SCT TALKS: NOTHING SPECIAL ON SPECIAL BUDGET

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003345

SIPDIS

STATE PASS AIT/W

E.O. 12958: DECL: 08/11/2015
TAGS: PGOV PREL MARR TW
SUBJECT: SCT TALKS: NOTHING SPECIAL ON SPECIAL BUDGET

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


1. (C) The Ministry of National Defense (MND) presentation
to the formal opening round of U.S. Security Cooperation
Talks (SCT) in Taipei on August 9, 2005, stated that Taiwan
plans to increase its national defense spending to 3 percent
of GDP, an annual increase of 50 billion NTD (USD 1.7
billion). After the presentation, Vice Admiral Liang
Kung-Rai, Director General of the Strategic Planning
Department (SPD),told the visiting U.S. interagency
delegation that Minister of Defense Lee Jye is encouraged by
recent statements by President Chen in support of the Defense
Procurement Special Budget, but emphasized that the real
challenge remains the Legislative Yuan (LY). Liang said MND
Lee will meet with LY speaker Wang Jin-pyng after Wang's
return from the U.S. on August 10 to discuss how to improve
MND-LY cooperation to gain passage of the Special Budget.


2. (C) VADM Liang speculated that if the Special Budget is
reduced or modified as part of an LY compromise, MND Lee Jye
will probably give top priority to diesel submarines above
the other weapons systems.

Pan-Blue Position
--------------


3. (C) During a separate meeting on August 9, PFP Legislator
Sun Ta-Chien told AIT that although the PFP continued to
object to any use of an LY Special Session to purchase
military hardware, it would be willing to consider and pass a
regular budget bill authorizing the purchase of the PAC-III
anti-missile defense system and the P-3C antisubmarine
aircraft. However, PFP leaders have serious concerns about
the "old, outdated" design and lengthy delivery time of the
submarines proposed in the Special Budget package, and would
rather see that money spent on modern fighter aircraft. Sun
told AIT that PFP leaders consider air superiority to be more
important than submarine capability, and they may request the
Taiwan government ask the USG to prepare a proposal for the
sale of more advanced fighters to Taiwan.


4. (C) Sun's comments were echoed by KMT LY member and Ma
Ying-jeou ally Wu Yu-sheng, who told AIT on August 10 that
the KMT's top priorities are to strengthen Taiwan's missile
defense and air defense capabilities, with submarines placing
a distant third. Wu added that Taiwan's economy had worsened
since 2001, making large-scale weapons purchases less
affordable. He argued that Taiwan should lower its sights
and purchase only those weapons systems that immediately
improve its security situation.

NSC Deputy SecGen Comments
--------------


5. (C) During his meeting with the visiting U.S. delegation
on August 8, NSC Deputy SecGen Henry Ko (Cheng-heng) told the
delegation that in an August 4 meeting, President Chen
Shui-bian stated that Taiwan needs to: 1) Reinforce its
defense capability; 2) Increase its defense budget to 3
percent of GDP; and
3) Pass a modified Special Budget and move unfunded weapons
systems into the annual defense budget to be presented to the
regular LY session in September.


6. (C) Additionally, Ko volunteered that Taiwan would be
prepared to assist in advancing U.S. efforts in Southeast
Asia upon request. Ko made this comment in response to DOD
Security Cooperation Operations/DSCA Principal Director Ed
Ross's earlier statement that the U.S. is actively addressing
the terrorism threat in the region.


7. (U) Despite Chen's emphasis on increasing the defense
budget to 3 percent of GDP by 2008, Premier Frank Hsieh told
the local press August 10 that it would probably be extremely
difficult to increase the defense budget over the next few
years given Taiwan's financial situation.

Comment
--------------

8. (C) While Taiwan MND officials acknowledged the continued
challenge posed by lack of a Special Budget, during this
opening round there was little discussion of the steps that
MND plans to take to continue to push for its passage, nor
did MND formally discuss other options or scenarios for
funding defense purchases. While reports of improved
cooperation between MND Lee Jye and LY Speaker Wang are good
news, there is little to indicate this effort will make real
progress towards passage of the Special Budget. In fact, if
Liang's speculation regarding Lee Jye's preference for
submarines is correct, then it signals the gulf between the
MND and LY on the Special Budget remains as wide as ever.
PAAL