Still the One

The Japanese still have the lion’s share of Hawaii’s foreign investments.

April, 2001

Despite the drop from a record of $14 billion in 1994 to $10.96 billion in 1998, Japan today still dominates more than 90 percent of Hawaii’s foreign investment scene. Japan also holds approximately 93 percent of foreign-owned land on Oahu, according to the Department of Business, Economics and Tourism. In peak 1994, Japanese investors had 4,900 parcels of land valued at $6.1 billion. By 1999 that number fell to 2,198 parcels, valued at $1.24 billion. “I don’t see any other country that’s going to replace Japan as a foreign investor,” says Seiji Naya, director. “What’s important is to raise all investments, because there are other investors in Hawaii.”

Those other investors, however, each represent less than 3 percent of total foreign investments in Hawaii, according to the most recent (1998) numbers by the Bureau of Economic Analysis. Following Japan’s lead in direct investment dollars in 1998 was United Kingdom (2.7 percent), with $344 million. Next were France ($239 million), Germany ($235 million) and Canada ($152 million).

Foreign land ownership on Oahu is no different, except that Asian investors also are among the top five countries. The second largest property owner in Hawaii in 1999 was Canada, which held 146 parcels at an assessed value of $25 million. France ranked No. 3 with 38 parcels ($18 million) and was followed by Hong Kong ($15 million) and South Korea ($12 million), with 55 and 36 parcels respectively.

Only in the past two decades has South Korea aggressively pursued business in the United States. Industry experts attribute this to less stringent controls by the government, coupled with economic and cultural influences from the West. Outbound travel was a major restriction that was lifted in recent years. “Prior to the Olympics (1988), the government didn’t allow men to leave the country unless they were 55 years of age,” says James Mak, economics professor at University of Hawaii at Manoa.

The watershed event that marked Hong Kong’s investment climate, was the former British colony’s takeover by China in 1997. Hong Kong investors took their dollars overseas; however Hawaii wasn’t high on their list. Industry experts say several factors contributed to that: strict immigration policies, few economic incentives and a dearth of direct flights to the Islands.

“They (Hong Kong investors) were concerned about what the economic and political implications might have been when Hong Kong was returned to China,” Mak says. “They took huge amounts of money to places like Canada, because Hong Kong was a British protectorate.” The most recent multimillion-dollar transaction by Hong Kong investors, according to the department of economic development, is Mandarin Oriental International Ltd.’s acquisition of the former Kahala Hilton Hotel in 1994. Mandarin Oriental acquired a one-third interest, estimated at approximately $125 million.

Other, and more recent, transactions by non-Japanese investors in Hawaii include:

  • Netherlands company Pharming Group NV last November purchased 3-year-old Hawaii biotechnology company ProBio Inc. The local research company, which Pharming purchased for more than $4 million, owns patents for mouse cloning at the University of Hawaii’s medical school. Pharming is a 13-year-old company specializing in the development and production of human medicines from animal milk.
  • Genesys Group, a France-based international teleconferencing service provider, in April 1999 acquired Aloha Conferencing Services Inc., a specialist in operator-assisted teleconferencing calls since 1990. The renamed Genesys Conferencing Inc. employs more than 100 in its downtown Honolulu office. The French company last October acquired Vialog Corp., an Internet conferencing provider based in Massachusetts.
  • Keck Seng Group, a Singapore company that owns hotels in Canada, Vietnam, China, Singapore and Malaysia, last December purchased the Doubletree Alana Waikiki for approximately $30 million. Incorporated in Hawaii as KSG Enterprises Ltd., the Singapore company’s officials say they plan to acquire other properties in the state.

“These are not like the Japanese, with hundreds of millions of dollars,” Mak says. Unlike the headline-making deals of the Japanese, foreign investors typically make smaller, scattered transactions, which easily can alter a foreign country’s investment status in Hawaii. Says Naya: “Foreign investment is not well-definable, especially when you have $2- to $3-million investments. It’s only tracked when it’s large and there’s a definite connection to the home country.”

To attract more investments, industry leaders say Hawaii should continue its economic incentives. “For the last few years, Hawaii has tried to make a better climate that is more favorable to business,” Naya says, adding that income-tax cuts, the de-pyramiding of general excess taxes and other deregulations are some ways that Hawaii has attracted outside investors. “Hawaii has become more business-friendly.”

 

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Author:

Cathy S. Cruz