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Tuesday, Feb. 8, 2000

Business minds look for bright spots at Kansai seminar

Staff writer KYOTO -- The fear of losing out to the U.S. in economic globalization will be among the topics raised at the 38th annual Kansai Economic Seminar, which opens today in Kyoto. Sponsored by the Kansai Association of Corporate Executives, the seminar brings together the region's top business leaders for two days to discuss strategies to revive the local economy. Other hot topics will be investment priorities and the possibility of public works projects attracting new businesses -- especially information technology and venture capital firms. This year's seminar takes place amid mixed signals from the central government over the state of the economy. With the exception of a few sectors, such as auto parts and pharmaceuticals, it is all bad news for Kansai. Although Tokyo says things are getting better nationally, economic forecasts for the Kansai region range from cautious to pessimistic. Further cause for pessimism is the roughly 6 percent unemployment rate in the region, well above the 4.7 percent national average, and more businesses are leaving the region for Tokyo or overseas. However the number of bankruptcies, especially in the construction industry, appears to have peaked and there are some signs consumer spending is on the rise. Panelists at this year's seminar will present a wide range of proposals to tackle specific problems affecting the region, including structural unemployment, technical development and investment. Few of the proposals and investment schemes will be new, however, because they will reflect concerns that have remained unchanged for several years. One of these is a deeply rooted suspicion among Kansai business leaders of U.S.-style deregulation and management methods as a way to revive the economy. The seminar will focus on exploring different ways to stimulate employment, including increased public works projects. There will also be calls for both government and business to support elderly workers and pay for retraining programs. But there will be no discussion on the issues of shutting down unprofitable industries, laying off workers or promoting economic revitalization by offering foreign high-tech firms specific tax incentives to relocate to Kansai. Yet these are the kind of difficult political decisions that many in both the foreign and Japanese business communities have long said are necessary to revive local economies. Another topic that is expected to divide participants is how to prioritize joint business-government investment. Executives at Kansai's largest firms, including Kansai Electric Power, Osaka Gas, the Sumitomo group and Kyocera, as well as many local politicians, favor providing seed money for venture businesses in selected sectors, most notably information technology. Unless more efforts are made to attract venture capital and IT businesses, they warn, Kansai's long-term future as a major economic region is in peril. But labor-intensive small and medium-size firms have more immediate worries.Many are specialized manufacturers that are nearly bankrupt and have an aging workforce they cannot afford to retrain for high-tech jobs that may or may not materialize in the future. Although they agree venture capital businesses and information technology industries should be developed, they are against doing so at the expense of displacing current workers. Then there is Kansai's relationship with Asia. More than 50 percent of Kansai's exports go to Asia, including China, a figure that has increased in recent years despite the Asian economic crisis. On the other hand, exports to North America account for only about 22 percent of the region's total. Because of its deeper ties with Asia, Kansai has benefited less from the upswing in the U.S. and European economies than other parts of Japan and has been hurt more by the Asian economic crisis. But Kansai's leaders remain bullish on Asia's future, and this attitude is reflected in two separate seminars to promote Asian ties, one on taking advantage of the after math of the Asian currency crisis and the other on investing in China. Although the role of public works projects in reviving the local economy will not be a major topic of discussion, it is very much in the back of the minds of most participants. Some private economists estimate that possibly as much as 25 percent of workers in Kansai rely, either directly or indirectly, on public works projects for at least part of their income. Whatever the true figure, small and midsize firms and their large counterparts are in agreement about the need for continued public works projects to support the local economy, although they are divided on which ones should be given priority. For example, many in the Kansai Economic Federation favor a concerted effort on supporting second-phase construction at Kansai International Airport over projects such as the Kobe airport or proposed Biwako airport. Kobe Chamber of Commerce officials, however, have criticized this stance, arguing both are necessary to revitalize the region.

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