Identifier
Created
Classification
Origin
05TAIPEI2565
2005-06-10 09:42:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

CROSS-STRAIT TOURISM - INDUSTRY HAS HIGH

Tags:  ECON CH TW 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002565 

SIPDIS

DEPT FOR EAP/TC
DEPT PLEASE PASS AIT/W

E.O. 12958: DECL: 06/10/2015
TAGS: ECON CH TW
SUBJECT: CROSS-STRAIT TOURISM - INDUSTRY HAS HIGH
EXPECTATIONS, TAIWAN GOVERNMENT STANDING IN THE WAY

REF: TAIPEI 2479

Classified By: AIT Director Douglas H. Paal, Reason 1.4 b

Summary
-------

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002565

SIPDIS

DEPT FOR EAP/TC
DEPT PLEASE PASS AIT/W

E.O. 12958: DECL: 06/10/2015
TAGS: ECON CH TW
SUBJECT: CROSS-STRAIT TOURISM - INDUSTRY HAS HIGH
EXPECTATIONS, TAIWAN GOVERNMENT STANDING IN THE WAY

REF: TAIPEI 2479

Classified By: AIT Director Douglas H. Paal, Reason 1.4 b

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


1. (C) The PRC has announced plans to allow the general
public to visit Taiwan as tourists. The reaction in
Taiwan's tourism industry has been enthusiastic, with
Taiwan's tourism stock index increasing 37 percent since
late April. A mixed Taiwan government reaction has delayed
rapid implementation. Although Premier Frank Hsieh
indicated that Taiwan would welcome such tourists, the
Mainland Affairs Council has insisted that some form of
government-to-government negotiation precede
implementation. Estimates of the potential increased
revenue for Taiwan's economy range as high as NT$ 24
billion (USD 770 million). Some of these estimates may be
excessively optimistic, but the potential for substantial
economic gains is real if the Chen Administration decides
to stop standing in the way of implementation. If the
Taiwan government is suitably flexible about the model for
negotiations, there may be hope for progress. End summary.

PRC Offers to Open the Gate for Mainland Tourists
-------------- --------------


2. (U) On May 20, the PRC's National Tourism Administration
(CNTA) announced plans to allow the general public to visit
Taiwan as tourists. The more formal announcement followed
the PRC's offer to expand tourism during Kuomintang (KMT)
Chairman Lien Chan's visit to China April 26 - May 3. The
CNTA announcement indicated that private sector
organizations from each side of the Taiwan Strait could
negotiate details of the new policy as was the case for
Lunar New Year charter flights earlier this year, using
what is now frequently referred to as the "Macao model."

Taipei Wants Government-to-Government Negotiations
-------------- --------------


3. (U) The mixed Taiwan government reaction thus far to the
PRC's proposal has had the effect of delaying rapid
implementation. On May 23, Taiwan Premier Frank Hsieh
publicly welcomed the initiative. He argued that currently
the PRC is responsible for restrictions on travel to Taiwan
by Mainland tourists. He indicated that Taiwan would be
willing to accept up to 1,000 Mainland tourists per day for

stays as long as 10 days.


4. (C) Officials from Taiwan's Mainland Affairs Council
(MAC) have insisted that the PRC's proposal requires
government-to-government negotiations. According to press
reports, MAC Chairman Joseph Wu, testifying before the
Legislative Yuan on May 23, said that the talks modeled on
the Lunar New Year charter flight negotiations would be
acceptable to Taiwan. However, he also emphasized that the
issue must be discussed by the two governments, and Civil
Aeronautics Administration Director-General Billy Chang
would lead the Taiwan delegation. (Note: The Taiwan
delegation in the Lunar New Year charter flight
negotiations in Macao was led by Taipei Airline Association
Chairman Michael Lo. Chang and another CAA official were
the two Taiwan government officials in the delegation. End
note.) MAC Economics Department Director Fu Don-cheng
later told AIT/T that he expected Taiwan would insist that
MAC officials also participate in the negotiations. MAC
officials have indicated that some form of government-to-
government negotiations are necessary to discuss issues
related to illegal overstays, medical emergencies, travel
documentation, and mechanisms for disputes between
travelers and service providers. (Note: Currently, very
few PRC visitors overstay - less than two out of every 1000
according to Taiwan's Tourism Bureau. MAC officials have
provided AIT/T data indicating that PRC overstay rates are
lower in Taiwan than in South Korea or Japan. In addition,
there already exist mechanisms for returning them from
Taiwan. End note.)


5. (C) Nevertheless, the Taiwan government's Tourism Bureau
is enthusiastic about the potential benefits for Taiwan.
Tourism Bureau Director General Hsu Wen-sheng told AIT/T
that the initiative would benefit not only Taiwan's tourism
industry but also retail sales and other service providers.
He argued that beneficial effects will be seen throughout
the island and believes many of the estimates put forward
by the tourism industry of the potential number of tourists
and the money they will bring to the Taiwan economy. MAC's
Fu, on the other hand, was more skeptical. He reported
that since the PRC liberalized tourist travel to Taiwan-
controlled Kinmen Island in December 2004, only 360
Mainland visitors had made the trip.

Industry Chomping at the Bit
--------------


6. (U) The reaction to the PRC's proposals in Taiwan's
tourism industry has been enthusiastic bordering on giddy.
Taiwan's stock market has responded very favorably. From
its April 25 close on the eve of Lien Chan's visit to June
8, the Taiwan Stock Exchange Tourism Index rose 37 percent,
compared to 7 percent for the TAIEX overall index. Several
Taiwan hotel firms have announced increased investment and
plans to expand capacity. According to media reports, the
Ambassador Hotel, Grand Formosa Regent, and Ritz Taipei
Hotel and others have announced expansions that will add
2,000 rooms at a combined cost of NT$ 20 million (USD 630
million). In addition, two of Taiwan's popular theme
parks, Leofoo Wonder World and Janfusun Wonder World are
planning expansions.


7. (SBU) Industry organizations are also anxious to see the
proposal implemented. The Travel Agent Association of
Taiwan (TAAT) and the Taiwan Visitors Association (TVA)
have both been named as possible representatives for Taiwan
in cross-Strait negotiations. Taiwan media reported that
industry sources had said TVA Chairman S.L. Chang would
head a Taiwan delegation for negotiations. Chang was
formerly Director General of Taiwan's Tourism Bureau. He
recently returned from a trip to Beijing where he
reportedly met with officials from the PRC's National
Tourism Association. TAAT Assistant Chairman Yao Ta-kuang
told AIT/T that his organization, which represents 2,500
travel agents in Taiwan, is best suited to represent
Taiwan. According to Yao, TAAT assisted MAC and Taiwan's
Bureau of Immigration in communicating with Beijing on
Taiwan's liberalization of exchange visitors and Mainland
tourists who reside outside the PRC.

Potential Impact - Estimates Vary but Bullish Overall
-------------- --------------


8. (SBU) Estimates vary on the potential economic impact
from the potential increase in Mainland tourists, but
industry observers are optimistic overall that the impact
will be substantial. With fewer than 3 million tourists in
2004, an additional 1,000 tourists per day would increase
visits by more than 10 percent. TVA estimates that the new
visitors will add NT$ 15 billion (almost USD 500 million)
to the economy. TAAT is more optimistic with a NT$ 24
billion (USD 770 million) estimated increase in revenue for
Taiwan. TAAT's estimate is based on 1,000 additional PRC
visitors per day, staying close to 10 days and spending up
to NT$ 50,000 (about USD 1,600) on travel and accommodation
expenses and another NT$ 30,000 (more than USD 950)
shopping while in Taiwan. According to TAAT's Yao, Hong
Kong's experience suggests that Mainland visitors to Taiwan
will spend more than other tourists on average. He also
pointed out that its research suggests demand in the
Mainland will be high. He said a survey of seven Mainland
coastal provinces in 2004 revealed that 28.9 million people
would like to travel abroad with Taiwan as their top
destination.


9. (SBU) Many analysts point to the experience of Hong
Kong. According to a report by CLSA, a brokerage and
investment banking services firm, tourism revenues in Hong
Kong rose by USD 4.5 billion between 1999 and 2004 - a 62
percent increase - largely thanks to increased tourism from
the Mainland. As a result, tourism's share of GDP rose
from 4.6 percent to 7.2 percent. However, CLSA analysts
also point out that Taiwan is not currently a top tourist
destination in Asia. Although the number of Mainland
tourists may be high initially, Taiwan may have trouble
winning back repeat visitors.

Comment - Chen Administration Standing in the Way
-------------- --------------


10. (C) Industry observers agree that the PRC's proposed
liberalization of tourism to Taiwan could have a
substantial positive impact on the island's economy. Some
of the estimates may be high, but the potential is real.
The Chen Administration has so far appeared determined to
stand in the way of this initiative as with others that
emerged from the Lien Chan visit. The Taiwan government
may find it easier to justify obstruction of the tourism
proposal than the fruit export and panda offers by pointing
to security and immigration concerns. However, Taiwan
currently accepts tens of thousands of PRC exchange
visitors and Mainland tourists who do not reside in the PRC
every year - more than 160,000 in 2004. It has found
mechanisms to deal with its concerns regarding this kind of
travel. Concerns about increased tourism levels could also
be resolved quickly, when Taiwan's leadership is ready to
make the political decision to get out of the way and
facilitate this initiative. On June 10, MAC Chairman Wu
told AIT/T Deputy Director that Premier Hsieh might make a
statement over the weekend indicating Taiwan's willingness
to move forward on this initiative as well as cargo
charters and agricultural trade, having come to the end of
a cooling-off period after passage of the Anti-Secession
Law. If the Taiwan government is suitably flexible with
the model for negotiation, there may be hope for progress.
End Comment.
PAAL