NAHA, Okinawa Pref. — Business is slack along Heiwa Dori (Peace Street), one in a maze of narrow streets that make up Machigwa, Naha’s central market.
At one store, a young girl stares longingly at a red dress prominently displayed out front. It’s an unremarkable garment; the badges stitched on the sleeves and front, however, stand out: “U.S. AIR FORCE”
“Military garb — it’s our biggest seller,” the store’s proprietor said. “That’s how mainland Japanese think of us: ‘Okinawa equals American bases.’ That’s what they come here for,” she added.
With the market reportedly soon to undergo a 400 billion yen government-funded facelift, Machigwa is, in a sense, a microcosm of Okinawa’s economy, which is well known for being propped up by the “three K’s”: “kichi” (U.S. military bases); “kanko” (tourism); and “kokyo-koji” (public works projects).
A small population and remoteness from major trading centers conspire to make Okinawa Japan’s poorest prefecture. With no large-scale employers, Okinawa has the nation’s highest unemployment rate and lowest per capita income.
As one American business official in the prefecture put it: “Okinawa is Japan’s Puerto Rico.”
It was not always this way.
During the 15th to 19th centuries, the prefecture was known as the Ryukyus, a wealthy island kingdom that for 150 years prospered as a transit trade hub for East and Southeast Asia.
Ryukyuans traveled throughout Southeast Asia to engage in trade more than a century before Japanese traders took to the high seas.
They bought goods like spices and ivory and traded them in the markets of China, Korea and Japan.
By the beginning of the 18th century all that had changed, and one of Asia’s engines of international trade had been reduced to a mere cog in Japan’s centralized machinery.
Since its annexation under the Meiji government in 1889, Okinawa has ranked as one of Japan’s poorest prefectures. Today it is considered its
poorest. Unemployment stood at 8.3 percent in fiscal 1999, almost double the national average. Its per capita income of 2.2 million yen is 70 percent of the national average.
A favorite scapegoat among Okinawa residents for this woeful showing is the U.S. bases, which occupy some 20 percent of prime land on Okinawa Island. During the years of U.S. military rule from 1945 to 1972, Okinawa’s economy not only became “base dependent” but also “development restricted,” experts say.
A measure of how much that reliance has remained in the Okinawan psyche can be seen in the increasing number of young people seeking jobs on the bases. One 24-year-old from the city of Okinawa said he was among some 18,000 who applied for 850 posts on base two years ago.
“It wasn’t my first choice,” the University of Okinawa graduate said. “But then, there’s not a lot to choose from in Okinawa.”
One attraction of base employment, he said, is the stable salary, which, although a pittance during the days of U.S. control, is now on a par with that of local government employees.
Another influential factor is the near 40 percent jobless rate among the prefecture’s 15- to 29-year-olds.
Hiroshi Yoshikawa, an economics professor at the University of Okinawa, has attempted to provide some hope for young Okinawans by introducing two weekly after-school courses on the nuts and bolts of setting up venture businesses.
A third of the 300-plus participants are local businesspeople looking to set up side businesses within their companies. Guest speakers include those who have graduated from the course and started up their own venture firms.
Yoshikawa said the main objective of the project was to fill a void for young Okinawans who previously had no place to learn such skills.
“When I came to this university, I was shocked to discover that 50 percent of graduating students can’t find jobs,” said Yoshikawa, adding that 100 percent of graduates at his previous college, Tsukuba University in Ibaraki Prefecture, find employment.
“Okinawa’s industry is not composed of a firmly fixed pyramid like the national industry structure: there’s so much opportunity here,” he said. “But since there is no firmly established business, there’s no place . . . for students to fulfill their dream after graduating.”
The creation of such opportunities has been at the heart of the government’s three “promotion and development plans” carried out since the 1972 reversion.
The main goal of each of the 10-year plans was to bring Okinawa’s economy up to the national level and lay the foundations for an economy that could exist without the bases.
The total budget for the three packages — the third of which is due to expire next year — currently stands at some 6 trillion yen.
Around 80 percent to 90 percent of the development plans’ funds were devoted to public works projects, leading to Okinawa’s construction industry being ranked No. 1 in Japan, accounting for around 15 percent of the gross prefectural product. Nevertheless, its secondary, or manufacturing, sector is Japan’s weakest, both in terms of output and people employed.
In contrast, earnings generated by agriculture, the prefecture’s primary sector, which in prewar times had been productive, has declined to around 2 percent of total industry earnings.
Okinawa’s infrastructure has improved greatly thanks to all the public works projects. But still, little is exported from the prefecture, whose population of 1.3 million and relative isolation mean it relies heavily on the import of everyday goods and capital goods.
Okinawa’s crack at the “build it and they will come” theory has been largely ineffective. Japan’s only free-trade zone was opened in 1988, offering a miserly 2.7-hectare space for 27 companies to operate in a regulation-free environment. Today 14 remain. A second — and bigger — FTZ opened northeast of Naha in 1998 but is home to only three companies. None of these 17 total is from overseas.
In 1994, Korean businessman Kim Tae Won, an Okinawa resident for over 20 years, operated his computer manufacturing company out of the FTZ, which is located near Okinawa’s international airport. By 1997, he had moved out after becoming frustrated with regulations and restrictions that he said seriously hindered business.
“Computers are like hotcakes — you can’t afford to lose time,” said Kim, president of Imicom Inc. “That’s why I went to the free-trade zone, because my understanding was that everything was free — even regulations. . . . But that place is a joke. There was no reason for me to stay there.”
A lack of incentives and high corporate tax rates — which although lower than the rest of Japan are far higher than other parts of Asia — have kept many potential investors away from the FTZs, according to Charles Chen of the Sino-Ryukyu Cultural and Economic Association in Naha, a liaison office for trade and other contacts between Taiwan and Okinawa.
At just an hour’s flight away from Naha, Taiwan represents a major business opportunity Okinawa seems happy to overlook, Chen said.
“For Taiwanese, Okinawa is a great environment, it’s close and there are many cultural similarities,” Chen said. “But there’s nothing to entice Taiwanese businesses here. Businessmen are not going to waste their time fighting regulations. There are other choices (in Asia).”
Chen’s association has made a number of recommendations to the prefectural government to try and get Taiwanese businesses to reconsider, including a seven-year tax-free incentive to foreign businesses that set up operations in Okinawa.
Said Imicom’s Kim: “The only way Okinawa can develop is if the government gives us a ‘one country, two systems’ policy.”
Such a system was effectively the idea behind a prefectural proposal in 1996 to turn the entire prefecture into a free-trade zone, an idea Okinawa’s business circles objected to out of fear of the potential damage to the farming sector, according to prefectural official Takayuki Azama.
“Making the entire prefecture an FTZ is to make an argument based on the premise that the prefecture is internationally competitive,” Azama said. “But in reality, it isn’t.”
Some Okinawans believe the prefecture can never truly develop until the bases are out of sight and mind. But the question of whether Okinawa can really survive without them is a hotly disputed one.
In addition to the almost 8,500 citizens employed by the U.S. military, Okinawa’s second-highest employer behind the civil service, economic benefits accrued from the base presence has been estimated at approximately 330 billion yen, or 10 percent of Okinawa’s annual gross prefectural product.
A local taxi driver said many Okinawans say they want the bases out, but deep down they know it could mean disaster.
“The landowners receiving rent (for the bases) almost certainly don’t want them out, nor the thousands of people whose wages come directly or indirectly from the military,” he said. “Many of the remainder can’t say ‘Out with the military!’ with much conviction.”
Moritake Tomikawa, a professor in the business and economics department at Okinawa Kokusai University, has calculated that base-related production and demand could total as much as 500 billion yen per year, with rent paid to compensated landowners alone coming to around 70 billion yen. Up to 37,000 jobs could be at risk if the base presence ends, he said.
But it is more than just a monetary issue, he added.
“Over the past 50 years, we’ve become too dependent (on the bases). The roots have grown too deep, and to sever them one by one would cause severe hemorrhaging.”
John Dickson of the World Trade Center, Okinawa, is a little more blunt: “The bottom line is, the bases are leverage for Okinawans. Without them, Okinawa would be nothing but a place for rich people to come and get married.”