KINMEN CIVILIAN OFFICIALS EAGER FOR CLOSER PRC TIES

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 000640

SIPDIS

E.O. 12958: DECL: 06/01/2019
TAGS: PREL ETRD ECON TW CH
SUBJECT: KINMEN CIVILIAN OFFICIALS EAGER FOR CLOSER PRC TIES

Classified By: The Director for reasons 1.4(b/d)


1. (C) Summary. Kinmen, a group of small islands held by
Taiwan but situated just a few kilometers away from the
prosperous Chinese city of Xiamen, stands as a symbol both of
the decades-long military confrontation between China and
Taiwan as well as of a possible future of closer economic
integration. In May 27 meetings with the Director, local
government and military officials outlined the contradictions
between maintaining Kinmen as the traditional front line
against possible PRC aggression while, at the same time,
deepening the cross-Strait economic integration that is
rapidly becoming the backbone of the island's economy.
Because of popular and PRC opposition, Kinmen is unlikely to
take advantage of a policy allowing casino gambling on
Taiwan's outer islands. End Summary.

Kinmen Looks (Longingly) to the Mainland
--------------


2. (C) Kinmen faces China, not Taiwan, and should be allowed
the autonomy to pursue closer ties with the PRC, Kinmen
county's free-wheeling magistrate Lee Zhu-feng told the
Director during a cordial 30-minute courtesy call on May 27.
Still widely popular in the final year of his second (and
final, under Taiwan law) four-year term as magistrate, Lee
described Kinmen as being naturally much closer to China than
to Taiwan. Although a member of the ruling KMT party, Lee
was critical of the Ma administration's refusal to allow him
to accelerate his pursuit of closer ties.


3. (C) The vestiges of cross-Strait confrontation -
particularly Taiwan's heavy military presence on the island -
are out of step with the times and with Kinmen's economic
development needs. In separate conversations, military
officials who accompanied the Director, including Vice
Minister Zhang Liang-ren and Kinmen garrison commander
General Lu Xiao-rong, said Lee made no bones about his view
that the military is an obstacle to Kinmen's development.
Despite the magistrate's unabashed advocacy for reducing the
military profile on Kinmen, however, the military officials
said they enjoyed good working relations with Lee and other
civilian officials. General Lu also noted that, for reasons
unrelated to Kinmen civilian officials' economic development
priorities, there are now fewer than 8,000 troops on the
island - thousands fewer than when tensions were at their
peak.


4. (C) Taiwan, Lee stressed, should adopt Chairman Mao's
motto that "practice should be the sole criterion" in its
approach to cross-Strait engagement. In today's world,
ideology is no longer relevant, he said. Kinmen should be an
experimental zone, to test the impact closer economic
integration with China could have on Taiwan. In particular,
Lee suggested that Taiwan should relax restrictions on PRC
investment and labor.

Tapping into the PRC Labor Market
--------------


5. (C) The benefits of partially opening Kinmen's labor
market to PRC workers are particularly clear, Lee suggested.
Political leaders in Taipei are terrified of relaxing
restrictions on Chinese workers, fearful that they would take
jobs from ordinary workers on Taiwan. Because few young
people want to live in the remote outpost, however, Kinmen
faces a labor shortage that has become an obstacle to
economic growth and investment. Similarly, roughly 500
foreign caregivers, primarily from Southeast Asia, live in
Kinmen (whose total year-round population is roughly 70,000).
Allowing residents to hire PRC domestic workers would cut
labor costs in half, remove language and cultural barriers,
and result in better conditions for the workers themselves.
Lee noted that, because Kinmen is only a short 30-minute
ferry ride from Xiamen, these caregivers would be able to
return home every month, rather than the yearly visits home
many foreign from farther afield are able to make.


6. (C) Similarly, Lee noted, it would make far better
economic sense to reduce barriers to importing PRC-produced
food into Kinmen. Despite the high cost of shipping
foodstuffs from Taiwan to Kinmen, Lee claimed, Taiwan's
current food safety regime and other trade barriers make it
impossible to procure a significant part of the island's food
supply from China. Noting the problems in the PRC food
system brought to light by the recent contaminated milk
scandal in China, Lee admitted that there are advantages to
the Taiwan system.


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Only Politics Blocking a Kinmen-Xiamen Bridge
--------------


7. (C) Lee voiced enthusiastic support for a proposed bridge
between Kinmen and the mainland. From a technical
perspective, such a project would be relatively
straightforward. "China puts up multi-kilometer bridges
every day," the magistrate waxed, "and could finish the one
to Kinmen in a couple of years." Similarly, money does not
present a major obstacle, he suggested. The total cost of
the project would be in the neighborhood of USD 300 million
of which China, Lee suggested, would pay half. The problem,
Lee said, is politics. At least for now, he lamented,
Taiwan's central government shows no sign of being ready to
approve the project.

Ferry Links Booming
--------------


8. (C) Officials at the ferry terminal that, since 2001, has
been the primary link between Kinmen and Xiamen, were
enthusiastic about the impact that the relaxation of travel
restrictions has had on their business and on Kinmen's
economy in general. Twenty thousand people took advantage of
the "mini-Three Links" in 2001. Since then, as Taiwan has
relaxed rules on who can use the ferries, passenger numbers
have taken off. Last year, the eight companies (four
Taiwan-owned and four PRC-owned) sold more than 900,000
round-trip tickets, officials said. With nearly 450,000
round trip tickets sold in the first four months of 2009,
these companies are on track to break the one million mark.
Illustrating the economic impact of this traffic, one local
official noted that the small duty-free liquor store at the
terminal was the single largest seller of Kinmen's famous
"kaoliang" white liquor. While most of the passengers are
PRC tourists, the Director did see several foreign travelers,
including a Canadian student who said flying from Taipei to
Kinmen and then taking the ferry cost half what a ticket on a
direct Taipei-Xiamen flight would.


9. (C) In an indication of the tensions that remain between
Taiwan and China - but also of the cooperation between Kinmen
military and civilian authorities - the uniformed military
personnel who escorted the Director throughout his visit to
Kinmen made a discreet exit when the delegation arrived at
the terminal. Gen. Lu explained that, as a policy, Taiwan
armed forces personnel in uniform stay out of the facility,
to avoid "scaring" mainland tourists.

Gambling Not in the Cards
--------------


10. (C) The proposal to allow gambling on Taiwan's offshore
islands would likely have little impact on Kinmen, Lee
predicted. Gambling did not have the clear support of
Kinmen's people and it is far from certain, Lee said, that a
majority of Kinmen residents would vote in favor of the
proposal if a referendum were held. While admitting that the
results were somewhat dated, Lee noted that a poll taken a
few years ago had shown that more than half of the island's
people opposed casino gambling. For his part, Lee said he
was personally opposed to the idea of casino gambling, since
it would detract from Kinmen's image a a quiet, traditional
tourist destination. Likewise, he said, the PRC appears
unenthusiastic with what he termed "the Macao model" of
gambling, in which Chinese officials and businessmen use the
former Portuguese enclave's casinos to, in effect, launder
money.

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


11. (C) One is struck by the sharp contrasts found in Kinmen,
which for much of the past 60 years was the frontline of a
deadly military face-off between the PRC and Taiwan.
Following the "Quemoy crisis" of 1958, the island endured
alternate-day shelling from PRC-held islands as close as 3
kilometers away for the next 20 years, halted only in 1979.
Now, the threatened invasion is of say-traveler tourists from
Xiamen city, a mere 8 kilometers away and both more populous
and more prosperous than tiny Kinmen. Magistrate Lee would
clearly like the remaining Taiwan troops to depart, so he can
use their extensive land holdings to further promote ties
with his mainland neighbors. While that is not likely to
happen right away, the prospects of a Kinmen relying heavily
on PRC economic ties is already energizing the island chain's
future.
YOUNG