Staff writer CHATAN, Okinawa Pref. -- The music meandering from Rinken Teruya's sea-front live house is a catchy, vibrant blend of sing-along pop and Okinawan folk song.

Rehearsing inside is a group of young Okinawans whose performance in the evening can be heard by millions worldwide when the gig is transmitted over the Internet, said Teruya, president of ajima inc., a live house/recording studio/restaurant complex. "You can get a taste of Okinawa from just about anywhere."

The American Village in Chatan was built on the site of a former U.S. military airstrip, and it represents for many Okinawans what can be achieved if bases are returned.

The mixing of past, present and future is symbolic of ajima's ideology, which is dedicated to promoting Okinawan bands and venture businesses using information technology as a key ingredient.

Based in the town of Chatan, a 50-minute drive north of Naha, Teruya nicknamed ajima "North Valley" -- a direct translation of "Chatan" -- in recognition of its ideological similarities with Tokyo's so-called Bit Valley.

" 'Ajima' means 'meeting point.' This company is a space for people to gather and exchange ideas, about music and about business," Teruya explained.

"These people are the seeds of Okinawa's economic future."

"Ajima" is also a suitable epithet for Okinawa, a prefecture aiming to become Japan's meeting point for exchange and cooperation in the next century.

Since Okinawa's reversion to Japan in 1972, the government has implemented three "promotion and development plans." The objective of the final plan, which runs to 2001, and of the prefectural government's "cosmopolitan city formation" project set to succeed it, is to prepare Okinawa to become Japan's hub of international exchange and cooperation through the development of returned bases.

Teruya's complex is located in American Village, a 23-hectare urban resort with cinemas, bowling alleys and a shopping mall. Formerly a U.S. military airstrip, it is viewed by many here as a model of what can be achieved if the military facilities are returned.

"For the realization (of a self-sufficient economy), we have to develop Okinawa's economy ourselves, from within," Teruya said. "Okinawa has many areas of business that can only be developed here. Each is a key to our future."

Okinawa's music industry already has unlocked a treasure chest of local talent. An almost disproportionate number of Japan's best-selling pop artists in recent years hail from the island prefecture -- Namie Amuro, Da Pump, MAX, Speed and Kiroro, to name a few.

Yet, while annual revenues from Amuro's CDs are reportedly greater than those generated by Okinawa's famed sugar cane industry, when it comes to appealing to a global audience, these artists are far from being "stars," said Masayuki Makino, president of Okinawa Actors School, which nurtured each of the above-named artists to fame.

The school's unique educational environment encourages students to move away from Japan's traditional educational values, to express themselves and look beyond Japan's "limited borders." Makino says he believes Okinawans in general lack this global perspective, and his "successful" graduates have, in this sense, been failures:

They appear satisfied simply with their domestic fame.

"Okinawans have no courage. Okinawa used to be a nation that could manage itself, protect its people and cooperate with other countries. We have to find out how to regain the courage to look outward."

Charles McDermott, of the American Chamber of Commerce in Okinawa, says a lack of courage in Okinawa's business circles is due to a 150-year absence from international trading.

"We don't need payoffs from Tokyo, we need deregulation so we can become competitive in the (Asia-Pacific) region," he said.

Business experts say heavy regulations and high sea and air freight rates in Japan have been a major barrier to Okinawa's economic development.

They are also a barrier to McDermott's vision of Okinawa as a potential hub for "fulfillment centers" that could coexist with its growing "call center" industry -- a trump card in the local government's attempts to develop Okinawa as Japan's IT hub.

There are currently 14 call centers employing around 2,000 people in Okinawa. Each company receives an 80 percent subsidy on connection fees from the local government.

A similar subsidy for tangible goods would be a boon for business in the region, McDermott said. "With an 80 percent domestic freight subsidy, Okinawans wouldn't need confidence to trade with foreign companies. They could just be facilitators."

With call centers providing intangible e-commerce services such as marketing and order-taking, fulfillment centers could then provide tangible services such as order-sorting and shipment to mainland Japan, McDermott said.

In the United States, the fulfillment center industry is estimated to grow from $6 million to $24 billion within the next four years, he added.

But Japan's domestic freight rates are a major disincentive, with rates from Naha to mainland Japan higher than those from, for example, L.A. to Yokohama, he said.

"Our location here is strategic for trans-shipping and shipping, but we're so regulated we can't compete with Singapore or Hong Kong."

However, indirect trade between China and Taiwan using Okinawa as a trans-shipment point has nonetheless grown in recent years. Last year over 1,500 "clearance" ships passed through customs at Okinawa's ports, according to Hiroshi Kakazu of the Okinawa Development Finance Corp. A few years ago there were around 100, he said.

Kakazu is currently promoting the creation of a trade zone incorporating Taiwan, Okinawa, Kyushu and Shanghai "where we can abolish tariffs and regulations and freely exchange trade in this area," he said.

Regarding restrictions and corporate tax levels in Japan, Kakazu said: "(Taxes) are high compared with Hong Kong or Singapore, but (in Okinawa they are) half that of mainland Japan. So it gives incentives."

Hiroya Yoshikawa, an economics professor at the University of Okinawa who was largely responsible for opening Okinawa's first shipping lane between Naha and China's Xiamen in 1994, has long been an advocate of promoting a "relationship of interdependence" between Okinawa, Japan's mainland, Taiwan and China, the two trade centers closest to Okinawa.

Okinawa's geographical location -- often seen as a disadvantage due to its relative isolation from major economic centers -- its natural resources and niche industries can help reinstate the prefecture as a center of trade for the Pacific Rim and Western Pacific region, he says.

There are a number of local industries already taking advantage of the prefecture's geographical proximity to Southeast Asian economies, Yoshikawa added.

One company producing Ryukyu glass, for example, is exploiting cheaper labor in Vietnam to produce the popular traditional glassware. This is then finished and sold in Japan.

Although small in scale, niche industries such as health foods are increasingly in demand on international markets. Producers of "nuchimasu," a natural salt with a high mineral content, add to its value by emphasizing Okinawans' healthy image and unequaled longevity, he said.

Meanwhile, the prefecture's natural resources, such as its subtropical climate and pristine beaches, are already a proven success. Some 4 million tourists visited Okinawa in fiscal 1998 -- a 10-fold increase over the 26 years since reversion.

Yet, future success at the international level will depend on the prefecture's ability to lure foreign businesses to operate here -- something it failed to do upon opening its two free trade zones in 1988 and 1998.

"When Okinawans have a pie to share, they try as much as possible to share it among themselves. (To grow an economy) they have to make that pie bigger. To make the pie bigger, they have to share it with people from outside."

Today tourism is a major earner for the prefecture, behind only public expenditures and, according to some figures, base-related expenditures, in terms of gross prefectural profit.

Yet, despite Okinawa's favorable location, tourism has remained a largely local affair, with visitors from Japan's mainland accounting for around 95 percent of the total.

"(Hotels) end up relying on bulk bookings from the mainland instead of looking elsewhere," said Moritake Tomikawa, professor at Okinawa Kokusai University. "When Taiwanese, for example, try to make a booking a couple of months in advance, they can't get in."

Taiwanese made up 86 percent of Okinawa's foreign visitors in 1998, a figure that some industry insiders believe could be quadrupled if Okinawa's tourism industry offered greater variety and if Tokyo responds to requests for a no-visa system for Taiwanese and other visitors from the region.

Tomikawa said Okinawa tourism should make available appropriate facilities for Taiwan's "super rich," who are showing an increasing interest in the resort potential of Okinawa.

Yet, complaints from Taiwanese visitors are rife and threaten future prospects, Tomikawa said. It starts when they arrive at Naha International Airport, where there is no foreign currency exchange service.

"Okinawa is not set up for the variety (of things to do and buy) desired by overseas visitors," Tomikawa said. "Hence, there are very few who come back for a second visit."

Tomikawa believes that while the dream of regaining Okinawa's great trading renaissance of the 14th to 16th centuries is hindered by Okinawa having "absolutely no international network," tourism is one way to draw attention back to the prefecture.

As one possible way to add variety to Okinawa's tourism and also greatly reduce its reliance on public funds, he cited the development of a "wellness industry" that capitalizes on the various factors that contribute to the healthiness of native Okinawans.

"When you hear talk about Okinawa's economy it's almost always pessimistic. But in tourism and the wellness industry, I can't help seeing a ray of light."