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UP CLOSE ON THE ISLES'
ECONOMIC FUTURE

Hawaii courting
business delegates

Isle officials use the economic
conference to promote the state
as a good location for business

Increased China trade possible
Hawaii businesses seek connections

By Susan Kreifels
Star-Bulletin

Yon Lew, chief executive officer and president of an upstart Internet business based in Colorado, is fired up about Hawaii.

With digital speed, he speaks about the state as "the center of the new economy," the perfect base to cash in on vastly potential e-commerce markets in China and South Korea. He believes the islands have the right time zone, location, and multicultural population.

Lew compares Hawaii, where he wants to open an office one day, to his young DataCrystal Inc.: "very, very young, with untapped energy." Thinking about the state otherwise, he said, is an "old attitude."

Lew was one of about 500 delegates who traveled here for this week's annual international meeting of the Pacific Basin Economic Council, with members representing some of the world's biggest companies. But not all delegates in the generally conservative organization shared Lew's enthusiasm for Hawaii as a good bet for business. Some from the "old economy" said reshaping Hawaii's weak business image would take hard work and convincing, and it will take time.

Frank Farfone of Dow Chemical Co. said the state's push to create a more business-friendly image was the right step. But convincing the world that Hawaii was more than a tourist haven will take "a dramatic effort," he said.

Cayetano makes a pitch

Local officials and businesses are using the conference of influential delegates as a means to promote Hawaii as a serious place for business. At the opening ceremony, Gov. Ben Cayetano touted the state's excellent telecommunications and its health care, biotechnology, marine science and other areas of specialty, along with workable time zones and quality of life.

John Donovan of San Francisco-based Applied Communications Corp. agreed that the state offered advantages, but said its small population was a drawback. "The critical mass of people you need is in Silicon Valley," Donovan said. It will take a lot of public relations "to change the mind-set on the West Coast" about Hawaii.

Associated Press
Hawaii governor Benjamin J. Cayetano welcomes
delegates to the opening of the 33rd annual international
meeting of the Pacific Basin Economic Council yesterday.

If there's still reluctance to look at the islands as a place for long-term investment, delegates may be viewing it in a new light as a good meeting and convention place. Robert Lees, Honolulu-based PBEC secretary general, said it's too soon to tell what impact Hawaii has made on delegates. But he's convinced that the PBEC golf tournament held at the Ko Olina Golf Club was the best in 33 years. And the 130 spouses who came with delegates this year represent more than twice the number who normally show up for meetings.

Sokan Chang, of the Korea Federation of Textile Industry, said he expected Honolulu to be just a resort city rather than a good place for business conferences. "This relaxed format makes us more open-minded" than meetings of the past, Chang said, adding that he prefers the Hawaii environment. He changed from a business suit to an aloha-type shirt after he saw other delegates in informal wear.

But "transforming Hawaii as a business investment city will take time" and more such conferences, Chang said.

Focus on new niches

Economic analysts at the conference said Hawaii will have to refocus on new niches to pick up business here. Kenneth Courtis, vice chairman-Asia for Goldman Sachs, said biotechnology, health care and education are areas with potential. He also believes the state should look at off-shore banking facilities and fund-management centers. "You have to make it tax-efficient so people don't get double-whammied," Courtis recommended.

Clyde Prestowitz Jr., president of the Economic Strategy Institute in Washington, D.C., said Hawaii must attract "investment in upscale tourism" and focus on health care for a rapidly aging population. He added that for Internet businesses and call centers, Hawaii's more remote location was not that important.

Steve Case, chief executive officer of America Online, who attended Punahou School, "could do a lot himself for investment in Hawaii," Prestowitz said.

Cayetano told delegates that Asia's economic success was crucial to Hawaii. Analysts at the conference were generally optimistic about Asia's recovery.

Graeme Lawless, managing director of Export Finance and Insurance Corp. in Australia, said he did not see a repeat of the Asian economic crisis because the "things that triggered it no longer prevail." Exchange rates are more flexible, Asian countries have less foreign debt, and they have accumulated more capital.

Lawless said that the influx of capital into Asia has been slow and that growth in the region will be lower than that which occurred in the 1980s.

But "it will still be robust by world standards," he added.

Richard Koo, senior economist at Nomura Research Institute, predicted Japan would be back on its feet in two or three years.

Koo said the government's fiscal stimulus programs were necessary because no one is buying or borrowing in Japan despite the low interest rates. "Everybody had to clean up the balance sheets at the same time," Koo said.

On another topic, Joseph Prueher, U.S. ambassador to China, and Li Zhaoxing, Chinese ambassador to the United States, canceled their speeches at the conference because of tensions between Taiwan and China.

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PBEC