COMMENTARY
Diversification of our economy under way
By Mike Fitzgerald
President and CEO of Enterprise Honolulu (formerly the O'ahu Economic Development Board)
The recent Forbes article, and other recent critical national articles, are not all right and they aren't all wrong. But they provide a call to action.
Bruce Asato • The Honolulu Advertiser
There's a quiet revolution under way in Hawai'i, which may not yet have reached the awareness of local citizens, much less of mainland business journalists.
Recent articles in national publications about the business climate in Hawai'i have placed the state near the bottom in nearly every area.
This revolution of entrepreneurial start-ups, technology incentives, venture capital investments, business incubators and private labor union development initiatives demonstrate a shared sense of urgency among business, education, labor, nonprofit and government leaders to focus on Hawai'i's key competitive strengths in a focused and collaborative effort to diversify the economy.
This new, yet-unorganized emerging partnership, if supported and encouraged, can usher in a new era of economic self-determination in Hawai'i and will result in our ability to leverage our assets in coordinated efforts to retain and expand existing business, support entrepreneurs, as well as recruit companies and new capital investment to Hawai'i.
It's happening none too soon.
Three publications that rate business climates, and are noted for somewhat forgiving standards, aren't encouraging:
- The Corporation for Enterprise Development, Washington, D.C. (the most liberal), graded Hawai'i D for performance, F for business vitality, and F for development capacity in its "2001 Development Report Card of the States".
- The National Governor's Association recently contracted with Michael E. Porter, Harvard Business School, to do a comparative analysis of the states. Porter doesn't think Hawai'i is just an underachiever, he found us cruising along the bottom in nearly every category. According to the Harvard study, the 50th state is 50th when it comes to job growth, 48th in the amount of yearly growth in local paychecks, and 51st (behind the District of Columbia, too) in fast-growth (read high-tech) firms.
- And the comparisons don't get any better if you read "The State New Economy Index", a study of state economies as part of the Progressive Policy Institute's "Technology and New Economy Project."
Hawai'i's economic challenges, real and perceived, are widely acknowledged and continue to generate damaging, negative national media.
An honest response is difficult for those of us who live here and love Hawai'i, yet know the hard economic realities of the economy here. The economy isn't growing, and as a result of shrinking business revenues, tax revenues are declining, there are fewer jobs, and many of the jobs we do have don't pay enough to support a family.
It's time to create a new future of prosperity. There are challenges, but opportunities abound.
The new economy agenda
The most important question to ask ourselves is: "What do we want?" If we want a diversified, healthy economy that is creating good paying living-wage jobs for the people who live here, then most of the jobs will come from private profit-making businesses that are able to compete by world standards. The "business climate" necessary to make this happen has a more complex and extensive set of criteria than the old industrial model.
For the first time since the Industrial Revolution began, what now constitutes a "good business climate" in the new global information economy are the same criteria as a high quality community.
The most important factors for economic prosperity are: world-class education and training; modern infrastructure; balanced, stable and fair taxation; adequate, not obstructive regulations; and expedited permitting; available capital — venture equity and debt; university technology and R&D affordable quality housing; affordable quality child care; safe schools, parks and streets; diverse arts, cultural and recreational activities; a high-quality natural environment; support for diverse cultures, races and lifestyles; and community leaders committed to continuous improvement, who challenge the status quo.
That's not all. We must also agree that we want a healthy, growing, diversifying economy. This requires a shared vision and measurable goals, a new partnership of business, government, unions and education (K through university), training, and lifelong learning. Success requires an unequivocal commitment to continuous improvement and excellence measured by world standards.
To create the foundation for sustained competitiveness in the 21st century, we must understand the nature of our changing economy and design a framework adapted to our unique circumstances.
Hawai'i's uncommon strengths are well known to all of us. We also know that we have the entrepreneurial spirit and potential to grow industries based on these assets: biotech, telecommunications, film and digital media, call centers, diversified ag, healthcare, ocean, astronomy and space sciences, defense technology and military, as well as tourism, which will likely remain the largest.
More elusive has been transforming all these assets into the jobs, capital investment and business which will grow the pie and create living wage jobs and a prosperous, sustainable community.
These jobs will come from private, profit-making businesses that must be able to compete in the global economy, so we shouldn't lose sight of some of the positives that are under way: Since Act 221, the Technology Incentive, became law, the technology sector is the fastest-growing sector in Hawai'i — up 23 percent — and the number of technology sector companies has increased 43 percent. There's an influx of venture capital from Hawai'i and the West Coast.
Our universities, public and private, all have initiated entrepreneurial courses, internships and mentoring programs.
This presages the emergence of an entrepreneurial culture. Combined with the revival of the UH, the Medical School Biotech project, the successes of the Neighbor Island economic development boards in new technology start-ups, and agricultural diversification initiatives, the reality is that Hawai'i's economy has started to become diversified. There is entrepreneurial energy here with real successes creating a new momentum and positive change.
Even though the state Business, Economic Development and Tourism's new campaign, "Business Hawaii," has been criticized, it is accurate — economic diversification is happening and many businesses that are here do put a high value on the culture as part of the bottom line. Companies that don't will not likely ever be happy here, nor will new companies that don't have keen appreciation for the culture and the environment come here. That's reality.
New directions
There is a growing recognition among a cadre of leaders, public private and nonprofit, that we must initiate a collaborative process to build trust between the companies, organizations and agencies that make up Hawai'i's economic development community. There is heightened awareness and understanding that business development requires professional, competitive and sustained public-private partnerships with clear vision, goals and resources.
Worldwide, other cities and regions have successfully marshaled their resources for this same purpose with enviable results. The Neighbor Island economic development boards, the Hawai'i Business Roundtable, the Chamber of Commerce of Hawai'i, DBEDT, the Pacific Resource Partnership, the University of Hawai'i, the city Office of Economic Development, the Workforce Investment Boards and Enterprise Honolulu have all initiated efforts that begin a coordinated statewide economic development agenda. We are working to identify the roles, responsibilities and capacity necessary for more effective retention and expansion of existing business; the support of emerging entrepreneurs; and, the recruitment of new businesses and investment to Hawai'i.
We face real, complex and difficult challenges, some in government, some in business, some in education and some in the unions. The probable continued decline if we don't change, as well as the potential benefits if we do, are becoming apparent and urgent. Our environment, our values and our cultural diversity together with the emerging entrepreneurial spirit allow us to invent our economic future — to create and sustain a more robust, dynamic, diversified economy that benefits the people who live here.
