House panel OKs creation
of economic-diversity board

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By B.J. Reyes
Associated Press

Be it agriculture or an aquarium, high technology or high-stakes gambling, most everyone in the state agrees: Hawaii must diversify its economy away from its traditional base of tourism.

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The drop in tourism following the Sept. 11, 2001, terrorist attacks and the fear that a war with Iraq could send the industry into another tailspin have lawmakers exploring diversification now more than ever.

One measure approved by a House committee last week tries to address the issue by setting up an Economic Diversification Authority within the Department of Business, Economic Development & Tourism.

The authority would bring together the heads of the various agencies attached to the business agency, including the Hawaii Community Development Authority, the High Technology Development Corp. and the Hawaii Strategic Development Corp.

"We're going to create an overarching strategy for economic diversification and force all of the different agencies with all of their different turfs and fiefdoms to work together in concert toward a more diverse economy," said Rep. Brian Schatz (D, Tantalus-Makiki), chairman of the House Committee on Economic Development and Business Concerns.

"Everybody is working in their own kuleanas separately without any overarching strategy, and that's what this will change."

The measure goes along with Gov. Linda Lingle's proposed restructuring of Business, Economic Development & Tourism, by changing the law to allow the reorganization to take place, Schatz said.

Throughout her campaign, Lingle touted her plan to pare agencies, such as the Land Use Commission and the Housing and Community Development Corp. of Hawaii, from the business agency to allow it to focus on its core mission of economic development.

But saying the state needs a more diverse economy is one thing. Bringing it about is another.

Hawaii's economic structure is largely dictated by where the state fits into a "global economic distribution" -- outside forces that are affected by factors such as consumer preferences and political decisions, said Paul Brewbaker, chief economist for Bank of Hawaii.

"I don't think there's as much room to engineer economic diversification as seems to be the conventional wisdom," he said.

While bringing department heads together to work on an overarching strategy is a commonsense approach, Brewbaker said there are more concrete ways to go about trying to assure diversity.

"If we're talking about initiatives to help industries overcome the barriers they face because ... they can't seem to make a compelling case to the investor community and attract capital, or because there's some sort of regulatory or bureaucratic obstacle that thwarts their being thriving industries, yeah, we should do that all day long," Brewbaker said.