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A SPECIAL REPORT ON THE SOUTHERN CALIFORNIA ECONOMY : THE FINANCIAL CAPITAL OF THE WEST : THE PACIFIC BASIN : Flood of Money Is Southland's Latest 'Import' : Investors From Pacific Nations Buying Local Real Estate, Buildings, Factories

November 15, 1987|NANCY YOSHIHARA | Times Staff Writer

A Singapore firm provides some venture capital for Advanced Matrix Technology, a Newbury Park company that produces color printers for computers. Sultan Muda Hassanal Bolkiah of Brunei purchases the Beverly Hills Hotel for a reported $185 million. Taiwanese visitors knock on doors in Temple City, offering to purchase homes for more than the sellers are asking.

These seemingly unrelated transactions have a common thread: Money is flowing into Southern California from across the Pacific. It is coming from Japan, Australia, Hong Kong, Taiwan, Singapore and other countries, from individuals and from companies.

As this capital flows, it marks a new chapter in Pacific trade, one that is expected to transform Los Angeles into a major world center of commerce and trade. Because of its proximity to Asia, Los Angeles became a favored port of entry for Pacific trade as first Japan and then others became industrial powers. But now, joining that flood of cars and stereos and cameras is money--lots of it.

"Capital from the Pacific 10 years ago was irrelevant," says Robert B. Paulson, director of the Los Angeles office of the consulting firm McKinsey & Co. "Within the next decade, it will be a driving force."

The Japanese have been been investing heavily in U.S. real estate for more than a year. Paulson points out, "Los Angeles land and buildings still look attractive to real estate investors in Japan because we have the world's largest market and a politically stable economy. They're spending 60 cents on the dollar (because of the yen's strong exchange rate) and can't buy Japanese real estate" because of skyrocketing prices.

'Money Center'

He sees more U.S. acquisitions and factory start-ups by foreign manufacturers. "In high technology, we'll see increasing number of partnerships, joint ventures, design groups, listening posts in U.S. technological markets," Paulson says.

Paul Gilbert at the Los Angeles office of the Kidder, Peabody & Co. investment firm, who is seeking out Hong Kong clients, says of the money flows: "We're not just a trans-shipment point any more. We're becoming a money center."

So far, these new investors have received a hospitable reception, especially in Southern California where many have purchased homes, businesses and investments. The rising protectionist sentiments on Capitol Hill have not significantly affected business in the West. In order not to attract much attention, many Asian investors have taken a deliberately low profile.

For years now, much of the world's industrial production has shifted to the developing countries of Asia that offer a cheap labor force. Garments sold in the United States now come from Hong Kong, Taiwan, Korea and Bangladesh. Cars, video cassette recorders, electric fans, refrigerators and other electronic gadgets come in from Japan and Korea. Computer chips arrive from Malaysia.

It is many of these foreign suppliers who now have the wealth to shop the United States for a variety of investments. Their wealth also has given rise to global securities markets in Tokyo and Hong Kong.

Jobs Related to Trade

Asian investors became painfully aware of the impact of U.S. securities trading on their markets last month. New York's October crash sent the Tokyo and Hong Kong stock markets into a tailspin. It was a painful, costly lesson of how interdependent the Asian and U.S. securities markets have become.

Meanwhile, economists are forecasting that U.S. trade will continue to grow with the biggest gains coming in goods crossing the Pacific, with most of them passing through Southern California ports.

"Today, one out of 10 jobs in the Southern California region is related to trade," says Mark Pisano, executive director at the Southern California Assn. of Governments, composed of city and county governments which work together to define common regional concerns.

"By year 2000, that will grow to one out of six jobs," Pisano says, adding that those numbers reflect workers involved only in the movement of exports and imports. It does not take into account service-related jobs, such as finance.

The Japanese--who first discovered the Southern California area as a vast, receptive market for their products in the 1960s--have been followed by other Asian trading partners.

"(Southern California) is a natural because of its physical location," Pisano says. "It's the intersection point between Asian countries and the United States."

He says the emergence of Los Angeles over San Francisco as the U.S. center of Pacific trade is due in part to major port facilities here that have provided easy, relatively inexpensive access to the huge Southern California consumer market.

In addition, Southern California has large immigrant populations from most of the major Asian nations, and that has given the area a natural advantage over other regions. "There is a willingness to deal . . . where there are communities with cultural ties," Pisano notes.

Maturing of Economies

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