Treason and Resistance to Pension Reform in Taiwan
Photo Credit: The San Diego Union-Tribune
By Elizabeth Freund Larus

Treason and Resistance to Pension Reform in Taiwan

Apr. 26, 2017  |     |  0 comments

One year into her presidency, Tsai Ing-wen is setting off a firestorm of protest against her government’s reform of Taiwan’s public pension system. Angry and uncertain about their future, public employees have taken to the streets in raucous protest. Discontent among active and retired military is particularly palpable, possibly driving Taiwan’s military to sell out the island to China and raising concerns for Taiwan’s national security.

Tsai ran for ROC president on a platform of economic, social and political reform. As a presidential candidate, one of her major concerns was generational injustice, in which she blamed previous governments and the older generation for spending money without restraint. In her campaign speeches and inaugural speech, Tsai claimed that high levels of government spending have resulted in rising national debt, a nearly bankrupt national pension system, and a heavy burden on the younger generation. Taiwan’s debt has climbed to NTD 5.57 trillion in the past 23 years, and the debt for public pension funds is now 53 percent of GDP. These pensions are underfunded by as much as NTD 18 trillion (USD 570 billion), more than nine times the government’s 2017 budget of NTD 1.99 trillion.

To correct this perceived injustice, Tsai proposed to reform Taiwan’s pension system. Taiwan is one of the world’s fastest aging populations, leaving fewer young workers to pay for more and more pensioners. Contributions to the public servants’ pensions funds is already less than the benefits paid out to retirees. In 2015, the Pension Fund paid out more than NTD 10 million in benefits than it received, and the Fund’s net assets are decreasing. In 2015, the Fund’s net assets dropped NTD 21.2 billion from the previous year. This pattern is unsustainable, as the pensions are putting a heavy burden on the younger generation and are draining state coffers.

In response to this scenario, in January 2017 Vice President Chen Chien-jen announced a pension reform plan for teachers, civil servants and non-government employees which would delay a default in payments to retirees by a decade. The plan has angered Taiwan’s public servants, who claim the reform will ruin their retirement plans and that it demonstrates incompetence by Tsai. Chen’s announcement of pension reform has been followed by nearly continuous protests outside central government offices in Taipei. On January 22, thousands of civil servants, military personnel, and teachers gathered in protest outside the Presidential Palace in Taipei, where Tsai had convened a meeting on reform. Protestors were barricaded from the building by wired fences and barriers. Protesters called the reform plan “government bullying” and “majority tyranny,” and called for Tsai to step down.

Taiwan’s central government claims that pension reform is urgent as the state cannot afford to continue its payouts after many years of defaults, and with an aging population. Despite the protests, the Tsai administration introduced draft reform to Taiwan’s Legislative Yuan on February 24. The reforms call for phasing out over six years the preferential 18 percent rate on savings deposits for teachers and civil servants. The reforms also include a reduction in monthly pensions for public servants, and an increase in the retirement age to 65 for most public servants.

Although the administration has not yet introduced reform of military pensions, reform is coming. The military pension system is nearly bankrupt. Taiwan’s pension fund for military personnel could default by 2020, for civil servants by 2030, teachers by 2031, and other workers by 2048. There are approximately 120,000 people on military pension benefits, and another 200,000 in the civil service. People are concerned that they will have to wait longer to retire or that they will receive smaller pensions. Monthly pensions for military staff are currently approximately NTD 49,379. Civil servants receive about NTD 56,383, which is 75-85 percent of their final salaries and about twice the starting pay of new graduates. In some cases, reform could cut pensions by as much as half. The central government is leaving it up to the military to devise its own reforms to the military pension system.

Military Protests

Uncertainty about their future security is having a negative effect on Taiwan’s current and retired military personnel. Fear of the unknown is driving some military personnel to protest, and this has sometimes turned violent, as happened during a February 18 protest when army veterans threw smoke bombs, joss sticks, and eggs in front of the Ministry of Defense. The veterans were angry that Defense Minister Feng Shih-kuan had failed to accept their petition to retain the military’s current pension scheme. During the melee, the electric gate in front of the Ministry was damaged when some of the veterans tried to force their way through while active military personnel and police tried to hold up the gate. On March 11, retired service members protested pension reform outside the Ministry of Defense in Taipei. They were greeted with heavy security detail. Prevented from advancing, the angry veterans set off firecracker rockets and laid five stuffed dogs outside the gate to symbolize their subhuman treatment. The protests have continued with several veterans at a time conducting a daily vigil outside the Legislative Yuan.

Support for the ROC among some veterans has been declining, with some veterans tipping toward Beijing. Taiwan intelligence officers cannot visit mainland China, even to see family or as tourists. They argue that they have sacrificed for the good of the nation, but their loyalty is being tested by pension reform. Originally, they were promised pension funds, but a change in the promise is resulting in a loss of face for Taiwan’s military. They may decide to sell Taiwan to the other side of the Taiwan Strait. Many active and retired military are indicating and complaining toward that direction.

The US needs to consider how its interests may be damaged by Taiwan’s military pension reform policy.

It is not hard to find cases of retired military who have sent confidential materials to the other side. For instance, in March 2017 Retired Air Force Colonel Ko Chi-hsien and Lieutenant Colonel Lou Wen-ching were arrested in Taiwan on charges of passing military secrets to a PLA army captain who had orchestrated a spy ring in Taiwan. Ko was a military hero in Taiwan for having confronted Chinese military jets over the Taiwan Strait in 1990. In another case, retired Army Major General Hsu Nai-chuan was sentenced to two years and ten months in prison in 2016 for participating in the same spy scheme. Hsu was the highest-ranking army officer ever to be prosecuted for a national security-related offense. In another famous case, a retired national security special service task force commander who was a body guard to Taiwan VP Annette Lu was arrested in March 2017 as a Chinese spy. Retired commander Wang Hong-ru was found to have engaged in spying operations for the Chinese intelligence agency after leaving Taiwan’s military. A Chinese intelligence unit in Shanghai had recruited him to spy for China in exchange for business privileges and cash. Wang had teamed up with a China-based Taiwanese businessman, Ho Chih-chiang, to establish an espionage ring in Taiwan.

This type of espionage is not new. In December 2014, a retired Taiwanese naval officer, Chang Chih-hsin, was sentenced to 15 years in prison for leaking secrets to Chinese spies and taking bribes. Wang was a former chief officer in charge of political warfare at the Naval Meteorology and Oceanography office, which produces mapping data for use by Taiwan’s naval forces, including cartographic manuals used by Taiwanese warships and submarines guarding Taiwan’s coastline. Chang had recruited at least eight active duty or retired naval officers into a spy ring that took hefty bribes from China in exchange for military secrets. The rising discontent among Taiwan’s military over pension reform is likely to result in more of such betrayals.

The angst over military pension reform not only affects Taiwan’s domestic stability, but also highly affects the US security calculus. The US needs to take this situation into account in analyzing the security situation in the Asia-Pacific. The sentiment among Taiwan’s military that the Tsai government is selling them out is reminiscent of that of the “stab in the back” legend (Dolchstoßlegenden) that became popular among right-wing nationalists during the Weimar Republic after World War I.

The view among the German soldiers at the time was that traitors in the Weimar Republic had failed to fully support the military in its 1918 Spring Offensive, thereby ensuring the defeat of Germany’s army. Although the “stab in the back” was more myth than reality, it contributed to German solidarity that led to Nazi extremism. According to several retired military sources in Taiwan, it is not unthinkable that this could happen in Taiwan if retired military personnel become disillusioned and despairing.

The question is not one of veterans’ preference for the PRC over the ROC. The risk is that they may go over to other side of the Taiwan Strait if they feel that they have nothing to lose. Some retired military personnel are already convinced that they are choosing only between the better of two bad choices. A quick look at the slogans and banners from the January 22, March 4 and 11 protests, as well as a veterans’ encampment outside the Legislative Yuan, is indicative of the military’s sentiment toward the Tsai government:

“Tsai Ing-wen, how dare you?”

“If the nation does not take care of military personnel, why would the military pay allegiance to the nation?”

“Lose the heart of the military and the country will die!

“Today it is us, tomorrow is you.”

“A monarch bullies the military, ridiculous!”

“A breach of contract, but I have my rights and interests.”

“Lose the heart of the military and the country will die!

“Recruit you, cheat you, retire abandon you!”

“The military will always protect the civilians. The people should treat soldiers with respect.”

The US has its own security interest in Taiwan, as Taiwan’s geostrategic location is vital for US maritime supremacy in the Asia-Pacific. Taiwan lies dead center in a chain of island the runs southward from the Kuril Islands north of Japan to Borneo and the northern part of the Philippines. This “first island chain” is a psychological and geographical barrier to China’s access to the Western Pacific. Breaking out of the chain would enable China to threaten Japan and its Sea Lines of Communication. Gaining control of Taiwan’s Itu Abu, the largest of the Spratly Islands, would enable Beijing to flex its muscles against its maritime neighbors, many of whom have territorial disputes with China in the South China Sea. Chinese occupation of Taiwan would also enable Beijing to better monitor US and Japanese naval deployments in the region. In short, Taiwan is a necessary partner in the US security calculus in the Asia-Pacific.

The US hence needs to consider how its interests may be damaged by Taiwan’s military pension reform policy. Taiwan’s military personnel may lose the will to defend themselves if they feel betrayed by President Tsai. In that case, Washington would have no reason to help Taiwan defend itself. The US should also consider that Taiwan’s military personnel may not hesitate to double cross a regime that they feel has turned its back on them by passing to China confidential materials shared between Washington and Taipei. In this manner, the US’ national security and security interests in the Asia-Pacific would be compromised.

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