The Pacific Rim -- Kobe Connection -- Japan City Uses Government, Business To Forge Vibrant Economy

KOBE, Japan - When Kobe began to run out of land along its blue-collar waterfront, the city government leveled some inland hills, built a 9-mile conveyor belt to the bay and used the dirt and rock to build two huge artificial islands.

It was an impressive engineering feat. But more remarkable than the islands is what's on them.

Unlike Seattle's Harbor Island, an artificial island devoted to port and other industrial uses, Kobe's islands have high-tech commercial and office buildings, residential complexes and recreational facilities as well as shipping berths - a mix that makes them unique.

They not only are the largest man-made islands on earth, but the only ones to support comprehensive urban development. They amount to new towns in the harbor.

"In a sense, Kobe is creating a new marine cultural area," says Masaaki Sano, assistant manager of the city Planning Bureau's development division.

Nor is that all. The leveled inland areas are being used for new housing, light industrial parks and technical education centers. The old downtown waterfront is being redeveloped. And the transportation systems that tie them all together are being expanded.

Together these elements comprise a huge, integrated development project that would be impressive anywhere.

"The goal is a diversified city without emphasis on just one industry," says Tatsuo Miyazaki, the city's elder statesman, who as mayor for 20 years and acting mayor for 16 initiated the program.

Unlike some government projects, these look good, have made money for the city and so far are weathering the rupture of Japan's speculative "bubble economy," which has sent land prices plummeting.

As the U.S. prepares for a Clinton administration that promises to improve infrastructure and develop a more cohesive industrial policy, Kobe offers an example of how such programs can function in practice.

Kobe, with a population just shy of 1.5 million, is the seventh-largest city in Japan. It also is Seattle's sister city, and the two have some things in common.

Both are relatively new. Seattle dates from 1852. Though the Kobe area had been inhabited for hundreds of years, it dates its modern history from 1868 when the provincial town of 50,000 was designated as a port for Japan's newly opened trade with the outside world, triggering industrial development and a population boom.

Both cities have become major ports (they are sister ports as well as sister cities) with a cosmopolitan atmosphere.

And they share similar geography. Seattle is pinched north to south between bodies of water and Kobe is pinched east to west between Japan's inland sea and the Rokko Mountains, which rise sharply as high as 3,500 feet, providing a dramatic backdrop behind downtown. At its narrowest, Kobe is only about a mile wide.

Kobe dove into its massive development campaign in 1966, when work began on Port Island. From the beginning, it was an innovative project.

The city skirted the need for central government approval - which it probably would not have gotten because of competing large projects in Tokyo and other larger cities - by establishing a quasi-private development organization that floated bonds denominated in deutsch marks and Swiss francs.

Cooperation between city government and private construction interests was central to development plans. The city created the new land and provided such infrastructure as dredged waterways, roads and railways. And it provided the overall policy that guided what kinds of development would take place on the islands. Private companies built specific projects.

A key function of Port Island was to provide new facilities for Kobe's port, which was expanding rapidly and is now the world's fourth-largest container port. It also was to provide space for other business activities; some public facilities, among them a major hospital, that were becoming difficult to site conveniently in the congested central city; and new residential areas, which always are in high demand in Japan.

As Port Island progressed, it became clear to city officials that Kobe's industrial muscle, concentrated in such old-line powerhouses as Mitsubishi Heavy Industries, Kawasaki Heavy Industries, Kawasaki Steel and Kobe Steel, was weakening because of competition from lower-cost producers in South Korea, Taiwan and elsewhere.

So in 1973, Miyazaki proposed that the city become a center for fashion, a creative, non-polluting industry that could help broaden Kobe's business base.

The proposal might have seemed quixotic since Kobe at the time was like Cleveland with better scenery, but the city had two powerful things going for it.

Port Island's 1,076 acres of new land would be incredibly attractive to businesses in Tokyo, where a piece of property the size of a phone booth can be worth $100,000. And despite its blue-collar base, the city had a reputation both as an entry point for new ideas (Japan's first golf course was built here in 1903) and innovation (the city claims to be the birthplace of one of modern Japan's major contributions to pop culture, karaoke).

Miyazaki's idea caught on. Construction of a Fashion Town area on Port Island began in 1979 and today it is home to 38 fashion-related businesses, including apparel manufacturers, pearl processors, jewelry makers and confectioners ("fashion" is broadly defined here).

Kobe's presence in this industry is still small compared with Tokyo, which has 796 fashion-related businesses, compared with a total of 89 in the Kobe area.

But Kobe is attracting considerable attention through such state-of-the-art facilities as its new Fashion Mart, a huge trade center for the industry on Rokko Island, and an astonishing retrospective at the city museum of the work of Hanae Mori, the only Japanese to head a Paris haute couture house.

Some of Kobe's promotional literature for its islands may overreach - one brochure describes Fashion Town on Port Island as "a creative and sensuous town with basic themes of beauty, love and dream" - but these developments are impressive.

Port Island, which was completed in 1981, was the largest artificial island in the world until Rokko Island exceeded it with 1,432 acres. That's roughly the size of Seattle's central business district.

In addition to its container berths, Fashion Town and hospital, Port Island boasts the city's largest hotel, the Portopia, the smaller five-star Hotel Gaufres Ritz, consumer product and environmental health research centers, an exhibition hall, a four-level public sports center, an amusement park, a sewage treatment plant and a garbage incinerator.

Housing on Port Island proved so popular that a lottery was necessary to determine who would get a chance to bid. The same thing has happened on Rokko Island, where some homes sell for $800,000.

Some 17,000 people now live on Port Island and about 10,000 on Rokko, where the population eventually is expected to reach 30,000.

Residents can commute downtown on automated, conductorless trains. The computer-controlled windows of the Rokko line's cars demurely black out along one section of track to protect the privacy of nearby apartment dwellers who don't want to leave their blinds shut. All very high-tech.

Much of Rokko is still under construction, but already the Kansai branch of the American Chamber of Commerce in Japan has moved in from Osaka. A sleek new high-rise scheduled to open next year will be the new Asian headquarters for Procter & Gamble.

The current mayor, Kazutoshi Sasayama, says the city eventually hopes to lure the Asian division of the United Nations World Health Organization, at present anachronistically located in Geneva.

Now the city has embarked on a second phase of construction at Port Island, which will double its size. After that, a third island is planned to accommodate a new airport for domestic flights.

International travelers will commute a half-hour by high-speed jetfoil (some components of which are being manufactured under license from Boeing) from a new city air terminal on Port Island to the new Kansai International Airport, which is being constructed on yet another artificial island off Osaka on the other side of the bay.

Another terminal on Rokko Island will handle air cargo to and from Kansai International.

The artificial islands have freed up large chunks of the old waterfront for other purposes and the city is now busily redeveloping them.

One large area has been turned into a sandy beach, a rarity in urban Japan. Meriken Park is an oasis in the heart of the city and home to a new museum celebrating Kobe's maritime history.

But the most spectacular development is the 57-acre Harborland complex, which has replaced a Japan Rail yard and a Mitsubishi warehouse.

It includes a mammoth mall that includes everything from a branch of Japan's first membership discount warehouse to the tony Hankyu department store, "artificial reality" palm trees with real trunks and plastic fronds, a 2,000-car parking garage (the largest in Japan), the new 35-story headquarters of Kawasaki Heavy Industries and an adjacent complex of some 100 restaurants.

This cornucopia has encouraged some of the dowdy industrial neighbors to compete with whimsy: a grain silo sports a rendering of the Mona Lisa and dummies on ladders appear to be painting some shoreside storage tanks.

Still under construction are major expressways to link all these projects and to carry traffic to Osaka to the east and across the world's longest clear-span suspension bridge across the Akashi Strait, which will provide access to Shikoku Island.

Kobe officials enjoyed a number of advantages in putting together this enormous package of projects: a booming economy for almost all the 25 years it's been under way, a business community accustomed to cooperating with government, a different legal structure and a homogeneous society that until quite recently wasn't much concerned with the environmental implications.

They also had an unusual continuity of leadership and policy under Miyazaki and Sasayama, who are such close allies that Seiichi Sakurai, the city's chief spokesman, describes them as "like brothers."

Miyazaki, who now heads the Kobe Institute of Urban Research, worked for the city for 53 years. Sasayama has been in city service since the end of World War II.

"I've devoted all my life to Kobe," Miyazaki said. Sasayama seems intent on doing the same.