A Time Special Advertising Section
Beth Hughes
June 1986

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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.”