VZCZCXRO7854
RR RUEHCN RUEHGH RUEHHM
DE RUEHIN #1042/01 1980449
ZNR UUUUU ZZH
R 160449Z JUL 08
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 9515
INFO RUEHBJ/AMEMBASSY BEIJING 8452
RUEHHI/AMEMBASSY HANOI 3635
RUEHGH/AMCONSUL SHANGHAI 2157
RUEHCN/AMCONSUL CHENGDU 2774
RUEHSH/AMCONSUL SHENYANG 6732
RUEHGZ/AMCONSUL GUANGZHOU 1343
RUEHHK/AMCONSUL HONG KONG 9675
RUEHHM/AMCONSUL HO CHI MINH CITY 0299

UNCLAS SECTION 01 OF 03 TAIPEI 001042 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR AIT/W, EAP/TC, INR/EAP 
 
FROM AIT KAOHSIUNG BRANCH OFFICE 
 
E.O. 12958: N/A 
TAGS: PGOV ECON TW
SUBJECT: SOUTHERN TAIWAN KMT LEADERS POSITIONING THE PARTY - AND 
THEMSELVES - FOR CRUCIAL MAYORAL RACE 
 
SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY 
 
¶1.  (SBU) Summary:  In a July 9 luncheon with DIR Young, prominent 
local KMT leaders assessed the early stages of President Ma's 
administration and blamed Ma's lagging poll ratings on the declining 
stock market and rising prices.  Participants hoped that Terry Gou's 
Hon Hai electronics' major investment in Kaohsiung would bring the 
city prosperity, but doubted that proposals to establish casinos in 
southern Taiwan had much prospect for success.  Noting their 
interest in realizing the benefits of direct cross-Strait flights to 
Kaohsiung, they suggested that if Mayor Chen leaned too far forward 
on direct flights, she would alienate her core deep-Green 
supporters.  All agreed that Mayor Chen would run for re-election in 
2010 if her health allowed.  Although still two years away, the 2010 
mayoral election stage is already shaping up to be a fierce battle 
within both blue and green camps, as recent local KMT gains and DPP 
setbacks have led both sides to believe that this coveted seat is up 
for grabs.  End summary. 
 
Kaohsiung's KMT Titans:  Looking to Mayoral Race 
--------------------------------------------- --- 
 
¶2.  (SBU) During his July 9 visit to Kaohsiung, DIR Young hosted 
lunch for several of Kaohsiung City's most prominent KMT officials - 
powerful City Council Speaker Chuang Chi-wang, newly-minted 
Executive Yuan (EY) Southern Taiwan Office CEO Luo Shih-hsiung, 
two-time narrowly-defeated KMT Kaohsiung City mayoral candidate 
Huang Chun-ying, successful Kaohsiung City KMT Party Chair Hsu 
Fu-ming, and popular Legislative Yuan (LY) member Lee Fu-hsiung. 
The KMT is enjoying a winning streak of sorts in Kaohsiung, as it 
took three of five seats in the January 2008 LY election and Ma 
Ying-jeou decisively beat Frank Hsieh in Kaohsiung during the March 
2008 Presidential election.  The KMT has high hopes that it can 
retake this coveted mayoral seat in 2010, and both Chuang and Luo 
reportedly are interested in running. 
 
Presidential Politics:  Assessing Ma 
------------------------------------ 
 
¶3.  (SBU) Rehashing the outcome of the spring presidential election, 
Speaker Chuang mentioned that Ma's success in Kaohsiung City was due 
in large part to his effective campaign style.  He promised the 
economic changes people were seeking and connected with voters in 
the south through his "long stay" program.  The "long stay" visits 
in particular allowed him to campaign as a person beyond his party 
affiliation and were vital to his victory in Kaohsiung City, Chuang 
observed. 
 
¶4.  (SBU) DIR noted that he had recently spoken to former President 
Lee Teng-hui about the current political situation.  Everyone agreed 
that President Ma's nomination of Lee supporter and Taiwan 
Solidarity Union (TSU) insider Lai Hsin-yuan as Mainland Affairs 
Council Chairman was intended to be a goodwill gesture to former 
President Lee.  City KMT Chair Hsu noted that while Lee did not 
openly support Ma in the last election, his TSU refrained from 
endorsing Frank Hsieh and was thus friendly to Ma's campaign. 
(Note: Lee came out at the last minute and announced he would vote 
for Hsieh.) 
 
¶5.  (SBU) Alluding to Ma's difficulties with the  Legislative Yuan 
regarding his nominees to the Control and Examination Yuans, DIR 
noted that some observers felt Ma was to blame because he failed to 
win over legislators prior to the vote.  Legislator Lee Fu-hsing 
commented that he would not openly criticize Ma's handling of the 
nomination process.  He mentioned that he did, however, write a 
letter to Ma expressing his disappointment. 
 
Economic Troubles:  Hoping for a Turnaround 
------------------------------------------- 
 
¶6.  (SBU) Several lunch participants suggested that President Ma's 
"honeymoon" in southern Taiwan might be over, as people were growing 
impatient waiting for the region's promised economic revitalization 
to take shape.  Speaker Chuang confirmed that the KMT's biggest 
concern in Kaohsiung is the economy, which had thus far remained 
stagnant.  Chuang said that many of President Ma's supporters 
invested in the stock market following the election, hoping from his 
election promises that an economic turnaround was imminent.  Until 
 
TAIPEI 00001042  002 OF 003 
 
 
the market improved, he speculated, Ma's approval ratings were 
likely to continue declining. 
 
¶7.  (SBU) Asked if Terry Gou's planned Hon Hai investment in 
Kaohsiung would help to alleviate the City's economic and 
unemployment woes, CEO Luo commented that Hon Hai would bring its 
own highly trained engineers to Kaohsiung and would thus not create 
employment opportunities for blue collar workers.  Luo noted, 
however, that if Hon Hai also decided to build a factory in 
Kaohsiung County, as some were suggesting would happen, more jobs 
could be created.  He added that Hon Hai was considering relocating 
its transshipment operations from Vietnam to Kaohsiung - a move that 
would be an economic shot in the arm for both the harbor and the 
city.  Hon Hai's mainland subsidiary, Foxconn, was currently the 
largest exporter in China and had an enormous amount invested in its 
Vietnam operations.  If the firm were to move its transshipment 
center to Kaohsiung, the KMT would score a major victory in the 
south that would translate into political capital for future 
elections. 
 
¶8.  (SBU) Regarding the proposal to build casinos in Penghu, CEO Luo 
noted that a Penghu referendum on the issue had passed with over 
fifty-percent support and predicted that casinos would indeed be 
coming to Penghu.  Speaker Chuang, however, doubted that any casino 
company would agree to invest in Penghu given the competition from 
nearby gambling centers like Macau.  He suggested that Kinmen would 
be a better location for casinos given its proximity to the PRC and 
greater potential to attract PRC tourists. 
 
Cross-Strait Links:  Applauding Direct Flights 
--------------------------------------------- - 
 
¶9.  (SBU) Lunch participants agreed that the KMT in Kaohsiung needed 
to capitalize on the opening of direct cross-Strait fights.  Speaker 
Chuang noted that the DPP and Kaohsiung City Mayor Chen were in a 
quandary regarding these flights.  Chen had already been criticized 
for not doing more to promote Kaohsiung tourism in the PRC - a 
misstep that some say explained why Kaohsiung did not receive any 
direct flights on the first day of service. However, if Chen were to 
throw her full support behind the flights, she would risk losing the 
support of deep-Green backers wary of drawing closer to the 
Mainland.  Taking advantage of this dilemma, Speaker Chuang and CEO 
Luo both said they would visit Guangzhou on July 18 with a 
delegation from the Development Bureau to encourage tourism to 
Kaohsiung.  This issue was likely to be key in the early stages of 
the Kaohsiung mayoral race, they suggested. 
 
¶10.  (SBU) The group concurred that the biggest draw attracting 
Mainland tourists to come to Taiwan was not the island's 
infrastructure but rather its culture and vibrant democracy.  They 
recommended that tours be set up to highlight these aspects of 
Taiwan, for example by taking tourists to visit Kaohsiung's City 
Council. 
 
2010 Mayoral Race:  Vetting DPP Candidates 
------------------------------------------ 
 
¶11.  (SBU) On possible DPP candidates for the 2010 Kaohsiung mayoral 
race, all agreed that Kaohsiung City Mayor Chen Chu would likely run 
for a second term.  As evidence, they pointed to her choice of Huang 
Chao-huei, a seasoned campaign organizer, to be Civil Affairs Bureau 
Director.  They related that they had already seen Huang's influence 
in Mayor Chen's sit-in to protest delays in Kaohsiung's proposed Pop 
Music Center.  They also believed that DPP Kaohsiung County 
Magistrate Yang Chiu-hsing was interested in running as he had 
recently bought a house in Kaohsiung City.  However, they agreed 
that Yang was more influential in Kaohsiung County than in Kaohsiung 
City and that he would face stiff competition from incumbent Mayor 
Chen.  Lunch participants also revealed that another rumored 
contender, former acting DPP Mayor Chen Chi-mai, would probably not 
run after all, as he was more interested in a Legislative Yuan 
seat. 
 
¶12.  (SBU) Lunch participants added that Frank Hsieh, still 
influential in Kaohsiung City politics, remained a force in the DPP. 
 They suspected that he may be waiting to replace DPP Chairperson 
Tsai Ing-wen at the end of her term.  They pointed out that in a 
recent TV interview, Hsieh declared that he might be forced to 
 
TAIPEI 00001042  003 OF 003 
 
 
return to politics in order to protect his political interests - a 
move that would put Tsai in a difficult position.  They also 
speculated that Tsai would be a leading contender for the DPP's 2012 
presidential ticket, along with former 2008 DPP Vice Presidential 
candidate Su Tseng-Chang. 
 
Comment 
------- 
 
¶13.  (SBU) The KMT faces a difficult political challenge in 
Kaohsiung.  As Speaker Chuang explained to DIR, Ma's "long stays" 
resonated with southern Taiwan voters who responded to his message 
of economic regeneration in the south.  The local KMT is eager to 
translate Ma's campaign promises for Kaohsiung into reality, but 
only in a manner that scores political points for the KMT and not 
the DPP.  Meanwhile, the DPP and Mayor Chen can place the blame on 
Ma's administration if it fails to meet local voters' high 
expectations in the near term, and they can even claim credit for 
central government largesse.  With Mayor Chen possibly facing a 
bruising primary challenge within the DPP, local KMT officials hope 
that a strong candidate leading a unified local party will clinch 
victory for them in 2010.  However, the KMT's recent electoral 
successes in the city and the DPP's setbacks have encouraged a host 
of potential KMT mayoral aspirants, and even at this early stage, 
the KMT field is getting very crowded.  End comment. 
 
CASTRO 
 
YOUNG