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