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