LIEN CHAN ON SPECIAL BUDGET, CROSS-STRAIT, AND PFP

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 000118

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 01/13/2015
TAGS: PGOV PREL TW
SUBJECT: LIEN CHAN ON SPECIAL BUDGET, CROSS-STRAIT, AND PFP

Classified By: AIT Director Douglas Paal, Reason: 1.4 (B/D)


1. (C) Summary: KMT Chairman Lien Chan told AIT Director on
December 12 that the KMT Legislative Yuan (LY) caucus intends
to pass half (approximately USD nine billion) of the USD 18
billion as soon as the legislation is resubmitted in the next
LY session, beginning February 1. On the cross-Strait Lunar
New Year charter flights, Lien gave credit to the KMT
delegation that traveled to Beijing to meet with the Taiwan
Affairs Office for "paving the way" for further discussions
between Taiwan and PRC representatives, and said he is ninety
percent certain direct flights will be implemented. On the
media speculation of DPP cooperation with the People First
Party (PFP),Lien said that the DPP has a strategic interest
in promoting the rumors, but that he is certain the Pan-Blue
alliance will remain intact. End Summary.

Special Defense Budget
--------------


2. (C) KMT Chairman Lien told AIT Director in a December 12
meeting that the KMT is committed to maintaining a viable
military capability for Taiwan and that reports that the KMT
opposes to arms procurement are misleading. Lien did say,
however, that the KMT objects to the DPP's submission of the
Special Budget and the Special Budget Authorization Bill as a
package. Lien pointed out that the requirement for separate
legislation authorizing a Special Budget was a feature that
the DPP pressed to be enacted in 1996.


3. (C) Asserting that there is not enough time for action in
this LY session, Lien then conveyed the intention of the KMT
LY caucus to pass half (approximately USD nine billion) of
the USD 18 billion as soon as the legislation is resubmitted
in the next LY session, beginning February 1. After a quick
telephone call to KMT LY caucus leader Tseng Yung-chuan, Lien
told the Director that there is no need for a six-month delay
in resubmission by the Executive Yuan (EY),as National
Security Council Secretary General Chiou I-jen contended in
previous conversations with AIT. Rather, Lien said that if
the EY accepts the Ministry of National Defense's
recommendation to separate the authorization and spending
bills, the KMT will cooperate to pass the bill in the first
week of February. He noted that the KMT would support PAC-3,
P-3, and other acquisitions, leaving an additional
approximately USD one billion for purchases of needed
ammunitions such as Standard missiles for Kidd destroyers and
AMRAAMs for the Taiwan Air Force. While the submarines are
desirable, Lien explained, eight at one time is too many for
Taiwan to handle. Since it was the KMT that had originally
proposed purchasing the submarines, he continued, the party
did not want to be seen as opposing it, so would instead
advocate buying piecemeal.

Cross-Strait Chartered Flights
--------------


4. (C) On the cross-Strait Lunar New Year charter flights,
Lien credited the KMT delegation that traveled to Beijing to
meet with the PRC's Taiwan Affairs Office (TAO) with "paving
the way" for further discussions between Taiwan and PRC
representatives. Lien told the AIT Director that the KMT
decided to get involved in the issue because many Taishang
(Taiwan businessmen working in the PRC) complained to the KMT
that the DPP government had made no progress. He said that
after receiving a positive response from the TAO welcoming
the KMT's involvement, KMT Legislator John Chang (Hsiao-yen)
led a delegation to meet with TAO Director Chen Yunlin on
January 10. Lien said that he was 90 percent certain that
the proposals negotiated between Chen and the KMT delegation,
including direct reciprocal flights between the Mainland and
Taiwan servicing multiple routes, would be implemented in
time for the Lunar New Year. Lien said he hoped the DPP
would not obstruct the KMT's accomplishment by politicizing
the charter flight issue.


5. (C) Lien told the Director that when the KMT briefed the
Mainland Affairs Council (MAC) on the talks between the KMT
delegation and the TAO, MAC officials insisted they would
follow the "Hong Kong Model" for negotiations (i.e., in which
MAC officials had been members of the Taiwan negotiating team
nominally headed by an airline industry official). Lien said
the Hong Kong formula is not necessarily the ideal model, for
if Taiwan is independent and sovereign, then why should it be
downgraded to Hong Kong's status. In passing, he criticized
the 2002 "Hong Kong model," arguing that it was not
appropriate for Taiwan national officials to have been
negotiating with mere Hong Kong municipal authorities. Lien
concluded by stating that since the LY election the KMT has
concluded that it should play a more active role in
cross-Strait affairs, even taking the lead in areas where
the government cannot.

Rumors of DPP-PFP Cooperation
--------------


6. (C) Commenting on the media speculation of DPP cooperation
with the People First Party (PFP),Lien told the AIT Director
that the DPP has nothing to lose in promoting the rumors. If
the DPP were to succeed in courting the PFP, the DPP would
gain a working LY majority and effectively divide the
Pan-Blue, Lien explained, however, he is certain the Pan-Blue
will stand fast. Lien said that before PFP Chairman James
Soong departed Taiwan he assured him that although KMT-PFP
merger is not possible in the immediate future, the PFP will
continue to cooperate with the KMT. Soong had told Lien that
on the premise that the DPP government is responsible for
safeguarding the ROC, he would consider cooperating with the
DPP on specific issues involving the people's livelihood.
Lien also stated that Soong told him the PFP would support
Wang Jin-pyng for LY Speaker in exchange for the KMT
supporting a PFP member for Vice Speaker. Lien noted that
although Chen Shui-bian has suffered a setback in the LY
election, Chen's policy direction will not change.
Therefore, Lien argued, it is in the interest of Taiwan, and
the U.S., to have a viable opposition alliance.

Comment: Emerging from Post Election Haze?
--------------


7. (C) Since the March 2004 presidential election, Lien
focused almost exclusively on the Pan-Blue's challenge of the
presidential election result, first in the streets, then in
the courts, to the detriment of other party affairs. Lien
was not fully involved in the KMT LY campaign effort. KMT
Vice Chairman Vincent Siew told AIT that many LY members in
Central and Southern Taiwan did not want Lien to stump for
them. The KMT's unexpected success in the LY election
appears to have reinvigorated Lien, who did not hesitate to
step back into the limelight. So far, however, Lien has only
used the KMT's victory to oppose the DPP, showing few signs
that he has even begun to address the many internal problems
in the Pan-Blue alliance.
PAAL