KMT LY SPEAKER WANG ON DEFENSE BUDGET, "DEPOSE

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003154

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/12/2031
TAGS: PGOV TW
SUBJECT: KMT LY SPEAKER WANG ON DEFENSE BUDGET, "DEPOSE
CHEN" PROTEST


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


1. (C) Summary: Kuomintang (KMT) Legislative Yuan (LY)
Speaker Wang Jin-pyng told the Director and DDIR on September
11 that "the time had arrived" for the LY to resolve the
defense budget question. Wang said he and KMT Chairman Ma
Ying-jeou expect the LY to approve funding for the purchase
of P-3C anti-submarine warfare (ASW) aircraft, PAC-II missile
upgrades, and an initial "feasibility study" of submarines.
Turning to ongoing protests against President Chen, Wang
suggested that Chen's Pan-Green supporters have not abandoned
him. The "Depose Chen" protest is "ninety-nine percent"
Pan-Blue, and therefore President Chen faces little real
pressure to step down. End Summary.

Pan-Blue Consensus on Defense Budget?
--------------


2. (C) During a September 11 meeting to introduce AIT Deputy
Director Robert Wang, KMT LY Speaker Wang Jin-pyng told the
Director that he and Chairman Ma agreed that "the time had
arrived" for the KMT to push for resolution of the defense
budget question. PFP Chairman James Soong, however, is
threatening to tinker with the specifics of various weapons
platforms, Wang said, which could complicate matters.
According to Wang, Soong has suggested that Taiwan need buy
only eight or ten P-3C aircraft, instead of the twelve
airframes proposed by the original special defense budget
package. Wang suggested that Soong is concerned about
significant arms purchases because he fears damaging his
"very good relationship with Beijing." Nonetheless, Wang
continued, Soong was beginning to "come around," noting that
KMT Chairman Ma Ying-jeou himself would press Soong again to
cooperate on the defense budget. Wang also urged the
Director to meet with Soong again, to persuade him to drop
his minor objections.


3. (C) Wang said he had convinced Ma that PAC-II upgrades
were not banned by the 2004 failed "missile defense
referendum." Ma was willing to purchase the PAC-II upgrades,
Wang continued, but would oppose the purchase of new PAC-III
missile batteries until after the three-year referendum ban
expired in March 2007. When the PAC-IIIs do come up for
consideration, Wang said, the LY should, for political
reasons, buy at least nine batteries, so that Taipei,
Taichung, and Kaohsiung can receive three batteries each. In
this way, Wang explained, each of Taiwan's major cities will
have at least some protection, not just Taipei.
Demonstrating his regional perspective, Wang noted in passing
that Japan has purchased a number of PAC-III systems in order
to cope with the growing DPRK missile threat, the implication
being that Taiwan should follow suit.

Increased Spending to 2.85 Percent in Doubt
--------------


4. (C) The LY will discuss funding an NT$600 million (US$20
million) submarine feasibility study, Wang said, and might
also discuss the purchase of some newer-model F-16 aircraft.
Wang was less optimistic about the LY increasing overall
military spending to 2.85 percent of GDP. Wang said Taiwan
is facing a budgetary crisis and slow economic growth.
Legislators will be forced to justify increasing military
spending at the expense of social and economic investment.
The Director countered that Taiwan's defenses had atrophied
from years of insufficient spending, and noted that Chairman
Ma himself had agreed that Taiwan should gradually increase
its military spending to 3 percent of GDP to redress this
shortfall. Wang said the people should discuss with their
representatives whether it made sense to increase military
spending in the midst of Taiwan's current financial straits.



5. (C) Wang predicted that if all goes smoothly, the LY could
begin its defense budget deliberations by late October or
early November. Because the defense budget is part of the
larger annual budget bill, Wang explained, a final decision
on the defense budget will not be made until the annual
budget is finally passed, in late December, or even next
January, if the LY fall session spills over into 2007.

TAIPEI 00003154 002 OF 002



Protests Won't Affect Chen
--------------


6. (C) Wang told the Director that "ninety-nine percent" of
the participants in Shih Ming-te's ongoing "Depose Chen"
protest are Pan-Blue supporters. President Chen knows this,
he said, and therefore feels no real pressure from the
movement to step down. Wang disapproved of KMT Chairman Ma's
recent performance, saying that Ma had changed his position
toward the protest too many times and had been "naive" to
propose that the DPP LY caucus should offer its own proposal
to recall President Chen. The Director observed that Ma, as
a possible future president, had obvious reasons to be
concerned about the lack of respect being shown to Chen, the
sitting president. Wang argued that Chen's personal flaws
had damaged his political reputation, making him vulnerable
to attack, but had not affected the office of the presidency.

Comment
--------------


7. (C) Wang's remarks suggest that progress could be made on
the defense budget during this upcoming LY session, but he
also left us with cause to be concerned. First, we have
heard these kinds of promises before, only to be greeted with
one excuse (defense referendum "veto" on missiles) after
another (the NUC/NUG debacle). Second, even Wang seems to be
building wiggle room into his optimistic predictions: PFP
Chairman Soong could hinder progress by dwelling on minor
issues, or other factions in the LY could object to increased
military spending at the expense of social and economic
investment programs. What really comes across from this
exchange is the continuing horse-trading going on behind the
scene as the LY prepares to enter into autumn session next
week.
YOUNG