DPP CAMPAIGN ADVISOR OUTLINES "TAIWAN-CENTRIC"

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 002295 SIPDIS SIPDIS STATE PASS USTR, STATE FOR EAP/TC,USTR FOR STRATFORD AND ALTBACH, TREASURY FOR OASIA/TTYANG, COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN E.O. 12958: DECL: 10/04/2017 TAGS: ECON EFIN ETRD SENV PREL PGOV PINR TW SUBJECT: DPP CAMPAIGN ADVISOR OUTLINES "TAIWAN-CENTRIC" ECONOMIC PLATFORM REF: TAIPEI 2283 TAIPEI 00002295 001.2 OF 002 Classified By: Stephen M. Young, AIT Director, for reasons 1.4 (b) and (d). ¶1. (U) This cable is one in a series on the Taiwan presidential candidates' economic policies and advisors. ¶2. (C) SUMMARY. During an October 5 meeting with AIT economic chief, DPP economic policy advisor Kenneth Lin (Lin Shiang-kai) said stimulating domestic investment is the key to reviving Taiwan's job and wage growth. Lin, who leads a team of academics drafting an economic policy White Paper for DPP presidential candidate Frank Hsieh, argued Taiwan should bolster its technological base by shifting investment from China to the U.S. and other advanced economies. Lin identified expanded charter flights as Hsieh's top priority for cross-Strait economic opening, and highlighted environmental issues as a main pillar of Hsieh's agenda. END SUMMARY. -------------- Emphasis on domestic development -------------- ¶3. (C) Lin explained that he is coordinating a small group of academics in drafting an economic policy White Paper for Frank Hsieh. The White Paper will be finished by the end of the year, he noted, and will be based on Hsieh's "Golden Triangle" concept combining sustainable economic development, social justice, and environmental protection. According to Lin, Hsieh's economic platform is largely consistent with Chen Shui-bian's, but with additional emphasis on environmental issues. He said Hsieh's strategy is to shift the emphasis away from GDP growth as the main indicator of Taiwan's economic health, and instead put greater emphasis on real wages, income distribution, and overall quality of life. Lin stressed Hsieh wants to address the needs of the people of Taiwan, rather than simply the interests of businesses and businesspeople that have shifted their focus to China. ¶4. (C) In Lin's analysis, Taiwan's average real wages have declined over the past two years, a phenomenon he attributes in part to lack of domestic investment. He observed that over 70 percent of Taiwan's outbound investment goes to China, much higher than the similar figures for South Korea, Japan, and other major East Asian economies. Taiwan's domestic investment is among the lowest in the region, he complained, and what he termed as disproportionate investment in the PRC has hurt Taiwan's economic competitiveness. Lin argued that advanced economies such as the U.S. and the EU typically spend most of their foreign investment in other developed economies, a process he believes reinforces technological development and job growth in the investing economy. Taiwan's focus on Chinese investment, he maintained, is hampering the economy's technological advancement and holding back wage and employment growth. According to Lin, the loss of over one million primarily middle class Taiwan residents to China has depressed durable goods consumption in Taiwan. At the same time, he continued, the shift of jobs and residents to the mainland has put those left behind in a "losers' circle" unable to benefit from economic globalization. Economic disparities between those who have moved to China and those who have stayed behind are making it harder for Taiwan to achieve "social consensus" on economic development, Lin argued. -------------- Charter flights are cross-Strait priority -------------- ¶5. (C) Lin identified expansion of charter flights as Hsieh's top priority for cross-Strait economic opening. Since formally establishing direct flights will require difficult negotiations between Taiwan and the PRC, he explained, expanded charter flights are a desirable interim substitute. Lin was vague about tourism policy, saying only that the issue is likely to remain stalemated over what he TAIPEI 00002295 002.2 OF 002 characterized as PRC intransigence on the "one China" principle. On investment policy, Lin said Hsieh will advocate replacing the current 40 percent-of-net-worth investment cap with a more "comprehensive" policy that would evaluate an investment's impact on Taiwan's employment, industrial structure, and technological base. -------------- -------------- Global trade, financial sector, and environmental policies -------------- -------------- ¶6. (C) Lin noted that Hsieh plans to pursue a "Taiwan-centric" policy of developing the domestic economy while simultaneously "opening up" to global trade and investment, especially with the U.S. and other advanced countries. In his view, closer economic ties with developed countries are "probably the only way" to upgrade Taiwan's technological competitiveness. He said Hsieh would follow the Chen administration's current financial sector liberalization policy. On environmental issues, Lin stated that Hsieh will emphasize energy security and climate change issues, and would revise budget and tax policies to remove de facto subsidies and incentives for heavily polluting industries. ¶7. (C) COMMENT. Like the KMT (reftel),the DPP is reading voters' economic mood as focused on bread-and-butter wage and job concerns. Both campaigns appear to share the common themes of boosting domestic demand and maintaining Taiwan's openness to the global economy. Environmental and social issues are more prominent in DPP planning, however, and Lin was markedly less detailed than KMT counterparts on plans for cross-Strait economic opening. Although it is unclear to what extent the material Lin gave us will be leavened by Hsieh during the campaign, much of Lin's thinking sounded like warmed-over Chen Shui-bian economic policy, and would likely have limited resonance with those concerned about whether or not Taiwan is taking full advantage of China's booming economy. END COMMENT. -------------- Biographic data -------------- ¶8. (SBU) Kenneth Lin (Lin Shiang-kai) is in his 50s, and was born in Changhua. He moved to Taipei with his family as a child. Lin holds a B.A. and an M.A. in economics from National Taiwan University (NTU),and in 1986 obtained a PhD. in economics from Carnegie-Mellon University. After graduating from Carnegie-Mellon, he was an Assistant Professor of Economics at the University of California, Santa Barbara before returning to Taiwan in 1987. Lin was an Associate Research Fellow at the Academia Sinica Institute of Economics in 1987-88, an Associate Professor of Economics at NTU in 1988-91, and was a visiting Professor of Economics at Victoria University, Wellington, New Zealand in 1994. In 2000-03, he was invited by then-mayor Frank Hsieh to serve as Director of the Kaohsiung City Bureau of Finance. Since 2003, Lin has been Professor of Economics at NTU. ¶9. (SBU) Lin was a member of Chen Shui-bian's economic team during the 2000 campaign, and is now Director of the Department of Policy Development in the Office of Frank Hsieh. His wife, Gloria Hsu, is the former head of an environmental protection NGO, and is advising Hsieh on climate change and other environmental issues. Lin has no children. He speaks fluent English. YOUNG