TAIWAN: NEW LEADERS AND NEW POLICIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00227R000100040006-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 19, 2016
• Document Release Date: February 12, 2007
• Sequence Number: 6
• Publication Date: February 1, 1982
• Content Type: REPORT

Directorate of Secret
Intelligence
Taiwan: New Leaders
Secret
EA 82-10019
February 1982
Copy 2 4 1
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and New Policies
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Directorate of
Intelligence
Taiwan: New Leaders
and New Policies
Information available as of 25 January 1982
has been used in the preparation of this report.
This paper was prepared by
Office of East Asian Analysis. Comments and queries
are welcome and may be addressed to the Chief,
Foreign Policy and National Security Affairs Branch,
OEA,
Intelligence Officer for East Asia.
0
Secret
EA 82-10019
February 1982
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Premier
Sun Yun-hsuan
68
Vice Premier
Chiu Chuang-huan a
56
Communications
Lien Chan
55
Defense
Sung Chang-chih
65
Economic Affairs
Chao Yao-tung
66
Education
Chu Hui-sen
70
Finance
Hsu Li-teh
50
Foreign Affairs
Chu Fu-sung
66
Interior
Lin Yang-kang a
55
Justice
Li Yuan-tzu
58
Ministers Without Portfolios
Chang Feng-hsu a
53
Chou Hung-tao
65
Kao Yu-shu a
68
Li Kuo-ting
71
Yu Kuo-hua
64
Lin Chin-sheng a
65
Taiwan Governor
Li Teng-hui a
58
Taipei Mayor
Shao En-hsin a
57
Incumbent
Interior Minister
Chairman, National Youth
Commission
Chief of General Staff
President, China Steel Corporation
Incumbent
Finance Commissioner, Taiwan
Province
Incumbent
Taiwan Governor
Incumbent
Incumbent
Incumbent
Incumbent
Incumbent
Incumbent
Communications Minister
Mayor Taipei
Civil Affairs Commissioner, Taiwan
Province
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Secret
Taiwan: New Leaders
and New PoliciesE
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Key Judgments The shakeup of the senior leadership on Taiwan in December 1981-the
first government reorganization by President Chiang Ching-kuo since
1978-marks an important attempt to introduce new political blood into
the bureaucracy and to deal with recent economic problems. In changing
two-thirds of the Cabinet as well as the top military leadership, the Taiwan
provincial, and Taipei municipal governments, Chiang has installed a
younger and more aggressive group of managers (see table 1). The changes,
however, do not clarify Chiang's intentions concerning his own successor
but do strengthen the position of Premier Sun Yun-hsuan and only
partially alleviate the problem of a military rank structure still topheavy
with aged senior commanders.0 25X1
The installation of new cabinet ministers amounts to a recognition by
Chiang and his advisers that the government needs a younger and more re-
sponsive image, particularly in the legislature, where some older ministers
were either unable or unwilling to perform effectively. In fact, some of the
new cabinet members have roots outside the bureaucracy, and their
somewhat more independent political connections, combined with their
youth and political skills, will probably further diminish the influence of
the Kuomintang old guard in the next few years. 25X1
The changes do not signal any significant realignment of Taiwan vis-a-vis
either China or the United States. Nonetheless, some of the new ministers
are reportedly unhappy with Taiwan's heavy dependence on the United
States and will probably try to accelerate Taiwan's policy of trade
diversification. They will also try to speed Taiwan's economic moderniza-
tion, a policy that will bring Taiwan into more direct economic competition
with the United States, especially in the areas of automobiles and
electronics. 25X1
Secret
EA 82-10019
February 1982
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Secret
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Taiwan: New Leaders
and New PoliciesE
The Economic Ministries
The most significant personnel changes were those
affecting Taiwan's management of economic policy.
Virtually all of Taiwan's senior economic planners
and policymakers were replaced in December; at the
same time, the locus for economic planning moved to
the Premier's office and away from the conservative,
monetarist Minister Without Portfolio Yu Kuo-hua.
The fact that Chiang also replaced the Finance and
the Economic Affairs Ministers emphasized his un-
happiness with Taiwan's recent economic perform-
ance as well as his desire to respond to increasing
complaints about the ministries from the private
sector.
Although Chao's background in the private sector-
unique in Taiwan's bureaucracy-equips him well for
the task, he will face problems. Chao has pledged to
reorganize and revitalize Taiwan's other state-owned
corporations, which in many cases are notorious for
waste, corruption, inefficiency, and unprofitability.
The senior positions in these companies are tradition-
ally filled by retired government, military, and party
leaders who are mainlanders. They will almost cer-
tainly resist any significant reorganization or consoli-
dation of their fiefdoms.0 25X1
In other areas, Chao has said he wants to speed
Taiwan's shift from labor-intensive to skill- an(MXlr}
nology-intensive exports. This program, begun during
the 1970s, is regarded in the same light as the official
decision 20 years ago to organize an export-based
economy for the island. It now has added urgency,
however, because of pressure on Taiwan's position
from competitors-including China-which enjoy
lower labor costs. Taiwan wants to accelerate its
export of high-technology goods that can compete in
the Japanese, West European, and US markets,
where the costs of its highly skilled work force still
provide Taiwan a competitive advantage. Chao is also
Taiwan remains one of Asia's economic bright spots,
but, during the past two years, the island's export-
driven economy has encountered a number of prob-
lems. These include:
Two consecutive annual budget deficits after 16
years of surplus.
Persistent double-digit inflation, slower economic
growth, and a declining rate of domestic investment.
Increased competition facing Taiwan's labor-inten-
sive exports abroad, combined with heightened pro-
tectionism in its most important markets.
The newly named Minister of Economic Affairs-66-
year-old Chao Yao-tung-will play the primary role
in rejuvenating Taiwan's economy. Chao, who earned
a reputation as an aggressive and innovative manager
while president of the state-owned China Steel Corpo-
ration, is apparently willing to tolerate somewhat
higher rates of inflation in order to restore Taiwan's
high growth rates. Unlike his more conservative pred-
ecessor, he has moved quickly to lower interest rates
and increase the money supply. Other steps to stimu-
late the economy are expected. Indeed, Chao's philos-
ophy represents a basic generational change from the
seeking new products for export. He has suggeQC1
for example, that Taiwan could one da sell some
200,000 automobiles per year abroad. 5X1
This shift should increase Taiwan's international sta-
bility, providing it a much firmer position in the
international division of labor. Industrialized coun-
tries purchasing Taiwan's less expensive components
for their own finished products would presumably
become more concerned with Taiwan's future, and
Taiwan's position as a newly industrialized nation
would be significantly enhanced. 2 X1
Other Appointments
attitudes of the older leadership, which tightly con- The appointment of the capable and popular Gover-
trolled the economy to prevent the kind of hyperinfla- nor of Taiwan, Lin Yang-kang, as Interior Minister
tion of the late 1940s, which, in its view, contributed represents another significant personnel change. Lin,
to the Kuomintang (KMT) defeat on the mainland.= 25X1
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Lin Yang-kang, the new Minis-
ter of Interior, may try to use
who is Taiwanese, appears to have already launched a
press campaign ostensibly aimed at criticizing the
police for not curbing crime on Taiwan. We believe he
may actually want to control the police, who are
nominally under his jurisdiction, but who in fact are
commanded by the security services, and his move to
focus public criticism on them is almost certainly
directed at that goal. It is unclear, however, whether
Chiang, who may have chosen Lin to reform the oft-
troubled ministry, backs such an ambitious plan.
Indeed, Lin's efforts could result in a direct conflict
between the civilian leadership and the security ser-
vices.F___1
While governor, Lin had been particularly outspoken
in his criticisms of the mainlander-dominated govern-
ment, and his appointment to the Interior Ministry
had been viewed by some as a demotion, a punishment
for refusing to play by the rules. Still, Lin-who had
apparently hoped to be named Vice Premier-is an
astute and well-connected politician with strong sup-
port from both native Taiwanese and younger main-
landers. Although he may eventually back down from
his confrontation with the police administration, he
will continue to use his position to build a powerful
political base.
retains his position, now has
increased power
Lin has undertaken other initiatives that will be
popular with the Taiwanese. He has reportedly killed
a bill, sponsored by the government, that would have
severely restricted the activities of religious organiza-
tions on Taiwan-a law that had drawn strong popu-
lar opposition. Lin will probably also try to amend
Taiwan's election laws, especially those sections limit-
ing the speeches and campaign activities of candi-
dates
Changes in the Military
The retirement of Defense Minister Kao Kuei-yuan
triggered the long-delayed replacement of Taiwan's
top military leadership. Kao-aged and ailing-was
the last graduate of the Whampoa Military Academy
still on active duty. He was succeeded by 65-year-old
Fleet Admiral Sung Chang-chih, the first naval offi-
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cer to hold the post. 25X1
Chen Shou-shan, appointed to command the Taiwan
Garrison General Headquarters, is the first Taiwan-
ese ever named to a service command. He replaces
Wang Ching-hsu, who had been under some criticism
in his office. Even so, Wang's career did not suffer; he
was promoted to director of the National Security
Bureau. 25X1
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Secret
include anyone from the group that was educated on
Taiwan and are still a step short of the major change
Sung Chang-chih is the first
naval officer ever named
Changes in the general staff also reflect the steady-
albeit slow-decline in the influence of the mainland
old guard. The promotion of Hao Po-tsun to be chief
of the general staff ended the control of the Army by
officers who were educated in the military academy
prior to the Sino-Japanese war. The appointment to
Army commander in chief of Chiang Chung-ling, who
enrolled in the academy after the war began, com-
pletes his generation's takeover of the Army's top jobs
(see table 2). If there are no further delays in regular
rotations at this level, virtually no mainland-educated
officers will remain on active duty within five years.
Despite the turnover in the military's senior ranks, the
new leadership is not appreciably younger than its
predecessors were at the time of their appointments.
Although the installation of the new commanders has
removed the roadblocks to orderly progression at the
top for the time being, we believe problems could
recur if Chiang again fails to replace this group at the
end of their customary two-year terms. Moreover, all
military appointments at these levels have yet to
that will eventually occur.
Implications
The Cabinet appointments reflect the recognition by
Taiwan's senior leadership that it must become more
responsive to an increasingly active and demanding
legislature and must address complaints about the
government's poor performance in handling the cur-
rent economic difficulties. Because the older bureau-
crats could not adjust to the new pressures-the
legislature had until recently been all but moribund-
they were replaced with individuals able to handle the
legislators' inquiries. This change does not suggest
that the ministries will in fact become accountable,
but it does highlight the regime's recognition of the
legislature's new vigor and the potential for political
trouble as a result of the ambitions of those meLr}]~e~
who wer
Alerted i
1 .~~K~
1980
e
n
.
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In the economic sphere, the new appointments seem to
reinforce the position of Premier -Sun Yun-hsuan as
Chiang Ching-kuo's eventual successor. Several new
appointees are connected to Sun, and the reduction of
Yu Kuo-hua's influence in economic planning gives
Sun the opportunity to establish his credentials in this
crucial area. If Taiwan can reverse current trends by
boosting its economic growth, the Premier will gain a
major advantage. 25X1
In the military, the choice of the relatively apolitical
Sung Chang-chih as defense minister minimizes the
chances that the regular military will contest civilian
succession arrangements. At the same time, h6 )(et,
the increasing number of regular line commands held
by former subordinates of Wang Sheng-widely re-
garded as the present and future power behind the
throne-leaves open the possibility that selected units,
particularly from the Taiwan garrison command,
could become involved if political problems required a
peacekeeping force.0 25X1
Despite the number and range of the appointments,
there is no indication that Taiwan will adopt any
major new diplomatic initiatives or that its relations
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Senior Military Commands Held by Army Officers
Deputy Minister of National Defense
Chang Kuo-ying
12
Chief of the General Staff
Hao Po-tsun
12
Administrative Vice Minister of National Defense
Ku Chuan-hsin
14
Director, National Security Bureau
Wang Ching-hsu
14
Deputy Chief of the General Staff for Operations
Chen Chien-kao
14
Director, General Political Warfare Department MND
Wang Sheng
16 a
CINC Army
Chiang Chung-ling
16
Vice CINC Army
Yen Pai-chien
16
Kinmen Defense Commander
Hsu Li-nung
16
6th Army Commander
Meng Hsien-ting
8th Army Commander
Unknown
9
10th Army Commander
Sung Hsin-lien
16
CINC, Taiwan Garrison General Headquarters
Chen Shou-shan b
16
a Although Wang has claimed to be a member of this class, he
probably was not.
b Taiwanese.
with China or the United States will be affected
significantly. There were virtually no changes in the
foreign ministry, and Chiang Ching-kuo's top adviso-
ry group remains intact. To the extent that the
changes in the economic sphere might create prob-
lems in US-Taiwan bilateral relations, these will most
likely be mild, slow to develop, and far from insolv-
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