TAIWAN WOOING LATIN AMERICA ALLIES WITH NEW

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 004292

SIPDIS

STATE PASS AIT/WASHINGTON

E.O. 12958: DECL: 10/20/2015
TAGS: PREL PGOV ASEC XR TW
SUBJECT: TAIWAN WOOING LATIN AMERICA ALLIES WITH NEW
DIPLOMATIC STRATEGY

Classified By: AIT Acting Director Dave Keegan, Reason 1.4 (b/d)


1. (C) Summary: Taiwan's US $250 million "Co-Prosperity
Project" is a new foreign policy strategy aimed at bolstering
Taiwan's standing with its diplomatic partners in Latin
America and countering Beijing's growing economic ties.
Ministry of Foreign Affairs (MOFA) officials explain that the
initiative came from President Chen Shui-bian's personal
dissatisfaction with Taipei's existing aid programs and
Beijing's efforts to use its growing economy to pressure
Taiwan. The program will promote Taiwan investment and
encourage long term development rather than rely on Taipei's
traditional infrastructure and humanitarian assistance
projects. Taiwan officials from several government
ministries jointly developed the plan with Taiwan business
leaders and recipient governments in Latin America. MOFA
officials are worried, however, that it will be difficult to
convince Taiwan businesses to invest in Central America
because most firms see more potential in the PRC and
Southeast Asia. End summary.

Taiwan's Co-Prosperity Project
--------------


2. (C) President Chen unveiled the ambitious plan during his
September 2005 summit meeting with Central American leaders
in Nicaragua. Taiwan's Co-Prosperity Project will promote
Taiwan investment among Taipei's Latin American partners in
an effort to increasingly integrate the economies of Taiwan
and its diplomatic partners. The initiative is primarily
focused on Central America, but other nations with relatively
developed economies, such as the Dominican Republic, will
also be included. According to MOFA's Latin America
Director-General Jaison Ko, the government has earmarked $250
million USD for the project, which is the result of five
months of joint planning by Taiwan government ministries,
businesses, and recipient governments in Latin America. Ko
said that the program will be tailored to each individual
country and focus on two or three key economic sectors for
investment and development. The investment will be
facilitated by joint Taiwan-Latin American ventures and
funding will come from the Executive Yuan (EY) and Taiwan's
aid agency, the International Cooperation Development Fund
(ICDF).

New Strategy to Counter Beijing in Latin America
-------------- ---


3. (C) MOFA's Ko explained that the project emerged from
Presidential Office dissatisfaction with Taiwan's previous
foreign policy strategy and Beijing's growing economic
influence in Latin America. He told AIT that President Chen
was personally involved in planning the new program and
insisted that Taipei needed a new diplomatic plan to shore up
Taiwan's ties with its remaining partners and counter
Beijing's growing economic pressure on Taipei. Ko said that
Beijing has been using its economy to entice Latin American
business leaders to pressure Latin American governments to
increase ties with Beijing on the grounds that the PRC offers
more economic potential than Taiwan.


4. (C) Ko told AIT that Taipei government officials had put a
great deal of effort into this proposal and that it is not
just an initiative cobbled together at the last minute for
the benefit of Chen's trip or political gain. Ko added that
Taiwan wants to prove to its remaining partners that it has
much to contribute to their long-term development. He said
that too often Beijing makes promises that it cannot keep and
many Latin American governments are beginning to grumble
about Beijing's unreliability in fulfilling its promises to
import billions of dollars worth of products. Ko said that
the Presidential Office had directed MOFA that Taiwan must do
more to promote investment to take advantage of this growing
discontent over the PRC's promises.

Allies Concern Also a Factor
--------------


5. (C) Taiwan's diplomatic partners have also been very vocal
about their changing economic needs and what Taiwan can
provide. MOFA's Ko said that many of Taiwan's partners have
moved beyond basic economic development and require more
high-tech assistance and access to markets. Ko said that
Dominican Republic President Fernandez asserted that Santo
Domingo needs less humanitarian, agriculture, and
infrastructure projects and more investment from Taiwan that
will serve the long term development of the economy and
promote jobs. Previously, humanitarian projects had been the
traditional mainstay of Taiwan's aid programs for its
diplomatic partners. Ko said that Taiwan is planning to
build a science park in the Dominican Republic and has also
initiated discussions for an FTA. Thus far, Ko said that
Taiwan's partners are pleased with the Co-Prosperity Project
because they had a voice from the beginning in the program's
development.

But Will Taiwan Firms Support the Idea?
--------------


6. (C) One key to this program is persuading more Taiwan
firms to invest in Latin America. MOFA worries that this may
prove the biggest problem Taipei faces with its new strategy.
MOFA's Ko told AIT that the majority of Taiwan's investors
are focused on the PRC or the Southeast Asian market.
Taiwan's Co-Prosperity Project is focused on promoting
Central America as a base for Taiwan free trade access to the
US market because of the newly passed Central America Free
Trade Agreement (CAFTA). Ko explained this involves
convincing Taiwan investors that there is a new opportunity
for them to access the US market via investment and exports
from Central America under CAFTA.


7. (C) Ko explained that Taipei will focus on the textile
market because many factories in the region, especially
Guatemala and the Dominican Republic, have shut down because
they cannot compete with the flood of cheap Chinese textile
products. He remarked that this has given the PRC negative
publicity in the region and is an industry Taipei can assist.
Under CAFTA, Ko said that Central American nations can
export textiles to the US more cheaply, which is why Taipei
is encouraging Taiwan investors to take advantage of this and
open textile firms in Central America for export to the US
market. However, Ko lamented that it remains to be seen if
Taiwan businesses will support the idea.

So Far Political Opposition Muted
--------------


8. (C) Ko told AIT that President Chen's initiative has drawn
the ire of opposition parties (KMT and PFP) in Taiwan's
Legislative Yuan (LY),but that overall opposition has been
muted. Ko explained that the government predicted such
opposition and to ensure that the initiative would not be
blocked, the money will come out of the EY's already approved
budget and will not require LY approval. He said this is the
only way for the government to promote its foreign policy
because political infighting makes it impossible to achieve
foreign policy consensus among the political parties. (Note:
Press coverage of the Co-Prosperity Project in Taiwan quickly
tapered off, suggesting it will be relegated to a memory as
LY politicians prepare for December local elections and focus
on politically contentious domestic issues. End note).

Comment: An Opportunity for Success
--------------


9. (C) It is too early to tell if the initiative will get off
the ground; MOFA claims Taiwan's Co-Prosperity Project has
been initially well received by Taipei's diplomatic partners.
This could give the Chen administration a window of
opportunity to bolster its standing with its Latin America
diplomatic partners. However, much will depend on whether
Taipei can convince Taiwan firms to participate in the
project and whether Taiwan can deliver on its promise to
provide real investment and differentiate itself from the
criticism of empty promises and unreliability that is
beginning to plague Beijing in Latin America.
KEEGAN