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RUEHGH/AMCONSUL SHANGHAI 1968
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RHEFDIA/DIA WASHINGTON DC
RHHJJAA/JICPAC HONOLULU HI
RUEKJCS/SECDEF WASHINGTON DC
RHHMUNA/USPACOM HONOLULU HI

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 000473 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 04/01/2018 
TAGS: PGOV PREL ECON EAGR ETRD CH TW
SUBJECT: VP-ELECT VINCENT SIEW AND CHAIRMAN BURGHARDT 
DISCUSS ECONOMIC STRATEGY AND BILATERAL ISSUES 
 
 
Classified By: AIT Director Stephen M. Young, 
Reasons: 1.4 (b/d) 
 
¶1. (C) Summary: Vice President-elect Vincent Siew told 
Chairman Burghardt and DDIR Wang on March 28 that the Ma 
administration will end the current price freezes on oil and 
electricity, as well as take other steps to deregulate 
Taiwan's economy and lower barriers to investment in the PRC. 
 The new administration will also permit weekend direct 
charter flights to PRC destinations by June 2008, with a goal 
of daily direct scheduled flights within one year.  Siew 
promised to discuss with Ma the possibility of giving 
incumbent Chen Shui-bian the go-ahead to open Taiwan's market 
to all U.S. beef products before Chen leaves office.  Siew 
said he hoped the U.S. would allow a Ma visit to Washington 
before his May 20 inauguration, which, he argued, would 
provide Ma more leverage with China in future cross-Strait 
negotiations.  End Summary. 
 
Ma To End Price Freeze on Oil and Electricity 
--------------------------------------------- 
 
¶2. (C) In a March 28 meeting at KMT headquarters with AIT 
Chairman Burghardt and Deputy Director Wang, Vice 
President-elect Vincent Siew, accompanied by foreign policy 
advisor John Feng, outlined the Ma administration's top 
priorities upon taking office on May 20.  First on the 
agenda, he said, is inflation control.  Although the economy 
is performing well, benefits haven't accrued to everyday 
citizens, who believe inflation is higher than that suggested 
by official government statistics.  At the same time, 
however, the administration will also have to act on price 
freezes for oil and electricity.  The Chen administration 
froze these commodities over a year ago as an election ploy, 
and oil sells for about half its actual market price while 
electricity goes for one-third of its true value.  Siew told 
the Chairman that if the price freezes continue, the China 
Petroleum Company (CPC) stands to lose 90 billion NTD and 
could go bankrupt. 
 
Siew and Ma Enjoy Close Partnership 
----------------------------------- 
 
¶3. (C) Siew said he had forged a very close partnership with 
Ma Ying-jeou during the presidential campaign.  His role 
during the race was to explain and promote Ma's economic 
platform, based on his reputation and experience as an 
economic authority in the administration of Lee Teng-hui. 
Also, he capitalized on his Taiwanese ethnicity in the south, 
which had become a DPP stronghold in the previous two 
presidential elections.  By campaigning in Taiwanese dialect, 
Siew helped win support for Ma, viewed with suspicion by many 
southern voters as an "outsider" and "mainlander".  Finally, 
he took advantage of his strong ties in the business 
community to drum up their support, since Ma lacked 
significant connections with this important constituency. 
 
Siew to Have Expanded Vice Presidential Role 
-------------------------------------------- 
 
¶4. (C) Siew said Ma wants him to have a more substantial role 
in his administration than previous vice presidents, 
particularly in the areas of cross-Strait and economic 
issues.  He told the Chairman he also intends to assist by 
familiarizing Ma with how the central government functions, 
as he is more experienced in government operations and how 
the various levels of the bureaucracy interact. 
 
Domestic and Cross-Strait Economic Strategies 
--------------------------------------------- 
 
¶5. (C) Siew discussed three long-term economic strategies of 
the Ma administration.  First, the government will increase 
domestic demand with the "Love Taiwan" infrastructure plan, 
consisting of 12 large-scale construction projects.  The 
total cost will approach four trillion NTD, with half to come 
out of the government budget, and half from private sector 
investment.  Second, the Ma administration will enact a new 
industrial restructuring enhancement law upon expiration of 
 
TAIPEI 00000473  002 OF 002 
 
 
the current law in 2009.  Siew said the new law will provide 
tax breaks for innovation only, and will be WTO compliant. 
Third,  the administration will encourage general 
deregulation in Taiwan and remove barriers to investment in 
the PRC, particularly in the financial sector. Siew said once 
Taiwan and the PRC negotiate an MOU for a financial 
supervision system, the path will be clear for Taiwan banks 
to open branches in China. 
 
¶6. (C) The Ma administration also plans to encourage direct 
PRC investment in Taiwan, said Siew.  He told the Chairman 
that mainland investors find Taiwan real estate particularly 
attractive.  He added that the government will proceed on 
expanding direct charter flights beginning with weekend 
flights commencing from June of this year, extending these to 
daily charter flights, and finally, daily scheduled flights 
within one year. 
 
Siew Agrees to Discuss Beef Import Issue with Ma 
--------------------------------------------- --- 
 
¶7. (C) Burghardt then explained the two U.S. two goals on 
beef and pork imports to Taiwan: for beef, a general 
liberalization of all cuts and grades; and for pork, a return 
to the previously agreed upon Maximum Residue Level (MRL) of 
1.0 ppb for ractopamine.  The Chairman noted that in his 
meeting with President Chen Shui-bian, they had discussed 
Chen's commitment to open up Taiwan's beef market before the 
end of his term.  Chen wanted to fulfill this pledge, he had 
told the Chairman, but because he considered himself to be in 
a "caretaker" role, he believed he did not have the power or 
right to act unless the incoming administration made clear it 
did not object.  The Chairman suggested to Siew that Ma 
should clear this issue from the agenda so that the U.S. and 
Taiwan could devote the time to more substantive issues at 
the beginning of Ma's first term.  The beef question is the 
highest priority for the White House, Burghardt stressed, 
adding that an agreement with Taiwan would also help pave the 
way for market access in South Korea.  Siew promised to look 
into the issue and discuss it further with Ma. 
 
Ma's Request to Visit the U.S. 
------------------------------ 
 
¶8. (C) Siew expressed hope that Washington will allow Ma 
Ying-jeou to visit the U.S. before he takes office on May 20. 
 A visit would offer a good opportunity to "test the waters" 
of the cross-Strait relationship, Siew maintained.  He 
doubted that Chinese President Hu Jintao would object to a Ma 
visit, noting the positive tone of Hu's phone conversation 
with President Bush.  John Feng added that a Washington visit 
by Ma would demonstrate Taiwan enjoys strong ties with the 
U.S. and has its implicit backing, and would give Ma added 
leverage when approaching China.  Siew concurred, stressing 
that the resumption of cross-Strait dialogue requires U.S. 
support.  A visit to Washington would ensure that the USG 
fully understands the position of Ma and his administration. 
 
¶9. (C) The Chairman said he would inform Washington of Siew's 
comments, and he added that new ways need to be found for Ma 
and other Taiwan officials to enjoy better communication with 
their U.S. counterparts.  Although the framework set up 
thirty years ago makes this difficult, he acknowledged, 
adjustments over the years have made the situation better now 
than in the past. 
YOUNG