The most recent state Comprehensive Economic Development Strategy (CEDS) was published in 2016 for the period 2016-20. The 2020 edition has not been published and publication is not expected soon.
In the 2016 CEDS report, eight sectors were identified as “targeted clusters”: xxxiv
There was little agreement in cluster rankings, however, in the CEDS reports for the counties. Honolulu, for example, ranked Hospitality and Tourism #1, while Maui and Hawaiʻi ranked it last, and Kaua‘i did not include it on their list. In interviews with workforce development organizations, CEDS was described as more of an aspirational set of goals than a forecast based on analytics.
The CEDS report includes an assessment of Hawaiʻi’s strengths, weaknesses, opportunities and threats (a SWOT analysis) based on input from the four county economic development boards, the Hawaiʻi Business Roundtable, the Chamber of Commerce of Hawaiʻi, government agencies, civic leaders, elected officials, and education. The following provides a list of the top seven factors (verbatim) for each element of the SWOT:
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
The strategic shift placing more emphasis on the “Indo-Pacific” region may drive additional military assignments to Hawaiʻi.
While the full impact of this shift is yet to be experienced, there are indications that it will benefit the state’s economy. The Department of Defense has already begun plans to rehabilitate, expand, and modernize the navy shipyard to accommodate larger submarines based at Pearl Harbor.
The announcement of a new branch of the military service, the “Space Command,” may have implications for the state if the Barking Sands facility on Kaua‘i is incorporated into the development plans.
Expanded defense programs, including intercept missile facilities may be based in Hawaiʻi, since the state is strategically located to respond to emerging threats from Asia.
Apart from the currently identified economic opportunities, new and emerging sectors present opportunities to diversify Hawaiʻi’s economy. In the recent past, genetically modified seed crops represented a new opportunity that capitalized on Hawaiʻi’s expertise in tropical agriculture coupled with an ideal climate. Other possibilities include:
Undersea mining. Eighteen contracts have been signed through the International Seabed Authority (ISA) to explore the development of deep sea mining operations for rare earth and polymetallic nodules in the 1.7 million square mile Clarion-Clipperton Zone, which lies on the seabed between Hawaiʻi and California. 2 The U.S. is not currently engaged in this development. If the environmental issues are resolved and the project proceeds, it will create a very substantial mining sector in the region which may offer opportunities for the University’s involvement.
Commercial Space Ventures. With the commercialization of space, Hawaiʻi’s geographic location presents an opportunity for developing a possible launch site for future commercial space initiatives. Hawaiʻi is generally in an ideal geospatial location for space-related development. Kaua‘i already possesses a launch site and the University could provide training and support for commercial success.
2 Companies from Singapore, Cook Islands, Kiribati, Germany, China, Japan, Belgium, Korea, France, Slovakia, Nauru, Tonga, Russia, 2 UK Companies.
One of the five main goals listed in the University of Hawaiʻi Strategic Directions, 2015-2021, is the Hawaiʻi Innovation Initiative (HII): “Create more high-quality jobs and diversify Hawaiʻi's economy by leading the development of a $1 billion innovation, research, education and training enterprise that addresses the challenges and opportunities faced by Hawaiʻi and the world. The economy of Hawaiʻi is currently highly dependent on tourism and military spending. The creation of a third economic sector based on research and innovation has been identified as a community priority.” xxxv
The University will also provide the training required for technological innovation and economic development to enable Hawaiʻi’s citizens to lead and participate in this sector.
With an emphasis on its responsibility to the community, the Hawaiʻi Innovation Initiative will focus on the following hubs: astronomy, ocean sciences, health sciences and wellness, data intensive sciences and engineering, agriculture and sustainability sciences including energy.”
Over the last five years, UH Mānoa has focused on increasing the number of STEM-related programs to attract competitive students and to respond to the needs of the State. Toward this end, the Board of Regents approved new undergraduate degrees in Astronomy, Astrophysics, Biochemistry, Construction Engineering, Dietetics, Engineering Science (Biomedical Engineering and Aerospace Engineering), Environmental Design, Molecular Cell Biology, Public Health and Second Language Studies.
Over the same period, UH Mānoa developed professional Master’s degrees in Asian International Affairs, Environmental Management, Finance, Information Systems, Landscape Architecture, and Marketing Management.
UH Mānoa has the infrastructure to be innovative in the development and delivery of new degree programs through the Interdisciplinary Studies (IS) Program. UH Mānoa’s IS Program has incubated a number of successful programs, including the BA in Creative Media, and the Bachelor of Environmental Design. In Spring 2020, the campus launched the Sustainability BA program, which is a collaboration between the new Institute for Sustainability and Resilience and the IS program. Programs under development in IS include major equivalents in Data Science, Health Sciences (a collaboration between JABSOM, Public Health, Nutrition, Social Sciences), and Design.
New technologies, including artificial intelligence, augmented reality, big data, cybersecurity applications, data analytics, 5G, and others are fields of study in and of themselves but which also may be applied to enhance existing academic programs such as health sciences, travel industry management, architecture, engineering, and others.
New technologies will drive both new economic opportunities and new or expanded channels for the distribution of education. For many of these applications, high speed broadband will become increasingly essential. As reported by Broadbandnow xxxvi Hawaiʻi is the 7th most connected state in the U.S., with an average statewide speed of 45.5 megabits per second (MBPS). The site estimates that 97% of Hawaiʻi’s population has broadband coverage with 8% of the population described as “underserved.” For future development, which will require increasing levels of internet speed, current availability of access to the fastest speed (1G) is limited outside of Oʻahu.
| Percent Coverage | 100 MBS | 1 G |
|---|---|---|
| Kauaʻi | 92.6% | 8.0% |
| Oʻahu | 99.0% | 68.9% |
| Maui County | 95.1% | 8.6% |
| Hawaiʻi County | 88.6% | 12.4% |
Source: Broadbandnow.com
The University of Hawaiʻi System Office of Innovation and Technology Transfer tracks the University’s success in fostering innovation from disclosure through licensing and startup. xxxvii
| 2019 | 5-Year Average | |
|---|---|---|
| Inventions disclosed | 41 | 48.6 |
| U.S. Patents Issued | 7 | 7.8 |
| Licenses/Options Executed | 7 | 9.4 |
| Active Licenses/Options | 135 | N/A |
| Royalties Received | $200.7K | $264.2K |
| Startups and New Companies | 7 | 5 |
Source: UH Research and Technology Transfer Dashboard
Hawaiʻi’s Department of Business Economic Development and Tourism is the primary agency responsible for supporting economic growth in the state. The state supports economic development in two different ways: 1) supportive economic structures and frameworks and 2) incentives, policies, and support programs.
Supportive economic structures and frameworks
Attached Agencies. The State has created a series of “authorities” and organizations that are focused on industries, act independently, but are “administratively attached” to DBEDT. Among these are:
DBEDT Managed Support Programs. While the “attached” agencies operate independently of DBEDT, DBEDT itself manages programs supporting economic diversification and growth.
Economic incentives, policies, and support programs
Incentives. Hawaiʻi’s state legislature has implemented a range of targeted tax incentives to “encourage certain industries or economic activities.” Most recent reported credits (tax year 2017) include:
Previously enacted (but expired) credits include:
Creating a favorable legal or regulatory environment. The state has adopted regulatory measures that favor the development of certain sectors. For example, HRS 431 established favorable regulations for the Captive Insurance Industry that were intended to make Hawaiʻi a leader in this sector. xxxviii Captive Insurance companies are formed to insure and reinsure risks for their parent (in place of traditional insurance policies). Essentially, the captive provides the parent with self-insurance which can lower costs, improve cash flow, and can assure coverage. By establishing a favorable environment for captive insurance in Hawaiʻi the state has encouraged the development of jobs in legal service, underwriting, risk management, and other related fields.
Supporting the development of new economic sectors in the interest of diversifying the economy is inherently political, with special interests and interested parties lobbying the legislature for support. Without coordination supported by a statewide development plan, development can be ad hoc or sporadic. The debates over funding for the movie industry, technology tax credits, hemp production and other initiatives are examples of the challenges in developing a coordinated development plan.
Economic cluster development is an approach to sector expansion by ensuring that all of the necessary components for sector success are present in a defined geographic area. Defined by Michael Porter of Harvard, “Clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition.” xxxix
The University of Hawaiʻi has several examples of initiatives based on cluster development, including Honolulu Community College’s M.E.L.E. (Music and Education Learning Experience) program. M.E.L.E was developed to provide a program focused on music production and business, key components of the music and entertainment cluster in Hawaiʻi that were missing. Without M.E.L.E., musicians had to rely on resources on the Continent. The development of the program recognized the interconnected fields of production technology, music industry business, and artistic creativity.
In 2008, the Hawaiʻi State Legislature adopted its first long-range plan in thirty years: the Hawaiʻi 2050 Sustainability Plan. Previously, state planning was guided by the Hawaiʻi State Plan (Haw. Rev. Stat. Ch. 226) adopted in 1978 and last revised in 1986. Twelve state functional plans provided more specific direction and were last updated in 1991.
The Hawaiʻi 2050 Sustainability Plan has five broad goals for the year 2050, including one on the economy: “Our diversified and globally competitive economy enables us to meaningfully live, work and play in Hawaiʻi.” xl
The plan identified nine “priority” items along with suggested benchmarks. Some of these are directly related to the University and others could be the basis for University initiatives. The priority items are:
While item 2, “Strengthen public education,” directly relates to the University and its mission, many of the other priority items intersect with the University’s academic and research programs. These are just some of the University’s programs that seem aligned with the plan’s priorities: Urban Planning (#1, #3 and #8), Science and Engineering (#3), Shidler College of Business (#5), CTAHR (#7), JABSOM (#8), Hawaiian Studies (#9) and Community Colleges (#5, #7, #8). The University is called out both as a data source and an agent for the plan’s implementation.
Despite a recommendation to create a broadly constituted “Sustainability Council” to begin the plan’s implementation and to coordinate activities and resources across agencies, the Council was never established, and the plan has not been implemented.
Hawaiʻi is unique among the United States as a multi-ethnic, multi-cultural society with a decidedly different profile from other states when it comes to business characteristics and economic diversification. For many years, Hawaiʻi was shaped by a plantation mentality and the dominance of a “big five” oligarchy of companies. The Hawaiian culture, historically, was suppressed or marginalized until a Hawaiian renaissance beginning in the 1970s began a period in which the language, arts and practices of the host culture became more prominent.
With change has come friction. The development of the proposed Thirty Meter Telescope on Mauna Kea is the latest example of community resistance to new developments and initiatives. Other examples of community activism include protests of Genetically Modified Crop farming, the proposed renovation of Ala Moana Park, Sherwood Forest Park, Superferry, Kawailoa Wind Farm, and others. The Hawaiian Sovereignty movement is still active, though extreme calls for independence have subsided.
Recent negative news stories, especially the Federal indictments and convictions of high-profile government officials (including the Honolulu Chief of Police), have likely affected citizen trust and confidence in Hawaiʻi’s institutions.
A recently completed survey conducted for the City and County of Honolulu by the National Community Survey (NCS) provides a comprehensive view of resident feelings and attitudes and highlights areas of concern. xli Generally, the survey shows that resident attitudes about quality of life and confidence in governmental institutions have eroded sharply since 2014.
The following shows change in key ratings on city attributes:
| 2019 | 2014 | Difference | |
|---|---|---|---|
| Overall quality of life | 54% | 68% | -14 |
| Place to Live | 65% | 77% | -12 |
| Place to raise children | 53% | 58% | -5 |
| Place to retire | 39% | 52% | -13 |
| Overall feeling of safety | 46% | 66% | -20 |
| Ease of travel | 40% | 44% | -4 |
| Travel by Public Transportation | 28% | 38% | -10 |
| Cleanliness | 24% | 33% | -9 |
| 2019 | 2014 | Difference | |
|---|---|---|---|
| Service provided by Honolulu | 30% | 46% | -16 |
| Value of services for taxes paid | 16% | 35% | -19 |
| Confidence in City & County Government | 17% | 30% | -13 |
| Overall Direction | 14% | 35% | -21 |
| Being Honest | 19% | 30% | -11 |
Source: National Community Survey of Honolulu Residents (2019)
The ALICE study conducted by the Aloha United Way (AUW) looks at Hawaiʻi residents who have income above the Federal Poverty Level but insufficient to afford basic necessities.
AUW estimates that a combined 48% of Hawaiʻi Households are in the poverty level (47,066 households or 11%) or the ALICE level (165,013 households or 37%). The ALICE/Poverty rate is lowest on Kauaʻi and highest in Hawaiʻi County. xlii
| Total Households | % ALICE and Poverty | |
|---|---|---|
| Hawaiʻi County | 64,201 | 55% |
| Honolulu | 307,703 | 46% |
| Kauaʻi | 21,862 | 43% |
| Maui County | 52,134 | 51% |
| State | 445,900 | 48% |
Source: Aloha United Way
Demographically, younger residents (under the age of 25) are the most likely to have household incomes in the poverty or ALICE ranges.
| Age group | Poverty | ALICE | Above ALICE |
|---|---|---|---|
| Under 25 | 22% | 60% | 18% |
| 25-44 | 11% | 39% | 50% |
| 45-64 | 10% | 33% | 57% |
| 65+ | 9% | 37% | 54% |
Source: Aloha United Way
In terms of race and ethnicity, a significant percentage of every ethnic group falls within the poverty or ALICE income levels, but the incidence is highest among Hispanics (62%) Hawaiians (57%) and Blacks (61%).
| Race/Ethnicity | Poverty | ALICE | Above ALICE |
|---|---|---|---|
| Asian | 9% | 37% | 54% |
| White | 8% | 40% | 52% |
| Two or more | 8% | 41% | 51% |
| Hispanic | 9% | 53% | 38% |
| Hawaiian | 10% | 47% | 43% |
| Black | 6% | 55% | 39% |
Source: Aloha United Way
For households with children, 86% of single female headed households and 66% of single male headed households are in the “poverty” or “ALICE” income categories.
| Poverty | ALICE | Above ALICE | |
|---|---|---|---|
| Married | - | 33% | 62% |
| Single, Female Headed | 37% | 49% | 14% |
| Single, Male Headed | 29% | 37% | 28% |
Source: Aloha United Way
In its summary, AUW concludes that there are three primary reasons for the number of ALICE households in the state:
The Hawaiʻi Roadmap (Talent Roadmap to Support Economic Recovery in Hawaiʻi) is an initiative of the Hawaiʻi Executive Collaborative involving the Hawaiʻi Community Foundation, the Chamber of Commerce of Hawaiʻi, the Harold K. L. Castle Foundation, Hawaiʻi P-20, the Strada Education Network, and JFF (Jobs for the Future). The purpose of the Roadmap is to show “how state leaders can fill Hawaiʻi jobs with local workers, ensure employment for displaced workers, and create lasting and effective partnerships across education and industry.” Recognizing the earnings premium for workers with a college degree, the Roadmap set a goal to double the rate of growth in post-secondary academic achievement (to 8% growth) over five years. Importantly, the Roadmap seeks to strengthen the alignment between education and industry and consolidates various programs and platforms across agencies and institutions (including the University of Hawaiʻi Career Explorer) in its Hawaiʻi Career Pathways platform hawaiicareerpathways.org. It also identifies the University of Hawaiʻi and P-20 as two of the organizations that can “serve as a neutral, credible convener of all partners and provide staff” to support the Roadmap’s recommendations. xliii
Hawaiʻi Community Foundation (HCF) is investing in a program to improve the quality of life in Hawaiʻi known as C.H.A.N.G.E., with elements related to Community/Economy, Health and Wellness, Arts and Culture, the Natural Environment, Government and Civics, and Education .xliv The CHANGE framework “is a curated set of statewide data that begins to identify the gaps where help in our community is needed & opportunities where help will do the most good.”
Hawaiʻi Green Growth has developed the Aloha+ Challenge, a statewide initiative built upon the United Nations Strategic Development Goals (SDGs). The program has been supported by the State Legislature and promotes: clean energy; local food; natural resource management; waste reduction; smart, sustainable communities; a green workforce; and education. xlv
The Hawaiʻi Alliance for Community-Based Economic Development (HACBED) was formed to facilitate community-based planning, providing technical assistance to community organizations. xlvi
Jobs for the Future (JFF) is an initiative funded through the Hawaiʻi Community Foundation, the Castle Foundation, the Weinberg Foundation and the Strada Education Network designed as a roadmap that “outlines how Hawaiʻi can rebuild its economy and build a talent pipeline that provides all of the state’s residents with access to education and training opportunities that lead to economic advancement.” The initiative works with educational institutions such as P-20 to identify high paying jobs with growth opportunities and develop career pathways to prepare students for them.
The University’s broad mission intersects with these initiatives, but its role is not specified in their structure.
The dominance of the Democratic Party in Hawaiʻi state politics has historically resulted in congressional seniority in the United States Senate that provides influence in obtaining Federal contracts and programs. For many years Senator Daniel Inouye’s seniority (he ultimately became the Senate’s most senior member) was instrumental in obtaining significant Federal spending in the State. Senator Brian Schatz currently ranks 55th and Senator Mazie Hirono ranks 59th in Senate seniority. Longevity and seniority for Hawaiʻi’s Senators ensure that the State’s perspectives are represented in influential committees. Senator Schatz currently sits on the important Appropriations, Commerce, Science and Transportation, and Indian Affairs Committees. Senator Hirono serves on the Armed Services and Energy & Natural Resources Committees.
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