MORE "EFFECTIVE MANAGEMENT" COULD AFFECT

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001691

SIPDIS

DEPT FOR EAP/TC
DEPT PLEASE PASS AIT/W

E.O. 12958: DECL: 04/07/2015
TAGS: ECON EINV TW CH
SUBJECT: MORE "EFFECTIVE MANAGEMENT" COULD AFFECT
CROSS-STRAIT IC INVESTMENT

REF: A. TAIPEI 1376


B. TAIPEI 1626

Classified By: Acting AIT Director David J. Keegan, Reason 1.5 b

Summary
--------------


1. (C) After the April 5 meeting of senior Chen
administration and DPP officials on cross-Strait relations,
the Taiwan government has announced a new emphasis on the
"effective management" portion of its "active opening,
effective management policy" (ref B). "Difficult to manage"
policies will be reviewed by a meeting of cabinet members on
April 9 and 10. Comments by Mainland Affairs Council (MAC)
Chairman Joseph Wu suggest this may cause further delay in
the approval of Mainland investment in the semiconductor
packaging and testing industry. The Ministry of Economic
Affairs (MOEA) Investment Commission is preparing a report on
its cross-Strait policies for senior review. Despite MAC's
comments, outside observers have told AIT/T they expect any
delay in cross-Strait liberalization measures to be short.
End summary.


2. (U) After the April 5 meeting of senior Chen
administration and DPP officials on cross-Strait relations,
the Taiwan government has announced a new emphasis on the
"effective management" portion of its "active opening,
effective management policy." Premier Frank Hsieh's
instructions to relevant agencies on how to implement more
"effective management" as announced by the Executive Yuan's
(EY) spokesman indicated that the overall policy would not be
changed. However, relevant Taiwan government agencies were
instructed to reevaluate policies that are "difficult to
manage" and submit them for review by higher government
authorities. Hsieh will host a two-day meeting of cabinet
members on April 9 and 10 to discuss these policies. Hsieh's
instructions indicated that likely topics for discussion
include passenger charter flights, agricultural exports,
Taiwan investors' rights, media exchanges, law enforcement
cooperation, tourism, and service sector liberalization.

MAC ) IC Packaging and Testing a Likely Target
-------------- -


3. (C) MAC Chairman Joseph Wu told the press April 6 that the
approval of investment in the Mainland in the semiconductor
packaging and testing and petrochemicals industries would be
put off for further review. As reported ref B, MAC officials
had previously informed us that they has been ready to
approve IC packaging and testing investment but after the
passage of the Anti-Secession Law had decided to put off an
announcement until May. At that time, MAC officials had
already decided that liberalization for petrochemicals
manufacturing, specifically naptha crackers, would require
further study and would be delayed longer. Wu's linkage of
the two categories suggests that the legalization of IC
packaging and testing may be delayed significantly beyond
May. MAC Senior Secretary Lee Li-Jane confirmed to AIT/T
that IC packaging and testing would likely be delayed longer
than previously anticipated. She was unable to say how much
longer.


4. (U) The media reported that representatives of several
major Taiwan IC packaging and testing firms -- namely
Advanced Semiconductor Engineering Inc., King Yuan
Electronics Co. and Siliconware Precision Instruments Co. --
had warned that if Taiwan did not authorize Mainland
investment this year it would be too late for Taiwan firms to
penetrate successfully the PRC market. Taiwan Electrical and
Electronics Manufacturing Association Chairman Lo pointed out
to the press that Intel already had packaging and testing
facilities in the PRC.

Investment Commission Preparing Study
--------------


5. (C) MOEA Investment Commission Deputy Executive Secretary
Emile Chang told AIT/T that as of April 7 the Investment
Commission, which approves and regulates Taiwan firms'
investment in the Mainland, had not been instructed to alter
any of its cross-Strait policies or procedures. Chang said
that Economic Affairs Minister Ho Mei-yueh had instructed the
Commission to conduct a survey of its policies and prepare a
report with recommendations on how to enhance "effective
management" within the next few days. He noted that the
Minister's instructions were quite vague.

Outside Observers See Short Delay
--------------


6. (C) Various business and academic observers have indicated
to AIT/T that they do not foresee any major changes in the
Chen administration's approach to cross-Strait economic
affairs, despite MAC's new emphasis on "effective
management." National Chengchi University Professor Tung
Chen-yuan told us that he believes that the Taiwan government
will continue to hold back cross-Strait exchanges and
economic initiatives for a month or two and then resume
efforts for further liberalization. Chinese National
Federation of Industries Deputy Secretary General Tsai
Horng-ming told AIT/T that the Taiwan government had
consulted with him on this new approach and that he was
confident that the review of cross-Strait exchange and
economic policies would not dramatically slow down
liberalization. He was very optimistic that the review would
improve the environment for cross-Strait business by
rationalizing Taiwan's policy.
KEEGAN