A new University of Hawaii report finds that Hawaii Island has the most economic diversification options of all counties in the state.
The University of Hawaii Economic Research Organization (UHERO) released a report Tuesday looking at ways the state can diversify in a tourism-driven economy that has seen shaky and slow growth in tourism revenue over the past three decades.
The report analyzes various industries across U.S. and Hawaii counties to identify what potential opportunities exist for the state’s economy.
Click here to see the full report.
Based on Hawaii’s existing industries, the study shows there is great potential for marine industries, including fishing, fish farming and hatcheries, ship building, port operations, seafood packaging, etc. Diversifying into these industries can create long-term stability and support growth beyond tourism.
The report found that Hawaii Island has existing industrial diversity that creates opportunities for further branching out, meaning there is a range of local capabilities that can be leveraged to establish new industries.
Also, unlike Oahu, many of the Big Island’s related industries are still small scale. The greatest opportunities for diversification are in fishing and aquaculture, fish fisheries, shellfish fisheries, and fish farms and hatcheries.
Additionally, the study highlights opportunities for statewide growth in industries such as hospitality, water transportation and video production that align with Hawaii’s traditional strengths while also offering potential for diversification.
Report authors Steven Bond-Smith, assistant professor at UHERO, and Sumit Ilamkar, graduate research assistant at UHERO, came up with these potential opportunities after examining the industrial composition of every county in the U.S. to measure the connections between industries. To find diversification opportunities, they looked at the industrial composition of Hawaii’s counties and identified underperforming industries that are likely to become stronger because they are linked to existing strengths.
“The information in this report will be useful to policymakers and legislators seeking advice on economic development policies, as well as to businesses and entrepreneurs seeking new opportunities,” the report states. “It also presents Hawaii as a case study of an approach that can be useful to other jurisdictions exploring diversification strategies.”
Diversifying Hawaii’s economy is difficult because small, open economies have an advantage by specializing in their strengths.
The report identifies industries with great growth potential that face obstacles such as inadequate infrastructure, skills shortages, and market and government failures. To further diversify the economy, the report suggests adopting a more ambitious approach that targets these obstacles, rather than concentrating on already successful areas.
To be effective in the long term, these policies must also include ongoing oversight and strong governance.
“We show how Hawaii initially benefited from specializing in tourism and how this specialization now exposes Hawaii to short- and long-term risks,” the report states. “Thus, diversification is not an end in itself, but rather aims to build a more resilient economy that is less exposed to short- and long-term risks.”