By David G. McIntyre, Special to the Star-Bulletin
Troy Guard, center, is an Oahu native and executive chef
of Roy's of New China Max restaurant in Hong Kong. Here,
he watches sous chef Samnuel Tsang prepare a dish.
SPECIAL REPORT:
Hot Times
IN HONG KONG
Hawaii has not attracted much
By Susan Kreifels
capital from the booming colony as it
prepares to revert to China
Star-BulletinEconomists are fond of saying a millionaire is born in Hong Kong every day. Hong Kong is the business gateway to China's 1.2 billion consumers; it also is the gateway out for increasing numbers of Chinese tourists. And investors believe the July 1 return of the British colony to China will bring more prosperity to the city.
So far, however, Hawaii has failed to attract much Hong Kong capital.
When analysts discuss why Hawaii missed out on Hong Kong investment, they cite the lack of direct flights between here and Hong Kong at the top of the list.
Also, scarce state promotion, a lack of tax incentives, tough immigration laws, a stale economy, government bureaucracy, union might, even the sovereignty movement scare away shrewd Chinese and Hong Kong investors who keep a keen eye on opportunities around the world.
"Hong Kong finds these things onerous," said Paul Loo, senior vice president of the Pacific Region for Dean Witter, Discover and Co., in Hawaii. "On a scale of investment climate, Hawaii is one and Hong Kong is 10. They're on opposite ends."
According to figures from Hawaii's Department of Business, Economic Development & Tourism (DBEDT), Hong Kong investors spent $380.5 million here, or about 2 percent of all foreign investment in Hawaii dating before 1985 to 1995.
Last year they spent about $40 million, or 1.1 percent of total foreign investment. (These figures could be incomplete if Hong Kong money comes via companies from other countries, officials say.)
Several former Hawaii residents who work in Hong Kong said the state has done little to promote itself there.
"I don't hear very much about Hawaii," said Beverly Sunn, director of Asian Pacific Properties and a 15-year resident of Hong Kong. "In the next decade a new growth of multimillionaires will come from the Far East. Hawaii with its great resources can look for a target market."
It's too late to cash in on Hong Kong money, at least until next year, analysts said. Overseas investments have fallen off as business waits to see what happens after the hand-over to China.
Money is moving between China and Hong Kong but not much elsewhere, said George Kwan, vice president of the International Banking Group for the Bank of Hawaii, which operates a branch in Hong Kong. Kwan said heavy state promotions would fall on deaf ears now.
"Whatever plans there were have already been executed," said the Hong Kong-born Kwan.
"For the last several months, based on the contacts I have, people have been doing nothing.... It's a timing issue."
Hawaii is one of nine states to have a trade representative in Hong Kong. But DBEDT officials say they're focusing more on trade missions to Taiwan, where they hope to pull the investments they failed to get in Hong Kong.
Taiwan has the right ingredients for the next round of capital flight: fast-growing wealth and political uncertainty as China's focus shifts from Hong Kong to Taipei to complete what Beijing sees as the legitimate reunification of the motherland.
By David G. McIntyre, Special to the Star-Bulletin
K.P. Kwok, a salesman for Eu Yan Sang (Hong Kong) Ltd.,
a traditional Chinese herbal medicine shop, measures out
ingredients for a remedy in central Hong Kong. Owner
Edward Eu, a 4-year Hawaii resident, belives anything
Hawaiian will sell well in Hong Kong.
DBEDT director Seiji Naya said 40 potential Taiwanese investors have visited Hawaii since the state's trade mission there last month."It's timing," said Richard Bahar, DBEDT's investment promotion manager.
"Taiwan is the last domino."
Bahar said attracting Taiwanese investment will be an easier sell than Hong Kong. Most important are the 14 direct flights between Hawaii and Taipei bringing 80,000 visitors a year.
But Bahar also said Hong Kong investors will once again look overseas for business opportunities. Even if the new relationship with China works in the long term, business won't put all its eggs in the China basket.
The next time, Hawaii will be better prepared, he said, citing such moves as Congress easing investment requirements needed to get permanent residency.
Taiwanese top the list of foreign-investor applicants in Hawaii: about 20 investing $15 million here. Hong Kong is second with roughly 15 investors bringing $10 million.
At the same time, Canada has called a moratorium on immigrant investment after an onslaught of overseas investors brought problems, Bahar said, and other countries have tightened regulations.
If they can get potential investors here, promoters hope Hawaii's advantages will convince investors to stay: time zones that let businesses deal with the U.S. mainland in the morning and Asia in the afternoon, a wealth of professionals, real estate available for a fraction of its bubble-days value, a beautiful environment and healthy climate, good medical facilities and a cross-cultural population where Hong Kong and mainland Chinese can blend in.
But Keith Vong, president of the Hong Kong Business Association of Hawaii, said the state needs to promote more in Hong Kong.
"People still look at it as a tourist destination rather than a place they can continue business," Vong said.
Some are looking at Hawaii as a home. Patricia Choi of Patricia Choi Realty Inc. in Kahala said while there is no rush on residential buys by Hong Kong investors -- five to 10 this year -- that's more than triple over last year. Taiwanese families are also buying here, Bahar said.
Hawaii's depressed prices are a big reason sales have increased, but the lifestyle helps.
"They can buy anywhere in the world," Choi said.
"Families are their first consideration. They admit Hawaii is the most beautiful place to live, and it's safe."
As for the other things that are harder to change in the state -- government bureaucracy, union dominance, tax structures -- Bahar said it may be a "perception problem."
"If you look at a number of people who have started successful businesses here, they went in with a perception to make the best of it."
Meanwhile, Hawaii businesses are slowly moving into Hong Kong, as are some professionals -- architectures, engineers, planners, tourism experts -- offering services needed there and in China.
Hawaii's Roy Yamaguchi opened a Roy's Restaurant in Hong Kong two years ago, and said he believes operating there will make the step into China easier.
Edward Eu is a 40-year Hawaii resident whose Universal Motors sold European cars in the state. He and his family own Eu Yan Sang (Hong Kong) Ltd., the biggest manufacturer of traditional Chinese herbal medicines in Hong Kong.
He believes anything Hawaiian will do well there. Kona coffee, for example, could be a hit with upscale consumers in Hong Kong and future ones in China.
He is more optimistic about Hawaii business going there than getting Hong Kong investment here. "Indicators here are not the best," he said. "They can find better offshore tax structures. There are not direct flights. What do we have to offer here?"
Hong Kong market
By Susan Kreifels
untapped by HVCB
Star-BulletinWith millions of mainland Chinese now traveling to Hong Kong, it's become a fertile ground for luring tourists to Hawaii. But with no direct flights across the 5,554 miles between the state and Hong Kong, and with virtually no tourism promotion there, Hawaii can't tap a market that travel-industry experts say holds the greatest future.
It's a classic chicken-and-egg predicament. Airlines officials say they need more passengers to start direct flights. The best way to increase passengers is to promote the state. But the Hawaii Visitors and Convention Bureau says it's not spending money to promote in Hong Kong because there are no direct flights.
Instead the HVCB is concentrating on the countries that have flights and supply the tourists.
That attitude is short-sighted, a number of travel industry analysts said.
"If I were a carrier, I'd want some strong assurance that HVCB was really going to promote Hawaii much more than it has in Hong Kong and China," said Fredrick M. Collison, a professor of transportation marketing at the University of Hawaii's School of Travel Industry Management.
"You can't expect the airlines to develop the market themselves. I'm concerned Hawaii is not doing the marketing it needs to beyond Japan."
Close to 1 million people from around the world visit Hong Kong every month. Of the city's own 6 million residents, a quarter million visited the United States last year.
Then consider the 1.2 billion mainland Chinese next door. Last year 2.3 million of them visited Hong Kong, and that number is expected to grow 8 percent every year into the next century.
By Dennis Oda, Star-Bulletin
Patricia Choi says she's seen no rush by Hong Kong
home buyers here. She did show this 12.5 million home
to prospective buyers.
Although per capita earnings in China are much lower than elsewhere in Asia, there are pockets of wealth. The potential earning power is enormous for the Chinese, who far outnumber the combined populations of Japan, Taiwan and South Korea -- about 189 million -- which supply most of Hawaii's Asia tourists now. Visas for Chinese travelers are still a problem in both Beijing and the United States, but officials expect restrictions to loosen with time.Tom Liu, with Renaissance Hotels International in Hong Kong, said many mainland Chinese use Hong Kong as their gate out to the rest of the world.
"It's the biggest potential market in the future," said Liu, formerly with the Ala Moana Hotel in Honolulu. "They have spending power. They're buying designer labels."
Liu said Hawaii would be attractive to mainland Chinese, but he rarely sees the state promoted in Hong Kong.
Hong Kong's new airport opens next April and will accommodate 15,000 more passengers a day. State officials have wooed Hong Kong's airlines to add Honolulu flights. Travelers now must endure six-hour layovers from Hong Kong to Hawaii.
Hong Kong-based Cathay Pacific Airways Ltd. holds the most hope for a direct flight -- but not for at least several years. A Cathay
spokesperson said the company's highest priority was flights to the U.S. West Coast, but "Honolulu will definitely be featured on our route study. We'll take a serious look in two years' time."
Hong Kong Dragon Airlines Ltd. said it had no plans to add a direct Honolulu flight.
U.S. airline officials were not optimistic that American carriers would add direct flights to Honolulu. They said, however, that flights could become more convenient with less layover time.
Ron Wright, director of sales and marketing in Hawaii for Continental Airlines and Continental Micronesia, said new aircraft and Guam's expanded airport would allow Continental to develop better and more frequent connections from Honolulu to Asia.
Rich Gray, director of customer service at Northwest Airlines in Hawaii, said he thought the best hope for improving flight connections to Hawaii was through alliances with Asian airlines. "I would almost guarantee within the next few years that service will improve through those types of connections," Gray said.
Direct flights now link Honolulu to Japanese cities, Taipei, Seoul and Manila. Officials in the state government and travel industry tick off several factors working against more direct flights:
U.S. laws passed to protect U.S. airlines prevent foreign carriers from picking up new passengers in Honolulu, making non-stop flights to the West Coast more profitable.
Kazumasa "Kaz" Tamura, vice president for the Asia Pacific region at HVCB, said most of his $400,000 budget this year was spent on Japan because it totals 30 percent of the tourist market in Hawaii. An additional $6 million in emergency funds was tapped for Japan spending to boost sagging visitor numbers there. The remainder of the Asia promotion money goes mainly to South Korea, with 2 percent of all tourists, and Taiwan, with 1 percent. Tourists from the rest of Asia make up less than 2 percent.
Although Tamura says there's much potential in China and Hong Kong, he is "fishing where the fish are. We see the greatest numbers still in Japan with definite growth in Korea and Taiwan" since direct flights were added there.
With the bureau's limited funding, "we have to use it where there are proven numbers now," Tamura said.
What they say
about Hong KongWho: Clifton Kagawa, chairman and chief executive, Hill and Knowlton Asia Pacific; Hawaii resident for 20 years. CLIFTON KAGAWA
Hawaii-Hong Kong Connection: From Hong Kong's standpoint, Hawaii is not a major consideration in terms of investment or to be tapped as a service resource. If Hawaii is to be taken seriously in Hong Kong and Asia, it must reconsider its business climate. Consistently negative media coverage such as the recent Forbes article takes Hawaii's limited opportunities and marginalizes them. Hawaii as a medical care center and its resort development and travel marketing expertise are niche opportunities.
Job opportunities for Asian-Americans: The market for Asian Americans who can bridge Western and Eastern cultures is substantial. There are many examples of Americans of Chinese ancestry in particular who have moved or returned to Hong Kong who are in top management posts. Demand for management talent is great in the technology and health care sectors. Increasingly, speaking Cantonese or Mandarin will be a prerequisite for any expatriate wishing to work in Hong Kong.
The turnover: There is far more angst about the handover outside Hong Kong than within.
Hong Kong's future: For the near term, the future is bright. The longer term issue is whether Hong Kong, as a regional financial services center and top property market, will be eclipsed by Shanghai to become just another major metropolis in China.
Who: Akiko Takahashi, group director of Human Resources for Shangri-La Hotels & Resorts, based in Hong Kong; Kalani High School graduate. AKIKO TAKAHASHI
Hawaii-Hong Kong Connection: Unfortunately I do not see any natural connection between Hong Kong and Hawaii. Individuals with foresight will try to forge their own connections. But there is no infrastructure foundation that compels a natural liaison.
The "sun and sand" of Hawaii is found in many places in Asia that are easier to reach, just as friendly and within the same time zone. ... It's a shame that one rarely sees a reminder in Hong Kong that Hawaii even exists.
Job opportunities for Asian Americans: Asia is desperate for them. The ideal person will be born and raised in Asia with a solid foundation of Asian values. He/she will adapt and integrate the best of the East and West but always remember that this is Asia and the people are Asians.
The turnover: It will not have much impact on our company. Shangri-La Hotels & Resorts has 36 hotels throughout Asia with plans for 50 by the year 2000. We will increase our 12 hotels in China to 20 by the same year.
Personally, I must learn Mandarin and much more about China's culture. Everyone who wants to be part of the next economic growth will have to learn to do business in China.
Hong Kong's future: Over the short term Hong Kong will remain unchanged. The economic viability of Hong Kong will be stronger than ever. The longer term implications are difficult to ascertain. Hong Kong will have tough competition from Shanghai, which will probably be the future "Hong Kong" of China.
Hong Kong
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