Economic Development:
What It Is and Why We Must Do It
Tony Clapes

All over the country, in fact, all over the world, economic development has become a hot topic.  Why?  We all know that athletes must develop their bodies in order to excel, and that companies must expand their list of satisfied customers in order to grow.   So, too, a state, city, or region must actively improve its economy as its population grows, and must see to it that higher-paying jobs will be available for future generations as inflation erodes the value of the dollar.

What is Economic Development?

“Economic development” is the process by which a state brings wealth and prosperity to its people by bringing together its assets, resources and political action into a cohesive strategy that is then put into action.  The three basic strategies used in economic development are:

a.    Business Retention and Expansion — Keep and grow the companies you already have;

b.    New Business Development — Create and grow your own new companies; and

c.    Business Attraction — Based upon the clusters of existing industries, attract new companies to complement and strengthen those clusters.

Why is economic development critical for Hawai‘i?

In Hawai‘i, wealth creation occurs when we export goods and services outside the state and import money in return.  Of course, export may occur without economic development, but only in haphazard and unreliable ways.  In Hawai‘i, where most of the money we import comes from tourists and the military, we experience the haphazard and unreliable nature of those imports in the form of our boom-and-bust economy.

Economic development strategies aim at bringing high-value jobs, capital investment, and growth industries to a state, city or region.  If Hawai‘i had energetically developed and pursued an economic development strategy in the past, boom-and-bust would no longer be the primary characteristic of our economy today. In fact, Governor George Ariyoshi recognized the benefits of economic development a quarter of a century ago, and adopted a statewide strategy for developing high technology industries in Hawai‘i.  Regrettably, that development strategy was not energetically pursued after George Ariyoshi left office, and we are left today with no statewide strategy for economic development.

Why is it important to do economic development "right"?

Economic development, done right, brings more job opportunities, better pay, expands the tax base, improves the quality of life, and assures a brighter economic future.  That's why states and cities across the country try to do it right.  What does it mean for Hawai‘i to "do economic development right"?  There are seven critical steps:

1. Research and assess key community factors, such as demographics, workforce, existing industrial base, real estate inventory, tax climate, and quality of life.

2. Evaluate community strengths and liabilities, and develop strategies to maximize strengths and minimize weaknesses.

3. Identify target industries that are good matches for our communities' strengths.

4. Make the most of advanced industries and industry clusters already present in Hawai‘i.

5. Present data to prospective companies persuasively, in order to make the shortlist of firms intending to relocate.

6. Market Hawai‘i as an excellent place for innovative companies to do business. (This requires, of course, that Hawai‘i become an excellent place for such companies.)  Marketing outlets include trade shows, trade missions, trade publications, websites and links, and consultants with whom we develop relationships.

7. Stay in close contact with all leads and contacts, and also with project location specialists and, trade associations and industry associations.



Tony Clapes is an international technology attorney and Hawai‘i resident since 1998.  He is the author of Blue Wave Millennium, a book about high-tech in Hawai‘i. Before entering private practice in 1996, he was Assistant General Counsel at IBM, where he managed a large group of in-house attorneys and outside firms. He has represented high-technology companies on matters including antitrust, employee relations, Web-based businesses, intellectual property, commercial and securities law.

[NEXT INSTALLMENT (January, 2010):  Site Selection Criteria, Incentives for Relocation, and ‘Targeted Economic Development’.]