US embassy cable - 05TAIPEI1691

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001691 
 
SIPDIS 
 
DEPT FOR EAP/TC 
DEPT PLEASE PASS AIT/W 
 
E.O. 12958: DECL: 04/07/2015 
TAGS: ECON, EINV, TW, CH, Cross Strait Economics 
SUBJECT: MORE "EFFECTIVE MANAGEMENT" COULD AFFECT 
CROSS-STRAIT IC INVESTMENT 
 
REF: A. TAIPEI 1376 
 
     B. TAIPEI 1626 
 
Classified By: Acting AIT Director David J. Keegan, Reason 1.5 b 
 
Summary 
------- 
 
1. (C) After the April 5 meeting of senior Chen 
administration and DPP officials on cross-Strait relations, 
the Taiwan government has announced a new emphasis on the 
"effective management" portion of its "active opening, 
effective management policy" (ref B).  "Difficult to manage" 
policies will be reviewed by a meeting of cabinet members on 
April 9 and 10.  Comments by Mainland Affairs Council (MAC) 
Chairman Joseph Wu suggest this may cause further delay in 
the approval of Mainland investment in the semiconductor 
packaging and testing industry.  The Ministry of Economic 
Affairs (MOEA) Investment Commission is preparing a report on 
its cross-Strait policies for senior review.  Despite MAC's 
comments, outside observers have told AIT/T they expect any 
delay in cross-Strait liberalization measures to be short. 
End summary. 
 
2. (U) After the April 5 meeting of senior Chen 
administration and DPP officials on cross-Strait relations, 
the Taiwan government has announced a new emphasis on the 
"effective management" portion of its "active opening, 
effective management policy."  Premier Frank Hsieh's 
instructions to relevant agencies on how to implement more 
"effective management" as announced by the Executive Yuan's 
(EY) spokesman indicated that the overall policy would not be 
changed.  However, relevant Taiwan government agencies were 
instructed to reevaluate policies that are "difficult to 
manage" and submit them for review by higher government 
authorities.  Hsieh will host a two-day meeting of cabinet 
members on April 9 and 10 to discuss these policies.  Hsieh's 
instructions indicated that likely topics for discussion 
include passenger charter flights, agricultural exports, 
Taiwan investors' rights, media exchanges, law enforcement 
cooperation, tourism, and service sector liberalization. 
 
MAC ) IC Packaging and Testing a Likely Target 
--------------------------------------------- - 
 
3. (C) MAC Chairman Joseph Wu told the press April 6 that the 
approval of investment in the Mainland in the semiconductor 
packaging and testing and petrochemicals industries would be 
put off for further review.  As reported ref B, MAC officials 
had previously informed us that they has been ready to 
approve IC packaging and testing investment but after the 
passage of the Anti-Secession Law had decided to put off an 
announcement until May.  At that time, MAC officials had 
already decided that liberalization for petrochemicals 
manufacturing, specifically naptha crackers, would require 
further study and would be delayed longer.  Wu's linkage of 
the two categories suggests that the legalization of IC 
packaging and testing may be delayed significantly beyond 
May.  MAC Senior Secretary Lee Li-Jane confirmed to AIT/T 
that IC packaging and testing would likely be delayed longer 
than previously anticipated.  She was unable to say how much 
longer. 
 
4. (U) The media reported that representatives of several 
major Taiwan IC packaging and testing firms -- namely 
Advanced Semiconductor Engineering Inc., King Yuan 
Electronics Co. and Siliconware Precision Instruments Co. -- 
had warned that if Taiwan did not authorize Mainland 
investment this year it would be too late for Taiwan firms to 
penetrate successfully the PRC market.  Taiwan Electrical and 
Electronics Manufacturing Association Chairman Lo pointed out 
to the press that Intel already had packaging and testing 
facilities in the PRC. 
 
Investment Commission Preparing Study 
------------------------------------- 
 
5. (C) MOEA Investment Commission Deputy Executive Secretary 
Emile Chang told AIT/T that as of April 7 the Investment 
Commission, which approves and regulates Taiwan firms' 
investment in the Mainland, had not been instructed to alter 
any of its cross-Strait policies or procedures.  Chang said 
that Economic Affairs Minister Ho Mei-yueh had instructed the 
Commission to conduct a survey of its policies and prepare a 
report with recommendations on how to enhance "effective 
management" within the next few days.  He noted that the 
Minister's instructions were quite vague. 
 
Outside Observers See Short Delay 
--------------------------------- 
 
6. (C) Various business and academic observers have indicated 
to AIT/T that they do not foresee any major changes in the 
Chen administration's approach to cross-Strait economic 
affairs, despite MAC's new emphasis on "effective 
management."  National Chengchi University Professor Tung 
Chen-yuan told us that he believes that the Taiwan government 
will continue to hold back cross-Strait exchanges and 
economic initiatives for a month or two and then resume 
efforts for further liberalization.  Chinese National 
Federation of Industries Deputy Secretary General Tsai 
Horng-ming told AIT/T that the Taiwan government had 
consulted with him on this new approach and that he was 
confident that the review of cross-Strait exchange and 
economic policies would not dramatically slow down 
liberalization.  He was very optimistic that the review would 
improve the environment for cross-Strait business by 
rationalizing Taiwan's policy. 
KEEGAN