US embassy cable - 05TAIPEI71

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000071 
 
SIPDIS 
 
STATE PASS AIT/W 
 
E.O. 12958: DECL: 01/10/2015 
TAGS: MARR, PREL, PGOV, TW 
SUBJECT: LEGISLATIVE YUAN REJECTS DEFENSE SPECIAL BUDGET 
BILL; EXTENDED DELAY LIKELY 
 
Classified By: AIT Director Douglas H. Paal.  Reason: 1.4 (B,D) 
 
1.  (C) Summary.  On January 4, the Legislative Yuan (LY) 
once again refused to put the 610.8 billion NT (USD 18 
billion) Defense Special Budget on the LY agenda.  With only 
two weeks remaining, prospects for passage in the current 
session are virtually zero.  The ruling Democratic 
Progressive Party (DPP) places all blame for the Special 
Budget failure on the post-election political machinations of 
the KMT-led Pan-Blue coalition.  KMT leaders insist they are 
not the obstacle but offer a litany of all questions and 
often misinformation surrounding the Special Budget and 
appear intent on keeping it as a political football.  The DPP 
sees the Special Budget as a perfect opportunity to blacken 
Pan-Blue's image as an irresponsible party that ignores 
Taiwan's security and defense.  The Special Budget likely 
faces months of political gamesmanship -- although DPP 
legislative leaders promise they will try again tomorrow, 
January 11, and are trying to work out a way for quick 
passage early next session.  End Summary. 
 
2.  (C) In its regular Tuesday meeting on January 4, the 
Legislative Yuan (LY) Procedural Committee once again -- 
reportedly the fourteenth time -- voted along strictly 
Blue-Green coalition lines against placing the 610.8 billion 
NT (USD 18 billion) Defense Special Budget on the LY agenda. 
Technically, there are two Tuesdays remaining before the end 
of the current LY session on January 21.  However it would be 
extremely difficult for the LY to go through the necessary 
steps required to carry over a draft bill to the next 
legislative session beginning February 1.  A draft bill must 
be approved by a majority of the Procedural Committee, go 
through a first reading on the LY floor, and finally be 
unanimously approved by the relevant LY Committee, in this 
case the Defense Committee, before it can carry over to the 
next session.  Failing this, a draft bill &automatically 
returns to zero8 (zidong guiling), meaning it must be 
reintroduced from scratch by the Executive Yuan in the next 
session that begins February 1. 
 
3.  (C) One other LY procedural requirement not only 
complicates approval in these last two weeks of the current 
session but could cause a long delay upon reintroduction in 
the next session.  According to LY regulations, approval of a 
bill by the relevant committee must be unanimous, otherwise 
the draft bill automatically goes into a four-month 
negotiation period, aptly termed &frozen period.8 
 
DPP Attempts Compromise 
----------------------- 
 
4.  (C) With the odds for Procedural Committee approval 
stacked against the Special Budget at this late date in the 
LY session, Lee Wen-chung, DPP ranking member on the Defense 
Committee and a member of the Procedural Committee, worked 
out a two-part compromise &to show good will8 and elicit 
the votes of Pan-Blue legislators for the Special Budget. 
First, the DPP would agree to split the two parts of the 
special defense package (the &Major Defense Procurement 
Authorization Bill8 and the &Special Budget8), in 
accordance with a long-term demand of Pan-Blue legislators. 
The authorization bill would then be approved and put on the 
present LY session agenda and the government (Executive Yuan) 
would reintroduce the &Special Budget8 in the next session. 
 Second, the government would pledge to cut NT 100 billion 
from the NT 610.8 billion special budget proposal, with the 
&leftover8 100 billion going for social welfare programs. 
Lee told AIT that the 100 billion cut would come from 
eliminating the requirement that the 12 Special Budget 
submarines be manufactured in Taiwan. 
 
5.  (C) The KMT legislators on the Procedural Committee, 
however, voted down the two bills as a package.  At the same 
time the Procedural Committee also rejected the two other 
government proposed bills -- the President,s Control Yuan 
nomination list and the Pan-Green &Defense of the Republic 
of China Bill,8 intended as a response to the PRC,s 
recently announced &Anti-Secession (Draft) Law.8 
 
6.  (C) Vice Minister of National Defense (MND) Michael Tsai 
told AIT on January 6 that both MND and the National Security 
Council (NSC) had endorsed Lee,s compromise.  Lee, however, 
told AIT that the Presidential Office did not follow through 
with sufficient support to persuade Blue legislators to sign 
on to his compromise. 
 
KMT Leaders Dig in Their Heels 
------------------------------ 
 
7.  (C) KMT Legislative Yuan Vice Chairman P. K. Chiang and 
four other KMT leaders discussed the Special Budget stalemate 
with the Deputy Director on January 6.  When the Deputy 
Director noted that negotiations toward the Special Budget 
had begun in the 1990,s under the KMT government, the KMT 
leaders responded that Pan-Blue was not the obstacle.  They 
then proceeded to throw out a grab-bag of most of the 
criticisms of the Special Budget that have been raised (and 
rebutted) in the public arena.  Retired military officer and 
KMT defense specialist Shuai Hua-min, a regular feature on TV 
talk shows, raised only objections to the Special Budget. 
Taiwan, he said, does not know the exact nature of the 
systems in the submarine package and fears the weapons 
systems being sold to Taiwan would be special, dumbed-down 
versions that would become obsolete in a decade of so.  So 
why, he mused, should Taiwan purchase these weapons?  Shuai, 
who has participated in U.S.-Taiwan defense discussions in 
Monterey and discussed the Special Budget with AIT LAS and 
OSD officials, then criticized the DPP government for not 
providing the military with sufficient training.  Until that 
was resolved, he suggested, new systems would be meaningless. 
 
 
8.  (C) Newly-elected KMT legislator Su Chi rehashed the 
argument of one Taiwan aerospace expert who claimed Patriot 
missiles would be virtually useless, because Taiwan would not 
have time to receive warnings from PACOM in order to respond 
to a PRC missile attack (AIT pointed out that the Patriots 
have self-contained radar systems and would also draw on 
warning from Taiwan's long-range radar).  The Special Budget 
package, Su continued, was entirely too expensive for Taiwan. 
 He then shifted gears and stated that &many people8 
objected to the Special Budget because they fear the weapon 
systems might be used to further Chen Shui-bian,s 
pro-independence agenda.  Amb. Loh I-cheng (Lu Yi-cheng) 
explained that the KMT must take into consideration the views 
of the &Democratic Alliance,8 which strongly opposes the 
Special Budget and organized the September 26, 2004 
anti-Special Budget demonstration in Taipei. 
 
9.  (C) When the Deputy Director emphasized the high stakes 
of the Defense Special Budget in terms of both cross-Strait 
security and US-Taiwan relations, the KMT leaders, response 
was essentially that until the DPP government resolved the 
domestic political situation, the constitutional issue, and 
Taiwan identity to Pan Blue's satisfaction they would not 
move on the Special Budget appropriation. 
 
I Have a Plan, Says Lee Wen-chung 
--------------------------------- 
 
10. (C) Lee Wen-chung told AIT that he was not surprised by 
Pan-Blue,s continued boycott of the Special Budget, since 
the coalition had made the Defense Special Budget such a big 
campaign issue.  During the campaign, Blue candidates had 
charged the Special Budget was a waste of money and claimed 
the U.S. was charging Taiwan two to three times higher than 
normal for the weapons systems.  Now, after the election, 
they had to keep their promise and maintain their boycott. 
Lee, however, was miffed that he had not received full or 
sufficient support for his compromise package from the 
Presidential Office. 
 
11.  (C) Lee is working on a second compromise with the 
knowledge -- and, implicitly, support -- of MND, Vice 
Minister Tsai,s Special Assistant York Chen told AIT January 
6.  Lee told AIT that he believes this compromise would get 
the Defense Special Budget approved &within one month8 in 
the next LY session, which begins on February 1.  Lee is 
proposing that the revised Defense Special Budget, to be 
introduced in the LY at the beginning of the next session, be 
slashed by NT 200-250 billion by removing the submarine 
made-in-Taiwan provision (a saving of NT 100 billion) and 
separating out the PAC)3 missiles (another NT 100-150 
billion), shifting them to the regular MND budget.  When AIT 
pointed out that breaking up the carefully calibrated weapons 
package would be problematic for the U.S., Lee responded that 
he hoped for a three percent-plus increase in the annual 
defense budget, which would cover the cost of the missiles 
over three years. 
 
Comment 
------- 
 
12.  (C) Introduced in the very early days of the LY 
campaign, the Special Budget stalemate has been almost 
exclusively an outgrowth of the bitter partisan rivalry 
between Blue and Green.  For the opposition Pan Blue, 
security and defense are taking a backseat to politics, as 
the coalition seeks to leverage its unexpected election 
victory into greater influence on both policy and new 
government formation.  The fact that the Pan Blue-controlled 
LY Procedural Committee rejected all three bills proposed by 
the DPP government, while passing three tax relief bills, 
further demonstrates the political nature of the legislative 
stalemate.  But the DPP government shares a large measure of 
responsibility via its less than stellar performance 
explaining the bill to the LY and to the public. 
 
13.  (C) The January 4 vote could effectively delay the 
Special Budget package for a considerable time.  NSC 
Secretary General Chiou I-jen told AIT that any changes to 
 
SIPDIS 
the special appropriation bills, almost inevitable before the 
Executive Yuan would resubmit them to the next LY session, 
would delay re-introduction to the LY by six months or more. 
Unless there is a dramatic change in the political climate 
here, which we do not expect, the Special Budget would then 
return to the LY foodfight on the eve of the LY's summer 
recess - a recipe for continued failure. 
PAAL