MA OPTIMISTIC ON DEFENSE BUDGET, PUBLIC ORDER

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003273

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/21/2031
TAGS: PGOV TW
SUBJECT: MA OPTIMISTIC ON DEFENSE BUDGET, PUBLIC ORDER


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


1. (C) Summary: Taipei Mayor and Kuomintang (KMT) Chairman Ma
Ying-jeou told AIT Director that the KMT leadership and
Legislative Yuan (LY) caucus had reached consensus to support
the purchase of P-3C antisub aircraft and PAC-2 missile
upgrades, and to fund a submarine feasibility study (in the
2006 supplemental budget). The KMT also supports increasing
overall defense spending to 2.85 percent of GDP, but will not
consider PAC-3 missiles until next year's defense budget.
With regard to the "Depose Chen" demonstrations, Ma is
confident that good communication with protest leaders and a
well-prepared police force will minimize protest-related
violence during upcoming "Double Ten" National Day
celebrations in Taipei. The KMT will not support a
no-confidence vote against Premier Su because the legal
underpinnings for potential snap LY elections are not yet in
place. However, the KMT will back a second attempt to recall
President Chen because, Ma argued, the people are entitled to
express their political will through a national referendum on
Chen's presidency. End Summary.

Upbeat on Defense
--------------


2. (C) Director Young and Deputy Director Wang met with
Taipei Mayor and KMT Chairman Ma Ying-jeou and his defense
advisor Su Chi on September 21. The Director informed Ma
that he would be returning to Washington for consultations
soon, and stressed that Washington decision-makers would be
interested to hear about Ma's leadership on the arms
procurement and defense budget issues. Ma responded that the
KMT leadership had reached a "strong consensus" to resolve
the defense budget question during this LY session.


3. (C) According to Ma, the KMT LY caucus understands that
PAC-2 upgrades are improvements to an existing missile
defense system, and not new missiles "banned" by the failed
March 2004 missile defense referendum. Ma said a few
"deep-blue" caucus members still oppose the PAC-2 upgrades,
but, on the whole, the KMT caucus is "willing to be
convinced" of the need for them. To that end, the KMT has
requested the Ministry of National Defense (MND) to provide a
detailed explanation as to why the upgrades are needed. This
will help Ma and other moderates in the party silence
deep-blue objections, and help LY members justify the expense
to their constituents. Ma said the MND is not skilled at
public relations, but acknowledged recent efforts by Defense
Minister Lee Jye and others to better educate the LY and the
public. The Director urged Ma and Su to help the MND
convince LY members and the public of the need to improve
Taiwan's defense posture.


4. (C) The KMT, however, will not approve the purchase of new
PAC-3 missile batteries until the fall of next year, to honor
the results of the March 2004 missile defense referendum, Ma
stated. Regardless of the legal significance of the missile
defense referendum, the Director responded, the conclusion by
U.S. defense experts that Taiwan needs upgraded missile
defenses has been validated by the Japanese decision to
install their own PAC-3 based system. In light of prolonged
procurement times, the Director continued, Taiwan should put
the PAC-3 purchase on a "fast track" as soon as possible. Ma
responded that KMT LY President Wang Jin-pyng had informed
him that LY budgetary rules precluded consideration of the
PAC-3s during the FY 2007 budget cycle; thus, the earliest
the LY could revisit the issue would be September 2007. The
Director urged Ma to act sooner instead of later, and to
think of the missile defense posture that Ma himself would
like to inherit if he were to become the next president.


5. (C) Ma told the Director that the KMT legislative caucus
also supported funding the purchase of P-3C antisubmarine
(ASW) aircraft, as well as the proposal for an NT$200 million
(US$6 million) study to determine whether Taiwan needs
submarines, and if so, what kind. (Note: This item is
included in the 2006 supplemental defense budget. End note.)
Ma added the caveat that the "submarine feasibility study"
should not be seen as a commitment by Taiwan to buy
submarines in the future. Ma said the party caucus had
debated the issue extensively, and some members had expressed

TAIPEI 00003273 002 OF 003


concern over whether the USG fully supported a submarine
program for Taiwan. The Director responded that the decision
was one that Taiwan needed to make on its own.


6. (C) The KMT is not opposed to increasing Taiwan's defense
budget to 2.85 percent of GDP, but reaching that level could
be difficult, Ma explained. KMT LY member and defense policy
advisor Su Chi noted the MND defense budget will satisfy the
2.85 percent threshold only if the LY fully funds every MND
budget request. Since the KMT will push to cut all funding
for the PAC-3 missiles this budget cycle, and the larger LY
may cut proposed spending on other items, the final budget
may fall short of the 2.85 percent mark. Su said he had
anticipated this problem, and during January 2006 meetings
with Defense Minister Lee Jye, he had suggested replacing the
PAC-3s with other less controversial items that could pass
legislative muster. The Director remarked that it would not
serve Taiwan's interests for the MND to preemptively redact
items from the budget that it deemed necessary to Taiwan's
defense. The 2.85 percent spending level is an important
symbolic step toward Taiwan reaching the 3 percent mark next
year, and the US hope is that Taiwan will use the defense
budget process to re-allocate unspent money to maintain the
2.85 percent spending level. The Director reminded Ma that
aside from high-profile new weapons systems, Taiwan must also
invest in critical infrastructure, facilities hardening,
communications systems, and munitions reserves. Ma responded
that if big-ticket items are cut, the MND can always submit a
"supplemental budget" request later, to increase funding for
other already-funded projects, in an effort to reach the
requisite 2.85 percent mark.

Confident on Domestic Order
--------------


7. (C) Ma shrugged off public criticism that he was "weak"
for failing to take a stronger stand in favor of Shih
Ming-te's "Depose Chen" movement. As Taipei Mayor, he said
he is committed to providing an open forum for both "green"
and "red" protesters to express themselves, as long as such
protests remain peaceful and continue to operate within the
law. Ma said the Taipei city government has established
"many" direct contacts within both pro- and anti-Chen camps,
and is working closely with Taipei police authorities.
Protests permits are reviewed on a daily basis to discourage
violence. Ma expressed utmost confidence in the judgment of
the Taipei Police Chief and the ability of his police force
to maintain public order during upcoming protest activities.


8. (C) At present, the Ketagalan Square in front of the
Presidential Palace will remain the site of the October 10
"National Day" celebrations, unless the Police Chief decides
a change is necessary, Ma said. Although the "National Day"
celebration grounds will be open to the public, protest
activities will not be permitted there, though they might be
allowed on the perimeter. Ma stressed that protesters must
honor not only the letter but the spirit of the protest law,
which does not allow for impromptu protests in the midst of
"National Day" observances.

Second Recall Attempt?
--------------


9. (C) Ma ruled out for the time being any KMT push for a
no-confidence vote against Premier Su. The districts for the
new, smaller LY have not been redrawn, and the laws to govern
the next LY election have not yet been passed. Thus, if
President Chen were to dissolve the LY following Su's ouster,
the subsequent snap LY election could be chaotic, which the
KMT would prefer to avoid. Ma said the KMT might pursue a
second attempt to recall President Chen, since a recall may
be the only way to "give the people a chance to express their
opinion" and to "get Shih Ming-te off the streets." Ma said
his earlier call to DPP legislators to propose their own
recall bill was designed to ensure their participation in the
recall process this time. (Comment: If the DPP LY caucus
continues to block a recall as expected, Ma can blame them
for preventing the public from deciding Chen's fate by
referendum. End commen.) If Chen survives a public
referendum, Ma explained, he will be immune from further
recalls for the remainder of his term. This could also

TAIPEI 00003273 003 OF 003


enable Shih Ming-te to back down with honor, he added, since
the people would have had their say.


10. (C) Aside from the street protests and the LY, Chen must
also face the judicial-prosecutorial process, Ma said. A
sitting president is immune from prosecution, but not from
investigation, and if Chen or his wife are personally
implicated, DPP leaders may abandon him. If prosecutors
conclude there was no wrongdoing, the Director asked, would
that resolve the crisis, or would anti-Chen forces continue
to pursue the president in the LY and the streets? Ma said
it was hard to imagine how prosecutors could exculpate Chen,
since he had already admitted to asking the first lady to
collect receipts for his "secret diplomatic fund." Ma added
that by urging Chen to retain counsel before questioning,
prosecutors had telegraphed the possibility that Chen was a
possible target for indictment. The Director commented that
if Taiwan's judicial system found no wrongdoing, but the
people refused to accept that conclusion, the rule of law
would be undermined. As a lawyer himself, Ma had to recognize
the implications of this.


11. (C) In closing, the Director stressed to Ma that passage
of a responsible defense budget was essential to maintaining
a positive U.S.-Taiwan bilateral relationship, and would
improve chances for future U.S.-Taiwan military cooperation.
Ma confirmed his commitment to break through partisan
politics to reach a reasonable defense budget this LY
session, and added that he would honor all of the promises he
made to the United States during his March 2006 visit.

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


12. (C) Though still highly partisan in his overall approach
to Chen Shui-bian, Ma seems to have resolved to support a
significant plus-up of this year's defense spending. That
said, his unproven leadership skills will be tested by
members of his fractious pan-blue coalition, especially in
light of ongoing attempts to bring down the Chen presidency.
YOUNG