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Introduction
The defeat of the Taiwan's Democratic Progressive Party (DPP) in the presidential election in March 2008 was a blow for the party, but the shocking aid scandal that forced three top DPP officials to resign was the final straw.1The scandal refers to the mislaying of US$30 million in foreign aid. Reportedly, Taiwan remitted the money to a joint account of two brokers in a Singapore bank on 24 September 2006 in the hope of establishing diplomatic ties with Papua New Guinea. The project was abandoned after the Republic of China (ROC) government stated that Papua New Guinea was unlikely to extend diplomatic recognition to Taiwan. It was unclear whether the officials embezzled the missing funds, but the usage of fraudulent brokers to win allies for Taiwan truly highlighted the nature and dilemma of Taiwan's foreign aid policy.
Taiwan possesses two unique features. Economically, Taiwan is regarded as an economic miracle in the region. So although Taiwan is a small state with scarce natural resources, it has grown strong through successful economic development in terms of its foreign reserves, foreign trade, and gross national product. This has all been accomplished despite the fact that Taiwan has been diplomatically isolated in the international arena since 1971, when it lost its membership in the United Nations (UN) to China. Moreover, China has sought to exclude Taiwan from the international arena, vowing to sever or downgrade relations with any country that endeavors to strengthen diplomatic relations with Taiwan. Consequently, as of March 2016, only 22 countries officially recognized Taiwan.2In order to engage in the diplomatic competition across the Taiwan Strait, as well as to remain competitive globally, Taiwan launched a policy of pragmatic diplomacy at the end of the 1980s, employing its economic strength to foster interactions with friendly countries and enlarge its web of connections with the international community. One important instrument that has been frequently utilized by Taiwan to pursue its foreign policy goals is foreign aid - defined here as bilateral official development assistance (ODA).
Theories of foreign aid behavior focus primarily on discussions of the motivation for foreign aid giving by major donors and strong states, but little light is shed on the management of foreign relations of small states...