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Many Predict Golden Future for California Despite Recent Woes

April 14, 1992

LOS ANGELES (AP) _ Recent wailing over the impact of defense cuts tends to drown out the many voices who believe California’s economy will remain golden in the long run.

Optimists acknowledge the short-term pain caused by Pentagon cutbacks. But they add that California’s troubles - and opportunities - go far beyond those posed by a single declining industry and the current recession.

They see California remaining a Pacific trading hub where small- to medium- sized businesses prosper. They say the state will thrive in such areas as entertainment, casual fashion, auto design, computers and bioengineering.

Rick Merrill, president and chief executive of Prudential California Realty, notes that California in the past has weathered the losses of large industries such as steel and rubber production.

″I remember growing up here, the aerospace layoffs in the mid-1970s, when you had aerospace engineers pumping gas. And yet California recovered and diversified into smaller businesses,″ he says.

Thomas C.K. Yuen attributes part of his company’s success to its home base in Irvine. The Hong Kong expatriate founded computer maker AST Research Inc. with Pakistan native Safi U. Qureshey 12 years ago.

The two had less than $2,000 when they started AST in Yuen’s Santa Ana garage. Quick to develop products and penetrate foreign markets, AST’s sales will top $800 million this year.

″You cannot overemphasize the advantages in coming years of the stronger Pacific economy,″ Yuen says, praising California’s high-tech expertise and access to Pacific markets. Nearly half of AST’s sales come from abroad, more than 12 percent from the Far East. AST is No. 1 in PC sales in China and Hong Kong.

Neither he nor anyone else predicts an immediate recovery for the state’s economy, which has also suffered from a depressed construction industry, stagnating government employment and consolidation in the banking industry.

The February jobless rate was 8.7 percent, compared with 7.3 percent nationwide.

The UCLA Business Forecasting Project reported last month that California will watch from the sidelines this year as a slow national recovery begins. That would mean collective tough times for more people than live in Canada.

David Hensley, the head of the usually pessimistic forecast, recently prepared a worst-case scenario under which defense cuts would result in 184,000 total job losses by 2001.

However, Hensley says defense cuts ″aren’t the end of the world″ and will not preclude an eventual recovery in the mid-1990s.

Remy O’Neill, the owner of the 22,000 square-foot Pacific Fabric Reels factory in Mira Loma, has 11 workers who make winding boards for fabric bolts and cardboard spools for lace, ribbons, auto trim and the like.

Ms. O’Neill says the company had its biggest fiscal year ever in the period ending Nov. 30. She attributes part of the boom to the recession: People are making their own clothes to save money.

Beyond that, she says California’s huge and increasing Asian and Hispanic populations sew more. And the fabric industry’s sales to Japan, Australia and South America are booming.

Joel Kotkin, an author, lecturer and journalist, mocks those who fear that high costs and overregulation will drive business out of California.

He predicts reforms in worker’s compensation law and revisions allowing ″one-stop shopping″ for environmental permits will defuse much of the criticism from business.

He says intelligent business people find five reasons to stay for every one to leave.

″If your idea of culture is a VCR and Dennys, then you probably should move to Utah,″ Kotkin says. ″Me, I don’t want to live anyplace where you have to go to the supermarker freezer section to get dim sum.″

-92 0015EDT

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