COURTESY GOVERNOR'S STAFF The Hawaii brand is recognized worldwide -- and we can use that to our economic advantage. Above, police officers wearing orchid lei greeted retired Adm. Thomas C. Fargo and Gov. Linda Lingle in Shanghai, China, last month.

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Crossroads of commerce

Hawaii must position itself to benefit
from Asia's good fortune

Crossroads of the Pacific or Middle of Nowhere. That is the stark choice that we in Hawaii face today when it comes to our future in the Asia-Pacific region.

As an island economy based on the most isolated archipelago in the world, Hawaii's economy has been dependent on in-flows of capital from outside the islands. Outside capital -- both human and financial -- from the contact by Polynesian explorers, to the arrival of whaling ships and sandalwood traders, to Japanese investment, to the recent U.S. mainland investors -- has driven Hawaii's economy.

Tourism is, after all, just another means by which offshore capital is transferred to our domestic economy. Layered on top of that, we all know the effect that outside events such as an oil or energy crisis, West Coast longshoremen's strike or terrorism have on our economy.

But today, being the "Middle of Nowhere" is not an option. Even if we wanted to ignore the Asia-Pacific region, its accelerating economic, technological and social developments already have and will continue to affect our economy and quality of life.

China's demands for steel and petroleum have increased Hawaii's already high costs of construction and gasoline. Meteorologists already have detected evidence of urban pollution generated by Asia's major industrial centers in Hawaii's atmosphere. Wealthy travelers from Asian countries other than Japan already have begun to discover Hawaii.

We ignore the region at our peril.

In today's global and Web-connected economy, however, becoming the "Cross- roads of the Pacific" does not mean the port-of-call role for steamships and twin-engine aircraft that Hawaii played in the pre-trans-Pacific jetliner age. At the dawn of the 21st century, Hawaii has the opportunity to be an innovation crossroads of the Pacific.

Innovation does not mean only high-tech products or services, although Hawaii has several competitive niches in technology and biotechnology that have a potentially large market in Asia. Among these, we envision leadership in marine biotechnology, in processes and products derived from ocean sciences, in environmental technologies, in tropical agriculture techniques and in pharmaceutical products that deal with infectious diseases and health and wellness issues in the Asian population.

Innovation offered by Hawaii as a crossroads to the Asia-Pacific region also means offering expertise in planning and architectural design; health and medical treatment; environmental services; resource management and other professional services. For Hawaii, becoming an innovation crossroads means showcasing and transferring management and industry "best practices" and techniques to Asian users.

It also means devoting more of our energies to training and educating Asian business managers, professionals and government officials to meet the demands of an increasingly globalized economy. Hawaii can become the crossroads that applies innovation to the burgeoning film, digital media and entertainment industry in Asia.

As countries around Asia digest billions of dollars of investment in infrastructure and other hard assets, they are increasingly realizing the importance of the "software," the know-how and management skills to manage these hard assets. As companies in Asia begin to deal with the competitive realities of membership in the World Trade Organization and other drivers of increased competition, they are reaching out to purchase services and know-how. Hawaii's competitive advantage can be in these professional services.

If Hawaii successfully positions itself as a crossroads of the Pacific for services that are in demand across the region, not only will our local firms do better, but we will be creating the types of higher-paying jobs sought by our graduates.

How do we increase the chances of this vision being realized? A few suggestions might include:

We need to be proactive. The global markets are very competitive. Windows of opportunity close rapidly. If we do not actively seek out this position, someone else will.

Our businesses need to be more outward-oriented. It is natural in an island economy, especially one as isolated as ours, to be focused on the domestic market. However, that focus has come at the expense of losing sight of markets beyond our borders. As the result, we compete over a small pie. We need to grow the pie by looking for and competing in other markets.

We need to be bolder and take a few more risks. Foreign markets, especially Asian markets, are risky. If properly tackled, there are higher rewards to compensate for that risk. Perceptions of that risk, however, have dissuaded many Hawaii businesses from even trying. For many of the 50-plus businesses that participated in Hawaii's recent trade mission to China and Korea, the initial exposure to those two markets was invaluable.

To achieve this outward-orientation and boldness, we need to invest in capacity-building. That is, we need to invest in educating, training and preparing Hawaii businesses on the basics of doing business in foreign markets. Organizations such as the state Department of Business, Economic Development & Tourism, the District Export Council, Hawaii Pacific University, the University of Hawaii College of Business and Richardson Law School, ethnic Chambers of Commerce and our local press need to do more in this area.

Successful Hawaii exporters -- and there are quite a few of these -- need to be encouraged to share the secrets of their success, or at least their stories. As an island economy, we compete against each other and are wary of sharing. We need to change that mentality and realize that in foreign markets if more Hawaii businesses are successful, the resulting increased attention and enhanced reputation benefits all Hawaii exporters. A rising tide will lift all ships.

One means of sharing is forming co-ops of complementary goods or services to engage in marketing and business development in foreign markets. Resources are thus pooled and leveraged and risks spread. A good example is Hawaii's Integrated Development Group, a consortium of a dozen Hawaii professional service providers in the area of tourism development.

Government needs to continue to develop and nurture government-to-government relationships. Governments matter a lot in Asia. Relationships matter a lot in Asia. Gov. Linda Lingle's mission to China and Korea, along with those of her predecessors, developed the types of relationships that help facilitate the doing of business in those countries. Now, Hawaii businesses need to take advantage of these relationships.

We are a small state; our businesses are small. Trade missions provide scale and draw attention to us. DBEDT's recent trade missions have worked with Hawaii's leading performance artists to use our music and performing arts as "the thin edge of the wedge." The attention they created drew attention to Hawaii's businesses.

Though we are a small state, we need to realize that we have an incredible brand: Hawaii is one of the most desired destinations in the world. Its attraction creates a huge opportunity. Hawaii's public and private sectors need to work together to leverage that brand into a business brand, a brand not only to attract business travelers to Hawaii, but that wraps Hawaii's products and services in the warm halo of Hawaii's aloha.

We need to start teaching foreign languages, preferably Asian languages, starting at the grade- school level. By the time our students graduate, they should be proficient in a foreign language.

None of these ideas are new. In 1988, then Gov. John Waihee convened a Congress on Hawaii's International Role. The experts and leaders convened for that exercise stated that Hawaii needed to develop "multilingual competence, particularly in the Asian and Pacific languages." Its other recommendations covered many of the above ideas.

The Asia-Pacific region has changed radically since 1998 and new opportunities abound that fit Hawaii's expertise. Hawaii's economy also has turned around from a decade of stagnation. Perhaps these better economic times provide us with the opportunity to implement some of these ideas.