TAIPEI - TAIWANESE prosecutors on Saturday questioned a Singaporean man accused of embezzling 30 million dollars (S$40.92 million) of diplomatic aid earmarked for Papua New Guinea, reports said.

Television footage showed Wu Shih-tsai entering the Taipei district prosecutors office for questioning over his alleged role in the scandal, which has gripped the island.

Taiwanese authorities allege that Wu and another businessman Ching Chi-ju pocketed the fund intended for Taiwan to forge ties with Papua New Guinea in 2006 - a charge he denied.

'If I get a penny of this I won't be sitting here today,' Wu told a press conference conducted in English on Saturday.

'I would like to let the public know that I didn't run away. If I want to run I would... I'm still here and I have no intention to leave,' he said.

Wu said the money was in Ching's own account, instead of their joint account, before it vanished as Ching claimed that he would return it to Taiwan's foreign ministry which called off the plan.

The whereabouts of Ching, a Taiwan citizen who also has a US passport, is unknown, while Wu has been barred from leaving Taiwan.

If proven true, the allegations would embarrass outgoing pro-independence President Chen Shui-bian, who has sought to convince states in the South Pacific, Latin America and Africa to switch allegiance from Beijing to Taipei.

The claims came to light this week when Singapore's high court approved Taiwan's request to freeze the joint bank account of Wu and Ching, who were to serve as 'intermediaries' to help Taipei forge ties with Papua New Guinea.

Taiwan's government has tried to limit the fallout from the alleged embezzlement and rejected accusations of 'chequebook diplomacy' in the Pacific.

Foreign minister James Huang and Vice-Premier Chiou I-jen, who vowed to take the largest responsibility for recommending the two businessmen, were questioned late on Friday for their alleged involvement in the case.

They are due to leave office on May 20 with the rest of Mr Chen's government.

Only 23 countries in the world formally recognise Taiwan over China. The two split in 1949 after a civil war.

Papua New Guinea set up diplomatic ties with Taiwan in 1999 but its government renounced the deal after only 16 days.

Beijing sees Taiwan as part of its territory awaiting reunification, if necessary by force.