DPP CHAIRMAN YU SHYI-KUN ON DOMESTIC POLITICS,

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 002537 SIPDIS SIPDIS E.O. 12958: DECL: 07/27/2031 TAGS: PGOV TW SUBJECT: DPP CHAIRMAN YU SHYI-KUN ON DOMESTIC POLITICS, CROSS-STRAIT RELATIONS, AND DEFENSE BUDGET Classified By: AIT Director Stephen M. Young, Reasons: 1.4 (b/d) ¶1. (C) Summary: DPP Chairman Yu Shyi-kun told the Director on July 26 that the DPP's recent national party congress was the most productive of the last ten years. Over the next six months, DPP efforts will focus on implementing the congress' reform resolutions and supporting its candidates in the Taipei and Kaohsiung municipal elections. Yu predicted the Kuomintang (KMT) will not move forward with a threatened no-confidence vote against Premier Su this fall. Yu expressed support for increased economic and cultural exchanges with the Mainland so long as Taiwan's national security and economic competitiveness are protected. End Summary. Domestic Politics -------------- ¶2. (C) Democratic Progressive Party (DPP) Chairman Yu Shyi-kun told the Director on July 26 that he was satisfied with the results of the July 22-23 national party congress, characterizing it as the most productive congress held in the last ten years. The decision to abolish party factions will be good for the party because the factions had become a "party within the party." Yu acknowledged that factional groups will still be allowed to function within the legislature as they do in other countries, but he hoped that the abolition of the party's formal factions, which maintained their own separate offices and budgets, will reduce internal tensions and improve the party's image. Yu also noted the decision to crack down on "proxy party members," groups of people whose membership dues were paid by certain politicians who used them to manipulate party primary elections. ¶3. (C) Although the corruption issues surrounding some of President Chen's close advisors and family continue to weigh on the party's public support, Yu stressed that the DPP will continue to support the President as long as he has not violated any laws. Yu added that the DPP will not interfere in the legal process, which is the proper place to resolve the allegations against the President's advisors and family members. Yu said the party will be focused on restoring its image and unity through implementing the congress' anti-corruption resolutions and supporting its candidates in Taipei and Kaohsiung. ¶4. (C) Turning to the Taipei and Kaohsiung mayoral races, Yu said the expected entry of People First Party Chairman James Soong will help the DPP's Frank Hsieh. DPP internal polls show Hsieh holds about 25 percent support, trailing the KMT's Hau Long-bin by 15-20 points, but Yu predicted Soong's entrance would siphon off deep-Blue supporters from Hau. On Kaohsiung, Yu revealed that DPP internal polls show DPP candidate Chen Chu and KMT candidate Huang Chun-ying even at this stage. Yu was confident that Chen Chu will win if she can unify Pan-Green supporters to back her, including local factions in Kaohsiung, former Kaohsiung mayor Frank Hsieh's political network, and the Taiwan Solidarity Union (TSU), which now has its own candidate in the race. Yu said the DPP will continue working to persuade the TSU to withdraw its candidate, to avoid splitting the Pan-Green vote and giving the election to the KMT, an outcome that would hurt the TSU as well as the DPP. ¶5. (C) Yu said he does not expect KMT Chairman Ma Ying-jeou to push a no-confidence vote against Premier Su in the LY this fall, but the DPP has to be prepared for the possibility. KMT legislators fear such a move could lead President Chen to dissolve the LY and call for new early elections, which the legislators do not want. In addition, Ma is focused on consolidating his position within the KMT and does not want to create uncertainties as he prepares to run for president in 2008. Cross-Strait Ties -------------- ¶6. (C) Localization (bentuhua) and promoting Taiwan's sovereignty are two long term objectives that Chen and the party share, said Yu. He explained the DPP view that Taiwan is already a sovereign, independent country. The DPP's long-term goal over the next five, ten or twenty years is to turn Taiwan into a "normal country." TAIPEI 00002537 002 OF 002 ¶7. (C) Yu said he viewed increased exchanges with the Mainland as good for Taiwan as long as Taiwan's national security interests and economic competitiveness are protected. Yu expressed concern that, according to his figures, two percent of Taiwan's GDP is flowing to the Mainland as investment and a large number of companies are moving operations to the PRC--Yu said over 70 percent of companies listed on the Taiwan stock market have significant investments in the mainland--leading to a hollowing out of Taiwan's economy. Based on Taiwan's experience, Yu predicted that the PRC will democratize when its per capita rises from the current USD 1,000 to about USD 4, 000. Defense Budget -------------- ¶8. (C) The Director urged Yu to find a way to work with the opposition parties to pass measures to enhance Taiwan's defense capabilities. Yu reaffirmed that passing a special defense budget remains a top priority of President Chen's administration and an initiative that the DPP firmly supports. Comment -------------- ¶9. (C) Relatively moderate, low-key, and with a warm personality, Yu manages to play politics without giving offense, a difficult feat in Taiwan's polarized society. So far, Yu is doing a quite credible job in keeping the party together in a very challenging period. He sounded especially upbeat when discussing the reforms approved by the recent national party congress. Despite Yu's positive approach, however, the party's problems are bound to continue because of the DPP's identification with President Chen, who is besieged by scandal allegations against a number of those closest to him. YOUNG