Island Voices
Now's time to diversify economy

By Shelly Mark

Hawai'i's best chance to overcome recession lies in activation of "the other 40 percent," such as natural resource management, technology and healthcare.

The September terrorism has dealt a severe blow to the national psyche and to a Hawaii economy that has been so heavily dependent on tourism, its major industry. Reductions in overseas air travel, fueled by fear and concern of potential travelers, have already negatively affected the industry and its employees.

Remedial action has been instituted and legislation passed, such as expanded capital improvements spending, a full-court press on tourism marketing, further business incentives and short-term employee support. It is expected that these measures will provide short-term relief and possible stimulation. However, it should be recognized that because of the mounting uncertainties of anti-terrorism activity, the heavy recessionary prognoses in Japan and possibly for the Mainland, and the fear of flying worldwide, restoration of industry growth and economic well-being will be a painful, long-term journey.

What to do? First, it should be acknowledged that for the foreseeable future, tourism will remain Hawai'i's foremost income generator and employment source, though no longer at the pre-attack phase.

Second, there is necessity and opportunity to accelerate measures and activity in what might be termed "the other 40 percent" of the economy that is not so reliant on tourism growth. In short, our response to difficulties is to fight back in terms of economic diversification.

The mission is to devise a strategic planning process for economic diversification in Hawai'i through a realistic assessment of Hawai'i's market opportunities and resource availability. Its long-term goal is to transform the economy from one that is externally prone to shock to one that is not necessarily shockproof, but rich in knowledge, proficient in technology and competitive globally.

Six target areas

Market assessment in science and technology studies has brought out six major areas for economic growth and diversification: information technology, biotechnology, healthcare and medical technology, natural resource management, defense and dual-use technology, and tourism diversification. Continuing assessment of Hawai'i's resource availability and capability can lead to other areas that can be strengthened or extended to realize market potentials in the New Economy environment.

However, to achieve diversification, technology should be viewed as a means to many economic development opportunities. This is as applicable to tourism as well as other sectors of the economy. The value of technology-based initiatives for economic development not only lies in establishing industries that develop high technologies, but also in promoting those that apply them.

For example, the federal government has mandated that defense appropriations should not only meet security objectives, but that technology developed or employed should also be open to commercialization.

Indeed, diversification must go beyond high technology. It means utilizing the knowledge it creates to increase firm efficiency and industry competitiveness, labor productivity and employee benefit. Diversification also means looking back at industries whose time may have passed, not only for lessons that can still be applied, but also in terms of growth opportunities in a new market environment.

Revisiting agriculture

For a good part of the 20th century, Hawai'i was a global leader not only in sugar and pineapple output, but also in the technology employed to establish that leadership. This is not to call for a return to plantation crops, but to utilize our inherent knowledge and expertise not only to develop new varieties and new markets, but to validate diversified agriculture as a valuable means of providing open space and scenic assets to enhance tourism development.

In addition, agricultural enterprise can be the basis for biotechnology, experimentation and production, for maintaining biodiversity, and as an antidote against global warming through an emphasis on proper environmental management. In this manner, tropical agriculture can be valuable for economic diversification.

What needs to be done

Overall, to meet this charge of economic diversification and rejuvenation, and expand the other 40 percent, strategic actions will be required.

In research and development:

• Attract talent and encourage quality research at the University of Hawai'i in selected areas of excellence that will provide economic benefits to the state.

• Foster and facilitate technology transfer of research results to commercial applications in Hawai'i.

In work force development:

• Upgrade work-force skills in scientific disciplines, engineering, computer science and other areas of diversified activity to the mutual advantage of workers and the enterprises involved.

• Reorient some professional disciplines such as law, accounting, corporate management and finance to meet specialized requirements of technology-based transactions and new outlets of economic diversification.

In infrastructure development:

• Provide the physical infrastructure, including affordable land areas, building space and telecom connections needed to achieve success with technology-based ventures.

In local business environment:

• Streamline regulations and provide incentives with appropriate environmental safeguards to support more entrepreneurial activity and reduce the costs of doing business in Hawai'i.

In capital formation:

• Develop reliable sources and outlets for sustainable venture capital investment, particularly for start-up firms.

In marketing and promotion:

• Strengthen the marketing and promotion of Hawai'i's diversified products and services, and "brand" Hawai'i as a serious location for technology-based companies and research activities.

In dual-use technology:

• Maintain close interaction with Hawai'i's congressional delegation to provide information on new or additional possibilities for federal financing in identified areas of dual-use technological development, with a focus on research and development advances and commercialization potentials in such areas as ocean science, remote sensing, disaster management, telemedicine, information storage, dispersion, and telecommunications.

Shelley Mark is a former director of the state Department of Business and Economic Development.