ACTING KMT CHAIRMAN P.K. CHIANG ON KMT POLITICS

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000675

SIPDIS

SIPDIS

E.O. 12958: DECL: 3/21/2032
TAGS: PGOV TW
SUBJECT: ACTING KMT CHAIRMAN P.K. CHIANG ON KMT POLITICS
AND LIEN CHAN'S UPCOMING TRIP TO CHINA


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


1. (C) Summary: Acting KMT Chairman P.K. Chiang told the
Director on March 22 that former KMT Chairman Ma Ying-jeou
remains the KMT's strongest hope to retake the presidency in
2008 despite his legal troubles. Chiang believed LY Speaker
Wang Jin-pying will not challenge Ma in the party primary and
might accept the vice presidential slot on a Ma-led ticket.
Chiang said it is "difficult" to resolve the impasse in the
legislature over the defense budget, but recent KMT-DPP
negotiations indicated some possibility of progress. KMT
Honorary Chairman Lien Chan will focus on promoting
cross-Strait economic exchanges during his April visit to the
PRC. Chiang said if the KMT returns to power in 2008 it will
promote cross-Strait peace, economic liberalization, and
domestic political harmony, avoiding socially and politically
polarizing issues. End Summary.

KMT Primary Politics
--------------


2. (C) Acting KMT Chairman P.K. Chiang (Ping-kun) told the
Director on March 22 that former KMT Chairman Ma Ying-jeou
remains the KMT's strongest hope to retake the presidency in
2008 despite his indictment for corruption in February.
Legislative Yuan Speaker Wang Jin-pying has only limited
public support and will likely not challenge Ma in the
primary to avoid a repeat of his embarrassing loss during the
2005 party chairman contest. Cooperation between Ma and
Wang, nevertheless, is crucial to the KMT's prospects in 2008
and Chiang emphasized that he and other party leaders have
strongly encouraged Wang to serve as Ma's vice presidential
running mate. Although Wang has not made his intentions
clear, Chiang suggested that Wang may accept the position to
improve his chances of stepping into the KMT presidential
slot should Ma have to withdraw from the race as a result of
his legal problems.

Ma Legal Problems Energizing KMT, For Now
--------------


3. (C) Chiang said that Ma's indictment has heightened the
sense of urgency within the KMT and energized party
supporters ahead of the legislative and presidential
elections. Seeing the indictment as a politically-motivated
assault by the ruling Democratic Progressive Party (DPP),the
KMT faithful have rallied more closely behind Ma. Ma's
decision to "fight back" and his forceful response to the
accusations, including the announcement of his candidacy
despite the charges, has also helped dispel doubts that he is
a strong leader. With Ma's case going to trial next month,
Chiang predicted that a verdict could be reached as early as
July or August. Most people on Taiwan believe Ma is "clean"
and the trial will be a key test of the legal system's
fairness and impartiality, Chiang suggested. In the unlikely
event that Ma is found guilty, the KMT may modify its charter
to allow Ma to remain the presidential candidate during the
appeal process, but Ma may nevertheless decide to withdraw
from the presidential race.

KMT Outlook for Legislative Elections
--------------


4. (C) Chiang predicted that the KMT will make significant
gains and win an outright majority in the Legislative Yuan,
eliminating its reliance on the smaller People First Party
(PFP),which has pushed more radical policy positions.
Chiang said he expects the KMT to win seats representing the
outlying island districts, the east coast, and the Aborigine
districts. The party will also do well in the heavily
populated and urbanized north, but struggle in the rural
south. The greatest "headache" for the KMT will be fielding
only one pan-Blue candidate in each of the 73 geographic
districts. Chiang explained that candidates who do not win
the KMT primary nomination may choose to run as independents
and split the Blue vote, improving the DPP's odds of winning.
Since the KMT is no longer the ruling party, it has fewer
resources at its disposal to dissuade primary runners-up from
competing against their fellow party members. The PFP, with

TAIPEI 00000675 002 OF 003


only 15 incumbent district legislators, will be fielding its
own candidates but poses a minor challenge to the KMT.
Chiang said he expects that the two sides will be able to use
mediation and public opinion polling to field the strongest
Blue candidate in most districts.


5. (C) Chiang told the Director that most people on Taiwan
favor holding the presidential and legislative elections on
the same day for the sake of convenience, simplicity, and
frugality. Although he personally favors such an approach,
the KMT is concerned that the DPP will tie a referendum on
KMT party assets to the joint-election, hurting the KMT
prospects. A combined election without a referendum,
however, would favor the KMT because it could more
effectively mobilize its extensive grassroots organizations
to get out the vote.

CEC & Budget Battle
--------------


6. (C) Chiang said it was "difficult" to resolve the
current impasse in the legislature over the Central Election
Commission (CEC) reform bill because the CEC has the power to
determine the date of the elections and referenda. The
Director emphasized to Chiang the importance of passing a
robust defense budget for Taiwan's security and urged the KMT
to work with the DPP to resolve the legislative deadlock.
Chiang replied that the KMT hopes to resolve the budget issue
as soon as possible and noted that the compromise proposed by
the DPP is a start, although DPP efforts to restore earlier
defense cuts to the budget as a bargaining chip have prompted
the PFP to oppose a compromise.

Lien Chan Visit to the PRC
--------------


7. (C) Chiang told the Director that KMT Honorary Chairman
Lien Chan will focus on promoting cross-Strait economic
exchanges during his April visit to the PRC, rather than
working on a "peace agreement" as speculated in the press.
Chiang, who will accompany Lien, said the main purpose of the
trip is to consolidate electoral support for the KMT among
the Taiwan business community in China, promote Taiwan
agricultural exports, and encourage Beijing to open up direct
flights and PRC tourism to Taiwan. He noted that Lien will
also participate in a "peace seminar" intended to start a
dialogue with China to reduce tensions across the Taiwan
Strait. Chiang added that to further improve cross-Strait
relations each side needs to make some unilateral
concessions, improve people-to-people exchanges, and open up
a government-to-government dialogue.

KMT Economic Policies
--------------


8. (C) Chiang suggested that the challenge to Taiwan's
future growth is not economic, but political. The KMT will
pursue policies that promote cross-Strait peace, liberalize
Taiwan's economy, especially in terms of cross-Strait trade
and investment, and promote harmony between Taiwan's
political parties if it returns to power in 2008. Chiang
emphasized that the KMT would put economics above politics in
contrast to the DPP, which promotes socially and politically
polarizing issues, such as Taiwan identity, independence, and
Constitutional reform.

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


9. (C) With Ma's indictment and resignation from the
Chairmanship on February 14, the KMT is still struggling to
put its own house in order and now faces a Chairman
bi-election on April 7, as well presidential and legislative
primaries later this spring. The Ma-Wang rivalry shows no
sign of abating and it remains to be seen whether the two can
put aside their past grievances to form a joint ticket for
2008 or reach some other accommodation. We will be watching
closely the ramifications that future judicial rulings on the
Ma and First Lady Wu Shu-chen cases could have on Taiwan's

TAIPEI 00000675 003 OF 003


political system and the presidential race.
YOUNG