VZCZCXRO9991
RR RUEHCN
DE RUEHIN #1151/01 0930724
ZNY CCCCC ZZH
R 030724Z APR 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 9494
INFO RUEHBJ/AMEMBASSY BEIJING 5006
RUEHUL/AMEMBASSY SEOUL 7729
RUEHGP/AMEMBASSY SINGAPORE 6411
RUEHKO/AMEMBASSY TOKYO 7591
RUEHCN/AMCONSUL CHENGDU 1154
RUEHGZ/AMCONSUL GUANGZHOU 9179
RUEHHK/AMCONSUL HONG KONG 6197
RUESLE/AMCONSUL SHANGHAI 8569
RUEHSH/AMCONSUL SHENYANG 5103
RUEKJCS/SECDEF WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
RHHMUNA/USPACOM HONOLULU HI

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001151 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/28/2016 
TAGS: ECON PGOV PREL TW
SUBJECT: DIRECTOR'S INITIAL CALL ON VICE PREMIER TSAI 
ING-WEN 
 
 
Classified By: AIT Director Stephen M. Young. Reasons: 1.4 (B/D) 
 
¶1. (C) Summary: Vice Premier Tsai Ing-wen expressed concerns 
about Taiwan's democracy and economic situation with AIT 
Director Young during his initial courtesy call on March 28. 
She promised to work hard to address the concerns of business 
leaders with regard to overly bureaucratic travel regulations 
for PRC workers, but was less optimistic about speedy passage 
of the special defense procurement budget, blaming continued 
obstructionism on the Pan-Blue opposition.  The Director told 
her that frustration about this and other issues threatened 
to erode support for Taiwan in Washington.  End summary. 
 
From Democracy to Good Governance 
--------------------------------- 
 
¶2. (C) AIT Director Young made his initial courtesy call on 
Vice Premier Tsai Ing-wen on March 28.  The Director stated 
that Taiwan's next challenge, having succeeded in 
establishing a strong democracy, is to focus on issues of 
good governance.  He said he was concerned that excessive 
political conflict and gridlock were becoming obstacles to 
that goal.  As an example, he pointed to the continuing 
fighting over the special defense procurement budget, which 
he warned was leaving Taiwan vulnerable in the face of 
China's growing military modernization, while undermining 
support for Taiwan's defense among its best friends.  He 
urged Tsai to build public support for greater defense 
spending, and promised his help in explaining its necessity 
to the public. 
 
¶3. (C) Tsai responded that Taiwan is very divided about this 
issue and that reasonable discussion is difficult.  She said 
much of the blame for this lies with Pan-Blue leaders, such 
as KMT Chairman Ma Ying-jeou and PFP Chairman James Soong, 
who use the issue to support other political objectives.  She 
warned that Taiwan "still has some distance to travel" before 
it will be ready to pass the Special Budget.  Tsai was 
pessimistic that Taiwan's political gridlock would diminish 
in the future, even if Ma were elected President in 2008. 
 
Challenges to Taiwan's Economy 
------------------------------ 
 
¶4. (C) Turning to the economy, the Director said he had met 
that morning with the American Chamber of Commerce, whose 
members discussed some of their concerns.  He encouraged Tsai 
to read their 2005 White Paper, which he said offers a 
downbeat assessment of Taiwan's economic situation.  The 
Director emphasized that his own view of Taiwan's economy is 
more optimistic, based on his confidence in Taiwan's 
democracy and its investment in human capital.  Tsai agreed 
to look at the paper, and asked about AmCham's concerns.  The 
Director explained that one of the concerns of the business 
community is that regulations governing travel to Taiwan by 
PRC nationals for business and training purposes are too 
bureaucratic, often requiring months of advance planning. 
Business leaders want the flexibility to move specialized 
workers between plants in the PRC and on Taiwan to solve 
problems as they arise.  They are also concerned about the 
difficulty of holding international conferences and trade 
shows in Taiwan, in light of these restrictions.  Tsai 
responded that she had worked on solutions to these issues in 
her previous position as Chief of the Mainland Affairs 
Council, and she promised to meet with AmCham's business 
leaders to discuss how these concerns could be better 
addressed. 
 
¶5. (C) The Director told Tsai he is concerned that Taiwan's 
debate about how to manage cross-Strait trade is distracting 
its leaders, particularly President Chen Shui-bian from the 
more important task of planning for Taiwan's future economic 
opportunities.  He said that Chen should shift his focus to 
injecting health into the economy, rather than dealing with 
"theological issues" such as Taiwan's sovereignty and 
identity.  Tsai said she shared the Director's concerns about 
Taiwan's future, but countered that the KMT would do a worse 
job managing the economy than the DPP.  She characterized the 
KMT as lacking flexibility and being stuck in "the last 
 
TAIPEI 00001151  002 OF 002 
 
 
century."  She said the DPP is much quicker about responding 
to crises, even if these are, she admitted, sometimes of its 
own making.  Tsai noted that Ma Ying-jeou, in his position as 
Taipei City Mayor, has not handled crises very well, but has 
managed to preserve his popularity only through his good 
fortune in not facing many crises in his term. 
 
Don't Underestimate the Power of Democracy 
------------------------------------------ 
 
¶6. (C) The Director reiterated his confidence in Taiwan, 
saying that it should not underestimate the power of its 
democracy.  He suggested that Taiwan should shift its foreign 
policy focus toward promoting itself as a model for 
democratization to other countries, rather than making the 
priority its long-standing quest for official diplomatic 
relationships.  He said that Taiwan should offer its 
experience in democracy to the people in the PRC, and need 
not allow the PRC to define the Cross-Straits relationship 
solely in terms of sovereignty.  The Director suggested that 
a long-term process of change was occurring in China which 
could mean over time that Taiwan would be dealing with a more 
democratic system than currently exists in Beijing.  He cited 
his recent experience in Kyrgyzstan, where the people's 
long-suppressed desire for a greater political voice led to 
one of the ousters of authoritarian leaders from the former 
Soviet Union known as the "color revolutions." Tsai agreed 
that there was no hurry to change the status quo, but 
insisted that Taiwan needs to ensure that its options for the 
future remain open and that its people be allowed to make 
those decisions for themselves. 
 
¶7. (C) The Director noted that the guarantor for Taiwan's 
democracy is the U.S., but warned that support for Taiwan has 
been diminishing.  He concluded that President Chen needs to 
do a better job of fencing off U.S. interests from his 
domestic politics, or he risks further eroding the pillar 
that supports Taiwan's democracy. 
YOUNG