VZCZCXRO0307
RR RUEHCN RUEHGH
DE RUEHIN #1398/01 1110825
ZNR UUUUU ZZH
R 210825Z APR 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 9827
INFO RUEHBJ/AMEMBASSY BEIJING 5102
RUEHCN/AMCONSUL CHENGDU 1211
RUEHGZ/AMCONSUL GUANGZHOU 9258
RUEHHK/AMCONSUL HONG KONG 6303
RUEHGH/AMCONSUL SHANGHAI 0069
RUEHSH/AMCONSUL SHENYANG 5170
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEFDIA/DIA WASHINGTON DC

UNCLAS SECTION 01 OF 02 TAIPEI 001398 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/TC 
 
E.O. 12958: N/A 
TAGS: ECON PREL CH TW
SUBJECT: CROSS-STRAIT TOURISM - EXPECTATIONS HIGH, PRESSURE 
ON 
 
REF: A. TAIPEI 1260 
 
     ¶B. TAIPEI 1341 
 
Summary 
------- 
 
¶1. (SBU) Expectations are high that Taiwan and the PRC will 
lift remaining restrictions on PRC tourist travel to 
Taiwan.  Estimates of the potential economic benefit range 
as high as 0.2 percent of GDP.  One industry contact 
speculated that Taiwan could see 5 million PRC tourists per 
year within 5 years.  Tourism stocks on the Taiwan Stock 
Exchange have risen 66 percent in the last year and 20 
percent since the end of March.  Local government officials 
are also anxious to see tourism liberalization.  Tourism- 
related firms and investors are confident that the DPP 
government will make progress on lifting restrictions. 
Their expectations will keep the pressure on the DPP to 
produce results.  End summary. 
 
Expectations of a Significant Boost to GDP 
------------------------------------------ 
 
¶2. (U) Expectations are high that Taiwan and the PRC will 
lift remaining restrictions on PRC tourist travel to 
Taiwan, with high estimates of the potential economic 
impact.  The Taiwan press recently reported a Merrill Lynch 
estimate that PRC tourism could raise Taiwan's GDP by 0.2 
percent, even with limits of 1,000 PRC tourist entries per 
day.  A Morgan Stanley report was less optimistic, 
estimating a GDP increase of 0.05 percent.  In terms of 
additional income, a recent study by the Taiwan 
government's Tourism Bureau predicted that PRC tourists 
would bring up to NT$ 19.2 billion (US$ 600 million) to the 
Taiwan economy. 
 
¶3. (SBU) The Taiwan government has indicated that at least 
initially PRC tourists would be limited to 1,000 tourists 
per day.  An additional 365,000 tourists per year will not 
have a dramatic impact on the total number of Taiwan's 
international visitors, which totaled 3.4 million in 2005. 
However, many expect the daily quota to be gradually 
increased.  Grand Formosa Regent Chairman Steven Pan told 
AIT that he believed that PRC visitors to Taiwan could 
total 5 million per year within 5 years. 
 
Tourism Stock Prices Soaring, Investment Up 
------------------------------------------- 
 
¶4. (SBU) Investor expectations of rising numbers of PRC 
tourists have significantly raised values of tourism 
related stocks.  The Taiwan Stock Exchange's tourism index 
started to show dramatic gains a year ago after then KMT 
Chairman Lien Chan went to the PRC on April 28, 2005.  As 
of April 20, 2006, the index had risen 66 percent since a 
year earlier.  The most recent announcements on tourism by 
Taiwan and the PRC have driven up the index 20 percent 
since March 31, 2006.  In the last week, Phoenix Tour and 
Formosa Regent, key tourism-related stocks, have reached 
all-time highs.  Formosa Regent's Pan told AIT that both 
local and foreign investors have driven the rising the 
stock prices. 
 
¶5. (SBU) Local tourism-related firms have also increased 
investment.  Pan said that Formosa Regent had invested in 
two new hotel projects in Taipei and a large new restaurant 
and conference complex at Taiwan's National Palace Museum. 
Leofoo Development, which owns two hotels in Taipei, 
recently completed a NT$ 550 million (US$ 16.9 million) 
investment in a new hotel in Kenting, in southern Taiwan. 
Leofoo Chairman Chuan Tsuan Che told AIT the Kenting 
facility created 160 new jobs.  He expects PRC tourism to 
increase Leofoo's income by 20 to 30 percent. 
 
Local Officials Also Anxious 
---------------------------- 
 
¶6. (U) Many local government officials also have high 
expectations of the economic benefits that tourism will 
 
TAIPEI 00001398  002 OF 002 
 
 
bring and are eager for the central government to make 
progress on lifting restrictions soon.  AIT Economic 
Section staff member recently attended a forum hosted by a 
Taiwan industry association titled "Local Competitiveness 
in Globalization."  Nineteen out of Taiwan's 23 counties 
were represented at the forum by county commissioners or 
deputy commissioners.  Tourism liberalization dominated the 
discussion.  Several local officials commented that their 
governments have also taken steps to prepare for higher 
numbers of PRC tourists. 
 
Industry Confident DPP Will Proceed, Pressure is High 
--------------------------------------------- -------- 
 
¶7. (SBU) Market reaction shows that Taiwan investors are 
betting that tourism restrictions will be liberalized in 
the near future.  Formosa Regent's Pan told AIT that he has 
little doubt the ruling DPP government will move forward on 
tourism liberalization.  Vice Chairman Yao Ta-kuang of the 
Travel Agents Association of Taiwan (TAAT), the association 
named by the Taiwan government to lead informal cross- 
Strait discussions on tourism, recently told AIT that he 
believed more formal cross-Strait consultations would occur 
soon.  However, he also believes Taiwan and the PRC will 
lift the remaining restrictions regardless of whether more 
formal consultations take place.  Mainland Affairs Council 
(MAC) Joseph Wu's April 12 statement that Taiwan may 
unilaterally lift remaining restrictions on PRC tourists 
regardless of whether cross-Strait consultations are 
completed (ref B) has further fueled the belief that 
liberalization will occur soon.  High expectations among 
tourism-related firms, investors, and other stakeholders 
will keep the pressure on the DPP government to produce 
results on PRC tourism soon. 
YOUNG