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After more than a year, Hawaii economy slow to diversify

  • CINDY ELLEN RUSSELL / CRUSSELL@STARADVERTISER.COM / NOV. 8 
                                “We’re going to go back to the same old ways of milking the tourism cow,” said state Sen. Glenn Wakai. People walk and gather along Kalakaua Avenue.

    CINDY ELLEN RUSSELL / CRUSSELL@STARADVERTISER.COM / NOV. 8

    “We’re going to go back to the same old ways of milking the tourism cow,” said state Sen. Glenn Wakai. People walk and gather along Kalakaua Avenue.

After more than a year of talk about diversifying Hawaii’s tourism-dependent economy, little progress has been made as isle tourism comes roaring back.

“We’ve learned nothing from our troubled year,” said state Sen. Glenn Wakai, chairman of the state Senate’s Energy, Economic Development, Tourism and Technology Committee. “And as we rebound quicker than anticipated, it seems like there’s even less discussion. … We really lost an opportunity in the past year to really think through what Hawaii’s economy should look like.”

The legislative session began with a State of the State speech by Gov. David Ige on Jan. 25 in which he called for a post-COVID-19 “Hawaii 2.0” economy.

“Every government, business and nonprofit organization must embrace digital technology to thrive,” Ige said. “We need to develop a clear vision for a more diversified and sustainable economy that is compatible with our culture and way of life. And that vision must be based on solid economic analyses. A post-COVID Hawaii cannot be a Hawaii as it used to be.”

Wakai — when asked for examples of specific efforts this legislative session to invest in or amplify industries such as aquaculture, technology, aerospace, alternative energy or diversified agriculture — said bluntly, “Nope.”

“We’re going to go back to the same old ways of milking the tourism cow. For how long?”

Wakai’s committee Monday did pass two nonbinding House resolutions that would ask the state Department of Business, Economic Development and Tourism to compile a list of Fortune 500 companies that might be willing to relocate to Hawaii and come up with potential incentives for them to move; and another that would request the Hawaii Community Foundation to organize a working group “to develop a public-private partnership model to prepare for Hawaii’s post- pandemic recovery.”

The goal would be to build on the collaborative work between government, philanthropy and the private sector that helped Hawaii respond to the COVID- 19-driven food shortage when thousands of families suddenly lost their incomes, said Micah Kane, HCF’s president and CEO.

“Food insecurity was a major issue going in, and it was exacerbated during the pandemic,” Kane said.

He hopes to build on those collaborations and possibly bring in more philanthropic investment from the mainland to address even more long-standing island issues, including developing affordable housing and diversifying the state’s economy.

“We need to build on that before it gets too far in our rearview mirror,” Kane said. “We should be able to do it while enjoying a very robust tourism economy. … We’re going to have to come together.”

Carl Bonham, executive director of the University of Hawaii Economic Research Organization and a member of the state House Select Committee on COVID-19, said Hawaii’s tourism industry resulted from years-long efforts to diversify an island economy that once relied on growing sugar and pine­apple.

The conversion to tourism also was driven by outside forces, such as the post-World War II boom and the development of air travel.

“It was planned out and was an effort that involved government and the private sector and took time,” Bonham said. “Now we’ve been talking about this (diversification) for 40 or 50 or 60 years. There was never any realistic reason to think that we were going to make dramatic changes over the last year. You have to look at this as a multiyear, multidecade effort.”

In the short term, Bonham said, “it’s still all about tourism. There’s no switch you can suddenly flip and diversify the economy.”

But Bonham said more efforts could have been made over the past year to better manage tourism, including limiting access to popular tourist sites such as Hana­uma Bay and Diamond Head.

“That’s the kind of thing we should have made big progress on when nobody was here,” Bonham said.

State Rep. Gene Ward (R, Hawaii Kai-Kalama Valley) flew to Maui on Saturday to give a speech and saw firsthand the Valley Isle’s tourism rebound when Ward’s office was quoted a rental car price of $850 just for one day.

Instead, Ward said, “we got picked up.”

Ward also believes that Hawaii wasted a year doing little to wean the economy off of tourism.

“Cynically, it’s the same old same-old: rhetoric, no action,” Ward said. “All promises, no delivery.”

Private-sector aerospace firms are interesting in working in Hawaii with a new era of space exploration underway — similar to Hawaii’s role during the early days of America’s Mercury and Gemini space projects. Wakai also said that Hawaii — being the closest state to the equator — is “primed for small space satellite launches.”

“We’ve lived off our good looks for so long,” Ward said. “Now we need to live off of our brains, the high-tech stuff. But we’re either numb or dumb. We should have prepped the economy for reentry and long-term survival. But I don’t see anything in the pipeline.”

Steven Bond-Smith, senior research fellow at the Curtin University business school’s Bankwest Curtin Economics Centre in Australia, has been studying Hawaii’s economy as an incoming member at UHERO and said it will be difficult for Hawaii to find a different industry to replace tourism.

“Places that are really small and isolated like Hawaii or western Australia or New Zealand — in order to compete with large conglomerated economics — have to specialize in one industry,” Bond-Smith said. “It also means that you’re exposed to external shocks like the pandemic.”

“Tourism’s not going to disappear,” he said. “It’s what Hawaii’s good at.”

But there are possibilities to train hospitality workers and businesses to diversify to other tourism markets, such as convention and business travel — or as a Hawaii-based market for travel to and from China and Brazil, Bond-Smith said.

“It’s putting the eggs in a few more baskets,” he said.

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