An owner of a medium-sized vegetable distribution company in New Taipei City used to go to a wholesale vegetable market in Fuzhong at midnight to purchase his stock. One day, eight years ago, a pattern began whereby a series of young men would offer him either a cigarette or some betel nut or some tea while trading. After a number of occasions when this took place, a “boss” figure approached him and told him the owner needed to always buy vegetables from him or he would be beaten up. Rather than acquiesce, the owner changed the market which he bought vegetables from, moving to a newer, more professional operation that requires ID cards and registration for bidding on and selling vegetables.
That story, told to Domino Theory by a relative of the owner who works in the same industry, does not exactly fit with the image of Taiwan that its diplomacy efforts seek to portray. Presented as a clean and modern democracy, Taiwan’s image is bolstered by high rankings in indices such as the Corruption Perceptions Index — where it placed 28th in the world in 2023. However, it remains possible to trace a seam from low-level operations like the one described above up through to the top levels of business and politics in Taiwan.
History of Organized Crime
Historically speaking, the influx of people coming to Taiwan from China after the Chinese Civil War formed gangs in part as a form of protection against already existing local gangs, as described in the authoritative book “Heijin: Organized Crime, Business, and Politics in Taiwan,” published in 2003. Author Chin Ko-lin ( 陳國霖) describes how these gangs then increased their influence and financial power as Taiwan’s economy grew at an extremely fast pace, even working with the authoritarian Chinese National Party (KMT) regime. When Taiwan became a democracy in the 1990s, gang figures entered politics directly, at both local and national level, in part because of their strong local networks, but also with the help of vote-buying campaigns. A series of high-profile political assassinations followed.
Interviews from Chin’s book make for grim — and even darkly funny — reading. One senior journalist explained that the KMT “let” bid-rigging happen in the 1990s by forcing construction companies to register in advance of bidding on a project. “If nobody knows who is going to bid on the project, there is no way anybody can control the bidding process,” they said. Around the same time, in 1992, the book describes how “owners of some of the major construction companies in Taiwan received bullets from anonymous senders along with threatening letters.” Along similar lines, one businessman who worked in waste management told Chin that the owners or offices of several waste management companies had been shot at.
The Present Day Situation
The situation now is less obvious, but organized crime still exists within business. “Gangsters now stay behind the scenes and let their family members and relatives represent them on the [political] stage. Organized crime in Taiwan is still a formidable force in Taiwan’s business and politics, but violence is less frequent and visible nowadays, both in the business and political sectors,” Chin told Domino Theory by email.
For a snapshot of what that formidable force looks like in practice, we recently spoke to a freelance entrepreneur with experience in construction and finance. They told Domino Theory “middle men” with backgrounds in areas such as illegal gambling, scams and illegal taxi companies were involved in laundering money for a wide variety of financial and real estate projects. These middle men operated “like engine oil” in projects, handling things “in their own way” to ensure they run “smoothly,” the entrepreneur said — with the implication being that illegal activity such as intimidation may be involved. These middle men were most likely to appear in the “easiest [with the least money and scrutiny involved] or the most difficult [with the most profit involved] transactions,” they added. Asked how things had changed since the 1990s, they summarized that they “remain unchanged, just more low profile. Things below the table are still happening.”
Another person we spoke to with experience in construction had a slightly more optimistic view. A project manager, they said in private projects there had never been much room for bid-rigging because it’s “difficult to fool” veteran developers in the bidding process, due to their ability to read unusual bidding patterns. In public projects, they said “bid-rigging still exists but is going out of fashion” because the profit is now very low compared to the private projects. Elaborating on this, they said while government budgets have been reduced, construction costs have gone up because of factors like material and equipment price increases, labor shortages, “ever tightening” environmental regulations, urban planning regulations and new building codes.
A key underlying factor in this shift is the introduction of a database of expected costs for public projects, introduced in 2010. “PCCES [Public Construction Cost Estimating System] is one major reason why budgets for public projects are only going lower forever,” the project manager explained. “The database collects bidding data for all the public projects. This gives the government absolute bargaining power. They can always look up the lowest price in the database for any particular item that has ever existed in history. The lowest price will become the new price basis next time for a new project. As this repeats, there’s no profit margin in the projects.”
However, use of this system is not required for projects worth less than 10 million New Taiwan dollars. Thus, although the project manager said they had not seen any examples of violence or intimidation, they noted that “Corruption is more common in smaller projects [less than 10 million New Taiwan dollars], because fewer eyes are watching.”
They also ventured this prediction: “If the profit ever becomes good again one day, you can expect [bid-rigging] will thrive again.”
An Illustrative Example
How exactly can this kind of corruption work? “Unfair specifications is the most common form of malpractice and crime throughout public [construction] projects nowadays,” the project manager told us. “In Chinese, it’s called ‘binding specifications’ [綁規格.]” They explained that specifications for a project either cite a specific brand name or are written so restrictively that only one vendor or manufacturer can supply the desired items. “This is often initiated by the building equipment or material vendors, who would find these corrupted officers or design architects to implement unfair specifications in the project requirements to gain advantage for themselves. Then these vendors will pay out commissions.”
Summary: Organized Crime Remains an Open Secret
What was striking about these, and a number of other conversations we had with people who worked in different areas of business in Taiwan for this article, was the amount of casual familiarity with these kinds of practices and engagements. Even those without direct knowledge of their own expressed cynical acceptance of illegality and gang operations as something inevitable in business. A kind of open secret.
In 2003, Chin Ko-lin’s book described organized crime involvement in the operation of everything from long distance buses and taxis to construction projects and prostitution; from gambling dens and karaoke bars to road building; from illegal waste management to illegal gravel digging; from debt repayment and protection to managing farmer and fisheries associations and people trafficking. Despite some notes of optimism, there remains a deep well of cynicism around how much things might have improved since then. And this is not simply a residual effect: All of the links in this paragraph are from the last five years or so.
Note: The people interviewed for this article wished to remain anonymous for the sake of their safety and careers.
A follow-up article on the influence of organized crime on Taiwan’s politics will be published next month.
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