AIT DIRECTOR VISITS ITRI CHAIRMAN LIN HSIN-I

UNCLAS SECTION 01 OF 02 TAIPEI 002677 SIPDIS SENSITIVE SIPDIS STATE PASS EAP/TC E.O. 12958: N/A TAGS: ECON PREL ETRD EINV TW SUBJECT: AIT DIRECTOR VISITS ITRI CHAIRMAN LIN HSIN-I ¶1. (U) Summary. AIT director paid a courtesy call on July 24 to Industrial Technology Research Institute (ITRI) Chairman Lin Hsin-I to exchange views on Taiwan's current educational system, economic situation, and strategies for the future. Lin stressed the need for educational reform, to bring dynamic thinking into industry. He also said that Taiwan needed to develop new cutting edge technology items such as carbon fiber composites. On cross-Strait trade, Lin emphasized the need to encourage bilateral trade, but he did not foresee any progress on this issue at the upcoming Sustainable Economic Conference. End summary. ¶2. (U) Lin was appointed as ITRI Chairman in 2004. ITRI is a government-financed (45 percent) non-profit organization tasked with guiding Taiwan's industrial development. It has a staff of 6,100 persons including 820 PhD's. It serves as a research center for industry and an unofficial arm of the government's industrial policies. CROSS-STRAIT TRADE -------------- ¶3. (SBU) Lin stressed that the ruling Democratic Progressive Party (DPP) did not understand commercial concerns and had squandered opportunities to foster bilateral trade between China and Taiwan. He said in the PRC many of the government officials came from industry. Lin said President Chen thought that if he (Chen) opened up trade with China, he would lose support from his own party. Lin said he favored relaxing the restrictions on semiconductor investment in China. AIT Director observed that China's cheaper labor was not always the main consideration for Taiwan investors, citing the example of Morris Chang, Chairman of TMSC and former Chairman of ITRI, whose primary concern was the lack of IPR protection in China. Lin said he was an advisor to the Sustainable Economic Conference but he did not expect any breakthroughs on cross-Strait trade to emerge from that conference. Note. The July 28-29 Sustainable Economic Development Conference fell short of business expectations for a more open trade policy towards China. It kept the 40 percent investment cap for Taiwan firms in China, although it endorsed relaxed restrictions on tourism, charter flights and banking and to permit mainland manufacture of semiconductor chips up to 0.18 microns. End note. HOW TO STAY COMPETITIVE -------------- ¶4. (U) Lin said one way to stay competitive with mainland China was to promote higher value-added products. Taiwan currently was developing cutting-edge technology products such as carbonized bamboo which was used in combination with natural/synthetic fibers to provide insulation. Lin said that boxes insulated with carbonized bamboo composites might replace refrigerated trucks in the future. Likewise, Taiwan makes high-end bicycles locally but cheaper bikes are produced by Taiwan companies in China. EDUCATIONAL REFORM -------------- ¶5. (U) Lin complained that university-level education in Taiwan was turning out students who knew how things work but not why. He said Taiwan needed to develop a connection between the educational system and industry so that college graduates would be able to contribute to industrial development. AIT Director quoted Academia Sinica President Li Yuan-tseh as saying the students were good at taking tests but not at creative thinking. Lin said that he looked forward to the time when foreign institutions would invest in education in Taiwan. He added he thought it was good that Taiwan professors were going to China to teach. SHORT TERM PROSPECTS -------------- ¶6. (U) AIT Director asked Lin about the prospects for Taiwan's economy in the next five years. Lin thought that as long as Taiwan kept its key technologies, added good management and R&D, then it could stay ahead of the TAIPEI 00002677 002 OF 002 competition. Lin said since manufacturing was moving away from Taiwan the service sector held much promise. Given Lin's experience in the automobile industry, AIT Director asked him about development of hybrid vehicle technology in Taiwan. Lin said Taiwan was lacking in that technology but was strong in the area of auto parts and components. Lin said Taiwan provided USD4 billion in automobile components to the world market. Implementation and coordination of economic policy between government and industry were critical to keep Taiwan's industry on a healthy course, according to Lin. YOUNG