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Hawaii’s Commitment to Business: The Evidence is Clear

Hawaii’s commitment to attracting and supporting business is more than just talk, and the recent record speaks for itself. Last year the state:

- committed $30,000 to the multi-sourced financing of the University of Hawaii’s Pacific Business Center Program. Small businesses and entrepreneurs can tap in to the valuable resources of professors and researchers.

- granted an additional $100,000 for the Industry and Product Promotion Program and $500,000 for the Hawaii Capital Loan Program. Both these programs support small business, and both have been proven to return more tax revenues to the state than the programs cost.

- modified the laws governing the Land Use Commission so that body will no longer hear petitions on zoning changes of parcels of 15 acres or smaller. Over the past 20 years, petitions for these parcels have accounted for almost one-half the actions before the Commission. The action is expected to reduce the number of petitions by one-third to one-half; in short, fewer petitions mean faster permits.

The state has also devised a one-stop permit application center in Honolulu to accommodate the needs of the film industry, burgeoning thanks to the climate. the talent pool, and of course, the mystique of Hawaii.

Hawaii: A Mini-Melting Pot

Hawaii’s people are famed for the warm generosity of the “aloha spirit.” Many of the cultural influences come from Asia. Everybody belongs to a minority, sometimes two or three. That this mighty mixture works, on both personal and community levels, is a source of pride. “I’m 7/16th Hawaiian and seven other things,” says Luanna Burke, a recent graduate of the University of Hawaii. With a grin she recites her heritage: “Portuguese, British, Scottish, Austrian, Czechoslovakian, French and Spanish.” She looks up, worried. “Did I get Austrian? I don’t want to leave anyone out.” With such a diverse heritage, it’s no wonder that people here work well together and come to the workplace with the industrious outlook that is traditional in many Asian countries.

The Three Most Important Facts About Hawaii: Location, Location, Location

Honolulu is located equidistant from most of the major market centers in North American, Asia and Oceania. With the ninth busiest airport in the world, Honolulu is a hub for Pacific air routes, a gateway to the region with non-stop links to 17 cities in Asia and Oceania. This is 11 more than Los Angeles, 12 more than San Francisco, and 16 more than New York City. Even among Asian cities, Honolulu compares well, ranking third after Hong Kong and Singapore in terms of air access – and ahead of Tokyo.

Consequently, Hawaii affords a key advantage to the busy executive or entrepreneur who can leave aboard a night flight, sleep to Hong Kong or Tokyo, conduct a full day’s work, board another night flight and return to Honolulu without losing a business day.

Hawaii’s location also provides a time zone advantage that permits communication with cities in North American, Asia and Oceania during the working day. During a 7 a.m. to 6 p.m. business day in Honolulu, there is a six-hour overlap with New York, a seven-hour window of availability for Chicago, nine hours for the West Coast, seven hours for Melbourne, six for Hong Kong and Manila, and five hours for calling Bangkok or Singapore.

“Location gives you a market niche, and that’s very important,’’ says Andrea L. Simpson, a vice president of Honolulu-based Pacific Resources, Inc. For PRI, an independent energy company, the niche translates to just under $2 billion in a market that ranges from the West Coast to Southeast Asia and throughout the Pacific Basin. “From Hawaii, we can talk to New York the same day we talk to Tokyo. We use this to great advantage, whether it is making arrangements for procuring products, refining crude oil, or for shipping.

Living Costs: The Bottom Line

Living costs in Hawaii can be high but before assuming the worst, check these figures: One a base of 100, Honolulu is 94 to 97 in Los Angeles and 101 in San Francisco. That looks very good indeed when compared to 105 in Hong Kong and 135 in Tokyo. The cost-per-square-foot of prime office space echoes this, with Honolulu at $20-$30, and Hong Kong topping the list at $50-$70. And Hawaii has a tax base that compares favorably with other key Pacific Rim locations.

Education in Hawaii: Good Grades All Around

Remarkably, Hawaii is the only state in the union with a single, unified public school system. In 1984, 163,298 students enrolled in 231 schools in grades kindergarten to 12. Private schools, with tuition ranging from $250 to $8,520 annually, provide an alternative of internationally recognized quality. The state university system includes nine campuses, with a powerhouse reputation in fields as diverse as electrical engineering and astronomy. Most of the students, more than 21,000, are enrolled at the University of Hawaii’s Manoa campus, an area of Honolulu renowned for the number and intensity of its rainbows. There are four private four-year colleges.

Two other Honolulu education institutions can benefit business. At the public, non-profit East-West Center, scholars have been exploring the issues pertinent to nations on or in the Pacific Ocean. Found by the United States Congress in 1960, the Center receives support from more than 20 Asian and Pacific governments, as well as private agencies and corporations. At the Japan-America Institute of Management Science, managers from Japanese and American firms have been learning each other’s languages and business practices since 1972, when Fujitsu Ltd., of Japan founded this private, non-profit facility.

Hawaii and Culture: Beyond the Grass Skirts

The Hawaiian lifestyle? The catch-phrase is “casually elegant.” If that seems a bit vague, here are some guidelines. Every Friday is “Aloha Day,” when everybody sports traditional Hawaiian shirts or muumuus. Don’t let those bright flowery prints fool you. People work hard and afterwards they play hard. Short of ice-fishing, just a bout anything anyone has every considered doing in, on, or near the ocean is done here. Fitness reaches manic levels in the hours just before and after the work day. The local joke describes a child from out-of-state visiting her grandmother in Honolulu. After watching running pound out their laps of Kapiolani Park, the tiny tourist asks, “Is there a law that makes people run here?”

There is life beyond triathlons and water sports, though, as a glance at the entertainment columns of the newspaper will attest. Opera? Sure. Will it be Chinese or Italian? A night on the town? Choose: a sweaty rave-up at The Wave in Waikiki, dancing to local faves, or a quieter time with one of the many club acts that play the big hotels throughout the islands. Ballet. Hula. The Symphony. The Prince Kuhio Rodeo. The International Film Festival draws an array of folks to mix in the local audience. Tickets are free. Just about any cultural activity you could imagine is here. The problem is selecting the activity and the culture. To help you make an education choice, the Bishop Museum in Honolulu offers special shows, permanent exhibits, and demonstrations of traditional crafts of Hawaii, and other Pacific Island cultures.

“People here, in the main, support the arts,” said Elaine Zinn, the executive director of the non-profit Arts Council of Hawaii. This was the first state to set aside public money for the purchase of art. Hawaii ranks fifth in the nation in the amount of money it spend per resident for art and cultural activities. There are 144 cultural organizations throughout the islands, bringing in some $16 million. “The arts industries are among Hawaii’s top 21 earners,” Zinn says. “That’s $7 million above papayas.”






Hawaii: A World of New Opportunity

A Time Special Advertising Section
Beth Hughes
June 1986


The steep descent into Honolulu International Airport lurches you awake. Somewhere between the movie and the second meal you fell asleep. No wonder. A trip for the record - books, bouncing about looking for possible locations for a new Pacific Rim office. “Thank goodness we scheduled the trip home with R&R in Hawaii,” you think to yourself as you stretch a body numbed by accumulated jetlag and the strange beds of the past two weeks. As Diamond Head comes into view behind the steel-and-glass towers of downtown Honolulu, you jot down a summations of your trip. “Taxes! Cost! Politics! Culture Shock!”

Through customs, you emerge to the sunshine and breath deeply. Plumeria and ginger scent the soft trade-winds sweeping away the fumes of a busy airport. Looking around, you notice lots of business-types. It hits you. They know something you just figured out.

Hawaii is changing the way it does business. That change is for the better. Sure, there was bad press about excessive local regulations delaying projects that wriggled free of the state’s red tape. But rather than discouraging folks here, the negative comments got them all fired up to do more than just yammer about the problems. The attitude is “No more studies. Let’s get this show on the road.” While it’s tough to roll up the sleeves on an aloha shirt, that’s what’s happening. Public sector, private sector, academia, the community at large, they’re in this together.

No matter what you’ve heard about the easygoing pace of life in paradise, in just two years the state has taken some impressive action. In part, the motivation comes from a slowdown in the local economy, one that reflected national and international trends during the 1980-84 period. During that time, however, Hawaii’s official unemployment rate was among the lowest in the United States. Hawaii, unlike 40 other states, balanced the budget in those years without raising taxes.

“The really big thing we have to offer is the fiscal condition of our state,” says Governor George R. Ariyoshi. “Our nation has gone through a very rough period. Many states have been in a chaotic condition. But in Hawaii, we manage our resources very carefully. We’ve avoided these ups and downs. We’re encouraging business. We have many new programs to provide support to normal businesses as well as agriculture,” he says.

The radical improvements—everything from a streamlined permit process to an increased utilization of the resources offered by the University of Hawaii—are receiving good notices.

Inc. magazine rated Hawaii 20th, up from 35th, as a place for small business to succeed in America. State figures show some 21,000 small firms operate here and provide about 90 percent of the gross state product. Half of those businesses employ four or fewer people: 98 percent have 100 employers or fewer. A national rating placed Honolulu 5th among 74 cities as a good place to do business. So much for the image of businessmen drowning in red tape on the regulatory reefs.

What brought about the change? Partly it is the result of a shift in the structure of the state economy. “We are now a small business state,” said Kent Keith, director of planning and economic development. “Our laws and regulations were enacted years ago when the economy was dominated by a few big companies. Workers’ compensation, unemployment insurance, permits and taxes affect small companies differently than big companies. More small businesses and their lobbying organizations are speaking up and raising these concerns as business climate issues. This is appropriate.”

Change also came with the realization that “any economy, no matter where, cannot survive on one industry. Tourism is an industry, and like the auto industry, the shoe industry and the textile industry, it cannot support an economy very long. Our aim is not to discredit the visitor industry. But the problem we see is that the other industries are declining. It could spell disaster if anything happened to tourism,’’ said Fred Sexton, director of the Economic Development Corporation of Honolulu. Rather than pick up the pieces, the state is encouraging diversification of the local economy, a move that is leading Hawaii into such future-focused areas as aqua-farming and astronomy.

One of the changes Hawaii businessmen made was to work for a restructuring of Hawaii’s unique land laws. They realized that many outsiders believed, incorrectly, that it was impossible to purchase land here. True, the original system saw a home or business owner leasing the land under his building from one of the big land companies. That’s changing. Another factor in the change has been that old bugaboo, democracy in action. With their new attitude towards business, state and local politicians are responding to a recent public opinion survey conducted as part of a revision for the state plan. Hawaii’s residents want more economic diversity. People know the problems business encountered here, but they are also aware of what the state can offer business. “There are opportunities here and they’re not to hard to identify. People are forcing government to look forward,” Sexton says.

This year, the state legislature will be considering action to eliminate the general excise tax on a variety of goods, as well as the consolidation of all land use permits under one county department to guarantee processing within 90 days from receipts of the application. The legislators will also be asked to create a venture capital fund and an “innovation center’’ at the Manoa Campus of the University of Hawaii.

Action in these areas would build on the state’s recent pro-business record. It has already created a network of small business services and obtained a total of $850,000 for small business loans, product promotion and informational services, according to Keith.
In 1983, the State Department of Planning and Economic Development provided $80,000 as its share of a 50-50 matching grant program with the Chamber of Commerce of Hawaii for the Chamber’s Small Business Information Service. Since then, the service has been able to operate entirely on Chamber monies.

In 1984, DPED established its Small Business Information Service, with three staffers who do nothing but work with small businesses. The project began with a $45,000 state grant and recently scored a $95,000 federal grant to continue operation. “I sense a lot of attention to business and the difficulties businesses have here,” said Angela Williams, director of the Pacific Business Center Program at the Mania campus of the University of Hawaii. “I don’t think you can blame the state too much because in the past, business people haven’t lobbied the legislature diligently. People who were anti-business were there.”

Williams described her program as “brokers of university expertise. I think you’re going to see more and more universities across the country moving in this direction. All the professors’ research is published in journals. The Japanese are reading them selling our own technology back to us. We’ve got to turn this research into actual products.”
Local businesses and local folks thinking of setting businesses come to the center for assistance in everything from marketing strategy to package design. Williams directs the inquiries to the appropriate professors and graduate students. The center also works on the reverse route. “We help the University commercialize the results of research project and evaluate their commercial value. Too often, scientists don’t have a good grasp of how much something is worth, or how to market it,” she said.

Three hi-tech parks are on the way with one, in Mililani, “that should be up and running by summer 1987,” said Ray Tsuchiyama of Oceanic Properties. “A lot of people stereotype Hawaii as a place where you cannot buy land. Well, there it is, at the hi-tech park. Fully improved land for sale. We had a very, very smooth approval process with the state. We’re following the state’s lead in this. The prices are competitive with Silicon Valley, at $11 a square foot, fully improved,” Tsuchiyama said. (He might want to add that wages here are 18 percent below those paid in California.)

All this is solid evidence that Hawaii wants to work well with the businesses already here and those who will move here. Sure, Hawaii isn’t the perfect place for every business. Find one that is. A feed lot on 42nd Street? No. Heavy manufacturing in Hawaii would have the same chance of success. Here, the key is lightweight products with high values, good management and a reason to locate near the Pacific Rim markets of Asia and Oceania.

Hawaii has the people and the location. Honolulu, with a population of over 865,000, is home to about 80% of Hawaii’s people. It is the eighth fastest growing major metropolitan area in the United States. The cultures of East and West have been meeting, mingling and getting along just-fine-thank-you here for some 150 years. Business is done with Western firms in the Western manner and with Asian firms in the Asian manner, based on personal relationships such as those Governor Ariyoshi and other local leaders have built over the years. An example of this came last November when Honolulu’s mayor, Frank Faso and other community leaders ventured to Australia and Japan to attract business. He said “Come to me directly. We’ll help you find a place to get settled on Oahu. I assure you we’ll cut the red tape.” “That made quite an impression,” said Galen Fox, the mayor’s executive assistant.

“When we talked about doing business here, they were surprised to find we have attributes that are business-related,” said Sexton, director of the Economic Development Corporation of Honolulu. “Half the battle is telling them there’s something beyond Waikiki.”

Andrea Simpson of Pacific Resources cites other advantages for locating in Hawaii. “We tend to be able to understand how to do business with the each better. We have the cultural diversity, so we’re used to this. We also have a language advantage here. We have resources at our fingertips for interpretation and assistance, for printing in different languages.”

The lack of an international banking system is a problem, Simpson pointed out, but “that’s changing. And there definitely are delays and red tape. But to tell you the truth, we haven’t had many of the problems other companies have had. We’re a success story that would attest to the helpfulness here.”

There’s another perk to being a Hawaii-based company, one that Simpson reveals with a smile. “In the past, our management has said ‘we kind of wish we could travel on a Hawaii passport.’ Because of Hawaii’s mystique, it’s easier to get a foot in the door. People love to stop in Hawaii on their way to and fro. The hospitality here is just marvelous. The Asian cultures do know how to entertain properly, and in business, that is absolutely essential.”

While there will always be a place for sugar and pineapple in the state’s agricultural plan, state farmers and leaders are betting on the blossoming of such diversified options as papayas, macadamia nuts, coffee, flowers, foliage plants and guava. This means Hans-Peter Hager, owner chef at Edelweiss in Waimea, on Hawaii, can fulfill a diner’s request for a meal featuring local products with an appetizer of oyster mushrooms grown in Hilo, a main course of local papayas stuffed with locally raised veal prepared in a stroganoff, and of course, world renowned Kona coffee.

According to State Department of Agriculture statistics, in 1983, the receipts from all crops totaled $83.7 million, 13 percent above the 1982 receipts of $740.5 million. The $837 million includes the processed value of sugar and pineapple and $6.8 million in government funding for various programs. Molasses and sugar amounted to $410.2 million and sales of pineapple to $219 million. That’s 75 percent of the total when the crops’ receipts are combined. About $199 million came from diversified agriculture, including $86.4 million form livestock.

Another major factor in Hawaii’s economy is the military. In the past, the state has relied on its strategic location to attract military contracts. Now, leaders realize they can bid for additional military contract and they go after them aggressively. The military accounts for more than 20,000 civilian jobs – about 5% of all non-agricultural jobs in the state. As of July 1, 1984, 60,000 members of the armed forces and 67,100 dependents called Hawaii home.

Tourism ranks as the state’s number one industry and will continue in the position for the foreseeable future. However, patterns of the visitor industry are changing: m ore repeat visitors; more tourism on the islands other than Oahu, which enhances the economy of the state and each island.

The aloha tradition of hospitality contributed to the popularity of Hawaii as a vacation spot. Now, with the decline of the monolithic sugar and pineapple industries, the visitor industry is the state’s largest moneymaker. After several sluggish years, developers are building resorts again, changing their focus to create spectacular hideaways off Oahu.
Business and tourism work together to promote the islands. “Hawaii still conjures up visions of that dream vacation,” said Gordon Kai, of Mauna Lani Bay and the other two Emerald Hotels. “No matter what we do, there’s always that in the back of their minds. Yet we’ve found when professional groups meet in Hawaii, participants are more motivated to start early and work efficiently throughout the day so they can have a little time off in the afternoon.”

Just over ten years ago, the state created the Natural Energy Laboratory of Hawaii on 322 acres at Ke-ahole Point on the Kona coast of the Big Island, as locals call the island of Hawaii. Off the point, the ocean floor drops deeply and steeply.

Through a 6,000 foot-long-line, pumps, operating at the rate of 1,000 gallons a minute, such up the cold, germ-free water that is rich in nutrients. This kind of water exists only in tropical oceans where there is a year-round difference in the temperature of the surface and the deep. To find this kind of water near an inhabited landmass with an international airport is akin to a wet Sutter’s Mill.

The NELH seized the natural advantage to become the only place on the planet where this water is available for research experiments and commercial ventures such as the nearby Hawaiian Abalone Farms, Cyanotech’s cultivation of spirula, a plant source for the complex of B vitamins and the lobsters.

Last summer, the folks at West Coast Lobster in Oceanside, California “were ready to throw in the towel,” said president David Weiner. As one of the state’s largest suppliers of Maine lobsters, he knew it was becoming increasingly difficult for East Coast fishermen to trap the diminishing stock of lobsters. After some research and development activity, the company had the technology to raise lobsters on a commercial level. Taste tests at San Diego restaurants proved diners couldn’t discern a difference between wild and domesticated lobsters.

The company investigated possible lobster-farming sites in Mexico. “We had problems with just being down there,” said John Handrus, a company partner who is also a biologist. And after years of confronting California’s regulatory morass, Weiner and Handrus were ready for the towel toss.

In mid-August the company wrote the NELH. “In early September, we went out to Hawaii. We got an approval in concept September 6. We were financially approved on October 10,” said Weiner. “We felt kind of silly, wearing suits when everyone else was wearing Hawaiian shirts, but they were a lot more straightforward, and there was a lot less red tape,” Handrus said.

“They gave us the guidelines. Hawaii basically held our hand all the way through the process and that was good,” Weiner said.

Lobsters, brought from Canada to mature in Ke-ahole Point tanks, should reach the Hawaiian market by Christmas. Looking ahead, Weiner sees a ready market for what should be an annual yield of 3.2 million lobsters in five years. He anticipates few problems finding workers for the labor-intensive project – “There’s a large workforce trained in aquaculture already and we plan on drawing on that,” he said.
Aquaculture fits into the state’s efforts to encourage the expansion of Hawaii’s existing $200 million hi-tech industry, which include research facilities that attract astronomers from all over the world to Mauna Kea for planetary, satellite and lunar ranging studies at the Institute for Astronomy.

There’s the Research Corporation of the University of Hawaii (RCUH), a non-profit enterprise created to develop projects directly or as joint ventures with government agencies, international organizations, foreign nations or private businesses.
The Physical Electronics Laboratory at the University of Hawaii supports electronic device education, research and development on novel electronic sensors targeting industrial needs.

The Pacific Biomedical Research Center (PBRC), the Hawaii Institute of Geophysics and the Look Laboratory of Oceanographic Engineering also tie in with the hi-tech industries that have a long history in Hawaii.

On the Big Island, the NELH sites is located just a few miles from some fish ponds once maintained for ancient Hawaiian royalty. These ponds are preserved on what are now the grounds of the Mauna Lani Bay Hotel, a luxurious, isolated resort, where weekend activities for guests include the usual – aerobics, golf, tennis, swimming; the usual for Hawaii – helicopter tours of live volcanoes, lei-making, wild boar hunting; and, the truly unusual for just about anyplace – feeding the fish. Like the awa following the shower of trout chow around the pools, intrigued hotel guests trails the hotel’s resident Hawaii historian, Kaniela Akaka, as he feed the fish and chats about the ancient origins of the royal fish ponds. Guests, already goose-bumpy from watching eels slither out from their muddy hideholes, react with shivers to Akaka’s good-natured revelation that recent haul from the ponds included a 49-pound barracuda. “That shows you how good life is in our ponds,” Akaka said. (Big fish are happy fish.) The ponds, with other areas of the resort, are on the National Register of Historic Places.

Tapping into its natural resources by developing industries such as aquaculture is what Hawaii does best. At a 1984 state-sponsored symposium on hi-tech, Dr. David Morrison of the University of Hawaii said: “Most of the population of the world lives in tropical climates; most of the population lives in countries that poor in fossil fuels. Much of the world is adjacent to the ocean, and Hawaii is the natural window on a large part of the world for the United States. It is the place where we should test our research activities and should develop the techniques which we can export to the rest of the world. We have the capability here of doing things no one else in the United States can do, but which are of tremendous importance and have tremendous potential markets in the rest of the world.”