw the advocacy of
Taiwan independence decriminalized. This milieu informed thinking about
foreign aid, with voices in the opposition Democratic Progressive Party
(DPP) arguing that Taiwan should first claim statehood separate from the
ROC, and then the aid program should be reorganized so that it was
extended on the basis of genuine recipient need (Lee 1993: 55–56).
414 The Pacific Review

While the importance of securing diplomatic recognition through aid

payments remained, the basis of China–Taiwan competition through aid
did indeed change. As the ROC ‘Taiwanized’ under Lee Teng-hui, Taipei
increasingly began to act as a government of Taiwan, and dropped the con-
dition that it would only recognize a country if it cut relations with the PRC
(Hsieh 1996: 80). Taiwan also became interested in using aid to win incre-
ments of recognition from impoverished countries that have diplomatic rela-
tions with China, such as permission for presidential flight stopovers or
statements of mutual recognition. However, as Beijing continued to insist
that other countries adhere to a ‘one China policy’ and not recognize
Taiwan’s statehood, China–Taiwan diplomatic competition has maintained
much of its pre-1988 form despite this fundamental change (Chen 2009: 61).
Control of Taiwan’s foreign aid became increasingly consolidated in
MOFA in an effort to better promote Taiwan’s international position. A
bill was passed in 1995 that established the Foreign Ministry-dominated
International Cooperation and Development Fund (ICDF) to replace the
IECDF. This new body also absorbed the Committee of International
Technical Cooperation (CITC) (TaiwanICDF 2010). The Taiwan Govern-
ment highlighted the role of the ICDF over MOFA in its public diplomacy.
For example, the 1998 annual report described it as the ‘ROC’s principal
body overseeing foreign aid’ (TaiwanICDF 1998). In reality, the ICDF’s
most important role was implementing technical cooperation projects
commissioned by MOFA – and funded by a small fraction of MOFA’s bud-
get. According to interviews conducted by the author, such ICDF projects
account for about 10% of MOFA’s aid budget. The bulk of Taiwan’s aid
was, and continues to be, delivered through bilateral agreements between
MOFA and the diplomatic allies. This means that oversight of most of
Taiwan’s foreign aid is actually the responsibility of MOFA and recipient
governments. Indeed, Loh Ping-chang, who was brought in to establish the
ICDF due to his experience at the World Bank would eventually leave as
his attempts to make Taiwan’s aid less political were resisted.1
The tension continued to increase within Taiwan’s aid policy between
securing the support of diplomatic allies and maintaining a responsible rep-
utation, while maintaining support from the Taiwan public at the same
time. As noted above, Lee Teng-hui succeeded in expanding the list of
countries that recognized Taiwan and those that had provided ‘increments’
of recognition. However, some initiatives encouraging Taiwanese invest-
ment in allied countries without sufficient underlying economic rationale
squandered Taiwanese wealth and damaged public support. Taiwan’s
failed attempt to establish official relations with Papua New Guinea’s
Prime Minister Bill Skate in 1999 drew further criticism. Skate was
embroiled in a reform dispute with Australia, the country’s largest aid
donor. The incident created significant and lasting friction between Taiwan
and Australia, a country allied with the USA and well-connected and influ-
ential within the international community.
 J. Atkinson: Aid in Taiwan’s Foreign Policy 415

The Chen Shui-bian administration

The start of the Chen Shui-bian administration in May 2000 represented a
historic transfer of power away from the KMT, strongly affirming the Tai-
wanization of the ROC and Taiwan’s democracy. Nevertheless – and
despite initial intentions – the Chen Shui-bian administration largely contin-
ued Lee Teng-hui’s foreign aid policy while reducing aid expenditure.2 The
reasons why it did this throws light on the domestic and international condi-
tions, which drive Taiwan’s aid policy.
As noted above, in the early 1990s influential voices within the DPP had
argued against buying diplomatic recognition for the ROC as the cost to
the Taiwanese taxpayer and Taiwan’s international reputation was too
great. This inclination within the DPP remained as the public’s perception
of waste and the international community’s perception of venality in
Taiwan’s foreign aid programs continued to grow through Lee Teng-hui’s
presidency. At the same time, Lee Teng-hui left office with the ally count
at 29. Having relatively many diplomatic allies made the thought of losing
a few even less consequential to policy-makers in the new administration.
Accordingly, the Chen Shui-bian administration’s ‘primary aim’ in for-
eign aid was to be ‘thrifty with public money’ (see note 2). The ally count
was still important, but it would not stand in the way of reducing expendi-
ture. Spending on large economic zones in countries such as Paraguay and
Panama was the first to be cut. Once obligations entered into by the Lee
Teng-hui administration had been met, foreign aid was also reduced.
The Chen administration declared its rejection of the KMT’s ‘dollar
diplomacy’, and emphasized democracy and human rights as the ‘new
basis’ for Taiwan’s foreign policy (Tubilewicz and Guilloux 2011: 326).
This turning away from money diplomacy was real to a certain extent. The
Chen administration maintained existing relationships largely in line with
Lee Teng-hui government without aggressively seeking out new ones. Win-
ning diplomatic allies was inherently risky, and liable to blow up in ways
that drew domestic and international criticism. Moreover, even if the
administration was successful in acquiring a new diplomatic ally, the nega-
tive attention could outweigh any incremental and hard to measure benefit
accrued through merely adding one more ally to the list.
Establishing new relationships was only considered in the relatively
uncommon case that the potential ally was politically stable and broad sup-
port existed within the polity for establishing relations with Taiwan (see
note 2). During Chen’s first term, Taiwan only established one new rela-
tionship, with Kiribati in the South Pacific. In that instance, a strong back-
lash against the Chinese ambassador’s interference in domestic politics and
concerns over the impact of a Chinese satellite tracking facility’s impact on
Kiribati’s relations with the USA translated into a relatively secure and
enduring relationship for Taiwan (Atkinson 2010: 415–416).
416 The Pacific Review

Nevertheless, concern about relations with the west would not stop
Taiwan from reaching for the checkbook when a relationship was at risk.
For example, in June 2001, Taiwan’s state-owned EXIM Bank agreed to a
$25 million loan after the Solomon Islands Government threatened to
switch diplomatic recognition to China at the height of the Solomon
Islands Crisis. The package was used to finance hundreds of embezzlement
payouts. When the money ran out government offices were invaded by
armed men, including police, demanding money (Atkinson 2009: 47–65).
Three competing foreign aid bills before the legislature (Legislative
Yuan) in the first half of 2002 encapsulated the prevailing pressures.
Through these bills legislators debated proposals such as cutting aid to
regimes that seriously violate human rights, preserving the ‘vague rules’
MOFA considered crucial to maintaining diplomatic allies, greater trans-
parency and external oversight to manage issues of corruption within
MOFA, and closer scrutiny of how recipient countries disperse Taiwan’s
aid (Chu 2001, 2002). The three bills finally came together in a compro-
mise, with legislation passed that gave greater control over more of the
budget to the legislature (Yeh 2002). This legislative grip on the budget
would significantly reduce the Chen Shui-bian administration’s room to
maneuver as the legislature turned increasingly hostile during Chen’s sec-
ond term.
If Taiwan had somewhat slow-pedaled money diplomacy, China had
done the opposite. By 2000, the balance of power that could be leveraged
into official diplomatic relations with small impoverished states had swung
decisively in China’s favor. This advantage would continue to accrue to
China as its economy rapidly grew over the next decade (Dumbaugh 2008:
26).
The Chinese Government relentlessly pressed this advantage in an effort
to discredit Chen Shui-bian and his opposition to its unification agenda.
Taiwan’s ally count dropped from 29 to 26 during Chen’s first term (see
Figure 1). China would then take a further five diplomatic allies from Tai-
wan while losing only two during Chen’s second term. Constant criticism
from the KMT dominated legislature and negative public opinion drowned
out assertions from some DPP policy-makers that this decline in the ally
count was not a problem per se (e.g. Ko 2005).
The Chen administration accordingly made the ally count more of a pri-
ority, especially during its second term. Raising the aid budget was impossi-
ble due to the hostile legislature and lack of public support for greater aid
spending on diplomatic allies (see note 2). In fact, the aid budget would
decrease along with overall government and MOFA spending (Tubilewicz
and Guilloux 2011: 324). The government instead channeled more of its
resources into riskier gambits to secure diplomatic allies. Taiwan’s ambas-
sadors were also given greater leeway to spend money as they saw fit.3
Wary of criticism, Taiwan also tried to cement ties in ways that did not
involve money. For example, President Chen would visit each diplomatic
 J. Atkinson: Aid in Taiwan’s Foreign Policy 417

Figure 1 Taiwan’s official diplomatic relationships, 1988–2012. The author calcu-

lated the number of diplomatic allies per year using the annual lists of diplomatic
allies provided in the Taiwan Government’s ‘yearbooks’, produced by the Govern-
ment Information Office (GIO) in Taipei.

ally personally, something Chinese leader Hu Jintao found impossible to

do for both practical and symbolic reasons (see note 3). Taiwan also orga-
nized regional groupings of its diplomatic allies so as to avoid being ‘held
hostage by one’.4
Nevertheless, the domestic and international reputation of the Chen
administration both suffered. For example, allegations were reported in
the media that Taiwan had interfered in several elections (Huang 2006;
Painter 2004; RNZI 2006). A US official told Congress that ‘we remain
concerned that competition between China and Taiwan for recognition by
Pacific Island states is undermining good governance’ (Davies 2007).
Taiwan’s humanitarian credentials were damaged when the Chen adminis-
tration withdrew vital funding from an important AIDS clinic in Malawi
after that country shifted diplomatic recognition to China (Rollet 2008).
Taiwan also looked like a bully when the EXIM Bank used the US court
system to attempt to recover $30 million in loans after Grenada cut rela-
tions. The Ma Ying-jeou administration is still trying to recoup these funds
(Caribbean360 2012). At home, MOFA had to deny that ‘our allies. . .seek
opportunities to extort money from us’ (MOFA 2007). Finally, revelations
that $30 million MOFA had provided two middlemen to arrange relations
with Papua New Guinea had been stolen forced Chen Shui-bian to admit
that his administration had in fact reluctantly continued his predecessors’
418 The Pacific Review

‘practices of foreign affairs’ due to ‘China’s relentless suppression’

(Ko 2008).

A new direction under Ma Ying-jeou?

After assuming office on 20 May 2008, President Ma Ying-jeou of the KMT
was able to relieve much of this squeeze between the ally count, a limited
budget and international criticism. As he had promised before the election,
Ma was able to establish a tacit diplomatic truce with the Chinese Govern-
ment in return for concessions towards its ‘one China principle’ (see for
example Cabestan 2010). According to a leaked US diplomatic cable, this
truce saw China refuse offers of official recognition from Taiwan’s diplo-
matic allies, including Paraguay, the Dominican Republic and Panama
(Wikileaks 2009). While the long-term durability and significance of the
truce remains to be seen, it has greatly increased the Ma administration’s
leverage over Taiwan’s 23 remaining diplomatic allies while it holds. This
has enabled Taiwan to improve its tarnished donor reputation while hold-
ing steady or even reducing the aid budget.
In theory, Taiwan could now provide aid that conformed to OECD best
practice and its diplomatic allies would have little choice but to accept.
However, the truce can break down at any time, and the Taiwan Govern-
ment has avoided utterly alienating allied political elites and their networks
of support.
Fortunately for the Ma administration, simply halting diplomatic compe-
tition with China and its associated churn of diplomatic allies, scandals and
headlines rapidly reduced negative international interest in Taiwan’s aid
program. The government concurrently declared its intentions to bring
Taiwan’s aid into line with OECD official development assistance (ODA)
guidelines, and the new leverage with diplomatic allies was used to stop
bribes to allied politicians (payments which had always been in a different
conceptual and funding category to Taiwan’s foreign aid). Taiwan’s reputa-
tion then improved dramatically without requiring a major overhaul to
bring Taiwan’s aid program into line with OECD best practice. This was
not detrimental to Taiwan’s reputation, presumably in part because these
ODA ‘norms’ are aspirational to a significant extent, and OECD donors
regularly fail to adhere to these same standards (see for example Fukuda-
Parr and Hulme 2009).

2009 White Paper

The 2009 White Paper on Foreign Aid Policy navigated this line between
public diplomacy and aid practices through defending Taiwan’s past and
present aid policy, while ambiguously signaling reform. According to the
White Paper, the motives and means of Taiwan’s aid programs will not
 J. Atkinson: Aid in Taiwan’s Foreign Policy 419

change, and this is justified in terms of both international practice and ben-
efit to recipient countries:

Developed countries provide aid with a view to expanding their polit-

ical influence, maintaining regional stability, bolstering national secu-
rity, combating drug smuggling, preserving environmental integrity
and curbing illegal immigration, amongst other things. Some also aim
to secure direct or indirect trade benefits by fostering a given recipi-
ent country’s economic and social development. Due to its unique
diplomatic situation, it is imperative that Taiwan prioritize the alloca-
tion of its limited resources based mainly on the need to maintain and
strengthen relations with its diplomatic allies. Through specialized
and effective bilateral aid programs, Taiwan will continue to draw on
its own development experience and the resources at its disposal to
help its diplomatic allies develop their economic infrastructure and
to further boost its diplomatic ties, creating a win-win scenario.
(MOFA 2009a: 9)

At the same time, the document highlights the importance of the Millen-
nium Development Goals (MDGs) and the Paris Declaration:

By establishing a complete framework for international cooperation

in line with the MDGs and by readjusting the nation’s aid model to
fit with the Paris Declaration, MOFA is ensuring that Taiwan con-
forms to global trends and plays the role of responsible stakeholder
in the international community. (MOFA 2009a: 17)

However, as Taiwan’s aid is already ‘effective’, these vague statements

appear to amount to little more than window dressing. For example, later
the document states that the Paris Declaration is a mere ‘guideline’ for
establishing ‘models’ (MOFA 2009a: 41).
An October 2011 statement from MOFA frankly characterized this link
to the Paris Declaration as primarily ‘a blueprint in emphasizing Taiwan’s
connection with the international community’, and only secondarily ‘to
further improve the quality of its future program’ (emphasis added)
(Government Information Office 2011). For example, an important Paris
Declaration commitment to ‘Provide timely, transparent and comprehen-
sive information on aid flows so as to enable partner authorities to present
comprehensive budget reports to their legislatures and citizens,’ has done
little to remove the shroud of secrecy around the specifics of Taiwan’s aid
programs.
The White Paper also misleadingly claims that the entire aid budget con-
stitutes ODA through misrepresenting the definition of this technical term:
420 The Pacific Review

According to the OECD, ODA refers to flows of official financing

from donor government agencies or their executive agencies to devel-
oping countries listed as their aid recipients. This assistance, which
comes in the form of bilateral or multilateral aid, includes preferen-
tial or zero-interest loans, cash donations and technical assistance,
and is intended to foster the recipient’s economic and social develop-
ment. (MOFA 2009a: 27)

However, according to the official definition (available from IMF 2003),

the main objective of ODA, not a mere intention, is to foster economic
development and welfare, not ‘economic and social development’. Clearly,
the main objective of Taiwan’s aid is to secure diplomatic allies, and almost
anything could fall under the heading of ‘social development’. Although
the continued lack of transparency surrounding Taiwan’s aid program
makes it very difficult to be specific, in fact a significant proportion of bilat-
eral aid is actually used to fund ordinary allied government expenditure.
This would appear to lie outside the OECD definition of ODA.
The White Paper also raises the possibility of seizing the opportunity
brought by the diplomatic truce with China to disregard OECD best
practice and increase tied aid. Under Lee Teng-hui and Chen Shui-bian,
Taiwan avoided such tying of aid to contracts that benefit Taiwan’s com-
panies as this would have hampered the effectiveness of its aid diplo-
macy. Now, however, ‘enterprises from Taiwan will gain a chance to
partake in the construction and procurements related to the projects’
(MOFA 2009a: 42):

The donor country of a given ODA project typically [emphasis

added] hires a domestic enterprise to implement the project, thereby
benefiting the donor country’s businesses while spurring the develop-
ment of the partner country’s infrastructure. MOFA will continue to
look into feasible measures to foster greater participation by the local
business community in Taiwan’s international aid initiatives, thus
maximizing the effectiveness of cooperation and creating a winning
situation for everyone involved. (MOFA 2009a: 45)

Very little has been done to tie up more of Taiwan’s aid up to now. For
example, KMT Legislator Lin Yu-fang found it necessary to criticize the
Ma government for allowing a loan to Nicaragua to be used to purchase
South Korean computers, and demanded that local enterprises have a pri-
ority in bidding for government foreign aid projects (Shih 2012). Still, this
part of the White Paper demonstrates that being a more normal aid donor
does not automatically make Taiwan a better aid donor.
While signaling that something important has shifted in Taiwan’s aid
management, the White Paper remains uncommitted on what will change
on the ground. It vaguely states that ‘President Ma Ying-jeou has called on
 J. Atkinson: Aid in Taiwan’s Foreign Policy 421

government officials to adhere to appropriate motives, due diligence and

effective practices when offering assistance’. The new expectations placed
on diplomatic allies are similarly equivocal, ‘Taiwan’s embassies will fully
convey to their host countries the government’s basic principles for extend-
ing assistance. Diplomatic allies are encouraged to honor the Paris Declara-
tion’s first and foremost partner commitment to ownership while mapping
out long-term development plans and priorities’ (MOFA 2009a: 41–42).
Interestingly, the White Paper’s discussion of accountability mechanisms
appears to steer away from the OECD. The Paris Declaration urged:

Using a country’s own institutions and systems, where these provide

assurance that aid will be used for agreed purposes, increases aid
effectiveness by strengthening the partner country’s sustainable
capacity to develop, implement and account for its policies to its citi-
zens and parliament. (OECD 2009)

The White Paper ignores this, instead signaling that information and deci-
sions about aid expenditure belong under the control of MOFA:

MOFA is to lay out standard operating procedures for distributing

funds in accordance with Taiwan’s assistance guidelines and regula-
tions so as to keep track of how the projects are progressing and how
the funds are being used. The funds are to be released incrementally
as the projects progress, with reports on which to be submitted on a
regular basis. (MOFA 2009a: 42)

Atypically for donor–recipient relationships, before the diplomatic truce

‘institutions and systems’ of Taiwan’s diplomatic allies had a very signifi-
cant degree of control over funding from Taiwan, even when these did not
‘provide assurance that aid will be used for agreed purposes’. This section
of the White Paper signals the Ma administration’s intention to take some
degree of control away from recipients in order to reduce corruption and
scandal.
However, it is unclear what this will mean in practice. Under the Chen
administration, Taiwan’s embassies monitored how aid was being spent,
received periodic reports and released funds incrementally. The question,
then, is how closely embassies scrutinize their diplomatic allies and what is
then done with this information, none of which is spelled out in the White
Paper.
Crucially, the White Paper does not explain what government officials
will do when their counterparts in recipient governments oppose changes
or fail to live up to commitments. Rather, it blithely states that these
changes will consolidate bilateral relations between Taiwan and its diplo-
matic allies ‘even further’ (MOFA 2009a: 41). Like the White Paper as a
422 The Pacific Review

whole, this suggests that the Ma administration is tweaking Taiwan’s aid

program rather than overhauling it.

The International Cooperation and Development Act

The other significant pillar of the Ma administration’s new aid policy was
the International Cooperation and Development Act, promulgated on 15
June 2010 (MOFA 2010). The government stated that MOFA drew on ‘on
the Paris Declaration on Aid Effectiveness of the Organization for Eco-
nomic Cooperation and Development’ when drafting the Act, which ‘aims
to bring Taiwan’s international cooperation and development projects in
line with international norms’.
At least in part, the Act appears to have been an attempt to identify Tai-
wan with an important facet of OECD best practice – ‘Have a clear, top-
level statement of the purpose of development co-operation, whether in
legislation or another form, that has wide ownership and can remain rele-
vant for a sufficient period’. The OECD’s (2008) ‘Twelve Lessons from
DAC Peer Reviews’ cites the model example of the UK, which ‘reflects in
law the centrality of poverty elimination and forbids the use of develop-
ment assistance for other purposes, including the tying of bilateral aid to
procurement contracts for British companies’. Ironically, the UK came
under recent criticism for spending £500 million of aid funding – consider-
ably more than that of Taiwan’s total aid budget – on fees to mostly British
consultancies in 2011 (Gilligan 2012).
Like the White Paper, the Act is more a public diplomacy effort than an
attempt to restrict and control the aid program. For example, rather than
an enforceable set of rules with which the legislature or the judiciary could
restrict executive autonomy, its stated function is to provide ‘a legal basis
and serves as a guideline for the ROC’s foreign aid activities.’ In addition,
‘The competent authority in charge of administering this Act is the Minis-
try of Foreign Affairs’, the same authority which drafted the Act and
administers Taiwan’s aid program.
Moreover, in contrast to the DAC recommendation, the Act provides a
patently unclear top-level statement of the purpose of development co-
operation. Article 2 states:

Unless otherwise covered by treaties or agreements between the

ROC and its diplomatic allies, friendly countries or intergovernmen-
tal organizations, international cooperation and development affairs
shall be governed by this Act.

As noted above, most of Taiwan’s aid is covered by bilateral agreements.

For example, according to a leaked US diplomatic cable, Panamanian For-
eign Minister Juan Carlos Varela told US officials that money from Taiwan
 J. Atkinson: Aid in Taiwan’s Foreign Policy 423

‘is simply deposited in the treasury’ (Wikileaks 2010). This article means
that the role of the Act in Taiwan’s aid program is highly ambiguous.
Article 5 is similarly opaque, listing an exhaustive list of six ‘goals of
international cooperation and development affairs’ without explaining
how they are to be prioritized. If the order in which these goals are listed is
a guide, ‘To promote diplomatic relations’ remains the first priority, and
‘To fulfill international obligations and responsibilities’ is the last. Indeed,
Article 10 suggests that promoting diplomatic and friendly relations
remains sine qua non:

If a cooperation partner is deemed likely to harm the interests of the

ROC or its people, the competent authority or other government
agencies/institutions, legal entities, organizations and professionals
shall immediately cease cooperation with the said partner and seek
compensation, where appropriate.

Even the definition of aid remains vague:

The term ‘international cooperation and development affairs’ . . .

[refers to] governmental development assistance, humanitarian aid
or other related forms of cooperation and development projects.

In addition, Article 7 on ‘the scope of international cooperation and

development affairs’ states that projects will be formulated ‘with reference
to’ rather than on the basis of, ‘official development assistance (ODA) cat-
egories’. The article then goes on to expand the scope of Taiwan’s aid pro-
gram apparently ad infinitum, to include ‘Other matters related to
international cooperation and development affairs’.
The Act is also generous with regard to the ‘methods’ MOFA may
use. Article 8 lists what would seem to be a comprehensive and very
flexible list of such methods, before providing for undefined ‘other feasi-
ble methods’. These methods are to be approved by the executive
branch of government on a case-by-case basis. Similarly, Article 11 says
that MOFA or ‘other government agencies/institutions. . .may first
commission the International Cooperation and Development Fund, or
commission other legal entities, organizations or professionals to handle
them’.
The author was told in an interview that under the Ma administration
‘aid will [now] be an open book’.5 However, the Act allows the administra-
tion to keep secret ‘details of the latest. . .projects’. Moreover, neither
MOFA’s annual report on the ‘promotion of international cooperation
and development affairs’ submitted to the cabinet (Executive Yuan) and
forwarded to the legislature, nor any ‘related discussions, reports and doc-
uments’ are required to be made public. At present, the ICDF, which is
424 The Pacific Review

significantly more transparent than its MOFA parent, does not even reveal
its per country expenditure on scholarships in case it leads to diplomatic
allies demanding more.6 Taiwan’s new leverage over its diplomatic allies
may lead to increasing transparency for such relatively insignificant items
in the future. However, there is nothing in the Act which requires MOFA
or the ICDF to disclose anything.
The implication of the Act, then, is that in the name of foreign aid the
administration may legally commission anybody to do anything, without
having to tell anybody. This differs very little, if at all, from the Chen Shui-
bian administration.

Reduced aid funding

A significant point of continuity between the Ma and Chen administra-
tions is declining aid funding. In 2009, some recipient governments com-
plained that Taiwan’s aid had ‘diminished markedly’ (Radio Australia
2009). In 2011, the Taiwan Government confirmed that the aid budget
would be a further 12.94% lower the following year (Shih 2011). This
continuing decline is despite a Ma administration promise that aid fund-
ing would not be reduced as a result of the diplomatic truce (Taiwan
News 2008).
According to one interviewee, the aid budget has gone down because of
the shift away from checkbook diplomacy, and the government is in the
process of developing the capacity to spend it properly. Once that capacity
is in place, the budget will return to previous levels. The interviewee said
that as Taiwan had ‘moved what was under the table to normal programs
the ordinary people think aid has increased significantly’.7 Another infor-
mant stated that that the decline in the aid budget is a ‘temporary dip’ as
some programs undergo re-evaluation (see note 5).
This remains to be seen; however, what is clear is that unlike South
Korea (Hankyoreh 2009), Taiwan has not committed to increasing aid.
This is a major deviation from the donor commitments made in the MDGs
and the Paris Declaration. Article 14 of the International Cooperation and
Development Act does not commit to any figure or even a target: ‘The
funds available for international cooperation and development affairs
shall depend on the government’s financial position, as well as consider-
ation of international foreign aid standards.’ In reference to Taiwan’s
‘US$515 million in international assistance, accounting for 0.13 percent of
gross domestic product’ in 2007 and $380 million in 2010, the Government
Information Office (GIO) stated, ‘Clearly, the island is no slouch when it
comes to pulling its weight on the humanitarian aid front’ (Government
Information Office 2011). A senior MOFA official told a news briefing that
Taiwan’s 0.101% of GNI spending on aid while ‘lower than the ratio of
0.28 percent for the OECD donor community as a whole and the 0.7
 J. Atkinson: Aid in Taiwan’s Foreign Policy 425

Figure 2 Self-reported Taiwan ODA vs. DAC member states as percentage of

gross national income for 2007 (Source: OECD 2008).South Korea joined DAC in
2009.

percent target set by the UN. . .is in proportion to the role [Taiwan] plays in
the international community’ (Shih 2011) (see figure 2).

The situation on the ground

While the Ma administration has retained executive prerogative, and has
not changed significantly the legal and bureaucratic mechanisms control-
ling Taiwan’s aid program, it has used its new leverage over its diplomatic
allies to change how it practices this aid policy.
Most significant are the Ma administration’s steps to reduce the risk of
scandal. President Ma is said to have told his ambassadors that if any are
‘caught “checkbooking” then they are done’ (see note 7). The week-long
training camp for case officers responsible for aid from all 23 embassies
and some offices such as Indonesia was presumably in part an effort to rein-
force this message of what is now expected (see note 5).
Taiwan has also become less tolerant of allied governments creating
scandal. In one remarkable example, Taiwan Ambassador Roy Wu report-
edly refused to tolerate Solomon Islands’ Prime Minister Danny Phillip’s
misuse of roughly $1.5 million of development funding, apparently contrib-
uting to Phillip’s unseating (Solomon Star 2011a, 2011b).
There are less high-profile examples indicative of this shift. According to
an interview, previously MOFA would instruct the ICDF to carry out a
426 The Pacific Review

project requested by an allied government even if the ICDF considered it

to be unfeasible. Now the situation is said to be different. For example, the
Haitian Government was told that its desire to build a fertilizer plant was
impracticable due to supply chain problems and other issues, and invited
to discuss other options. Another example is St Lucia’s request that Taiwan
fund the construction of an abattoir. The Government of St Lucia assigned
the job to a contractor that failed to complete it. Taiwan then ‘gave the
project back’ to the St Lucia Government, which then provided its own
funds to pay a new contractor (see note 6).
Although the contradiction within Taiwan’s aid policy between securing
diplomatic ties and improving Taiwan’s international reputation has dimin-
ished, there are still problems. Taiwan faced accusations that it interfered
in elections in St Lucia (Shih 2012). Also, in December 2009, Taiwan
donated a $22 million executive jet to Panama based on what Taiwan
Ambassador Simon Y. S. Ko said was ‘consideration of the Panamanian
government’s need for planes that are safe and can be used for emergency
patient transport services’ (The China Post and Asia News 2009). The
plane is actually for the sole use of the president (Wikileaks 2010). Taiwan
also provided a helicopter in May 2011 for the Paraguayan president to use
(Parkin 2011). Taiwan and Paraguay included this helicopter in the cate-
gory of ‘defense aid’.8
Clearly, Taiwan’s leverage over its diplomatic allies still has limits. One
interesting example of an apparent power struggle between Taiwan and an
ally was the six months Taiwan Ambassador Diego Chou was made to wait
before Panamanian President Ricardo Martinelli would accept his creden-
tials. Beijing had rebuffed Martinelli’s very public attempts to recognize
China, and this was presumably one way for him to exercise a degree of
control. Foreign Minister Timothy Yang did not reveal details of what had
been discussed between the two countries, and avoided a reporter’s ques-
tion on whether or not Panama had requested additional aid. However,
Yang did specify that the ministry had managed to ‘convey the message
that Taiwan has moved away from “dollar diplomacy”’ (Shih 2012).

Conclusion
Criticisms of Taiwan’s aid program have often been overblown. Critics
generally fail to grasp the importance of Taiwan’s national interest in
defending its sovereignty, or China’s protagonistic role in driving money
diplomacy. Taiwan should be seen as a country in a unique and fraught
international situation, which informs a parsimonious, dissimulating aid
program over which its diplomatic allies have control unparalleled in other
donor–recipient relationships. This has led to significant corruption and
waste. However, unlike typical transnational corruption, Taiwan provides
money for a commodity that costs its diplomatic allies nothing and which
 J. Atkinson: Aid in Taiwan’s Foreign Policy 427

cannot be diminished – diplomatic recognition. Without interference from

China, these countries would extend this recognition to Taiwan as a matter
of course, and free of charge. Since China does interfere, these countries
have been provided with an unusual opportunity to receive significant
funds to use largely as they see fit. Domestic constituents within these dip-
lomatic allies may perceive the use and abuse of these funds as unfair.
However, it is too simplistic to claim that by providing money to be mis-
used Taiwan promotes poor governance. The misuse of Taiwan’s aid is
more properly seen as a symptom rather than a cause. Moreover, much of
Taiwan’s aid does improve livelihoods and living standards for the recipi-
ents. As such, and for all its problems and controversies, Taiwan’s aid pro-
gram would appear to do more good than harm.
There has been significantly more continuity than change in this aid pro-
gram across various administrations. This is not surprising given that three
often competing pressures – maintaining the ally count, containing aid
spending and maintaining a responsible reputation – have continued to set
the parameters within which Taiwan’s aid policy is formulated and carried
out. Moreover, MOFA, the bureaucracy charged with formulating and car-
rying out this policy, has maintained significant consistency through the
various administrations.
Nevertheless, the ‘tweaking’ of Taiwan’s aid program under Ma Ying-
jeou is noteworthy. The tacit diplomatic truce with China has seen Taiwan
spend even less money on aid, but probably in more effective and fairer
ways. Taiwan’s aid program is now less vulnerable to accusations of corrup-
tion and waste. The costs to Taiwan of the Ma administration’s concessions
towards China’s ‘One China principle’ is beyond the scope of what can be
dealt with here, but should not be ignored when weighing up the value of
these policy changes for the people of Taiwan.
There are two important questions regarding the future of Taiwan’s
aid program: will the truce break down, and what will happen if it does?
The truce is more likely to hold if the KMT retains the presidency.
However, Beijing may withdraw this form of support if future KMT
presidents do not make sufficient concessions to its unification agenda.
Beijing is much less likely to get these concessions from a DPP
president, and thus presumably the truce is more likely to be withdrawn
if the KMT loses power. However, some interviewees believe that the
truce has saved China considerable money, and that the leadership in
Beijing is reluctant to alienate Taiwanese voters through a return to
diplomatic competition. If this is the case, the truce may have more
staying power.
If or when China cancels the truce, the future president – either
KMT or DPP – will have to make a new calculation based on the three
main pressures detailed above. The Taiwan Government and MOFA
are enjoying the reduced international criticism of Taiwan’s aid
program. Many interviewees suggested that no matter which party he
428 The Pacific Review

or she belongs to, a future Taiwan president will tolerate a reduced ally
count in return for maintaining the positive gains to Taiwan’s
international reputation. According to these informants, as long as the
Taiwanese public perceives China to be the status quo-changing
aggressor, they will ignore efforts to sensationalize this falling count to
a certain – ill-defined – extent. No interviewees saw Taiwan’s aid
funding to increase much, if at all, beyond existing levels in the foresee-
able future.

Acknowledgements
The author gratefully acknowledges funding from Monash University, and
would like to thank those who agreed to be interviewed for this project.

Notes
1 Interview, Taipei, Taiwan, 2 September 2011.
2 Interview, Taipei, Taiwan, 6 September 2011.
3 Interview, Taipei, Taiwan, 8 September 2011.
4 Interview, Taipei, Taiwan, 8 September 2011.
5 Interview, Taipei, Taiwan, 7 September 2011.
6 Interview, Taipei, Taiwan, 13 September 2011.
7 Interview, Taipei, Taiwan, 13 September 2011.
8 Interview, Taipei, Taiwan, 13 September 2011.

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