Business Beyond the Reef

Journalists in Hawaii live for the moments when Governor Neil Abercrombie goes “off script”. An intelligent man, the former college professor has a propensity for off the cuff remarks about things he doesn’t know much about. The nation’s least popular state governor often provokes hilarity and amusement.

Governor Abercrombie went off the reservation Monday when he delivered his annual “State of the State” address to the Hawaii Legislature. While discussing energy issues, he suddenly departed from his text to blame Singaporean speculators for Hawaii’s problems.

We are totally in the hands of oil speculators in Singapore.
- Hawaii Governor Neil Abercrombie

Rather than the usual giggles, the crowd responded with a collective “hunh?”.

There is a lot that’s just wrong here. First is the assumption that anybody in Singapore controls energy prices in Hawaii. Yes, Singapore is a sort of headquarters for oil companies in S.E. Asia, but I’ve worked with these folks and they don’t sit around discussing how to hurt Hawaii. Second, as Honolulu Civil Beat points out, Singapore doesn’t have a futures market in oil so any speculation isn’t happening there. Third is Abercrombie’s implicit assumption that speculation must, by its nature, be bad – an assumption made by politicians and beleaguered CEOs worldwide. Have you noticed, though, that politicians blame speculators when prices rise, but CEOs blame speculators when prices go down?

Fact is, “speculator” is merely a derogatory term for somebody who buys and sells stocks, bonds or commodities and doesn’t intend to hold them for a long time. They provide a lot of the liquidity that allows markets to function efficiently. Some bet that prices will go up, others make the opposite wager, and they often offset each other. If you sell stock in an oil company, there is a good chance that you sold it to one of those evil speculators. And what does that make you?

The price of oil in Hawaii was once driven by supply from the mainland United States, but not so much anymore. We always compare our gasoline prices to the mainland and we usually run about a dollar a gallon more than most Americans pay. Many in Hawaii haven’t noticed yet, but our oil prices now are more dependent on demand in Asia. Economic growth in China has driven the price up, but our local price surged when Japan shut down most of its nuclear reactors following the Fukushima disasters last year. That’s where the blame lies for our spiking electricity bills, but somebody on his staff needs to tell the governor.

Before the holidays I posted about the great export development plans that MBA students at Hawaii Pacific University had done for small Hawaii companies during the fall 2011 semester. It’s time to get your company into the program for the spring 2012 semester! More than 50 Hawaii companies have used this program over the past four years and have achieved some magnificent results in penetrating new foreign markets.

Free Market Entry Analysis for Companies Seeking International Sales

Limited Opportunity – Accepting Applications Now! The Hawaii Export Assistance Center has partnered with Hawaii Pacific University to offer local companies getting started in exporting a free in-depth market entry analysis. During the 2012 Spring semester, MBA students at HPU will develop a complete market entry analysis for local Hawaii companies looking to enter international markets. Several will be assigned to each company and will develop a market entry strategy for one market based on the company’s best prospects. At the conclusion of the semester, the students will present their findings and recommended strategy to the company.

Participant Requirements: Participating companies must have begun selling internationally in the past 3 years or are planning to sell internationally for the first time. General information about the company and its products will need to be shared with the students in order to develop effective strategies. At the conclusion of the semester in May, the company must be present for the student’s final presentation.

Limited to 10 companies.

If you are interested in participating, please get in touch with John Holman at John.Holman@trade.gov.

The course is taught by David Day, international lawyer and a member of the Hawaii Pacific Export Council. The plans are a joint project of Hawaii Pacific University and the Honolulu office of the U.S. Commercial Service, with active support from the Hawaii Pacific Export Council.

I often rail about the fact that Hawaii’s official tourism promotion agency virtually ignores Europe. The Hawaii Tourism Authority (HTA) pays a contractor a pittance to promote Hawaii as a destination in the United Kingdom and in Germany, but nothing gets spent anywhere else. And there isn’t enough money for the contractor to place exhibits in the major tourism trade shows, such as ITB in Berlin, where business is really done in Europe. Part of the reason is an assumption by HTA that tourists won’t come if there are no direct flights and, I suspect, part is discrimination in favor of Asian markets. Whatever the reason, Hawaii does not take full advantage of Europe’s relatively well-heeled travelers – who have always been willing to take more than a single flight to get where they want to go.

So I was interested in the visitor statistics published just before Christmas that showed Hawaii’s visitors for the first ten months of 2011. In this bleak, dark year for Europe, traffic to Hawaii rose by 3.9% to 88,280. You might assume they were all from the markets in which HTA spends money, but no. True, the leading sources for visitors were the U.K. (33,738) and Germany (27,358), but the former saw a drop of 3.1%. Germany, one of Europe’s strongest economies, saw a creditable rise of 5.3%.

Switzerland, with its strong currency, was the 3rd largest source of Hawaii’s visitors from Europe. 10,129 Swiss tourists made the journey around the world – a whopping increase of 31.5% over 2010. Admittedly, there could have been spillover from HTA promotions in next door Germany, though I doubt this had much influence.

France was an impressive performer, too, despite more economic issues than Switzerland. I knew I heard more French in Waikiki and, sure enough, French visitors were up 13.4% to 7,920. They were still outnumbered by our 9,135 Italians, though the Italians were down 3.5% in this year of economic disasters. Still, pretty good results for markets in which Hawaii does no promotion at all.