LEGISLATURE FREEZES PART OF BUDGET FOR PURCHASING

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001336

SIPDIS

E.O. 12958: DECL: 11/09/2019
TAGS: PREL MARR TW CH
SUBJECT: LEGISLATURE FREEZES PART OF BUDGET FOR PURCHASING
U.S. ARMS, AIDE SAYS ACT NOT ANTI-AMERICAN

Classified By: AIT Political Section Chief David H. Rank for Reasons 1.
4 (b/d)


1. (C) Summary. The Legislative Yuan Defense and Foreign
Affairs Committee froze nearly USD 200 million from the 2010
defense budget, most of which would buy U.S. weapons in the
procurement pipeline or on Taiwan's &wish list.8 A
well-placed legislative staff member said the freeze was a
result of committee members taking their oversight and fiscal
responsibilities seriously. He said it would be lifted once
the Ministry of National Defense (MND) answered lawmakers'
questions about the purchases. Although the aide insisted
the freeze was not intended as an anti-American signal, he
said U.S. foot-dragging and lack of transparency in the
procurement process had led to a loss of confidence in the
U.S. commitment to Taiwan among a segment of the local
population. End summary.

Budget Freeze: Act of Good Government Not Anti-Americanism
-------------- --------------


2. (C) In an October 30 meeting with PolOff, Winston Li,
Chief of Staff to influential Legislative Yuan (LY) Defense
and Foreign Affairs Committee member Shuai Hua-Ming, provided
some details of the panel's just-concluded review of the 2010
defense budget. Li said Shuai led the Committee's review of
classified and unclassified portions of the defense budget
and froze a small part of the arms procurement fund. The
actions affected five proposed defense-related purchases from
the United States: UH-60M utility helicopters, diesel
submarines, Javelin anti-tank missiles, F-16C/D fighters and
software for an early-warning radar system. The money would
be unfrozen, Li said, once the MND provided acceptable
responses to the committee's queries on cost and acquisition
strategy. Li added that the Committee's action was taken as
part of its oversight function, not as an act of
anti-Americanism or an attempt to send the United States a
message. Li stressed several times Shuai,s pro-U.S.
leanings and his commitment to the U.S.-Taiwan relationship.

Budget Freeze Affecting Some U.S. Systems
--------------


3. (SBU) Although Li would not confirm the amounts frozen for
specific procurements because some of the figures were
classified, local media reported approximately USD 192
million was frozen from the recently submitted USD 9 billion
defense budget. The freeze affected about USD 149.1 million
in five U.S. programs either in the acquisition pipeline or
on Taiwan's &wish list:8 UH-60M utility helicopters
(approximately USD 3.1 million); a diesel submarine design
study and full-program competition (approximately USD 36.9
million); Javelin anti-tank missiles (approximately USD 13.8
million); F-16C/D fighters (approximately USD 44 million of
the current installment, to be unfrozen only if the U.S.
agreed to sell the aircraft to Taiwan); and encryption
software for an early warning radar system (approximately USD
55.3 million). The committee also froze money for tank
upgrades, personnel-related spending and French air-to-air
missile parts.

Eroding Confidence in U.S. Support
--------------


4. (C) His boss's pro-U.S. comments notwithstanding, Li noted
Shuai's concern that some Taiwan decision makers and a small
segment of Taiwan's population have started to question the
U.S. commitment to Taiwan because of what they characterized
as "self-interested decisions" by Washington. Li
specifically cited as sources of anxiety perceptions of U.S.
inaction on Taiwan's arms requests, especially F-16C/Ds, and
of constant increases in U.S. weapons costs without proper
justification. Shuai and other legislators believed Taiwan
and the U.S. must rebuild mutual trust following eight years
of tense relations during the Democratic Progressive Party
administration of former President Chen Shui-bian, Li said.
This would pave the way for confidence-building measures

TAIPEI 00001336 002 OF 002


between Taiwan and the PRC and for continued improvement of
cross-Strait relations. As it now stood, U.S. unwillingness
to act on pending arms requests and Washington's reluctance
to release critical technologies to help develop Taiwan's own
defense industry put Taiwan in a weakened military position
vis-a-vis the PRC, he emphasized.


5. (C) Li passed on three suggestions from Shuai to bolster
the U.S.-Taiwan relationship and to shore up Taiwan's
confidence. Most urgently, the United States should show
some tangible demonstration of support, such as taking action
on the F-16C/D and other pending arms requests. Shuai also
hoped to see more transparency in the arms sales process,
especially on pricing. Finally, the United States should be
more sensitive to Taiwan's domestic considerations when
reaching policy decisions because officials could not ignore
public opinion.


6. (C) Comment: In many sense Taiwan still views U.S. arms
sales as a barometer of the relationship. There always is
much public posturing by Taiwan politicians during budget
season and LY member Shuai is sometimes a wild card in the
debate on security issues. However, he and his KMT colleague
on the Defense and Foreign Affairs Committee, Lin Yu-fang,
have been consistent in their support for frugality within
the MND and for proper legislative oversight, sometimes to
the detriment of ongoing programs. Nonetheless, the
Committee's actions seem to bear out some lawmakers' concerns
about the U.S. commitment to provide necessary arms to Taiwan
in a timely fashion and the U.S. willingness to support
Taiwan over Beijing's protestations.
STANTON