PRESIDENT CHEN ON DOMESTIC POLITICS AND ARMS

S E C R E T SECTION 01 OF 03 TAIPEI 004124

SIPDIS

SIPDIS
NOFORN

E.O. 12958: DECL: 12/14/2031
TAGS: PGOV TW
SUBJECT: PRESIDENT CHEN ON DOMESTIC POLITICS AND ARMS
PROCUREMENT


Classified By: AIT Director Stephen M. Young,
Reasons: 1.4 (b/d)


1. (S) Summary: During a meeting with President Chen
Shui-bian on December 14, the Director expressed hope that
the Taiwan government will submit a supplemental defense
budget request to the legislature next March to provide
funding for PAC-III and to increase defense spending to 2.85
percent of GDP. On the recent mayoral elections, President
Chen said he had been confident all along that the DPP would
win in Kaohsiung and he believed his campaigning there had
made a difference by stimulating the enthusiasm of DPP
supporters. Premier Su Tseng-chang had originally planned to
resign, Chen noted, but changed his mind on election day
before the results had come in. Chen characterized Frank
Hsieh's showing in Taipei as credible but not outstanding,
and said it is too early to determine the DPP's presidential
candidate for 2008. Chen predicted that the split between
KMT Chairman Ma Ying-jeou and LY Speaker Wang Jin-pyng (KMT)
will become increasingly serious in the first half of 2007.
End Summary.

Arms Procurement
--------------


2. (S) The Director met with President Chen Shui-bian at the
Presidential Office on December 14 to discuss bilateral
issues and the domestic political situation following the
December 9 mayoral elections in which the ruling Democratic
Progressive Party (DPP) won Kaohsiung and the Kuomintang
(KMT) Taipei. Noting he had recently discussed arms
procurement with Ma Ying-jeou, Wang Jin-pyng, and Defense
Minister Lee Jye, the Director said he was optimistic there
will be progress on the issue. The Director added that he
had pressed his interlocutors to support a supplementary
budget request next March that would include funding for
PAC-III and bring the defense budget up to 2.85 percent of
GDP. Chen did not respond but nodded, apparently in
agreement with this approach.

Taipei and Kaohsiung Elections
--------------


3. (S) The DPP and KMT both had problems heading into the
December 9 elections, Chen said, and many expected the DPP to
suffer a major defeat, leading to party divisions and even
collapse, which could affect political stability. The
election results allowed the DPP to avoid such a crisis and
to breathe a momentary sigh of relief. Both parties still
have many problems, however. In these elections, KMT
Chairman Ma Ying-jeou faced his biggest test so far, and the
numerous criticisms after December 9 have revealed many
problems in the KMT. Ma will face even greater difficulties
if he is indicted in the case involving his special mayoral
allowance. According to KMT rules, Ma's party rights should
be suspended if he is indicted. This factor could produce an
"earthquake" in the KMT, Chen suggested.

Division in the KMT
--------------


4. (S) Differences between Ma and Legislative Yuan Speaker
Wang Jin-pyng (KMT) will become more and more pronounced
during the first half of 2007, Chen predicted. Wang has
never given up his hopes to pursue the KMT presidential
nomination. So, Wang will cooperate with Honorary KMT
Chairman Lien Chan and People First Party (PFP) Chairman
James Soong, and this will create heightened tension with Ma.
The KMT will not have fewer problems than the DPP, Chen
wryly concluded.

Premier Su Tseng-chang
--------------


5. (S) Chen noted that Premier Su Tseng-chang had expected
the DPP to lose in Kaohsiung and was intending to resign the

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evening of December 9. Chen, who was fully confident the DPP
would prevail in Kaohsiung, had told Su there was no reason
for the premier to resign over a local election loss. Chen
added that Su's original plan had been to resign regardless
of whether the DPP won or lost, and therefore Su had been
reluctant to accept Chen's assignment to represent Taiwan at
the Gambian presidential inauguration. On election day,
however, Su changed his mind. Before the vote count Su
informed Straits Exchange Foundation (SEF) Chairman Chang
Chun-hsiung that he had decided to stay on as premier, if the
President wished, regardless of the election results. Chang
had passed this information to President Chen. Chen said he
would not let Su resign; the cabinet will stay on.

Kaohsiung
--------------


6. (S) Party unity and hard campaigning were important
factors in the difficult victory in Kaohsiung, as was
successful crisis management responding to a major tour bus
accident. The December 3 hand-in-hand rally at the Kaohsiung
Love River had unified the DPP and marginalized the Taiwan
Solidarity Union, which helped DPP candidate Chen Chu.
Despite some opposition within the party, President Chen had
participated in the rally and subsequently campaigned almost
every day in Kaohsiung, visiting numerous temples and meeting
many people. Chen said his visits had helped stimulate the
enthusiasm of Green supporters, a key to the victory. Chen
recalled how large numbers of shopkeepers and residents in
one traditional area had poured out onto the street to greet
him. Subsequently, Ma Ying-jeou had visited the same area,
but the people had not come out onto the street. Rather, Ma
had to knock on doors and go into shops to shake hands. In
addition, according to Chen, Ma had neglected to request
votes, whereas the President had made a big point of asking
people to vote for Chen Chu. According to President Chen,
the DPP would have won by a bigger margin in Kaohsiung if the
turnout had been higher. Chen also suggested that the voters
decided to marginalize the TSU and PFP in the elections on
December 9. In Taipei, PFP candidate James Soong was unable
to challenge the KMT's Hau Lung-bin, while in Kaohsiung, TSU
candidate Lo Chih-ming's candidacy did not affect Chen Chu.

Frank Hsieh
--------------


7. (S) Frank Hsieh's showing in Taipei was okay, Chen
suggested, noting that Hsieh had been expected to turn in a
relatively good performance because of his qualifications and
the comparative weakness of Hau Lung-bin, his opponent.
Noting Hau's 13 percent margin of victory over Hsieh, Chen
asserted that this gap could have been cut to less than 10
percent if Hsieh had allowed the President, Premier Su, and
other top party leaders to campaign for him, because such
campaigning would have stimulated the enthusiasm of Green
supporters.


8. (S) Chen said he had persuaded Hsieh to run in Taipei by
convincing him that this was the best way he could help Chen
Chu in Kaohsiung. Hsieh's main role was to tie the KMT down
in Taipei, preventing the KMT from focusing all of its
campaign resources on the very close race in Kaohsiung.
Hsieh's relatively good showing in Taipei does not mean he
will necessarily be the DPP presidential candidate, however.
It is too early to answer the question of who will become the
DPP's candidate. The original DPP plan was to select a
presidential candidate next June or July, Chen noted.
Recently, there have been different views on whether the
nomination process should be moved to an earlier date. If
there is not agreement, the DPP may stick to the original
plan, Chen said.

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


9. (S) Chen has regained much of his earlier confidence

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following the victory in Kaohsiung, a victory for which he
gives himself substantial credit. In this meeting, Chen was
particularly on top of his game when discussing the ins and
outs of domestic politics. He clearly relishes the idea of
having more than one potential DPP presidential candidate, a
situation which will maximize his political influence over
the coming months.
YOUNG