US embassy cable - 05TAIPEI3008

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003008 
 
SIPDIS 
 
STATE PASS AIT/W 
 
E.O. 12958: DECL: 07/05/2015 
TAGS: PGOV, TW 
SUBJECT: CHAIRMAN MA COULD BRING CHANGE, BUT SLOWLY 
 
 
Classified By: AIT Acting Director David J. Keegan, Reason(s): 1.4 (B/D 
). 
 
1. (C) Summary: Lien Chan is slated to step down as KMT 
Chairman following the outcome of the July 16 contest between 
Taipei Mayor Ma Ying-jeou and KMT Legislative Yuan (LY) 
Speaker Wang Jin-pyng. If Lien continues to control KMT 
finances after he steps down, as many within the KMT expect, 
he will remain a powerful Wang ally. The vast majority of KMT 
officials support Wang, which puts the KMT political machine 
at his disposal.  Should Wang lose the race, he will still 
hold his LY Speaker position, and therefore could, with 
Lien's backing, steer the Pan-Blue-controlled LY away from 
"Chairman" Ma's agenda. Although Ma may win the Chairmanship, 
his leadership could be handicapped by his dependence on a 
narrow political base and by lingering opposition from Lien, 
Wang and their allies.  Thus, there is potential for a rift 
within the party, but KMT sources tell AIT the likelihood of 
another PFP- or TSU-style split is low, because neither Ma 
nor Wang have the charisma to start or sustain a splinter 
party.  Ma assuming the Chairmanship is unlikely to produce 
rapid, dramatic improvements to Taiwan's conflictive domestic 
political scene.  Over time, however, a generational change 
in the KMT should allow for a less divisive political debate 
on issues important to the US, like a cohesive, cross-party 
strategy for dealing with the PRC, and improving Taiwan's 
self-defense capability. End Summary. 
 
Ma May Seek "Painless" Reform Strategies 
---------------------------------------- 
 
2. (C) Septel we consider the likely outcome of the election 
for KMT Chairman.  In this cable we consider how either a Ma 
or Wang victory could affect the program of the KMT. KMT 
Legislator and Ma ally Lai Shi-bao said that without 
substantial reforms, the KMT has little chance of attracting 
enough votes to win the 2008 presidential election.  He 
opposes Wang's candidacy because he believes Wang will allow 
business-as-usual for the next three years, with serious 
consequences for any KMT presidential candidate.  As evidence 
of Wang's aversion to reform, Lai said Wang is resorting to 
old KMT tricks to mobilize his voters: buying meals and gifts 
for meeting halls full of potential voters, paying local 
power brokers to deliver votes, paying the dues of ineligible 
voters and restoring them to the voter rolls, paying for 
large-scale smear campaigns against Ma.  All of these 
accusations have appeared in recent press reports, Lai said, 
and all are exactly the kinds of underhanded activities which 
have caused voters to reject the KMT in the past. 
 
3. (C) Soochow University political science professor and 
TVBS political commentator Emile Sheng told AIT that the key 
difference between Ma and Wang will be with respect to the 
disposition of allegedly illicitly-gained KMT assets.  Sheng 
expects Wang to continue to ignore the property issue, which 
has been a weight around the KMT's neck for forty-plus years. 
 Ma, on the other hand, by disposing of these disputed 
assets, can quickly gain credibility as a reformer, without 
truly goring the ox of anyone within the KMT, since most 
members distanced themselves from these assets long ago. 
Sheng added that most KMT members understand that it is 
necessary to resolve the illicit-property issue once and for 
all, and would likely rally around Ma.  Ma could also win 
easy support within the party by reducing KMT party worker 
payrolls. The move would not injure senior party members, and 
would move the party closer to balancing its budget. 
 
4. (C) Lai said that there has been little open debate 
amongst KMT members, but the consensus within the party is 
that, as a display of the party's increasing democratization, 
the Chairmanship campaign has been good for the party.  Lai 
said the KMT has been losing younger voters to the seemingly 
more youthful DPP, and must reverse that trend to assure its 
long-term survival.  The sense among Ma supporters is that it 
is time to do away with "old people" politics.  This 
criticism of Wang notwithstanding, Lai told AIT that Ma has 
been careful not to attack Wang too harshly because Ma 
recognizes that Wang's cooperation will be essential to KMT 
hopes of taking back the presidency in 2008.  Lai said Ma's 
camp had already broached with Wang the idea of a 2008 
Ma-Wang ticket, and that Wang demurred, contending that he 
would win the Chairmanship, not Ma.  Lai insisted that both 
sides understand that campaign attacks are part of the game, 
and that after the election is over the party will need to 
rally together. 
 
Little Possibility of KMT Split 
------------------------------- 
 
5. (C) Liao Feng-te is the Director of the KMT's 
Organizational and Development Committee.  Liao said the 
typical KMT voter wants to reform the party, as evidenced by 
the considerable popular support for Ma, while KMT leadership 
wants more of the same, as demonstrated by their support for 
Wang.  Liao said one key to Ma's probable success is the fact 
that KMT leaders currently have very few ways to influence 
the KMT popular vote -- if they did, Ma would lose.  In light 
of the grass-roots support for Ma, Liao believes that to win 
in 2008, the KMT must discover how to successfully combine 
the modernizing tendencies of the Ma camp with the Wang 
camp's organizational capabilities. 
 
6. (C) Liao told AIT there is little to no possibility, no 
matter who wins the election, of another KMT split.  Liao 
said no leader within the KMT, including Ma or Wang, has the 
charisma to attract the critical mass of followers required 
to form and sustain a splinter party.  Liao pointed out 
political observers throughout Taiwan are watching the PFP, 
the last party to split from the KMT, wither and die, and he 
opined that no one within the KMT wants to repeat that 
mistake.  Liao said Wang has publicly promised to help the 
KMT's 2008 presidential candidate win, regardless of who it 
is, and Liao told AIT he believes Wang means what he says. 
 
7. (C) Professor Sheng also ruled out a party split: Wang is 
a KMT legislator at large.  He has no direct constituency, 
and is entirely dependent on the party for his position. 
Should he leave the KMT, he would lose his LY seat, his LY 
Speaker position, and most, if not all, of his political 
power. 
 
What Will Lien Do? 
------------------ 
 
8. (C) Some Taiwan observers have speculated that during the 
campaign, Lien Chan has been quietly positioning himself to 
retain control of KMT financial resources and thereby keep 
control of the party.  Proposals from both Ma and Wang to 
name Lien as "honorary chairman" only fueled this 
speculation, since it was seen by many as an attempt by both 
camps to curry favor with Lien in order to ensure his 
cooperation after the election.  Professor Sheng told AIT he 
dismissed this speculation, because it is inconsistent with 
Lien Chan's personality, and with his practices while 
Chairman.  Sheng explained that Lien disliked being 
responsible for dealing with the day-to-day operations of the 
party, i.e., resolving disputes between rival factions or 
addressing the KMT's recurring financial problems.  (Sheng 
said Lien would often turn to Wang Jin-pyng for assistance in 
solving financial crises, to draw on Wang's wealthy contacts 
base.)  Sheng said the KMT runs a $200 million NT deficit 
every month, stemming from its pension obligations and 
massive party infrastructure.  Sheng told AIT that although 
the KMT has extensive property holdings on paper, most of 
those properties cannot be leveraged for cash because they 
are limited to government use and cannot be mortgaged, or 
because they have already been mortgaged or even sold.  Sheng 
said that according to his sources, the only remaining KMT 
asset of considerable worth is Hua Xia Investment Company, 
which has holdings in television stations and other media 
outlets.  Sheng believes Lien will be happy to leave the 
financial headache to his successor. 
 
9. (C)  After Lien steps down, he will continue as President 
of the KMT National Policy Foundation (NPF) think tank. 
Sheng told AIT that he expects Lien to use that position to 
influence KMT cross-Strait policy, which Sheng said Lien 
considers his most important legacy.  Sheng believes that 
both Ma and Wang would be more than willing to leave 
cross-Strait relations to Lien.  He explained that both 
candidates took pains to distance themselves from Lien when 
he first announced his plans to visit the Mainland, in order 
to protect themselves from potential fallout.  Only after KMT 
polling revealed Lien's (and the KMT's) increasing popularity 
resulting from Lien's visit did either candidate embrace 
Lien's PRC gambit.  Sheng said that by permitting Lien to 
continue his cross-Strait agenda, the future Chairman could 
assign blame to Lien if necessary, but could also claim 
partial credit should Lien's PRC strategy continue to benefit 
the party. 
 
10. (C) Sheng said he is not worried about a Lien-Wang 
alliance standing in opposition to Ma's leadership.  Sheng 
contends the KMT's organizational structure KMT will 
naturally shift policy and financial controls to Ma; 
moreover, the vast majority of KMT members realize that a 
schism would harm the party and virtually rule out any chance 
of winning the presidency in 2008.  Sheng said the KMT 
traditionally adheres to one leader, and although Wang has 
good relations with the party's elite, he is not powerful 
enough to unite them against Ma. 
 
Prospects for DPP-KMT Cooperation? 
---------------------------------- 
 
11. (C) Professor Sheng said that under Lien, the KMT simply 
ignored the Chen Shui-bian government, preventing most forms 
of cooperation.  Sheng is optimistic that Lien will 
relinquish control of the KMT's domestic agenda, and expects 
this stonewalling tactic to end under Ma, enabling DPP-KMT 
cooperation to naturally improve.   Sheng said that in the 
highly improbable event Lien is able to hold onto power and 
co-opt Wang's authority in the LY, it could lead to a vicious 
power struggle within the party, destroying KMT unity at 
least for the short term, and thwarting any significant 
Green-Blue cooperation. 
 
12. (C) Comment: Professor Sheng's analysis gives 
insufficient weight to the personal animosities which drive 
much of the decision-making within the KMT.  It is widely 
known Lien and Wang personally despise Ma, and have vested 
interests in preventing reforms from going forward.  Lo 
Chih-cheng, of the Institute for National Policy Research, 
told AIT that rumors are circulating within the KMT that Wang 
will refuse to mobilize KMT voters for the year-end local 
elections, in hopes of causing a humiliating KMT defeat, 
after which Wang can blame Ma, and call for his resignation. 
KMT sources tell AIT that Ma will not be able to consolidate 
KMT policy control under his authority before 2006, let alone 
control of the party structure.  Thus, while Ma may announce 
his commitment to change KMT policies or posture toward the 
government, it is probably unrealistic to expect immediate 
breakthroughs on issues important to the US, like a unified, 
cross-party strategy for dealing with the PRC, or passage of 
the Special Defense Budget bill.  End comment. 
KEEGAN