SPECIAL DEFENSE BUDGET: MOVEMENT IN MID-MAY?

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 002001

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 05/03/2015
TAGS: PREL MARR PGOV PINR CH TW
SUBJECT: SPECIAL DEFENSE BUDGET: MOVEMENT IN MID-MAY?

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


1. (C) Summary: Ruling and opposition party officials
express cautious optimism that the Legislative Yuan (LY) will
take action on Special Defense Procurement Budget shortly
after the May 14 National Assembly election. President Chen
Shui-bian will try to meet with the two Pan-Blue leaders,
either separately or together, between May 14 and May 17,
when the LY's Procedure Committee is expected to move the
budget bill into the defense committee. LY President Wang
Jin-pyng stated publicly on May 2 that the KMT is facing
growing U.S. pressure to move the budget, and suggested that
if the LY failed to act by the end of May, the LY might
reconvene in special session in July or August to complete
work on the bill. KMT and PFP officials insist that they
will cooperate with the government on the package as long as
President Chen refrains from publicly condemning their
leaders over recent contacts with Beijing. National Security
Council (NSC) officials insist that the President will do
everything in his power to maintain a positive atmosphere to
allow the Pan-Blue to come on board. End Summary.

Focus on May 17
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2. (C) Ruling and opposition officials tell AIT privately
that the May 17 LY Procedure Committee meeting will be the
key indicator over whether the Special Defense Procurement
Budget will be acted upon in a timely manner. NSC Deputy
Secretary General Henry Ko told AIT that the PFP has promised

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to vote with the government on May 17, but asked that the
Democratic Progressive Party (DPP) not press for actions any
earlier. PFP members cited James Soong's early May visit to
the Mainland and threats by the anti-defense budget
Democratic Action Alliance to denounce the PFP for reversing
its stance on the eve of the National Assembly vote. PFP
Policy Chief Vincent Chang confirmed the tacit agreement,
adding that as long as President Chen does not condemn
Soong's meetings in Beijing, the PFP is prepared to cooperate
with the government. The NSC's Ko told AIT that Chen is
cognizant of the need to maintain cordial relations with the
two opposition leaders in order to secure cooperation on the
budget. Ko said that the NSC will soon initiate contacts
with aides to both Lien and Soong about organizing a meeting,
ideally on May 15.


3. (C) KMT officials have sent mixed messages over the
party's intentions. KMT LY Caucus Leader Chen Chieh, a
member of KMT Chairman Lien Chan's delegation to the
Mainland, warned on May 2 that the KMT would not cooperate
with the DPP on the budget to protest the DPP's "two-faced"
approach to the Lien visit. However, LY Caucus Deputy
Secretary General Cho Po-yuan told reporters on April 30 that

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Lien's agreement with PRC leader Hu Jintao to seek an easing
of cross-Strait military tensions would not impact on the
KMT's willingness to support defense procurement. Cho said
that the KMT has concerns over the Special Defense Budget as
currently structured, and looks forward to working with the
DPP on ways to modify the package.


4. (C) On May 2, LY President Wang Jin-pyng publicly
committed the LY to early action, noting that Taipei was
facing growing pressure from the U.S. Wang stated that he
believed a budget priced in the 360 to 370 billion NTD range
would stand a good chance for passage, but noted the need for
further inter-party talks on the details. Wang noted that if
the LY does not have time to complete the budget by the May
31 recess, a special session may be convened in July or
August to complete action. Ranking DPP Legislator Hong
Chi-chang expressed skepticism that the LY could finish the
bill in the late May time frame, but said that if all four
parties committed to convening a summer session specifically
to act on the Special Defense Budget, the USG could rest
assured that the package would pass in some form.

Devils Still in the Details?
--------------


5. (C) Taiwan NSC officials tell AIT they are still
contending with variables in the LY Defense Committee,
especially continued demands by PFP Co-Chair Lin Yu-fang to
move the PAC-III Anti-Missile system to the regular budget
cycle. NSC officials say they fully understand the USG's
negative views on this proposal and would convey to the LY
that this is not a viable option. NSC and Ministry of
National Defense (MND) officials are also grappling with the
proposal to lease, vice purchase, P-3C anti-submarine
aircraft. A number of LY Defense Committee members have
raised this option in the past in the belief that Taiwan will
be able to procure the Multi-Mission Maritime Aircraft (MMA)
within the next ten years. While Chen administration
officials are skeptical of Taiwan's ability to secure MMA
until well beyond ten years, MND Minister Lee Jye told the LY
on May 2 that he would look into options for leasing the P-3C.

Comment: Light at the End of the Tunnel
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6. (C) If relations between the President and the two
opposition leaders, especially Lien, can weather the current
friction over cross-Strait relations, we are cautiously
optimistic that the LY will finally start taking concrete
action on the Special Defense Budget. With the LY scheduled
to go out of session on May 31, in order to allow the
National Assembly to meet in early June, it may be difficult
to secure final passage during the current session. However,
a firm commitment to act on the budget during a special
session would be a major step forward, as it would commit all
parties to address the budget in a timely manner. AIT will
continue to urge all parties to resist the temptation to
posture over the budget and recent cross-Strait contacts,
especially in the lead-up to May 17.
PAAL