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Cablegate: Ait Director Visits Itri Chairman Lin Hsin-I

VZCZCXRO3586
RR RUEHCN RUEHGH
DE RUEHIN #2677/01 2200905
ZNR UUUUU ZZH
R 080905Z AUG 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 1494
INFO RUEHBJ/AMEMBASSY BEIJING 5525
RUEHUL/AMEMBASSY SEOUL 7999
RUEHKO/AMEMBASSY TOKYO 7908
RUEHCN/AMCONSUL CHENGDU 1360
RUEHGZ/AMCONSUL GUANGZHOU 9482
RUEHHK/AMCONSUL HONG KONG 6735
RUEHGH/AMCONSUL SHANGHAI 0301
RUEHSH/AMCONSUL SHENYANG 5326
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 TAIPEI 002677

SIPDIS

SENSITIVE
SIPDIS

STATE PASS EAP/TC

E.O. 12958: N/A
TAGS: ECON PREL ETRD EINV TW
SUBJECT: AIT DIRECTOR VISITS ITRI CHAIRMAN LIN HSIN-I


1. (U) Summary. AIT director paid a courtesy call on July 24
to Industrial Technology Research Institute (ITRI) Chairman
Lin Hsin-I to exchange views on Taiwan's current educational
system, economic situation, and strategies for the future.
Lin stressed the need for educational reform, to bring
dynamic thinking into industry. He also said that Taiwan
needed to develop new cutting edge technology items such as
carbon fiber composites. On cross-Strait trade, Lin
emphasized the need to encourage bilateral trade, but he did
not foresee any progress on this issue at the upcoming
Sustainable Economic Conference. End summary.

2. (U) Lin was appointed as ITRI Chairman in 2004. ITRI is a
government-financed (45 percent) non-profit organization
tasked with guiding Taiwan's industrial development. It has
a staff of 6,100 persons including 820 PhD's. It serves as a
research center for industry and an unofficial arm of the
government's industrial policies.

CROSS-STRAIT TRADE
------------------

3. (SBU) Lin stressed that the ruling Democratic Progressive
Party (DPP) did not understand commercial concerns and had
squandered opportunities to foster bilateral trade between
China and Taiwan. He said in the PRC many of the government
officials came from industry. Lin said President Chen
thought that if he (Chen) opened up trade with China, he
would lose support from his own party. Lin said he favored
relaxing the restrictions on semiconductor investment in
China. AIT Director observed that China's cheaper labor was
not always the main consideration for Taiwan investors,
citing the example of Morris Chang, Chairman of TMSC and
former Chairman of ITRI, whose primary concern was the lack
of IPR protection in China. Lin said he was an advisor to
the Sustainable Economic Conference but he did not expect any
breakthroughs on cross-Strait trade to emerge from that
conference. Note. The July 28-29 Sustainable Economic
Development Conference fell short of business expectations
for a more open trade policy towards China. It kept the 40
percent investment cap for Taiwan firms in China, although it
endorsed relaxed restrictions on tourism, charter flights and
banking and to permit mainland manufacture of semiconductor
chips up to 0.18 microns. End note.

HOW TO STAY COMPETITIVE
-----------------------

4. (U) Lin said one way to stay competitive with mainland
China was to promote higher value-added products. Taiwan
currently was developing cutting-edge technology products
such as carbonized bamboo which was used in combination with
natural/synthetic fibers to provide insulation. Lin said
that boxes insulated with carbonized bamboo composites might
replace refrigerated trucks in the future. Likewise, Taiwan
makes high-end bicycles locally but cheaper bikes are
produced by Taiwan companies in China.


EDUCATIONAL REFORM
------------------

5. (U) Lin complained that university-level education in
Taiwan was turning out students who knew how things work but
not why. He said Taiwan needed to develop a connection
between the educational system and industry so that college
graduates would be able to contribute to industrial
development. AIT Director quoted Academia Sinica President
Li Yuan-tseh as saying the students were good at taking
tests but not at creative thinking. Lin said that he looked
forward to the time when foreign institutions would invest in
education in Taiwan. He added he thought it was good that
Taiwan professors were going to China to teach.

SHORT TERM PROSPECTS
--------------------

6. (U) AIT Director asked Lin about the prospects for
Taiwan's economy in the next five years. Lin thought that as
long as Taiwan kept its key technologies, added good
management and R&D, then it could stay ahead of the

TAIPEI 00002677 002 OF 002


competition. Lin said since manufacturing was moving away
from Taiwan the service sector held much promise. Given
Lin's experience in the automobile industry, AIT Director
asked him about development of hybrid vehicle technology in
Taiwan. Lin said Taiwan was lacking in that technology but
was strong in the area of auto parts and components. Lin
said Taiwan provided USD4 billion in automobile components to
the world market. Implementation and coordination of
economic policy between government and industry were critical
to keep Taiwan's industry on a healthy course, according to
Lin.


YOUNG

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