MA SEEKS REFORM; WANG WITHHOLDS COOPERATION,

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003097

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 07/21/2015
TAGS: PGOV TW
SUBJECT: MA SEEKS REFORM; WANG WITHHOLDS COOPERATION,
PREDICTS NO SPECIAL SESSION


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


1. (C) Summary: On July 20 and 21, AIT Director Paal met with
both the winner and the loser of the July 16 election for KMT
Chair. Taipei Mayor and KMT Chairman-elect Ma Ying-jeou was
cautiously optimistic about prospects for reforming the KMT,
and for hammering out a working agreement with LY President
and former election opponent Wang Jin-pyng. Ma and key
advisor Su Chi acknowledged the KMT needs to reconsider
increasing Taiwan's defense expenditures but made no
commitment to pursue an LY Special Session to pass the
Special Defense Budget. Wang Jin-pyng, still smarting from
his overwhelming defeat, has refused repeated overtures from
Ma, and is demanding Ma publicly explain allegations of
corruption and vote-buying leveled during the campaign.
While Wang may ultimately cooperate with Ma he will likely
wait until he extracts a high price, or until he sees whether
Ma succeeds in consolidating his leadership over the party.
Wang said PFP Chairman James Soong will block any attempt to
convene an LY Special Session to consider the Special Defense
Budget. End Summary.

Ma Sees Election Victory As Mandate For Reform
-------------- -


2. (C) AIT Director Paal paid courtesy calls July 20 and 21
on Taipei City Mayor Ma Ying-jeou, who was elected July 16 as
the new KMT chairman, as well as his defeated opponent,
Legislative Yuan President Wang Jin-pyng. In response to the
Director's congratulations, Ma expressed gratitude and mild
surprise at the extent of his landslide victory against Wang
Jin-pyng. He said his final pre-election polling had
predicted a 58-42 victory, but that poll was completed on
July 15, before the Wang campaign released a commercial with
PFP Chairman James Soong and senior KMT leaders endorsing
Wang. Ma conceded that many within his campaign were unsure
of a win until very late on election day. Because the KMT
Chair race encompassed the entire island, Ma said it was much
more demanding than his previous race for Taipei Mayor. Ma
pointed out that he was even able to win in Kaohsiung County,
Wang Jin-pyng's home turf. KMT Legislator and key Ma advisor
Su Chi added that voter turnout in excess of 50 percent
helped secure a Ma victory. Ma noted that since the election
was KMT-only, the total number of polling places was less
than 1/20th of the places available during a normal,
island-wide election. With polling places so few and far
between, the KMT was required to provide buses, especially
for elderly voters, who otherwise would not participate. Ma
noted wistfully that despite KMT efforts to assure a clean,
transparent election, only 63 percent of KMT members polled
believe the election was "fair."


3. (C) Ma told the Director that his mandate for reform "is
quite clear" and that reform of the KMT is possible but will
take time. Ma asserted that aside from himself, there was no
one within the KMT capable of implementing the reforms the
KMT needed to prevent it from "fading into history." Ma's
strategy for revitalizing the KMT will also include the
formation of a KMT youth corps, and replacing the KMT's
top-down leadership style with an approach more attuned to
grass-roots sentiments. Ma remarked that since the election,
there have been many people requesting to join the party,
including some from well-known figures who had previously
strongly resisted joining. Ma is hopeful that this first
democratic KMT election will draw new blood to the party, and
will call home former members alienated by recent KMT
difficulties. Ma also wants to pay closer attention to
burnishing the KMT's image. Noting that the KMT National
Congress elects the 31-member Central Committee, Ma said
candidates customarily attract votes by hosting lavish
banquets and handing out gifts, actions the press has seized
upon as evidence of KMT corruption. This practice of
banquets and gifts, he stated, will stop at the 17th National
Congress, which will be convened August 19 and 20.


4. (C) Ma told the Director that, in light of the year-end
city/county chief elections, it is too soon to tackle the
KMT's "illicit property" and pension plan problems. He said
that when appropriate, he will propose the formation of a
special intra-party mechanism to develop and implement a
strategy. Ma expects the DPP to interfere with attempts to
resolve the "illicit property" question, since it has been
such effective fodder for DPP criticism of the KMT in the
past. He charged that past KMT attempts to sell off disputed
properties were stymied by DPP administration "blackmailing"
of potential buyers. Director Paal mentioned the KMT has in
the past failed to articulate its efforts to rectify the
"illicit property" question, letting its political opponents
drive the debate. Ma conceded that it is important to the
legitimacy of the process that it be public and transparent.

Apologies Don't Work, But Still Optimistic
--------------


5. (C) Regarding potential cooperation with LY Speaker Wang
Jin-pyng, Ma lamented that he had already apologized to Wang
six times for raising allegations of corruption against Wang
during the campaign. Ma alleged his campaign had proof of
Wang's alleged corruption, but qualified that the fault
mostly lay with Wang's staff, not with Wang himself. Ma
believed Wang is more inclined to cooperate with Ma than many
observers believe, but a good outcome is not guaranteed.
KMT 2008 Strategy: More "Taiwanese" Votes
--------------


6. (C) Ma did not spell out a strategy for competing with the
DPP, but emphasized that during the Chair election, he was
able to attract a considerable quantity of non-Mainlander
votes, drawing 64 percent of the vote in southern Taiwan, and
68 percent of the total vote in central Taiwan. (Note: Of
eligible KMT eligible voters, 49 percent are Taiwan-born.
End note.) Ma said that in any future campaign, the KMT will
focus more resources in the south to increase its share of
"Taiwanese" voters.

Compromise On Defense Budget Needed, But When?
-------------- -


7. (C) Ma told the Director that he needed to familiarize
himself with the intricacies of Taiwan's self-defense
situation, especially the US DOD's recent assessment of
Taiwan's increasing vulnerability relative to the PRC. Ma
advisor Su Chi said there had been no serious discussion of
Taiwan's military capability within the KMT for the past six
months, either at the KMT LY Caucus or Central Committee
level, and that the KMT needed to refine its policy toward
fashioning a compromise. Su said the prevailing sentiment
within the party was that President Chen and the DPP had
unfairly blamed the KMT and LY for blockading the passage of
a new defense budget, and that Chen would have to work hard
to eliminate strong resentment lingering within the KMT.
Neither Ma nor Su made any prediction regarding the
likelihood of an LY Special Session to address the Special
Defense Budget.

Wang: Biding His Time
--------------


8. (C) In the Director's subsequent meeting with LY President
Wang Jin-pyng on July 21, Wang said the chairmanship race had
an overall favorable impact on the KMT, pushing it to become
a more democratic institution. However, the election was
tainted by Ma Ying-jeou's use of unfounded allegations to
campaign against Wang. Wang insisted Ma must apologize
because he wrongly accused Wang of involvement in "black
gold" corruption and vote-buying schemes, and wrongly told
voters that Wang would follow former president Lee Teng-hui's
road toward Taiwan independence. Wang said Ma's willingness
to apologize six times thus far is proof that Ma knows his
accusations were false. Wang stated that Ma must explain
publicly why he chose to make false accusations, but an
explanation alone would be insufficient to entice Wang into
helping Ma govern the KMT. Wang said he could not currently
accept the position of First Vice-Chair because he must stick
to his principles, but added that "circumstances are
changing." (Comment: This suggests Wang may be willing to
cooperate with Ma, but has not yet decided his price, or the
optimal time to demand it. End comment.)


9. (C) Wang told the Director he resented Ma's decision to
play the "ethnicity card." Wang explained the KMT has
roughly 1 million eligible voters, 180,000 of which are
retired military (colloquially referred to as "Huang
Fu-hsing"),and another 320,000 who are mainland-born.
Taiwan-born KMT voters, at 49 percent, still constitute the
minority. Wang said that although Taiwanese-born voters
might vote for Ma, mainland-born voters would never vote for
a Taiwanese candidate. Wang said he worked very hard to
attract 40 percent of the Mainlander vote, but failed. By
emphasizing ethnicity, he continued, Ma heightened divisions
within the party. Wang contended the DPP welcomed a Ma
victory because Ma, as the presumptive KMT 2008 presidential
candidate, will be less able than Wang to draw "Taiwanese"
votes away from the DPP. Moreover, with Ma as Chairman, the
DPP and others will be able criticize the KMT as a
"Mainlander" party.


10. (C) Wang was unwilling to speculate about any role for
himself in the 2008 election, protesting that any such
discussion would be premature. He did opine that two factors
will be central to the KMT's chances in 2008: the
achievements of the Chen government must not be overwhelming,
and the Pan-Blues must be united, in order to effectively
marshal all their resources. Wang believes a
Mainlander-Taiwanese President-Vice President ticket has a
chance at winning, but it would be better to have two
Taiwanese candidates.

PFP Will Block Any Defense Spending Special Session
-------------- --------------


11. (C) Wang said there is virtually no chance that the
Special Defense Budget will be considered during a Special
Session of the LY this summer. The general question of
Taiwan's defense expenditures will likely have to wait until
the LY resumes normal sessions in September, when there may
be room for progress. Wang blamed the roadblock on PFP
Chairman James Soong, who had instructed PFP leadership that
under no circumstances would the PFP agree to convene a
Special Session. Wang told the Director he understood that,
aside from its implications regarding Taiwan security,
resolving the Defense Budget question is of central
importance to US-Taiwan relations. Wang said he will discuss
the matter with Lien Chan upon his return from the US, and he
hopes the Defense Special Budget issue can be resolved in
September, "without the US putting Taiwan under too much
financial pressure." When pressed to explain, Wang demurred,
saying that before an LY session was convened to discuss
particular defense budget proposals, it would be premature to
discuss questions of price or other budget difficulties.
Wang assured the Director that Taiwan would assume
"appropriate" responsibility for its own defense.

No Special Role For Lien
--------------


12. (C) Wang told the Director that Lien Chan will not
interfere with KMT day-to-day activities after he steps down
because Chairman Ma "will not let him." Instead, Lien will
concentrate his energies on the LY. Wang said he of course
would consult Lien's opinion if something "important" were to
come up.
PAAL