KMT VICE PRESIDENTIAL CANDIDATE ON ELECTION &

C O N F I D E N T I A L SECTION 01 OF 04 TAIPEI 001670 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/TC, EAP/EP USTR FOR STRATFORD AND ALTBACH E.O. 12958: DECL: 07/25/2010 TAGS: ECON ETRD PREL PGOV TW SUBJECT: KMT VICE PRESIDENTIAL CANDIDATE ON ELECTION & ECONOMICS REF: TAIPEI 01120 Classified By: AIT DIRECTOR STEPHEN M. YOUNG FOR REASONS 1.5 (b),(d) ¶1. (C) Summary: On July 24 AIT Director Young met with former Premier and recently named KMT candidate for Vice President, Vincent Siew (Hsiao Wan-chang),to discuss the 2008 presidential election and cross-Strait economic policy. Siew, a veteran KMT member highly regarded for his economic policy-making experience, was candid in his view that the election will be hard-fought. He stated DPP presidential candidate Frank Hsieh should choose former premier Su Tseng-chang as a running mate, as Su brings more to the ticket than former Kaohsiung mayor Yeh Chu-lan. Siew emphasized his advocacy of a common market with China is not equivalent to acceptance of 'one China', as the DPP is attempting to misrepresent his position. The Director raised the issue of Taiwan's defensive capability, and Siew readily agreed Taiwan must improve its defenses, in conjunction with strengthening economic ties with the mainland. Siew indicated KMT presidential candidate Ma Ying-jeou may seek to visit the U.S. before the election. End Summary. A RELUCTANT CANDIDATE ¶2. (SBU) AIT Director Young met former Premier Vincent Siew (Hsiao Wan-chang) on July 24 to discuss the 2008 presidential election and cross-Strait economic relations. KMT presidential candidate Ma Ying-jeou named Siew as his running mate in late June. A former Minister of Economic Affairs and director of the Council for Economic Planning and Development and later chairman of both the Chunghwa Institute for Economic Research and the Cross-Straits Common Market Foundation, Siew brings considerable economic policy-making experience to the ticket. Additionally, a native Taiwanese from Chiayi, he is considered to be able to attract voters, particularly in the south, who might not otherwise vote for Ma. Siew told the Director that Ma approached him repeatedly, both directly and through intermediaries, to accept the vice presidential nomination. Although Siew's family objected, he felt a sense of obligation to help guide Taiwan,s future economic growth and so accepted the nomination. SIEW SEES CLOSE ELECTION RACE ¶3. (C) Siew told the Director he believes the 2008 Presidential election will be very close. He sees DPP candidate Frank Hsieh (Chang-ting) as a strong contender, and suggested former premier Su Tseng-chang would be a significant asset to the DPP ticket. Siew believes former Kaohsiung mayor Yeh Chu-lan is generally considered too 'extremist' (Note: presumably too 'Deep Green') to be a good running mate for TAIPEI 00001670 002 OF 004 Hsieh. Regarding the KMT ticket, he told the Director voters see Ma as a man of character but are uncertain of his ability to lead. Siew believes Beijing understands that any public expression of support by China for a candidate in Taiwan's presidential elections is tantamount to ensuring that candidate's defeat, and so will refrain from comment during the 2008 race. Siew lamented that, if Ma were truly committed to attaining the Presidency, he should have begun learning Taiwanese and visiting the south of the island much earlier, particularly during his tenure as Mayor of Taipei. ¶4. (C) Siew acknowledged support for Ma within the KMT was not complete, but insisted Honorary KMT Chairman Lien Chan definitely supports Ma. Siew estimated as much as 20 percent of the electorate could be considered centrist voters (i.e., not firm supporters of either the KMT or DPP),and many of these will make their voting decision late in the campaign. He characterized the election for these voters as essentially a choice between 'livelihood' and 'identity'. In other words, deciding whether the KMT's emphasis on effectively managing Taiwan's economic growth (including improving cross-Strait economic ties) is more important than the DPP's emphasis on defining Taiwan's political status vis--vis China. Siew noted he has been campaigning among native Taiwanese, particularly in the south. TAIWAN'S ECONOMY, NOW AND IN THE FUTURE ¶5. (SBU) Siew reiterated his view that the administration of Chen Shui-bian has failed to devise and implement a coherent strategy for developing economic relations with the mainland (Reftel). He clearly believes the economy can be improved significantly. Siew sought to explain away the recent TAIEX surge toward 7-year highs by saying the Taiwan stock exchange is undervalued (compared with those of Hong Kong, Japan and Korea),reflecting domestic wariness of investing in Taiwan firms. Noting President Chen Shui-bian's claim that the recent record rise in the Taiwan stock market index is due to his administration's economic policies, Siew countered that the rise was caused by an influx of foreign investors who see undervalued Taiwan shares as a bargain. ¶6. (SBU) Siew explained that his proposal for a common market with China would effectively 'normalize' cross-Strait economic relations and would expand the market for Taiwan exports, attract more foreign investment, and create jobs. He told the Director the DPP criticism that the KMT common market proposal is equivalent to the 'one China' concept is a clever strategy, because voters can more easily understand TAIPEI 00001670 003 OF 004 the DPP attack than the complex economics of a common market. Siew said in his chats with voters in southern Taiwan, those with higher levels of education (high school or above) tend to understand his explanation of the benefits a common market could bring, while those in low income occupations with lower education levels tend not to understand. ¶7. (C) According to Siew, part of Ma's 'long stay' campaign strategy will be to help the campaign devise an economic development agenda targeting six different regions of Taiwan, where Ma will spend up to 3 weeks continuously campaigning. Siew explained that these plans will emphasize technology development, as part of Taiwan's transition from manufacturing to developing name brands and an 'innovation' economy. He noted, though, the plans will have to include small and medium sized enterprise development. DEFENSE OF THE ISLAND ¶8. (C) The Director raised the issue of Taiwan maintaining its defensive military capability, in particular the purchase of Patriot III anti-missile defense batteries and the question of increasing the defense budget to 3 percent of GDP. The Director warned against the KMT continuing to play politics with the budget. Siew was quick to agree Taiwan must improve its defenses, in conjunction with improving cross-Strait economic relations, in order to maximize its 'leverage' with China. He said if the KMT wins the 2008 election, he will make defense procurement a top priority of the Ma administration. Siew promised to look into the issue and consult with certain KMT legislators. MA MAY VISIT WASHINGTON ¶9. (C) Siew mentioned the possibility of Ma traveling to the U.S. before the election, and indicated the Ma campaign team would consult closely with AIT regarding such a trip if the decision is made. The Director reiterated the welcome for Ma to visit Washington, as Frank Hsieh has done. Siew acknowledged during our session that, thus far, he has had less time than he'd like to fully discuss campaign strategy with Ma. COMMENT ¶10. (C) The selection of Siew as Ma's running mate is widely considered an indication of Ma's plans to make Taiwan economic growth, particularly expansion of cross-Strait economic relations, a cornerstone of his presidential campaign. Siew is clearly a knowledgeable and experienced economic planner, but his reputation in the 2000 KMT presidential loss to Chen Shui-bian was as a lackluster grassroots campaigner. As he candidly acknowledged, he and Ma face a rough campaign. The DPP TAIPEI 00001670 004 OF 004 ticket is strong and will campaign effectively with no holds barred. In particular, the KMT could have a difficult time convincing voters that a common market with China is in Taiwan's interest. End Comment. YOUNG