US embassy cable - 05TAIPEI4415

UNCLAS SECTION 01 OF 02 TAIPEI 004415 
 
SIPDIS 
 
STATE PASS AIT/W 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, MASS, MARR, TW 
SUBJECT:  DEFENSE SPECIAL BUDGET: OPTIONS FOR RECONFIGURA- 
TION 
 
REF: A. TAIPEI 3551 
     B. TAIPEI 4159 
 
1.  (SBU) Summary.  The Defense Procurement Special Budget is 
stuck in legislative limbo until at least the December 3 
Taiwan local elections.  Government and opposition leaders 
offer varying explanations about what changes are, or are 
not, possible.  As the U.S. seeks to understand and influence 
Taiwan's defense modernization, the budget process could be a 
major limiting factor.  With that in mind, we have consulted 
with a variety of local experts to understand how the Taiwan 
budget process works.  End Summary. 
 
2.  (SBU) The Executive Yuan (EY) has submitted two bills to 
the Legislative Yuan (LY) containing funding for major new 
defense purchases.  The Defense Special Budget provides 
funding for submarines and P-3C maritime patrol aircraft. 
The regular 2006 Defense Budget includes among other items 
funding for PAC-III missiles. 
 
3.  (SBU) According to the Taiwan Budget Law (Article 83), 
the EY is charged with submitting the annual government 
budget to the LY for approval.  The EY may submit a separate 
"special budget" for major administrative programs covering a 
period longer than one year, as well as in the event of 
war/national emergency, major economic change, or disaster. 
Whereas LY members may normally propose bills on their own, 
in addition to or in lieu of EY-proposed bills, only the EY 
may make budget proposals to the LY. 
 
Defense Procurement Special Budget 
---------------------------------- 
 
4.  (SBU) A special budget bill, just as any submitted 
legislation, goes first to the LY Procedure Committee, which 
votes whether or not to place the bill on the LY agenda. 
(The Defense Special Budget has never been placed on the LY 
agenda, having been rejected by the Procedure Committee 
thirty-four times over the past year.)  If passed, the bill 
then goes to the LY floor for a first reading and referral to 
a committee for review and amendment, a Joint Committee of 
the Defense and Budget Committees in the case of the Defense 
Special Budget.  If the committee approves a draft bill, it 
is then returned to the floor for two additional readings and 
a final vote. 
 
5.  (SBU) Until any bill, including budget and special budget 
bills, is placed on the LY agenda, the government can 
withdraw it at any time, reconfigure and resubmit it.  The 
time required to reconfigure a special budget depends on the 
complexity of the change; the relatively simple alteration of 
the Defense Special Budget in August separating out the 
PAC-III missiles took about two weeks.  (Comment:  While AIT 
has been told by senior government officials that rewriting 
the Defense Special Budget would require a minimum of 
eighteen months, there is no legal or regulatory basis for 
this estimate, and the quick deletion of the PAC-III missiles 
in August proves there is no such minimum.  End Comment.) 
 
6.  (SBU) If the Defense Special Budget were to be placed on 
the LY agenda, the only changes that legislators could make 
would be to reduce the amount of the proposed budget. 
According to Article 70 of Taiwan's Constitution and the 
Grand Justice 264th Ruling in 1990, the LY can cut, but 
cannot increase, a proposed budget or special budget proposed 
by the EY. 
 
Regular Defense Budget 
---------------------- 
 
7.  (SBU) The regular defense budget is submitted as a part 
of the Government,s regular annual budget at the opening of 
the fall LY session.  By law, the budget must be approved by 
the LY before the beginning of the next fiscal year which, in 
Taiwan, coincides with the calendar year. 
 
8.  (SBU) The Procedure Committee is required to place the 
budget bill on the LY agenda and refer it to the relevant 
committee.  (Note: there is no such requirement for a special 
budget.  End Note.)  While there is no specific time limit 
for this, the Procedure Committee traditionally meets 
immediately after the start of the LY sesson and places the 
budget bill on the LY calendar within one week. 
9.  (SBU) The FY 2006 regular defense budget, containing the 
PAC-III missiles, is currently "in committee" undergoing 
deliberation, in this case by a Joint Defense-Budget 
Committee.  According to LY Rules, legislators cannot "add, 
shift or delete" budget items in committee or on the LY 
floor.  Legislators can, however, reduce funding at any stage 
and even effectively eliminate a budget item by reducing its 
funding level to zero, a possibility for the PAC-III 
missiles, given strong Pan-Blue opposition to their 
acquisition.  The full LY, however, can restore cuts made to 
a budget item in committee. 
 
10.  (SBU) The government itself can alter a regular budget 
item in two ways.  First, the EY can take the highly unusual 
step of recalling the entire 2006 government budget proposal 
in order to revise and resubmit it to the LY.  This rare 
procedure last occurred in October 2000, EY Budget Bureau 
Senior Specialist Lin Shen-yu told AIT, when new Premier 
Chang Chun-hsiung recalled, revised, and resubmitted the 2001 
Central Budget in two weeks; this was done, however, at the 
specific request of the LY.  Second, after the LY approves 
the budget, the government can submit an "extra budget" to 
increase funding for any portion of the approved budget. 
 
Comment:  Options for Budget Alteration Limited 
--------------------------------------------- -- 
 
11.  (SBU) The prospects for reconfiguring the three weapons 
systems of the original Defense Procurement Special Budget 
are specific and limited.  The PAC-III missile proposal in 
the regular defense budget can be approved at the proposed 
funding level (NT$130 billion) or reduced, even "zeroed out," 
in committee or on the LY floor.  The government itself can 
reconfigure the P-3C's and submarines in the Defense Special 
Budget relatively quickly, since the Defense Special Budget 
has never been passed by the Procedure Committee and placed 
on the LY agenda.  Other than reducing proposed funding 
levels, the LY itself can neither alter nor reconfigure 
either the regular or the special defense budget. 
 
PAAL