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How to Revitalize Hawaii’s Economy – Extended Version

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Petranik: I want to ask Keiki-Pua about that. Around a lot of tech centers – Silicon Valley, Research Triangle in North Carolina, etc. – there is a university or two helping feed that tech industry. Is that one thing that we need more of?

Dancil:  Yes. That’s usually the No. 1 source of innovation, universities. You have team of scientists and engineers that constantly work in innovation. And if you look at these tech centers around the country, they all center around these universities. Their engineering, computer science, medical schools. They find a niche somewhere. I know (UH) President Greenwood has made that one of her top three things to do, and she did appoint an innovation council. She definitely wants to figure out a better way to commercialize technology coming out of the university, and I think that’s a great first step. There’s been some frustration working with the university in getting technology out of the university, how to license it into different deals. People are communicating better and saying, “It’s not working, right now. What can we do?”

Some suggestions were about the Office of Technology Transfer. Is it being effective? We know it’s gone through different changes, new directors. What if they have somebody concentrate on just licensing and patenting? You can’t just patent everything. You have to do due diligence and vet things and ask, “Is this worth patenting?” What if we outsourced it to say, Stanford? That idea was presented. Or start from scratch. The Innovation Council has recommendations and I am helping facilitate that discussion. It’s a great first step.

Petranik: Dean, your thoughts on the big picture?

Okimoto:  In agriculture, part of the problem is developing infrastructure. Food safety, for example, requires processing facilities. We’re losing a lot of our ag industries like the pig industry, chicken, all of the livestock because we can’t keep up with the infrastructure, building of slaughterhouses and the new ways you have to follow to get to food safety. Part of the problem with government is permits, getting and expediting the permits. I had to put up a facility just to wash the produce for food safety reasons. When I started four years ago, our estimated cost was nearly half a million dollars. By the time I finished, it was $2 million. That was after two years going through the permitting – county and state, and that was actually an expedited process. Most small guys are not going to be able to do that. I finished it, but it certainly is hard trying to make that money back. I had a discussion with some people about bringing back, for example, chickens. Just for the processing facility alone you’re looking at $30 million, and the regulations are you need to have a FDA inspector in there at all times while you’re processing. People don’t realize these costs to put that product on your table. That’s what makes the whole system of food production not work for small farmers. Corporate farmers are the only ones that can afford this infrastructure. And that’s what we lack here in Hawaii – those guys who are able to take that to the next level – plus, of course, our cost to ship in things and everything else. Agriculture is going to need that help going forward.

There’s a lot of talk about sustainability, growing more food here, all of these things. Another example is just a simple water meter. A two-inch water meter costs $70,000. For a farmer that will feed about 15 acres, a two-inch water meter at $70,000. That’s the kind of infrastructure cost that most guys can’t afford.

Belsby: I think there are some bright spots on the horizon, though, because for the last several years as it relates to technology, intellectual property, economic development in general, I think we were trying to copy a lot of the Mainland models. I think now, we’ve moved to finding where our competitive advantage is and what our value proposition is in many arenas and clearly it would appear that renewable and green energy is such a valued proposition for Hawaii. I think that it’s really interesting that companies like General Electric, Shell Oil, First Wind, these large multinational companies are here doing business today, whether it’s wind, solar, or otherwise, and with that being said while they’re admittedly relying upon federal laws or federal credits, they’re not relying upon state support. And so I think we have found some opportunities that we can leverage and take advantage of, and I think it also goes to assist in the ag sector and satisfies a lot of wasted opportunities that we’ve been languishing over for the last several years.

Petranik:  The big companies like First Wind have people they can assign to deal with regulations, but put 10 small businessmen and women in a room and nine of them might say regulation is their biggest obstacle. They’re dealing with state and county in most cases, not just one level of government. Are there fixes that we can do with regulation that will help small and big businesses?

Okimoto:  One thing is having a one-stop center where you have county and state together in the same building so you’re not going back and forth. I think that would help construction guys, everyone. You need some of that bureaucracy to make sure that it’s done right, but it could be made a lot more efficiently and there is still a lot of duplication.

Nishizaki: A a study done last year about the loss of the beach in Waikiki that kind of stated that would lead to a $2 billion loss in revenue for Hawaii.  Several years ago, there was a notice about how to restore Waikiki beach. About four years ago, our company decided that we were going to spend our own money to look at bringing the public beach back to the area called Gray’s Beach right in front of Sheraton Waikiki. That was four years ago. Our consultants told us our timeline would be 18 months to get it done. The timeline is still 18 months. It hasn’t changed four years later. We actually have to go through, and this is not just state and county, but also federal, 25 different agencies. I understand there is a need to be cautious about we do for the environment. At the federal level, we were told this was navigable water. This is at our shoreline! We are still going through that. We have spent up to right now over $600,000 in private funds. This is a responsibility that we share. Somewhere down the line, the landowner that owned that property before built the wall that helped cause that problem. We are willing to spend that money. We are still working with the federal, state, DLNR, county. I mean it really gets to the point where you’re starting to wonder. We’ve talked about small business, but our company, relatively large, has been spending $600,000 and we haven’t started the project itself. I think that’s the frustration for not just small businesses but even big businesses. It’s been a long process.

Petranik:  It seems to be the fundamental problem of Hawaii. You have this beautiful place and people want to preserve it and there’s the tension of being unreasonable about that. I mean preserving it. I mean you want to restore a beach. You want to restore a beach that’s been there for generations. So that’s in a way, you’re preserving it by restoring it but that’s the tick. Carol, you deal about it. You’re a politician. You have to get voted out of office if you don’t somehow balance that tension between people who want to preserve Hawaii yet creating jobs and creating a place where people can make a piece of living.

Fukunaga: It’s very difficult to get all the levels of government to cooperate but I’ll point to some of our successes in the area of consolidated permitting: for example Hawaii is the only state in the country that has a consolidated permitting process for a film production. With Pirates of the Caribbean, and Hawaii Five-O recently got signed to start on their series, we said this industry is important for our long-term economic prosperity. So, we devised a permitting system that crosses federal, state, and local governments. I don’t see why we couldn’t cooperate and work together between state, county, and federal in other areas as well.

Those agencies have to sit down and be willing to hammer out whatever compromises are necessary to ensure that whatever is needed is provided. Can we do it one time and can you actually share this among agencies and expedite the process? I think it’s doable.

Dancil:  Take an example from technology: importation of species. If somebody wants to bring in a virus they are studying, for example, the RBL (Regional Biosafety Laboratory) that has been on the table for discussion. There’ve been federal funds allocated for it. NIH has funds set aside for it. Where is it today? We don’t know. There are still active discussions that it should come and it could be a viable economic engine – if you look at other RBLs around the country, they definitely sustain themselves and bring in topnotch researchers, but there are importation rules. Labs bring in certain strains and who do they go through? When I started my last biotech company, I just wanted to bring in this one strain –very nominal, just normal off the shelf – I had to get this letter from this person, get this letter from this person, go talk to this person, talk to this person. It’s a brand-new area. Like with the film industry, we wanted this consolidated approach – let’s all work together. We need to educate people. I have to go through government ag office but I’m supposed to be going through Department of Health, because they are medically related organisms.

Petranik: And the officials that you are dealing with are uncertain because they lack the expertise.

Dancil: They’re afraid to do anything. So, there needs to be some integrity to the process definitely, but I’d still go with somebody who understands microbiology and yet keeps the security in place.

Sullivan: Obviously the driver in this kind of discussion is the mongoose and the rat: The idea of bringing in the mongoose to fix the rat problem without realizing where it’s heading. In talking about permitting on Waikiki Beach – we don’t want what’s happened to Kuta Beach in Indonesia. It’s development out of control. So sensibility about this stuff, that it has to be regulated adequately. It is important because we’re trying to define local interests vs. somebody showing up from the Mainland who has got plenty of money and can drop something down here and do whatever they want. They all operate under the same justice system, the same legal system. So, there is probably another way to rethink how we do it so that you can reflect accurately the local interests and diversifying the economy and creating jobs and sustainability. At the same time what we’re trying to preserve is what makes Hawaii special and so that’s been an ongoing struggle here for quite some time and it exists today except we sort of swung to the other end of this issue. And now, we may need to find some equilibrium point to a more balanced setting because, for example, some of the things Keiki-Pua is talking about with bio-species and life sciences technology. A lot of things that we have to deal with didn’t even exist back in the days when the mongoose was brought in to get rid of the rat, yet we’re still thinking in the same terms. So, there are ways to upgrade our thinking and that could be reflected in the way some of the way permit jockeys to do their job and get reflected in policy.

Okimoto:  Part of that problem though is there’s a mistrust of government – more, I would say, by the environmental community because they fear these things will get out. So the bio-security plan that we’ve been pushing for the last five years is for a facility by the airport where we check everything coming in – and even things going out can be checked there rather than on the Mainland – but controlling it over there and putting both federal and state people there to check. That would probably help the biotech industry and ag, too. Every time a new virus is found in the Islands, people asks me what should we do and I keep telling people that we’re not going to be able to control it, period. We’re going to have raw mites on every island, these viruses on every island, myconia on every island, coqui frog, because there’s not enough controls, which is why this facility is really important. We spent so much time on controlling invasives when they come here, but if we had put all that money to putting up a biosecurity facility, we would have saved hundreds of millions probably by now spent trying to control invasives, especially in agriculture. Right now, we’re about 90 percent sustainable on tomatoes. Well, this summer, you’re going to see that drop way back down. There is a new virus here that I’m just talking to farmers about and it’s spreading like wildfire. And so a lot of tomatoes will be impossible to grow this summer. And this is a new thing, this just came last year. So these are the challenges that these guys are working with and it becomes very frustrating and guys quit because of it.

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