Political Tittle-tattle: News and Entertainment from Hawaii's Political Arena – Jan. 16, 2004-Small Business Hawaii Hosts First Major Business and Investment Conference of 2004; Case Calls on Small Business Community, Free Market Advocates, Lawmakers to Support Repeal of Jones Act; Governor's Administrators Outline How Business Climate is Improving; Small Business Owners Share How They Became Successful; Governor Says Good People are Bringing Positive Change; Well-Known Economist Says Hawaii is in Prime Spot to Reform Business Climate, Create More Success Stories; Award Winners Announced

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”Small Business Hawaii Hosts First Major Business and Investment Conference of 2004”


Small Business Hawaii hosted its 28th annual business and investment conference on Wednesday, bringing more than 250 small business owners together with Gov. Linda Lingle and several of her key cabinet members who outlined their plans to better Hawaii’s business climate and their progress over the last year.

Though Hawaii has been ranked dead last in several national studies over the last few decades in terms of business climates friendly to business, the governor and her cabinet members pledged to reform the policies, rules, regulations, mandates and taxes that have earned Hawaii that notorious rating.

Also at the conference — Congressman Ed Case, D-Hawaii, Second District, who spoke about his role on the small business and education committees in the U.S. House of Representatives, and his bill to amend or abolish the Jones Act, which increases the cost of goods imported to and exported from Hawaii.

Keynoting the conference was John Rutledge, chairman of Rutledge Capital, a private equity investment firm that has invested more than $150 million in the middle market manufacturing, distribution and services companies. In addition to also being chairman of Rutledge Research and founder of the Rutledge Institute, a forum for capital and growth policy, Rutledge serves as an economic advisor to President George W. Bush and developed economic policy for President Ronald Reagan.

A number of business owners also were recognized for their success and asked to share their experiences during the “Small Business Stories” segment.

”Case Calls on Small Business Community, Free Market Advocates, Lawmakers to Support Repeal of Jones Act”

Congressman Ed Case, D-Hawaii, Second District, in his speech to attendees at Wednesday’s Small Business Hawaii conference, called on small business owners, free market advocates and lawmakers to support and help lobby for three bills he introduced in the U.S. House in 2003. The bills, which all deal with the Jones Act, the federal law mandating goods transported within America must be shipped on U.S.-owned vessels ultimately raising the cost of goods, call on Congress to either abolish the Jones Act all together, or give Hawaii an exemption to the Jones Act.

Yesterday, Republican lawmakers in the state House and Senate announced they will support Case’s legislation and plan to introduce resolutions in the House and Senate calling on Congress to abolish the Jones Act.

See Case’s testimony before the House on the Jones Act:
“Jones Act Stranglehold on Hawaii Must End”

Case, who serves on the small business committee in the U.S. House as well as the education committee, says he and others on the small business committee are working to ensure small businesses and not large businesses, win the federal construction contracts set aside for small business contractors.
The federal government is in the process of awarding $235 billion in contracts for military-related projects, such as the construction and upgrading of military housing.

”Governor’s Administrators Outline How Business Climate is Improving”

Three of Gov. Linda Lingle’s cabinet members spoke at the SBH conference on improving Hawaii’s business climate. Those include Director of the Department of Business, Economic Development and Tourism Ted Liu; Director of the Department of Commerce and Consumer Affairs Mark Recktenwald; and Director of the Department of Land and Natural Resources Peter Young.

Liu of the business and economic development department, who is looking for ways to bring more capital into Hawaii to fund both high technology businesses and small and mid-sized businesses, shared reasons why investors are hesitant to put money into Hawaii’s businesses. That includes local real estate booms that attract capital and an “Asian mentality.” Liu, who is from Asia, says Asians have an “abysmal” investment record when it comes to business investment and are extremely cautious as to what they do invest in, such as real estate. Hawaii is hampered even more by the fact that it is not business friendly, Liu says.

Other problems for Hawaii’s businesses — many have become reliant on government rather than private solutions for capital, by vying for government loans and contracts. Hawaii also lacks the private sector players in lenders and financing, he says.

Some solutions his department is working on — creating a pool of capital for Hawaii’s businesses to tap into and giving Hawaii’s businesses tools through training they need to advance their businesses.

Recktenwald of the commerce and consumer affairs department has lowered a number of fees charged to business, returned some of the excess money the department has collected from business owners to the general fund, and is asking the Legislature to let the DCCA abolish or reduce even more fees. For example, businesses required by the state to have a license showing good standing, will no longer have to pay for Certificate of Good Standing.

Recktenwald says he is working to reform the workers’ compensation system in Hawaii, which is one of the most expensive mandates of operating a business, including bringing the responsibility of investigating workers comp fraud under his insurance division. He also is trying to eliminate the 4 percent general excise tax exemption that Hawaii’s current medical insurers benefit from because they are non-profit so that more for profit medical insurance companies will have an incentive to operate in the state. Currently there are only three existing major medical providers in Hawaii because others have been run out of the market by a combination of an unfriendly business climate and not being able to compete at a 4 percent disadvantage. As a result, there is now a medical insurance monopoly, with insurance providers able to say whom they will cover and whom they will not.

In addition, Recktenwald is working on other options for health coverage. He is striving to eliminate the elaborate regulatory requirements surrounding Medical Savings Accounts, so Hawaii’s workers can set up savings accounts their employer funds, allowing them to spend the money for medical care as needed, with a high deductible that helps ensure they will spend the money wisely. And working to have employers be allowed to insure themselves.

“Employers used to submit applications to the Department of Labor and Industrial Relations, languish and be rejected with no explanation,” Recktenwald says. “Nelson Befitel (director of the Department of Labor) is working in partnership with DCCA to ensure requirements are reasonable and applications get processed quickly.”

Entrepreneurs wanting to register businesses can soon do so quicker and with less hassle and fewer forms at a one-stop-shop online, another project Recktenwald’s department is pushing to completion in conjunction with other state departments by the fall of 2004.

Befitel of the labor department is working to make the labor department more friendly to business. In the past, the department has had the reputation for being hostile and extremely biased against business, but Befitel who has a background in business and labor is changing the department’s attitude and policies to make them more fair.

One of the major changes is in the labor inspection department — HIOSH — the single most complained about department by business. He says while in the past, businesses were fined for even the smallest violation, such as running an extension cord to a fan, now inspectors are being asked to counsel business owners, rather than fine them and issue paperwork.

Befitel says his department is striving to get more workers trained for the construction boom that is beginning again in Hawaii, primarily because of the billions of dollars the U.S. military is spending over the next 20 years on military housing and facilities.

Peter Young, director of the Department of Land and Natural Resources, says his department has a big task in managing the state’s coastal waters, conservation land and a budget of $70 million, among other responsibilities, and also is trying to become more fair in how it treats business.

Young, who was a real estate appraiser for 25 years, says he is on a mission to overhaul the state’s facilities, including restrooms, a major task that will cost more than $100 million. Hawaii is the fourth largest coastal state with 750 miles (compared with California that has 850 miles of general coast area). His department also oversees 410,000 acres of coral reefs in the Hawaiian islands, 300 acres near shore, as well as 21 small boat harbors, 129 dams, two million acres of coastal lands, among other areas of responsibility.

A number of businesses have been allowed exclusive access to state permits for several decades, which is preventing competition in the Hawaii marketplace. Young’s department is now working to identify those permits, and ask the state land board to consider putting them out to public bid so all qualified businesses can get a fair shot at the opportunity.

In addition, Young is working to make the state’s centralized Bureau of Conveyances, where all real estate transactions are recorded, more efficient. The agency has seen a 25 percent increase in filings from 2002 to 2003, and continues to be busy.

”Small Business Owners Share How They Became Successful”

Three small business owners attending the Small Business Hawaii conference shared how they became successful in their business.

Fran Egdamin, president of Hawaii Test Boring, Inc., is a low-key, successful, experienced and diversified small business owner and community leader. She has been active in the Aiea-Pearl City Business Association, the Grassroot Institute of Hawaii and also as an effective mentor. She discussed how she has become successful, despite being in a male-dominated profession.

Clarice Johnson, owner of Johnson Property Management, gave tips on how to survive in business, including having at least one year of funds to keep the rent paid and groceries on the table. “Do a well thought out budget for a year, slash your income in half, double your expenses and that is probably what you will have,” Johnson says. She got a sympathetic laugh from those in attendance. She also stressed the importance of getting involved with and supporting such free market and small business advocacy organizations as Small Business Hawaii and the Grassroot Institute of Hawaii.

Tom Jones, co-owner of Gyotaku Japanese Restaurant, talked about his journey from management to ownership at Gyotaku. He says one of the keys to his business’ success is a partner that always asks “the right questions,” including what qualified their business as a “success story.” He also has terrific vendors and contractors that he’s worked with, in some cases, for decades. Today the restaurant feeds over 1,000 customers everyday and tries to ensure one guest at time enjoys their experience and meal there.

He encouraged entrepreneurs to take risks so they can avoid missed opportunities. He says in a few years people will be more disappointed by what they did not try than what they did, even if they failed.

”Governor Says Good People are Bringing Positive Change, More Needs to Be Done”

Gov. Linda Lingle, who spoke at the Small Business Hawaii conference about improving Hawaii’s business climate, says the economy seems to be improving, and should continue to do so, in part because of the federal government’s plan to spend $10 billion in federal construction over the next 10 years.

She says the state also is planning to spend another half a billion dollars on repair and maintenance of state schools and other state facilities that are deteriorating.

“We want to protect the taxpayers’ investment in state facilities,” Lingle says. “If the state puts off these costs for so much longer, the repairs will be much more costly.”

The visitor industry also is improving, with the number of visitors from Japan increasing after a serious decline because of a SARS outbreak, the Sept. 11 attack on America, the War on Terrorism and weak economic conditions in Japan. She says her administration’s controversial trip to Japan six months ago may have in part contributed to the increase in visitors because of the importance of good relationships in Japan.

“It was important to take a step back and thank them (Japanese visitors) for all the years they did come to Hawaii. The message well received,” Lingle says.

Lingle says the state is looking for other ways to improve the visitor attendance, possibly even above the expected 6 percent increase in visitor arrivals for 2004 over 2003, including building what she calls a “wireless Waikiki.”

Meanwhile, Gov. Linda Lingle says her administration is continuing its emphasis on “living within its means” in order to balance the state budget, not raise taxes and not dip into special funds, such as the Rainy Day fund and Hurricane Relief Fund. The administration, headed up by the efforts of Budget Director Georgina Kawamura, implemented a 5 percent reduction in spending and a hiring freeze when Lingle first took office. Gov. Lingle says that the hiring freeze, which is still in effect, mandates that no position left vacant will be automatically filled, but will be rather on a case-by-case basis. Lingle’s administration also is working to repeal a number of special funds, because typically money is put into the funds from taxes and fees collected, and then raided when the state needs to balance the budget.

Another focus of the Lingle administration will be to improve a number of small business boat harbors around the state. Lingle says they have been allowed to run down, despite the fact that the boaters who live there have paid more than their share in fees to ensure the harbors are kept up.

She also touted the work of commerce and consumer affairs director Mark Recktenwald and labor director Nelson Befitel. She says she will work with them to focus on such employer mandates as workers’ compensation, a major expense and burden on business. Lingle also addressed health-care mandates, saying Hawaii will soon see one, possibly two new medical insurers (one was a sponsor of the conference — HMA out of Arizona). And she says she also will support legislation that requires the monopoly medical insurers already in Hawaii to offer plans to groups such as Small Business Hawaii, as they have in the past, but stopped offering in the last couple of years, leaving many small business owners without medical coverage.

The administration continues to look for ways to make Hawaii a better place to live and operate a business without going to the state Legislature, she says, and have held 15 talk story sessions in the community to find out what is most important to the community members.

“It was helpful to hear from people on the ground about their most important issues,” Lingle says. One of the foremost concerns was reforming the public education system. Without doing so, the economy, no matter how it improves, cannot be sustained, she says, because the educated workforce will not be in place to sustain it. The schools already are allocated more than half of the general fund budget or nearly $2 billion a year, but more than half of that money is not getting to the classroom, she says. Lingle says her education reform package will be her number one priority this Legislative session.

At the end of her speech, Lingle thanked the small business community for supporting her both before and after her 1998 and 2002 elections, and her administration since she got into the governor’s office in 2002.

“You have motivated me, gave me courage to try again, and now I need you more than ever,” Lingle said, encouraging her supporters to get involved at the state Legislature and in education and economic reforms.

”Well-Known Economist John Rutledge Says Hawaii is in Prime Spot to Reform Business Climate, Have More Success Stories”

Wrapping up the Small Business Hawaii conference was John Rutledge, an economist who is chairman of Rutledge Capital, a private investment firm that has invested more than $150 million in middle market manufacturing, distribution and service companies. He also is chairman of Rutledge Research and founder of the Rutledge Institute, a forum for capital and growth policy. Rutledge, who gives lectures around the world on global economics, financial markets, investment strategies, technology and the economy, as well as how to grow your business, says Hawaii has the greatest opportunity in the world. Businesses that have survived in the hostile business climate in Hawaii can now look forward to more prosperity, as the reforms planned by Lingle’s directors are put into place.

Rutledge, who serves as an economic advisor to President George W. Bush and did so during the Reagan years as well, shared his view on the reforms now taking place in Iraq, Ireland and Oklahoma, three places he’s acted as a consultant.

Like Lingle, he emphasized the importance of education for both children and adults, and says technology is an important part of that education, including making sure schools are wired with high-speed access, so kids can have their eyes opened to the world around them.

He says one quick way to see what kind of economy a state or country has is to look at whether people are exported or imported and at what rate. (Hawaii lost 100,000 residents from 1990 to 2000, which is a bad sign for Hawaii.) Rutledge, a consultant in Ireland, says the country’s leadership was able to stop the best and brightest from moving away by ensuring state-of-the-art communications were in every home, the economy improved, the cost of living was lowered through tax decreases, and there is better training locally. The leadership also recruited bright minds from around the world and imported them to Ireland. These are steps Hawaii also can take, he says.

He also encouraged the small business people in attendance to:
*Be dreamers and have faith because “you’ve got to be a dreamer if you are going to build anything;”
*Look for and be leaders with character;
*Know how to move capital;
*Work to reform the really troubling aspects of operating a business, such as workers’ comp and tort reform;
*Know some of the most important economic activity in the world is going on in China and to pay attention to that;
*Take lots of chances, because it is OK to fail, and not OK to let the opportunities pass you by.

”Small Business Hawaii Board Gives Awards to Best in Business Community”

Small Business Hawaii’s 12 Board members voted on who they felt should win a number of awards issued annually by Small Business Hawaii at its conference.

Those included, Dale Evans of Charley’s Taxi, who was given the most prestigious award, “Small Business Person of the Year.” Evans, who runs a family taxi dispatch business, is heavily involved in the community and in making positive changes in the heavy regulated transportation industry in Hawaii.



*SMALL BUSINESS BOOSTER, Deborah and John Paul Micek, RPM Success Group


*SBH JEAN FUKUDA CIVIC LEADERSHIP AWARD, Gary Arizala, Alphabetland Preschool

*SBH LAWMAKERS OF THE YEAR-2003, State Sen. Les Ihara, Jr. (D), 9th Dist. Oahu (Palolo); and Councilmember Charles Djou, IV District (Waikiki-Hawaii Kai)

*SPECIAL SBH PUBLIC SERVANT LEADERSHIP AWARD; Robert Watada, executive director of the State Campaign Spending Commission

”Sponsors of Conference Thanked”

Small Business Hawaii sent a special thanks to the sponsors of its 28th Annual Business and Investment Conference, including: JS Services, Alphabetland Preschool, Heavy Metal Barbell Co., ALTRES Inc., The Systemcenter, Fernandez Entertainment, Business Brokers Hawaii, Aloha Petroleum, HMA, New England Financial, Cruiseland Hawaii, Charley’s Taxi, Hawaii Home Inspections Inc. and Blue Moon Builders, Liz Moore-Realtor, Mylene’s Floral, Grassroot Institute of Hawaii, Peterson Sign Co., The Quorum and Hawaii Reporter Inc.

”’Reach Malia Zimmerman, editor and president of Hawaii Reporter, at:”’ mailto:Malia@HawaiiReporter.com