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2005-07-13 09:28:00
American Institute Taiwan, Taipei
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This record is a partial extract of the original cable. The full text of the original cable is not available.

130928Z Jul 05
						C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003008 



E.O. 12958: DECL: 07/05/2015

Classified By: AIT Acting Director David J. Keegan, Reason(s): 1.4 (B/D

1. (C) Summary: Lien Chan is slated to step down as KMT
Chairman following the outcome of the July 16 contest between
Taipei Mayor Ma Ying-jeou and KMT Legislative Yuan (LY)
Speaker Wang Jin-pyng. If Lien continues to control KMT
finances after he steps down, as many within the KMT expect,
he will remain a powerful Wang ally. The vast majority of KMT
officials support Wang, which puts the KMT political machine
at his disposal. Should Wang lose the race, he will still
hold his LY Speaker position, and therefore could, with
Lien's backing, steer the Pan-Blue-controlled LY away from
"Chairman" Ma's agenda. Although Ma may win the Chairmanship,
his leadership could be handicapped by his dependence on a
narrow political base and by lingering opposition from Lien,
Wang and their allies. Thus, there is potential for a rift
within the party, but KMT sources tell AIT the likelihood of
another PFP- or TSU-style split is low, because neither Ma
nor Wang have the charisma to start or sustain a splinter
party. Ma assuming the Chairmanship is unlikely to produce
rapid, dramatic improvements to Taiwan's conflictive domestic
political scene. Over time, however, a generational change
in the KMT should allow for a less divisive political debate
on issues important to the US, like a cohesive, cross-party
strategy for dealing with the PRC, and improving Taiwan's
self-defense capability. End Summary.

Ma May Seek "Painless" Reform Strategies


2. (C) Septel we consider the likely outcome of the election
for KMT Chairman. In this cable we consider how either a Ma
or Wang victory could affect the program of the KMT. KMT
Legislator and Ma ally Lai Shi-bao said that without
substantial reforms, the KMT has little chance of attracting
enough votes to win the 2008 presidential election. He
opposes Wang's candidacy because he believes Wang will allow
business-as-usual for the next three years, with serious
consequences for any KMT presidential candidate. As evidence
of Wang's aversion to reform, Lai said Wang is resorting to
old KMT tricks to mobilize his voters: buying meals and gifts
for meeting halls full of potential voters, paying local
power brokers to deliver votes, paying the dues of ineligible
voters and restoring them to the voter rolls, paying for
large-scale smear campaigns against Ma. All of these
accusations have appeared in recent press reports, Lai said,
and all are exactly the kinds of underhanded activities which
have caused voters to reject the KMT in the past.

3. (C) Soochow University political science professor and
TVBS political commentator Emile Sheng told AIT that the key
difference between Ma and Wang will be with respect to the

disposition of allegedly illicitly-gained KMT assets. Sheng
expects Wang to continue to ignore the property issue, which
has been a weight around the KMT's neck for forty-plus years.
Ma, on the other hand, by disposing of these disputed
assets, can quickly gain credibility as a reformer, without
truly goring the ox of anyone within the KMT, since most
members distanced themselves from these assets long ago.
Sheng added that most KMT members understand that it is
necessary to resolve the illicit-property issue once and for
all, and would likely rally around Ma. Ma could also win
easy support within the party by reducing KMT party worker
payrolls. The move would not injure senior party members, and
would move the party closer to balancing its budget.

4. (C) Lai said that there has been little open debate
amongst KMT members, but the consensus within the party is
that, as a display of the party's increasing democratization,
the Chairmanship campaign has been good for the party. Lai
said the KMT has been losing younger voters to the seemingly
more youthful DPP, and must reverse that trend to assure its
long-term survival. The sense among Ma supporters is that it
is time to do away with "old people" politics. This
criticism of Wang notwithstanding, Lai told AIT that Ma has
been careful not to attack Wang too harshly because Ma
recognizes that Wang's cooperation will be essential to KMT
hopes of taking back the presidency in 2008. Lai said Ma's
camp had already broached with Wang the idea of a 2008
Ma-Wang ticket, and that Wang demurred, contending that he
would win the Chairmanship, not Ma. Lai insisted that both
sides understand that campaign attacks are part of the game,
and that after the election is over the party will need to
rally together.

Little Possibility of KMT Split


5. (C) Liao Feng-te is the Director of the KMT's
Organizational and Development Committee. Liao said the
typical KMT voter wants to reform the party, as evidenced by
the considerable popular support for Ma, while KMT leadership
wants more of the same, as demonstrated by their support for
Wang. Liao said one key to Ma's probable success is the fact
that KMT leaders currently have very few ways to influence
the KMT popular vote -- if they did, Ma would lose. In light
of the grass-roots support for Ma, Liao believes that to win
in 2008, the KMT must discover how to successfully combine
the modernizing tendencies of the Ma camp with the Wang
camp's organizational capabilities.

6. (C) Liao told AIT there is little to no possibility, no
matter who wins the election, of another KMT split. Liao
said no leader within the KMT, including Ma or Wang, has the
charisma to attract the critical mass of followers required
to form and sustain a splinter party. Liao pointed out
political observers throughout Taiwan are watching the PFP,
the last party to split from the KMT, wither and die, and he
opined that no one within the KMT wants to repeat that
mistake. Liao said Wang has publicly promised to help the
KMT's 2008 presidential candidate win, regardless of who it
is, and Liao told AIT he believes Wang means what he says.

7. (C) Professor Sheng also ruled out a party split: Wang is
a KMT legislator at large. He has no direct constituency,
and is entirely dependent on the party for his position.
Should he leave the KMT, he would lose his LY seat, his LY
Speaker position, and most, if not all, of his political

What Will Lien Do?


8. (C) Some Taiwan observers have speculated that during the
campaign, Lien Chan has been quietly positioning himself to
retain control of KMT financial resources and thereby keep
control of the party. Proposals from both Ma and Wang to
name Lien as "honorary chairman" only fueled this
speculation, since it was seen by many as an attempt by both
camps to curry favor with Lien in order to ensure his
cooperation after the election. Professor Sheng told AIT he
dismissed this speculation, because it is inconsistent with
Lien Chan's personality, and with his practices while
Chairman. Sheng explained that Lien disliked being
responsible for dealing with the day-to-day operations of the
party, i.e., resolving disputes between rival factions or
addressing the KMT's recurring financial problems. (Sheng
said Lien would often turn to Wang Jin-pyng for assistance in
solving financial crises, to draw on Wang's wealthy contacts
base.) Sheng said the KMT runs a $200 million NT deficit
every month, stemming from its pension obligations and
massive party infrastructure. Sheng told AIT that although
the KMT has extensive property holdings on paper, most of
those properties cannot be leveraged for cash because they
are limited to government use and cannot be mortgaged, or
because they have already been mortgaged or even sold. Sheng
said that according to his sources, the only remaining KMT
asset of considerable worth is Hua Xia Investment Company,
which has holdings in television stations and other media
outlets. Sheng believes Lien will be happy to leave the
financial headache to his successor.

9. (C) After Lien steps down, he will continue as President
of the KMT National Policy Foundation (NPF) think tank.
Sheng told AIT that he expects Lien to use that position to
influence KMT cross-Strait policy, which Sheng said Lien
considers his most important legacy. Sheng believes that
both Ma and Wang would be more than willing to leave
cross-Strait relations to Lien. He explained that both
candidates took pains to distance themselves from Lien when
he first announced his plans to visit the Mainland, in order
to protect themselves from potential fallout. Only after KMT
polling revealed Lien's (and the KMT's) increasing popularity
resulting from Lien's visit did either candidate embrace
Lien's PRC gambit. Sheng said that by permitting Lien to
continue his cross-Strait agenda, the future Chairman could
assign blame to Lien if necessary, but could also claim
partial credit should Lien's PRC strategy continue to benefit
the party.

10. (C) Sheng said he is not worried about a Lien-Wang
alliance standing in opposition to Ma's leadership. Sheng
contends the KMT's organizational structure KMT will
naturally shift policy and financial controls to Ma;
moreover, the vast majority of KMT members realize that a
schism would harm the party and virtually rule out any chance
of winning the presidency in 2008. Sheng said the KMT
traditionally adheres to one leader, and although Wang has
good relations with the party's elite, he is not powerful
enough to unite them against Ma.

Prospects for DPP-KMT Cooperation?


11. (C) Professor Sheng said that under Lien, the KMT simply
ignored the Chen Shui-bian government, preventing most forms
of cooperation. Sheng is optimistic that Lien will
relinquish control of the KMT's domestic agenda, and expects
this stonewalling tactic to end under Ma, enabling DPP-KMT
cooperation to naturally improve. Sheng said that in the
highly improbable event Lien is able to hold onto power and
co-opt Wang's authority in the LY, it could lead to a vicious
power struggle within the party, destroying KMT unity at
least for the short term, and thwarting any significant
Green-Blue cooperation.

12. (C) Comment: Professor Sheng's analysis gives
insufficient weight to the personal animosities which drive
much of the decision-making within the KMT. It is widely
known Lien and Wang personally despise Ma, and have vested
interests in preventing reforms from going forward. Lo
Chih-cheng, of the Institute for National Policy Research,
told AIT that rumors are circulating within the KMT that Wang
will refuse to mobilize KMT voters for the year-end local
elections, in hopes of causing a humiliating KMT defeat,
after which Wang can blame Ma, and call for his resignation.
KMT sources tell AIT that Ma will not be able to consolidate
KMT policy control under his authority before 2006, let alone
control of the party structure. Thus, while Ma may announce
his commitment to change KMT policies or posture toward the
government, it is probably unrealistic to expect immediate
breakthroughs on issues important to the US, like a unified,
cross-party strategy for dealing with the PRC, or passage of
the Special Defense Budget bill. End comment.