A Report from the Department of Business, Economic Development & Tourismfiles.hawaii.gov/dbedt/economic/data_reports/hawaii-econ/... · 2015-07-28 · Department of Business, Economic

1Hawaii’s Economy / January 2000

EC NOMYA Report from the Department of Business, Economic Development & Tourism

HAWAII’S January 2000

Hawaii’s EmergingTechnology Industry

continued on page 3

Given these particular strengths, aswell as technology development alreadyunderway, it appears that Hawaii’s bestprospects for the development of anadvanced technology sector lie in thefollowing areas:

• Information Technology• Telecommunicat ions• Bio t e chno logy• Health Care & Medical Technolog y• Astronomy & Space Science• Ocean Research and Development• Environmental Technology• Renewable Energy• Engineering Research and

Development• Dual Use (military/civilian)

Techno log y

This report on technology begins witha look at these ten areas of specializationand the significant activity occurringin each.1

Information TechnologyHigh Performance Computing toInteractive Entertainment

Information technology covers thespectrum of advanced technical activityused to develop and process informationto serve the economic, social, and per-sonal needs of society. It includes thecomputer and software industries and

Hawaii is making a strong effortthrough infrastructure support,university research, labor force

training and other means, to supportthe growth of advanced technologyenterprise in the State. The effort isdeveloping as a partnership betweenthe private and public sectors and isstructured around Hawaii’s existingtechnology resources and competitiveadvantages. The goal of this effort is tohelp advanced technology become amajor growth sector in the State’seconomy.

Hawaii is well positioned to competein a broad range of science and technol-ogy-based endeavors. Given our State’sstrategic mid-Pacific location, we areideally situated to serve as a bridge toAsia-Pacific markets. Our Trans-Pacificfiber optic and satellite connectivitymake our island community an increas-ingly important node on the globalinformation superhighway. Our high-speed data processing and super-computing facilities give us parallelprocessing capabilities that can serve abroad range of industries (e.g., medicine,astronomy, global climate modeling andcoastal resource management). We arehome to the world’s premier sites forresearch, demonstration, and develop-ment in astronomy, oceanography, andland-based geophysics. Our state servesas a national leader in many researchand development efforts related torenewable energies, ocean resources,telecommunications, and other technol-ogy-based industries.

1 This article is an edited version of the January 1999DBEDT publication Science & Technolog y, The Key toHawaii’s Economic Future. The entire report is availableon the DBEDT web site at: http://www.hawaii.gov/dbedt/ert/key.html

In This IssueHawaii’s emerging

technology industry – page 1

Why Hawaii must pursuetechnology development—

Dr. Seiji Naya – page 2

New technology incentivespage 4

On-line technology resourcespage 5

Technology financing& exporting resources – page 6

Hawaii’s keytechnology assets – page 9

Measuring Hawaii’sadvanced tech sector – page 10

How technologyis changing work – page 15

Growing thetechnology industry—

Mr. Joseph F. Blanco – page 18

Two models of technologydevelopment – page 20

Hawaii TechnologyTrade Association – page 23

Selected economic indicatorspage 24

Hawaii’s Economyis published by the Department of Business,

Economic Development & Tourism; Research& Economic Analysis Division

BENJAMIN J. CAYETANOGovernor

SEIJI F. NAYADirector

BRADLEY J. MOSSMANDeputy Director

PEARL IMADA IBOSHIDivision Head

ROBERT SHOREEditor

Direct Inquiries to:Hawaii’s Economy

DBEDTP.O. Box 2359

Honolulu, Hawaii 96804Fax: (808) 586-8449

E-mail: [email protected] report is also available on the internet at:

http://www.hawaii.gov/dbedt/hecon.html

2 Hawaii’s Economy /January 2000

Why Hawaii Must PursueTechnology Development

that can take advantage of Hawaii’sunique resources and assets. The privatesector has also made significant progressin improving productivity, raising thecompetitiveness of the economy andrefocusing on areas where Hawaiicompanies have a competitive edge.

Now, for the first time in a numberof years, economists in Hawaii areexpressing genuine optimism about thenear-term future of our economy. Mosteconomic indicators have, or are begin-ning to turn positive and 1999 will likelyshow solid economic gains. It is, there-fore, an appropriate time to focus on thefuture, particularly the kinds of economicactivity and policies that will defineHawaii’s economy in the 21st century.

Technology’s Rolein the Economy

Technology will be an importantcornerstone in defining Hawaii’s economyin the 21st century. Certainly other indus-tries like tourism, the military, agricultureand others will continue to be vitally im-portant activities. However, technologydevelopment will be the key to boostingthe State’s productivity and competitive-ness in the economy of the future. Let meexplain why technology is so important.

Research over the past several decadeshas shown that the impact technologyhas on productivity is a major factor inhow fast economies grow and how wellthey can compete in national andinternational markets. Technology hasimmense impact on the economy. It isestimated that as much as half of alleconomic growth in the U.S. in recentdecades has been due to the applicationof technology in the economy.

At DBEDT we have tried to identify therole technology has played in the State’seconomic growth over the years. Usingsome tools of economic analysis, weestimated the individual contributions ofcapital, labor and technology to Hawaii’seconomic growth since the early 1970s.

The results were surprising. They helpedexplain why we have had difficulty ad-justing to the end of the post-statehoodboom as well as highlight why technol-ogy development is so vital.

The chart in Figure 1 shows the eco-nomic growth for Hawaii and the U.S.from 1970 to 1990, broken down bythe contributions of capital, labor andtechnological change.

The figure shows that during thisperiod of Hawaii’s tourism-driven eco-nomic boom, the State’s economy grew afull percentage point more on averagethan the U.S. economy. While the contri-bution from employment growth in theworkforce was similar for Hawaii and theU.S., the story is very different for capitalgrowth and technology. Hawaii’s eco-nomic growth depended nearly twice asmuch on increases in the capital stockthan did the U.S economy. On the otherhand, the contribution to total economicgrowth by technology was twice as muchat the national level. Increases in technol-ogy accounted for an estimated 29 per-cent of U.S. economic growth over theperiod, but only 15 percent for Hawaii.

continued on page 22

H

By Dr. Seiji Naya, DirectorDepartment of Business,Economic Development & Tourism

awaii’s economic future may bedetermined in large measure byhow well we can use science and

technology to increase our productivityand become a center for technologicalinnovation in the Pacific. As tourism

settles into an eraof more modestgrowth, an ex-panded technologysector could be-come Hawaii’snew growth en-gine. This wouldgenerate newexport products,raise Hawaii’s

profile in the worldwide technologycommunity and help attract interestand investment in Hawaii as a site forserious scientific and technology activity.Moreover, an expanded technology sectorcan help support the spread of new tech-nology into Hawaii’s industries, which iscritical for ensuring a competitive econo-my in the 21st century. Because of itsimportance and promise, the developmentof Hawaii’s technology capabilities hasbecome Governor Cayetano’s top eco-nomic policy goal.

Hawaii’s Economic TransitionThe last eight years has been a period

of change and restructuring in our econo-my. As most of us know, Hawaii’s post-statehood boom era, based on hightourism growth, large inflows of foreigncapital and high labor immigration, cameto an end in the early 1990s. The Statemet this challenge with an aggressiveprogram to reinvigorate economic growth,including government streamlining,reduced regulation in the economy andthe nurturing of new economic activity

Figure 1. Contributions to Economic Growth1970 to 1990

Aver

age

Econ

omic

Gro

wth

(per

cent

)

4.5%

Hawaii

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

Labor

47.5%

Labor

44.6%

Tech. Change

28.1%

Capital

24.4%

Tech. Change15.2%

Capital

40.2%

U.S.

Source: DBEDT

Seiji Naya

3Hawaii’s Economy /January 2000

Hawaii’s Emerging Technology Industrycontinued from page 1

increasingly the entertainment industry.Hawaii’s resources for advanced computing,communications, and data managementinfrastructure have established the State asa national leader in the development andapplication of information technology.

Pioneering research being conductedat the University of Hawaii’s Departments ofElectrical Engineering and Computer Sciencesis producing advanced computer programsfor intelligent image processing and strategicresource management. The University alsohouses the Hawaii Software Service Center,which provides strategic market information

and business development resources forcompanies that create, sell, use or supportsoftware-based products.

Other facilities across the state afforda wealth of resources that continue tosupport new developments in informationtechnology. The Manoa Innovation Center onOahu and the Maui Research & TechnologyCenter (MRTC) at Kihei provide high-tech“incubator” services linking start-upcompanies with university R&D organiza-tions, many of which are developingalgorithms for data imaging and compres-sion. The Hawaii Telecommunications &Information Resource Center, located at theMaui Research and Technology Parkpromotes development and use of informa-tion technology to facilitate technologytraining, business expansion, commercialspin-offs, exporting, high-speed connectivityto MHPCC, and the attraction of outsideinvestment. One of five national NASARegional Validation Centers has beenestablished at MRTC to transfer NASA-developed hardware and software that maybe used and applied by private industry,government agencies, and educationalinstitutions.

Software development has been agrowing activity in Hawaii for some years.However, a quantum boost in the activitywas generated through the entertainmentsoftware company Square USA and its recentrelocation to Honolulu. Staffed by employeesfrom California, Tokyo, Europe, and Hawaii,the company plans to expand into computer-generated film production, which representsthe next generation of interactive entertain-ment. The company also donated equipmentand software valued at more than $700,000to the University of Hawaii, with the goal oftraining Hawaii students to meet the firm’slong-term staffing requirements.

TelecommunicationsFiber Optic & Satellite Hub

Telecommunication is an essential coun-terpart to information technology and is abasic infrastructure requirement for anadvanced technology sector. Fortunately,Hawaii is situated at a diversified hub oftrans-Pacific fiber optic cables, satellite linksand cellular and wireless networks, whichaffords a full range of telecommunicationsservices to all domestic and foreign destina-tions. More than 29,000 miles of intra- andinter-island fiber optic cable link the Islandswith the rest of the world. An undersea cable“super-carrier” increases total capacity by130 thousand circuits and provides a sep-arate, redundant backup for the entire fibercable network in the Pacific.

In 1998, 100% of local telephone lineswere converted from analogue to digitalswitching, and a new inter-island fiber opticcable system was established, affording cus-tomers competitive choice and pricing fortelephonic service. High speed data linkswith more than 30 state-of-the-art telecom-munications satellites complement Hawaii’sfiber network, and provide rapid connectivityto remote locations throughout the Asia-Pacific region.

The residents of Hawaii in general havemoved swiftly into new telecommunicationstechnology. Hawaii has the highest per capitause of cellular telephones in the nation, anda wide range of cell services are now provi-ded by companies statewide. Cable televisionextends to 97% of residents on Oahu, andcable franchises operate on all major islands,which can be used to support a wide varietyof digital services. Hawaii’s state-of-the-arttelecommunications infrastructure and continued on page 5

Final Fantasy VIISquare Co. Ltd.

capabilities are complemented by a progres-sive State regulatory framework, recognizedas one of the best in the nation. A high levelof competition in Hawaii’s telecommunica-tions market helps keep costs in checkthroughout the State.

BiotechnologyVirus Resistant Papaya toThird-Generation Clones

The scientific world of biotechnologywas rocked last year by the announcementthrough national media that University ofHawaii researchers had developed a tech-nique for cloning several generations of micefrom adult cells. The “Honolulu Technique”provided strong evidence that cloning isnot only immediately possible, but mayalso be commercially feasible for projectsranging from breeding special kinds of cattleto using pigs to grow organs for humantransplantation.

The biotechnology revolution is changingthe world as we know it. The University ofHawaii may be leading the way in the stra-tegic aspect of cloning technology. A numberof favorable conditions give Hawaii a strongcomparative advantage for much widerparticipation in this rapidly expanding field.First, Hawaii’s highly favorable climate andocean setting make it well situated to growand experiment with many different kindsof terrestrial and ocean plants for which mar-kets exist on a global scale. Second, the stateis home to hundreds of trained researcherswith expertise in agricultural and marineresearch. This provides a rich base of residentscientists and researchers readily able totransform the offshoots of R&D into com-mercial products.

Finally, Hawaii is developing a strongprivate sector base for biotechnology. Local

Kapolei TeleportPhoto by Gary Hofheimer,Courtesy, Estate of James Campbell


Tax Incentives Through Act 178:1,2

Hawaii Internet Tax Freedom Act. Imposes a six-yearmoratorium on any “discriminatory tax” on electroniccommerce or Internet access under the income tax law,general excise tax law, and use tax law (Patterned afterFederal ITFA).Income received from stock options by an employeefrom a “qualified high technology business” that wouldotherwise be taxed as ordinary income or as capital gainswill be exempt from the income tax beginning tax year2000 (no sunset date).Royalties and other income derived from patents andcopyrights will be exempt from the income tax beginning inyear 2000 (no sunset date). Patents and copyrights mustbe won by an individual or “qualified high technologybusiness” and developed and arising out of the “qualifiedhigh technology business.”

High-technology business investment tax creditprovides a nonrefundable income tax credit for aninvestment in a “qualified high technology business.”The credit is equal to 10% of the investment made, up to amaximum credit of $500,000 per year per business. Creditcan be taken against the income tax, insurance premiumtax, and franchise tax (financial institution) for tax years1999-2005 for investments on or after July 1, 1999.

New R & D credit conforms Hawaii law to the federalR & D income tax credit under section 41 of the InternalRevenue code (IRC) with some modifications. The credit isbased upon a percentage of certain research expenses and isavailable for tax years 2000-2005.

General State Tax Benefits:Businesses which satisfy all requirements will qualify for thefollowing state tax benefits for up to seven consecutive years:

• 100% exemption from the General Excise Tax (GET) andUse Tax every year. (The GET exemption applies only togross revenues from EZ-eligible business categorieswithin an EZ.)

• Contractors are also exempt from GET on constructiondone within an EZ for an EZ-qualified business.

• An 80% reduction of state income tax the first year.(This reduction goes down 10% each year for 6 moreyears . )

• An additional income tax reduction equal to 80% ofannual Unemployment Insurance premiums the first year.(This reduction goes down 10% each year for 6 moreyears . )

The above two income tax reductions combined cannotexceed 100% of income tax due.

Hawaii’s Incentives for Technology-Driven Development

County Benefits:Each county will offer eligible businesses additional benefitsthat may include one or more of the following:• Priority permit processing• Zoning or building permit waivers or variances• Property tax adjustments• Priority consideration for federal job training or

community development funds

Energy Tax Credits:• Corporate income tax credit allows a company a credit of

35% of the cost of equipment and installation of an activesolar system.

• Individual income tax credit of 35% of the cost ofequipment and installation of a residential solar systemfor heating and electricity generation. The maximumallowable credit is $1,750 for single family homes and$350 per unit in a multi-unit complex.

• Individual and corporation tax credit of 20% of the costof equipment and installation of a residential ornon-residential wind energy system.

• Tax credits of 50% for ice storage systems that areinstalled and placed in service after December 31, 1990,but before July 1, 2003.

• Individual income tax credit of 20% of the cost ofequipment and installation of a single- or multi-familybuilding. The maximum allowable credit is $400 forsingle-family homes and $200 per unit of a multi-unitcomplex.

Other Assistance• Marketing support (cooperative tradeshow exhibits and

advertising, etc.) through DBEDT Oceans Program toassist ocean technology firms to export products andservices.

• State-funded Millennium Workforce DevelopmentTraining Program to provide the education and trainingfor high technology workers. Under development by theState Department of Labor and Industrial Relations(DLIR) and the University of Hawaii (UH).

• UH Office of Technology Transfer and EconomicDevelopment authorized to expend up to $4 million forthe Discoveries an Inventions Revolving Fund.

1 The purpose of Act 178, passed by the 1999 Hawaii State Legislature, is to spureconomic development and foster the growth of knowledge-based industries inHawaii by consolidating the State’s high technology agencies, integrating technol-ogy with the tourism industry, focusing on work force development programs,providing access to the Internet for the University of Hawaii and public schools,and enacting tax incentives.

2 The tax provisions of Act 178 are based on definition of terms that vary depend-ing on the tax provision at issue. For example, the term “qualified high technol-ogy business” is limited to a Hawaii based business for the high-technologybusiness investment tax credit, but not for the income tax exemption for royaltiesand stock option.


biotech firms are conducting both basic andapplied research in molecular and nuclearbiology, immunochemistry, and botanicalgenetics, leading to the genetic engineeringof antibodies and other high-value, complexproteins for commercial production.

Healthcare andMedical TechnologyHealthcare Center for theAsia-Pacific Region

Hawaii is the Healthcare State. Over 85%of its citizens are insured and have theirchoice of several health care plans thatcompete to provide high-quality personalizedcare, employing leading-edge health careconcepts and technologies. With its mildsubtropical climate, multi-cultural environ-ment, multiple tourism attractions, and state-of-the-art medical facilities, Hawaii alsoprovides a congenial venue for patients fromall over Asia and the Pacific, as well as anattractive, less stressful environment fortheir families.

Hawaii is one of the first states tofacilitate telemedical applications using itsadvanced telecommunications infrastructure.Governor Cayetano launched a comprehen-sive statewide telemedicine network in 1998through the Hawaii Health Systems Corpora-tion, which operates a 3,000-employee,12-hospital acute, long-term, and ruralhealthcare system throughout the state.Major healthcare providers throughout theIslands are utilizing network and internet

continued on page 7


© 1998 ProBio America, Ltd.

Source: DBEDT compilation

Selected On-Line Technology Links & Resources

General Resources

High Tech Hawaii (HTDC) http://www.hitechhawaii.com/

Science & Technology in Hawaii http://www.hawaii.gov/dbedt/ert/key.html

Technology & Services Export Directory http://www.hawaii.gov/dbedt/ert/heeetsed.html

High Technology Business Directory http://www.htdc.org/busdir/

Hawaii High Tech Job Link http://www.htdc.org/joblink.html

Hawaii Small Business InnovationResearch Grant Program http://www.htdc.org/sbir/sbir.html

Opportunity in Hawaii; Business &Technology in Paradise http://www.hawaii.htdc.org/

TIGRNet (Targeted IndustriesGrowth Report) http://www.tigrnet.org

State Agencies

Hawaii High Technology DevelopmentCorporation http://www.htdc.org/index.html

DBEDT Energy Resources and http://www.hawaii.gov/dbedt/ert/Technology Division ert_hmpg.html

University of Hawaii

University Connections http://www.hawaii.edu/connections/

Office of Technology Transfer &Economic Development http://www.mic.hawaii.edu/

Research at the University of Hawaii http://www.hawaii.edu/research/

Department of Education

Hawaii Dept of Education Home page http://www.k12.hi.us/technology.html

Content & Performance Standards http://www.hcps.k12.hi.us/

E- Academies http://www.k12.hi.us/~atr/e_academy/contents.htm

E-Schools http://www.eschool.k12.hi.us/

Facilities

Maui High Performance Computing Center http://www.mhpcc.edu/

Natural Energy Laboratory of Hawaii http://bigisland.com/nelha/

Manoa Innovation Center (HTDC) http://www.htdc.org/mic/mic.html

Funding Sources & Information

Hawaii Small Business InnovationResearch Grant Program http://www.htdc.org/sbir/sbir.html

Hawaii Strategic Development Corporation http://www.htdc.org/hsdc.html

Associations

Hawaii Technology Trade Association http://www.htta.org

Pacific Telecommunications Council http://www.ptc.org/index.html

Association for Information andImage Management http://www.aiimhawaii.org/

Hawai’i Venture Capital Association http://www.hvca.org/

Association of Information Technology http://www.pixi.com/~teroger/Professionals Hawaii aitphome.htm

Conferences & Meetings

Hawaii High Tech Business Opportunities,Meetings & Announcements http://www.htdc.org/htdcopp.html

HTDC Conference Tracker http://www.htdc.org/htdcconf.html


In addition to purely private financing, two major stateprograms bring to bear the resources of the State, Federaland private funding to support advanced technologystart-ups.

• The Hawaii Strategic Development Corporation(HSDC) is a state agency designed to provide capital,mainly to technology-oriented businesses, from publicand private sources. The HSDC provides both seed andventure capital through limited partnerships. HSDC’sgeneral partners for seed and early stages are Keo KeaHawaii, HMS Investments and Hawaii Venture Fund.For Mezzanine and later stage funding, the generalpartner is Tangent Growth Hawaii. HSDC is also working

Financing Technologywith several new venture funds being formed forinvestment in Hawaii-based firms. More information isavailable at the HSDC web page, http://www.htdc.org/hsdc.html, or contact John A. Chock, President,[email protected], (808) 587-3829

• The Hawaii Small Business Innovation ResearchGrant Program provides grants to Hawaii companiesthat receive the Federal Phase I SBIR awards -maximum $25,000, for research that is performed inthe State of Hawaii. The program is administered bythe High Technology Development Corporation.For more information, email [email protected] orcall Sybil at (808) 539-3845.

The State is increasing Hawaii’s international exports ofenergy, environmental and other sustainable technologiesand related services. DBEDT, through its Energy, Resources,and Technology Division has developed a StrategicTechnology Marketing and Development Program thatfocuses on the high growth potential of the Asia-Pacificmarkets as they recover economically and restructure forbetter long-term stability. The program helps facilitatesustainable, technology-related economic developmentin Asia while creating higher valued jobs, and exportopportunities for Hawaii and U.S. technology firms.

In particular Hawaii is seeking to facilitate U.S. exportsof technologies and related services in:• Renewable energy• Information Technologies• Energy efficiency• Health Care• Advanced efficient fossil energy• Ocean Science & Technologies• Recycling, reuse, and remanufacturing• Environmental management, control, protection,

and remediation

U.S. technologies and services lead the world, butcompetition for projects in the Asian region is fierce.Genuine partnerships and cooperation between industry andthe public sector are an essential part of Hawaii’s program.Hawaii partners with industry by way of country marketassessments; technical exchange and business trademissions; government-to-government contacts throughoutAsia — often at the ministerial level — and by helpingindustry develop business contacts and leads throughworkshops and conferences in Hawaii.

The many initiatives spearheaded by Hawaii in supportof technology trade development between Asian nations

Hawaii’s Technology Export Initiativesand U.S. firms are detailed within the DBEDT web site athttp://www.hawaii.gov/dbedt/ert/stmad.html. One initiativein particular is important to note:

Center for Asia-Pacific Infrastructure Development(CAPID).

The Center was established to help foster sustainableeconomic development throughout the Asia-Pacific regionthrough energy, environmental, transportation-relatedand other infrastructure technologies and related servicesavailable from Hawaii and U.S. companies. CAPID isassisting Hawaii and Mainland companies to establishrelationships crucial to successfully entering markets inthe Asia-Pacific. Through seminars such as BusinessOpportunities in the Asia-Pacific and 1998 Year of theTiger: Opportunities for Trade and Investment in China,the Center has assisted American firms establish direct linesof communication for negotiating and developinginfrastructure projects in Asia.

CAPID’s seminars have also provided the structure forpolicy makers, infrastructure project planners, developersand financiers from the Asia-Pacific region, to learn aboutthe latest innovative options for infrastructure projectdevelopment. The Center’s programs are helping attendeesshape priorities, determine feasibility, prepare financestrategies, and partner with the appropriate organizations —especially U.S. companies — to help develop the region’sinfrastructure. The Asian Development Bank has expressedkeen interest in supporting CAPID, and Hawaii officialshave met several times in Manila to develop ADB fundingand support.

For more information contact Mr. Maurice H. Kaya, P.E.Energy, Resources, and Technology Program Administrator.Phone: (808) 587-3812; e-mail: [email protected].


technology to transmit the results of medicaltests, and medical imagery. Queen’s MedicalCenter has even established a pilot project tofacilitate teleconsultations between MolokaiGeneral and Queen’s Medical Center to sup-port emergency room services. Soon suchtechnology could put the finest medical ex-perts from around the world into operatingrooms in otherwise remote locations. Astechnology progresses, remote communica-tions and precision robotics will allow such continued on next page


One of the most powerful Positron Emission Tomography(PET) Scanners in the world is in use at Queen’s MedicalCenter, Honolulu. Teresa Hanifin/Queen’s Medical Center

Table 1. Hawaii’s Astronomy and Space Science Assets

FacilityYear

OperationalCosts ($ million)

Capital/Operating

MAUNA KEA OBSERVATORIES

University of Hawaii (0.6m—Optical) 1969

University of Hawaii (2.2m—Optical/Infrared) 1970 5/1.2 10

NASA (3.0m—Infrared) 1979 10/2.5 12

Canada–France–Hawaii (3.6m—Optical/Infrared) 1979 30/6.2 54

United Kingdom Infrared (3.8m—Infrared) 1979 5/2.7 29

Caltech/NSF (10.4m—Submillimeter) 1986 10/2.1 11

James Clerk Maxwell UK, Canada, Netherlands (15m—Submillimeter) 1986 32/3.5 39

W. M. Keck I Caltech, U. of California (10m—Optical/Infrared) 1992 107/5 37

Very Long Baseline Array NRAO, AUI, NSF 1 (25m—Radio) 1992 7/0.25 3

W. M. Keck II Caltech, U. of California (10m—Optical/Infrared) 1996 91/5 37

Gemini Northern U.S., U.K., Canada, Argentina, Australia, Brazil,

Chile (8m—Optical/Infrared) 1999 88/5 35

Submillimeter Array Smithsonian, Taiwan (8x6m—Submillimeter) 1999 170/10 50

MAUNA LOA OBSERVATORY

Solar Observatory (0.3m—Optical) 1965 6/1.5 9

HALEAKALA OBSERVATORIES

Mees Solar Observatory 1964 0.5/0.5 9

Lunar Ranging Facility 1976/1984 3.3/0.6 12

Maui Space Surveillance Site 1984 200/11 120

Advanced Electro-Optical System 1997 50/10 0

SUBARU Japan, National Astronomical Observatory (8.3m—Optical/Infrared) 1999 300/10 est. 46 est.

Number of Employees

Source: DBEDT

experts to actually perform complex surgicalprocedures “on line.”

Astronomy & Space ScienceHawaii’s Eyes on Space

The clear skies and stable air aboveHawaii have made the state a premierlocation for astronomy and astrophysics.Astronomers and other scientists fromaround the world pursue mysteries of theUniverse with the world’s most farsighted,deep-penetrating astronomical instruments,which have been put in place on the summitsof Mauna Kea on the Island of Hawaii andHaleakala on Maui. Hawaii’s role in as-tronomy and space science began in about1964 with the construction of the Mees SolarObservatory atop Haleakala on Maui. Today,the islands host the largest collection ofprofessional telescopes anywhere in theworld, with more than a half billion dollarsinvested so far. By the end of 2000, the totalinvestment in observatories and supportfacilities at Haleakala and Mauna Kea on the

Island of Hawaii will surpass $800 million.Also by the end of 2000, the Mauna Keaand Haleakala Observatories will employover 500 people and infuse some $80million annually into the local economy.

Ocean Research &DevelopmentDeep Water Marine Research toCoral Reef Management

Hawaii’s strategic mid-Pacific location

© Copyright 1998 by Richard Wainscoat



and diverse geologic and marine resourcescombine with the state’s advanced technol-ogy infrastructure, and professionalexpertise to make the islands an unparallelednatural laboratory for ocean research anddevelopment. Lying within the second-largest U.S. Exclusive Economic Zone,Hawaii affords clear legal access to vastliving and mineral resources, as well as atime zone that enables communications withboth eastern and western hemispheres withinthe same business day.

Over the past two decades, Hawaii’socean R&D industry has been growing attwice the national average, with directannual revenues in excess of $85 million.Hawaii ranks high nationally in the receiptof Federal ocean R&D dollars. The Universityof Hawaii’s School of Earth Science andTechnology alone accrued more than $40million in 1997. The State governmentsupplements funding grants and loanprograms with a combined total revolvingfund of approximately $14.6 million.

The State’s ocean R&D strengths are alsoattracting increasing investments from bothprivate and government sectors in suchdiverse areas as Japan, Korea, Singapore,Venezuela, American Samoa, Australia,Canada, England, and Taiwan. Hawaii’seconomy currently gets an average of$2- to $3 million annually from Chinese,Japanese, and Korean groups prospectingfor marine minerals on the sea bottom southand east of Hawaii. The State serves asheadquarters for the Pacific Science Associa-tion and PACON International, whichorganizes the biennial Pacific Congress onMarine Science and Technology. Non-profitorganizations such as the Oceanic Institute,renowned for its pioneering work in aquacul-ture and oceanography, and the PacificInternational Center for High TechnologyResearch, provide expertise supportingapplied ocean R&D projects worldwide.

Environmental TechnologyTechnologies for Pollution Control

Environmental problems are often thebyproduct of producing and consumingenergy, related to the transportation system,the workplace and the home. This criticallink between Hawaii’s fragile island ecosys-tem and its economy, have encouragednumerous innovations in environmentaltechnology.

Hawaii’s high-tech engineering is embodied inthis twin-hulled SLICE vessel.Pacific Marine

Highly efficient combined-cycle oil-firedgenerators, as well as a state-of-the-technology coal-fired power generator,are producing extremely clean electricity inHawaii. The State is also a leader in the useof highly efficient electro-technologies forlighting, cooling, and other demand-sideapplications. Bio-waste conversion to fueland by-products, waste-to-energy incinera-tion, and biomass-fired electricity productionare additional examples of the advancedtechnical facilities and expertise availablein Hawaii.

The State-run Hawaii Natural EnergyInstitute (HNEI) serves as a catalyst forcooperation among academic, government,and industrial partners in developing re-source system packages in harmony with thenatural environment. The HNEI is currentlyfocused on the development of biofuels,ocean resources, materials applications, andconducting pioneering work on developinghydrogen from renewable resources andtechnologies for its production and storage.

Renewable EnergyResources from Sun, Earth, and Ocean

Hawaii has emerged as a world leader inthe demonstration and use of renewableenergy as an alternative to imported oil.Export potential is being developed in solartechnologies and systems for island appli-cations. Additional prospects reside in thedevelopment of biomass gasification, windenergy, alternative transportation fuels, andocean thermal energy conversion technolo-gies. Hawaii’s assets, such as a highly dev-eloped bio-energy infrastructure, residenttechnical capability in research and engineer-ing, and benign, year-round growing season,offer unique advantages for developing thesestate-of-the-art systems.

Hawaii has the highest per capita useof solar water heating in the United States.Hawaii is also a leader in the development ofapplications of photovoltaics, wind, and geo-thermal engineering, as well as in sophisti-cated computer modeling of its statewideenergy system. Several solar engineeringfirms in the state are active in both solarthermal heating and photovoltaic equipmentapplications servicing clients in the PacificIslands, South America and the MainlandU.S. Other firms are marketing hybrid solarproducts, including a patented solar pasteur-ization process for water purification.

Engineering Research &DevelopmentOcean Engineering to Image IntelligenceWith access to some of the world’s mostadvanced computer and telecommunicationtechnologies and services right here inHawaii, local engineers and design profes-sionals are involved in numerous R&Dspecialties. The University of Hawaii’sengineering programs take advantage ofthese resources and have developedrenowned expertise particularly in oceanengineering. UH R&D programs are also atthe forefront in the engineering of systemsand applications using parallel computingand distributed networking.

Beyond the University, Hawaii’s privatesector engineering firms have been innova-tors in such techniques as pre-stressed con-crete construction, sea-floor surveying ofdeep-water ocean outfalls and geotechnicalengineering for the construction of founda-tions in tropical soils. Private sector expertiseoften partners with the resources of theUniversity of Hawaii to support a broadrange of applied engineering developmentprojects, including auxiliary wastewatertreatment facilities, innovative air condition-ing systems, and new high-tech systems toprotect steel from corrosion in tropicalenvironments. Among the more notableengineering accomplishments for local firmshave been the construction of state-of-the-arttelescope facilities atop the peaks of MaunaKea and Haleakala, on Hawaii and Mauiislands respectively.

Dual-Use TechnologiesNational Defense to Civilian Innovation

The term dual-use technologies refers tothe application of defense-funded technolo-


gies to civilian and commercial use. Thisactivity affords multiple opportunities forentrepreneurial business development inHawaii, and a number of technology trainingand transfer centers and programs statewideare spurring new growth in a wide range ofindustries. A major example of duel-usetechnology is the Maui High PerformanceComputing Center (MHPCC) on Maui Island,home to one of the world’s most powerfulparallel processing supercomputers. This Pacific Missile Range Facility, Kauai

Most people think of “technology” as computers, cell phones,automated tellers, the internet, etc. But these are really justproducts of technology rather than technology per se. Technologyis actually the sets of knowledge, skills and procedures that wereused to create these and all other products of economic activity.In fact “Technology” originally came from the Greek word tekhne,meaning “skill.” Technologies range from the “low tech” needle-and-thread method of attaching buttons to a shirt, to the very“high-tech” activity of building and operating interplanetaryspace probes.

There is a wide range of technologies in use throughout theeconomy. The characteristic that most separates simple or standardtechnologies from the most advanced technologies is the role ofscientific research. Advanced technologies incorporate the latestknowledge emerging from the physical and life sciences, aided byengineering and mathematics. Moreover it usually takes technol-ogy to get technology. For instance, technologies for gene splicingand cloning cannot be developed without equipment and trained

What is “Technology”?

staff made possible by information, telecommunications andengineering technologies coupled with intensive training in thetools of these technologies.

Because technologies are ways of making products, rather thanproducts themselves, it is difficult to define technology industries.We cannot easily measure ways of producing things. Consequently,what we end up measuring as “high tech” tends to be productsand services that contain a very high content of leading-edgetechnology.

From an economic standpoint, there are two primary reasonswhy we are interested in advanced technology. First, the develop-ment of new technology and products based on leading edgetechnology represent very high-valued export potential. A baseof advanced technology export activity brings sales revenues andnew investment into the State. Second, the infusion of leading edgetechnology into traditional industries and other export activity,can improve productivity and make the State’s industries morecompetitive in overseas markets.

• University of Hawaii at Manoa: A first-class researchuniversity, within which the “Honolulu Technique” for geneticcloning was pioneered. The UH runs a multitude of scientific,engineering, oceanographic and technology programs.

• The world’s finest astronomical observatory, atop MaunaKea on the Island of Hawaii, managed by the University ofHawaii and including 13 telescopes – 8 of them exceeding8 meters in diameter.

• The Maui High Performance Computing Center’s IBM SPSuper Computer located in the Maui Research and TechnologyPark. One of the most powerful computing centers in the world,serving more than 900 academic and commercial clients.

• Before the end of 2000 Hawaii will have six underseafiber-optic transpacific cables providing 1.6 million voiceequivalent circuits between Hawaii and U.S./Asianmarkets. Hawaii has more than 29,000 miles of intra- andinter-island fiber optic cable. All phone lines on digital switching.

Hawaii’s Key Technology Assets

• Major medical facilities pioneering advances in tele-medicine, supported by the University of Hawaii’s John A. BurnsSchool of Medicine.

• Research and Development centers/parks on Oahu, Mauiand Hawaii provide support for startup technology firms.

• New technology tax and investment incentives, venturecapital funds and workforce development programs to supportadvanced technology industry.

• A growing list of world class technology firms includingSquare One USA, Uniden and ESS Technologies. Homegrownfirms have including Digital Island, Cyanotech, Probio, Ltd.,and many others.

• Major international call centers on the Islands of Oahuand Hawaii.

• Educated, multilingual workforce• Mid Pacific location, permitting real-time communication with

Asia and the U.S. Mainland during the same working day.

computing power supports a broad range ofR&D projects, including the Pacific DisasterCenter at the Maui Research and TechnologyCenter and the Advanced Electro-OpticalSystem atop Haleakala. Another example isthe Navy’s Pacific Missile Range Facility(PMRF) on Kauai. This facility providesstate-of-the-art telemetry, tracking, and datamanagement technologies to support surface,subsurface, air and space operations.


I A New Measure ofHawaii’s AdvancedTechnology Sector

n cooperation with otheragencies dealing withadvanced technology and

labor statistics, DBEDT hasdeveloped a measure of thetechnology sector in Hawaii.The measure indicates thatprivate sector advanced technol-ogy activity in Hawaii encom-passes nearly 13,000 workers,more than 800 firms and has anannual payroll of $560 million.These figures do not include Hawaii’shealth/medical sector, which also playsan important role in the growth ofadvanced technology in the Islands.Health / medicine activity is compiled asa special category apart from what wewould normally consider to be the “core”technology activities in the economy.This is because of the limitations onidentifying technology-intensive activityin the very large, health/medical sector.(See the accompanying side article for adescription of the definition, data andmethods used to construct the measure)

Table 1 shows the data components forthe core measure of advanced technologyalong with a measure of the health/medical sector.

The data represent firms, employmentand earnings in nearly 60 sub industries

in which Hawaii’s technology activity isemerging. Data for the sub industrieshave been regrouped to meet disclosurerequirements. However, the list ofStandard Industrial Classification (SIC)code industries making up the sectorappears on page 14.

Because the most recent data availableare for 1998, the measure undoubtedly

understates the current sizeof this rapidly growing sector.The measure is also limited toprivate sector activity due tothe difficulty of measuringtechnology activity in thegovernment sector.

The technology core sectorrepresents about 3 percentof all private sector jobs and5 percent of total private sector

payroll (Figure 1). The health/medicalsector, which contains both advanced-and standard-technology activity,accounts for another 4 percent of privatesector employment and 6 percent ofpayrolls.

Overall, firms in the core technologysector averaged slightly over 15 employ-ees per firm. This is higher than the

Table 1. Hawaii’s Emerging Advanced Technology Sector: 1998

Groupings

Firms 2 Employees

Percentchange

from 1990No.Ave. jobsper firm

AverageAnnual

Earnings No.

Percent ofCore

Sector

Percentchange

from 1990

By Category

Bio Technology3 22 144.4% 23.1 $26,413 508 4.0% 202.4%

Information Technology 547 63.3% 6.9 $49,192 3,779 29.8% 16.3%

Telecommunications 116 78.5% 48.4 $45,702 5,611 44.3% -13.1%

Research, Development & Testing4 148 48.0% 18.9 $37,385 2,782 21.9% -3.8%

Total: Advanced Technology Core Sector1 833 63.7 15.2 $44,144 12,680 100.0% -0.7%

By Type of Output

Goods 32 100.0% 22.5 $37,098 720 5.7% 136.7%

Services 801 62.5% 14.9 $44,568 11,960 94.3% -4.0%

Health/Medical Sector 71 24.6% 259.3 $36,457 18,413 NA 11.8%

Expanded Technology Measure:

Core Technology plus Health & Medical 904 59.7% 34.4 $39,592 31,093 NA 6.4%

Balance of Private Sector Industry 30,349 13.6% 13.0 $26,722 395,161 NA -2.1%

All Private Sector 31,253 14.6% 13.6 $27,661 426,255 NA -1.5%

Source: DBEDT, Dept. of Labor & Industrial Relations, US Dept. of Labor1 Data represent all activity in standard sub-industries identified by either DBEDT or falling within the definition of American Electronics Association.2 Includes only private sector firms with payroll. Excludes self-employed and firms without paid employees.3 Growth rates may be somewhat inflated due to reclassification of some firms from among the 4-digit industries of R&D and Biotech between 1990 and 1999.4 Growth may be somewhat understated. See 3 above.

Figure 1a.Advanced Technology’s Share of Jobs

Figure 1b.Advanced Technology’s Share of Wages & Salaries

Technology Core Sector 5% Health/Medical Sector

6%

TechnologyCore Sector

3%

Health/Medical Sector 4%

Balance of Private Economy93%

Balance of Private Economy89%


average for the rest of the private sector,which was about 13 employees per firmin 1998.

Components of theTechnology Sector

The core technology sector hasbeen divided into four sub-sectors —biotechnology, information technology,telecommunications and research anddevelopment activity. These correspondto several key areas of technologythat are identified in the first article in thisreport. Unfortunately, the underlyingindustry data do not permit measurementof such categories as dual use, energyand environmental technology. Thoseactivities are, however, integrated into thefour categories that are measured. It isalso likely that some ocean and spacetechnology activity is also present in thefour measurable categories. However,since ocean and space activities areconducted mainly by the public sector,the overall measure cannot adequatelycapture the bulk of that activity.

firm. This could be the result of one ortwo large firms significantly raising theaverage .

Research, development and testingactivity represent 22 percent of employ-ment in the core technology sector.Information technology was the thirdlargest concentration at 30 percent ofemployment, while telecommunicationstopped the sector with 44 percent oftotal employment.

Health Medical TechnologyIn addition to being very large in

relation to the core technology sector, thehealth/medical sub sector is dominated bylarger organizations. Average employ-ment in this sector was nearly 260 perfirm in 1998, reflecting the dominancein the statistics of the major hospitals.

Future growth in the health/medicalsector will primarily reflect the demand formedical services. Growth is expected to beabove average due to the aging of thepopulation. Further growth may occur asa result of efforts to market Hawaii as amedical treatment, health and wellnesscenter for the Asia-Pacific region. As thesector grows, so too will the sector’stechnology component.

Goods vs. ServiceAnother way of viewing the technol-

ogy sector is to distinguish between theproduction of goods and the provision ofservices. Hawaii has traditionally been aservice-oriented state. The technologysector reflects this service sector bias.As the table shows, only about 6 percent

As shown in Figure 2, biotechnology isthe smallest of the core technology areas,amounting to about 4 percent of employ-ment in the sector. However, it was thefastest growing over the past decade, withemployment roughly tripling in size from1990. Part of this growth was due to therapid expansion of the seed corn industryin Hawaii, which is using genetic researchto develop new varieties of corn foroverseas commercial farm operations.Biotechnology activities at the Big Islandfacilities of the Natural Energy Laboratoryof Hawaii also contributed to the growth.Biotechnology had the second highestfirm size in the core technology sectorwith an average of 23 employees per

$50,000

$45,000

$40,000

$35,000

$30,000

$25,000

$20,000

$5,000

$0

$15,000

$10,000

Technology Core Sector Health/Medical Sector Balance of Pvt. Economy

1998 Ave. Wage

1990 Ave. Wage

$60,000

$50,000

$30,000

$40,000

$20,000

$0

$10,000

Bio Technology InformationTechnology

Telecommu-nications

Research, Devel.& Testing

Health/MedicalCore Sector

Balance ofPvt. Economy

continued on next page

Figure 2. Private Sector Advanced TechnologyJobs by Activity, 1998

Total Jobs: 12,680

Information Technology30%Bio Technology

4%

Research, Devel.& Testing

22%Telecommunications

44%

Figure 3. Average Wage for Technologyand Non-Technology, 1990 & 1998

Figure 4. Average Wages, 1998Source: DBEDT

Source: DBEDT

Source: DBEDT


A New Measure of Hawaii’s Advanced Technology Sectorcontinued from page 11

of employment in the advanced technol-ogy sector is in goods producing indus-tries, with more than 94 percent in theservices. However, from 1990 to 1998,the goods producing area of advancedtechnology showed significant growth,more than doubling over the period. Overthe same period service-oriented technol-ogy actually declined somewhat, due tothe sluggishness in the economy overall.

Wages & SalariesAs shown in Figure 3, advanced

technology and the health medical sectorshowed higher than average annual wagelevels in both 1990 and 1998. Amongthe individual areas, information technol-ogy had the highest average wage levelat about $49,200 in 1998 (Figure 4).This was nearly twice the average of thenon-technology, balance of the economywhich was $26,700. Somewhat surpris-ingly, the only area of technology show-ing an average wage less than the econo-my wide average was biotechnology at$26,400. This may have been due to

the agricultural component of biotechnol-ogy, including seed corn development.Despite the sophistication of its technicalmethods, agricultural biotech may stillrequire a good deal of lower paying,labor-intensive fieldwork.

Limitations andFuture Refinements

As the accompanying technical articleindicates, all measures of the technologysector are somewhat arbitrary. On onehand, all industries use advanced techno-logy to some degree. On the other hand,very few industries are exclusively devo-ted to producing new technology. Thequestion is always one of what activitiesshould be counted.

Based on standard industry data ratherthan custom surveys, this new measureof technology in Hawaii’s economy repre-sents a compromise between the narrowvs. broad definition. Being industry ratherthan company based, it unavoidablyincludes a certain amount of economicactivity that may not be advanced

technology. However, the new measure isnarrow enough that future growth in thesector should reflect primarily the influ-ence of the technology companies andtheir activity.

This initial effort to construct measuresof Hawaii’s core, advanced technologysector and the more technologicallyintensive areas of health and medicine,will continue to undergo refinement andimprovement in the future. Growth in theindustry data will be compared withgrowth in key firms within the sector toensure the measure is truly reflecting anincrease in advanced technology ratherthan other factors. In any case, themeasure will eventually need to berevised to reflect a new industry classifi-cation method called the North AmericanIndustrial Classification System (NAICS).This system replaces the long-standing,Standard Industrial Classification Codeand is being phased in for Federalstatistics programs over the nextseveral years.

It is less straightforward than it seems to identify andmeasure advanced technology. Most economic activity isclassified and measured by the nature of what is produced—the output. For instance, even though farm equipmentand automobiles use much the same material inputs andproduction processes, they are distinctly different indus-tries based on the differences in the products that areproduced.

The problem with identifying a “technology” industryis that technology is generally an input into productionrather than an output. Moreover, it is hard to draw the lineon what is to be excluded from a technology definitionbecause just about every business and product incorpo-rates advanced technology to some degree. Given thisdifficulty, it is not surprising that there has not yetemerged an official definition of “advanced” or “high”technology for the nation. Partly because there is nocommon definition, there has been no comprehensiveeconomic census to measure the size and scope oftechnology activity. Nevertheless, it is important that ameasurement of the activity in Hawaii be established inorder to gauge progress in developing this industry.

Measuring Advanced TechnologyDBEDT began the effort to develop a measure of

advanced technology by establishing a few importantgoals for the measure. These goals were to:

• Develop a measure that will mirror the growth inadvanced technology over time.

• Ensure that the measure reflects Hawaii’s unique mix ofspecialties, as well as broader, more generic technologycomponents important nationwide.

• Develop a measure that will allow calculation of somehistorical data as well as permit some comparisons withU.S. technology activity.

• Develop a cost-effective measure that will permit trackingthe growth of the sector on an ongoing basis, withlimited staff resources and without the need for consult-ant assistance or special surveys.

Fortunately, there have been some efforts to quantifyan advanced technology sector. While the results of theseefforts have been mixed, they have served as a guide fordeveloping a comprehensive measure relevant to Hawaii.


The three primary measures reviewed as potentialmodels for the DBEDT measure (AEA, Arizona and BLS)are highlighted in the next side bar. Each of these mea-sures used selected subindustries of the Standard IndustrialClassification (SIC) code to define an advanced technologysector. The measures differed mainly with respect to theircriteria for choosing what sub-industries to include. Usingstandard industry statistics makes it easier and faster toprepare and update the measure. It also has the advantageof consistency and comparability over time. However,even at the fairly detailed, 4-digit SIC level, the datainclude activity that may not be strictly advanced technol-ogy but which cannot be easily separated from thetechnology activity. There is also the problem that theexisting measures of advanced technology industry arenot necessarily appropriate for all regions of the country.

An alternative method to standard industry statistics isto conduct special surveys of companies doing advancedtechnology. The Hawaii High Technology DevelopmentCorporation uses this method, which has the advantageof focusing more precisely on firms conducting intensivetechnology activity and excluding firms using standardtechnologies. However, this method can be an expensiveand time-consuming effort. It also will include non-technology activity conducted by the firms surveyed.Moreover, since many companies choose not to participatein such voluntary surveys, the results are oftenincomplete.

It was decided that a measure based on selected SICcodes would be the most cost effective and efficientapproach. It is not an accident that the three measuresreviewed also used an SIC-based approach. However, noneof the three measures reviewed met the goals DBEDT hadset for the development of a measure. Consequently,DBEDT created a hybrid definition that combined asuitable national definition with locally generatedinformation on technology activity.

The American Electronics Association (AEA) definitionwas chosen to cover one major component for Hawaii’smeasure of technology. The AEA definition focuses onSIC industries in information technology (computers,equipment, software and programming) and telecommuni-cations (equipment and communications services). Thissector represents a key group of activities with a highcontent of advanced technologies found more or lessthroughout the nation. The other two definitions reviewedincluded more specialized activity, including the manufac-ture of automobiles, commercial aircraft, defense weap-onry and other aerospace related hardware, which are notappropriate to Hawaii or for national comparisons. Evenfor some AEA-identified technology industries, Hawaii hadlittle or no activity according to the latest statistics.However, Hawaii generates activity in most of the AEAindustries and there is considerable overlap between the

AEA and DBEDT/HTDC identified industries discussedbelow.

To the list of SIC codes contained in the AEA definition,READ added more SIC-based industries reflecting Hawaii’sevolving technology sector. The two main sources ofinformation for these industries were the directory oftechnology companies in Hawaii prepared and maintainedby the HTDC and firms identified in the 1999 DBEDTreport, Science & Technology: The Key to Hawaii’sEconomic Future, prepared by DBEDT’s ERT Division.Not surprisingly, many of the same companies wereidentified in both the HTDC and ERTD reports.

It was also decided that the definition and measurementwould be based on private sector activity. This was mainlydue to the lack of available data on technology activityconducted by state (mainly university) and federalgovernment in Hawaii. However, even if a public sectormeasure were available, there is no counter part measureat the national level for comparison. If the goal is tomeasure growth in technology, the lack of public sectordata is unfortunate but not a major shortcoming.Ultimately, it is private sector employment and diversifica-tion of the economy that the State is trying to accelerate.

Four-digit SIC industry codes were identified for theHawaii companies in cooperation with the State Depart-ment of Labor and Industrial Relations. SIC codes in whichadvanced technology firms were a very small part of thetotal were not included in the measure, to avoid includingan excessive amount of non-technology activity. Also,SIC codes in which factors unrelated to technology activitywere the driving force in industry growth were excludedwhere possible.

The remaining 4-digit industries that appeared to bestrepresent advanced technology grouped rather nicely intofour major categories of interest for Hawaii — biotechnol-ogy, information technology, telecommunications, andresearch & development. Unfortunately, such areas asocean related technology, astronomy, dual-use technologyand environmental activity, tend to overlap and blend withthese more measurable categories, particularly the R&Dand biotech categories. Moreover, areas such as oceanresearch, space and astronomy cannot be measured asyet, since they are primarily government or universityactivities.

The identification of healthcare and medical technologyposed a dilemma. This sector was not included as part ofthe technology core measurement because it is notpossible to separate the technology and non-technologyactivities within the health and medical SIC codes. Thefocus of medical technology is the leading edge diagnosticand treatment capabilities of the major hospitals. Buthospitals in Hawaii employ many thousands of workers,most of who are not involved in the application of leading



Bio Tech

Crop & animalbiotech, medicinals,botanicals, diagnos-tic substances &organic chemicals

0115, 0182, 0919,0273, 2833, 2835,2865

Definitions for Hawaii’s Advanced Technology Categories

Info-Tech

Computer & Dataprocessing equip-ment, software andrelated facilities,sales, services &repair

8243, 3571, 3652,3861, 7371-76,7378-79, 5045,5065, 5734

Telecom

Radio, TV,telephone, cableand othercommunicationsequipment &services

3663, 3669,4812-13, 4822,4841, 4899

R&D

Research &testing devices.Commercial physi-cal & bio research& testing serv.

3844, 3829, 8731,8733-34

Health/Medicine

General & specialmedical & surgicalhospitals, labs &dialysis.

8062, 8069, 8071,8092

Source: DBEDT

Descriptionof activities

4-digitStandardIndustrialClassification(SIC)

Three Definitions of Advanced Technology

Three national efforts to define andmeasure advanced technologywere reviewed as possible modelsfor DBEDT’s Hawaii measure.These were: (1) a definitionadopted by the American Electron-ics Association (AEA), (2) thedefinition developed in a study ofhigh technology in Arizona, and(3) a definition recently used in anarticle in the U.S. Bureau of LaborStatistics’ (BLS) Monthly LaborReview. 2

The accompanying tablesummarizes the elements of thosethree national definitions ofadvanced technology industryreviewed by DBEDT as models fora Hawaii-based measure.

The AEA and Arizona defini-tions are straight-forward assump-tions about what industries shouldbe considered in the advancedtechnology sector. The BLS

How the Three Definitions Compare

American ElectronicsAssociation (AEA)

Judgement

45, 4-digit SIC

171,416

12.9

State of Arizona

For manufacturing, industryincluded if met 5 of 9 pre-existingdefinitions. For services, judge-ment was used.

22, mix of 3- and 4-digit SIC

157,310

27.2

Bureau of Labor Statistics (BLS)

First, technology-orientedoccupations were identifiedjudgmentally. Industries thendefined as advanced technology ifproportion of research & develop-ment and technology-orientedoccupations exceeded twice theaverage proportion for all industries.

31, 3-digit SIC

422,330

16.4

Definitional Basis.How industries orparts of industrieswere defined asadvanced technology.

Number and type:

Number of 1997establishments:

Percentmanufacturing (1997):

2 The AEA definition is used in its periodic industryreports Cyberstates and Cybernation. Information aboutthese reports can be found at http://www.aeanet.org/aeanet/Public/research/index.html. The Arizona defini-tion comes from Charney, Alberta and Julie Leones(October 1995), “Impact of High Technology Industryon the Arizona Economy.” The Bureau of Labor Statis-tics definition is in Hecker, Daniel (1999), “High-tech-nology employment: a broader view,” Monthly LaborReview pp. 18-28 (June).

Measuring Advanced Technologycontinued from page 13

edge technology. On the otherhand, the expansion of the healthcare sector and medical technologyis a focus of State technologypolicy and there clearly is signifi-cant technology activity occurringin this industry.

The dilemma was resolved byadding the most technology-relevant segments of health andmedicine as an addendum to thecore technology measure. In thisway users may choose a basic orexpanded definition of technologydepending on the importance ofhealth-medical technology to theirneeds.

The detailed SIC codes used to measureadvanced technology in Hawaii were thengrouped to avoid the possibility ofdisclosing information on specific firms.Unfortunately, disclosure rules preclude

release of the detailed information byeach SIC code. However, the 4-digitSIC code numbers used in defining thefour sub-sectors of technology areshown in the table.

definition is a little different. Theindustries in this definition wereselected by their high proportion ofadvanced technology occupations. Thiscaptured a much broader selection ofeconomic activity, including some notusually associated with advancedtechnology such as the auto industryand public relations.

Source: DBEDT


C HowTechnologyis Changing

Work

oncern about the effect of technol-ogy on jobs goes back at least200 years to the time when the

introduction of textile equipment inBritain began threatening the jobs ofweavers. There has been a general fear byworkers ever since that technology willdestroy jobs and replace people throughmechanization and electronics.

There is certainly evidence thattechnology eliminates some jobs; evenjobs in the technology industry itself asbetter technologies emerge. But theevidence also shows that the introductionof technology creates many more jobsthan are eliminated. For instance, manyeconomists have attributed the lastseveral years of sustained economicgrowth in the U.S. to the rapid introduc-tion of new technology and associatedproductivity gains. Yet rather thaneroding the employment base, thistechnological surge has caused thenumber of new jobs to soar for the U.S.as a whole, and the unemployment rateto fall to its lowest level in a generation.Thus, for every job that technologyrenders obsolete, it generates more jobselsewhere.

But creating new jobs is just the tip ofthe technology iceberg. Perhaps moresignificantly, technology dramaticallychanges the way people work. Forexample, many autoworkers who used toweld seams and tighten bolts, nowoversee computers and robotic machinesthat do this job much more effectively.Most office workers no longer composelonghand memos, type letters or maintainpaper account ledgers. Now they develop,proof and send by e-mail such docu-ments, all on their desktop computers.Thus in addition to creating and eliminat-ing jobs, technology is demandingincreased flexibility and adaptability bytoday’s workforce.

Expected Growth ofHigh Tech jobs

But specifically what effects aretechnological advances having onHawaii’s workforce? Several studies haveused national data to assess how hightechnology has affected jobs, and howtechnology has changed the projectionsabout which jobs will grow and whichwill decline in the future. Based on thesemethodologies, DBEDT has conducted asimilar analysis for Hawaii.

The U.S. Bureau of Labor Statistics’(BLS) Occupational Outlook Quarterlynotes that nationally, there is a shortageof workers with technology skills.3

Indeed, over the 10-year period 1996 to2006, the expected increase in employ-ment for some computer-related occupa-tions is expected to more than doublewhile total employment in all occupationswill rise by only 14 percent.

Table 1 shows a portion of the BLSemployment growth projections for somekey technology occupations the Bureauhas identified, along with similar projec-tions for Hawaii from the State Depart-ment of Labor and Industrial Relations(DLIR).

3 Veneri, Carolyn J. (1998), “Here Today, Jobs of Tomorrow:Opportunities in Information Technology,” (Fall) pp. 45-57.

Table 1.BLS Employment Projections for Some Occupations

Source: Occupational Outlook Quarterly, Fall 1998, p. 47;and State of Hawaii Employment Outlook for Industries andOccupations, 1996-2006, March 1999.

Projected ChangeOccupation 1996-2006

U.S. Hawaii

Total, All occupations 14% 14%

Database administrators, computersupport specialists, & othercomputer scientists 118% 109%

Computer engineers 109% 46%

System analysts 103% 82%

Computer programmers 23% 25%

An interesting feature of this outlook isthe relatively modest increase projected inemployment for computer programmers.This is primarily because past projectionsfor this category were higher thanactually experienced. Consolidation ofcomputer applications, the popularity ofpackaged software, and the developmentof programming tools and languages haslimited growth in the demand forprogrammers.

The BLS projections also indicate thatnew information technology jobs will not

be confined to “high tech” or “informationtech” industries such as computer equip-ment or telecommunications. Increas-ingly, the skills associated with hightechnology permeate the U.S. economy.

As Table 2 shows, advanced technol-ogy occupations are spread throughoutHawaii’s economy also. The data showthat about 3 percent of Hawaii occupa-tions in 1996 could be classified as“technology-oriented” by BLS standards.For the most part, these jobs were spreadmore or less evenly across the state’smajor industries. The exception isgovernment, which showed a muchhigher share of advanced technologyoccupations than the rest of the economy.This may reflect concentrations ofscientific and technology occupationsin State and Federal agencies.

The projections information in Table 2indicates that between 1996 and 2006,advanced technology occupations areexpected to grow about 50 percent fasterthan the average for all occupations.The growth in technology occupations isprojected to be particularly strong inservices and trade activity. The technol-ogy-intensive government sector will addtechnology occupations faster than it willother occupations over the decade.

However, there is a concern that whilethe demand for high technology skills isexpected to rise, the supply of those skillsmay lag behind at the national level. Forexample, the BLS notes that the numberof computer and information sciencebachelor’s degrees awarded has declinedfrom about 41,900 in 1985-86 to 24,400in 1994-95. Some attribute this to theacademic challenges of these majorswhile others think it is a reaction thedownsizing of information technologystaffs during the 1990s. More recentsurveys reported by BLS indicate sharplyrising enrollments in computer scienceand engineering fields in 1996 and 1997,so the trend may be reversing.

Examples of Declines inTechnology Occupations

Despite the expectation that thetechnology sector in the economy willexpand rapidly in the coming years,how the technical occupations will share



Table 2. Hawaii’s Advanced Technology Occupations: Share in 1996 and Projected Growth

Source: U.S. Bureau of Labor Statistics

Advanced tech.as % of all

occupations, 1996

Projected growth1996-2006

Advanced Tech.occupations

Alloccupations

All Industries 3.1% 21% 14%

Agriculture 1.2% 0% 4%

Mining & Construction 2.0% 9% 9%

Manufacturing 1.6% 26% 6%

Transportation, Communications, & Utilities 2.5% 18% 13%

Wholesale & Retail Trade 0.3% 35% 12%

Finance, Insurance, & Real Estate 2.3% 26% 8%

Services 2.5% 37% 22%

Government 8.2% 12% 3%

in this growth is not yet clear. From 1984to 1995, some advanced technologyoccupations grew much slower thanexpected and even declined. Theseappeared to be occupations associatedwith the aero-space and defense indus-tries, many of which were severelydownsized after the collapse of the SovietUnion. An accelerated shift from manu-facturing to services may have beenresponsible for sluggish growth in sometechnology occupations.

Even technology itself impacted ontechnology occupations. For instance,growth in the demand for word process-ing specialists was much slower thanprojected because of innovations incomputers and software that increasedproductivity in the processing of docu-ments. Employment of mainframecomputer programmers and operatorsgrew more slowly than expected becausechanging technology in the 1990sfavored small computers and prepackagedsoftware over centralized, mainframecomputers. Such occupations as electricaland electronics engineers, data entrykeyers, and peripheral EDP equipmentoperators had all been expected to growmuch faster than average between 1984and 1995. However, employment in eachof these areas actually declined.

These patterns suggest that simplyacquiring skills in advanced technologyspecialties may not be sufficient toguarantee long-term employment at thesame job. The types of skills acquired andthe changing demands for technical skillsare important factors. People must be able

to learn new skills or to adapt existingskills to new problems in order to managesuccessful careers.

Building a TechnologyWorkforce:

How can Hawaii make sure that itcan supply the skilled workers to supportgrowth in the advanced technologysector? This question has received aconsiderable amount of attention by thepublic and private sectors over the pastseveral years. Out of this effort hasevolved educational and workforceinitiatives, a number of which areaddressed in Act 178, of the 1999Legislative session.

The Millennium WorkforceDevelopment Initiative

Unveiled by Governor Cayetano in hisJanuary 1999 State-of-the-State address,the primary goal of the MillenniumWorkforce Development Initiative is tocreate work force training programs fortechnology. The initiative will focustraining efforts on specialty niche areasthat have great potential for Hawaii, butwhich require the support of an expand-ing corps of workers with the requiredskills. These niches were initially identi-fied as healthcare, biotechnology,telecommunications, environmentalsciences, and other areas of advancedtechnology as appropriate.

The short-term goal of the initiative isto put in place or augment education andtraining programs to train workers in thetechnology niche areas. The longer-term

goal is to expand the diversity of jobsavailable in the State, increase thecompetitiveness of local industry in worldmarkets and help attract new investmentto the State.

Act 178 provided initial funding forthe Millennium Workforce DevelopmentInitiative and charged DLIR with the taskof implementing it. The Initiative hasbeen adopted by the State WorkforceDevelopment Council, an organization ofprivate and public sector representativesthat is administratively attached to DLIRand which was established to coordinateefforts to develop Hawaii’s workforce.

Through Act 178, DLIR and theUniversity of Hawaii have been fundedat $50,000 and $436,000 respectivelyto begin developing Millennium Initiativeprograms. Workgroups of the initialMillennium Workforce Task Forceappointed by the governor have drafted

How Technology is Changing Workcontinued from page 15

Perhaps the most obvious waytechnology has changed lives andjobs is through the growing use ofcomputers at home and at work. TheNational Telecommunications andInformation Administration recentlyreported survey results of householdswith information about the presenceof a computer and internet use. Table3 indicates that Hawaii householdsare no different, and perhaps slightlymore likely, to have a computer athome and to use the Internet than inthe nation as a whole. Moreover,both for the U.S. and Hawaii, usageincreased significantly just between1997 and 1998.

Computer Use

Table 3: Percent of Households with aComputer and Internet Use

Computer Internet Use

U.S. Hawaii U.S. Hawaii

1997 36.6 34.6 18.6 NA

1998 42.1 42.3 26.2 27.9

Source: NTIA, Falling Through the Net: Defining theDigital Divide, July 1999 and Falling Through the Net II:New Data on the Digital Divide, July 1998.http://www.ntia.doc.gov/ntiahome/digitaldivide.


preliminary reports on training needsfor each of the niche areas.

Technology educationTechnology skills training is most

effective among those who alreadypossess hands-on familiarity with theleading-edge products of advancedtechnology. But even those who will notbe training for technology occupationsmust understand technology and theincreasing role it will play in 21st centurysociety.

With this in mind, the Departmentof Education is taking aggressive andimpressive steps to integrate technologyeducation into elementary and highschool curricula. The strategy for develop-ing future generations of technology-savvy, Hawaii workers is embodied inthe DOE’s new content and performancestandards. Among the standards are a set

of six areas for technology literacy thataim to teach students both the technicaland the human side of technology (seeside bar). Specific performance standardshave been established for each grade levelfrom kindergarten through 12th grade.

Two other innovations gatheringmomentum in DOE’s effort to acceleratetechnology literacy of both students andeducators are Magnet E-Academiesand E-Schools.

• E-Acad emi e sMagnet E-Academies will explore thedevelopment of new teaching methodsand learning environments usingemerging information and telecommuni-cations technology. More than 20schools statewide were offering E-Academy courses as of the Fall of 1999.The focus of the E-Academy programsare on math, science, engineering and

technology, combining the best practicesof technology-aided on-site instructionand on-line learning through theinternet and educational networks.

• E - S c h o o l sThe Electronic School or “e-school”program offers academic courses overcable television and on the Internet.About 20 courses were offered in theFall of 1999 in subjects ranging frommath and technology to history andjournalism. Some of these courses carryAdvanced Placement (AP) college credit.

Playing an increasing role in an effortto build an understanding of technologyamong students and staff is the DOEOffice of Information and Telecommunica-tions Services (ITS), particularly theAdvanced Technology Research unit.The ITS has partnered with a number ofprivate and public sector organizations tobring the expertise needed into theschools and sought-out Federal grantmonies to accomplish their mission.

ConclusionTechnology can create whole new

occupational opportunities and alsoeliminate some occupations. The fasterthe pace of technological change, themore challenging is the task of restructur-ing education and training programs aswell as retraining and upgrading the skillsof affected workers. The key to helpingthe workforce adjust to technologicalchange is for the education and trainingsystem to anticipate the needs of thetechnology sector and the impact technol-ogy will have on existing industries inthe future.

Hawaii Department of EducationStatewide Standards

for Educational Technology

Content Standards Overview

BASIC OPERATIONS AND Students demonstrate a sound understanding of the nature andCONCEPTS operation of technology systems. Students are proficient in the use

of technology.

SOCIAL, ETHICAL AND Students understand the ethical, cultural, and societal issues HUMAN ISSUES related to technology. Students practice responsible use of

technology systems, information, and software.

TECHNOLOGY AS A TOOL Students use technology tools to enhance learning, increaseFOR PRODUCTIVITY productivity, and promote creativity. Students use productivity tools

to collaborate in constructing technology-enhanced models,preparing publications, and producing other creative works.

TECHNOLOGY AS A TOOL Students use technology to communicate, to collaborate, publish,FOR COMMUNICATIONS and interact with peers, experts, and other audiences. Students

use a variety of media and formats to communicate informationand ideas effectively to multiple audiences.

TECHNOLOGY AS A TOOL Students use technology to locate, evaluate, and collectFOR RESEARCH information from a variety of sources. Students use technology

tools to process data and report results. Students evaluate andselect new information resources and technological innovationsbased on the appropriateness to specific tasks.

TECHNOLOGY AS A TOOL Students use technology resources for solving problems andFOR PROBLEM-SOLVING making informed decisions. Students employ technology in theAND DECISION-MAKING development of strategies for solving problems in the real world.

Hawaii Department of Education (DOE), Standards for Educational Technology, Hawaii Content and PerformanceStandards, DOE internet web site, http://www.hcps.k12.hi.us/

MagnetE-Academy

Staff DevelopmentComputer Training AcademyUniversity of HawaiiHDOEMicrosoft

Hardware/SoftwareStandards

Access & ConnectivityMagnet School CentersDigital Magnet Facilitators

Content ResourcesTraining PackageA+ CertificationMS CertificationAcademic E-SchoolUH Computer ScienceSource: DOE


GrowingHawai i’s

TechnologyIndustry

The explosion that’s taking place inthe worldwide technology industryholds tremendous potential for

Hawaii. As the Governor’s Special Advisorfor Technology Development, my job is toensure that the islands develop a strongand vibrant technology sector and that

we take fulladvantage of themany opportunitiestechnologyindustries canprovide. But whilethe state govern-ment must and will,play a key role, it isHawaii’s technology

businesses that will be the driving force infacilitating the growth of our emergingtechnology sector.

Of course, there are already strong,well-established centers of technologyaround the country including SiliconValley in California, the Silicon “forest”in the Northwest, and nearly a dozenothers. But, Hawaii can be every bit ascompetitive as these other centers if we

Joseph F. Blanco

focus on selected niche markets that canthrive on the unique assets and resourcesfound in Hawaii. Our top-notch talent,strategic location as America’s “gateway”

For example, Square USA Hawaii’slatest computer generated film project,being created in the company’s cutting-edge, Honolulu design studios, will rivalor exceed the quality of products put outby industry giants like George Lucas’Industrial Light and Magic or Disney’sPixsar Studios.

By Joseph F. BlancoExecutive Assistant to the Governorand Special Advisor for TechnologyDeve lopment

Act 178 of the 1999 Hawaii State Legislatureestablished the position of Special Advisor to theGovernor for Technology Development. Mr. Blancowas appointed to this position on August 27, 1999,by Governor Cayetano. The duties of the Special Advisoras set out in Act 178 include:

• Developing, coordinating, and implementing short- andlong-range state policies and directions to enhance thedevelopment of high technology industries in Hawaii;

• Coordinating all state high technology agencies whiledeveloping a plan for reorganization or consolidation ofthese agencies in the interests of greater efficiency andcost effectiveness;

• Advising the private sector in the development of hightechnology activities and resources and providingtechnical or other assistance to private industry uponrequest;

Responsibilities of the Special Advisor

• Creating, disseminating, and updating a listing of allhigh technology assistance programs in the State andwhere they can be reached;

• Pursuing appropriate public-private sector businesspartnerships;

• Coordinating the State’s promotion and marketing of thehigh technology industry, including a review of currentmarketing efforts;

• Arranging for the conduct of research through contrac-tual services with the University of Hawaii or anyagency or other qualified persons;

• Encouraging the development of educational, training,and career programs in high technology industries; and

• Performing other necessary or desirable functions tofacilitate the intent of the Act.

technology niche marketscan thrive on the unique assets

and resources foundin Hawaii

to Asia, technology infrastructure assetsfunded by the state and federalgovernments, our unparalleled quality oflife, and even our unique geology andclimate, can make Hawaii the “location ofchoice” for many important areas ofadvanced technology.

we have been listening towhat Hawaii’s technology

leaders have to say

Homegrown companies likeAquasearch and Cyanotech aredeveloping dietary supplements andpharmaceuticals from microalgae on theBig Island that are better and produced atless cost than anywhere else in the world.The work being done by these companieshas the potential to generate hundreds ofmillions of dollars in new revenues forHawaii.

Another example is the PET scannerat Queen’s Medical Center, which is oneof the most advance medical imagingsystems today. Right now, this is one ofonly two such scanners of comparablepower in the world.

The areas in which Hawaii isdeveloping its own unique brand ofadvanced technology were highlighted


continued on page 21

earlier in this report. Topping the list areinformation and communicationstechnology, biotechnology, health andmedial technology and astronomy, ocean,energy and environmental research andtechnology. While all areas of technologyare important, we think these areas haveparticular promise for the islands. Formany of them there is no place else in theworld that can offer what Hawaii offers,from the standpoint of either resources orlocation.

But what do we need to do to growthese niches and shift Hawaii’s effort tobecome a technology leader into highgear? And more specifically, what will I bedoing as the Governor’s Special Advisorfor Technology Development?

My first step has been to listen towhat our technology leaders have to say.My team and I have been meeting withdozens of technology companiesthroughout Hawaii, soliciting their inputand ideas. Many of them have alreadytold us, loud and clear, what they need tokeep growing their particular businesses.We deeply appreciate and value thisinput, and will continue to seek it out,and act on it.

With that input in mind, we arecommitted to helping technologycompanies grow and become increasinglycompetitive through a number of efforts.

Making it easier forTechnology firms to dobusiness in Hawaii

Our technology companies must beable to compete globally. This means theymust be able to operate as cost-effectivelyas possible. Let me give you twoexamples of how we’re helping Hawaii’stechnology companies remain costeffective and competitive. Through Act

We’re also working to make more,low-cost financing available to Hawaii’stechnology companies. In doing so, a newpool of attractive financing will beavailable to local technology companies tohelp them grow and expand their physicalfacilities. Our goal is to create a $100million bond facility for Hawaii’stechnology companies.

Ensuring that Hawaii has aTop-Flight TechnologyWorkforce

We know that in order to compete,Hawaii’s technology companies must beable to draw from the best and thebrightest employees available. The good

the same for our technology image.We believe strongly that this plan must

include all of Hawaii’s assets, includingour state and federally funded assets andprograms which give Hawaii anothersignificant advantage over many of ourcompetitors. Our goal is to work withHawaii’s technology industry to forge aunified statewide marketing strategy, sothat instead of having many separatemarketing plans for IT, biotech, medicalresearch, etc., we’ll have an integratedmarketing plan and message that brandsand sells Hawaii first. This marketing andpublic relations campaign will target anational and international audience and isdesigned to focus attention on Hawaii’sadvantages as a preferred location fortechnology. The campaign will showcaseHawaii’s unique assets and existingtechnological expertise.

We will be placing special emphasis onmaking “Hawaii” synonymous withintellectual property protection in thetechnology community, just as Delawareis for corporate registrations in thecorporate community. Governor Cayetanoenvisions Hawaii as a place where thebest and brightest from around the worldwill want to come to test new ideas andwhere technological breakthroughs inmany disciplines can take place.

Hawaii now has one of themost ‘high-tech’ friendly tax

structures in the nation

The quality of technologicalresearch and development that

is taking place at the Universityof Hawaii is unparalleled.

Our goal is to work withHawaii’s technology industry to

forge a unified statewidemarketing strategy

Toward that end, the Governor recentlyled the charge to block extremelydamaging federal legislation that wouldhurt - not help - American inventors.The Governor’s action, which includedwriting all 49 of his fellow governors,urging them to join him in opposing thebill, has caught the attention of severalnationally prominent independentinventors who are now taking a moreserious look at Hawaii as a place todo business.

Two important upcoming eventsin Hawaii will provide excellentopportunities for Hawaii to tell our storyand demonstrate our competencies. ThePacific Basin Economic Council (PBEC)

178 of 1999, (the Technology OmnibusBill) Hawaii now has one of the most“high-tech friendly” tax structures in thenation. In fact, when we shared thedetails of Act 178 with some technologycompanies in California, their onlyquestion was how soon could theymove here!

news is that our universities and collegesare already producing what are widelyrecognized as some of the nation’s toptechnology graduates. And, the quality oftechnological research and developmentthat’s taking place at the University ofHawaii is unparalleled. We need to domore, however, to help create moretechnology job opportunities that willallow our young people to remain hereat home.

We understand the importance ofteaching strong science, math andcomputer skills at an early age and we’llbe doing more to expand technologyeducation and training programs into thelower grade levels. The Department ofEducation’s new “E-Academies” and“E-schools,” which teach science, mathand engineering subjects through“virtual” schools statewide is just oneof the ways we’ll be working towardthat goal.

Creating a Technology Imagefor Hawaii

We will work to help create an excitingand dynamic new image for Hawaii andhelp unify Hawaii’s marketing efforts. Ourcurrent marketing efforts have alreadybranded Hawaii as one of the world’smost desired vacation spots. We must do


The significant progress that has been made indeveloping Hawaii’s advanced technology sector duringthe past several years has been due in part to the workin 1996 and 1997 of Governor Cayetano’s Task Forceon Science & Technology, chaired by Lt. GovernorMazie Hirono. Many of the financial, educational andcoordination elements of Act 178 and the EconomicRevitalization package enacted the year before can betraced to recommendations of the Task Force. (The fullreport may be reviewed at http://www.hawaii.gov/ltgov/scitec.html.)

The Governor’s Task Force also looked at numerousmodels of technology development around the countryand what distinguished the most successful among these.The most instructive of the models reviewed by theTask Force were those of Silicon Valley in California andRoute 128 in Massachusetts. Route 128 is generallyacknowledged to have been the premier U.S. center fortechnology innovation in the 1970s. However since then,Silicon Valley has achieved phenomenal success, as acenter for technology development, while Route 128 hasarguably faded. This is despite the fact that each centerhas had roughly equal resources in terms of academic,industry and government support.

Silicon Valley, located at the south end of San FranciscoBay, is just outside the doorstep of Stanford Universityand very close to the University of Southern Californiaat Berkley. It is also within the major San Franciscolabor market. Route 128 rings the metropolitan Boston-Cambridge area and encompasses MIT and HarvardUniversities. Route 128 was the center of theminicomputer revolution of the 1970s through suchcompanies as DEC, DataGeneral and Wang Laboratories.But it was Silicon Valley that became home for Xerox,Hewlett-Packard, Intel and countless others, leading intothe age of broad-based personal computing, applicationssoftware and connectivity in the 1990s.

The eventual dominance of Silicon Valley was,according to the Task Force, mainly the result of pro-activeefforts on the part of key faculty at Stanford University tonurture the development of start-ups, provide facilities andexpertise, and facilitate financing for the fledgling privatetechnology sector as it evolved. By contrast, MIT in theRoute 128 area maintained the traditional, arms-lengthrelationship with the private technology sector.

The collaborative nature between Stanford Universityand Silicon Valley technology firms made all the

Models of Advanced Technology DevelopmentView of the Governor’s Task Force on Science and Technology

difference, in the Task Force’ view. The Task Force notedthat others have been able to emulate the Silicon Valleyformula, including the UC San Diego-San Diego EconomicDevelopment Council’s well-regarded “CONNECT” programand to a degree the Austin “Miracle” in Texas, anchored bythe University of Texas. Each area specializes in somewhatdifferent technologies. But the Silicon Valley formula forsuccessfully growing a technology sector dependent onheavy input from scientific research and development,appears to cross cut all niches.

The Task Force concluded that for Hawaii to emulatethe success formula, there are two essential ingredients.

1 . A first-rate research university.2 . A concerted effort to develop interlocking networks

of talent, information exchanges, and marketing foradvanced technology firms.

The Task Force made six recommendations designed toselectively strengthen the University of Hawaii’s capacityto serve as such a catalyst for the development of anadvanced technology sector in Hawaii. These were:

✔ Encourage entrepreneurial activity by faculty;✔ Imbed technology transfer activity more broadly within

the research intensive units;✔ Reward technological innovation by including it in the

criteria for tenure and promotion;✔ Provide incentives for research leadership to interact

with local companies;✔ Allocate positions, rewards and resources for disposal

by research managers as performance-based incentives;and

✔ Establish a super-scale of remuneration, or find othermeans to compensate those new and existing facultywhose superstar status is sought for designatedprograms.

The Task Force also concluded that a coalition wasneeded among the UH and private sector firms to providethe technical and business training, information exchange,technology transfer, access to financing and venturecapital and marketing of Hawaii’s location for high-techstart ups.

The University has moved aggressively to address theneed for leadership in technology development. It hasexpanded its role in technology transfer and establishedthe “University Connections” program, inspired by theSan Diego CONNECTS program.


annual meeting here in March 2000 willbring hundreds of CEO’s and captains ofindustry from throughout Asia-Pacific and

Growing Hawaii’s Technology Industrycontinued from page 19

line. Governor Cayetano has targeted thefirst phase of this project, on-line businessregistrations and licensing, to be up andrunning within a year.

We will also be using technology tohelp us do everything in governmentfaster and more efficiently, fromprocessing payroll to paying our vendors.Our goal is to provide Hawaii’s citizenswith government that is more accessible,more responsive and more customer-service oriented in the future.

But technology is perishable. We mustmove quickly to organize a collaborativeeffort among stakeholders to build an

Goals of the Special Advisor’s Office

Industry Development:• Position Hawaii as synonymous with Intellectual

Property Protection.• Capitalize on existing tourism marketing efforts to

promote Hawaii as a locale for advanced technology.• Foster and facilitate many public-private partnerships.• Foster the creation of an entrepreneurial environment.• Facilitate the focus of education providers on the

workforce needs of advanced technology industry.• Attract $100 million in private venture capital and

debt financing.• Establish a $100 million Special Revenue Bond Facility

for “brick & mortar” investments.

Industry Coordination & Support• Complete an industry needs assessment

• Complete an inventory of public and private technologyasse t s .

• Facilitate development of a statewide TechnologyStrategic Plan with all stakeholders.

• Consolidate state government agencies to best servethe private sector.

Hawaii will becomesynonymous with intellectual

property rights

the mainland US. Hawaii will also behosting the Western Governor’s Asso-ciation Annual Meeting in June 2000,which will bring together governors fromall the Western and Pacific states to Maui.

Using Technology MoreEfficiently Within OurState Government

Government needs to become just astechnology savvy as the private sector inorder to better serve our businesscustomers and residents, and we aremoving rapidly in that direction. Forexample, our planned e-commerceinternet portal for the State of Hawaiicalled Access Hawaii is expected to saveHawaii’s businesses considerable time andmoney by allowing them to accessinformation, file documents and pay fees— all without ever having to stand in a

The State’s e-commerce,internet portal ‘Access Hawaii’

will permit companies tointeract with government

on-line for most routine matters

We must move quickly in anorganized, collaborative effort

to build a competitivetechnology industry

Partnership for ActionThe development of Hawaii’s

technology industry is critical to ourfuture economic prosperity. Fortunately,Hawaii currently enjoys potentialcompetitive advantages in a number ofunique technology niche areas. Theseniche areas have tremendous growthpotential.

environment conducive to a competitivetechnology industry and develop astrategy for success. Public-privatepartnerships are critical to the effort.I am convinced that it will be the degreeof stakeholder collaboration that willdetermine our future success.

By creating the position of SpecialAdvisor for Technology Development,Governor Cayetano has signaled thestate’s commitment to work with theprivate sector to grow Hawaii’stechnology industry. With the leadershipof the private sector, and the closecollaboration of education andgovernment, I am confident we canaccomplish the goal of creating atechnology industry in Hawaii ofworld prominence.

(e-mail Mr. Blanco at [email protected])


Why Hawaii Must Pursue Technology Developmentcontinued from page 2

The results show that Hawaii’s post-statehood economic boom was fueledmainly though large inflows of overseasinvestment and labor but not very muchthrough the application of new technol-ogy to the economy. As a result Hawaii’seconomy grew faster than the nationaleconomy, but did not show the productiv-ity increases that technology contributedat the national level.

Moreover, when the post-statehoodboom ended in the early 1990s and theinflows of capital and labor stopped, thelimited role of technology deterioratedsignificantly. As shown in Table 1, the netcontribution of technology from 1990 to1995 was actually negative. What thismeans is that the small contribution beingmade by new technology was not able toovercome other inefficiencies in theeconomy that were causing overallproductivity to fall, even though laborand the capital stock were increasing.

The improvement in the contributionof technology shown for the 1995-98period reflects the effort to improveefficiency by both the private and publicsectors. The private sector increased itsefficiency, introduced newer technologyand began to focus on areas where itcould be more competitive. The State’sprogram of budget restraint, regulatoryreform and business stimulation institutedby Governor Cayetano in 1995, has alsobeen an important factor in improvedproductivity. The improvement illustratesthe potential boost that technology canprovide to the economy. Technologydevelopment permits the economy toexpand, even when capital and laborgrowth are modest.

We Have the Foundation forTechnology Development

It is important to note that Hawaiialready has an established base oftechnology-related activity to build on.In fact, with little fanfare, that base hashad a positive impact on the economy inrecent years, even helping to cushion anotherwise flat or declining job count inother industries. For instance, from 1990to 1997, the number of jobs in businesscomputer services nearly doubled in the

Table 1. The Role of Labor, Capital and Technological Change in Economic Growth(share of percentage growth accounted for by each source)*

state. This helped jobs in the broaderbusiness services industry to show agrowth of more than 85 percent for thesame period. Jobs in the economy as awhole increased only one-half percentover the period and would have beeneven lower without the boost fromtechnology activity. Another example isHawaii’s technology-intensive, healthcare industry. This sector has alsocontributed to the economy, boosting jobs20 percent since the beginning of thedecade. The health care industry nowprovides nearly as many jobs as the entirehotel industry in the state, and more thanhotels when public sector health care isincluded.

Hawaii has also had some significantaccomplishments in the development ofscience and technology. Most notable hasbeen the development of the “Honolulu”genetic cloning technique by researchersat the University of Hawaii. We have alsoattracted such international firms asUniden and Square USA (which nowemploys 300 people in Hawaii).

The islands have a number of impor-tant advantages and niche opportunitieswhich can help us be competitive intechnology development. Conditions areunparalleled in Hawaii for research andtechnology related to biotechnology,astronomy, oceanography, energy, andvulcanology, to name a few. Hawaii’smid-Pacific location and first-classresearch University attract scholars andresearch projects from around the PacificRim. The physical and social environmentfor doing research and technologycouldn’t be better.

Government’s Role inTechnology Development

Clearly, technology is important to theeconomy and Hawaii now has a soundbase to build upon. But is there a need forstate government to be involved in thedevelopment of the technology sector?My preference as an economist, is toallow the private economy to decide whatindustries are best rather than govern-ment making this choice. However thereare a number of activities that arepotentially very valuable to the economyand the community but which, forvarious reasons, the market systemproduces less than the socially optimalamount. Technology development is oneof these and some other examples areeducation, public safety, and publichealth. These activities benefit thecommunity greatly but cannot be easilycharged for by those who pay for theactivity in the first place.

For example, more educated citizensprovide additional value to the commu-nity that is not reflected in the returnthey earn on their educational invest-ment. This additional value ranges fromraising the general productivity of theeconomy to their community leadershiproles. Thus, the more that people invest intheir education, the better off society willbe in general. However, people tend toinvest in only enough education to satisfytheir own goals, not the community’sgoals. By subsidizing basic and advancededucation, government is able to encour-age more investment in education, whichresults in future benefits to the commu-nity that more than make up for thesubsidy.

Technology investment is similar toeducation investment in that the potential

1990 to 1995 1995 to 1998

Component of growth Hawaii U.S. Hawaii U.S.

Labor 0.7 0.8 1.1 1.0

Capital Stock 0.6 0.5 0.4 0.7

Technology -1.0 0.9 0.3 1.1

Total (% change in economic growth) 0.3 2.2 1.8 2.8

* average for period

Source: DBEDT


benefits to the community go far beyondthe sales value of technology products.However, the expense and risks involvedin technology development are muchgreater than in education. Consequently,the private economy will tend to underinvest in technology development. Thus,in technology development there is animportant role for government in estab-lishing incentives for technology firms toengage in research, development andcommercialization. Like the educationexample, assistance provided by thecommunity to encourage more technologydevelopment will lead to long-run benefitsto all individuals and businesses.

Because of the tremendous positiveimpact that scientific research has ontechnology and economic development,the Federal government has, for decades,invested public resources to encouragescientific research and development.What the taxpayer has received in returnfor this support is the most technicallyadvanced society on the planet, witharguably the highest standard of living.

Technology Development is aCooperative Effort

The state is very active in encouragingthe further development of Hawaii’stechnological resources. GovernorCayetano’s direct participation andleadership has been a pivotal factor in thiseffort through scores of face-to-face visitswith the CEOs of fast-growing technologyfirms on the Mainland and Asia.

To supplement this effort, we areengaged in a cooperative partnershipamong the private technology sector, theUniversity, and agencies of the State topursue technology development as wellas the physical and human resourceinfrastructure to support it. We arepromoting our potential by acquaintinghigh technology companies with whatHawaii can offer and seek their counselabout how we can best develop ourtechnology sector. We are also promotingthe products of Hawaii’s technologysector — particularly energy technologies— in trade missions to Asia.

To further support these efforts, theAdministration secured the passage ofAct 178 through the 1999 Legislativesession. This act established a number ofincentives, institutional changes andinnovative programs that the industryand government will use to begin a newera for technology development inHawaii.

Among the many elements of Act 178are tax changes and incentives that willencourage firms to engage in moreresearch and development that willultimately benefit the State as a whole.The act also established the MillenniumWorkforce Development Initiative. Thisprogram will help develop a work forcewith the technical skills needed by bothtechnology companies and companieswho must adopt new technologies inorder to stay competitive. The Actprovides for the establishment of virtual,

site-based schools in the DOE (E Acad-emies) and authorizes a special advisor tothe Governor for Technology Develop-ment, as a first step in a process tostreamline the agencies dealing withtechnology development.

Final ThoughtsIt is important for the community to

understand that the State’s determinationto develop the technology sector is not apipe dream, political rhetoric, or simplyfollowing a fad. We are pursuing it in thesincere belief that it is essential to thefuture of Hawaii in the next century.Research clearly shows that the applica-tion of technology, innovation and laborskills to the production of goods andservices can significantly increaseproductivity and competitiveness in theeconomy. This leads to higher incomesand a rising standard of living.

Although technology development isan area in which government mustexercise leadership to ensure the bestprogress, the effort must be in cooperativepartnership with the private sector. Inaddition to the rewards of a healthyeconomy, the common thread that unitesthe partners is the knowledge that thefuture of our children and their children inthese islands may depend upon how wellour partnership succeeds.

Seiji NayaDirector

Why Hawaii Must Pursue Technology Development continued from page 22

The Hawaii Technology Trade Association

The Hawaii Technology Trade Association was formed in1999 to “foster and facilitate a healthy business, funding,educational and governmental environment for thetechnology industry in Hawaii.” The association is astatewide private-sector membership organization.The association provides an umbrella under which moreestablished but fragmented technology interest groups cancome to together and pursue mutual goals.

The goals of the association are:

• Become the “voice” for Hawaii’s technology industry• Lobby for pro-technology legislation and policies• Identify and link members with venture capital and

other sources of funding.• Provide networking, resources and information.• Help market Hawaii’s high tech image.• Help Hawaii’s high tech companies compete.

The organization has a web site at http://www.htta.org,for further information.


ECO

OM

YNHAWAII’S

State of Hawaii, DBEDT • No. 1 Capitol District Bldg., 5th Floor • 250 South Hotel St. • Honolulu, Hawaii 96813

Printed on recycled paper

This report has been cataloged as follows:Hawaii. Dept. of Business, Economic Development & Tourism.Research and Economic Analysis Division.

Hawaii’s economy. Honolulu: May 1995–1. Hawaii-Economic conditions.

2. Hawaii-Statistics.HA4007.H358

Percent change from same periodPercent change from same periodof previous year

Series 1998 (12 mo.) Jan-Oct 1999 October 1999 1998 Jan-Oct 1999 October 1999

Selected Economic IndicatorsPeriod

(calendar year basis except for taxes)

Civilian Labor Force (persons) 1 597,050 599,150 599,000 0.0 0.5 0.3

Civilian Employment 559,750 565,050 567,800 0.2 1.3 1.2

Civilian Unemployment 37,300 34,100 31,150 -2.3 -10.1 -14.0

Unemployment Rate (percent) 2 6.2 5.7 5.2 -0.1 -0.7 -0.9

Total Wage & Salary Jobs 537,550 536,350 538,650 -0.2 -0.1 0.5

Taxes ($thousands, state fiscal year 1998-99)

Total State Tax Collections 3,367,700 2,800,890 248,854 3.6 -0.9 -4.0

State General Fund Tax Revenues 3 2,889,291 2,372,644 214,022 4.8 -1.8 -2.2

(Selected taxes)

Transit Accommodations Tax Revenue 125,882 127,464 10,049 -0.8 20.9 22.5

General Excise & Use Tax 1,436,654 1,210,194 103,161 0.3 1.2 -7.4

Personal Income Tax Collections 1,093,241 876,113 83,150 11.0 -3.3 0.1

Corporate Income Tax Collections 50,113 58,462 10,811 -11.9 1.9 1,084.0

Visitor Arrivals (persons) 6,738,230 5,750,150 563,630 -2.0 1.9 6.5

Westbound Visitors 4,245,280 3,776,350 388,240 4.1 6.5 11.0

Eastbound Visitors 2,492,950 1,973,800 175,390 -10.9 -6.0 -2.1

Hotel Occupancy Rates (percent) 2 71.8 74.1 73.7 -1.9 0.5 5.1

1 Labor force and jobs averages are based on monthly rounded data. Labor force data were also rebenchmarked in March 1999.2 Change is expressed in percentage points rather than actual percent change of the rates shown.3 If tax period ends on a weekend some of the collections may be shifted to the next period.Note: Most data are preliminary and subject to revision.

Documents

A Report from the Department of Business, Economic Development & Tourismfiles.hawaii.gov/dbedt/economic/data_reports/hawaii-econ/... · 2015-07-28 · Department of Business, Economic