Posted on: Friday, January 10, 2003

Department to undergo big changes

• Lingle adds 2 more to Cabinet

By Sean Hao
Advertiser Staff Writer

With a new leader at the top, a leaner, more focused operation may emerge in the restructuring of the state agency charged with the herculean task of developing Hawai'i's economy.

In a way, the agency's name illustrates part of its problem. The Department of Business, Economic Development and Tourism, or DBEDT, is a mouthful for sure.

It reflects how the department, with its $107 million in state money, has become a potpourri of programs, some of which have only tangential links to its core mission of economic development.

Now the department, blamed by critics for failing to pull the state out of its sluggish economy, is scheduled for a makeover under Gov. Linda Lingle.

Her appointment of Ted Liu, a venture capitalist, corporate financial consultant and government outsider, signals that major changes are in store.

During the gubernatorial campaign, Lingle charged that the department had strayed from its primary task of developing the economy. The department, for example, houses several unrelated agencies with such far-flung responsibilities as public housing and land use.

"I'm concerned that having some of those attached agencies tends to detract from the focus and dedication of resources to (the department's) core mission," Liu said after named the department's new head yesterday.

"So we will have to look at whether or not there is some restructuring necessary of those attached agencies."

Signaling the direction he plans to take, Liu said the state needs to support growth of existing small business, develop the state's science and technology industries and diversify the tourism base.

Although announcements of specific changes to the department will come later, Liu said it made no sense for the department to administer the state Housing and Community Development Corp., the agency that operates public housing. Lingle has previously stated the agency would be better placed under the state Department of Human Services.

Another DBEDT agency, the Hawai'i Tourism Agency, is seeking to operate separately. Rex Johnson, president and chief executive of the Hawai'i Tourism Authority, said the agency's current structure requires too many approvals, preventing it from keeping up in a fast-paced business world.

"We're of the opinion that the more autonomy we have, the easier it is for us to at like a business within the government," he said. "So we'd like to be attached to nobody."

Running independently would require the tourism authority to hire additional staff to deal with personnel and budget-related matters now handled by DBEDT staff.

"We would have to figure out if it would make sense to pay that added overhead in exchange for the ability to get things done quicker," Johnson said.

Restructuring DBET, which will likely take legislative action, is on the agenda at the Capitol this session, said House Majority Whip Brian Schatz.

Schatz, chairman of the Committee on Economic Development and Business Concerns, said the department has grown into a hodgepodge of government operations.

"It's really the place agencies end up when legislators don't know where to put them," he said.

Schatz wants to hear discussion on combining some of the department's technology-related agencies, including the Hawai'i Strategic Development Corp. that helps increase venture capital financing and the High Technology Development Corp.

Other possible changes could include moving the Office of Planning to the Department of Land and Natural Resources, Schatz said.

Liu did not address relocating the Office of Planning or Land Use Commission, but he said some of the regulatory duties of the department's agencies conflict with its ability to advocate for the state.

Lingle has hinted at other changes that may be in store for DBEDT, including privatizing its marketing and business attraction duties.

A dozen people and about $1.8 million of the department's budget are dedicated to its Business Development and Marketing Division. They're charged with the marketing and support of local products such as coffee and nuts, promoting niche tourism activities such as environmental tourism and conducting outreach missions on behalf of the business community.

Liu has not said whether he thought shifting marketing money and personnel to private economic development groups would be the direction his department might take. But he said DBEDT's future success will depend on closer collaboration with the private sector.

"A smart public-private partnership that works is privatization," Liu said. "We don't necessarily have to go all the way towards spinning-off a service unless that is what the market calls for and requires."

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.