I have always considered that development planning consisted of two
principal elements; a physical component for infrastructure, (roads,
schools, parks, power, etc.) and an economic base portion. The two are
closely interlocked. Existing and projected economic indicators such as
population characteristics; the various business sectors and their growth
potential point the way for future infrastructure investment. As a
particular location on the island experiences growth, it follows that
sooner or later existing roads, power, water, sewer and sometimes schools
will have to be either provided or improved. Those who have been on Saipan
for five or six years remember the previous condition of Middle Road, a
narrow two lane, rough road with relative few businesses situated along
road side. Once improved, new businesses quickly located there. Logically,
roads should not be resurfaced and then dug up a short time later to
install a sewer or water line. The line should should go in first. Citing
another example, when a road is resurfaced, vehicle speeds increase, the
accident rate goes up and some thought must be given to enlarging  hospital
emergency facilities. Again, Middle Road serves as a lesson. These obvious
examples fall within the infrastructure or physical portion of a  plan. It
is one thing to create a plan - which by the way - should have broad
community support, it is quite another matter to implement it. Usually, the
only implementation tools available are: the budgeting process, various
laws such as building codes and directing the use of land. Looking very
briefly at land and just a couple of the many elements to consider, a
particular use of land can also be a generator of vehicle traffic since its
use can be either an origin or destination of traffic patterns. To cite
another example, when it is known that a new road will one day be
necessary, or an exiting roadway realigned at some point in the future, a
plan can suggest that the necessary right of way be purchased at today’s
prices rather than at some future time when the right of way is certain to
be more expensive. Solid waste disposal, underground power lines, schools
with concrete roofs to serve as typhoon shelters, these are just a few of
the facilities to be addressed in the physical portion of any plan.
          The economic portion is quite different from the physical
component of a plan. It is no secret that rigid economic planning is the
anathema of private enterprise. Traditionally, economic planning, per se,
has been the hallmark of socialistic and communist countries and we have
all seen where that has led in recent years. Indeed, the United States does
not have an economic plan for the nation and while many states and cities
have plans for the physical development of their respective areas, I am not
aware that any have extensive plans relative to economic development other
than to strive toward establishing a conducive business and investment
climate by offering incentives, constructing industrial parks, free trade
zones, etc.
     Economic development cannot be “legislated” to occur, only the
business climate within which the private sector is expected to thrive and
prosper can be established by an area’s legal environment and even then it
is only a welcome mat for potential investors, both local and foreign.
     The economic base portion of any plan is an important component since,
in the absence of federal grants and programs, it is the economy that
generates the tax revenues that will finance the infrastructure of the
future and provide for the social programs for society, and it is the
economic base that will provide the funds for the maintenance of
facilities.
     There are many issues that have the potential for influencing the
Commonwealth’s economic future in both positive and negative ways - all of
which are difficult to foresee and measure, many of which are beyond the
control of the Commonwealth. These include: the threat of United States
control over immigration and the precipitant imposition of the U. S.
minimum wage; a continuation of the benefits afforded by Headnote 3 (a)
permitting duty free access to U. S. markets; the impact of the North
American Free Trade Agreement on the CNMI’s manufactured products of all
type; the influx of increasing numbers of unemployed, unskilled youth from
the Federated States of Micronesia, (FSM)  as that nation’s Compact funds
become exhausted in a few years. Should the FSM economy continue to falter,
it will stimulate  an increase in outward migration to the Marianas. Still
other uncertainties involve the relationship of the dollar to the yen and
the continued health of Korea and Japan’s export economies; the Philippine
Government’s ban on certain categories of expatriate workers; budget
difficulties; the competitiveness of other tourist destinations around the
Pacific; the economic contribution of casino operations on Tinian; the
concern of future potential investors over Article XII and the sanctity of
land title among other things. These unknown issues make it difficult to
make forecasts for any distance into the future. Any one of the above can
have a major impact on the economy. Having mentioned some of the
difficulties in anticipating the future direction of the economy does not
mean that attempts to develop a “best estimate scenario” should not be
made. They should.
     To digress a bit, I am reminded of the economists in New York City
who, at the beginning of this century, were concerned as to where all of
the land would be found to grow the oats for the hundreds of thousands of
horses that would be needed for transportation by the year 1950. Technology
has a way of nullifying the best of projections. The advancement of the
automobile probably served to negate some enterprising entrepreneur’s
business plans to process fertilizer collected from New York streets of
which, I am told, there was quite a horrendous and dreadful volume. When
this occurred the purchase of stock in a firm manufacturing  buggy whips
would not have been a wise investment but carpet manufacturing, on the
other hand, would have been since people no longer need fear the stench
from tracking street soil from the spent fuel of horses into one’s home or
office. This is but another historical reference as to how seemly unrelated
events are entwined.  Do I hear you say - only dedicated economists would
turn their attention to horse manure.
      Returning to the other “other hand” there are events transpiring over
the horizon that can effect our economy in the future. Ever larger cruise
ships operating from Asian ports are certain to change the visitors choice
of travel to the islands. The  recent program on television “Castles on the
Ocean,” concerned new cruise ships that are coming on line. These behemoths
are larger than anything previously constructed, larger than the Titanic
and the Queen Elizabeth. They are truly floating islands, each a virtual
community afloat with architecture and interiors that rival the most
palatial Las Vegas hotel casinos. They are lavishly decorated with stage
shows, luxurious casinos, opulent shopping galleries and diversions of
every imaginable description. People fly to their ports of embarkation,
board and experience the pleasure and adventure of an ocean voyage. One
cruise line alone was responsible for $1.4 million in airline ticket sales
in a single season. I believe this is the next century’s competitor for
hotels since they are floating islands themselves. Granted one of the joys
of travel is the experience of different cultures which passengers
experience at each port of call. This improved mode of tourism travel may
rewrite the book on resort hotel structures fixed, as they are, in one
place and at the same time require ever larger port facilities just as the
jumbo jet changed the architecture air ports.
      As the yen declines in value against the dollar our islands become
more expensive for the Japanese to visit. Currently it requires about 130
yen to purchase one U. S. Dollar. At what point would the Dollar become so
expensive for the Japanese that it becomes prohibitively expensive for the
average Japanese to purchase a vacation in the Commonwealth as compared
with other non dollar associated areas? I submit that the level must be
somewhere around 170 yen to the Dollar. Unfortunately we have no control
over any exchange rate. Already the Thai Baht has lost fifty percent of its
value which translates into hotel room rates being one half of what they
were six months ago. Imagine this impact on a hotel’s reduced cash flow
measured against a fixed debt service obligation.
     Since each of the islands are different, a development plan tailored
to fit the special circumstances of each while taking care to protect the
environment would be worthwhile. Unlike Guam, the three principal
inhabited  islands of the Northern Marianas require a tremendous
duplication of services that cannot be consolidated. Three airports, three
school systems, three power and water systems, fire immigration, health,
etc. Thus, the high cost of providing government services.
     The infrastructure requirements and well being of a growing
population, the needs of the private sector and the protection of the
environment are difficult elements to balance and accommodate. But sooner
or later they must all mesh usually as a result of compromise and “trade
offs.” Many professional disciplines, all government agencies and
municipalities and most business and civic organizations must have an
input. This coordination is very difficult and may explain the failure of
the planning process in many areas. It’s a task for which I would not want
responsibility. As someone once said about planning, "I can explain it to
you, but I can't understand it for you" and according to Murphy, “If
there’s more than one way to do a plan and one of those ways will end in
disaster, then somebody will do it that way.”  A lot of common sense goes
into creating a plan. Without a dictator the whole thing may be impossible
but it’s nice to talk about between typhoons. Having a dictator has the
added advantage of getting rid all the economists and most, if not all, of
the lawyers. But there is a choice, plow new ground - or let the weeds
grow.
Forces Influencing Projections
     Any development plan for the CNMI  must, of course, center around the
needs of the people. Therefore, population characteristics are of central
importance in anticipating such needs as: housing, class rooms, medical
facilities, infrastructure and the provision of a wide variety of other
public services. In the Commonwealth there are several distinct population
groups which must be considered. These are United States citizens, both
indigenous and non indigenous; the nonresident worker; Micronesians, which
by reason of a negotiated agreement are permitted entry into the CNMI and
finally, the transient population of tourists. Within the United States
citizen group there are several important sub categories each of which
require special consideration as, for example, minorities -  as in the case
of Carolinians, school age children, retired and handicapped persons, etc.
Population characteristics and projections should be prepared for each of
the inhabited islands of the Commonwealth, namely, Rota, Tinian, Saipan and
the Northern Islands in the event they will again be inhabited in any
number in the future.
     It would be very convenient to state as a principal assumption that
the projections are based on an evaluation of the present general local and
regional economies and does not take into account, or make provisions for,
the effect of sharp changes not presently foreseeable. This, however,
avoids the issue of attempting to make future projections as accurate as
possible. Population projections must be objective and it should be clearly
understood that they consist of an elaborate combination of estimates. To
the extent that any one estimate is in error then the final result will be
in deficient. Hazardous as it is, it is an improvement over the intuitive
method which some would employ without any attempt to measure the varied
factors involved.
      Projections must take into consideration the possible future state of
the economy and be based on major assumptions for the principal sectors of:
government, manufacturing, tourism and the related sectors of  retail,
wholesale, construction, etc. It is somewhat difficult to foresee the many
changes that could occur in the Commonwealth’s economic base over the next
five years considering that many of the forces effecting the future well
being of the economy are external and are influenced by events over which
the CNMI has no control. Among such forces within Asia are: changes in the
exchange rate of the dollar in relation to the Japanese yen and other Asian
currencies, (a strong dollar results in the Commonwealth becoming a more
expensive destination and thus less competitive with other areas);
fluctuations in Asian stock markets and other factors. Forces within the
United States which could have a detrimental effect on the economy and thus
the future population include: the American Government’s ability to
increase the CNMI’s minimum wage to that prevailing in the U. S.; the U. S.
assuming control of immigration in the Commonwealth; application of federal
tax laws and withdrawal of the Commonwealth’s privilege to export its
manufactured products duty free to the U. S. market. Additionally, the
Commonwealth legislature and the executive branch can modify the business
environment by either stimulating increased economic activity by offering
additional investment incentives or adversely effecting economic growth by
enacting measures to discourage additional investment. This sometimes
results when laws are enacted without anticipating the unintended,
unanticipated consequences of such legislation or regulation. Other
unforeseen factors affecting the area’s economic growth and thus its
population can include: physical disasters such as droughts, typhoons and
earthquakes; increased crime; degradation of the environment; the island’s
business climate and its appeal to additional foreign investment; whether
or not casinos will be operating successfully; the availability of adequate
infrastructure, etc. To the extent that these unforeseen forces effect the
economy in the future then obviously the projections will require
adjustment. Reasonable assumptions that are employed in making projections
must be clearly articulated. As events unfold over the planning period
necessary adjustments in the population projections will, of course,  have
to be made and incorporated into the overall plan.
      A previous article discussed some of the elements and considerations,
encompassing economic, social and environmental that must be addressed in
any planning process. But how can a plan proceed when major tools for its
implementation can be modified or entirely negated by unforeseen
international events or actions by “outside” forces such as U. S.
government policies?
   As is widely known, the present labor element of the economy can not be
sustained  entirely by the indigenous population nor are there sufficient
numbers of "off-island" U.S. citizens available to augment the limited
Chamorro/Carolinian labor force.
      Returning to the tourism sector, while it may not be a popular
observation, many of the nonresident workers in the Commonwealth were
recruited from the slums of Asia and, as an unfortunate consequence,
brought with them slum ideas as to how a community should appear rather
than an ambience complimenting a tourist resort.
     Some members of the United States Congress have suggested that local
control of immigration in the Commonwealth be withdrawn and the
administration of immigration be placed under the laws of the United States
with federal immigration authorities responsible for this element of
government. In my judgment if this occurs the Commonwealth economy may
shrink to somewhere around the 1990 level of $1.2 billion in reported
business gross revenue, if not lower. This would be about half of the $2.2
billion reported for 1996, the most recent data I have available.
     Presently, two industries dominate the economy of the Northern
Marianas - tourism and garment manufacturing. Tourism is an extremely
fragile industry and many forces, both internal and external, can affect
its success. Typhoons can be a disruptive force, as can droughts,
pollution, crime, an area’s price structure, competition from other areas,
fuel prices and a myriad of other factors. No economy should be dependent
on a single industry - especially tourism. Therefore, every effort must be
made to diversify the island’s economic base. Manufacturing, fishing,
agriculture, etc., accomplishes this goal.  In most cases manufacturing,
and to some extent, fishing and agriculture will require nonresident
workers. Manufacturing will also require the importation of raw materials.
     In 1996 when tourist entries totaled 736,508, there were 3,847 hotel
rooms available to accommodate them. Before the recent currency crisis in
Asia, I prepared a study, that indicated that about twice the above number
of visitors would be required to make up for the loss of government
revenues should the garment industry leave. This means that about twice the
above number of hotel rooms would be necessary to accommodate the increase
in visitors. At an average cost of, say,  $120,000 as the pro-rated, per
room construction cost for a first class facility, approximately $462
million in new investment would be required along with an additional  5,800
non-indigenous workers to staff the hotels. So what happens? In terms of
the labor situation, it’s a zero sum game, we trade garment workers for
hotel workers. Either that, or the economy stagnates somewhere around the
1990 level. If you don’t accept my rough estimates reduce them by 10 to 15
percent and the results are still significant in terms of hotel rooms,
investment capital and workers that would be required. For those that don’t
agree - make your own analyses and show it to me.
      I happen to believe that the Asian economies will straighten out in a
year and one half or so. Their workers are highly skilled and productive,
they have enormous capital invested in every thing from ship building to
electronics and, in the case of Korea, the interest of the U. S. armed
forces and thus the United States Government.
     But always the matter of an adequate labor force arises. One must
legitimately pose the question: Why should an indigenous population - one
which has endured for centuries in relative isolation; coped with the
devastation of typhoons; been destroyed by war; survived the colonial
administration of the Spanish, Germans, Japanese, the United Nations and
the Trust Territory Government not desire to retain control of its
government?  One’s cultural heritage strengthens one against such forces
and it is only natural to desire to protect it.

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