Riding the Korean Wave

Hawaii's Korean business community hopes to make a big splash with a new bank

February, 2006

For James Son, it seems that everyone wants to talk about things Korean nowadays, especially South Korea’s wildly popular soap operas, or K-dramas. Over the last year, non-Korean friends, business associates and even his doctor want to discuss the latest dramatic developments with the Coldwell Bankers Pacific Properties vice president. Son is gratified by all the attention, but he doesn’t have much to say. He rarely watches the shows.

The Korean Wave

“Wherever I go, I get this feeling that the interest in these shows is really huge. I’ve heard that Korean television and movie DVD and pop music CD sales are very strong thanks to all these fans, and I’ve spoken to some Korean restaurant owners who see more and more local customers who want to order whatever they see their favorite characters eating on television,” says the 44-year-old Son, who immigrated from Korea to Hawaii with his family 21 years ago. “I’m really excited that we have so much exposure now and happy that we’ve been embraced by the local community the way we have been.”

From K-dramas to Michelle Wie to daikon kim chee, Islanders are eating up Korean culture (and frequenting Korean-owned businesses) like never before. Hardly a week goes by that an urban Islander doesn’t visit a Korean-owned eatery or small business. Now, thanks to K-dramas, Korean exposure continues well into the night. This is on top of a profusion of South Korean-made electronics, appliances and automobiles that have been flooding the U.S. market in recent years.

The sudden exposure has been a stunning reversal for an ethnic group that for decades has been the Islands’ “stealth Asians,” assimilating and dispersing faster than any other ethnic group. Korean immigration began in 1903 but was abruptly stopped two-and-a-half years later by the Japanese, who began occupying and ruling the Korean peninsula in 1905. Without a homeland to return to, the approximately 4,000 Koreans got busy weaving themselves seamlessly into the Islands’ cultural and social fabric. Two wars later, an influx of immigrants – mainly during the ’60s and ’70s – increase the state’s tiny Korean population many times over. According to the 2000 U.S. Census, there are approximately 40,000 Hawaii residents who identify themselves as Korean, making it one of the smallest ethnic groups in the state.

According to Rex Kim, attorney and head of the Korean Chamber of Commerce, the recent community dynamism within the local Korean community is partly due to the overseas cultural wave but also the result of a local upwelling that occurred during the state’s celebration of the centennial of Korean immigration in 2003.

“The Centennial made everyone [in the Korean community] very proud. It was a sort of a catalyst and as a result people have been opening up shops and trying different things,” says Kim, a second-generation Korean American. “Today, there is a spirit of working together. Before the Centennial, the first generation and other Korean-speaking and non-speaking community members just didn’t communicate.”

Kim points out that Oahu’s Korean Festival, which started five years ago in preparation of the Centennial, has grown wildly, from 15,000 people in attendance in 2002 to 50,000 in 2004.

But waxing on the new found enthusiasm and brotherhood is one thing and quantifying the resultant business activity is a different matter altogether. Kim admits that at this time there is no accurate economic barometer besides word-of-mouth reporting. His own organization’s membership hasn’t been a reliable gauge, remaining steady over the last several years. Moreover, since it is mainly made up of professionals, with very few first-generation Korean small business people as members, the chamber would be largely unaffected by any increase of start-up businesses.

Just a Culture Club?

Because of the lack of hard data, Duk Hee Murabayashi is wary of all the talk of an energized Korean business community. The retired city planner and unofficial historian and cultural expert of the Korean community believes that enthusiastic business leaders are confusing cultural exposure with economic power. Nationally, that power is quite formidable. According to the SBA, although Koreans make up only 0.4 percent of the U.S. population, they control 11 percent of the grocery stores and one third of all dry-cleaning stores. In addition, according to the U.S. Department of Labor, Korean-owned businesses employ 333,000 people and generate more than $46 billion in sales.

“People don’t realize just how small we are here in Hawaii, because of the popularity of the Korean dramas,” says Murabayashi. “Counting 40,000 Korean residents is really a guesstimate. The population is probably more around 25,000, which includes fourth- and fifth-generation, English-speaking Koreans. We are the smallest of the Asian groups, and we continue to have a very small immigration.”However, Murabayashi points out that the surge in Korean immigration ended in Hawaii several decades ago, and the local Korean community is just too small to account for much of the ethnic group’s economic success nationally.

Moreover, Murabayashi says that for many recent Korean immigrants, Hawaii is no more than a stepping stone to the Mainland and more opportunities in big cities such as Los Angeles and New York.

“The Centennial was a catalyst, but it was a cultural one. It’s true that the Korean community is more united here than in other cities in the country, but again, that doesn’t translate into economic power,” says Murabayashi. “The Vietnamese are doing very well in Hawaii as are the Thais. But they don’t get the kind of exposure that we Koreans do. I’m not sure why we get so much visibility. Maybe it’s because we speak so loudly.”

All in the Ohana

Whether Honolulu’s Korean business community is experiencing an upsurge or not will remains a matter of debate. However, one thing is certain, the community will get a shot in the arm when the Ohana Pacific Bank opens it doors next month. Just the second new bank to open in the state in more than 15 years, and the first Korean-owned bank in the history of the Islands, Ohana Pacific Bank’s branch is located on Kapiolani Blvd., near Keeaumoku Street, the epicenter of Korean business activity. Its location will make it easier to reach its target market: first-generation Korean small business people and residents.

According to Ohana Pacific’s CEO and president Woon Seok Hyun, the necessity for a bank that specifically services the Korean community arose after last year’s City Bank and Central Pacific Bank merger. Over the years, the now defunct City Bank had become the de facto bank of the Korean community.

Hyun acknowledges that Hawaii’s Korean community is tiny in comparison to those found on the Mainland, especially Los Angeles’ huge enclave, which has swelled to nearly 500,000 strong. But simple math makes him believe that his bank, with $12 million from mostly local investors, can start up fast and remain strong.

“The Korean population in Honolulu is somewhere around 35,000. If the median income is $20,000, we’re talking about $600 million to $700 million,” says Hyun. “We’re confident that we can capture 5 percent market share [of this population] in our first year and 5 percent each of our next two years of operation before reaching out to other ethnic groups.”

Maybe because of the presence of so many loan-hungry small businesses, U.S.-based banks catering to the Korean community are some of the strongest performing financial institutions around. According to the California state department of Financial Institutions, there are seven state-charted Korean-American banks headquartered in Los Angeles’ Koreatown. (Hyun is the former CEO and president of the Los Angeles-based Pacific Union Bank, which boasts deposits of more than $1 billion.) The banks controlled $8.2 billion in total assets in 2005, 5 percent of total state-chartered bank assets and 3 percent of California bank assets overall. (Five are listed on the NASDAQ.) In addition, Korean banks regularly outearn similarly sized banks nationwide, sometimes as much as two to one.Fortunately, Hyun has more than simple math behind him. According to the National Bureau of Economic Research, Korean Americans have the highest rate of entrepreneurship of any ethnic group in the country – 28 percent for men and 20 percent for women. With 25 percent of the population self-employed, Korean Ameri-cans seem to be able to sustain what they start. They also finish the job, too, having one of the lowest loan failure rates in the country.

But it’s not just in the mega-enclaves like Los Angeles, where these financial institutions have grown and thrived. In less than a decade, U.S.-based Korean banks have opened in New York, Chicago and Atlanta. Most recently, the Pacific International Bank started doing business in Puget Sound in November 2004. Although the picturesque Washington town is home to just 20,000 Koreans, bank officials were able to raise $6.6 million in just a four-month long capital-raising campaign. According to the Puget Sound Business Journal, only 200 Korean Americans invested into Pacific International, constituting almost 90 percent of the bank’s shareholders.

But before all the high finance, Ohana Pacific will start with high touch. “Some of the bigger banks are too luxurious, and Koreans don’t feel right,” says Hyun. “We want to make a bank that is more comfortable like their home. Small-business people like that kind of service.”

The Korean Chamber of Commerce’s Kim, who also sits on Ohana Pacific’s board of directors, says that some of the bank’s Korean-sensitive touches will include safe deposit boxes on the premises, greeting customers in a respectful manner and using honorific language. “Most all of the banks in town have a Korean-speaking teller on staff, but we want to build a personal relationships with our customers based on a shared cultural identity,” says Kim. “Korean businesspeople are extremely independent. They work very hard and don’t give up. As a second generation Korean, I want to help the first generation wherever I can to understand and adapt to western business practices and rules.”

Will the opening of the new bank lead to a real economic resurgence in Honolulu’s Korean community and ignite South Korean investment in the state? It’s hard to say. According to Murabayashi, the Hawaii’s Korean community is just too small. And when it comes to overseas investment, the South Korean government still has strict controls on how much capital can leave the country. But economic success has happened in other parts of the country without large foreign investment. Will there be an upwelling of pride and enthusiasm similar to what happened following the Korean Centennial? Again, it is impossible to predict. But stay tuned. There might be a soap opera based on this storyline someday.

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Author:

David K. Choo