SPECIAL BUDGET REMAINS IN POLITICAL LIMBO

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001803

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 04/15/2015
TAGS: PREL PGOV MASS MARR TW
SUBJECT: SPECIAL BUDGET REMAINS IN POLITICAL LIMBO

REF: A. TAIPEI 1112


B. TAIPEI 1201

Classified By: AIT Director Douglas H. Paal, Reason 1.4 (b/d)


1. (C) Summary. Rising political discord among Taiwan
political parties is complicating prospects for passage of
the Defense Procurement Special Budget in the Legislative
Yuan (LY). The political parties are largely focused inward
on the domestic political debate and jockeying for short-term
political advantage, to the disadvantage of larger security
issues, including cross-Strait relations and the Special
Budget. End Summary.


2. (C) Vice Minister of National Defense Michael Tsai
(Ming-hsien) told AIT on April 13 that the government is
losing hope for passage of the Defense Procurement Special
Budget in the current LY session scheduled to end in May
(though it could extend into June). The growing political
discord among Tawan political parties, he explained, will
likely prevent early passage of the bill. He noted the
separate Kuomintang (KMT) and People First Party (PFP)
legislative boycotts on cooperation with the ruling
Democratic Progressive Party (DPP) -- the KMT in retaliation
for the government investigation of Chiang Ping-kun for
leading the KMT delegation to Beijing, and the PFP angry over
DPP refusal to support the PFP "cross-Strait peace bill."
Tsai, who is government point person in lobbying the LY to

SIPDIS
pass the Special Budget, said he was increasingly pessimistic
on early passage. AIT notes that this represents a continued
deterioration of the prospects for the Special Budget
reported two weeks ago (Ref B).


3. (C) Vice Minister Tsai noted that he had been hit hard in
LY Defense Committee questioning over the last two weeks,
particularly by PFP legislator Lin Yu-fang on the "excessive"
amount of the Special Budget, and by independent maverick
legislator Li Ao with one of his typically erudite but arcane
points of order. Li Ao told Tsai that the U.S. should honor
its pledge under the Taiwan Relations Act (TRA) to "give" the
weapons systems in question to Taiwan. (Note: Li was trying
to interpret the word "provide" -- "tigong" -- in TRA Sec
2(b)(5) to mean "give" in the sense of gratis.) Tsai
responded by reminding Legislator Li Ao what Professor Li Ao
had told Taiwan student activists, including Tsai himself,
back in the 1960's -- "there is no free lunch," he quoted the
1960's Li Ao.


4. (C) After Vice Minister Tsai departed to return to the
afternoon session of the Hankuang 21 military exercise, his
Special Advisor, Dr. York Chen (Wen-cheng),told AIT that MND
is trying to work out a possible deal with Pan-Blue
legislators to move the Special Budget out of the Procedure
Committee into the Defense Committee, so that the bill would
automatically carry over to the fall LY agenda. MND is
trying for a package reducing the Special Budget to NT
$380-400 billion (US $12-12.7 billion at current exchange
rates),down from the Executive Yuan's early March 2005
budget submission of NT $480 billion (US $15.2 billion).
Opposition Pan-Blue legislators, however, continue to push
for greater cuts in the NT $300-360 range. The MND and DPP
legislators are floating a number of trial balloons to see if
a compromise package can be devised. One of those "balloons"
is a proposal to reduce the number of PAC-III missile
batteries from six to five and moving the sixth battery to
the regular budget cycle. When AIT explained (again) to Chen
that the U.S. is opposed to splitting up the Special Budget
and, in particular, hiving off the PAC-III missiles (Ref B),
he responded that MND understands this, and is only
considering possible "fiddling" on the margins of the PAC-III
missiles because they are the easiest of the three missile
systems to obtain further support for in the regular defense
budget cycle. Trying to move submarines or P3C's to the
regular budget cycle, on the contrary, would stir up strong
opposition. He emphasized again that MND is simply floating
trial balloons at this point, in search of possible areas for
compromise, given the extremely querulous state of
inter-party relations these days. "We have no choice but to
compromise," Chen said, but emphasized that MND would keep
AIT advised of any developments.


5. (C) Comment. Special Budget prospects in the LY have
deteriorated in direct proportion to the centrifugal forces
at work on the Taiwan political scene. With DPP, KMT, and
PFP each mad at the other two, and each wholly intent on
squeezing any and all political mileage out of every
available issue, it will take a major shock to halt the
political disintegration and to resurrect the now moribund
"reconciliation" approach of Premier Frank Hsieh. The
pending visit to Mainland China by KMT Chairman Lien Chan
would further complicate the Special Budget process, as the
KMT would likely stonewall the legislative process prior to
such a trip. AIT will be urging such discussion and
reconciliation in public and privately with recalcitrant
Pan-Blue political leaders in meetings over the next several
weeks, but until Taiwan political parties at least moderate
their political bickering, the Defense Procurement Special
Budget appears set to remain one more available political
football to be put in play for short-term political advantage.
PAAL