Okinawa - Part One: How it Became a Technology Center

Okinawa - Part One: How it Became a Technology Center

The following is an unofficial history of how Okinawa has become a rising technology center in Japan. I will follow up next week with my impressions of the island and practical issues relating to either setting up there and finding people, or on the other side of the coin finding a job there.

Back in the mid-1990's, Japan's economy was in a pretty bad slump, unemployment was rising, and manufacturing and technology companies were starting to feel the pinch of Chinese competition. Those firms that could go off-shore already had, to China, Malaysia, Thailand, and elsewhere, and those that had to remain in Japan for legal or language reasons, were cutting staff.

While most of the groans were coming from Tokyo, the real pain was being felt in further flung parts of Japan, such as the special territories of Hokkaido and Okinawa. Both of these prefectures suffer the twin curses of distance and lack of industrial infrastructure, and have had weak economies and thus high unemployment since records were kept. In Okinawa in particular, the local government was at a cross-roads, wondering whether fishing, tourism, or casinos were going to be its salvation.

Then around 1996, a group of enterprising managers connected to the Itochu subsidiary, CTC, "discovered" that Okinawa could be ideal as a source of lower-cost support staff, specifically to man inbound and outbound call centers. Although NTT had already set up an early-stage call center in 1990 followed by a directory enquiries service in 1996, these were seen as an isolated effort and were not emulated by others. However, with the relentless cost-cutting pressures bearing down on IT companies, CTC had to come up with an innovative way to help their clients pare back their own costs, and they saw Okinawa as being the next best thing to moving customers off-shore yet still retain the benefits of language and technical infrastructure.

The CTC team made a proposal to the Okinawan government that since the national government was already putting in broadband connections to the island, as part of an overall national infrastructure upgrade, that the prefecture subsidize call costs from Okinawa to the mainland, specifically calls to greater Tokyo, and to put into place other incentives to encourage companies to set up data and call centers on the island.

Not surprisingly, the proposal was first greeted with some skepticism. The idea of turning vacant suburban lots in Naha into dozens of sophisticated technology centers, and training an entire population how to man these centers, was a wee stretch of the imagination. But the Okinawan government to its credit studied the proposal and after analyzing the call center industry elsewhere in Japan started to realize that with the right political push, such a plan might actually work..

The tipping point for them to move on creating appropriate legislation, was the fact that other companies besides CTC were ready to commit funds and customers to establish call centers, then, as word spread, local towns around the island also put up their hands to help finance the building of data and call center buildings.
Thus in 1998, the prefectural government announced its "Multimedia Island Plan." The plan focused on incubating high-tech businesses that would overcome the constraints of distance. While the plan is quite ambitious overall, it very pragmatically focused in the first phase on simply establishing a call center industry. Tax incentives and telecoms subsidies were enacted which made it effectively only 20% more to originate a call in Okinawa as in Tokyo, and yet with tax deductions, the cost of labor was about one half of that in Tokyo. These conditions were compelling enough that there was a sudden surge of companies willing to set up in Okinawa. CTC was one of the first, followed shortly thereafter by CSK and Transcosmos in 1999.

By 2001 there were about 3,500 people manning call centers, primarily in Naha, the prefectural capital, and by 2005, more than 10,000. Indeed, the call center business has become such a major employer, that it is reckoned about 30% of the single female work force aged between 20 and 30 years old now works for the industry. Call centers of course also need infrastructure, and so along with the people manning the phones, demand has arisen for networking and voice engineers, technical support staff, and data center operations staff.

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