In considering the above subject as it applies to the U. S.
Commonwealth of the Northern Mariana Islands  one has to have a historical
point of economic departure in order to appreciate how far the Commonwealth
has come over a relatively short period of time.
     By the late summer of 1970 the islands were almost devoid of the
amenities of the last quarter of the twentieth century. There was one black
and white television channel available operating only a few hours each
evening; there were only three food stores of any size with a very limited
inventory; one cargo vessel a month called at the port. The airport was an
open-air tin shack with one aircraft a day. Since the airstrip was not
lighted and had no navigational aids, aircraft had to overfly the strip at
a low altitude prior to landing to check the wind direction and to frighten
stray dogs and cattle from the landing strip. There were no recreational
craft in the lagoon except for a single glass bottom boat operated by a
Palauan. There were only two hotels, the 73 room Royal Taga Hotel where the
elegant Diamond Hotel now stands in Susupe and the Hafa Adai Hotel in
Garapan which consisted of ten plywood bungalows each slightly larger than
a shipping container. Today, after three major expansions it has 280
rooms.  In those days the number of island restaurants could be counted on
one hand. There were very few automobiles on the island and those consisted
mostly of second hand, rusted pick-ups. The Fire Department had a single
red jeep with a garden hose and there was only one stop sign on Saipan's
roadways. To make an overseas telephone call one had to drive to the RCA
office in Susupe and make the call from a booth.The economy was minuscule.
     As late as 1980 the Commonwealth still had no economy to speak of,
indeed, a very prominent businessman  remarked that he thought the economy
"had a black hand over it." It appeared in those days that the Northern
Marianas, like several islands in Micronesia that were previously  part of
the Trust Territory would forever remain  an economically stagnate Pacific
backwater.
      Between the period of 1985 and 1990 the Northern Marianas witnessed
unprecedented growth which was a direct result of the huge amount of
foreign investment which flowed into the Commonwealth.  Prior to that time
there was very little investment and no private sector economy worthy of
the name as the principal employer was the Government.
 Unfortunately very few indigenous businessmen and women seized the
opportunities that presented themselves except for the more obvious retail
and wholesale businesses  which  by their very nature do not introduce new
money into an economy but rather circulated only that which is already
there -  largely as a result of government payrolls provided, in many
instances, by appropriations from the United States Government.
     I believe it is safe to state that very few projects have been
implemented in the islands which, either  produce items for export or are
designed to substitute imports - both of which introduce new money into
circulation, with the exception in the Commonwealth of  "invisible exports"
derived from the tourist sector and those earnings from the garment
manufacturing industry with their large nonresident work force.
     There are many reasons why  local people were unable to develop a tax
revenue base built upon a private sector owned and operated by indigenous
businessmen and women and one sufficiently large enough to generate
revenues equal to, or exceeding, the annual appropriations provided by the
United States Government. Several of these reasons are: a limited number of
people with the risk taking spirit of the entrepreneur; lack of sufficient
capital; limited knowledge of the intricacies of export markets; infrequent
ocean shipping service (at least in years past); weather uncertainties and
lack of appreciation of potential business opportunities that existed. It
is probably safe to state that the Northern Marianas was in such a
situation until the abandonment of a restrictive Congress of Micronesia
foreign investment law and the area's acceptance of the "tradeoffs" that
accompany an economy with a large presence of  foreign investment  That act
of abandonment and the acceptance of foreign investment plus our close
affiliation with the United States which has inspired confidence in the
international investment community are the three principal reasons for our
phenomenal economic growth in recent years. The 1986 devaluation of the
U.S. Dollar in relation to the Yen as a result of the Plaza Accords in New
York also contributed to the large influx of foreign investment in the
Commonwealth.
     I am not here to state  unequivocally that our economic model is the
one to follow, certainly we have made some mistakes along the way  which
basically revolve around  our inability to  foresee the "unanticipated
consequences" of such rapid and largely uncontrolled growth, particularly
the strain placed upon, at that time, an inadequate, 40 year old
infrastructure of power, water, sewer and roads. Since our influence in the
world's economy is negligible to say the least, there was some fear that if
we did not take immediate advantage of the investment that was expressing
interest in the Commonwealth during the period 1985 thru 1991 that some
event, or economic cycle, would force a down-turn in the region's economic
well - being and the investment interest would dry up. It was decided to
take advantage of the "goose while it was still laying golden eggs" since
no one knew when the prosperity of the investing nations might recede which
in turn could result in such countries placing restrictions on their
citizens and companies who were investing abroad. Indeed, world events
being what they are at the present  - especially as regards the Middle East
-  and the potential negative impact on the Japanese economy, which is now
cutting back somewhat on investment abroad, it is well that the Northern
Marianas did adopt an "open door" policy on foreign investment  and thus
strike while the  so -called "iron  was hot" and reap the advantages of the
flow of foreign capital.
     What has been the result of this policy?
     Through the boom of the mid ‘80’s  every sector of the economy grew at
an annual rate of sixteen percent. During this period  the CNMI experienced
a rate of growth compressed into five or six years that would normally
require a span of two decades or more to achieve. The basic development
issue several years ago was - must the islands be forever doomed to a small
economy because they have a small local population?  The Commonwealth now
finds itself in the strange, if not unique, position of having an economy
that has far outstripped the capacity of the indigenous population to
provide the necessary workers for the labor force. No other area or
country, with the possible exception of Saudi Arabia, is in a similar
situation. For almost all other areas throughout the world the exact
opposite is true, not enough jobs for the available work force to occupy.
     It was only a few years ago that the islands had no economy to speak
of and the only employer of any size was the Trust Territory Government.
By 1973 the Japanese lifted the limit on the amount of foreign exchange,
(then the equivalent of $743.), that a Japanese tourist could take abroad.
Many that had the money to travel sought the sun, sand and sea and the
travel industry in the Northern Marianas was born. In 1980 there were only
740 hotel rooms and tourist expenditures were $58.8 million. By 1995 the
industry had grown to 3,561 rooms and the combined expenditures of 654,375
visitors has been estimated at $521.6  million.
     During the period since 1980 the CNMI experienced an increase in
housing units of 323 percent.  Between 1980 and 1990 median household
income rose 43 percent  from $14,425. to $20,644.  Median income for owner
households rose 94 percent from $13,353. to $25,960.
     The median value of owner-occupied, one-family houses increased 1,525
percent over the decade of the ‘80’s from $10,400. to $169,000. This was 22
times as great as the average increase in the United States which rose 68
percent from $47,200. to $79,100.
       In 1980 the number of housing units in the islands totaled 3,373. By
1995 the number of residential units increased substantially growing by
76.8 percent over 1990 to 14,505 units and 323 percent over the fifteen
year period since 1980.  In 1995 the capita income had reached $6,984 over
the $2,418 recorded in 1980.Telephone subscribers grew from less than 1,600
instruments to 15,460, ('95) and registered vehicles from 5,500 to 15,355.
Over this fifteen year period 54,493 land transaction were recorded. Wages
and salaries for all sectors including government increased from $41.7
million in 1980 to $415.4 million, ('95). Considering earnings from tourism
as an invisible export, the value of Northern Marianas' exports in 1995 was
$940.7 million which includes $419.1 million in exported garments, a total
slightly less than one billion dollars. In 1995 our imports amounted to
$628 million.
     Our economic engine is fueled by tourism. In 1980 there were only
14,046 aircraft landings at Saipan International Airport. Last year there
were 29,439. Visitor arrivals have increased from 117,149 ('80) to 654,375
('95), visitor expenditures over the same period have jumped from an
estimated $58.7 million to $521.6 million. Locally generated revenues have
increased from $10.8 million in 1980 to $196.1 million in 1995 and our
population has increased from 16,780 ('80) to 59,913 in 1995.  Over the
last 10 years our private sector has grown from $244.4 million ('85) in
reported gross business revenue to $1.4 billion.
     Our growth has been so phenomenal that various policy making groups in
the United States have visited the Northern Marianas to study our success
for possible use as a model to improve the national economy.
How was our unprecedented growth achieved?
   In any foreign investment promotion program, business opportunities must
be brought  to the attention of potential investors as well as the location
of the geographic area, and its "business climate" which are those laws
relating to business and any advantage - comparative or otherwise - which
makes the island a profitable place from which to conduct a particular
business .
     What has happened in recent years to the Northern Marianas and to our
neighbor to the south - Guam - has to be one of the great economic success
stories within the American political family in this - the last quarter of
the 20th century. However, our present growth  did not come without some
strain.
     For one thing - there is not now , and there may likely never be a
large enough local population to operate the Commonwealth's "new" economy
with  the result that we now must rely upon foreign workers to operate much
of the economy. The ratio of U. S. citizens to foreign workers is now 1.0
to 1.2. The unprecedented and unanticipated pace of development required
that our infrastructure be rapidly upgraded - which was done or is
currently underway.  At the time the government was faced with a dilemma of
either limiting private economic expansion until an adequate infrastructure
base could be put in place to accommodate the much needed investment or
permit private development to occur at a pace certain to strain an already
inadequate infrastructure. To slow development would have required, among
other things, a prohibition on all but local investment and deprive
landowners of the right to exercise their freedom of choice in the use, or
lease, of their land to whomever they choose. Such a policy would hardly
conform to the democratic principles of a free people. The government
decided to attempt to balance the two parallel objectives by making
incremental improvements in the infrastructure while at the same time
permitting free enterprise to flourish. This policy in the end provided
increased tax revenues which will  ultimately lead to less reliance on
United States' financial support and the uncertainties of U. S.
Congressional appropriations.
     If you were to visit Saipan for the first time - almost everything you
would see around the island has "sprung up" within the last 10 years.
  Having briefly mentioned the past and summarized  the present, the
question to be posed is,  "where do we go from here? "
    Very conservative projections prepared for the Marianas Visitors Bureau
and our Department of Commerce indicate that barring any unforeseen
economic disruption, particularly as regards the Middle East and its effect
on the Japanese economy -  and with the introduction of casino gambling on
Tinian, by the year 2001 we will need from 5,560 to 7,290 hotel rooms in
our inventory if we are to accommodate the market demand of from 1.0
million to 1.4 million visitors who will spend an estimated $1.1 to $1.9
billion annually in our islands.
      The most recent data (1995) on the composition of the population
within the CNMI  is:  Chamorro and Carolinian 20,089 (33.5%); Filipino
-19,668 (33%); all others 20,089 (33.5%).
     Economist refer to the 4 factors of production which some of you may
recall from your own study of economics -- these are Land, Labor, Capitol
and Entrepreneurship (or management). In the Commonwealth we see all those
factors inter-act largely as a result of geography. The land belongs to the
local population and while it cannot be sold to non-island people it can be
leased for periods up to 55 years. As might be expected the Japanese with
their huge surplus of capital in recent years  largely provided the
financing for Saipan's economic engine. The Philippines with their large
reservoir of low cost, skilled workers has provided the majority of the
labor needed. It is fortunate that the Commonwealth is in proximity to the
Philippines and can thus take advantage of their surplus labor. However,
the introduction of such large numbers of guest workers has not been
without some problems.
     Unlike the economic sectors of manufacturing, agriculture, fishing and
so forth, the tourist sector of any economy is the only sector that, by
necessity, strives to inject an ever increasing number of visitors into an
area. It goes without saying that more  visitors require more hotel rooms,
rent-a cars, banking services, a myriad of entertainment forms, the vast
majority of which are small business and all these activities must be
staffed by skilled, reliable employees. In the last 10 years our
restaurants and bars, most of which are small businesses, reported gross
business revenue of $6.2 million ('85) increasing to $29.5 million by 1995.
Our retail sector, again most of which is made up of small business,
increased their sales from $23.9 million in 1985 to $160.9 million by 1995.

     As I listen to people, I note their concern over the environment, the
erosion of an area's cultural identity, the need to maintain local
traditions and these concerns are certainly justified -- but there can also
be some desirable tradeoffs as an economy develops. As personal income
rises - so does improved standards of living; modern medical care,
opportunities for travel and the educational benefits that accrue
there-from as well as many other worth-while benefits as a result of the
"tradeoffs"  mentioned earlier. It would certainly be a  wonderful world if
we could have everything we want  - "have it both ways" - so speak but
unfortunately it rarely works out that way. As a result the Northern
Marianas has opted for a position to derive the desirable benefits of a
modern economy in this last decade of the 20th century and accept the
tradeoffs that are necessary and attempt to mitigate any adverse impact as
much as possible as it moves toward the 21st century.
Foreign Investment - Is It Wanted Or Not?
     Before any legislation is promulgated relative to foreign investment,
the basic question should be asked, DO YOU SERIOUSLY WANT TO ENCOURAGE
FOREIGN INVESTMENT?  If the answer to the question is "no." . . then the
steps necessary to be taken are simple -- either retain cumbersome and
restrictive laws or prohibit such outside investment altogether.
     If however the answer to the question is "yes" then certainly
investment laws must be designed as an adequate tool to serve this
purpose.  Assuming that a government does indeed desire to develop the
economy  utilizing, where necessary, foreign capital to accomplish this
goal, it may be useful for the drafters of such legislation to examine the
situation from the point of view of the people whose decision to invest
they are trying to influence.  Before addressing the subject of such
investment legislation some background relative to the Northern Marianas'
experience may be useful to place the subject in perspective.
     For a long period of time in the Northern Marianas and throughout the
islands of the former Trust Territory it was the expressed intention of the
United States, as the administering authority, to discourage foreign
investment and leave the development of the islands to the indigenous
people, or at least adopt a "do-nothing " attitude relative to the subject
until such time as the local people were in a position to "rule their own
houses", by governing themselves and adopting their own positions on the
matter.  Certainly, there was nothing wrong with that policy and it was
indeed commendable. However, during this "wait and see" period of hiatus
several things happened to influence the  attitudes vis-a-vis foreign
investment.  Until April 1, 1974, the United States exercised the
so-called Favored Nation Clause of the Trusteeship Agreement.  Without
going into laborious detail, Article 8 simply prohibited foreign investment
by citizens or firms of any nation other than that of the administering
authority (U.S. Investment) unless otherwise approved by the administering
authority. In those Cold War days it was U.S.  policy to keep the Russians
and Chinese from investing in the area and this legal maneuver served this
purpose.  During the restless years of the mid 60's and early 70's the
United States fielded  its first Peace Corps volunteers to Micronesia.
Many of the young volunteers  who landed on Micronesian shores were
themselves becoming alienated with American society, primarily because of
United States involvement in Vietnam. Unfortunately, many who worked as
business and legislative advisors in Micronesia at the time were also
alienated against foreign investment of any kind in the area.
Interestingly, those that elected to stay behind and make the islands their
home are today quite successful and wealthy businessmen and women. However,
for many  in the early days their belief was largely that foreign
investment would exploit Micronesian resources for corporate profit with
little benefit  accruing to the islanders.  I can distinctly recall one
American employee of the Department of Education in Palau being adamantly
opposed to tourism development because he believed  the Palauans would wind
up being the maids and the waiters in hotels while management remained
foreign.  This individual failed to acknowledge the fact that the foreign
owners would probably prefer to employ a qualified island resident and
there-by save the added expense of airfare, living allowances, transfer
expenses, etc. for a nonresident worker.  As far as the use of local people
for maids and waiters, one can not help but wonder why there was opposition
to this type of employment.  Such jobs are filled by nationals  of various
countries the world over . . . why should Palau be different?  Such
positions are often "starter jobs" leading to other careers in tourism such
as gift shop ownership and management, food and beverage businesses and so
forth.  But this prominent individual's cry was heard loud and far and no
one challenged his logic or countered his position . . . foreign investment
in  tourism was said not to be good for the islands . . and the matter was
left at that.
     Still other factors that influenced attitudes in our islands dealt
with a number of laws which had been incorporated into our legal structure
from the American experience.  There were - and still are - environmental
protection laws, occupational health and safety laws, historical
preservation, fish and wildlife, wetland laws and many others.  Never mind
that these restrictive laws were products which evolved out of one of the
most industrialized societies the world has ever seen . . if they were good
enough for the United States --- they were believed to be good enough for
us and they were transferred to the islands.   From a developer's point of
view some of these laws are so restrictive that if the United States itself
has to develop its economy in 1776 under such legislation it may have never
achieved the state of development it has attained.  Indeed, these laws are
a product of an economy that was, if anything, overdeveloped at the time,
and thus some controls were obviously necessary.  They are not all
applicable to a developing economy and in fact may have served to stunt
economic growth of some of the islands formerly part of the American
administered area just  as they are now inhibiting investment in the United
States - one of the few countries in the world which is in the process of
rapidly "de-industrializing" at this time.
     Certainly the environment should be protected but everything man does
affects his surroundings in some way.  You can't build a house without
affecting the environment.  But environmental "purists" have government
funds to support their positions and are not readily prone to accepting the
fact that "trade offs" have to be accepted.  If you build a hotel - you
modify the environment, . . . when you sacrifice a bit of pristine sea
shore you gain jobs, tax revenues, profits, etc.  That is the trade-off.
     None of the above can be cited as the root cause of the xenophobic
attitude at that time that one frequently encountered relative to foreign
investment but, taken together, these factors have had their influence on
the issue and I suggest have influenced the structure of the present
foreign investment laws and the economic development of many islands in
Micronesia.
What Can Be Done To Encourage Foreign Investment Assuming It Is Desired?
     I suggest repealing any law that is considered restrictive and replace
it with streamlined, efficient legislation offering various incentives for
such investment. In this regard certainly preference should be given those
investors desirous of joint venture participation with local investment.
     The drafters of such legislation must realistically examine the
situation from the investor's view point.  In order to do this, one must
recognize two factors basic to the issue.
     Given the fierce competition for foreign investment among countries
around the Pacific rim, the islands should abandon the attitude that they
are doing a potential investor a favor by letting him do business in the
country.  It is actually the other way around, the businessman does your
area a great service by investing in the nation.  Second, there must be an
appreciation of what investment capital really is . . .  and from what it
is derived. Investment capital is risk, venture money.  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.  It is
extremely rare for such money to flow into areas where these traits are not
respected. In these changing times it is difficult enough to compete and
succeed in business in one's own home country where the laws are familiar
and where there is no question as to one's rights in terms of ownership of
assets, profit and such other business essentials such as respect for
contract, etc.  It is quite another matter, however, in a country  which
has yet to establish its record in dealing in a positive way with foreign
investment.  The limited historical experience of a new nation relative to
its relationship with foreign investment creates a degree of uncertainty .
. . the one single factor such investment abhors above all else.
     Foreign Investment has learned the hard way from its experience in the
newly emerging nations of Africa, the Caribbean and elsewhere that it is
possible to be exploited, nationalized and have your assets confiscated.
The result being that foreign investment has become very cautious and
frequently adopts a "wait and see" attitude.
     When management reviews the business potential of a new area, no
factor escapes analysis, most of all the so called "business climate" and
the experience of other foreign investors in the area.
     These are just a few things to keep in mind when establishing the
"investment climate" to which one hopes to attract such funds.
     It is worthwhile considering that development itself can not be
"legislated" as is so  commonly thought in the islands.  Only the legal
environment known as the "business climate" under which such investment is
expected to thrive can be established by a nation's legislative body and
even then there is no guarantee investment will result, but such
legislation is, in a real sense, a "welcome mat."
Streamlining The Law
     The old Trust Territory Foreign Investment Law under which we labored
did not encourage foreign investment because of its onerous structure.  The
following are just a few example of its provisions and several sections in
the law concerning the application for a Foreign Investor's Business Permit
actually served to discourage investment.
     There was a requirement for the potential investor to agree not to
revalue stock shares - authorized but not issued - that had been set aside
for purchase by citizens within the first five years after receipt of a
business permit unless such  a revaluation had the  approval of the Foreign
Investment Board and the President, (a board which rarely met). This was
one provision in the law which made the area less than desirable as an
investment location.   This section of the law failed to consider the
factor of appreciation of fixed assets which normally accrues to any
successful business as it grows - nor did it fully consider the need for a
developing business to have access to cash through the sale of the
authorized shares not issued previously .
     The law required a detailed investment analysis and required
disclosure of anticipated and proposed marketing plans.  This section
failed to consider the investor's need to protect proprietary information
and required the divulging  of information relative to the businesses'
development and marketing strategy that could be damaging to the business
applicant should such information fall into the hands of a competitor.  No
business wants to release such information.
     The old law required the applicant to state, among other things, the
beautification programs and libraries, etc. the business intended to
implement, thus tacitly implying that something other than the business
investment was expected.  Why should the executives of the proposed
business spend  the stock holder's money on facilities which are
non-essential to the business?  Libraries should be built with government
tax dollars not stock holder's capital.
     The crowning constraint, however, was found in the procedures for
granting business permits which stated, in pertinent part, the following:
     "The applicant is required to indicate the extent of participation by
citizens of the country at the outset in the ownership and management of
the enterprise and in the case of noncitizen corporations chartered outside
the nation, the degree of willingness to form a national corporation at
some time in the future and to offer a majority of the ownership and
capital to citizens of the country."
      In more than a quarter of a century of work with foreign investors, I
have yet to meet one businessman that would agree to offer a majority of
the ownership and capital to anyone other than the rightful owners of the
stock.  The reason goes back to the earlier definition of the elements
necessary to create risk venture capital.  Anyone who does not fully
comprehend and appreciate this attitude will never be able to understand
the foreign investor's point of view.
Offer Investment Opportunities
     One of the measures of how badly a country wants foreign investment
may be gleaned from the incentives it offers.  These can take various
forms, several of which follow as examples found in other countries.
-  Training of employees at government expense;
-  Provision of access roads to business site locations not presently
located  adjacent to a  public highway;
-  Provision of utility lines (water, power, sewer, telephone) to the
business property line when such sites are  not located along such lines;
-  Assistance with the construction of shell buildings for either lease,
lease with an option to buy or out-right purchase;
-  Duty free importation of raw materials equipment and supplies (when not
for resale within the country);
-  Guarantees against expropriation or naturalization of assets;
-  Tax holiday;
-  Guarantee against increase in taxes for a specified period.
     With respect to the latter incentive, the following is suggested for
consideration.  This need  not necessarily be confined solely to foreign
investment but can be directed to local business investment as well.
Taxes
     Some stimuli are necessary to encourage increased private investment
within the potential productive sectors of the economy and, to the extent
possible, direct investment away from consumption  oriented enterprises.
In a society where any local investor is free to enter any legitimate
business, some inducements may be necessary to convince businessmen to take
the risk in implementing new productive endeavors particularly those the
government desires to see undertaken. In this regard the government should
also indicate a willingness to assist in sharing the risk as well.  This
can take the form of a tax holiday for "approved" projects.
     Consideration should be given to enacting  laws designed to offer tax
relief for a period of several years for those undertaking new projects.
Of course, care must be taken to avoid prejudice against those already in
business even though they may be of a smaller scale than the government
desires.
     A number of formulae could be devised.  For example, for every
additional 5 acres of farm land brought under cultivation the law might
permit two years relief  from taxation.  The tax relief could be applied to
all new project investment activities such as agri-business, food
processing, production of fruits and vegetables, horticulture, animal
husbandry, etc.  The same legislation can be extended to forestry, timber,
and lumber production, fishing, fish processing, mariculture, light
manufacturing, air and sea transportation, etc.  The key words here are
"new projects" which must, of course, include an expansion of an existing
endeavor.  The tax holiday would remain in effect for a particular period
providing the business itself was in operation for the duration of the tax
relief period.  The legislation should not be extended to retail,
wholesale  or construction activities (unless related to the overall
project) since the objective of the legislation should be to reduce
consumption of imported items through import substitution which translates
into local production for both local consumption and export.
A Suggested Foreign Investment Program
     In the discussion which follows relative to the encouragement of
foreign investment it may be useful to define the perimeters of the
subject.  It is not suggested that foreign investment is needed or desired
in any retail or wholesale activity, small construction, etc. where clearly
the effort can usually be undertaken locally.  It is suggested, however,
that foreign investment be actively sought where it can contribute to one
or more of the following:  finance  projects where local capital is
insufficient to implement the endeavor; provide access to a foreign market
not otherwise open to a local business without making a huge, expensive
marketing effort, or provide technology not otherwise available on the
island.
     In the past, the encouragement of foreign investment in some islands
in our area of the Pacific has been somewhat passive in  nature in that the
various government administrations would react only to those investment
proposals which  came  its way - rather  than stimulate such interest as a
result of a dynamic, aggressive promotional effort to generate increased
investment interest.
     Most countries in the free world make a concerted effort to stimulate
such investment  as they realized that without it their economic growth
would probably remain at a level where unemployment would be high, foreign
exchange earnings low and tax revenues reduced.
     Such countries frequently staff, and fund, an office specifically
charged with the responsibility to generate foreign investment within their
nation.  In the event your government desires to consider undertaking such
an effort the following would contribute to such a program.
-   Organize a small office of 2 or 3 people within the present Foreign
Investment Board.
-   Publish an information booklet as an "Investment Guide To The Area."
The printing should be first class and in color since it will be the
nation's  calling card.
     A potential investor reviewing the contents of the book will receive
his first impression of the area from the appearance of the publication.
It must therefore be a quality document, be complete and accurate.
     The office should purchase advertising in various printed media around
the region, inviting investment inquiries.  These ads can be very expensive
and great care must be taken to select the appropriate publication.  For
example, a 1/2  page ad in the Islands Magazine of Continental Airlines
costs about $400. per month with a 3 month minimum run and is a good
selection. On the other hand a small ad in the Mainichi Daily News in Japan
costs about $19,000 for a one time insertion. This is not the media in
which you should advertise.  Probably the better approach would be to
advertise specific investment  opportunities  in the particular trade
journals concerned with specific subjects.  For example, mariculture
projects would have an ad in trade journals concerned with that business.
Such ads are less expensive and a specific audience can be targeted.
     Another technique which results in free publicity is to issue press
releases relative to a specific investment opportunity.  These are
frequently  published as news items in trade journals.
     When investment inquiries are received the Investment Promotion Office
should be prepared  to provide additional, specific information in the form
of an investment prospectus.  This is not the general,  informative
investment guide mention earlier but a thoroughly researched detailed
feasibility study of each project for which outside investment is sought,
either  in the form of a joint venture proposal or for 100 percent foreign
ownership of the enterprise.  These financial analyses should indicate
estimated investment requirements, pro-forma statements of potential income
and expenses; cash flow calculations, internal rates of return, discounted
net present values and various other recognized methods to measure  a
project's viability.  While no firm will base an investment decision upon a
feasibility analysis prepared by organizations other than their own, such
documents do receive the investor's attention and sometimes assist in the
preparation of the investor's own independent analyses. The investment
promotion office should have sufficient funds to visit various countries,
i.e., Japan, Korea, Taiwan, Hong Kong, United States, etc., for the purpose
of conducting investment seminars promoting the area as an investment
location and to expose specific investment proposals to interested
investors.
     Some nations establish foreign investment promotion offices in the
countries from which they wish to attract investment.  Others rely upon
their liaison  offices to handle such duties along with other diplomatic
responsibilities.  Usually the latter arrangement does not work well and
frequently results in the investor simply being given a printed hand-out
and little more when he calls on the office to discuss investment
opportunities. Frequently, the staff of such liaison offices have neither
the time, inclination, or knowledge to discuss so many diverse issues in
any meaningful detail and certainly can not discuss private business issues
involving potential joint ventures.  Whatever is done, contact should be
maintained with two entities which can assist in any investment promotion
effort.  These are the United Nations Investment Promotion Office in
Austria and the U.S. Overseas Private Investment Corporation in
Washington.
      A 20 minute video  presentation should be made featuring  the area
assets.  A large sign should be erected at the airport displaying a welcome
to potential investors and informing them who to contact for more
information about business opportunities.  All inquiries for information
about the nation should be answered completely and promptly.
     Potential sites for  resort hotel, mariculture ponds, agri-business,
small manufacturing, etc. all have unique requirements. Such sites must be
first identified; obtain an agreement from the owner that the land is
available for lease for  a particular purpose; the boundaries should be
established based on an accurate survey indicating the length of time the
land is available for lease if it can't be purchased in fee simple.  The
payment  for the duration of the lease should be determined. A formula can
be devised based on a percentage of the gross or net profit or it can be a
fixed annual rent.
     The above are basic requirements for any serious investment  promotion
program.  The entire effort is expensive and if not properly financed is
probably better not undertaken at all. Once the campaign to generate
investment inquiries gets under way a variety of responses can be
anticipated of which many will be from people who have ideas but little
money to carry them out.  This group must be weeded out and ignored.  Other
inquiries will be more serious  and it is this group which should be
encouraged to visit the area for the purpose of meeting with government
officials and private businessmen interested in joint ventures.  When, and
if, sufficient interest  has been generated  on the part  of the foreign
investor that he is convinced the area offers a profitable venture (if he
is not convinced he will disappear - and you will hear no more about his
project) - at some point prior to receiving  final approval by the
government, the financial and character references of the foreign
participant must be thoroughly checked.  This can sometimes be done by
requesting a Dun and Bradstreet report, particularly for U.S. citizens, or
requesting that the potential investor sign a letter to his bank permitting
the bank to release otherwise confidential financial information to the
appropriate Government official. This is extremely important  and no permit
to do business in the nation should be granted unless this information is
received.  Legitimate businessmen or firms will not object to this request
for information as they will understand the reason behind the requirement.
It will be found, however, that some who claim to be interested in
investing will object to providing such information. Extreme caution should
be exercised with such people and the promotion office should disengage
itself from any further relationship. The reason for this action being -
that once an area starts to make known its interest in generating foreign
investment, a certain number of carpetbaggers, "big shot", self promoting
con-men will appear and they must be identified early and ignored.  You can
imagine the result when the promotional agency, operating under the good
offices of the government and acting as a catalytic agent, engineers a
joint venture investment relationship between a local investor and a
foreign participant without the benefit of a thorough financial and
character investigation only to learn too late that the foreign participant
had no funds to invest in the project.  The agencies reputation will be
irreparably damaged within the community and the local participant may lose
the capital he may have advanced.  This very thing happened to a prominent
member of the Congress of the Federated States.  Although the government's
promotional agency was not involved , the Micronesian's investor lost a
$75,000 investment on a non existent air craft which was supposed to
operate within the state.  The money was never recovered.  The above
example is not cited to discourage the overall effort to attempt to
generate  foreign investment, but rather to illustrate that some degree of
caution should be exercised when dealing with people or firms you do not
know.  It is not always necessary to conduct such an investigation when
dealing with known, recognized reputable firms and individuals. If such an
office is established it is suggested that the nation establish specific
foreign investment goals to be accomplished.  For example:
-  10 resort type hotels each with 50 rooms or more;
-  100 acres of shrimp mariculture grow out ponds;
-  Establish a moderate size food processing facility;
-  Generate interest in basing a fishing fleet in the area.  Such
permission would be
    contingent upon the establishment of shore side processing facilities;
-  Seek investment in specific manufacturing activities, e. g.,   bottling,
button making,
    ceramics, etc.
 - Attempt to generate interest in a establishing a port of call for a
cruise ship.
     These are just a few specific projects on which investment promotion
initiative could be taken.  To fail to do so is to acquiesce and leave the
development initiative (if any) to others and therefore happenstance.
Summary Of Steps For The Promotion Of Foreign Investment
- Research and provide basic geographic, economic, business and legal
information for the potential investor's review in a single, published
package, (printed and video);
- Identify and document business opportunities open to foreign investors.
Where it is  possible to do so  include a financial feasibility study
and/or a marketing analysis for the project the government wishes to
encourage;
-  Where necessary, identify local joint venture participants and the
potential site (land) for the endeavor;
- Promote (advertise) the opportunity using methods described here-in;
- Service all inquires for information from potential interested investors;

-Check the financial and character references of all foreign investors when
a joint venture with local parties is planned;
- Provide all possible assistance during the initial start-up of the
enterprise.
- Organize investment promotion missions to the U. S. and Asian countries
consisting of high government officials and prominent local private sector
businessmen (with specific documented investment proposals).

Back