In 1973 after the United States Government rescinded the so called
“favored nation clause” in the Trusteeship Agreement which prohibited
foreign investment in the islands, the Congress of Micronesia passed its
own rather restrictive foreign investment law which continued to forestall
outside investment. During the period of the Trust Territory Government, it
was the policy of the United States Government as the administering
authority and its implementing agent, the U. S. Department of Interior, to
strive to develop the local economy for the benefit of the indigenous
people. In those days everyone knew that the limited financial resources,
management skills and marketing  acumen of many local people was such that
large projects were simply beyond their capacity to implement.  It was
hoped that the smaller “mom and pop” businesses would be identified and
undertaken by the Chamorro and Carolinian people and that these would
eventually evolve into ever larger enterprises. To an extent some did enter
the world of business and develop thriving enterprises which continue to be
successful. But not enough people were willing to accept the risk that all
entrepreneurs recognize when they embark on their own business venture.
When the above Trust Territory law governing foreign investment was
repealed by the Commonwealth legislature in the early eighties nothing was
put in its place to encourage and direct “selected” outside investment. The
door was opened and both large and small amounts of “off island” investment
flooded into the new Commonwealth. We see the results of this policy around
the island today and the conspicuous absence of large U. S. mainland
investment.
     While “outside” investment was welcome and, hopefully, will continue
to be so saluted, one is astonished at the large number of smaller
enterprises that are foreign owned which have located in the CNMI. During
the period before Commonwealth status was achieved it was just such
businesses as the smaller “mom and pop” operations that, hopefully, the
local people would undertake. Only a few seem to have taken up the
challenge. 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 but are
returned to the expatriate investor’s home country.
     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. The Commonwealth is a very safe place to
invest and the tax incentives it offers are unequaled under the American
Flag.
       I am aware that there has long been a difference of opinion among
some in the community as to the type and amount of development that should
be permitted in the islands. United States citizenship aside, I feel the
issue is one for the islanders themselves to decide based largely on my
attitude as a guest in the islands and the fact that the bones of my
ancestors are not here.
     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?
     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. Last year of the 3,488 hotel rooms
in the CNMI, only 5.6 percent or 197 rooms within 12 hotels or motels were
controlled by local people.  Of this number 7 of the hotels were located on
Rota and Tinian with a total of 88 rooms or 45 percent of total number of
locally owned hotel rooms. Local owners on Saipan controlled 5 hotels with
a total of only 109 rooms. However, a substantial number of apartments and
office buildings are locally owned.
     According to data from the CNMI Department of Commerce of the 4,257
business licenses issued in 1995 only 735 or 17 percent were issued to CNMI
born United States citizens. Of the 735 - thirty six business licenses were
issued for fishing and farming; 33 for travel and tour enterprises; 405
issued for general merchandise activity; 30 nightclubs and bars; 10
speciality shops; 5 car rentals and 216 import - export licenses. Some of
these may be “shadow licenses” in the sense that a local serves as a
“front” for the foreign investor.
Diversifying The Economy
    The issue remains as to whether certain of the smaller business
opportunities in the Commonwealth should be reserved for local
implementation and, if so, the best method to do so.
     I have always believed that any “grand plan” for an endeavor is
nothing more than the sum of its smallest elements - and so it is with
economies. A healthy and diversified economy which the Commonwealth needs
must consist of many different business activities. Agriculture, fishing,
light manufacturing, service oriented activities and so forth. We are all
aware that no economy should place all its “eggs in one basket.” There are
many business opportunities available for our increasingly well educated
young adults many of whom are quite aware that there are careers other than
working for the  government.
     The creativeness of entrepreneurs and the varied ways people make
money in business knows no bounds particularly in an American legal
environment where one  is generally free and encouraged to undertake
productive legal activities.
     I tend to separate economic opportunities into the following broad
categories: - those that are one hundred percent foreign owned. For
example, these might be projects where a large capital investment is
required such as a resort hotel, fishing vessel repair facility, automobile
ferry between the islands, etc. Still others are projects where a joint
venture partnership is desirable where the local partner participates with
land or a limited amount of capital matched by an outside partner. And
there are projects which can be undertaken entirely by local indigenous
people and other U. S. citizens.  New projects that should be evaluated to
determine their profit potential include the following all of which must
first be determined to be viable in filling a market need and must exhibit
the potential for generating a profit based upon a financial feasibility
analysis which obviously is beyond the scope of this article. These include
but are not limited to:
Service (Tourism Oriented): Northern Islands dive and sport fishing camp,
saddle horse rental (horse drawn cabs), flea market shopping operation,
bottling (water -Rota), hot air sightseeing balloons (tethered), aerial
cable lift (to Mt. Tapotchau with mountain top restaurant), underwater
marine observatory, Suicide /Banzai Cliff observation elevator.
Manufacturing or Assembly: leather sandals, belts, wallets,
etc.,handicrafts and souvenirs (shell jewelry), ceramic products, beachwear
(bathing suits), candy, Hafa Adai island shirts & mu mus, souvenir candles.
Marine: mariculture (marine shrimp), hatchery, marine shrimp juveniles (for
export) and cultured pearls  (Northern Islands).  Fruit Culture:Papaya:
Fresh papaya, jam,marmalade, pickles,canned papaya, frozen papaya, papaya
juice, banana chips, pudding, frozen or canned mango, star-apple, guava,
passion  fruit . Flower Culture: Flowers have high value in relation to
bulk and can be flown to Asian markets, they include: plumeria, hibiscus,
anthurium, chrysanthemum, roses, snap dragons, carnation, vanda orchid, ti-
leaf, marigold. Scientific/Aesthetic:Cultural and performing arts center,
aquarium, planetarium.
       For those who would say, “ I don’t know anything about such
businesses.” My reply is: find out how to do it  - that’s what others have
done and if they can do it so can you. You have a brain, you live within a
fair and impartial judicial system, you have local and federal government
agencies established to assist and encourage you and there are funds and
incentives available to get you started. But - realize it “ain’t” all free
and it doesn’t come easy. It requires work and you must want to meet the
challenge. Remember, nothing in business is certain and one enters the
venture (perhaps adventure is a better word) and takes the risk that the
endeavor will be a success and that the investor will be rewarded.  The
reward for taking the risk is the profit earned. The money which is put at
risk is itself a product of thrift, prudence, planning, management and in
some cases sacrifice.
     We also have the benefit of a great gift from the U. S. Congress
permitting the export of qualified locally manufactured products duty free
to the United States’ market. I am constantly asked by potential foreign
investors how the process works and whether or not one product or another
could be produced or assembled in the CNMI for export to the U. S.
Considering that in almost all cases the raw materials would have to be
imported, these could include certain electronic components,
pharmaceuticals, leather products, toys and many others.
    There is an interesting dichotomy of sorts at work here in the
Commonwealth where non U. S. citizen Asian investors can locate in the
islands and export to the U. S. mainland market but mainland American
investors haven’t positioned themselves to export to Asian nations. What
can be done to equalize this imbalance? One possible solution is to
publicize the advantages of a CNMI location among American investors to
establish themselves in the Commonwealth as Foreign Sales Corporations
(FSC’s) when exporting  to the U. S. mainland manufactured products to
Asia. United States businesses registered in the Northern Marianas and
engaged in export sales can enjoy significant tax relief from their tax
obligation to the Internal Revenue Service by establishing offices within
the Commonwealth since a portion of the income generated by foreign sales
is exempt, or partially so, from U.S. taxes.  Any firm engaged in export
transactions can become eligible for these tax benefits if it meets certain
simple qualifying criteria.
Marketing Commonwealth Geography
     Entrepreneurs usually examine three levels of geography in arriving at
an investment decision. First - the country and its laws - in this case he
United States; second - a specific area or region such as the Commonwealth
along with its local laws, regulations and incentives, the area’s market
and any comparative advantage which may exist and finally - a specific site
as may be situated in Garapan, Marpi, etc.
      As one who has been involved in briefing both foreign and domestic
potential investors on the advantages of doing business in these islands,
sooner or later, the question is invariably asked where the potential
investor can find suitable land to lease for their project. Aside from
telling them that they should contact MPLC for information on available
public land and realtors listed in the phone book for private land, I have
to tell them that I don’t know what sites are available or where. It
occurred to me that an inventory of such sites free of Article XII problems
would be helpful to both the potential investor and those land owners with
parcels available for lease. Data could be collected and presented in a
portfolio complete with a site description, oblique and aerial photographs,
topographic and cadastral maps depicting English, Japanese, Chinese and
Korean systems of measurements and, of course metric, all designed to
permit a “one stop” initial office reconnaissance and review of such a
private land inventory retained somewhere for ease in examination. The
investor could then identify several locations that appear to meet his
criteria and subsequently make direct contact with the responsible party
and negotiate the terms privately with the owner or agent. The site
portfolio could be made available for inspection by anyone, the potential
investor, chamber of commerce, island realtors, attorneys - anyone
servicing the client. This would be the extent of government evolvement
which would not otherwise interfere with any legal land transaction between
the private parties. While recalling the old Indian proverb, “buy no land
until you have walked over it in your moccasins”, this process alone will
not result in a transaction agreement, it’s only a useful tool which could
be helpful to all parties concerned.

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