Isle economy
gaining before
start of war

Despite fewer tourists,
the slowdown may be
short, DBEDT chief says

By Russ Lynch

A drop in visitor traffic since the outbreak of war in Iraq is already visible, but Hawaii's economy was gaining strength before the war and there are good reasons to believe that post-war recovery will be rapid, Ted Liu, director of the state Department of Business, Economic Development and Tourism, said today.

State of Hawaii The economic outcome will depend on the duration and the severity of the war and whether there are any terrorist attacks in the United States, Liu said.

"Clearly the war will have an impact on Hawaii and that impact will be most severe on our travel and hospitality sectors and those connected to them," Liu said.

But there are some underlying industries, such as construction, that maintain strength even during a war. Preparations are under way for some $2 billion in privatized housing construction on Hawaii military bases, some to begin this year and some next year, Liu said.

Federal funds continue to flow into Hawaii and are even increased by a spurt in military activity, he said.

Tourism -- the dominant industry -- is the most vulnerable in times of international uncertainty and there has already been a significant drop-off in international arrivals.

On March 19, total passenger arrivals at Hawaii's airports were down 11.7 percent from the same day last year. Domestic arrivals were down 6.4 percent while international arrivals, mostly Japanese, were down 24 percent. On Thursday, total arrivals were down 9.7 percent from a year ago, with domestic tourists down 2.9 percent and international down 29 percent.

On Friday, international arrivals, the only segment for which figures are available, were down 10 percent compared to the same day a year ago, Liu said.

But Liu said the dip has not been as large as those that came after the start of the first Gulf War in 1991 and immediately after 9/11.

Right after the first Gulf War started, travel to Hawaii dropped 22 percent. In the days after air travel resumed following 9/11, total arrivals were down around 40 percent and international arrivals were down about 70 percent.

Liu acknowledged that the early 2002 figures used as a comparison for current arrival figures were already depressed because the effects of 9/11 were lingering.

"There is no question that some people will stop traveling, but we can't know how many or for how long," Liu said.

From January this year to March 18, the day before the war started, total passenger arrivals were up 6.3 percent from the same period last year, with domestic arrivals up 5.1 percent and international visitors up 9.9 percent, Liu said.

Liu said he and the DBEDT analysts are "not forecasting or predicting the specific impact of the war on Hawaii's economy" because it is too early to tell what that may be.

"However, the war should have less of an impact on the other Hawaii economic growth drivers that were in place before the war, including construction spending, transfer payments to the state and its residents (from the federal government) and increase in personal incomes," Liu said.

Last year, the value of construction in Hawaii was $4.3 billion, he said.

Permits for residential construction issued in the fourth quarter of 2002 showed a 44.9 percent increase in value from permits issued a year earlier -- money for future construction that won't stop because of a war, Liu said.

Private building authorizations last year were up 11.7 percent in value over 2001.

Department of Business, Economic Development & Tourism

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