Fishing for Funds

From research and development to commercialization, federal spending is giving Hawaii’s dual-use industry a shot in the arm. BY JACY L. YOUN

February, 2002

There is no wavering when State House Speaker Calvin Say announces matter-of-factly, “The only thing that’s propping us up today is the Department of Defense spending.” By us, he means Hawaii as a state. And by Department of Defense spending, he means military spending at the federal level. But the financial role of the federal government in Hawaii extends far beyond the area of defense … into medicine, agriculture, ocean sciences and University of Hawaii programs. Total federal expenditures in Hawaii reached $9 billion in 2000, with defense spending accounting for 38.5 percent, while nondefense-related expenditures totaled 61.5 percent.

All Islands are seeing unrivaled increases in federal spending in the wake of Sept. 11, particularly Maui, Oahu and Kauai, where an emphasis is placed on security and national defense technologies. The availability of billions of federal dollars, over the past decade, has even spurred the growth of a new industry for the state: dual-use technology.

“Dual-use technologies are originally developed to support more than $9 billion in federal and defense-related programs and then are applied commercially,” says Joseph Blanco, special advisor of technology development with the Office of the Governor.

Dual-use technology is still a budding industry in Hawaii, although the tenant lists at both the West Kauai Technology & Visitor Center and the Maui Research and Technology Park appear contrary. Companies such as Solipsys Corp., Textron Systems, Akimeka LLC and Trex Enterprises represent just a tiny fraction of a growing number of dual-use companies setting up shop in these technology centers. Their technologies are diverse, but their goals are akin: maximizing research and development money coming in to ease the push of final products out.

“There are significant advantages for dual-use companies creating technology for the government,” says Ian Kitajima, marketing manager for Oceanit Laboratories Inc., a local engineering, science and research company looking to commercialize two of its technologies early this year. “A lot of companies in Hawaii don’t have enough of a financial base to launch off of, and that’s where the federal money comes into play.” Kitajima says 50 percent of Oceanit’s contracts are government-supported, with the most recent being a two-year, $1 million contract to develop space and science technologies with the U. S. Air Force.

Oceanit took its first real baby step toward commercialization late last year with a product called Cigua-check, which tests for ciguatera disease in reef fish. Kitajima says that, like most other dual-use companies, there will be a learning curve at Oceanit. “The company is very good at doing a lot of research and technology, but we’re also trying hard to learn the business of commercializing technology,” he says. Oceanit’s revenues fall between $5 million to $7 million annually, but Kitajima says the potential for growth is limitless if their commercial applications take off.

The company’s second spinoff product is a medical monitoring device called Blackhawk, which was originally developed for use in the battlefield and Army medivac helicopters. It measures, monitors and tracks a person’s vital signs without having to touch them physically.

Just a few years ago, products like Blackhawk were thought to be inventions too technologically advanced to come out of Hawaii. “The success of defense and dual-use companies lies in the federal assets that are located in Hawaii and the significant investment that Sen. Inouye and the defense appropriations committee have made in recent years in their technological infrastructure,” says Gary Baldwin, executive director of the Kauai Economic Development Board. He works closely with the growing number of dual use companies housed in the West Kauai Technology & Visitor Center.

“Hopefully we can be a model that shows other businesses in Hawaii that even during this downturn, if you have good ideas and you have a good team, it’s possible to start companies that can do well,” says Kitajima. “If Hawaii wants a diversified economy, we need to create different companies here that will create new jobs, and that’s the only way.”

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Jacy L. Youn