While getting a haircut I was struck with the thought that I was not
aware of the existence of a local “operating” barber or beautician. While
the owners of several shops may be local, I am relatively certain that few
provide the actual day to day service - which is certainly OK.  Nor, can I
recall a local watch or shoe repair person. The vast majority of these
small businesses are operated by non indigenous people most of whom are not
U. S. citizens. The more I thought about it I could only think of three
locally operated businesses on Hotel Street. While no doubt many of the
buildings are owned by indigenous people, few seem to actually operate a
daily business activity. Why don’t we have more dynamic, creative, risk
taking entrepreneurs developing  businesses such as: Efrain Camacho -
(Engineering); Tony Muna, (Accounting); Ron Sablan and Ben Camacho,
(Hotels); Joe Ayuyu, (restaurateur); Tony Camacho, (Printing) and several
others whose names are not included because of space limitations? There are
many opportunities for local participation in business, several which come
to mind are: the provision of lagoon tours in  traditional proa canoes,
manufacture of beach wear, sugar cane sticks packaged as nature’s natural
candy, commercial fishing, Hafa Adai shirts and dresses similar to the
Hawaiian “mu mu”, cut flowers (which have high value in relation to bulk
and can thus be flown to Asian markets), bottled water on Rota,  marine
biological laboratory associated with a Japanese university, fishing vessel
repair facility to service Asian fleets operating in the western Pacific,
shrimp mariculture, cultured pearls in the Northern Islands,  and health
spas  to mention only a few. Must the tourist sector  forego these services
if no local person seizes the business opportunity? One would think that
the bus company and jungle tours would be locally owned and operated along
with greater stock ownership in airlines.
     In the vibrant tourist dominated economy of the Northern Marianas only
six percent, or 210, hotel rooms within the total of 3,561 rooms are owned
by indigenous people. However, a substantial number of apartments and
office buildings are locally owned.
     Twenty five years ago when the Northern Marianas was a part of the
Trust Territory it was the policy of the Department of Interior to
encourage local ownership of businesses and toward this end an economic
development loan fund was established to provide long term, low interest
capital. Today the Commonwealth Development Authority stands ready to
provide financing for qualified projects. It was also during those early
years that the United States Government counseled against the sale of land
in fee simple.
    In an economy dominated by the tourism sector few local people  are
directly participating in the rewards generated by the industry. Unless
this record changes the local people will not be full participants in the
Commonwealth’s future growth potential. According to data from the CNMI
Department of Commerce of the 4,575 business licenses issued in 1992, (the
most recent data available to me), only 299 or 6.5 percent were issued to
United States citizens and of this number only 143 (48%) were issued to
indigenous people. These licenses were as follows: tours, charters and car
rental - 27; speciality shops - 79; general merchandise - 45; food outlets
- 30; hotels, night clubs and bars - 38; commercial farming and fishing -
30 and general export/import - 50.
     Turning to the issue of foreign investment and  the long term foreign
business entry permit current regulations require a minimum investment of
$50,000 on the part of the foreign investor. For sometime it was my opinion
that this was too low preferring instead a minimum of $250,000 as the base
line. But always there are exceptions that need addressed. For example, the
investment in a beauty shop would  rarely require a $50,000 investment.
When you have major world class hotels making significant contributions to
the economy these hotels must provide their guests with world class service
and one such service is a beauty shop, to cite a single example.  Beauty
shops don’t  require $50,000 to set up. You can’t realistically say, “let
the hotel operate the beauty shop.” The business of hotel management is to
operate the hotel, not to set hair. Hotels usually only lease space for
such services. So what is the answer when a foreign beautician wants to
lease the space to provide the service but can’t qualify because the
investment is lower than the $50,000 baseline and no local person has
stepped forward to provide the service the hotel wants to make available
for its guests? An investment requirement of $250,000  would certainly
prohibit the provision of this service if no local person invested and
operated the business. The above is only one example and there are many
other businesses that require less than $50,000 to start up. So at what
level of investment should the base line be?
      Still another matter to be pondered  concerns the survival  over the
long term of locally owned “mom and pop” stores. There are some in the
Commonwealth that may not have given a great deal of thought to the various
economic linkages which, when multiplying financial expenditures throughout
the economy, tie it all together. The adage "an economic chain is only as
strong as its weakest link" has not always been fully appreciated by some
and there are now several indications in the Commonwealth's economic life
that may not bode well in the future for many of the smaller “mom and pop”
businesses currently operated by local people. Few probably haven’t
considered to any great degree that a foreign investor leasing land from
one local owner may eventually spell the demise of another locally owned
business. Of the 41,971 land transactions recorded since 1986 a very large
number involved the lease of land to non indigenous investors. No foreign
investor is going to pay a high price for leased land and then leave it
idle. He is going to develop his investment either for residential use or
for some commercial endeavor, often with superior financial resources as
compared with that of many local businessmen and women. Many of the new
foreign owned businesses are larger, well stocked and possibly more
efficient. While it is a free country and competition is a good thing in
the market place eventually the smaller, locally owned businesses will feel
the pressure of lost customers. When that happens it will become a case of
survival of the fittest. Too often, it will be the smaller  local business
person who will lose out.
     Returning to the initial land transaction that occurred in the first
place. Frequently when a site  is leased  from a local owner by a foreign
entity, in the early period following the exchange of funds for land, many
such transactions resulted in two construction projects. The investor
implements his project by constructing a structure and the local person who
leased the land now has funds for his own project. Tax for the transaction
is paid to the government. The investor starts construction, materials are
imported with excise taxes paid. The contractor hires workers and they pay
taxes while the contractor pays a gross revenue and the NMTIT tax. The
workers purchase food and other commodities from merchants who in turn pay
taxes and hire sales staff who also pay taxes and have money for outside
purchases. Automobiles, clothing, food, supplies, telephone communications,
vacations, restaurant meals, boats, fuel,  airline tickets and hundreds of
other items are all purchased - again generating business gross revenue
upon which tax is paid to the CNMI Treasury providing funds to hire
employees, build roads, finance power and water lines, provide for public
safety, furnish schools and employ teachers, doctors and nurses. Money
flows through the economy - up and down - in and out - all the while
turning over and over again as it circulates throughout the economy before
it leaves the island in the form of remitted profits or to pay for imported
commodities, etc. Economists refer to this as “leakage.” Few people think
about and appreciate these connections and the interlocking elements of
"trickled-down" investment and business activity. One occasional and
lamentable “trade-off” being that the new foreign owned business can often
force another locally owned enterprise out of business - all a result of a
land transaction and the subsequent issuance of a long term business entry
permit.
    I certainly believe in free enterprise and competition, and I’m not
xenophobic since an individual’s ethnicity or nationality means little to
me. I also believe in taking care of your own people first. There are a lot
of young people coming along that will need the opportunity to  participate
in their own businesses. Will any of the smaller opportunities be left for
them to implement?
    In the 1994 -’95 school year there were 3,767 secondary and 9,767
elementary students enrolled in both the public and private school systems.
Exactly how many of that number will want to own and operate a business is
impossible to say but certainly many will wish to pursue such a career.
    So here is the dilemma.
   While large “outside” investment is welcome and, hopefully, will
continue to be so saluted, one is astonished at the large number of
smaller, lower capital investment enterprises that are foreign owned which
have also located in the CNMI. A few years ago the primary concern of many
was to lease land to anyone from anywhere. It should not come as a surprise
that the outside investor would develop the leased land to his or her
advantage. So, in effect, the more land that was leased to, and developed
by, outside investors, the more control over the local economy was lost by
the indigenous people. It was a “trade off” that was accepted if not fully
realized at the time.
     Very often the profits from such businesses are fugitive in that they
are not reinvested in the local economy.
     Certainly a government cannot on the one hand invite outside
investment at a point in its economic evolution and later “uninvite” it. To
do so would seriously jeopardize its investment reputation and
creditability around the world and I certainly don’t advocate such action
nor has the CNMI Government.
     However, the question remains if the investment opportunities,
particularly the smaller endeavors, that are available in the Commonwealth
are open and available to all comers - what opportunities will remain for
the local people and the graduating youth that come forward in the future?

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