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Helping to Build a More Attractive Business Climate

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By Lowell L. Kalapa

Taxpayers have become weary, if not leery, of legislative attempts to improve the economic outlook by using gimmicks such as tax incentives or tax credits to lure certain types of businesses or investments to Hawaii.
Hoping the dangling of a carrot in front of potential investors in high technology start-ups or subsidizing construction of residential or hotel property will improve the economic outlook, lawmakers have managed to shove the state to the brink of financial disaster without truly creating new job opportunities.
Apparently lawmakers just don=t get the point that it takes more than financial subsidies or exemptions from taxes to spur economic activity. However, because the tax incentives are there, why shouldn’t investors or hotel owners take advantage of the free money. If lawmakers truly want to build sustainable economic activity, they must begin to address the underlying problems and hurdles to a vibrant business climate.
Sure the tax burden is high in Hawaii, but other high costs present sometimes insurmountable barriers to success for start-up businesses. And while land is limited, getting the proper zoning and the permits to make that site workable for a business adds to the overhead a business will have to recover over the time of the use of the site.
And don’t forget all the regulatory red tape with which all businesses have to contend. Some of the regulations are so complex that many businesses, especially small businesses, hire consultants to help them get through the technical language and meet the requirements of the law to just open the door of their business. The cost of energy is amongst the highest in the nation and while Hawaii is still highly dependent on fossil fuel-based energy resources, the state does not help reduce the cost of that energy as it requires the electric companies to pay the full 4 percent retail rate on that oil even though it is used to generate electricity that is eventually sold to businesses and homeowners.
Then there is transportation. Not only does the cost of transporting a product between the islands and across the Pacific affect the bottom line, but sometimes even the transportation infrastructure on the island adds to the cost of doing business. Not having good, well-paved roads or sufficient dock space to load and unload cargo at the state’s ports adds to the cost of doing business in Hawaii.
Finally, the most critical component of a better business climate is a well-trained, skilled workforce from which to draw new employees. While calling for education reform seems like a broken record, especially during this most recent legislative session, education reform in both lower and higher education is critical. Although there have been numerous proposals put forward on the reform of lower education in the primary and secondary school levels, little has been said about improving the quality of education at the university level.
While the university is currently beset with its managerial problems, the board of regents must get past this current crisis and turn their attention to improving the quality of education at all of the university system campuses. While the university was given autonomy several years ago, consideration should be given to making the university financially independent for operational purposes. This would mean that the university would have to come up with ways to generate the revenues to keep the classrooms open. This would mean increases in tuition and a more aggressive campaign for research grants and philanthropic contributions.
And no, it does not mean that deserving students would be barred from attending the university because they cannot not afford the tuition. What it does mean is that the university would have to set up a financial aid system to help those students who truly cannot afford to pay the tuition. For those who can pay for a college education, they should be asked to do so. Such a plan would give renewed meaning to “placing a value on a good education.”
This would also increase the accountability that students would demand of their teachers. After all, no one wants to pay for an inferior product especially if one is paying a lot of money for that product. Parents would also demand that their children take their college education seriously. But the best by-product will be a well-trained workforce ready to take the state into the future. So, bettering the economy and the business climate goes well beyond the gimmick tax incentives.

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