VZCZCXYZ0023
RR RUEHWEB

DE RUEHINA #2590 2140927
ZNR UUUUU ZZH ZUI RUEWMCF2046 2140926
R 020927Z AUG 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 0000
INFO CHINA POSTS COLLECTIVE
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS AIT TAIPEI 002590 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
 
 
 
 
DEPT FOR EAP/TC 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAIR EINV PREL CH TW
SUBJECT: VAGUE CONSENSUS, MINORITY OPINIONS, POSITIVE 
SIGNALS - SUSTAINABLE  ECONOMIC DEVELOPMENT CONFERENCE 
CONCLUDES 
 
REF: A. TAIPEI 2307 
 
     ¶B. TAIPEI 2365 
     ¶C. TAIPEI 2462 
     ¶D. TAIPEI 2488 
     ¶E. TAIPEI 2493 
     ¶F. TAIPEI 2542 
 
¶1. (SBU) SUMMARY: TAIWAN'S SUSTAINABLE ECONOMIC DEVELOPMENT 
CONFERENCE CONCLUDED JULY 28 PRODUCING NUMEROUS VAGUE 
CONSENSUS RECOMMENDATIONS.  MORE CONTENTIOUS AND CONCRETE 
RECOMMENDATIONS WERE RELEGATED TO THE CATEGORY OF "OTHER 
OPINIONS," ON WHICH NO CONSENSUS WAS POSSIBLE.  HIGHLIGHTS 
INCLUDED FINANCIAL SECTOR RECOMMENDATIONS, WHICH SEEM TO 
REFLECT A NEW APPROACH BY THE ADMINISTRATION TO FINANCIAL 
SECTOR REFORM.  HOWEVER, THE MOST IMPORTANT RESULT OF THE 
CONFERENCE WAS THE SIGNAL PREMIER SU SENT OF HIS 
DETERMINATION TO PROCEED WITH ADDITIONAL CROSS-STRAIT 
OPENING MEASURES THAT COULD HAVE A STRONG POSITIVE IMPACT 
ON TAIWAN'S ECONOMY OVERALL.  END SUMMARY. 
 
¶2. (SBU) TAIWAN'S LONG-AWAITED SUSTAINABLE ECONOMIC 
DEVELOPMENT CONFERENCE CONCLUDED JULY 28 AFTER REACHING 
CONSENSUS ON 516 RECOMMENDATIONS.  HOWEVER, MOST OF THE 
CONSENSUS RECOMMENDATIONS AMOUNTED TO LITTLE MORE THAN 
VAGUE STATEMENTS ON WIDELY-ACCEPTED PRINCIPLES THAT SHOULD 
GUIDE TAIWAN'S ECONOMIC POLICY.  MORE ATTENTION WAS FOCUSED 
ON "OTHER OPINIONS" IN THE REPORT, WHICH REPRESENTED THE 
VIEWS OF SOME OF THE PARTICIPANTS BUT NOT A CONSENSUS.  THE 
CONFERENCE REPORT INCLUDED 166 "OTHER OPINIONS".  SINCE THE 
CONFERENCE, TAIWAN OFFICIALS HAVE INDICATED THAT THEY WILL 
TAKE ACTION IMMEDIATELY TO IMPLEMENT CONSENSUS 
RECOMMENDATIONS AND WILL GIVE THE "OTHER OPINIONS" 
RECOMMENDATIONS FURTHER STUDY. 
 
¶3. (U) THE CONFERENCE WAS DIVIDED INTO FIVE SESSIONS, WHICH 
ADDRESSED THE FINANCIAL SECTOR, INDUSTRIAL COMPETITIVENESS, 
GOVERNMENT EFFICIENCY, THE SOCIAL SECURITY SYSTEM, AND 
GLOBALIZATION AND CROSS-STRAIT ECONOMIC RELATIONS.  EACH 
SESSION PRODUCED ITS OWN REPORT OF RECOMMENDATIONS. 
 
FINANCE - REFORM AND STATE-OWNED INSTITUTIONS 
--------------------------------------------- 
 
¶4. (SBU) IN THE FINANCIAL SECTOR SESSION, THE MOST 
IMPORTANT CONSENSUS ITEMS FOCUSED MAINLY ON THE TAIWAN 
AUTHORITIES HANDLING OF STATE-OWNED FINANCIAL INSTITUTIONS. 
THE RECENT CONTROVERSY OVER CHINATRUST'S EFFORTS TO TAKE 
OVER STATE-OWNED MEGA FINANCIAL HOLDING COMPANY (REPORTED 
REFS A AND E) HIGHLIGHTED PUBLIC CONCERN OVER THIS ISSUE. 
SOME OF THE CONFERENCE RECOMMENDATIONS ENCOURAGED THE 
AUTHORITIES TO FOCUS MORE ON IMPROVING THE MANAGEMENT OF 
STATE-OWNED FINANCIAL INSTITUTIONS RATHER THAN RAPID 
PRIVATIZATION.  THE RECOMMENDATIONS ALSO ENDORSED LIFTING 
SOME RESTRICTIONS ON THE OPENING OF NEW BANK BRANCHES IN 
TAIWAN.  THESE REFLECT A SHIFT IN THE ADMINISTRATION ON ITS 
APPROACH TO FINANCIAL SECTOR REFORM.  THERE WAS ALSO 
CONSENSUS TO ALLOW INVESTMENT FUNDS TO PURCHASE MAINLAND 
CHINESE SECURITIES.  THE "OTHER OPINIONS" FOCUSED MAINLY ON 
CROSS-STRAIT RESTRICTIONS AS WELL.  THEY INCLUDED A 
RECOMMENDATION TO LIFT THE 40 PERCENT CEILING ON TAIWAN 
INVESTMENT IN THE PRC (REF F), OPENING THE WAY FOR TAIWAN 
BANKS AND OTHER FINANCIAL INSTITUTIONS TO OPEN BRANCHES OR 
EXPAND OPERATIONS IN THE MAINLAND, AND PERMITTING PRC BANKS 
TO OPEN REPRESENTATIVE OFFICES IN TAIWAN. 
 
INDUSTRY - GDP TARGETS AND FOREIGN LABOR 
---------------------------------------- 
 
¶5. (SBU) THE SESSION ON INDUSTRIAL COMPETITIVENESS PRODUCED 
MORE RECOMMENDATIONS THAN ANY OTHER WITH 148 CONSENSUS 
ITEMS AND 88 "OTHER OPINIONS".  HOWEVER, MANY ITEMS 
ADDRESSED VERY SPECIFIC PROBLEMS IN A PARTICULAR INDUSTRY. 
OTHERS FOLLOWED THE LARGER PATTERN OF THE CONFERENCE BY 
SETTING BROAD GOALS WITHOUT MUCH DIRECTION ON HOW TO 
ACHIEVE THEM.  FOR EXAMPLE, ONE RECOMMENDATION SET THE GOAL 
THAT TAIWAN'S GDP PER CAPITA REACH US$ 30,000 BY 2015 AND 
THAT UNEMPLOYMENT BE MAINTAINED BELOW 4 PERCENT.  SEVERAL 
OF THE RECOMMENDATIONS ADDRESSED THE PROBLEM OF THE RISING 
COST OF UNSKILLED LABOR.  THERE WAS CONSENSUS TO REVIEW THE 
POLICY ON FOREIGN LABOR IN TAIWAN, BUT ONE OF THE "OTHER 
OPINIONS" WAS A RECOMMENDATION TO GRADUALLY REDUCE THE 
NUMBER OF FOREIGN WORKERS IN TAIWAN.  THE PARTICIPANTS WERE 
UNABLE TO REACH CONSENSUS ON OTHER KEY ITEMS AS WELL.  THE 
PROPOSAL TO DELAY IMPLEMENTING A 10 PERCENT CORPORATE TAX 
 
 
 
ON UNDISTRIBUTED PROFITS WAS INCLUDED UNDER "OTHER 
OPINIONS".  ALTHOUGH THE CONFERENCE REACHED CONSENSUS ON 
THE NEED TO CONTROL GREENHOUSE GAS EMISSIONS, THERE WAS NO 
CONSENSUS ON STANDARDS.  A RECOMMENDATION TO RESTRICT 
EMISSIONS FOR HIGH-POLLUTING INDUSTRIES BASED ON THE 
AVERAGE RATE OF OECD NATIONS IN 2000 WAS RELEGATED TO 
"OTHER OPINIONS". 
 
GOVERNMENT EFFICIENCY - DEALING WITH SCANDALS 
--------------------------------------------- 
 
¶6. (SBU) DISCUSSIONS OF GOVERNMENT EFFICIENCY REFLECTED 
CONCERNS GENERATED BY HIGHLY-PUBLICIZED POLITICAL SCANDALS. 
ONE CONSENSUS RECOMMENDATION PROPOSED THE ESTABLISHMENT OF 
A SPECIAL AGENCY TO INVESTIGATE CORRUPTION AMONG PUBLIC 
OFFICIALS.  ANOTHER CALLED FOR A REVIEW OF THE RETIREMENT 
SYSTEM FOR OFFICIALS.  RECOMMENDATIONS UNDER "OTHER 
OPINIONS" INCLUDED A REVIEW OF THE METHODS USED TO FREEZE 
THE BUDGETS OF PARTICULAR AGENCIES. 
 
SOCIAL SECURITY - DAY CARE, PENSIONS, HEALTH INSURANCE 
--------------------------------------------- --------- 
 
¶7. (U) THE SESSION ON SOCIAL SECURITY WAS AMONG THE LEAST 
CONTENTIOUS.  THE CONFERENCE WAS ABLE TO REACH CONSENSUS ON 
107 RECOMMENDATIONS WITH ONLY FIVE "OTHER OPINIONS".  THE 
CONFERENCE MADE CONSENSUS RECOMMENDATIONS TO COMPLETE 
LEGISLATION ON THE PENSION SYSTEM, IMPROVE DAY-CARE AND 
LEAVE OPTIONS FOR WORKING PARENTS, AND CALCULATE INSURANCE 
PREMIUMS BASED ON CUMULATIVE FAMILY INCOMES. 
 
CROSS-STRAIT - "OTHER OPINIONS" ABOUND 
------------------------------------ 
 
¶8. (SBU) SOME OF THE RECOMMENDATIONS UNDER THE TOPIC OF 
GLOBALIZATION AND CROSS-STRAIT ISSUES WERE DESCRIBED REF F. 
THE HIGHLIGHTS INCLUDED CONSENSUS ENDORSEMENT OF CROSS- 
STRAIT CONSULTATIONS ON BANKING AND SECURITIES AIMED AT 
OPENING THE PRC TO TAIWAN FIRMS, AND FURTHER OPENING TAIWAN 
TO PRC TOURISTS AND PRC EMPLOYEES OF TAIWAN AND 
MULTINATIONAL FIRMS.  BOTH SIDES OF THE DEBATE WERE ABLE TO 
INSERT CONTROVERSIAL AND OFTEN CONTRADICTORY "OTHER 
OPINIONS" ON CROSS STRAIT ISSUES.  PRO-LIBERALIZATION 
PARTICIPANTS ADDED RECOMMENDATIONS TO EASE THE 40 PERCENT 
INVESTMENT CEILING AND PROMOTE CROSS-STRAIT PASSENGER AND 
CARGO CHARTERS.  INDEPENDENCE-LEANING ANTI-LIBERALIZATION 
PARTICIPANTS ADDED "OTHER OPINIONS" CALLING ON TAIWAN TO 
MAINTAIN THE CEILING ON INVESTMENT, OPPOSE REGULAR CHARTER 
SERVICES AS AN INTERIM STEP TOWARDS DIRECT LINKS, AND STOP 
DELEGATING CROSS-STRAIT DISCUSSIONS TO INDUSTRY GROUPS 
ACCORDING TO THE "MACAU MODEL" USED TO NEGOTIATE CHARTER 
FLIGHTS.  WE WILL PROVIDE MORE INFORMATION ON THE 
ADMINISTRATION'S PLANS TO IMPLEMENT THE CROSS-STRAIT 
RECOMMENDATIONS SEPTEL. 
 
CONSENSUS IS DISAPPOINTMENT 
--------------------------- 
 
¶9. (SBU) THE REACTION TO THE RESULTS OF THE CONFERENCE 
AMONG INDUSTRY LEADERS AND OTHER OBSERVERS HAS BEEN MOSTLY 
ONE OF DISAPPOINTMENT.  IN GENERAL, TAIWAN BUSINESS LEADERS, 
WHO FOCUSED PRIMARILY ON CROSS-STRAIT LIBERALIZATION, FEEL 
THE CONFERENCE DID NOT GO FAR ENOUGH.  MANY HOPED THE 
CONFERENCE WOULD PRODUCE A CONSENSUS TO LIFT THE 40 PERCENT 
CEILING ON INVESTMENT IN MAINLAND CHINA BUT WERE 
DISAPPOINTED THAT IT WAS ONLY INCLUDED UNDER "OTHER 
OPINIONS".  JEFF CHANG, PRESIDENT OF CATHAY SECURITIES 
INVESTMENT TRUST SAID "THE WHOLE CONFERENCE IS LIKE A SHOW, 
IN WHICH WE DO NOT EXPECT ANY SUBSTANTIAL RELAXATION OF 
CROSS-STRAIT RESTRICTIONS OR IMPRESSIVE CHANGES IN ECONOMIC 
POLICY."  GARY WANG, CHAIRMAN OF THE GENERAL CHAMBER OF 
COMMERCE SAID "WE ARE NOT SATISFIED WITH THE CONFERENCE, 
BUT THERE IS NOTHING WE CAN DO BUT ACCEPT IT." 
NEVERTHELESS, FOUR MAJOR INDUSTRY GROUPS ISSUED A JOINT 
PRESS RELEASE AFTER THE CONFERENCE COMMENDING THE RESULTS. 
 
¶10. (SBU) PRO-INDEPENDENCE "DEEP GREEN" SUPPORTERS, 
ESPECIALLY TAIWAN SOLIDARITY UNION (TSU) PARTICIPANTS IN 
THE CONFERENCE, HAVE BEEN HIGHLY CRITICAL OF THE OUTCOME. 
THE TSU WALKED OUT OF THE CONFERENCE ON THE SECOND DAY (REF 
F) AND FORMER PRESIDENT LEE TENG-HUI GAVE A SCATHING SPEECH 
THE DAY AFTER THE CONFERENCE ENDED SAYING THAT INDUSTRY HAD 
"KIDNAPPED" THE ADMINISTRATION AT THE CONFERENCE. 
ENVIRONMENTAL PROTECTION GROUPS WERE ALSO OUTRAGED AND MANY 
 
 
 
WALKED OUT OF THE CONFERENCE THE SECOND DAY.  TAIWAN 
ENVIRONMENTAL PROTECTION UNION CHAIRMAN CHEN CHIAO-HUA SAID 
THE CONFERENCE WAS "MEANINGLESS" BOTH IN TERMS OF 
"SUSTAINABILITY" AND "DEVELOPMENT."  LABOR GROUPS WERE 
VOCAL IN THEIR CRITICISM OF PLANS TO RELAX CROSS-STRAIT 
TRADE AND DISSATISFIED WITH THE RESULTS. 
 
COMMENT - THE REAL IMPACT 
------------------------- 
 
¶11. (SBU) REACTIONS TO THE CONFERENCE HAVE BEEN CONSISTENT 
WITH THE PREDICTION OF COUNCIL FOR ECONOMIC PLANNING AND 
DEVELOPMENT CHAIRMAN HU SHENG-CHENG, WHO TOLD AIT BEFORE 
THE EVENT THAT IF EVERYONE WAS DISSATISFIED WITH THE 
RESULTS IT WOULD MEAN THAT THE CONFERENCE HAD STRUCK A 
BALANCE THAT APPROXIMATES A CONSENSUS.  THE UNHAPPY BALANCE 
ACHIEVED SEEMS TO HAVE FAVORED BUSINESS INTERESTS OVERALL. 
HOWEVER, THE REAL NEWS OF THE CONFERENCE WAS NOT APPARENT 
IN THE RECOMMENDATIONS.  MANY OF THE CONSENSUS 
RECOMMENDATIONS WILL BENEFIT THE TAIWAN ECONOMY IN SOME 
WAYS, BUT THE MOST IMPORTANT RESULT WAS THE SIGNAL PREMIER 
SU SENT THAT HE INTENDS TO PROCEED WITH CROSS-STRAIT 
LIBERALIZATION EVEN IN THE FACE OF VOCAL OPPOSITION FROM 
THE DEEP GREEN.  LIFTING THE INVESTMENT CEILING, MOVING 
TOWARD DIRECT TRANSPORTATION LINKS AND OPENING THE PRC TO 
TAIWAN BANKS AND OTHER FINANCIAL INSTITUTIONS, IF AND WHEN 
IMPLEMENTED, WILL HAVE A MAJOR POSITIVE EFFECT ON TAIWAN'S 
ECONOMY OVERALL AND ITS COMPETITIVENESS IN THE REGION. 
THEY WILL BE IMPORTANT STEPS IN STAVING OFF THE ECONOMIC 
MARGINALIZATION SO MANY IN TAIWAN FEAR. 
YOUNG