Current status and opportunity in Okinawa and expectations

Current status and opportunity in Okinawa, and expectations to OIST Oct. 6, 2010 Toshiaki Taira, Chief Operating Officer, Okinawa Industry Promotion Public Corporation, Japan

About Okinawa Industry Promotion Public Corporation • • Established：December. 1971 Basic fund ：36, 100, 000 Number of staff: about 70 Business overview 　 Okinawa Industry Promotion Public Corporation (OIPPC)is the organization that represents Okinawa and plays role as a center that support Okinawa industry development. OIPPC is 100% invested by Okinawa Prefecture. OIPPC aims to contribute to industrial development of Okinawa in the areas with greatest potential impact for Okinawa by strategies below; 1) support the small to mid-sized firm in Okinawa by modernization of facilities, mediating financing, exit to new sector and new business, business matching, business development to nation-wide or global. 2) support the new industry creation in Bio, IT and environment sector by supporting R&D in entrepreneurial companies in Okinawa.

Organization 職員の内訳 県　出　向： 14名 ﾌﾟﾛﾊﾟｰ職員： 13名 民間出向： 5名 嘱託･賃金： 42名 合計　　　　74名 理事長・副理事長 専務理事 事務局長 経営支援部 ー ー 　 　 　 ー ー ー ● ● 離下情経建中 島請報営設小 活か化サ業企 性け支ポ活業 こ 化み援 性総 総寺事 ト 化合 合 業事支支 支事 業援援 事事 援業 モ 業業 デ ル 事 業 　 新産 イ ベ沖おお 産業 ン ン 縄 き き 業人キ チ イ な な ュ ノ 産業振興課 創 材 ベ ャ ベ わ わ 出育 新新 人成 育 産産 材事シ成シ業業 ョ 育 ョ 　 地域連携推進　　業 ン 連 ン 創 創 成 携 出出 事 サ事創研投 　　ﾌﾟﾛｼﾞｪｸﾄﾁｰﾑ 業 ポ業出究資 事開事 業発業 ト 支 事 援 業 事 業 　 　 　 　 　 ー ● あ っ設 せ備 ん貸 事与 業 ・ 機 械 類 貸 与 事 業 融 資 中小企業 支援ｾﾝﾀｰ ● ● ● 海外・ビジネス 支援課 支 事 ・ 援沖業沖海海 事縄 縄外外 業県 友事事 内 好務務 中 会所所 小 館管活 企 運理動 業 営運支 　 営援 マ 事事 ケ 業業 テ ィ 福 ン 建 グ ● ● 融資課 ● 総務課 経営支援課 産業振興部 ● ● ● ● 総務部 3

１．Okinawa’s current status and challenges （Economic activities and industrial structure, decreasing share of public expenditure, severe employment condition, Okinawa’s geographical superiority）

（１）Economic activities which take advantage of regional characteristics and unique industrial structure ○Okinawa Industrial structure (2006)： Primary Industries 1. 9%, 　Secondary Industries 11. 8%　Tertiary Industries 90. 3% Industrial structure reflects 2 main factors below; - the economic activities of private sector which maximize regional characteristics - the demand fluctuation such as decrease in public projects Gross Prefectural Product Rate by industry （comparison to average of 6 prefectures in Kyushu excluding Fukuoka） Data: “Prefectural Economic Accounting” from the Okinawa Prefectural Government Statistics Division 1989 1972 ＯＫＩＮＡＷＡ ＫＹＵＳＹＵ 2006 ＯＫＩＮＡＷＡ ＫＹＵＳＹＵ 1. Primary Industries 2. Secondary Industries Manufacturing Construction 3. Tertiary Industries Employed population by industry （comparison to average of 6 prefectures in Kyushu excluding Fukuoka) Data: “National Census” from the Ministry of International Affaires and Communications　　　 1990 1975 ＯＫＩＮＡＷＡ ＫＹＵＳＹＵ 2005 ＯＫＩＮＡＷＡ ＫＹＵＳＹＵ 1. Primary Industries 2. Secondary Industries Manufacturing Construction 3. Tertiary Industries 5

（２）Declining economic dependency on base ○The proportion of military-related receipts of Gross Prefectural Income has declined In 1972　 ： 15. 5%（ 77. 7 billion yen） In 2006 ： 5. 4%（215. 5 billion yen） ○Current land use after reversion active economic activities which lead prefecture economy (e. g. Area of Naha new urban center) ○Challenge in the future time lag – it takes long time to reach productivity as high as the land itself has. Change in base revenues (revenues generated by military-related transaction) Gross Prefectural Income (left-hand scale) Proportion of military-related receipts of Gross Prefectural Income (right-hand scale) Military-related revenue (left-hand scale) 6

（３）Declining trend in share of public expenditure ○Proportion of public expenditure in prefecture economy 41. 6% in 1999 -> 35. 6% in 2006 　 be declining yearly ○Okinawa promotion and development project budget 443. 0 billion yen in 1998 -> 216. 6 billion yen in 2009 　 be declining yearly ○Public expenditure per capita 14 th (Prefecture Ranking) in 2006 　 Not distinctively high 2006 public expenditure by prefecture / amount per Capita (top 20 in nationwide) 7

（４）Improving social capital ○Comprehensive measures based on “the Okinawa Development and Promotion Plans” have been implemented to fill the gap in social capital between Okinawa and mainland Japan since the Okinawa reversion to Japan in 1972. ○Certain progress of social capital such as road, port and harbor, housing, education institution, medical facility and dam Need to advance “strategic social capital development that will leverage the Okinawa progress” towards the Asia Pacific exchange center formation 8

（５）Severe employment condition and rich labor force Current status of employment ○Number of people employed (comparison between 1972 and 2008) ・Okinawa has increase with index + 65% surpassing that of Nationwide +24% ○Employed rate (comparison between 1972 and 2008) ・Okinawa has increase with index + 73% surpassing that of Nationwide +27% Labor population increase is bigger than job opportunities, while job opportunities has increased. Therefore, unemployment rate has not improved. (-> NEXT SLIDE ) home-oriented ○UJI turn rate（2005） ・Okinawa UJI turn rate is 49. 0% compared to average 0. 9% in local prefecture (excluding urban area) Important resource from the perspective of regional development under the circumstance of decreasing population and low birth rate and longevity in Japan 9

Change in the Unemployment rate *left-hand scale indicates the # of unemployed, right-hand scale indicates the unemployment rate (1, 000) % Number of unemployed Okinawa Prefecture Nationwide ‘ 72 ‘ 75 ’ 77 ‘ 80 ‘ 85 ’ 86 ‘ 87 ‘ 88 ‘ 89 ‘ 90 ’ 91 ‘ 92 ‘ 93 ‘ 94 ‘ 95 ‘ 96 ’ 97 ‘ 98 ‘ 99 ‘ 00 ‘ 01 ‘ 02 ’ 03 ‘ 04 ‘ 05 ‘ 06 ‘ 07 ‘ 08 ‘ 09 Data: “Labor Force Survey” from the Ministry of Internal Affairs and Communications, “Labor Force Survey” from the Okinawa Prefectural Government Statistics Divisions. 10 Year

（６）Prefectural Income Per Capita ○Gross Prefectural Income (2006 F/Y) ・ 36 th in nationwide ranking（expansion of regional industry such as tourism and resort industry） ○Prefectural Income Per Capita (2006 F. Y) ・Last place in nationwide ranking（high growth rate of population, while there is industry development, etc. ) Prefectural Income Per Capita in 2006 (Top 10/ Last 10 in Nationwide) 　 Prefecture (Top 10) Gross income ( 1, 000) population Income Per capita ( 1, 000) Population over 15 years old Income per over 15 years old (Last 10) 11

Where is Okinawa? 　～Ｇｌｏｂａｌ～ TAIPEI 630 Km SHANGHAI 830 Km BEIＪING 1, 400 Km? SEOUL 1, 260 Km HONG KONG 1, 440 Km TOKYO 1, 550 Km OSAKA 1, 200 Km OKINAWA MAINLAND 1212

Okinawa location　～focus on East Asia～ ＴＯＫＹＯ ＯＳＡＫＡ DAITO Island IZENA, IHEYA Islands OKINAWA Main Land MIYAKO Island ISHIGAKI, IRIOMOTE Islands ＦＵＫＵＯＫＡ YONAGUNI Island TAIPEI SEOUL SHANGHAI HONG KONG BEIJING 13

２．OKINAWA 21 st century Vision 14

What is OKINAWA 21 st century VISION ○”OKINAWA 21 st century VISION” is long term plan of Okinawa prefecture. It draw out ideal future Okinawa of approximately 20 years time, based on citizen’s opinions and including directions for realization of each subjects. ○Citizen’s opinion have been collected through questionnaires, contest of essay by high school students, workshop, from each region and from each sector. ○ Citizen’s opinion have been summarized and categorized into 5 subjects for ideal future Okinawa. ○Five ideal future Okinawa subjects were discussed in the special committee and in the prefectural Diet. It is finally formed in March 2010. First ever long term plan created by citizen’s involvements and cooperation. 15

5 subjects for ideal future Okinawa 　（１）Okinawan nature, history, traditions and culture to be conserved as important basics for Islands’ life 　（Natural environment, Historical culture, landscape） 　（２）Spiritual richness, Safety and Security compose bases for Islands’ life 　（Social Welfare・Medical care・Health care） 　 （３）Prosperous Islands full of Hope and Dynamism 　（Economic & Industrial endeavor・Land use of Ex US bases・Remote Island） 　（４）Islands for interchange and mutualism 　（interchange・mutualism・peace） （５）Islands for exercising one’s abilities to realize its full potential 　（Education・Human resource development） 16

（３）Prosperous Islands full of Hope and Dynamism ●Basic assignments of the subject 1)Reviving ”Van koku shin ryoh”(International exchange center of Ryukyu kingdom era) of the 21 st century ・Incorporating developing Asian economies into Okinawa （Creating Networks of Asia-Pacific regions, Creating International aviation network, International competitiveness of Naha international airport, etc） 2)Promoting industry based on community ・Sustainable growth of the local industry （agriculture and fisheries, manufacturing industries→Advancement of the technology, Improvement of management culture, reducing relatively high cost of air and marine transport , etc ） 3)Creating New leading industry for Okinawa ・Environment, Tourism, IT, Bio, and the health care/high-level medical service linked with those fields are the areas for promising next generation industries （Quantitative increase of Tourism and IT industry, Enlarging added-value of these two industries, Expanding region assignment system, Creating new industry by making OIST as the core assets , etc ） 17

４)Creating employment and Securing manpower ・Securing employment, Improving working environment （High unemployment rate in young adult segment, mismatch in the labor market, reforming awareness for working, employment measure for civilian worker of the US military, etc） ５)Making good use of remote islands ・Arrangement for continuous use of regional resources, Building human resources of the regions （Falling birthrate and the aging population/population decline, Lack of human resource for the region, relatively high cost of transport, etc） ６) Land use of Ex US bases ・Land use of the ex-US bases for the development of entire Okinawa （Loss of profit by the existence of US bases, New legal system for promoting land-use of the ex-US bases, etc） ７)Ensuring financial resources ・Improving and strengthening policy-based finance （Capital needs of the future large project, Perpetuating “Okinawa Development Finance Corporation”, etc） 18

●Promotion Strategy 1) Reviving ”Van koku shin ryoh”(International exchange center of Ryukyu kingdom era) of the 21 st century ・Maintenance and improvement of IT infrastructure, airport and seaport ・Streamlining network of domestic and international transport, cost cutting ・Early implementation of Asia Gateway for mutual evolution, etc Envisaged key measures and projects Expansion of Naha airport runway, Expansion of international and domestic terminals, Organization and function of “Okinawa Trade Public Corporation” to be established, Consolidating international information and communication HUB function, Okinawa IT “shin ryoh” park, Maintenance and expansion of GIX(Global Internet e. Xchange), Initiative science and technology base 2) Promotion of local industry for continuous development ・Creating Okinawa brand of agricultural product, Creation of new added value ・Promoting local industries of manufacturing, medical care, welfare service, nursing care ・Breeding and supporting local industry based on competitive resources, etc Envisaged key measures and projects Creating leading production region, Strengthening delivery and sales and processing, Collaboration with food and tourism industries, Enhancement of research and development, etc 19

３)Okinawa new leading industry development ・Formation of a destination resort reaching world standards ・Sophisticating and diversifying IT industry ・Guiding new cluster of air/sea-side industries by forming the international logistics hub in Naha airport and Naha port, strengthening international competitiveness 　　 ・Creating new industry with applying front-line technology through “intellectual cluster” ・Promoting frontiers in agriculture, forestry and fisheries industry ・Promoting environment-related industries such as renewable energy ・Promoting ocean industry ●Aim to create new industries that apply cutting-edge technology in the fields of life science, medical/health by promoting to form “intellectual cluster ” that work with domestic/international R&D institutions, companies, having OIST as core center 　　・Development of the R&D center of science and technology through cooperation with OIST and R&D institutions in Okinawa 　　・Intellectual center development, global network and support for companies in Okinawa 　　・Formation of comfortable living environment in the integrated with resort function such as housing, medical and child education 　　・Attracting life science industry by upgrading of science park or incubation institution in cooperation with OIST, and creates venture companies 20

３．How to proceed based on 21 st century vision?

Direction of development 　 ○How to develop industry ・Steady development in agricultural and fishery industries, manufacturing industry that are deep-rooted in local area and become the basis for sustainable development as islands prefecture ・Advancement and new expansion in tourism and resort industries, information-communication related industry ・By using ANA international logistics hub that locates in Naha airport since the end of last year, new market development (such as China) in manufacturing industry (agricultural and fishery industries, manufacturing industry) and creation of new industry and new business 　 ・Development of innovative industry (IT, Health and Bio, Environment) by university-industry-government cooperation with OIST as core institution 　Development with new value creation in well-balanced way between Okinawa’s island economic characteristics, natural environment and domestic-international exchange 22

Towards Okinawa Bio cluster development Okinawa National College of Technology (Nago-city) Okinawa Institute of Science and technology (Onna-son) Okinawa Health Biotechnology Research & Development Center (Uruma-city) University of the Ryukyus, Okinawa TLO (Nishihara-cho) Okiawa Prefecture Industrial Technology Center (Urumacity) Naha Airport (Naha-city) Okinawa Industry Promotion Public Corporation (Naha city) Tropical Technology Center, Ltd. (Uruma-city) 23

Okinawa major Biological Resources Land Marine Soft Coral Marine Sponge Ukon (Turmeric) Kuwansou A diversity of subtropical biological resources Hirami Lemon Mozuku Choumeisou Kubiresuta Kumisukuchin (Cats whiskers) Papaya

Okinawa Health Food 【Major health food】 Ukon related health foods, Moromi (fermentation broth) vinegar, Hirami Lemon juice, Guava tea, Salt, Mozuku related health foods, etc. 25

Role of Biotechnology Advancement of prefecture’s industry and creation of new industries Agricultural and Fishery industries Information related industry Environme nt industry Health and Bio industries Biotechnology Health service industry Awamori industry Cosmetics industry 26

Bio Research & Development landscape in Okinawa R&D support system ・Okinawa Industry Promotion Public Corporation 　①Okinawa New Industry Creation Funding Project 　②Okinawa Innovation Creation Project ・ Okinawa General Bureau (cabinet office, Government of Japan) R&D institutions ・Okinawa Health Biotechnology Research & Development Center ・Okinawa Prefectural Research & Development Center (6 R&D centers - industrials, agriculture, livestock, fishery oceanography, deep seawater, forest resource) ・University of the Ryukyus Center of Molecular Biosciences ・Tropical Technology Center, Ltd. support project, etc. Okinawa noted for longevity Bio entrepreneurial venture Other support ・The Okinawa Development Finance Corporation 　support on investment and loan 　　 Plentiful Biological resources Education and Research institution ・Okinawa Institute of Science and technology ・University of the Ryukyus ・Okinawa National College of Technology 27

Outline of Okinawa New Industry Creation Investment Project Investment partnership (GP) Government of Japan subsidy 　　 Assistance Okinawa prefecture Government Cooperation Support Management fee Limited Liability Partnership (LP) Okinawa Industry Promotion Public Corporation ■Investment size 　・ 7 hundred and 50 million yen ■Raising and finding of an investment 　・finding and raising of venture company 　・Hands-on support to assistance company 　・Hold seminar for venture company ■Research Development Subsidy Project 　・assistance rate ：within 3 quarters 　・subsidy amount： 50 million yen (maximum) per ■Assistance of LP management fee Okinawa Human Capital Inc. ・Financing ・Management ・Decision of the investment enterprises Financing ・Management expenses ・Success fee ・distribution Venture Capital Ｉｎｖｅｓｔｍｅｎｔ Limited partnership for investment Venture company Investment to：IT /Bio technology/ Environment Growth 1 billion distribution Thoroughgoing support of specialist to the entrepreneur of Research Development subsidy Project ・return of investment ・capital gain Inviting enterprises ・income gain Employment creation Investors of Private enterprises ※Size of investment is 2. 5 hundred million. PY with GP. Thoroughgoing support of specialist to the investment enterprises New Industrial Cluster Venture company Assistance ：Research development venture Growth IPO Expansion of business scale

Major Bio company, R&D facility and support institutions in Okinawa Kume Island ・Point Pyuru ltd ・Bio marine Corporation ・ OP Biofactory Co. ltd. 【Okinawa National College of Technology】 ・Coral Bio Tech KK 【Okinawa Health Biotechnology Research and Development Center】 　・Tropical Plant Resources Institute, Inc. 　・Hi. Pep Laboratories 　・South Product Co. , Ltd. 　・Haplo. Pharma Inc. 　・DNA Bank Retail Inc. 　・Lequio Pharma Co. Ltd. 　・EM research Organization, Inc　　　　 ・Ryuku Bio Resource Co. Ltd. 【Okinawa Institute of Science and Technology】 ・The institute of biological Resources ・she’s Co. , Ltd. ・Lequio Pharma Co. Ltd. 【Tropical Technology Center Ltd. 】 　・C. I. Bio Incorporated 　・R-BIO Co. , LTD 【Okinawa Industry Support Center】 　　・Axiohelix Co. Ltd. 　　・Somnoquest Co. Ltd. 　　・Geno. Lac BL Corporation 　　・OP Biofactory Co. ltd. ・Bio 21 Co. Ltd ・Uruma-Bio Co. Ltd ・Sun Okinawa Co. Ltd. ・AMBi. S Corporation 【University of Ryukyus】 　・ Geno. Lac BL Corporation

Ｔｈａｎｋ ｙｏｕ！ ー　ＥＮＤ　ー 30