HB2648

Report Title:

Economic Development; Clusters; Task Force; Appropriation

Description:

Establishes a task force in the department of business, economic development, and tourism for administrative purposes to identify and analyze economic clusters. Appropriates funds to the department to hire a consultant to develop a statewide strategic economic action plan for the State that includes clusters.

HOUSE OF REPRESENTATIVES	H.B. NO.	2648
TWENTY-FIRST LEGISLATURE, 2002
STATE OF HAWAII

A BILL FOR AN ACT

relating to economic development.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. Findings and purpose. The legislature finds that there is an immediate need to address the weakened state of Hawaii's economy, which was made significantly worse by the tragic events of September 11, 2001, not only to improve Hawaii's economic foundations but to increase the prosperity for all of Hawaii's residents. The legislature finds that one way to stimulate Hawaii's economy is through the development of economic "clusters".

A cluster is essentially a concentration of companies and industries in a geographic region which are interconnected by the markets they serve and the products they produce, as well as the suppliers, trade associations, and educational institutions. Each cluster includes companies that sell inside and outside of the region as well as support firms that supply raw materials, components, and business services. Clusters develop over time and often stem from economic foundations, existing companies, and local demand for products and services.

Cluster-based economic development initiative is built around the idea that nurturing a State’s key industries will improve the competitiveness of businesses within those industries, in turn boosting the State's economy. By combining the market knowledge and expertise of businesses with the talents and resources of government, education, and economic development organizations, clusters better prepare each of their members to face the challenges created in the global marketplace.

The legislature finds that clusters become a powerful magnet for businesses to locate in an area and create a spawning ground for start-up companies. They create large, diverse pools of experienced workers, attract suppliers who tend to congregate in their vicinity for increased efficiency, and foster a competitive spirit that stimulates growth and innovative strategic-alliances.

The legislature finds that clusters have been forming naturally for years, both in the United States and abroad. The most famous clusters include Silicon Valley for its microelectronics, biotechnology, and venture capital markets; Route 128 in Massachusetts for its software, computer and communications hardware, and health care technology sectors; North Carolina’s Research Triangle for its pharmaceutical, agriculture, and telecommunications sectors; and Hartford, Connecticut for its insurance and finance sectors.

The legislature finds that states that have used an economic cluster model to address their economies have made great strides in rebuilding and stimulating their economies. A case in point is that of the State of Arizona.

Arizona’s economy had prospered steadily until the 1980s, when the real estate market collapsed and events in a few sectors rocked the entire economy. A severe recession followed, resulting in layoffs due to decreased government contracting and massive overbuilding. In reaction, a consortium of public and private leaders decided a systematic approach to economic development and diversity was necessary.

In 1988 a variety of individuals and organizations looked at Arizona’s economy, decided there was room for improvement, and issued a call to action. The entrepreneurial-supporting Enterprise Network formed a task force to design a strategic planning effort. In 1989, the Arizona legislature enacted the Omnibus Economic Development Act and directed the Arizona department of commerce to assess that state’s business climate and draft the first statewide strategic economic development plan.

In 1990, the Enterprise Network brought together the Arizona department of commerce and various economic councils to commit funds for the "Arizona strategic planning for economic development", which in turn contracted with SRI International to provide consulting support to better understand how regional economies create quality jobs. SRI produced a strategic framework, which is the source of the cluster, foundation, and vital cycle concepts, and used that framework to assess Arizona.

Sponsors subsequently provided additional funds to design an economic development plan based on the strategic assessment. More than one thousand Arizona residents took part in the process, which met regularly from May through October 1991. The process included six public forums, two regional town halls, and a statewide town hall in November, all of which resulted in a strategic plan.

The final phase of the process of designing the plan’s implementation was completed in June 1992 and outlined in a report published in October 1992. The next step was the actual implementation of Arizona’s plans for economic development, known as the "governor’s strategic partnership for economic development", which is a cluster-based economic development strategy. The strategy involves targeted marketing to attract and sustain certain industries that create quality high-paying jobs and benefit the economy. Arizona is nationally recognized as a pioneer in cluster-based economic development.

The governor’s strategic partnership for economic development identified the following eleven key clusters in Arizona: bioindustry; environmental technology; food, fiber, and natural products; high technology; minerals and mining; optics; plastics and advanced composite materials; senior industries development; software; tourism; and transportation and distribution.

The legislature finds that creating a business environment in which clusters can grow and prosper, similar to that of Arizona and other states that have adopted the idea of economic clusters, takes a large amount of cooperation between government and industry, but will greatly assist the State to rebuild its weakened economy. Accordingly, the purpose of this Act is to:

(1) Establish a task force within the department of business, economic development, and tourism for administrative purposes to identify economic clusters that are key to Hawaii's economic competitiveness; and

(2) Appropriate funds to the department of business, economic development, and tourism to hire a consultant as may be necessary to develop a statewide strategic economic action plan for the State that includes the development of economic clusters.

The legislature finds that a concerted, team effort by both the public and private sectors is the key to making Hawaii competitive in today’s global economy. The legislature finds that this Act will help to put Hawaii companies on the fast track; develop the resources needed to compete globally; achieve sustained, measurable growth in jobs, education levels, start-ups, and research and development funding; and ensure that positive results extend beyond a single contract, company, or county.

SECTION 2. Economic cluster task force. (a) As used in this section, the term "economic cluster" means a grouping of industries linked together through customer, supplier, or other relationships.

(b) There is established a temporary task force within the department of business, economic development, and tourism for administrative purposes. The members of the task force shall be appointed by the governor without regard to section 26-34. The task force shall be composed of: chief executive officers from a cross-section of industries and businesses, heads of key educational institutions, economists, labor representatives, officials of industry associations, directors of appropriate state agencies, and the general public. The task force shall elect a chairperson from among the members of the task force.

(1) Develop, implement, and revise Hawaii's economic development strategy;

(2) Establish outcome measures to track progress of the State's transition into the new economy;

(3) Identify economic clusters that are key to Hawaii's economic competitiveness;

(4) Analyze the growth, maturity, and decline of existing economic clusters;

(5) Analyze the formation of new economic clusters that employ emerging technologies;

(6) Examine the identification and use of economic clusters in other states that have successfully utilized this concept to improve economic development in those states;

(7) Work in cooperation with members of the public and private sectors to further the purposes of the task force;

(8) Hold public hearings throughout the State as may be necessary to receive public input regarding economic clusters and other areas related to economic development; and

(9) Report its findings and recommendations, including any proposed implementing legislation, to the legislature no later than twenty days before the convening of the regular session of 2004.

(d) The governor shall schedule and convene the first meeting of the task force after the initial appointment of the members, which shall be held no later than September 1, 2002.

(e) In carrying out its duties under this section, the task force may request staff assistance from the department of business, economic development, and tourism, and other appropriate state agencies.

(f) The members of the task force shall serve without compensation, but shall be reimbursed for expenses, including travel expenses, necessary for the performance of their duties.

(g) The task force shall cease to operate after the adjournment sine die of the 2004 regular session of the legislature.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ , or so much thereof as may be necessary for fiscal year 2002-2003, for the department of business, economic development, and tourism to hire a consultant, who shall be exempt from chapters 76, 78, and 89, to:

(1) Assess Hawaii's economic strengths and weaknesses and business climate;

(2) Work with the economic cluster task force established in section 2 of this Act to assist in the identification and development of economic clusters in Hawaii; and

(3) Design a strategic planning effort and statewide strategic economic action plan involving the use of economic clusters.

SECTION 4. The sum appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

SECTION 5. This Act shall take effect on July 1, 2002.

INTRODUCED BY:	_____________________________