US embassy cable - 05TAIPEI4292

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 004292 
 
SIPDIS 
 
STATE PASS AIT/WASHINGTON 
 
E.O. 12958: DECL: 10/20/2015 
TAGS: PREL, PGOV, ASEC, XR, TW 
SUBJECT: TAIWAN WOOING LATIN AMERICA ALLIES WITH NEW 
DIPLOMATIC STRATEGY 
 
Classified By: AIT Acting Director Dave Keegan, Reason 1.4 (b/d) 
 
 1. (C) Summary: Taiwan's US $250 million "Co-Prosperity 
Project" is a new foreign policy strategy aimed at bolstering 
Taiwan's standing with its diplomatic partners in Latin 
America and countering Beijing's growing economic ties. 
Ministry of Foreign Affairs (MOFA) officials explain that the 
initiative came from President Chen Shui-bian's personal 
dissatisfaction with Taipei's existing aid programs and 
Beijing's efforts to use its growing economy to pressure 
Taiwan.  The program will promote Taiwan investment and 
encourage long term development rather than rely on Taipei's 
traditional infrastructure and humanitarian assistance 
projects.  Taiwan officials from several government 
ministries jointly developed the plan with Taiwan business 
leaders and recipient governments in Latin America.  MOFA 
officials are worried, however, that it will be difficult to 
convince Taiwan businesses to invest in Central America 
because most firms see more potential in the PRC and 
Southeast Asia.  End summary. 
 
Taiwan's Co-Prosperity Project 
------------------------------ 
 
2. (C) President Chen unveiled the ambitious plan during his 
September 2005 summit meeting with Central American leaders 
in Nicaragua.  Taiwan's Co-Prosperity Project will promote 
Taiwan investment among Taipei's Latin American partners in 
an effort to increasingly integrate the economies of Taiwan 
and its diplomatic partners.  The initiative is primarily 
focused on Central America, but other nations with relatively 
developed economies, such as the Dominican Republic, will 
also be included.  According to MOFA's Latin America 
Director-General Jaison Ko, the government has earmarked $250 
million USD for the project, which is the result of five 
months of joint planning by Taiwan government ministries, 
businesses, and recipient governments in Latin America.  Ko 
said that the program will be tailored to each individual 
country and focus on two or three key economic sectors for 
investment and development.  The investment will be 
facilitated by joint Taiwan-Latin American ventures and 
funding will come from the Executive Yuan (EY) and Taiwan's 
aid agency, the International Cooperation Development Fund 
(ICDF). 
 
New Strategy to Counter Beijing in Latin America 
--------------------------------------------- --- 
 
3. (C) MOFA's Ko explained that the project emerged from 
Presidential Office dissatisfaction with Taiwan's previous 
foreign policy strategy and Beijing's growing economic 
influence in Latin America.  He told AIT that President Chen 
was personally involved in planning the new program and 
insisted that Taipei needed a new diplomatic plan to shore up 
Taiwan's ties with its remaining partners and counter 
Beijing's growing economic pressure on Taipei.  Ko said that 
Beijing has been using its economy to entice Latin American 
business leaders to pressure Latin American governments to 
increase ties with Beijing on the grounds that the PRC offers 
more economic potential than Taiwan. 
 
4. (C) Ko told AIT that Taipei government officials had put a 
great deal of effort into this proposal and that it is not 
just an initiative cobbled together at the last minute for 
the benefit of Chen's trip or political gain.  Ko added that 
Taiwan wants to prove to its remaining partners that it has 
much to contribute to their long-term development.  He said 
that too often Beijing makes promises that it cannot keep and 
many Latin American governments are beginning to grumble 
about Beijing's unreliability in fulfilling its promises to 
import billions of dollars worth of products.  Ko said that 
the Presidential Office had directed MOFA that Taiwan must do 
more to promote investment to take advantage of this growing 
discontent over the PRC's promises. 
 
Allies Concern Also a Factor 
---------------------------- 
 
5. (C) Taiwan's diplomatic partners have also been very vocal 
about their changing economic needs and what Taiwan can 
provide.  MOFA's Ko said that many of Taiwan's partners have 
moved beyond basic economic development and require more 
high-tech assistance and access to markets.  Ko said that 
Dominican Republic President Fernandez asserted that Santo 
Domingo needs less humanitarian, agriculture, and 
infrastructure projects and more investment from Taiwan that 
will serve the long term development of the economy and 
promote jobs.  Previously, humanitarian projects had been the 
traditional mainstay of Taiwan's aid programs for its 
diplomatic partners.  Ko said that Taiwan is planning to 
build a science park in the Dominican Republic and has also 
initiated discussions for an FTA.  Thus far, Ko said that 
Taiwan's partners are pleased with the Co-Prosperity Project 
because they had a voice from the beginning in the program's 
development. 
 
But Will Taiwan Firms Support the Idea? 
--------------------------------------- 
 
6. (C) One key to this program is persuading more Taiwan 
firms to invest in Latin America.  MOFA worries that this may 
prove the biggest problem Taipei faces with its new strategy. 
 MOFA's Ko told AIT that the majority of Taiwan's investors 
are focused on the PRC or the Southeast Asian market. 
Taiwan's Co-Prosperity Project is focused on promoting 
Central America as a base for Taiwan free trade access to the 
US market because of the newly passed Central America Free 
Trade Agreement (CAFTA).  Ko explained this involves 
convincing Taiwan investors that there is a new opportunity 
for them to access the US market via investment and exports 
from Central America under CAFTA. 
 
7. (C) Ko explained that Taipei will focus on the textile 
market because many factories in the region, especially 
Guatemala and the Dominican Republic, have shut down because 
they cannot compete with the flood of cheap Chinese textile 
products.  He remarked that this has given the PRC negative 
publicity in the region and is an industry Taipei can assist. 
 Under CAFTA, Ko said that Central American nations can 
export textiles to the US more cheaply, which is why Taipei 
is encouraging Taiwan investors to take advantage of this and 
open textile firms in Central America for export to the US 
market.  However, Ko lamented that it remains to be seen if 
Taiwan businesses will support the idea. 
 
So Far Political Opposition Muted 
--------------------------------- 
 
8. (C) Ko told AIT that President Chen's initiative has drawn 
the ire of opposition parties (KMT and PFP) in Taiwan's 
Legislative Yuan (LY), but that overall opposition has been 
muted.  Ko explained that the government predicted such 
opposition and to ensure that the initiative would not be 
blocked, the money will come out of the EY's already approved 
budget and will not require LY approval.  He said this is the 
only way for the government to promote its foreign policy 
because political infighting makes it impossible to achieve 
foreign policy consensus among the political parties.  (Note: 
Press coverage of the Co-Prosperity Project in Taiwan quickly 
tapered off, suggesting it will be relegated to a memory as 
LY politicians prepare for December local elections and focus 
on politically contentious domestic issues.  End note). 
 
Comment: An Opportunity for Success 
----------------------------------- 
 
9. (C) It is too early to tell if the initiative will get off 
the ground; MOFA claims Taiwan's Co-Prosperity Project has 
been initially well received by Taipei's diplomatic partners. 
 This could give the Chen administration a window of 
opportunity to bolster its standing with its Latin America 
diplomatic partners.  However, much will depend on whether 
Taipei can convince Taiwan firms to participate in the 
project and whether Taiwan can deliver on its promise to 
provide real investment and differentiate itself from the 
criticism of empty promises and unreliability that is 
beginning to plague Beijing in Latin America. 
KEEGAN