US embassy cable - 04TAIPEI3430

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003430 
 
SIPDIS 
 
STATE PASS TO AIT/W AND USAID 
AMEMBASSY BEIJING PLS PASS TO AMCONSUL CHENGDU 
 
E.O. 12958: DECL: 11/01/2014 
TAGS: PREL, EAID, TW 
SUBJECT: MOFA ON THE DEFENSIVE OVER CENTRAL AMERICA AID 
 
REF: SAN JOSE 02803 
 
Classified By: AIT Deputy Director David J. Keegan, Reason: 1.4 (B/D) 
 
1.  (C) Summary.  Taiwan officials are on the defensive in 
the wake of press allegations that MOFA funneled US$1.4 
million to former Costa Rican president Miguel Angel 
Rodriguez.  MOFA officials claim only $400,000 was given to 
Costa Rica for training programs and that Rodriguez 
apparently misused the funds.  Lawmakers have since released 
the approximately $40 million in confidential aid for Central 
America that had been frozen over the incident, but only if 
certain conditions are met by MOFA.  The scandal, however, is 
not likely to alter the way Taipei disperses aid to Central 
America in the immediate term.  MOFA and members of the 
Legislative Yuan (LY) appear most concerned with how the 
incident will affect Taipei's diplomatic battle with Beijing 
in the region, rather than whether it signals a need for more 
fundamental reform to Taipei's confidential aid procedures. 
Officials are adamant that a mechanism be established to 
ensure aid to Taiwan's diplomatic nations remains secret. 
Adding to Taipei's woes, the government of Nicaragua is also 
planning to officially request that Taiwan respond to 
allegations that it gave $1.5 million to former President 
Aleman.  MOFA officials tacitly acknowledge that some 
payments were made to Aleman.  End summary. 
 
MOFA Denies Payments Went to Rodriguez 
-------------------------------------- 
 
2.  (C) MOFA officials assured lawmakers from the LY's 
Foreign Affairs Committee that press reports in Costa Rica 
that claimed Taiwan funneled $1.4 million in payments over 3 
years to former President Rodriguez were completely false. 
MOFA Deputy Director General for Latin American Affairs, Wu 
Chin-mu, told AIT that MOFA provided a total of $400,000 in 
2001 and 2002 for personnel training programs and conferences 
in response to a request from the Costa Rican government.  Wu 
said Rodriguez may well have misused the money for his own 
benefit without MOFA's knowledge.  Wu said that he knew 
nothing about the other $1 million that was reportedly passed 
to a Rodriguez affiliated company in Panama.  Wu also told 
AIT that this was the same explanation that was officially 
provided via Taipei's Embassy in San Jose to the Costa Rican 
government. 
 
Central American Aid Released With Conditions 
--------------------------------------------- 
 
3.  (C) After the Rodriguez scandal broke, $40 million in 
confidential aid funds for Central America were frozen by the 
 
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LY's Foreign Affairs Committee.  The money was only released 
by the Foreign Affairs Committee after Foreign Minister Mark 
Chen personally agreed to meet certain conditions demanded by 
legislators.  Bill Sun, a lame duck KMT legislator on the 
Foreign Affairs Committee, told AIT that the LY's first 
requirement was that MOFA immediately form a multi-agency 
task-force comprised of diplomats, financial auditors, and 
lawmakers to investigate the Rodriguez allegations and to 
evaluate Taiwan's aid programs for Central America.  Sun also 
said he wanted to confirm that the $1 million had not been 
provided to Rodriguez through some other avenue, such as via 
the National Security Bureau (NSB).  Secondly, Sun said that 
MOFA had agreed to hold a video-teleconference with 
lawmakers, MOFA officials, and Taiwan's Central American 
Ambassadors to determine the best strategy over the next six 
months to minimize damage to Taiwan's relationship with its 
diplomatic partners.  Sun asserted that the task force may 
eventually evolve into a policy making group to review 
methods for providing aid and safeguards to ensure 
confidentiality. 
 
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4. (C) Democratic Progressive Party (DPP) Foreign Affairs 
Committee Convener Bi-khim Hsiao told AIT that the recent 
revelations were unfortunate, but demonstrated the challenges 
Taiwan faces in trying to maintain its dwindling numbers of 
formal diplomatic relationships.  Hsiao noted that Foreign 
Minister Mark Chen and his recent predecessors have all 
endorsed the need for more transparency in the way Taiwan 
distributes foreign aid, but their enthusiasm has been 
tempered by fear of being the one held responsible for 
"losing" a diplomatic partner.  Hsiao said that a full 
disclosure of Taiwan's aid programs may also incite a bidding 
war among Taiwan's developing country relations.  Hsiao 
asserted that the only course open to the DPP government is 
to incrementally reform its money-based foreign policy 
approach to enhance accountability. 
 
Impact on Diplomatic Relations? 
------------------------------- 
 
5.  (C) MOFA officials do not believe the scandal will have 
any immediate consequences on Taipei's diplomatic standing in 
Central America.  However, there is concern that in the long 
term this could have serious ramifications on Taipei's 
competition with Beijing in Latin America.  Sun told AIT he 
is worried that Taiwan's interests would be jeopardized if 
Taipei's Central American partners started to "compare notes" 
over how much they each receive from Taiwan.  Sun also 
expressed concern over the PRC's ability to discover the 
amount of aid Taiwan is giving and the manner in which it is 
distributed.  Wu echoed Sun's comments and expressed dismay 
that details of MOFA foreign aid practices had been publicly 
revealed.  He was particularly concerned that Beijing's 
knowledge of Taipei's activities in the region might allow 
them to outbid Taipei, as he claimed occurred with Antigua 
earlier in the year.  Wu added that the PRC is very active in 
the region and is trying to steal away Taiwan's diplomatic 
relationships. 
 
Et Tu Managua? 
-------------- 
 
6.  (C) Within days of the Costa Rican allegations came 
reports that MOFA may have provided payments to the 
Nicaraguan former president, Arnoldo Aleman.  When asked 
about the allegations that $1.5 million had been transferred 
to Aleman while he was president, MOFA DDG Wu did not deny 
the allegations.  Rather, he explained to AIT that Taiwan 
faces unique diplomatic challenges and cannot always rely on 
traditional forms of diplomacy.  Wu refused to say how Taipei 
would respond to reported plans by Nicaragua to ask Taipei 
for an official explanation over the Aleman affair. 
 
Comment: Will Anything Really Change? 
------------------------------------- 
 
7.  (C) Despite the embarrassment this scandal has caused 
Taipei and MOFA, Taiwan shows little inclination in the 
short-run to change the way aid is dispersed to Central 
America.  Under-the-table payments to foreign leaders have 
been a mainstay of Taipei's foreign policy for decades. 
However, with Beijing becoming increasingly active in the 
region and new, potentially less friendly (and less corrupt) 
governments in Costa Rica, Nicaragua, and Panama, Taipei has 
little margin for error in the diplomatic recognition game. 
New administrations in Central America may find that it is 
not worth the embarrassment of dealing with Taiwan if these 
aid flaps continue, especially if Beijing steps up to the 
plate with more attractive above board incentive packages. 
Moreover, a growing backlash at home and abroad against the 
practice of direct payments to political parties and foreign 
leaders also complicates the traditional approach. 
PAAL