A new report out of the University of Hawai‘i revealed that the Big Island has the most options out of all the counties in the state to diversify its economy.
In a tourism-concentrated economy, University of Hawaiʻi Economic Research Organization, also known as UHERO, released the report Tuesday, which looks at ways the state could diversify as tourism revenue has shown inconsistent and slow growth for the past 30 years.
The report analyzes the variety of industries across counties in the U.S. and Hawaiʻi to identify what those potential opportunities for the state’s economy might be.
Based on industries already in Hawaiʻi, the study shows Hawaiʻi has great potential for ocean-based industries—such as fishing, fish farming and hatcheries, boat building, port and harbor operations, and seafood packaging. Diversifying into these industries can create long-term stability and support growth beyond tourism.
The report showed that Hawai‘i Island has existing industrial diversity, which creates more branching opportunities. Meaning there are a variety of local capabilities that can be used to establish new industries.
And unlike O‘ahu, many of the Big Island’s highly related industries are still small. The top diversification opportunities include fishing and aquaculture, finfish fishing, shellfish fishing and finfish farming and hatcheries.
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Additionally, the study highlights opportunities to grow industries statewide that align with Hawaiʻi’s traditional strengths while also offering potential for diversification, such as hospitality, water transportation, and video production.
The report authors — UHERO Assistant Professor Steven Bond-Smith and UHERO graduate research assistant Sumit Ilamkar — developed these possible opportunities after studying the industrial composition of all counties in the U.S. to measure relatedness between industries. To find diversification opportunities they examined the industrial composition of Hawaiʻi’s counties to identify underperforming industries with a higher probability of being more robust because they are related to existing strengths.
“The information in this report will be useful for policymakers and legislators seeking advice for economic development policy and for businesses and entrepreneurs seeking new opportunities,” the report stated. “It also presents Hawaiʻi as a case study of an approach that will be useful for other places looking for strategies to diversify.”
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Diversifying Hawaiʻi’s economy is challenging due to the advantages small, open economies gain by specializing in their strengths.
The report identifies industries with significant growth potential that are currently facing obstacles such as inadequate infrastructure, skills shortages, and market and government failures. To achieve greater economic diversification, the report suggests adopting a more ambitious approach that targets these barriers instead of concentrating on already successful sectors.
For long-term effectiveness, these policies must also include ongoing monitoring and strong governance.
“We show how Hawaiʻi initially benefited from specializing in the tourism industry, and how this specialization now exposes Hawaiʻi to short- and long-term risks,” according to the report. “In this way, diversification is not an end in itself but aims to build a more resilient economy that is less exposed to these short- and long-term risks.”
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