US embassy cable - 05TAIPEI3345

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 003345 
 
SIPDIS 
 
STATE PASS AIT/W 
 
E.O. 12958: DECL: 08/11/2015 
TAGS: PGOV, PREL, MARR, TW, Domestic Politics, Military Issues, Foreign Policy 
SUBJECT: SCT TALKS:  NOTHING SPECIAL ON SPECIAL BUDGET 
 
Classified By: AIT Director Douglas Paal, Reason(s): 1.4 (B/D) 
 
1.  (C) The Ministry of National Defense (MND) presentation 
to the formal opening round of U.S. Security Cooperation 
Talks (SCT) in Taipei on August 9, 2005, stated that Taiwan 
plans to increase its national defense spending to 3 percent 
of GDP, an annual increase of 50 billion NTD (USD 1.7 
billion).  After the presentation, Vice Admiral Liang 
Kung-Rai, Director General of the Strategic Planning 
Department (SPD), told the visiting U.S. interagency 
delegation that Minister of Defense Lee Jye is encouraged by 
recent statements by President Chen in support of the Defense 
Procurement Special Budget, but emphasized that the real 
challenge remains the Legislative Yuan (LY).  Liang said MND 
Lee will meet with LY speaker Wang Jin-pyng after Wang's 
return from the U.S. on August 10 to discuss how to improve 
MND-LY cooperation to gain passage of the Special Budget. 
 
2.  (C) VADM Liang speculated that if the Special Budget is 
reduced or modified as part of an LY compromise, MND Lee Jye 
will probably give top priority to diesel submarines above 
the other weapons systems. 
 
Pan-Blue Position 
----------------- 
 
3.  (C) During a separate meeting on August 9, PFP Legislator 
Sun Ta-Chien told AIT that although the PFP continued to 
object to any use of an LY Special Session to purchase 
military hardware, it would be willing to consider and pass a 
regular budget bill authorizing the purchase of the PAC-III 
anti-missile defense system and the P-3C antisubmarine 
aircraft.  However, PFP leaders have serious concerns about 
the "old, outdated" design and lengthy delivery time of the 
submarines proposed in the Special Budget package, and would 
rather see that money spent on modern fighter aircraft.  Sun 
told AIT that PFP leaders consider air superiority to be more 
important than submarine capability, and they may request the 
Taiwan government ask the USG to prepare a proposal for the 
sale of more advanced fighters to Taiwan. 
 
4.  (C) Sun's comments were echoed by KMT LY member and Ma 
Ying-jeou ally Wu Yu-sheng, who told AIT on August 10 that 
the KMT's top priorities are to strengthen Taiwan's missile 
defense and air defense capabilities, with submarines placing 
a distant third.  Wu added that Taiwan's economy had worsened 
since 2001, making large-scale weapons purchases less 
affordable.  He argued that Taiwan should lower its sights 
and purchase only those weapons systems that immediately 
improve its security situation. 
 
NSC Deputy SecGen Comments 
-------------------------- 
 
5.  (C) During his meeting with the visiting U.S. delegation 
on August 8, NSC Deputy SecGen Henry Ko (Cheng-heng) told the 
delegation that in an August 4 meeting, President Chen 
Shui-bian stated that Taiwan needs to:  1) Reinforce its 
defense capability; 2) Increase its defense budget to 3 
percent of GDP; and 
3) Pass a modified Special Budget and move unfunded weapons 
systems into the annual defense budget to be presented to the 
regular LY session in September. 
 
6.  (C) Additionally, Ko volunteered that Taiwan would be 
prepared to assist in advancing U.S. efforts in Southeast 
Asia upon request.  Ko made this comment in response to DOD 
Security Cooperation Operations/DSCA Principal Director Ed 
Ross's earlier statement that the U.S. is actively addressing 
the terrorism threat in the region. 
 
7.  (U) Despite Chen's emphasis on increasing the defense 
budget to 3 percent of GDP by 2008, Premier Frank Hsieh told 
the local press August 10 that it would probably be extremely 
difficult to increase the defense budget over the next few 
years given Taiwan's financial situation. 
 
Comment 
------- 
8.  (C) While Taiwan MND officials acknowledged the continued 
challenge posed by lack of a Special Budget, during this 
opening round there was little discussion of the steps that 
MND plans to take to continue to push for its passage, nor 
did MND formally discuss other options or scenarios for 
funding defense purchases.  While reports of improved 
cooperation between MND Lee Jye and LY Speaker Wang are good 
news, there is little to indicate this effort will make real 
progress towards passage of the Special Budget.  In fact, if 
Liang's speculation regarding Lee Jye's preference for 
submarines is correct, then it signals the gulf between the 
MND and LY on the Special Budget remains as wide as ever. 
PAAL