Posted on: Sunday, January 28, 2001
Helping ourselves
Advertiser Staff
After struggling through nearly a decade of economic downturn, Hawai‘i has taken several steps in recent years to shore up its economy:
Tourism • The Hawai‘i Tourism Authority, formed in July 1998, is now supported with $60 million, the largest dedicated amount ever, to promote Hawai‘i tourism. The Hawai‘i Convention Center, opened in June 1998, adds to strategic efforts to market the Islands to new, more affluent groups, enlarging visitor counts and the amounts they spend. The interisland cruise industry is expanding, bringing more visitors to the Islands. American Hawaii Cruises has added a second ship, the 1,200-passenger Patriot, late last year, and Norwegian Cruise Line is scheduled to add its 1,900-passenger SuperStar Leo in December.
Science, techonology • More than 300 high-tech startups and scientific companies now call Hawai‘i home as the sector develops with initiatives in information technology, health, biotech, oceanology, geology and space. The state says such companies have tripled in Hawai‘i over the past five years. Two years of tax breaks for the high-tech industry have given some key boosts. Big Island astronomy projects such as the Keck, Subaru and Gemini telescopes on Mauna Kea are gaining international attention, helping to reshape the state’s image.
University of Hawai'i • Considered a key to a revitalizing economy, UH won approval last November for autonomous status, giving administrators flexibility to move fast on initiatives such as expansion of medical school research and creation of business college programs to promote entrepreneurialism.
Real estate • Prices that dropped during the downturn have lured buyers to start seeing Hawai‘i properties as a comparative value compared with those in preferred Mainland areas. That change, combined with demographic trends, has driven residential construction, especially on Neighbor Islands. Meanwhile, buyers of highly leveraged resorts are paying less and pumping capital into needed improvements.
General excise tax • Starting in 1999, the state restructured the 4 percent GET, removing the so-called pyramiding effect in which several businesses were forced to pay similar taxes repeatedly over the course of a transaction. Now, the initial business pays the full 4 percent, and others pay a reduced wholesale tax that will fall to 0.5 percent by 2006.
Personal income tax • The maximum state income-tax rate was cut from 10 percent to 8.75 percent for 1999 as part of a state reduction that saves residents as much as 23 percent over four years. The change also doubled the income minimum for the high rate to $80,000.
Hurting ourselves
Still, experts and business leaders say, there remain several areas the state sorely needs to tackle to further strengthen its economy:
Education • Despite recent hints of improvement, especially in math scores, Hawai‘i’s public-school students as a whole have consistently scored below average on national achievement tests. The National Assessment of Educational Progress ranked the state near the bottom in reading and writing during the past decade. High-tech experts, economists, business leaders and others say top schools are key to training tomorrow’s work force as well as attracting business opportunities.
Government • Despite some restructuring, small businesses and entrepreneurs still say taxes, fees and regulations are aimed more at protecting the status quo than promoting competition and needed risk-taking. Some economists suggest revisions to state tax structure.
The workforce • Business and employment leaders want more technology training and more workers with critical thinking skills to handle the flexible tasks required in the New Economy. This will be key as the state’s unemployment rate drops and employers are constricted from expanding.
Transportation • Congested roads, airports and ports slow the critical movement of goods and services that allow a dynamic economy to grow.
Cultural values • Hawai‘i benefits greatly from its placement and image as an ethnic and cultural center of the Asia-Pacific region. With that, however, comes a recent history of being slow to embrace change. In an age when success often means being open to new ideas, this wariness can work against the Islands.
Economic warning signs
King tourism • Diversification is a slow process, and despite some progress in areas such as agriculture, the economy remains dependent primarily on the vagaries of this single sector. When visitor counts ebb and flow, so do jobs, personal income and a lot more.
Mainland woes • The domestic slowdown, with prominent economists downgrading growth estimates as this year begins, is framed by uncertainty over oil prices and growing concerns about California’s skyrocketing energy prices. In the past year, Mainland tourists flush with cash from the high-tech and stock market booms have picked up Hawai‘i’s tourism slack from Asian visitors.
Whither Japan? • The moribund Japanese economy seems destined to limp along without a new political consensus for substantial reform. This year opened with continued weakening of the yen, another worrisome signal as it reduces the buying power of Japanese tourists. Other Asian countries, while growing, offer little immediate hope of adding anything but small gains for Hawai‘i.
The stock market • Dipping U.S. stock prices cut into consumers’ income and could influence consumer confidence, affordability of leisure travel and luxury purchases. A resulting drop could slow not only Hawai‘i’s tourism market, but residents’ willingness to spend.
Oil costs • Rising oil prices have affected everything from Hawai‘i gasoline and energy costs to air fares and the cost of shipping goods. Continued increases could reduce transportation profits and jack up the costs of moving tourists and goods.
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