This popular Chinese proverb captures the very essence of economic self-reliance. Every economic unit would want to achieve a certain degree of self-reliance in its economic activities. Okinawa is not an exception in that sense. This was made evident in the JICA Seminar on Regional Development in Okinawa last August 2006. It was clear in the said seminar that the Prefectural Government of Okinawa wants to have a greater self-reliance in its economic endeavours.
It is in this line that this paper is written to provide a discourse on the efforts of Okinawa in its quest for a self-reliant economy. Specifically, this paper would want to achieve the following research objectives:
To trace the economic history of Okinawa;
To discuss and analyse the economic development plans of Okinawa;
To discuss the potential/s of Okinawa in view of its development plan; and
To discuss the issues and challenges being faced by Okinawa in its effort to achieve a self-reliant economy.
This is a qualitative research paper that employs review of related literature and secondary in its discussion of the above-mentioned subject. An empirical study using quantitative tools is recommended for further research on the same topic that would evaluate the success of the Okinawa prefectural government in this matter.
Theoretical Background
The selection of Dr. Muhammad Yunus as 2006 Nobel Peace Prize winner underscored the importance of self-reliant development. Through his Grameen Bank, he was able to support millions of underprivileged women in Bangladesh by proving micro finance. As a result, these women who cannot avail capital loans in the regular bank are now capable of providing livelihood for themselves.
The experience of Grameen Bank showed that it is a natural desire of all economic units (maybe individuals, families, communities, states, regions, or nations) to minimize its dependence on resources of other economic units. Dr. Emmanuel O. Ojameruaye in his paper "Strategies for Self-Reliant Economic Development of Urhoboland (2004)" explained that "a rational economic unit would strive to depend on its own (internal resources) for sustenance and growth and avoid excessive reliance on external resources. This however does not preclude the use or support of external resources."
He then defined self-reliant economy as "a type of development that relies on the human and material resources of the economic unit whose development is the subject of discussion. In other words, it is development that relies on "internal" resources as opposed to development that relies heavily on "external" resources. External support is allowed but it is propelled and sustained by internal resources." As the economic units pursue policies of self-reliance and strive to ensure autonomy, they still allow for substantial external support. (Ojameruaye: 2004).
Paul Godfrey (2003) of Brigham Young University defined self-reliance development as the ability of an entity to sustain economic well-being. He said that self-reliance is the intermediate end in pursuit of the vision of good in life. With a self-reliant economy, the entity can "garner surplus resources that create well being and structure economic life to be relatively invulnerable to economic shock (Godfrey: 2003).
Overview of Okinawa
Situated between Kyushu and Taiwan, Okinawa is Japan's southernmost prefecture and consists of hundreds of the Ryūkyū Islands in a chain over 1,000 km long. It serves as keystone that links mainland Japan to the north, South-east Asia to the south, the Pacific Ocean to the east, and the East China Sea to the west. This important location makes Okinawa the southern Japanese hub for international traffic, trade and cultural exchange.
Map of Okinawa
Source: (www.wikipedia.org)
Okinawa Prefecture was not originally part of Japan but part of independent nation called the Ryūkyū Kingdom. Currently they include the main island of Okinawa and the Yaeyama and Miyako island groups. Okinawa's location in the East China Sea, and relatively close proximity to Japan, Korea, China and South East Asia allowed the Ryūkyū Kingdom to become a prosperous trading nation (www.wikipedia.org).
The many castle ruins that dot the island date from this period. The Ryūkyū Kingdom long had a tributary relationship with China. In 1609 the Satsuma clan, who controlled the region that is now Kagoshima Prefecture in Japan invaded the Ryūkyū Kingdom. Following this invasion, the Ryūkyū Kingdom was forced to enter into a tributary relationship with Satsuma in addition to their previous tributary relationship with China. Ryūkyūan sovereignty, however, was maintained, since to do otherwise would have created problems with both China and the Tokugawa Shogunate, which Satsuma had opposed during the preceding period of conflict. This gave Satsuma a high level of access to trade with China during a period in which such trade was heavily restricted and largely clandestine. Though Satsuma maintained strong influence over the Ryūkyū Kingdom, the Ryūkyū Kingdom maintained a large degree of political independence. In 1879, following the Meiji Restoration, the Ryūkyū Kingdom was forcibly incorporated into Japan as a colony known as Okinawa Prefecture (www.wikipedia.org).
Following the end of World War II and the Battle of Okinawa in 1945, for 27 years Okinawa was under United States administration. During this time the US military established numerous bases on Okinawa Honto and elsewhere. On May 15, 1972, Okinawa once again became part of Japan, although to this day the United States maintains a large military presence there (www.wikipedia.org).
Economic Overview of Okinawa Prefecture
Comparing Tables 1 and 2 would show that the rate of population growth in Okinawa is relatively high compared with Japan as a whole. It is estimated that the average annual growth rate of Okinawa over the period 2004 to 2015 will be at 0.47 percent, compared to minus 0.08 percent for Japan as a whole. Also, whereas the population of Japan is forecasted to peak in 2006, that of Okinawa is expected to continue growing until fiscal 2006 (OKIDEN: 2004).
Figure 1
Source: Japan Electric Power Survey
The number of households in Okinawa is also increasing rapidly than in Japan as a whole with the annual average growth rate from 2004 to 2015 of one percent compared to the national average of 0.32 percent.
Figure 2
Source: Japan Electric Power Survey
In terms of output, the gross domestic product (GDP) of Okinawa is forecasted to grow at a faster pace than the GDP of the whole of Japan. The average annual GDP growth for Japan from 2003 to 2012 is projected at 1.6 percent compared with 2.6 percent of Okinawa. On per capita basis over the same period is also forecasted to exceed national average at approximately 3.4 percent with around 2 percent for the whole of Japan (OKIDEN: 2004).
Table 1
Source: OKIDEN
Table 2
Source: OKIDEN
However, socio-economic conditions in Okinawa remain difficult. Although the per capita income is expected to grow at a faster rate than the national level, it is only 80 percent of the national average. Also, the unemployment rate continues to be high at 7.9 percent, one of the highest in the whole of Japan.
The economy of Okinawa is largely dependent of the tertiary industry which accounts for 86.1 percent of the gross prefectural product while secondary and primary industries account for 15.8 percent and 1.9 percent, respectively. A large part of the tertiary industry is concentrated in the service industry which accounts for 27.6 percent which includes the tourism industry.
Economic Structure of Okinawa
Figure 3
Source: OKIDEN
Because of the large dependence of the economy in the tertiary sector, most of the workers in Okinawa are also part of this sector with 74.4 percent of the labor share followed by 19.2 percent in the secondary industry and 6.2 percent in the primary industry. The services industry accounts for 33.4 percent in the tertiary industry. This large share of the services industry can be attributed to the growing trends in the tourism sector which is projected to increase to 6.5 million tourist arrival in 2012 as shown in the figure below.
Figure 4
Source: Okinawa Development and Promotion Plan
Economic History of Okinawa: Towards a Self-Reliant Economy
Before the reversion of Okinawa to Japan sovereignty, the economy was dependent on the economic activities in the US military bases and facilities; usually referred to as base economy.
In May 15, 1972, the Japan and US governments agreed for a reversion of Okinawa and the reduction of US military bases in the area. It was clear during that time that what Okinawa needed was to go away from base economy and this is can only be done with increase in economic growth (Takahama).
To address this need, the government has formulated and three Okinawa Promotion and Development Plans or "Okinawa Fukko Kaihatsu Keikaku" from 1972 to 2002 in an effort to close the gap between the islands and the rest of Japan, especially in the area of social infrastructure (CAO: 2006.)
Figure 5
Source: Cabinet Office
The first Okinawa Fukko Kaihatsu Keikaku was planned and done from 1972 to 1981 and the second plane was from 1982 to 1991. The goal for the first and second plans was the revision of the differences from the mainland and the adjustment for independent development. The third development plan was implemented from 1992 to 2001. In addition the goal of the first two plans, the third plan was aimed to contribute to the economic and cultural growth of Japan (Takahama).
In April 2002, the Act on Special Measures for the Promotion and Development of Okinawa was passed with the goal of fostering the emergence of a dynamic, self-reliant Okinawan economy led by the private sector. As a result, the Okinawa Promotion and Development Plan was adopted in July 2002 to serve as the road map for Okinawa's development over ten years until 2011 (CAO: 2006).
Under the current plan, the goal of achieving a self-reliant economy can be achieved by stimulating the following sectors:
Tourism and Resorts
Attracting Conventions
Development of Information Technology
Founding of New Industries
Export Oriented Processing Industries
Trade and Commerce
Manufacturing and Traditional Crafts
Agriculture, Animal Husbandry, Forestry and Fisheries
This effort will be combined with developing the human resources and, science and technology to support these sectors (CAO: 2006).
Moreover, revitalizing the outlying islands through (1) developing infrastructure such as harbours, airports and bridges to isolated islands; (2) putting in place production infrastructure; (3) ensuring adequate health care and enhancing welfare; (4) improving education, and (5) developing basic living environment will contribute to the attainment of such goal (CAO: 2006).
CASE ANALYSIS: Issues and Challenges
Aiming for a self-reliant economy is a good goal for Okinawa Prefecture. The previous development plans had been implemented to make Okinawa at par with other prefectures in terms of economic growth. Although these plans had been successful in ensuring growth in Okinawa, still, it lags behind the other prefectures.
Moreover, having a self-reliant economy is one way to cope up with the recent decentralization plan by the central government. With this plan, the subsidy by the central government to the local government units will be substantially reduced. At present, Okinawa is one of the prefectures which largely depend on the local allocation taxes. In 2002, Okinawa has basic financial demand of Y274 billion but its revenue is only Y68 billion, hence a deficit of Y206 billion. This was augmented by Y210 billion worth of local allocation taxes from the central government. The plan to make Okinawa a self-reliant economy will allow the Prefectural Government of Okinawa to endure the decrease of local tax allocation by encouraging the private sector to lead in the development efforts of Okinawa.
However, there are major issues which the Okinawa Prefectural Government must resolve in order for self-reliant economy to take place. One major issue that challenges the effort of Okinawa for self-reliant economy is the presence of the US military bases and facilities.
Figure 6
Source: Cabinet Office
Despite of its small size in terms of land area, Okinawa is home to 39 US Military bases and facilities. Figure 6 shows that almost 75 percent of US Military bases and facilities in Japan are located in Okinawa. These 39 US military bases and facilities are occupying 18.8 percent of the 1,204.41m2 of Okinawa Island. Some of these facilities are even located in the centre of the business and residential areas such as the case of Futenma Air Base.
There are efforts by both Japan and US governments to reduce, realign and consolidate these military facilities. However, the pace of reduction in Okinawa has been slower than in the mainland.
The presence of these bases pose a hindrance to the effort of Okinawa to attain a self-reliant economy. With the large presence of these military facilities in the area, it limits the development of Okinawa. As a result, there is no room for further development expansion in terms of physical asset such as land. A case in point is the Funtenma Air Base which is located at the centre of the city. This limits the expansion of the business activities and makes Okinawa one of the densely populated in Japan. Also, since most of these facilities are off-limits to the public, it makes the development of public infrastructure difficult.
Second, the limited space available in Okinawa makes the cost of doing business expensive. A good example of this is the high cost of airfare going to Okinawa. This partly because most of the air space and sea space in Okinawa are being used for military purpose. Hence, the Prefectural Government has no choice but to provide tax incentives through the creation of export processing zones to attract additional investments. This is importance because the key towards the achievement of a self-reliant economy is the private sector based on the current Okinawa Development and Promotion Plan.
Pollution is another problem as a result of the military bases in the area. Both noise and waste pollution are becoming a dangerous threat to the Okinawan economy since the economy is heavily dependent on the tourism sector.
Lastly, the rape incident in September 1995 involving a young Okinawan girl clearly showed the negative social effects and the threats to the society by the presence of these military facilities.
Not only the presence of US Military bases and facilities poses challenge to the development of Okinawa but also its continued dependence on national subsidy. As earlier stated, Okinawa depends on the subsidy from the central government to augment its shortage in revenues. Since the reversion of Okinawa to Japan, the central government has been pouring in trillions of yen as subsidy. This is serves as payment from the central government to Okinawa for hosting the US military facilities.
This huge amount of subsidy from the central government makes the Okinawan economy dependent on public works spending. Thus, "the economy has small manufacturing sector and excessively large tourism industry, giving Okinawa the nation's lowest per capita income and very high unemployment" (Ushikoshi).
The economic structure of Okinawa should be changed for it to have a self-reliance economy. As long as US military facilities and bases are significantly reduced, Okinawa has no other choice but to rely heavily on subsidies since economic expansion is no longer feasible.
Therefore, the resolution of these issues is necessary for Okinawa Prefecture achieve self-reliant economy.
Conclusion
The transformation of one economy into a self-reliant economy is an ultimate goal which is worthy of the effort. Self-reliance economy provides a sense of autonomy by not relying on others' resources for development to take place. However, in some cases, the achievement of a self-reliant economy would need external support to sustain internal resources.
This is the case of Okinawa in which it aims to achieve a self-reliant economy as stipulated in its recent Okinawa Economic Development and Promotion Plan. This plan outlines the strategies that it would take to achieve this goal. The private sectors is given the major task to lead in building a self-reliant Okinawan economy.
However, there are issues and challenges which the Okinawa Prefectural Government has to resolve first before it can pursue this goal. First of this is the presence of the US military bases and facilities which limits the economic expansion of Okinawa. As a result, Okinawa has become a base economy in which the service sector constitutes the bulk of the economy. As a result, Okinawa has a high incidence of unemployment and the lowest per capita income in Japan.
On the other hand, the very same scenario makes Okinawa heavily dependent on subsidy from the central government. Because of the limited economic expansion due to the presence of the US military bases, the central government has continuously poured trillions of yen in the Okinawan economy, mostly in terms of public work spending.
With this is mind, the attainment of self-reliant economy in Okinawa would continue to require external support specifically from the central government. But this is not enough. The central government should make sure that it is sincere in its policy of consolidation, reduction and realignment of the US military bases and facilities. Only with these policies would the goal of self-sufficiency in Okinawa be realized.
