Taiwanese Ministers Quit Over Missing Millions

The foreign minister and vice-premier of Taiwan's outgoing government have resigned over the disappearance of £15m intended to woo Papua New Guinea as a key diplomatic ally.

The cash, designated as development aid and intended to persuade the tiny nation to drop ties with China, vanished along with the middlemen involved in the deal.

Beijing has claimed the island as part of Chinese territory since it broke away at the end of the civil war in 1949. Taipei has relied on check book diplomacy to shore up its formal support - but has seen that backing erode as its neighbor grows stronger.

China is recognized by around 170 countries, including the world's most powerful nations. Taiwan boasts the recognition of 23 mostly impoverished states in Africa, Latin America and the South Pacific.

It recently lost Costa Rica and Malawi to Beijing - although it did win over St Lucia.

James Huang, foreign minister, and Chiou I-jen, vice premier, resigned yesterday after prosecutors raided their homes for clues to where the money had gone. Ko Cheng-heng, deputy defence minister, quit shortly afterwards. All denied wrongdoing.

President Chen Shiu-bian's administration leaves power this month anyway, having lost last month's election.

The foreign ministry has asked prosecutors to find a Singaporean national and a US national who were appointed to handle the 2006 deal. Taiwanese officials said the men were appointed through personal connections with the government.

"[These arrangements] have probably always had to go through unofficial sources and there may well have been similar cases before. It may be that the Taiwanese media is so much more critical it's harder to hide these things," said Dr Dafydd Fell, deputy director of the Taiwan Studies Center at the School of Oriental and African Studies.

"It could also reflect relative inexperience, because the DPP never had any taste of these dealings before they came to power."

He said that Taiwanese citizens were beginning to question the point of such arrangements, given that Taipei's unofficial dealings with the United States, Japan and European countries are more crucial to its future.

President Chen Shui-bian has apologized to the public over the scandal, saying it had damaged the image of the country, but added that the agencies involved deserved credit for trying to increase the country's diplomatic ties.