WANG JIN-PYNG PREDICTS ARMS BUDGET BY DECEMBER

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002513

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/26/2031
TAGS: PGOV TW
SUBJECT: WANG JIN-PYNG PREDICTS ARMS BUDGET BY DECEMBER


Classified By: Director Stephen M. Young, Reason(s): 1.4 (B/D).


1. (C) Summary: KMT LY President Wang Jin-pyng predicted to
the Director on July 25 that the LY would agree to an arms
budget no later than this December, which would include the
P-3Cs, and possibly PAC-II upgrades and limited funds for a
submarine feasibility study. According to "close hold"
information, former President Lee Teng-hui may be scheming to
have Vice President Annette Lu replace President Chen, Wang
alleged. KMT Chairman Ma Ying-jeou now opposes a
no-confidence vote against Premier Su because he fears Chen
would appoint Wang as the new premier. According to Wang, Ma
enjoyed less success in Japan than Wang did in his earlier
trip, because the Japanese perceive Ma as anti-Japan. Wang
expressed a desire to visit the Mainland and also said he was
working with former KMT Premier Vincent Siew on a plan to
increase PRC access for Taiwan banks. End Summary.

Defense Budget by December?
--------------


2. (C) In a meeting with Kuomintang (KMT) Legislative Yuan
(LY) President Wang Jin-pyng on July 25, the Director
stressed the importance of moving forward on arms procurement
in the LY this fall. Wang asserted that the DPP was most
responsible for the delay, sitting on the arms procurement
proposal for so long, and then delivering it to the LY in an
unworkable form. But he acknowledged that since 2004, the
onus for continuing delays had shifted to the Pan-Blue
dominated LY.


3. (C) The Director urged Wang to forget about the past and
focus on improving Taiwan's ability to defend itself.
Taiwan's friends in the U.S. are concerned that Taiwan
leaders no longer have the resolve to defend Taiwan, which
has negative implications for U.S.-Taiwan relations and could
embolden the PRC to take Taiwan by force. Taiwan must
maintain a convincing defense capability to protect its
hard-won liberties now and to ensure that any future
negotiations with the PRC are conducted on an equal basis.


4. (C) Wang agreed with the Director that the "blame game"
continued to be the largest obstacle to reaching cross-party
consensus on the defense budget. Wang added that no one in
Taiwan should take Beijing's words lightly, since the
communists view retaking Taiwan as the last piece in the
puzzle of restoring China's dignity.


5. (C) The Director urged Wang, as LY speaker, to play a
pivotal role in brokering cross-party consensus on the
defense budget. Wang seemed eager to play such a role and
expressed confidence that the LY would approve a defense
budget by December 2006. Wang explained that the first two
months of the LY session would be dedicated to planning the
legislative agenda. Assuming the Executive Yuan provided the
LY with a workable defense budget proposal, Wang said, he
would recommend during the scheduling phase that the LY set
aside a special period to debate and vote on it. If all went
well, Wang continued, the LY could begin deliberations on the
defense budget by late October, and pass a bill by the end of
December.


6. (C) Wang predicted the LY would approve the purchase of
the P-3C ASW aircraft, which enjoy broad cross-party support.
Wang said consensus is also building in favor of funding a
NT$200 million (US$7 million) submarine feasibility study.
The Director reminded Wang that the estimated cost of a full
feasibility study was closer to US$360 million. Wang replied
that the feasibility study might proceed to a second,
separately funded design stage after initial feasibility
studies were completed. Wang also stated that he and KMT
Chairman Ma Ying-jeou favored purchasing the upgrades to
existing PAC-II missiles during this LY session, but would
have to wait until after March 2007 to consider buying new
PAC-IIIs, because of the KMT's referendum-related "ban" on
PAC-III missiles until that date.

Lee Teng-Hui Backroom Deal with VP Annette Lu?
-------------- -


7. (C) Wang Jin-pyng told the Director it would not be in

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character for President Chen to voluntarily step down,
barring overwhelming public pressure. Such pressure, Wang
suggested, could come from former President Lee Teng-hui
publicly calling on Chen to step down to make way for Vice
President Annette Lu. Based on "close hold" information from
an undisclosed source, Wang claimed that Lee had decided on
the conditions he would demand Lu accept in exchange for his
support: she must promise not to run for president in 2008,
she must grant President Chen a full pardon for any alleged
crimes, and finally, she must promise to preserve and promote
Taiwan's sovereignty, but not pursue independence. Wang did
not identify the source of his information or say whether Lee
had already conveyed a proposal to Lu. The Director
responded that both the PRC and the Pan-Blues have their own
reasons to resist a Lu presidency, and he expressed doubt
that Lu herself would be willing to forego a candidacy in

2008.

Wang Willing to Cooperate on Cross-Strait Agenda
-------------- ---


8. (C) The upcoming Conference on Sustainable Economic
Development is not likely to produce any significant
breakthroughs in cross-Strait relations, Wang remarked, but
there is much important work to be done. Wang will co-chair
the conference with Premier Su Tseng-chang and Vincent Siew,
a former KMT premier and current chairman of the Chunghua
Institution for Economic Research. Wang said he has agreed
to work closely with Siew to facilitate access to the
Mainland market for Taiwan banks. This is essential, Wang
said, because Taiwan businesses in the PRC do not have access
to financial services and are therefore at a significant
competitive disadvantage. Wang also expressed admiration for
Vice Premier Tsai Ing-wen's economic policy acumen, giving
her credit for the Executive Yuan's increasingly pragmatic
cross-Strait policies.

Wang is the Reason Ma Opposes No-Confidence Vote?
-------------- --------------


9. (C) There is little chance for a no-confidence vote
against Premier Su this fall, Wang said. Ma Ying-jeou
opposes such a vote because he is fearful that President Chen
would choose Wang himself as the new premier. At this point,
Wang added, there is no consensus within the Pan-Blue LY
caucus on the need for a no-confidence vote or a second
recall, but neither could be entirely ruled out.

No Coordination with Ma on Japan Trips
--------------


10. (C) Wang said that he and Ma had not coordinated the
timing of their respective visits to Japan. Wang noted that
he had met with Japanese Chief Cabinet Secretary Shinzo Abe
during his visit, while Ma had not been able to do so, a fact
he attributed to Japanese perceptions of Ma as anti-Japan.
Wang said he has very close relations with many within the
Japanese government, seeming to imply that he was more
capable than Ma of successfully managing KMT relations with
Japan. (Note: KMT legislator and Ma advisor Su Chi, who
accompanied Ma to Japan, said Shinzo Abe was unable to meet
with Ma because he was preoccupied by the North Korean
test-firing of long range missiles, which occurred during
Ma's Japan visit. End note.) According to Wang, his
Japanese interlocutors pressed him to support Taiwan's
participation in a U.S.-Japan-Taiwan security arrangement.
Observing that U.S.-Japan and U.S.-Taiwan relations are quite
good, the Director suggested that any trilateral grouping
would be counterproductive, given the sharp Chinese reaction
it would be sure to trigger.

Wang Formulating Own PRC Visit Agenda
--------------


11. (C) Wang said he had received an open-ended invitation
and would like to visit the Mainland. He would like to
accomplish something new during such a visit, but had not yet
decided what that could be. Noting that neither former KMT
Chairman Lien Chan nor PFP Chairman James Soong had touched
on the question of "One China" during their respective
visits, Wang postulated that he might be able to encourage

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PRC acceptance of the KMT's "One China, Different
Interpretations" policy as a basis for future cross-Strait
dialogue.

Comment:
--------------


12. (C) Wang is always hedging his bets. On one hand, he
seems willing to work with Ma in trying to broker a
compromise between the Pan-Blue and Pan-Green on the
long-stalled arms budget. On the other hand, he is willing
to discuss quite openly Ma's flaws and his own ambitions,
including his hope to break new ground in the PRC. Wang, who
doubtless hopes to continue playing an important role in
Taiwan politics beyond 2008, is assiduously cultivating close
ties with both friends and foes of Chairman Ma.
YOUNG