The time is ripe for California’s small and medium-sized companies to export food and electronics equipment to Pacific Rim countries, Bank of America economists said Tuesday.
The companies have an opportunity to cash in on a predicted 85% increase in California exports to the region in the next three years, according to a report released by the bank.
Total world exports to the region are expected to rise by $270 billion by the end of 1991, and California’s share could reach nearly $33 billion by the end of the period, the report said.
“I think we have an export mentality,” economist Richard H. Courtney said in a telephone interview. “Those (Pacific basin) countries have an interest in California as a growing economy. There’s a synergy upon which other California businesses can build.”
Many smaller companies are hesitant to export because of high costs associated with breaking into outside economies, Courtney said. However, the opportunity to capitalize on the ballooning wealth in the Pacific basin may override such concerns, he said.
Civic and business leaders from San Francisco and San Jose recently conducted an extensive Asian tour to promote business between their cities and other points in the Pacific Rim.
Courtney, who compiled the Bank of America report with economists James M. Livingstone and John L. Weeks, maintains that the Pacific nations of Australia, China, Hong Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand will represent the fastest-growing area in the world in coming years.
The 1.6 billion consumers in the region spent $2.2 trillion in 1988. They are expected to spend 12% more in 1989 and an additional 11% in 1990, the economists said.
The $17.6 billion worth of goods California exported to Pacific countries last year accounted for 50.2% of the state’s total annual exports. Japan was the largest importer, bringing in $6.1 billion in California goods.
But while Japan is the biggest market, it is slower in terms of gross domestic product growth. Leaders in that arena are China, Malaysia, Singapore and Thailand, Courtney said.
Chemicals Also Exported
Manufacturers of electronics equipment, non-electronic machinery, transportation equipment and transportation-related goods are the main exporters to the region and should reap the bulk of the projected sales boom.
The state also exports chemicals, crop products, processed foods and petroleum and coal products to the region, Courtney said.
“They (Pacific Rim countries) are beginning to open their economies and recognize the need for additional growth and the growing demands of their populations,” Courtney said. “The incentives they offer are generally tax holidays or tax reductions.”
And as per-capita income in the Pacific Basin improves and people eat a more varied diet, producers of fresh fruits and wines and food processing companies will find an expanded market, the economists said.
“Smaller and medium-sized companies that may have thought they were too small to do exporting in the area have an opportunity to do so in the future,” Courtney said.