Alaska's key industries: a crystal ball into 2004.

• Author: Martin, Gary L.
• Position: 2004 Industry Forecast

Forecasting is a frustrating challenge at best; whether it is in the sports world or the business world, it takes a very knowledgeable and brave person to make predictions for an entire industry.

Leaders from 18 key industries in Alaska come forward and take their best shot at predicting what kind of year their business communities can expect to have in 2004.

Overall, most forecasts came in on the positive side, expecting this year to be a good one for business.

COMM-TECH

Liane Pelletier

President and CEO

Alaska Communication Systems

The model for "telecommunications of the future" is rooted in customer expectations that call for service that is seamless and consistent, whether home, work or elsewhere. If that is the customer's expectation, then the telecommunications company of the future must integrate its approach to customers. That takes both integration at the experience level as well as integration at the technology level.

Looking at the service experience fitting for home, work and elsewhere, we have to look to information processing, in the back office, that lashes together disparate environments and allow companies to recognize and treat the customer on an integrated basis. Looking at the technology that supports home, work and elsewhere activities, we have to look to wireless expansion, voice packetization, device miniaturization, increased battery life, sharper displays and operating systems that maintain seamlessness when users might be crossing networks such as cellular, DSL and WIFI. Such technology and service advancements will dramatically change the way we live. People want to be able to connect from wherever they are, and they want to be able to do what they normally do at home or at the office.

Given Alaska Communications Systems has assembled a broad asset mix--wireline, wireless, voice and data as well as an entertainment partner, we intend to be recognized as a future-proof telecommunications service provider.

CONSTRUCTION

Brigitta Windisch-Cole

Labor Economist

AK Dept. of Labor

In 2003, the construction industry turned in a stellar season. Performance was up in all divisions of the industry. A healthy mix of public, commercial and residential construction contributed to the industry's best season since 1985.

Activity should continue to be strong in 2004, although activity could head down to a lower but still sturdy level. Public construction is expected to remain strong because large projects such as the airport and multiple military projects will carry over to next season.

Higher mortgage rates could, however, put a damper on residential building. Commercial construction may not reach its 2003 performance because many projects were completed in 2003. But hotel construction and expansions will continue.

A few other larger commercial projects will start this year and the beginning of construction of the Pogo Mine remains a possibility. Although it is a high-dollar project, its impact will be soft at the start-up phase and gain strength in subsequent construction phases.

Fairbanks will remain a hot spot for construction activity and it is possible that performance locally will be up over the 2003 season. Military construction, the museum expansion, other projects and upcoming road jobs show the strength of public-sector involvement.

Retail, warehousing and hotel expansions are ongoing projects in the commercial sector. But as elsewhere, activity in residential construction will be influenced by mortgage rates.

ENVIRONMENTAL

Crystal Nygard

CEO, PSI Environmental & Instrumentation

LLC

The environmental and safety industries have more in common than some would like to comment on, besides the fact that for most of the time, one person with an organization, is responsible for both the safety and environmental programs. This is true for both the private and public sectors.

Whereas our government identifies problems, implements regulations and enforces them, they too realize the importance of compliance.

The local, state and federal governments govern the laws; either way they can fuel emotions that drive this industry both positively and negatively.

The regulations enacted will not disappear, but the education of people from the ground floor up will only increase. This means that at all levels of an organization, the emphasis of protecting the environment, and in a safe manner, is of the utmost importance to development; that means taking the time to plan, communicate and evaluate the process as a development proceeds.

The public will continue to receive information about the environmental and safety industries that are opinions, not fact, theory, not practical interpretations, all based on a fine line of interpretations and how their issue pertains to the regulations. Fortunately, this new administration, both at federal and state levels, values the opinions, and facts of progress, from these industries and is mandating the government to work with industry not against industry.

This means sitting down and talking about the federal regulations and how important it is to have the state of Alaska write exceptions and local interpretation to the federal protocol. For example, the transportation of hazardous waste must be completed 45 days from the time the generator signs until the final treatment, storage and disposal facility (TSDF) receives the material.

In the middle of summer when there are numerous shipments, it is unusually not a problem. However, in the middle of winter, when shipments are not as frequent, 45 days can be exceeded, and then the generator must send a letter to the Environmental Protection Agency as notification. This is one example of a regulation that needs to be re-examined by allowing industry to comment and have a dialogue with those who enact the laws.

FINANCIAL

By Marc Langland

President

Northrim Bank

Thanks to low interest rates and a strong economy, Alaska's financial institutions saw a banner year in 2003. We think that growth will continue into 2004, though possibly at a slower rate.

Near record-low interest rates last year enticed thousands of Alaskans to invest in new homes or to refinance existing loans. And because the economy is strong, Alaskans are demanding loans that are needed to fund growth in their businesses.

We don't expect interest rates to increase substantially in 2004, in part because it is an election year. However, much of the industry's continued success relies on how and when our state leaders handle the ongoing budget deficit, a key factor of current and future economic growth. The uncertainty of a sustaining budget adds a high degree of uncertainty in the minds of both individuals and business owners when making financial decisions.

Another key factor for continued growth lies in the natural gas pipeline. If this project is treated favorably in the Congressional Energy Bill, Alaska's financial institutions, as well as virtually every other industry operating in the state, could see long-term growth opportunities.

FISHING

Gunnar Knapp

Professor of Economics

UAA

Institute of Social & Economic Research

Forecasting is notoriously difficult for the Alaska fishing industry.

Looking ahead to 2004, as every year, the only thing that we can be sure about is that there will be surprises. What matters most for the fishing industry each year are catches and prices.

As of mid-November 2003, the biggest catch change on the horizon is the possibility of a much larger sockeye salmon harvest in Bristol Bay. The Alaska Department of Fish and Game has projected a 2004 Bristol Bay catch of 34.7 million fish--which would be more than double this year's catch of 14.9 million fish.

In our federally managed groundfish fisheries, including the huge Bering Sea pollock fishery, the catch quotas for 2004 are about the same as 2003. Catch quotas and projections for other fisheries haven't been released yet: the best guess is that 2004's catches will be similar to 2003.

What about prices? Fish prices are volatile and difficult to predict. Markets could change a lot before next summer's salmon season. A big Bristol Bay catch--if it happens--could further depress sockeye salmon prices, throughout Alaska. The big 2003 pink salmon catch could lead to a buildup of canned pink salmon stocks, which would be a drag on next year's pink salmon prices.

On the positive side, in recent months the value of the Japanese yen relative to the dollar has been strengthening. That could help those Alaska's fisheries, which depend heavily on the Japanese market--including sockeye salmon, herring, sablefish and pollock, because it increases what Japanese buyers can afford to pay more in dollars.

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