Identifier
Created
Classification
Origin
07TAIPEI2399
2007-10-26 00:30:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:
HSIEH ADVISOR OUTLINES FINANCE POLICY AGENDA
VZCZCXRO9711 PP RUEHCN RUEHGH RUEHVC DE RUEHIN #2399/01 2990030 ZNY CCCCC ZZH P 260030Z OCT 07 FM AIT TAIPEI TO RUEHC/SECSTATE WASHDC PRIORITY 7236 INFO RUEHOO/CHINA POSTS COLLECTIVE RUEHBK/AMEMBASSY BANGKOK 3864 RUEHBY/AMEMBASSY CANBERRA 4627 RUEHML/AMEMBASSY MANILA 0177 RUEHGP/AMEMBASSY SINGAPORE 7040 RUEHKO/AMEMBASSY TOKYO 9176 RUEHWL/AMEMBASSY WELLINGTON 1895 RUEHCHI/AMCONSUL CHIANG MAI 0318 RUEHHM/AMCONSUL HO CHI MINH CITY 0146 RUEATRS/DEPT OF TREASURY WASHDC RUCPDOC/DEPT OF COMMERCE WASHDC RUEAIIA/CIA WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 002399
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: 10/24/2017
TAGS: ECON EFIN EINV PGOV PREL PINR TW
SUBJECT: HSIEH ADVISOR OUTLINES FINANCE POLICY AGENDA
REF: TAIPEI 2295
TAIPEI 00002399 001.2 OF 002
Classified By: Robert S. Wang, AIT Deputy Director, for reasons 1.4 (b)
and (d).
C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 002399
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: 10/24/2017
TAGS: ECON EFIN EINV PGOV PREL PINR TW
SUBJECT: HSIEH ADVISOR OUTLINES FINANCE POLICY AGENDA
REF: TAIPEI 2295
TAIPEI 00002399 001.2 OF 002
Classified By: Robert S. Wang, AIT Deputy 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. In an October 25 meeting with AIT economic
chief, DPP presidential campaign financial policy advisor Ray
B. Dawn (Tung Rei-bin) criticized what he characterized as
KMT over-reliance on economic relations with China as the
solution to Taiwan's economic problems. Nonetheless, Taiwan
should facilitate cross-Strait economic exchange by
concluding investment protection and financial settlement
agreements with the PRC, he said, and all Taiwan residents
deserve equal opportunity to invest in Chinese stocks and
mutual funds. Dawn supported continued financial sector
consolidation and tax reform to bolster Taiwan's economic
competitiveness. He argued that KMT plans for sustained six
percent annual GDP growth are not possible, and cited four
percent as a more realistic long-term target. END SUMMARY.
-------------- --
Cross-strait economic and financial integration
-------------- --
3. (C) In addition to his duties as Chairman of the Central
Deposit Insurance Corporation (CDIC),Dawn coordinates with
academic Kenneth Lin (reftel) in advising DPP presidential
candidate Frank Hsieh on economic policy, with a focus on
financial issues. In Dawn's analysis, KMT candidate Ma
Ying-jeou sees China "as the solution to all of Taiwan's
economic problems," while Hsieh views relations with the PRC
as only one of multiple factors needed to improve the Taiwan
economy. Dawn criticized the KMT for encouraging greater
economic integration with China while neglecting the impact
of cross-Strait integration on Taiwan's employment. He
characterized the KMT's policy as a "Hong Kong model" of
outsourcing manufacturing to the Mainland while hoping that
the service sector and increased Chinese tourism will provide
sufficient economic growth. Taiwan already leads the world
in its degree of integration with the Chinese economy, argued
Dawn, and must look at other sources of growth.
4. (C) On cross-Strait financial integration, Dawn maintained
that China's financial sector will be accessible only to the
largest foreign financial institutions, effectively excluding
many small Taiwan banks from entering the market. He said the
Taiwan and China central banks should establish a bilateral
settlement mechanism to facilitate cross-Strait financial
flows. In Dawn's view, Taiwan businesses in China should be
treated like any other "foreign" investor, a reform that
would require negotiation of an investment protection scheme
with the PRC. Relatively affluent, well-connected Taiwan
residents now invest in Chinese stocks and mutual funds via
Hong Kong and other third party markets, he noted. The
system should be reformed so that everyone in Taiwan is able
to invest in China on an equal footing, stated Dawn.
--------------
Financial sector and tax reform
--------------
5. (C) Noting that Taiwan has "too many banks," Dawn stressed
the importance of continuing the current financial sector
consolidation program. The overlapping functions of Taiwan's
central bank, Financial Supervisory Commission, and other
financial regulatory institutions should be reviewed, he
added. The Taiwan authorities must divest their interest in
state-owned financial institutions, stated Dawn, but should
establish mechanisms to ensure that ordinary citizens have a
chance to buy shares. Otherwise, he warned, the state-owned
banks will be snapped up by prominent business families
already active in the financial sector. Dawn said he wants
to reduce Taiwan's inheritance tax so that the rate is more
competitive with those of Singapore, Hong Kong, and other
competitors in the region. He also called for closing a tax
policy loophole in the industrial upgrading law that he
TAIPEI 00002399 002.2 OF 002
maintained results in NT $170 billion (about US $5 billion)
in annual lost revenue. With the loophole closed, he
explained, the ensuing revenue gains would allow reductions
in corporate and/or personal income taxes. (Note: The law in
question includes tax holidays, tax offsets, and incentives
for research and training. Based on our understanding of the
law, Dawn appeared to be referring to foregone revenue when
describing the "loophole", rather than actual tax evasion.)
6. (C) According to Dawn, the KMT plan for an annual 6
percent GDP growth rate is "not sustainable over the long
term." Since Taiwan is a small, open economy and highly
dependent on imported commodities, he explained, it has no
way of hedging against the negative economic impact of
fluctuating commodity prices. A six percent growth rate may
be achievable over the short term, said Dawn, but over the
next decade, "I'd be happy with four percent." (Note:
Taiwan's projected 2007 growth rate is approximately 4.5
percent).
7. (C) COMMENT. Dawn appeared preoccupied with his day job of
CDIC Chairman, and was either unable or unwilling to discuss
his financial policy proposals in extensive detail. With
local newspapers running advertisements for investment trips
to Shanghai, the general public's access to Chinese
investments is already relatively widespread. END COMMENT.
--------------
Biographic data
--------------
8. (SBU) Ray B. Dawn (Chinese name: Tung Rei-bin) was born
on August 2, 1958, and is from the Taipei area. He holds
master's and bachelor's degrees in economics from National
Taiwan University, and a doctorate in economics from
Vanderbilt University. His previous positions include
Director of the Financial Research Division at the Taiwan
Institute of Economic Research (1994),Chairman of the Bank
of Kaohsiung (2000-02),President and CEO of Taiwan Sugar
Company (2002),President and CEO of First Financial Holding
Company (2003),Director General of the Finance Bureau of
Kaohsiung City Government (2003-05),and Chairman of the
Taiwan Tobacco and Liquor Company (2005-06). He became
Chairman of the Central Deposit Insurance Corporation in
September 2006. Dawn speaks fluent English.
YOUNG
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: 10/24/2017
TAGS: ECON EFIN EINV PGOV PREL PINR TW
SUBJECT: HSIEH ADVISOR OUTLINES FINANCE POLICY AGENDA
REF: TAIPEI 2295
TAIPEI 00002399 001.2 OF 002
Classified By: Robert S. Wang, AIT Deputy 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. In an October 25 meeting with AIT economic
chief, DPP presidential campaign financial policy advisor Ray
B. Dawn (Tung Rei-bin) criticized what he characterized as
KMT over-reliance on economic relations with China as the
solution to Taiwan's economic problems. Nonetheless, Taiwan
should facilitate cross-Strait economic exchange by
concluding investment protection and financial settlement
agreements with the PRC, he said, and all Taiwan residents
deserve equal opportunity to invest in Chinese stocks and
mutual funds. Dawn supported continued financial sector
consolidation and tax reform to bolster Taiwan's economic
competitiveness. He argued that KMT plans for sustained six
percent annual GDP growth are not possible, and cited four
percent as a more realistic long-term target. END SUMMARY.
-------------- --
Cross-strait economic and financial integration
-------------- --
3. (C) In addition to his duties as Chairman of the Central
Deposit Insurance Corporation (CDIC),Dawn coordinates with
academic Kenneth Lin (reftel) in advising DPP presidential
candidate Frank Hsieh on economic policy, with a focus on
financial issues. In Dawn's analysis, KMT candidate Ma
Ying-jeou sees China "as the solution to all of Taiwan's
economic problems," while Hsieh views relations with the PRC
as only one of multiple factors needed to improve the Taiwan
economy. Dawn criticized the KMT for encouraging greater
economic integration with China while neglecting the impact
of cross-Strait integration on Taiwan's employment. He
characterized the KMT's policy as a "Hong Kong model" of
outsourcing manufacturing to the Mainland while hoping that
the service sector and increased Chinese tourism will provide
sufficient economic growth. Taiwan already leads the world
in its degree of integration with the Chinese economy, argued
Dawn, and must look at other sources of growth.
4. (C) On cross-Strait financial integration, Dawn maintained
that China's financial sector will be accessible only to the
largest foreign financial institutions, effectively excluding
many small Taiwan banks from entering the market. He said the
Taiwan and China central banks should establish a bilateral
settlement mechanism to facilitate cross-Strait financial
flows. In Dawn's view, Taiwan businesses in China should be
treated like any other "foreign" investor, a reform that
would require negotiation of an investment protection scheme
with the PRC. Relatively affluent, well-connected Taiwan
residents now invest in Chinese stocks and mutual funds via
Hong Kong and other third party markets, he noted. The
system should be reformed so that everyone in Taiwan is able
to invest in China on an equal footing, stated Dawn.
--------------
Financial sector and tax reform
--------------
5. (C) Noting that Taiwan has "too many banks," Dawn stressed
the importance of continuing the current financial sector
consolidation program. The overlapping functions of Taiwan's
central bank, Financial Supervisory Commission, and other
financial regulatory institutions should be reviewed, he
added. The Taiwan authorities must divest their interest in
state-owned financial institutions, stated Dawn, but should
establish mechanisms to ensure that ordinary citizens have a
chance to buy shares. Otherwise, he warned, the state-owned
banks will be snapped up by prominent business families
already active in the financial sector. Dawn said he wants
to reduce Taiwan's inheritance tax so that the rate is more
competitive with those of Singapore, Hong Kong, and other
competitors in the region. He also called for closing a tax
policy loophole in the industrial upgrading law that he
TAIPEI 00002399 002.2 OF 002
maintained results in NT $170 billion (about US $5 billion)
in annual lost revenue. With the loophole closed, he
explained, the ensuing revenue gains would allow reductions
in corporate and/or personal income taxes. (Note: The law in
question includes tax holidays, tax offsets, and incentives
for research and training. Based on our understanding of the
law, Dawn appeared to be referring to foregone revenue when
describing the "loophole", rather than actual tax evasion.)
6. (C) According to Dawn, the KMT plan for an annual 6
percent GDP growth rate is "not sustainable over the long
term." Since Taiwan is a small, open economy and highly
dependent on imported commodities, he explained, it has no
way of hedging against the negative economic impact of
fluctuating commodity prices. A six percent growth rate may
be achievable over the short term, said Dawn, but over the
next decade, "I'd be happy with four percent." (Note:
Taiwan's projected 2007 growth rate is approximately 4.5
percent).
7. (C) COMMENT. Dawn appeared preoccupied with his day job of
CDIC Chairman, and was either unable or unwilling to discuss
his financial policy proposals in extensive detail. With
local newspapers running advertisements for investment trips
to Shanghai, the general public's access to Chinese
investments is already relatively widespread. END COMMENT.
--------------
Biographic data
--------------
8. (SBU) Ray B. Dawn (Chinese name: Tung Rei-bin) was born
on August 2, 1958, and is from the Taipei area. He holds
master's and bachelor's degrees in economics from National
Taiwan University, and a doctorate in economics from
Vanderbilt University. His previous positions include
Director of the Financial Research Division at the Taiwan
Institute of Economic Research (1994),Chairman of the Bank
of Kaohsiung (2000-02),President and CEO of Taiwan Sugar
Company (2002),President and CEO of First Financial Holding
Company (2003),Director General of the Finance Bureau of
Kaohsiung City Government (2003-05),and Chairman of the
Taiwan Tobacco and Liquor Company (2005-06). He became
Chairman of the Central Deposit Insurance Corporation in
September 2006. Dawn speaks fluent English.
YOUNG