Taipei  - Taiwan Vice Premier Chiou I-jen Monday quit the pro-independence Democratic Progressive Party (DPP) under mounting criticism over the island losing 30 million US dollars meant to win diplomatic recognition from Papua New Guinea (PNG).

"I feel deeply sorry to the country and people over the Taiwan-PNG scandal. In addition to cooperating with the judicial authorities in investigating the case, effective today, I withdraw from the DPP which I deeply love," he said in a statement.

He also said after he and the DPP government step down on May 20, he will quit politics forever. The DPP will have to hand over power to the Nationalist Party or Kuomintang (KMT) on May 20 after losing the presidency in the March 22 election.

Chiou has offered to resign as vice premier, but Premier Chang Chun-hsiung has yet to approve his resignation, saying Chiou should stay put to help resolve the problem.

Chiou has come under fire from fellow party colleagues who demanded that he leave the DPP to avoid further damaging its image.

He has been questioned by prosecutors over his role in the Taiwanese Foreign Ministry's hiring of two middlemen, identified as Ching Chi-ju, a Taiwanese national with a US passport, and Wu Shih-tsai, an ethnic Taiwanese Singaporean businessman, to persuade PNG to ditch China and recognize Taiwan.

According to Foreign Minister James Huang, Chiou, who then served as secretary-general of the National Security Council, recommended Ching to him in August 2006, saying the man could help Taiwan set up official ties with PNG.

However, instead of winning official recognition from PNG, a 30- million-dollar fund wired to a joint bank account set up in Singapore by Ching and Wu, who served as intermediaries in the secret talks with PNG, went missing along with Ching. Wu was arrested but was released due to lack of evidence.

This week Taipei won an injunction from the Singapore High Court to freeze the two men's bank accounts in a Singapore bank and their assets.

The scandal, which came to light 18 days before President Chen Shui-bian steps down, is the latest in a string of scandals concerning Taiwan's secret diplomacy, labelled chequebook diplomacy by China, a rival of Taiwan since the two sides split at the end of the 1949 civil war.

In an extraordinary congress Sunday, DPP bigwigs said that the scandal has dealt a serious blow to the party, the image of which had already been tarnished by a series of corruption scandals implicating the outgoing Chen government and Chen's family.

"Such a diplomatic bungle by Chiou has further hurt the DPP after the election setbacks of the party," said Kao Chien-chih, a former DPP lawmaker, referring to the DPP's drubbing in January's parliamentary and March's presidential elections.

DPP lawmaker Trong Tsai, who is running for the DPP chairmanship in the May 11 poll, said the party must act swiftly to control the damage, including referring the case to the anti-corruption department of the DPP for investigation.

Outgoing DPP chairman Frank Hsieh said it was highly improper for Chiou to skip the official mechanism in masterminding a so-called diplomatic recognition case like this. "We support a thorough probe and legal actions against any guilty parties involved," he said. (dpa)