UHERO Asia Pacific

UHERO FOREcast PROjEct sPEcial REPORt

Asia-Pacific Forecast:
Press Version: Embargoed Until 2:00 Am, 12/2/2011

Hawaii in the
Asia-Pacific Century
dEcEmbER 2, 2011

AsiA-PAcific forecAst
©2011 University of Hawai‘i Economic Research Organization.
All rights reserved.

caRl s. bOnHam, PH.d.
Executive Director

byROn GanGnEs, PH.d.
Director UHERO Forecast Project

KimbERly bURnEtt, PH.d.
Director UHERO Project Environment

PEtER FUlEKy, PH.d.
Economist

inna cintina, PH.d.
Economist

REsEaRcH assistancE by:
Ben Trevino
Jonathan Fung
James Jones
Natalie Schack
Ying Yao
Qianxue Zhao

cHRistOPHER GRandy sanG HyOP lEE
Associate Professor, Public Administration Program Associate Professor, Department of Economics
University of Hawaii at Manoa and UHERO Research Fellow
University of Hawaii at Manoa

andREw KatO cRaiG PaRsOns
Economist, U.S. Bureau of Labor Statistics Associate Professor, Faculty of Economics
U.S. Department of Labor Yokohama National University

sUmnER la cROix aRi Van asscHE
Professor, Department of Economics Associate Professor, Department of
and UHERO Research Fellow International Business
University of Hawaii at Manoa HEC Montréal
calla wiEmER
Visiting Scholar, US-China Institute
University of Southern California

2424 Mai le Way, RooM 5 40 • H o n o lu lu, HaWai ‘ i 9 6 82 2
(8 0 8) 95 6 -232 5 • u H eRo @ HaWaii . edu

PREss VERsiOn - EmbaRGOEd Until 2:00am On dEcEmbER 2, 2011
asia-PaciFic FOREcast i dEcEmbER 2, 2011

executive summAry
This report represents the first UHERO Asia-Pacific Forecast, a regionally focused report that replaces the
broader Global Forecast we have prepared in past years. The Asia-Pacific Forecast reviews conditions and
prospects for key countries within the region. For this maiden edition, we have also enlisted the help of an
international team of scholars to provide expert analysis of key issues that will influence regional economies
and Hawaii over the coming decade.

In the near term, nearly all economies of the Asia-Pacific region will see further incremental slowing, due to
headwinds from struggling European and other Western economies.

• North America will be a relatively weak performer in 2012. Despite some strengthening in the US
economy in the third quarter, the European debt crisis, soft consumer spending and fiscal retrenchment
will weigh on growth. Canada has fared better, but weaker export demand and a strong currency
will cause some slowing. Japan has made strides in recovery from the March 2011 earthquake, and
rebuilding will help in 2012.

• A recession in the West could undercut what has been fairly strong growth for emerging Asian
economies. The region has seen a marked slowdown in exports this year. Part of this resulted from
Japan’s supply chain disruptions, but weaker demand abroad was a larger problem. In 2012, countries
with robust domestic demand, such as China, will perform better than heavily trade-dependent
countries, such as many of the Southeast Asian emerging economies. Other regional concerns include
recovery from natural disasters in Thailand, Australia and New Zealand, inflationary pressures, and
more costly credit conditions. While emerging Asia will see slower growth in 2012 than 2011, it will
continue to be among the world’s best performing regions.

Longer term, several key trends will shape the pattern of growth in the Asia-Pacific region, with implications
for Hawaii. Each of these issues is analyzed in the report by an expert in their respective field.

• Key challenges for the region include the lingering aftereffects of the Japanese quake, population
aging in Korea and many other Asian economies, and the continuing exposure of emerging countries
to Western economic shocks, transmitted through the web of global production networks. While
China holds great promise as an engine of growth, there is much uncertainty about how rapidly it will
transform into a consumer society.

• For Hawaii, evolving patterns of growth have implications for tourism and the broader economy. For
tourism, it is clear that the countries from which our visitors come and the nature of those visitors—
they will be older and richer—will evolve in coming years. This will bring both welcome diversification

© 2011
UHERO.Hawaii.EdU

asia-PaciFic FOREcast ii dEcEmbER 2, 2011

and the challenge of adjusting flexibly to new tastes. For success in the broader economy, the public sector
should avoid calls for the government to “pick winners” through costly targeted subsides. Instead, the focus
should be on improving the basic infrastructure—physical, human, and policy—that will position our citizens
and businesses for success, wherever new opportunities present themselves.

Growth Rates of Real Gross Domestic Product

2008 2009 2010 2011 2012 2013

North America
United States -0.3 -3.5 3.0 1.6 1.6 2.4
Canada 0.7 -2.8 3.2 2.2 1.9 2.6

Asia and Oceania Developed
Japan -1.2 -6.3 4.0 -0.4 2.2 2.0
Australia 2.4 1.4 2.5 0.5 2.8 2.6

East and Southeast Asia 6.4 5.1 9.2 7.3 6.8 6.9
China 9.6 9.2 10.3 9.3 8.7 8.5
Republic of Korea 2.3 0.3 6.2 3.9 3.6 4.0

Gross World Product 1.5 -2.3 4.0 2.8 2.6 3.3

Source: UHERO. Forecasts other than for U.S. and Japan taken from United Nations
LINK Global Economic Outlook, October 2011. Figures for 2011 - 2013 are forecasts.
Gross World Product is calculated at 2005 prices and exchange rates.

© 2011
UHERO.Hawaii.EdU

asia-PaciFic FOREcast 1 dEcEmbER 2, 2011

uHero sPeciAl rePort
This year marks the launch of our Asia-Pacific forecast report, presenting projections and analysis of the key regional
economies, stretching from North America to the countries of East and Southeast Asia. This report replaces the Global
Forecast reports of past years with a more focused look at countries of the region in which Hawaii lives.

With the recent APEC meetings in Honolulu focusing local attention on the region, we have decided this year to go
beyond an evaluation of current conditions and near-term prospects. Yes, you’ll find that here, but also a more in-depth
analysis of major issues that will shape developments in core countries of the region over the coming decade: Japan’s
post-quake recovery, China’s shift toward a consumer society, the challenges of Korea’s rapidly aging population, and
the way in which global production networks expose East Asian emerging economies to Western demand shocks. And
we take a look at what Asia-Pacific developments will mean for Hawaii tourism, as well as some thoughts on policy-
making in an Asia-Pacific Century. These issue essays are contributed by an international panel of experts, all with
some tie to the University of Hawaii.

We hope you will find this special report informative and rewarding. Read on!

We have talked quite a bit in recent reports about
conditions and risks for the global economy and for the
Near Term Asian Outlook Softer, But
United States (See the UHERO Annual Hawaii Forecast,
Still Much Better than in West
September 2, 2011), so I will be brief here and also touch
Byron Gangnes, UHERO
on Canada. US growth slowed sharply in the year’s first
The economies of the Asia-Pacific region have all been half, partly because of the European crisis but also because
affected to varying degrees by the slowing that has dominated of domestic issues, including softening of consumption
the world economy in 2011. Developed North America has
*
and investment, and the continuing fiscal retrenchment at
decelerated sharply, affected by links to Europe and domestic all levels of government. Some strengthening occurred in
challenges. Japan has had to deal with the March 11 the third quarter, but prospects are limited going forward.
earthquake and the beginnings of reconstruction. Australia We expect 1.6% growth in 2012, on par with this year’s
and New Zealand, and more recently Thailand, have also performance (see Figure 1). Canada has fared somewhat
suffered from natural disasters. Meanwhile, emerging better, in part because residential investment retains some life
Asian economies have fared better. To be sure, trade- and equipment investment has been strong. Nevertheless,
dependent economies have suffered from weaker exports exports are feeling the effects of the US slowdown and an
to the developed world, but domestic demand and stronger appreciated currency. Growth will drop below 2% in 2012
markets have maintained fairly healthy growth. With global after slightly stronger annual performance this year. Overall,
conditions expected to remain weak, 2012 should see further North America will be a relatively weak performer among
incremental slowing in East Asia. Pacific Rim countries in 2012.

* For our purposes, the Asia-Pacific region under discussion will include those Japan’s economy was hit hard by the Great Tohoku
economies of the Pacific Rim and Oceania that are of most direct interest to and im-
portance for Hawaii, including the US and Canada, Japan and East Asia, Australia and Earthquake in March. Direct destruction in the affected
New Zealand, and the countries of South East Asia. We will omit from our discussion
smaller regional economies and developing countries of the Americas. region was nearly unimaginable. Supply chain disruptions

© 2011
UHERO.Hawaii.EdU


6%
is a larger problem. Emerging market equity markets have
4%
dropped sharply and bond spreads have widened somewhat,
2% as the European debt crisis has heightened risk concerns
around the world. Uncertain global economic prospects
0%
could also undermine business and consumer confidence
-2%
within the region, contributing to a sharper slowdown than
-4% currently expected.

-6% China has slowed in 2011, but as always this is a relative
statement. For the year as a whole, China’s GDP is expected
-8%
2009 2010 2011 2012 2013 to expand by 9.3%, down just one percentage point from last
United States Canada Japan
year’s 10.3% gain. The recent moderating of growth comes
Fi g . 1 - R e al g d P g RoW tH R ate s ( y e aR-y e aR %)
from weaker exports especially to the developed world, while
and electricity shortages from shuttered nuclear plants caused domestic demand continues to be strong. As in much of
a sharp drop in industrial production across the country, Asia, consumer price inflation has been a concern, driven by
and indeed globally. Recovery is now well underway, and strong demand and high prices of imported food and energy.
government reconstruction spending is expected to boost Lower food and commodity prices have brought some relief
output growth over the coming year. After a projected 0.4% recently. We continue to be concerned about the high level
drop in real GDP this year, growth should come in at about of activity and ever-higher property prices in China. While
2.2% in 2012, before dropping back toward trend. In the it is difficult to determine whether this represents a bubble
next section of this report, Craig Parsons reviews recovery (see UHERO Brief: China’s Real Estate Bubble), prices have
progress and practical issues going forward. turned down in some areas and there are reportedly financing
There is considerable concern in developing Asia about problems emerging for some developers. A hard landing for
the potential for a recession in the West to undercut what the property market remains a key concern for China. In
has continued to be fairly strong growth. There has already any event further moderating of China’s growth is expected
been significant slowing of regional exports after a strong over the next few years, as global demand for Chinese exports
rebound over the past two years. Part of this resulted from remains relatively weak (see Figure 2).
Japan’s supply chain disruptions, but weaker demand abroad The South Korean economy saw strong export growth in

Project liNK
UHERO forecasts for countries other than the US and Japan are drawn from the Global Economic Outlook of
Project LINK, the United Nations project for global forecasting and macroeconomic analysis. Established through
the leadership of Nobel Laureate Lawrence Klein, the project brings together researchers from institutions around the
globe to study current economic policy challenges in a coherent model framework that articulates the international
linkages among countries. UHERO’s Byron Gangnes has been affiliated with Project LINK for more than twenty years
and is a regular presenter and participant in LINK meetings. For more information on Project LINK, browse to the
Development Policy and Analysis Division of the UN Department of Economic and Social Affairs.

© 2011
UHERO.Hawaii.EdU


12% the rich world because of their role in global production

10% networks. Indonesia has fared better, driven by strong

8% demand for its commodity exports, an inflow of foreign

6% investment into these sectors, and resilient domestic demand.
4% Hong Kong has faced a similar falloff in exports this
2% year, although its trade with China and its diversification to
0% service exports has helped to soften the blow. Despite some
-2% slowing, the unemployment rate in Hong Kong has been
-4% running at the lowest levels since the late 1990s, reflecting
-6% positive overall economic conditions. Strong labor markets
2009 2010 2011 2012 2013
throughout Asia mark a sharp contrast to the employment
Developed Economies East Asia China
Fi g . 2 - R e al g d P g RoW tH R ate s ( y e aR-y e aR %) crisis that is gripping much of the developed world.
This is the Year of the Natural Disaster in Asia and the

the first half of the year. The country’s exporters benefited Pacific, and Australia and New Zealand shared in the misery.

from strong demand for autos and information technology Australia had historically severe flooding in the eastern states,

products and some trade diversion after the Japanese quake. and of course New Zealand experienced the devastating

Globally lower demand and a strong exchange rate are Christchurch quake in February. In Australia, the flooding

now leading to sharply lower trade growth. Relatively high disrupted some mining activity, which has benefitted from

inflation and budget concerns (despite a healthy fiscal position strong Chinese demand in recent years. Growth will slow to

by global standards) will prevent increased policy support as 0.5% this year, before rebounding to 2.8% growth in 2012.

external demand falls off, although like many other countries For New Zealand, the direct impact of the quake was large,

in the region, the Bank of Korea has halted further rate hikes and the destruction has also undercut private consumption.

for now to provide support for the economy. Some additional Reconstruction spending will help firm growth to 2.5% next

slowing of Korean GDP growth is expected, to 3.6% next year.

year. There are clear poles of growth and weakness across

The most rapid slowing is taking place in East and the Asia-Pacific region. Most of developing Asia remains

Southeast Asian countries that depend most heavily on relatively healthy, with export-dependent countries suffering

trade with the U.S. and Europe. Philippine exports, for the most from global concerns and those driven more heavily

example, have slowed to only a few percentage points by domestic demand faring better. Developed North America

year-on-year growth, owing to the country’s high export is struggling with the aftermath of a homegrown financial

specialization in electronic components. We have also seen crisis and the uncertainty and drag from the European crisis.

sharply lower growth in Malaysia, Singapore, Taiwan and Japan, Australia and New Zealand are among a number of

Thailand. Natural disasters, both the Japanese earthquake the region’s economies that face reconstruction challenges

and the recent historically severe flooding in Thailand have after natural disasters. How the overall region fares in 2012

also disrupted production and trade within the region. In will depend importantly on how the situation in Europe plays

his piece, below, Ari Van Assche explores the extent of out in coming months.

dependence of these countries on adverse developments in

© 2011
UHERO.Hawaii.EdU


110
Japan Shows Resilience But Faces 105
Challenges 100

Craig Parsons, Yokohama National University 95

The Great Tohoku earthquake of March 11 caused 90

extensive damage and nearly incomprehensible human 85

80
tragedy for Japan. Perhaps surprisingly, much of the country
75
is now largely back to business-as-usual. Firms have made
70
adjustments in their supply chains, and many consumers
65
have adjusted their habits, whether it be using bottled water, 60
2007 2008 2009 2010 2011
or buying fruits and vegetables from regions far from still-
Fi g . 3 - JaPan e s e i n d us tR ial P Ro d u c ti o n
radioactive Fukushima. Private firms and the government (Jan 20 07 =1 0 0)

are making progress in alleviating suffering and rebuilding overall are less pessimistic about future conditions than they
Northeastern Japan. Temporary housing units are being were in the June survey. Consumer confidence continues to
closed, as some are now able to return to their homes; but rise, but is still below historical norms.
many still cannot. One estimate suggests that 70,000 people An appreciated yen and slow global demand continue to
may have lost their jobs in the affected region. The number squeeze exporting firms (see Figure 4). The strong currency
of welfare recipients is at its highest level since 1951, and still and supply-chain disruption from the Japanese disaster—and
rising. now flooding in Thailand—are forcing Japanese firms to
The economic aftershocks continue. There have re-think production strategies, although not in a uniform
been upticks in household construction and government manner. Honda and Nissan are planning to shift more
expenditure, but all other domestic expenditure components production overseas, while Toyota is not. As the water
persist in negative growth. Export growth generally remains continues to rise in Thailand, so do production woes. About
negative, while import growth was up 3% on an annual basis 50 of 100 types of auto parts destined for Japan have been
in the second quarter , due in large part to the decrease in
**
disrupted by the flooding. Re-sourcing is a not always easy,
domestic energy supplies and the stronger yen. Sustained and as 30% or so of Japan-to-US merchandise exports are
GDP growth has remained elusive. After contracting at a cars, there will no doubt be some inconveniences for US
1% annual rate in the second quarter, preliminary estimates consumers.
put third quarter growth at 6% on an annualized basis. This In November, a third supplementary budget of 12
temporary summer boost is not expected to last, however. trillion yen was passed in the lower house to help finance
Though industrial production bounced back a bit during the reconstruction, relocation of residents and firms, and
summer, it is still four percent lower than pre-quake levels (see radioactive cleanup, mostly financed by new bond issuances.
Figure 3). The new stimulus is far larger than previous packages and
Unemployment fell to 4.4% in August, a tiny puts total government expenditure at 106 trillion yen this
improvement from the last report and the post-quake high of year, the largest outlay ever. A fourth extraordinary budget
4.9%. According to the September Tankan survey, businesses is now being discussed. New Prime Minister Noda made
** Post-quake GDP, unemployment and other data exclude the three most devastated
prefectures, Iwate, Fukushima and Miyagi. However, as they only account for 4% of a surprise announcement at the G20 summit that Japan
national GDP, the official underestimate is likely small.

© 2011
UHERO.Hawaii.EdU


APec iN retrosPect
Sumner La Croix, UH Economics and UHERO

In almost all respects, the APEC Leaders’ Meeting in Honolulu went incredibly well. After more than a week
of rainy, overcast skies, the sun came out on Friday the 11th, when most of the 21 APEC heads of state arrived in
Honolulu. With the exception of the cancelled summit meeting between the leaders of Mexico, Canada, and the
United States, the scheduled events appeared to go off without a hitch, and no large protests developed. There was
extremely tight security in Waikiki and major traffic disruptions. But most residents, repeatedly forewarned about a
potential “APECgeddon,” just stayed away from major arteries near Waikiki and off freeways when leaders were tipped
to be traveling.

There were assertions that the APEC meetings would provide a significant boost for Hawaii’s economy during
a non-peak travel period. The actual results were a mixed bag. Waikiki hoteliers were able to raise room rates
substantially, and the Neighbor Islands saw higher occupancy as some visitors turned away from busy Oahu. At the
same time, there were also many reports of lost business in the Waikiki and Ala Moana areas, and total passenger
arrival data for November 5-15 were little changed from 2010 levels. Nonetheless, the city and state clearly
demonstrated that they have the capacity to successfully host a major international political conference with intricate
security requirements. This clearly increases Hawaii’s chances of hosting future sensitive international conferences.

The trade agreements coming out of the APEC meetings were incremental in nature. First, APEC members
agreed to cut tariffs on clean energy technology to 5 percent by 2015. It is difficult, however, to get too excited, as
average tariff rates on these technologies are already low—just 7 percent in China.

Second, Japan agreed to join talks on the Trans Pacific Partnership (TPP), a regional trade agreement that aims
to eliminate tariffs on virtually all goods and services over the next decade. TPP negotiating countries announced the
broad outlines of a deal that they hope to finalize within a year. While an interesting and positive development, it is
hard for anyone to evaluate the TPP deal, as the negotiating countries are keeping all draft agreements secret.

There were also extensive “sidelines” consultations between APEC leaders on a number of issues including Iran’s
nuclear program, the China-US trade surplus and exchange rate, and response to disasters in the Asia-Pacific region.
Perhaps the most substantive discussions were among the region’s finance ministers, who discussed how they might
coordinate their policy responses if Europe’s simmering debt crisis begins to affect banks and other financial firms in
APEC countries.

While APEC is in many ways just a talk shop it is important for political and business leaders in the region to have
an annual forum to discuss issues directly and to build trust. The region is undergoing enormous change and faces
difficult challenges as populations age, China integrates into the world economy, and South and Southeast countries
struggle with reconciling populist political parties with middle class demands for competent government. In such times
of economic, social, and political stress, it is critical for governments to meet regularly to talk over differences, and
APEC provides just such a forum.

© 2011
UHERO.Hawaii.EdU


130 Moreover, often with crisis comes opportunity. There is
talk of a new energy strategy for Japan, with perhaps less
120
nuclear and more biomass and solar. Rebuilding the Tohoku
110 region opens up possibilities for “smart” cities, as well as
infrastructure innovations that are difficult to adopt when
100
switching costs are high and firms, government, and other
90
stakeholders are firmly invested in the status quo. But if the
80 1995 Kobe quake yields any lessons, it is that Japan does
not change radically in response to such devastation, at least
70
on this scale. Furthermore, with sharp divisions within the
60 ruling DPJ party and opposition from the LDP and others,
2007 2008 2009 2010 2011
a clear and dramatic change in either energy policy or fiscal
Fi g . 4 - y en - do ll a R e xc Han g e R ate
policy seems unlikely in the near future. As such, one can
would raise its consumption tax from 5% to 10%. However, expect flat growth in Japan in the short and medium-term as
political support for such a move at home is unclear. In any Japan continues to grapple with its domestic challenges.
event, the bill would only be introduced in March 2012 and, Having said that, this is not 1995, and the new political
if passed, would be very slowly phased in. landscape has not yet reached equilibrium. The current
In August, Moody’s downgraded Japan’s debt rating to Prime Minister and many in his cabinet are from a new mold
Aa3, due to persistent budget deficits. It is worthwhile to of technocrat-politicians, graduates from the Matsushita
note, however, that while Japan’s gross debt-to-GDP ratio is Institute. These politicians are said to be less beholden to
nearly 200%, because much of this government debt is held narrow special interests and well-trained in policymaking.
by other Japanese public institutions, the net debt-to-GDP So, perhaps there is reason to be cautiously optimistic for
ratio may be closer to 60%. meaningful change.
While firms and households have managed to avoid
energy shortages throughout peak summer months, energy
uncertainty will be a concern again this winter. TEPCO China’s Consumption Catch-Up
has announced their confidence that they will achieve cold Calla Wiemer, University of Southern California
shutdown of all three troubled reactors by the end of this China will overtake the US to become the world’s largest
year. A small, and apparently contained, criticality incident economy mid-way through the next decade according to
in early November is a reminder that the troubles are far from most forecasts. The obvious qualifier is that with more than
over. With many reactors still offline and no clear energy four times the population of the US, China will by that time
policy yet from PM Noda, increased imports of fossil fuels still have less than a quarter of US per capita income. The
will be necessary for some time. US will remain more affluent by a long shot for a long time
to come. But another milestone is also telling. Even before
A Time for Change? China becomes the world’s largest economy, its per capita
The government could do more to boost growth by income will surpass the world average. By the standards
restoring energy capacity and providing more fiscal stimulus. of most of the world then, China will no longer be a poor

© 2011
UHERO.Hawaii.EdU


country. The average Chinese will live comfortably, owning 55%

major appliances and enjoying vacation travel.
50%
Thus far China’s economic might has been expressed
mainly through dominance in the production of low-wage
45%
goods. As the world’s largest exporter, China has flooded
the shelves of American discount stores with clothes, toys, 40%
and household goods. Its relatively weak showing on the
consumption side has left it with a gaping trade surplus – 35%

which is a source of much political tension with the US. A
world growth model based on US consumption sustained 30%
1980 1985 1990 1995 2000 2005 2010
by Chinese credit clearly has its limits. To keep the global
Fi g . 5 - c H i n e s e savi n g R ate a s a % o F g d P
economic engine stoked, China will need to contribute more
to consumption demand as it climbs the income ladder. transition, although the issue of restructuring demand toward
China’s consumption and saving patterns have followed consumption has received much lip service for a number of
a course typical of rapid developers. Though rising by leaps years already with no discernible results.
and bounds, consumption has lagged growth in income Just how fast the transition to a more consumption driven
so that the share of consumption in income has decreased economy will proceed is subject to considerable uncertainty.
while the share of saving has risen. It takes time for living Demographic processes form a predictable, albeit gradual,
standards to catch up with surging growth in means. Indeed, backdrop. Trend GDP growth can be expected to slow as
when China last saw its GDP growth rate flag in the late the efficiency gains that derive from reform and opening
1990s, its saving rate fell off too (see Figure 5). Through the moderate. Speed of movement on the policy front will
2000s, growth was phenomenal and with that the national depend on the vision and resolve of the Chinese leadership.
saving rate shot from 38 percent to over 50 percent of The real wild card lies with the business cycle. China is
GDP. Demographics were also a factor in the saving rate not immune despite its economic levitation through the
increase of the 2000s. A generation on, the one-child policy Great Recession that has hammered the rest of the world.
has pushed the mass of population into prime working Growth in China has been sustained on the back of massive
ages cohorts. Those at the young and old ends of the age accumulation of debt in support of property development
spectrum, who consume without generating income, have and local government investment. This has led to financial
seen their ranks diminish. fragility of the sort that can spell the end of an expansionary
These trends are poised to reverse, with China’s saving period. And with a sudden drop in the growth rate the saving
rate consequently turning downward from its lofty heights. rate could fall as it did in the late 1990s.
The share of the population in retirement years is headed However, while a sharp slowdown in China’s economic
for an inexorable rise. At the same time GDP growth is growth could lower the saving rate, this would present no
likely to decline on both structural and cyclical grounds. boon for the rest of the world. Granted, it would aid in the
The double-digit pace of growth of the last decade is desired global rebalancing. But a larger share for Chinese
unsustainable. These shifting forces will induce a decline in consumption in a smaller economic pie does not necessarily
the national saving rate. Policy measures may augment the translate into a larger Chinese market for the world’s

© 2011
UHERO.Hawaii.EdU


exporters. is changing at a rate unprecedented in human history. In
The best scenario for those who wish to sell to the 1970, Korean women gave birth to 4.3 children on average.
China market is for continued solid growth and a measured By 2010, total fertility had dropped to 1.29, one of the lowest
transition to higher consumption and lower saving rates. rates in the world. As a result, the proportion of children in
GDP growth of 8 percent a year in real terms combined the population has decreased dramatically.
with an increase in the household consumption share of 2 As fertility began to decline in the 1970s, the working-
percentage points a year and real exchange rate appreciation age population grew faster than other age groups, creating an
of 8 percent a year (nominal appreciation of 6 percent age structure that was highly favorable for economic growth
plus inflation at 2 percentage points above the US rate) (see Figure 6). But beginning in 2015, the relative size of
would mobilize about $600 billion a year in new consumer Korea’s working-age population will begin to decline as the
spending by Chinese households. Some of this would be elderly population expands. Increasingly, Korea’s population
directed toward imports of goods and services or spending on will consist of very few children, not many workers, and
foreign travel. That would represent a great opportunity for many old people. South Korea is also entering a stage of
businesses worldwide, including Hawaii’s tourism industry. slower economic growth. As the country passes through this
transition of rapid population aging and slower economic
growth, how resources are allocated across generations will
Will Population Aging Sap Korean become increasingly important.
Growth? An analysis shows that consumption in South Korea
Sang Hyop Lee, UH Economics and UHERO exceeds labor income for two long periods of life (see Figure
Nearly every economy in the world has experienced or 7), bracketing a surprisingly short period—from age 24 to
is starting to experience population aging. Populations are 55—during which more is being earned than consumed.
growing older primarily because people are having fewer Although other economies show a similar pattern, the
children and, to a lesser extent, because they are living longer. situation in South Korea presents some unique features. For
The challenges resulting from rapid aging are of particular one thing, although many Koreans continue to work through
concern to South Korea where the population age structure their 50s and early 60s, labor income begins to fall as people
reach their late 40s. Older workers may be working fewer
100%
90%
hours than younger workers or earning less, perhaps because
80% they have less education and lower technological competence.
70% In addition, consumption by the elderly appears to be
60% much lower in Korea than in other countries at a similar
50%
level of economic development. This is partly due to low
40%
consumption of healthcare.
30%
20% Population aging provides both opportunities and
10% challenges. As the number of children declines, policymakers
0% and families can increase their investment in the health and
1950 1970 1990 2010 2030 2050
15-19 20-64 65+ education of each child, improving child welfare and boosting
Fi g . 6 - ko R e an ag e d is tR i b uti o n

© 2011
UHERO.Hawaii.EdU


120% Rapid population aging and slower economic growth
of South Korea will affect economies abroad, including
100%
Hawaii’s. As discussed further below, population aging and
80% slower growth will affect the tourism industry. Koreans
60% will continue to travel abroad in increasing numbers, but
slower economic growth will slow the growth rate of arrivals
40%
from Korea significantly. Research by UHERO Research
20%
Fellow James Mak and co-authors shows that the number
0% of overseas trips taken by retirees increases sharply, but trips
0 10 20 30 40 50 60 70 80 90
Age taken by young adults in the 20s and early 30s age groups
Consumption Labor Income may also decrease dramatically due to rising burdens of
Fi g . 7 - e vo luti o n o F i n co M e an d co n s u M Pti o n a s a
PeRc entag e o F aveR ag e an n ual l abo R i n co M e Fo R supporting an aging population.
a PR i M e ag e (30 - 49 y e a Rs) ad u lt
Like South Korea, other Asian countries will experience
the productivity of the future workforce. With fewer children rapid population aging and slower growth over the coming
to support, the society also has additional resources to save decades. The rapid growth of elderly populations may bring
and invest. There is evidence that Koreans have seized this important national and global goals into conflict. One is to
opportunity. Measured relative to labor income, spending develop socioeconomic systems that will provide economic
on the health and education of children is higher in South security to the growing number of old people; the other is to
Korea than in the United States or much of Europe. More sustain a strong global economy. Achievement of these two
than one-half of this spending on young people comes from goals will require new policies, most importantly policies that
families rather than the public sector. encourage saving, investments in health and education to
In the coming decades, the challenge will be to improve productivity, and well-functioning financial and labor
support South Korea’s growing elderly population without markets. These will be key to determining whether Asia can
overburdening other age groups or slowing economic growth. continue to play a leading role in global economic progress.
In the past, elderly Koreans received considerable support
as private transfers from their children. Although this type
of support was still common in 2000, the elderly today are Emerging East Asia “Chained” to the
increasingly supporting themselves from their own assets, West
built up over a lifetime. And public sector programs are also Ari Van Assche, HEC Montréal
playing a larger role. In 2000, public transfers provided a The European debt crisis and struggling U.S. economic
relatively small part of support for the elderly. More recently, recovery present important downside risks to Emerging
however, government-supported pension and healthcare East Asian economies. In the past three decades, the East
systems have been expanding very rapidly. This sharp Asian region has become a key player in the value chains
increase in social welfare for the elderly could create a serious of products that are consumed in Western markets. Many
burden for Korean taxpayers in the future as the elderly income-sensitive, high-technology products that we find
population expands and economic growth slows. As a result, on the shelves of Best Buy in the United States or Media
increased reliance on asset accumulation is critical. World in Italy incorporate components produced in the

© 2011
UHERO.Hawaii.EdU


40% combined exports to the United States and European Union

30% constituting more than 25 percent of their GDP in 2007 (see

20% Figure 9).

10% These indicators, however, understate the true

0%
vulnerability of some Emerging East Asian countries’ exports

-10%
to Western downturns. As the the iPad and Kindle examples
illustrate, many components that are made in Emerging East
-20%
Asia for Western consumer goods are not directly exported
-30%
to the West, but rather are indirectly shipped through China.
es

e

an

am
sia

sia

ea

nd
or
in

or
w

la
ay

ne

tN
ap
pp

i

K

ai
Ta
al

do
ng

Th These indirect exports are therefore largely dependent on

e
ili

of
M

Vi
In
Si
Ph

p.
Re

2007-2008 2008-2009
demand conditions in the U.S. and E.U., rather than on

Fi g . 8 - e xP o Rt g RoW tH i n e a s t a s ia those in China.
We can gauge the size of such indirect exports to the
Asian Tigers (Rep. of Korea, Singapore and Taiwan) and
West with data from China’s processing trade regime. Under
in the five largest ASEAN countries (Indonesia, Malaysia,
this customs regime, firms located in China receive duty
Philippines, Thailand and Vietnam). Economic downturns
exemptions on imported inputs, but only if the processed
in the West can therefore reverberate globally through supply
goods are subsequently exported. Emerging East Asian
chains, leading to significant export reductions in East Asia.
countries have been important component suppliers to
This contagion effect through the trade channel was
China’s processing regime. With the exception of Vietnam,
recently displayed during the Global Recession of 2008-
more than 30% of Emerging East Asian countries’ exports
2009. Except for Vietnam, the exports of all Emerging
to China in 2007 were processing inputs. For the Philippines
East Asian economies contracted between 13% and 22% in
and Taiwan it even amounted to more than half of their
2009 compared to a year earlier, with especially large export
exports to China.
collapses registered in the Philippines, Malaysia, Singapore
Almost 60% of China’s processing exports are destined
and Taiwan (see Figure 8).
The cases of the Apple iPad and the Amazon Kindle 35%

illustrate how important Emerging East Asia has become in 30%

the global value chains of blockbuster electronics products. 25%

In both instances, the vast majority of components (e.g. 20%

displays, wireless cards and memory chips) are manufactured 15%

in Japan, Taiwan and South Korea, before assembly is done 10%

in China and the final products are exported to the West. 5%

To measure the dependence of Emerging East Asian 0%
es

e

an

am

sia
ia

ea

nd

or

countries on Western markets, economists generally use the
es

in
or

iw
la

ay
tN
ap
n

pp
K

ai

Ta

al
do

ng
Th

e
ili
of

M
Vi
In

Si
Ph
p.

countries’ export-to-GDP ratio. According to this measure,
Re

Indirect exports Direct exports
Singapore, Malaysia and Vietnam indeed have a significant
economic exposure to Western demand shocks, with Fi g . 9 - d i R ec t an d i n d i R ec t e xP o Rts to
tH e us an d eu a s a s HaR e o F g d P, 20 07

© 2011
UHERO.Hawaii.EdU


for the U.S. and E.U. As a result, accounting for indirect All other expenses
exports significantly increases the export-to-GDP ratio for
Lodging
some Emerging East Asian countries. For example, Taiwan’s
combined exports to the U.S. and E.U. as a share of GDP Total Shopping

rise by a full 9 percentage points (see Figure 9). Most other Total Transportation
countries see their ratio increase by a more moderate 1-2%,
Entertainment & Recreation
while renowned final assembly hubs such as Indonesia and
Viet Nam are relatively unaffected. Total Food and beverage

Unless reforms in East Asia can rebalance growth GRAND TOTAL
towards domestic demand, Emerging East Asia remains
$0 $50 $100 $150 $200 $250
chained to business cycle movements in the West. This United States Korea Australia
risk may even increase as more firms adopt Just-In-Time Fi g . 1 0 - vis ito R PeRso nal dai ly
s Pen d i n g by MaR k e t (us $)
production techniques to reduce their costs. As the Japanese
spending levels. These visitors are much more likely, for
earthquake/tsunami in March 2011 illustrated, lean
example, to stay in hotels rather than time shares. They also
supply chains and the absence of redundancy imply that a
spend a lot more money shopping—upwards of two-and-a-
breakdown in one part of the chain more quickly reverberate
half times what visitors from North America spend each day
throughout the entire chain, thus potentially speeding up
(see Figure 10). For this reason, visitors from Asia and the
contagion through global supply chains.
Pacific are coveted by the visitor industry.
Other parts of Asia that are gradually opening up to
international travel are a potential boon to the state. Chinese
Asia-Pacific Tourism Outlook Upbeat,
With Caveats visitor arrivals in Hawaii grew almost 50% from 2009 to 2010

Andrew Kato, US Bureau of Labor Statistics *** while Korean arrivals expanded by nearly 60% (see Figure
11). High growth rates like these have been celebrated as
Asia-Pacific tourism has been an important part of
cause for excitement, but there are many reasons to be careful
Hawaii tourism for many years. And with strong projected
in setting expectations for growth over the long term. Let’s
growth and increasing outward orientation, there is clearly
take a look at the major market areas:
the potential for further gains. There are also challenges
that are sometimes overlooked in the rush of optimism about
Japan
these markets.
Although economic conditions and the recent March
The Asia-Pacific region is broadly divided into three
earthquake and tsunami combined to dampen Japanese
Major Market Area segments by the Hawaii Tourism
tourism earlier this year, Japan remains the keystone of
Authority (HTA): Japan, Other Asia, and Oceania.
Asia-Pacific tourism in Hawaii. Younger Japanese appear
Historically, 80 to 90 percent of Asia-Pacific visitors to
to be travelling less and the overall population is beginning
Hawaii hail from Japan. Visitors from the Asia-Pacific are
to shrink, but tourism authorities around the globe are
valuable for the Hawaii visitor industry because of their high
pinning hopes for the wave of retirements coming among
*** Andrew Kato wrote this article in his personal capacity. Any opinions, findings,
conclusions, or recommendations expressed in this article are those of the author and the Japanese Baby Boom generation. This presents an
do not necessarily represent the views of the Bureau of Labor Statistics or the U.S.
government.

© 2011
UHERO.Hawaii.EdU


booked tickets failed to receive visa approvals in time, is
180 emblematic of this longstanding problem. There does not
160
appear to be any solution on the horizon, and in any case this
140
is outside the control of the State to remedy.
120
Thousands

Even when the visa issue is addressed, it is not clear
100
Hawaii will be a major beneficiary of Chinese travel. Data
80

60
from the China National Tourism Administration shows

40 that 91% of all “outbound” Chinese trips stay in Asia. And
20 Hawaii faces stiff competition from closer in locations with a
0 similar product mix, such as Hainan Island (The “Hawaii of
2000 2002 2004 2006 2008 2010
Oceania Korea China and Satellites China”) or the Maldives. Finally, there is uncertainty about

Fi g . 1 1 - vi s ito R aR R ival s FRo M Ma J o R
the extent to which Chinese travelers will favor Hawaii as
a s ia- Paci Fi c MaR k e ts
opposed to mainland US destinations, particularly relatively
opportunity as these recent retirees are likely to remain active high-spending meeting and convention travelers. Despite
and possess both the time and the financial resources needed these questions, as outbound Chinese travel increases, Hawaii
to benefit Hawaii tourism. tourism stands to benefit.
Other factors encouraging Japanese tourism recovery are
lower oil prices and the resolution of the March crisis. Oil South Korea
prices began falling, ironically, shortly after the earthquake The main challenge for the Korean market is one of
and have led to reduced fuel surcharges in recent months. As scale. In 2010, there were 82,000 arrivals from South Korea
noted above, TEPCO has announced the Fukushima Daiichi compared with Japan’s 1.24 million. With a population less
plant might be shut down safely ahead of schedule, lifting than 40% that of Japan, in the near term it is not possible to
another worry from the minds of potential Japanese travelers. ramp up inbound Korean tourism to replace the Japanese.
Hawaii has already seen a recovery of Japanese travel to Direct airlift is rising, but it will take time to approach
roughly the same level as a year ago. anything like the traffic built in the Japanese market over
several decades. And, as Sang Hyop Lee has noted above,
China the burden of an aging population will bear on Korean
If China can make the move from saving to consumption growth and ability to travel in coming years. Therefore, the
discussed above, its growing middle class presents clear appropriate way to view South Korea is as a high-growth
opportunities for Hawaii. At the same time, barriers to supplemental market.
Chinese travel to the US make China a tough nut to crack Nevertheless, there are reasons to think Hawaii has
for Hawaii. The well-known difficulties in securing a visa to strong potential for further Korean growth. Koreans with
enter the United States remained even in late 2011, and there children prefer closer destinations such as Australia or Pacific
are few flights that directly connect Hawaii with Mainland islands, rather than longer haul trips to Europe or North
China. China East Airlines’ recent postponement of direct America. This suggests an emphasis on family friendly tours
flights from Shanghai, because nearly half the travelers who and attractions may be effective for growing Korean tourism.

© 2011
UHERO.Hawaii.EdU


Experience dealing with Americans in their home country, is good reason for Hawaii to keep its eye on the Asia-Pacific
relatively good English skills, and Hawaii’s perceived safety region in coming years.
are also in our favor. So too is the interest of many Korean
visitors in new experiences that enhance important notions of
“well being” in health and happiness. Exposure to uniquely Thoughts on Policy Orientation For An
Hawaiian attractions and activities, such as those featured Asia-Pacific Century
on KBS’ Challenger contest television series this year, are Christopher Grandy, UH Public Administration

excellent ways to showcase the state. The rapidly growing It is hard to imagine a region more likely to lead global
young golfing population in Korea is also a good match for economic growth for the remainder of this century than Asia.
the wide array of golf resources in Hawaii. Hawai‘i seems naturally poised to benefit disproportionately
from this development. Important to the degree to which
Australia we benefit will be the decisions of Hawai‘i’s public policy
A market sometimes overlooked when analyzing makers. One concern lies in misinterpreting the success of
opportunities for Hawaii in the Asia-Pacific region comes Asian countries transitioning from developing to developed
from the “Pacific” side in Oceania. Since 9/11, annual economies; a misinterpretation that could lead to wasting
visitor arrivals from Australia have grown fairly steadily, public resources. Hawai‘i’s Asia-Pacific public policy
more than doubling from 66,829 in 2001 to 143,742 in 2010 orientation should be highly engaged, conservative of public
(see Figure 11). In many respects Australians are similar to resources, and facilitative of private business arrangements
Koreans, with nearly identical average party sizes, propensity without trying to pick winners.
to stay in hotels, and even daily spending patterns. It is a cliché, though no less true, that Hawai‘i’s history
Australians provide additional diversification as they and culture have evolved with an Asia-Pacific focus that
are much more likely to be repeat visitors who have been positions us well. Most of our population traces ancestry and
to Hawaii before, and they are much more likely to be culture to migrants from the region, and our leaders have
independent travelers not taking tours or packages. Roughly long sought to promote Hawai‘i as a bridge between Asia
20% of Korean visitors in 2009 and 2010 were repeat and the West. While Hawai‘i has not dominated the bridging
visitors, but a little more than 40% of Australians were repeat function, that role has certainly shaped the state, making
visitor in those years. Australia represents a reliable market us a relatively comfortable partner with expanding Asian
with strong tastes for the natural and outdoor appeal of economies.
Hawaii. At the same time Hawai‘i has some sad history in terms
The major markets of the Asia-Pacific region show of developing economy-leading public projects. In our
promise for the next decade as well as some clear challenges, eagerness to create job opportunities and to raise standards
including population aging, local tourism competition, and, of living, we have spent resources on spaceports, establishing
in the case of China, visa restrictions. Asia’s ace in the hole Honolulu as the “Geneva of the Pacific,” high-technology
is rapid economic growth: this year the East Asian region is tax credits, and so on. While well intentioned, this desire to
expanding at a greater-than-7% rate, compared with less than identify, and partner early with, the next “winner” has wasted
2% growth in North American. And the region will account effort and resources.
for significant share of global growth in coming years. There Of course not all public economic development efforts

© 2011
UHERO.Hawaii.EdU


fail, but those that succeed are more likely to involve a modest Thus, in Hawai‘i, calls for an Asian-like, state-led
role for the public sector rather than leading the charge. economic strategy should be resisted to the extent they
Public sector expenditures to protect our natural resources, involve using resources primarily for the benefit of one, or a
to manage conflict among alternative uses of resources, and handful, of organizations. Hawai‘i citizens would be better
to construct and maintain public infrastructure, are more served by a public policy orientation that looks for ways to
likely to help Hawaii’s economy than plunking a large sum of facilitate private business without unduly favoring particular
money on the next “big idea.” interests. Our governance arrangements should be as widely
As (not “if ”) business activity picks up in the next few accommodating as possible, consistent with equitably sharing
years, perhaps with heavy influence from Asian investment, the expenses of the public sector (i.e. no special tax breaks)
we will see familiar pressure for government to be a and protecting our natural and built assets.
“partner,” or “leader.” The Legislature will hear references We should orient ourselves with tax policies and a
to “planting seeds,” moving the state to “critical mass,” regulatory framework that are generally neutral toward types
being “proactive,” or some other clever-sounding term that of economic activity. We thereby position ourselves to take
amounts to the public sector bearing financial risk for specific advantage of economic opportunity from whatever direction
investors. it emerges. And we avoid the trap of having spent millions
Such signals may come especially from Hawai‘i’s of dollars in one direction, only to find out one or two years
potential Asian partners. Economic development models later that the future lies elsewhere.
from China, Japan, and Korea give a greater role to the Hawai‘i leaders should neither pander to new,
state than is typical of the West. As a recent example, “promising” business ventures nor be blithely uninterested.
China has garnered attention for its public subsidy of solar A middle ground of engagement and sober assessment is
energy capacity. Japan’s historic post-war, export-led growth likely to be the best approach. This will call for self-restraint
model was strongly planned and directed. And Korea’s from enthusiasts of either the “public official” or “private
government-backed promotion of electronic media has entrepreneur” variety. Enthusiasm is wonderful; but it should
garnered global attention. be viewed with skepticism when it precedes a request for
Yet the viability of state-led economic growth strategies significant public monies.
may vary over the development life cycle. Developing Public policy should stick to the basics: Attending to
economies may grow rapidly via state-directed investments our infrastructure needs, making sure that our tax system
in particular industries or clusters. As they join the ranks adequately funds important public expenditures without
of developed economies, the pace of economic growth skewing economic incentives, and maintaining our regulatory
usually slows and the previous success of state-directed environment to be appropriate to the challenges of emerging
activity wanes. Ultimately, the global frontiers of knowledge, economic directions.
technology, and management innovation bind, and progress If we somehow manage to achieve this balance in public
comes more slowly. At this point, the risk of poor resource policy orientation, Hawai‘i will be well placed to benefit
decisions from state actors rises because the sources of future from an impending wave from Asia and the Pacific, or from
growth are much less obvious. whatever quarter opportunity comes.

© 2011
UHERO.Hawaii.EdU


Asia-Pacific Prospects: The Short and the Long View
It is a common, but no less accurate, observation that we are living in exceptional times. We are pressed by exceptional
challenges, of population pressure, environmental distress and political upheaval. But we are also living in a period of
exceptional accomplishment: the richest period the world has ever seen, where economic progress is lifting millions out of abject
poverty. Growth poles have shifted away from the West to dynamic countries of the East. But this can sometimes be overstated.
Much of the world’s wealth and technological innovation remains centered in Europe and North America, and high-growth
emerging regions may soon include Eastern Europe, Latin America, and even Africa. Assessing prospects for the future
requires a broad view.

It is therefore possible to overestimate the importance of the Asia-Pacific region. But not for Hawaii. As these essays
make clear, Hawaii today is tied up with Asia and the Pacific. If one folds into this definition (as we have) the Pacific Americas,
then our prospects are absolutely dominated by what happens in this region in the future. In the near term, Asia and Oceania
are providing important support as North America falters. They will be key engines of future growth. Our contributors have
highlighted this potential as well as some of the key challenges they face, and some of the ways that they will affect Hawaii
and Hawaii policymaking in years to come. Overall, this is a positive message, but one that does not shy away from some
uncomfortable truths.

A natural question is this: What does Hawaii need to do to take advantage of the Asia-Pacific Century? While there
is uncertainty about what is coming, some implications seem clear. One is that the countries from which our visitors come and
the nature of those visitors—they will be older and probably richer—is likely to evolve considerably in coming decades. There
will likely be more heterogeneity in the visitor mix, which should be welcome after a period of excessive reliance on the US and
Japanese markets. Visitor related companies will need to think about how to market appropriately and to shape the services
they offer, and how to be flexible as markets change.

From the public policy perspective, the question is what does government need to do to provide an environment in
which tourism, but also other industries, can thrive as Asia and the Pacific grow. Besides tourism, what other industries have the
most potential? Will it be energy technology? Health care? Education? The answer is that it is impossible to know. As Chris
Grandy has pointed out above, governments are bad at picking winners. So rather than potentially squandering public money
on targeted incentives, governments should focus on those things that are necessary for all businesses to be successful. One
clear priority is to invest in basic infrastructure needed for private sector success. Hawaii has woefully underinvested in physical
infrastructure for the past two decades, and most would agree we have underinvested in human capital as well. Addressing
these problems will be expensive, and so we need to look carefully at state and local budgets to make sure we are using revenues
efficiently and in a way that does not overly burden businesses and taxpayers. If we get that right, we will be well positioned to
take advantage of whatever opportunities present themselves.

We are thankful for the contributions of a panel of outstanding scholars. We think their expertise provides a rich and
informative view of issues coming down the pike. And, that they reflect the richness of expertise that we have at the University
of Hawaii, at UHERO, and among our far-flung alumni, colleagues, and friends. Mahalo.

© 2011
UHERO.Hawaii.EdU


Growth Rates of Real Gross Domestic Product

2008 2009 2010 2011 2012 2013

North America
United States -0.3 -3.5 3.0 1.6 1.6 2.4
Canada 0.7 -2.8 3.2 2.2 1.9 2.6

Asia and Oceania Developed
Japan -1.2 -6.3 4.0 -0.4 2.2 2.0
Australia 2.4 1.4 2.5 0.5 2.8 2.6
New Zealand -0.7 0.0 2.5 1.4 2.5 3.0

East and Southeast Asia 6.4 5.1 9.2 7.3 6.8 6.9
China 9.6 9.2 10.3 9.3 8.7 8.5
Hong Kong 2.3 -2.7 7.0 5.0 4.1 4.5
Indonesia 5.0 4.6 6.1 6.4 6.0 6.3
Republic of Korea 2.3 0.3 6.2 3.9 3.6 4.0
Malaysia 4.7 -1.7 7.2 4.6 4.4 5.0
Philippines 4.2 1.2 7.6 4.3 4.4 4.9
Singapore 1.5 -0.8 14.5 5.0 4.0 4.5
Taiwan 0.7 -1.9 10.8 4.6 3.9 4.3
Thailand 2.5 -2.3 7.8 3.5 3.9 4.2
Vietnam 6.3 5.3 6.8 5.8 6.0 6.3

Gross World Product 1.5 -2.3 4.0 2.8 2.6 3.3

Source: UHERO. Forecasts other than for U.S. and Japan taken from United Nations
LINK Global Economic Outlook, October 2011. Figures for 2011 - 2013 are forecasts.
Gross World Product is calculated at 2005 prices and exchange rates.

© 2011
UHERO.Hawaii.EdU

uHero tHANKs tHe followiNg sPoNsors:
KawEKi‘U - tHE tOPmOst sUmmit
The Bank of Hawaii

KilOHana - a lOOKOUt, HiGH POint
Hawaii Electric Light Company. Inc.
Hawaiian Electric Company, Inc.
Maui Electric Company, Ltd.
County of Kaua‘i Office of Economic Development
Kamehameha Schools
Matson Navigation Company

KUaHiwi - a HiGH Hill, mOUntain
American Savings Bank
Central Pacific Bank
Hau‘oli Mau Loa
Hawaii Foreign-Trade Zone
Kaiser Permanente Hawaii
The Nature Conservancy, Hawaii Program
Natural Energy Laboratory of Hawaii Authority
The Pacific Resource Partnership
Servco Pacific Inc.

Kulia I Ka Nu‘u (literally “Strive for the summit”) is the value of achievement, those who pursue personal
excellence. This was the motto of Hawai‘i’s Queen Kapi‘olani. Sponsors help UHERO to continually reach
for excellence as the premier organization dedicated to economic research relevant to Hawai‘i and the Asia-
Pacific region.

The UHERO Forecast Project is a community-sponsored research program of the University of Hawai‘i at
Mānoa. The Forecast Project provides the Hawai‘i community with analysis on economic, demographic, and
business trends in the State and the Asia-Pacific region.

All sponsors receive the full schedule of UHERO reports, as well as other benefits that vary with the level
of financial commitment.

For sponsorship information, browse to http://www.uhero.hawaii.edu.

UHERO Asia Pacific

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