MOTC MINISTER ON HIGH-SPEED RAIL, DIRECT LINKS,

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003099 SIPDIS SIPDIS STATE PASS USTR STATE FOR EAP/TC COMMERCE FOR 3132/USFCS/OIO/EAP/WZARIT TREASURY FOR OASIA/LMOGHTADER USTR FOR STRATFORD, ALTBACH E.O. 12958: DECL: 09/06/2016 TAGS: ELTN EAIR ECPS PREL CH TW SUBJECT: MOTC MINISTER ON HIGH-SPEED RAIL, DIRECT LINKS, INFRASTRUCTURE DEVELOPMENT REF: A. 05 TAIPEI 3779 ¶B. TAIPEI 240 ¶C. TAIPEI 729 ¶D. TAIPEI 1697 ¶E. TAIPEI 2860 Classified By: AIT Director Stephen M. Young, Reason 1.4 d ¶1. (C) Summary: In a September 5 meeting with AIT Director Young, Ministry of Transportation and Communications (MOTC) Minister Tsai Duei expressed confidence that Taiwan high- speed rail will open in October as scheduled after a one- year postponement. He also affirmed that the private sector will continue to play a leading role in Taiwan's infrastructure developments. End summary High Speed Rail -------------- ¶2. (C) AIT Director Young met with the newly-appointed Minister of Transportation and Communications Tsai Duei on September 5, 2006. When asked about the prospects for Taiwan's new high-speed rail system to begin operations as currently scheduled in October, Tsai assured the Director that there were no insurmountable technical problems and the starting date would not be further postponed (ref A). He said the only question was how soon the full length of the rail would be operational. The train will eventually offer service from downtown Taipei to Kaohsiung. However, because of delays in preparing a tunnel just outside of Taipei city, the northern terminus may initially be the Taipei suburb of Banqiao. Tsai said that service to downtown Taipei would be available before the Lunar New Year holiday in February 2007. Effect on Aviation Market -------------- ¶3. (C) Tsai acknowledged that the opening of the high-speed rail would put additional pressure on Taiwan's struggling local airlines, but he noted that they were already well prepared for the transition. They have already drastically reduced service on routes that will compete with the high- speed rail. Tsai pointed out that capacity on Taipei- Kaohsiung flights had fallen by 50 percent while airlines looked to expand service to Taiwan's outlying islands and other destinations in the region. He argued that high oil prices presented a more serious challenge to the small, local airlines and explained that the Taiwan authorities 
had already taken measures to help them reduce costs, such as lowering airport fees. (Note: United Airlines informed us that when MOTC lowered airport fees, it increased overflight fees by more than 50 percent. While local carriers saw a substantial reduction in their total fees, international carriers saw a much smaller reduction or in some cases a net increase. End note.) Cross-Strait Air Links -------------- ¶4. (C) Director Young asked if the opening of the high- speed rail would create more pressure for direct aviation links with the PRC. Tsai noted that local airlines have been eagerly awaiting direct links for quite some time and had invested in new aircraft years ago in anticipation of cross-Strait flight. According to Tsai, an announcement on further opening of Taiwan to PRC tourists will increase industry pressure on the Taiwan authorities for direct air links more than the opening of the high-speed rail. He commented that the trend toward further cross-Strait opening was positive, and he expects progress on tourism soon. The Director urged Tsai to consider permitting foreigners to use cross-Strait charter flights and to permit foreign airlines to participate in the routes. Tsai observed that local airlines would be eager to expand their passenger base to include foreigners. He also explained that Taiwan would be happy to have cross-Strait routes categorized as international routes. Under the U.S.-Taiwan bilateral aviation agreement, U.S. airlines would be TAIPEI 00003099 002 OF 002 welcome to participate in such routes, he added. (Comment: The PRC would almost certainly object strongly to such an outcome. End comment.) Transportation Security -------------- ¶5. (C) In response to a comment by the Director that new security procedures had placed a heavy burden on U.S. airlines, Tsai expressed Taiwan's willingness to cooperate with U.S. security agencies on any enhanced security procedures. The Director thanked Tsai for Taiwan's support of the Container Security Initiative (CSI) and Megaports Program. Tsai told the Director that the United States and Taiwan "speak a common language" on transportation safety and security, noting that Taiwan wants strong security to help business and trade flourish. Private Sector and Infrastructure Development -------------- ¶6. (C) When asked about the controversy surrounding Taiwan's Electronic Toll Collection (ETC) System that resulted in the resignation of Tsai's predecessor (ref E), Tsai reaffirmed the role of the private sector in Taiwan's SIPDIS infrastructure development. The ETC has run into difficulty because the award of the build-operate-transfer (BOT) contract to Far Eastern Electronic Toll Corporation (FETC),an affiliate of the Far Eastern Group, was challenged in court by one of the losing bidders. Tsai acknowledged that the ETC was "a little bit controversial" right now, but underscored the fact that FETC was able to begin service just one and half years after the contact was awarded and without the government paying a penny. He argued that it would have taken the government twice as long to put the system in operation and would have had a negative effect on the government budget. He said a new bidding process was in the works and predicted that FETC would be able to participate in the new round of bidding. Tsai also commented that the private sector would continue SIPDIS to play a leading role in the development of Taiwan's infrastructure and the Taiwan authorities would continue to use BOT contracts for large projects like the ETC. National Communications Commission -------------- ¶7. (C) Director Young reiterated U.S. support for Taiwan's new independent telecommunications and broadcasting regulatory agency, the National Communications Commission (NCC). Tsai emphasized that the NCC was now completely separate from MOTC and agreed that the agency needs to be fully independent. YOUNG