Kotkin/april5/mark1st

JOEL KOTKIN

Nearly two years ago, Los Angeles banker Chris Leu sat in the gilded halls of the Ritz Hotel in Paris, watching the coronation of a new global elite. Roughly 100-plus high-level Asian entrepreneurs attended the glittery event, listening to such luminaries as architect I.M. Pei, Computer Associates' CEO Charles Wang and Deng Pu-Feng, son of the late Deng Xiao Ping, amid turn-of-the-century European glitter.

For Leu, the hundred or so mostly Chinese, Japanese and Indian businesspeople and the few non-Asian guests, including this author, the $3.5 million conference for "Asian achievers" was a heady experience. Financed largely by overseas Chinese money, the lavish event took place in a palpable air of triumph.

"It was a little too much," said Leu, the 39-year-old president and CEO of United Pacific Bank, over breakfast at the Pacific Dining Car near downtown Los Angeles. "The theme was the passing of succession from one generation and group to another."

Today, Leu acknowledges, the immediate prospects of such a succession "seem far less persuasive." With much of Southeast Asia in financial turmoil, including Indonesia, many of those so proud in Paris are now scrambling to bail out businesses awash in devalued baht, rupiah, ringgit and won. Things look, if anything, even worse in Japan, which has been suffering with a stagnant economy for nearly a decade.

These developments have both negative and positive ramifications for Los Angeles. The decline of Asian trade by more than 10 percent last year has slowed the growth of the region's export economy, touching industries from aerospace and high-tech to tourism and entertainment. Yet at the same time, Leu explains, the weakening of the Pacific Rim economies has also brought increased interest in Southern California among Asian entrepreneurs and investors who, only a short time ago, were largely writing off the region.

Right now, he admits, many of his clients mostly Chinese from Indonesia, Taiwan and other Asian locals are too busy bailing water from their leaky bases at home to make huge new investments here. But once the leakage slows, he expects a greater shift of assets and interests to Los Angeles. One customer, an Indonesian glove maker, has already established a large presence here, in part as a hedge against instability at home, and Leu suggests others will soon follow.

Similar developments can be seen in other key Asian business communities. John Suh, executive vice president of the Overseas Korean Traders Association of Southern California, says many Korean textile and apparel firms are scouting for new locations in the region. He also notes that Korean Banks including Saehan, Nara, Wilshire State and Hamni have stepped up their presence as key financiers of the region's apparel industry.

"They know the United States, particularly Los Angeles and California, is the right place to be," Suh explains at his office in the Fashion District. "They know this is the right place for the marketplace and the business environment. They are coming here now and looking to move their operations."

But perhaps more important than investment dollars may be the flow of people. With Asia's economic prospects dimmer than in many decades, foreign students at places like the Fashion Institute downtown or local engineering or business schools may be more likely to stay here after graduation than return home. This may be particularly true for areas like the Internet, where Asia, even Japan, have been forced to eat American dust.

Take the case of Mike Morishita, a former Nippon Telephone and Telegraph computer engineer, who now has a thriving four-person Internet business in Torrance. Morishita says his old employer was clueless about the new technology, as are most Japanese firms. A recent Andersen Consulting survey found only 13 percent of Japanese top executives "comfortable" or "familiar" with the Internet, compared with 46 percent of their American counterparts. Only 71 percent of Japanese executives even have access to cyberspace, compared with 99 percent among Americans.

"The whole system is bad over there," suggests Morishita. "The top people don't have any computer skills or understand the net at all."

He also points out that Japan has an estimated 1.2 million computer hosts, or 9.6 for every 1,000 people, compared to 19 million, or 70 for every 1,000 persons, in the United States.

The differential in the scale of Internet commerce is even wider. In 1997, U.S. Internet commerce was estimated by International Data Corp. at $8.5 billion, compared with $400 million for Japan.

This has created an opportunity for Japanese like Morishita, who do work for leading Japanese companies like the New Otani, Nissin Foods and the Imperial Hotel. Other Japanese firms, like Osaka-based Kyoei Trading Co., are also placing their footprints in Los Angeles, largely to tap Japanese-speaking technical talent for their movement into the Internet. Like Morishita, he also plans to buy a home here.

"Young people look here for the future," notes Kyoei's chairman, Takayuki Sakayuchi, over lunch at a Sherman Oaks bistro with his wife and their toddler. "We used to think it was in Asia, but right now playing there is like the minor leagues. This is the major leagues now."

Joel Kotkin is a senior fellow at the Pepperdine Institute for Public Policy and a research fellow at the Reason Public Policy Institute.

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