'Sister cities' help open doors
By Sean Hao
Advertiser Staff Writer
When it comes to sisters, Hawai'i has no shortage. The state of Hawai'i has three "sister cities" in China, four in Japan and two in the Philippines, along with others sprinkled in Taiwan, the Korean peninsula and even Portugal.
Sister-city relationships are one way the state can help local businesses build contacts overseas. There also are state-sponsored trade missions — such as Lt. Gov. James "Duke" Aiona's trip to China this year — that often result in the signing of agreements promising economic cooperation.
The results of these efforts take time to develop and their value is difficult to assess, which raises the question: Do they really help businesses or are they a waste of taxpayer money and public servants' time?
The answer depends on how seriously both sides take such agreements, said Charles Morrison, president of the East-West Center.
"I do think there's an awful lot of times when people are kind of promiscuous (in signing such agreements)," Morrison said. "If it's solely a cover for a boondoggle, then there's no question (that the agreements lack economic value)."
Department of Business, Economic Development and Tourism Director Ted Liu, who will lead a trade mission to Taiwan next month, said the agreements point local businesses toward potential new markets.
"Part of our role is to point the way," he said. "It's to say to folks: 'Listen, here is a potential relationship for you. We've opened the doors, now (you) guys take advantage of it.' "
DBEDT is often the state's leader in initiating trade missions and negotiating so-called memorandums of understanding with foreign entities on behalf of Hawai'i's business interests. DBEDT officials last week could not provide a complete list of agreements signed by Hawai'i officials over the years because of files lost in the transition between various administrations.
Hawai'i has at least a dozen sister-city agreements and has signed at least 30 memorandums of understanding with foreign governments or trade groups, according to DBEDT.
While it's difficult to measure the total value of these agreements, Liu points to anecdotal evidence of the benefits.
"Multiples of millions of dollars for Hawai'i" business were generated by a single memorandum of understanding with a
Chinese agency, Liu said. The Guangdong Provincial Tourism Administration signed an agreement with Hawai'i that led to Chinese workers' traveling to Hawai'i for tourism-related training, Liu said.
Similarly an agreement with the Hong Kong World Trade Centers Association has provided a framework for tourism and technical training for visiting workers. Other agreements with Chinese officials in Tianjin, near Beijing, could generate business for local companies as Beijing gears up to host the 2008 Olympics, Liu said.
This year DBEDT "witnessed" a memorandum of understanding signing between Hawai'i-based Integrated Development Group, a hotel and resort developer, and the Fragrant Bay Resort in Hinan, which is expected to result in $100,000 of consulting work for IDG, Liu said.
Those benefits come at a minimal cost to the state, Liu said. The state's portion of the bill for its most recent trip to China was $18,000, Liu said. The total cost of the trip, which included a delegation of 55 from Hawai'i, was $182,000. Most of the cost was picked up by participating companies.
"This is part of the process of building relationships and doing business in Asia," Liu said. "It's what governments ought to do and, in a certain sense, it's all that governments can do."
However, with so many relationships going on at once, giving them the attention needed to develop can be difficult. Out of a dozen known sister-city agreements, only five remain active, Liu said. Nine of 23 memorandums of understanding on one list provided to The Advertiser were still active, he said, adding that a lack of resources prevents better follow-up.
International agreements work best when there's serious intent and commitment on both sides, backed by a study or business plan, said the East-West Center's Morrison.
"I think they help bring countries down to a size you can deal with," he said.
But even at their best, agreements with foreign bodies, which often are vaguely worded and loosely binding, aren't an end in themselves. Businesses looking to broaden their markets into areas such as China — where Hawai'i has at least 19 memorandums of understanding — still face the full range of challenges any new business encounters plus the cultural and language barriers.
"It's not like you open your door, hang your shingle and and everybody knocks on your door," said Lambert Yamashita, senior vice president for Austin Tsutsumi and Associates. "The most difficult part (is) the cultural thing (and) learning to do business there."
For eight years Austin Tsutsumi, a Honolulu-based engineering services consultant, has operated an office in Vietnam, which remains a break-even proposition. Yamashita said past state trade missions to Vietnam have been useful, but have yet to result in sales for his company.
"Sure, the return is low — but it's money well spent," he said.
For Hawaiian Natural Water Co. in Pearl City, $10,000 spent to join DBEDT on the trip to China earlier this year appeared to be well spent, said Roger Morey, senior vice president.
The company soon expects to sign an agreement to sell 100,000 cases of Hawaiian Springs drinking water a year to a distributor in Shanghai, Morey said. That would amount to about 7 percent of next year's estimated sales of 1.5 million cases of water.
Morey credited the state trip for the Shanghai deal and two sales leads in Beijing.
"Sooner or later we would have gone to China in some form," he said. "I judged it as a gamble and luckily I was right (to go)."
While China has been the focus of recent efforts by the state, it remains a relatively small part of Hawai'i's export picture. Overall, Hawai'i exported $368.2 million last year, which was down from $386.8 million in 2000, according to the U.S. Census Bureau. During that period, exports to China ranged between $5 million and $13.4 million. In 2003 China imported $12.9 million of locally made goods and services, making it Hawai'i's sixth-largest export market.
Apart from possible financial benefits, much of the value of memorandums of understanding comes from generating publicity, said Byron Gangnes, a University of Hawai'i associate professor of economics.
"I think they're mainly PR," he said. But "I'm not sure that's a bad thing. It's probably important for the state to have a visible presence in important markets. I think that's just part of being a player in a global environment — making sure that people know you exist."
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
