VZCZCXRO3586
RR RUEHCN RUEHGH
DE RUEHIN #2677/01 2200905
ZNR UUUUU ZZH
R 080905Z AUG 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 1494
INFO RUEHBJ/AMEMBASSY BEIJING 5525
RUEHUL/AMEMBASSY SEOUL 7999
RUEHKO/AMEMBASSY TOKYO 7908
RUEHCN/AMCONSUL CHENGDU 1360
RUEHGZ/AMCONSUL GUANGZHOU 9482
RUEHHK/AMCONSUL HONG KONG 6735
RUEHGH/AMCONSUL SHANGHAI 0301
RUEHSH/AMCONSUL SHENYANG 5326
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 TAIPEI 002677 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS EAP/TC 
 
E.O. 12958: N/A 
TAGS: ECON PREL ETRD EINV TW
SUBJECT: AIT DIRECTOR VISITS ITRI CHAIRMAN LIN HSIN-I 
 
 
¶1. (U) Summary. AIT director paid a courtesy call on July 24 
to Industrial Technology Research Institute (ITRI) Chairman 
Lin Hsin-I to exchange views on Taiwan's current educational 
system, economic situation, and strategies for the future. 
Lin stressed the need for educational reform, to bring 
dynamic thinking into industry.  He also said that Taiwan 
needed to develop new cutting edge technology items such as 
carbon fiber composites.  On cross-Strait trade, Lin 
emphasized the need to encourage bilateral trade, but he did 
not foresee any progress on this issue at the upcoming 
Sustainable Economic Conference.  End summary. 
 
¶2. (U) Lin was appointed as ITRI Chairman in 2004.  ITRI is a 
government-financed (45 percent) non-profit organization 
tasked with guiding Taiwan's industrial development.  It has 
a staff of 6,100 persons including 820 PhD's.  It serves as a 
research center for industry and an unofficial arm of the 
government's industrial policies. 
 
CROSS-STRAIT TRADE 
------------------ 
 
¶3. (SBU) Lin stressed that the ruling Democratic Progressive 
Party (DPP) did not understand commercial concerns and had 
squandered opportunities to foster bilateral trade between 
China and Taiwan.  He said in the PRC many of the government 
officials came from industry.  Lin said President Chen 
thought that if he (Chen) opened up trade with China, he 
would lose support from his own party.  Lin said he favored 
relaxing the restrictions on semiconductor investment in 
China.  AIT Director observed that China's cheaper labor was 
not always the main consideration for Taiwan investors, 
citing the example of Morris Chang, Chairman of TMSC and 
former Chairman of ITRI, whose primary concern was the lack 
of IPR protection in China.  Lin said he was an advisor to 
the Sustainable Economic Conference but he did not expect any 
breakthroughs on cross-Strait trade to emerge from that 
conference.  Note. The July 28-29 Sustainable Economic 
Development Conference fell short of business expectations 
for a more open trade policy towards China.  It kept the 40 
percent investment cap for Taiwan firms in China, although it 
endorsed relaxed restrictions on tourism, charter flights and 
banking and to permit mainland manufacture of semiconductor 
chips up to 0.18 microns. End note. 
 
HOW TO STAY COMPETITIVE 
----------------------- 
 
¶4. (U) Lin said one way to stay competitive with mainland 
China was to promote higher value-added products.  Taiwan 
currently was developing cutting-edge technology products 
such as carbonized bamboo which was used in combination with 
natural/synthetic fibers to provide insulation.  Lin said 
that boxes insulated with carbonized bamboo composites might 
replace refrigerated trucks in the future.  Likewise, Taiwan 
makes high-end bicycles locally but cheaper bikes are 
produced by Taiwan companies in China. 
 
 
EDUCATIONAL REFORM 
------------------ 
 
¶5. (U) Lin complained that university-level education in 
Taiwan was turning out students who knew how things work but 
not why.  He said Taiwan needed to develop a connection 
between the educational system and industry so that college 
graduates would be able to contribute to industrial 
development.  AIT Director quoted Academia Sinica President 
Li Yuan-tseh as saying the students were good at taking 
tests but not at creative thinking.  Lin said that he looked 
forward to the time when foreign institutions would invest in 
education in Taiwan.  He added he thought it was good that 
Taiwan professors were going to China to teach. 
 
SHORT TERM PROSPECTS 
-------------------- 
 
¶6. (U) AIT Director asked Lin about the prospects for 
Taiwan's economy in the next five years.  Lin thought that as 
long as Taiwan kept its key technologies, added good 
management and R&D, then it could stay ahead of the 
 
TAIPEI 00002677  002 OF 002 
 
 
competition.  Lin said since manufacturing was moving away 
from Taiwan the service sector held much promise.  Given 
Lin's experience in the automobile industry, AIT Director 
asked him about development of hybrid vehicle technology in 
Taiwan.  Lin said Taiwan was lacking in that technology but 
was strong in the area of auto parts and components.  Lin 
said Taiwan provided USD4 billion in automobile components to 
the world market.  Implementation and coordination of 
economic policy between government and industry were critical 
to keep Taiwan's industry on a healthy course, according to 
Lin. 
 
 
 
 
YOUNG