“The Economic Base of the Commonwealth’s Leaning Tower”
     For what ever it’s worth I would like to share an observation I
made many years ago which I call the “Leaning Tower of Pisa Syndrome.”
Before doing so I would like to pose the question, “at what age did you
first become aware that there was such a tower?” I would imagine that it
was an early age, perhaps as a result of a photograph in a first grade
primer. I once lived in a suburb of Pisa, Italy and had many occasions
to visit this wonderful structure completed in the 14th century. Like
millions of others I had always known that it leaned precipitously. But
one does not really get the full impact of its height and awkward slant
unless it is actually witnessed in person. Approaching the piazza where
it stands, the area is reached by walking down an avenue where, at
street level, the imbalanced structure is shielded from view by three
and four story buildings even though a municipal ordinance decrees that
nothing may built higher than the tower. Turning the corner for an
unencumbered, clear view, the magnificent ancient edifice of 58.4 meters
(192 feet) comes into full and sudden view. Moving closer your instinct
tells you not to stand beneath the side that first began to tilt during
construction in the 12th century.
     Positioned at the corner of the street at the point of the
pedestrian turn is a typical Italian outdoor cafe. Sitting there
watching virtually every nationality in the world walk to the corner and
turn where the tower looms into full view with an overpowering presence,
every one of the visitors  speaking excitingly in their native language
invariably exclaims, “It really does lean.”
      Sitting there and hearing the same expression of astonishment over
and over in a multitude of foreign languages among people who already
knew the tower leaned by virtue of the reason for their visit  and who -
one would think - be insulated from the sudden visual shock, prompted me
to coin the phrase, “the leaning tower of Pisa syndrome.”  For me this
poignant example illustrates that we human beings can be aware of
something - or some event - but, in reality, not know it. I am reminded
of another encounter I once had with an heiress of the Time Magazine
fortune. This lady was attempting to provide some desirable service for
the people of a Micronesian island but was experiencing some difficulty
in implementing her project. She asked me, “can you tell me what the
problem might be because I don’t want to be in a situation where I don’t
know -and don’t know that I don’t know.”
      Think about that elegant thought for a moment.
    What does the above story have to do with the Commonwealth? It’s all
a matter of awareness. As an observer of the economy for many years it
has occurred to me that  some law makers simply fail to comprehend the
unanticipated, unintended consequences of many laws and their potential
adverse effect on the health of the private sector as well as the fact
that it is only the well being of profit generating private enterprise
that is capable of producing tax revenues. They have been told by many
in the business community that the base of the Commonwealth’s “economic
tower” leans as a result of some of the laws governing various elements
of business activity but some don’t really seem to comprehend the
interlocking elements unless, of course,  they have been in business for
themselves, had to meet a payroll on time and in general operate at a
profit to stay alive. If you don’t have a healthy private sector - you
don’t have an economy. Without a vibrant economy there are reduced tax
revenues and thus fewer government services and employment
opportunities. Does the tower have to crumble before anyone realizes it
was in danger all the time? If so, by then, it may be too late to take
corrective measures. What might these measures and actions be?
“Strengthening The Economic Base of the CNMI’s Leaning Tower”
       An analogy with the leaning Tower of Pisa has been used with that
of the condition of the Commonwealth’s current economy. Similarly, the
base of our economic tower is also leaning which prompted me to think of
ways to stabilize, if not strengthen our economic foundation. A list
consisting of several suggestions follows, none of which are prioritized
and none as yet sanctioned by any agency or organization. For
consideration - they are: (#1) - Offer a guarantee against an increase
in taxes for a specified period and offer tax incentives for new
investment, (a tax holiday). 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 could take the
form of a tax holiday for "approved" projects.
     Perhaps consideration could 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 commercial farm land brought under cultivation the
law might permit two years relief  from the business gross revenue tax.
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. Many different crops
have long been identified  for possible production. Additional support
for agriculture could be provided with a crop insurance program. The
same legislation could be extended to fishing, fish processing, and
mariculture. All of which are capable of either substituting imports or
producing export oriented commodities.
      The key words are "new projects" which might also include an
expansion of an existing endeavor. The tax holiday would remain in
effect for only a specified period. (#2) - Explore U. S. tax advantages
for potential businesses operating from the CNMI. There must be many
United States’ firms unaware that businesses registered in the Northern
Marianas and engaged in export sales can enjoy significant tax relief
from their IRS tax obligation by establishing offices within the CNMI
since a portion of the income generated by foreign sales may be exempt
from U.S. tax. This is another opportunity to attempt to diversify the
economy. (#3) - The Northern Marianas has to be sold as a location from
which to do business along with the area’s business investment
incentives. One possibility which might interest firms that produce
computer software which should be explored concerns promoting the
islands as a location for such largely cerebral work. It’s a high value,
clean industry. People who earn their living by mental creativity work
best in an environment such as the CNMI can provide. While the passage
of local laws offering investment incentives is one thing, such
incentives still have to be made known outside the area and recognized
by potential investors as business opportunities in which they may be
interested. In short, potential projects must be packaged, advertised
and the initial inquires adequately and successfully serviced by the
government.  An office could be established and tasked with the
responsibility of preparing documented market and financial feasibility
analyses of potential projects for implementation consideration by
private investors. These investment prospectus or, “tools”, should be
used to introduce the Commonwealth’s investment opportunities to
interested parties. This process must actively involve several of  the
government’s operating departments and agencies which must begin to view
themselves as partners to business and render all available assistance
to the program. Being in proximity to the vast Asian markets the
Commonwealth’s geography might also be promoted as branch sales office
locations for American export oriented firms who recognize the advantage
of being situated under the stability provided by the American flag, the
U. S. judicial and banking systems along with U. S. copyright, patient
and trademark laws while benefiting from the CNMI’s lucrative tax rebate
advantages and resort atmosphere. Other investment opportunities include
encouraging: retirement subdivisions, time share condominiums and health
spas, an automobile ferry between islands, the manufacture of
pharmaceutical products, toys, beach wear, Hafa Adai shirts and dresses
similar to the Hawaiian “mu mu,” commercial fishing, cut flowers (which
have high value in relation to bulk and can thus be flown to Asian
markets), bottled water on Rota, fishing vessel repair facility to
service Asian fleets operating in the western Pacific, shrimp
mariculture and perhaps even culturing pearls in the Northern Islands.
     Nothing should be so small as to be overlooked remembering that any
grand plan is but the sum of its smallest elements. And it’s the smaller
projects where the local people have the financial capacity to
participate either as 100 percent owners or as joint venture partners.
(#4) -Undertake a publicity campaign to mitigate the adverse publicity
in Asia and the U. S. media which resulted some years ago from Article
XII lawsuits. (#5) - A possible new opportunity for Asian educational
institutions could be a tropical marine biological laboratory on Rota or
one of the Northern Islands in association with a Japanese or other
university as an extension of their campus in cooperation with our own
college. This would permit foreign and U. S. students of marine science
to study and gain actual experience in the field. Such activities
contribute to diversifying the economic base. (#6) - Offer new and
creative investment incentives. One of the measures of how badly an area
wants foreign investment may be gleaned from the incentives it offers.
These can take various forms, several of which follow as examples found
in various states on the mainland. Train U. S. citizen employees for
private sector positions in new, high tech. positions at government
expense, (i.e., free or at reduced tuition at the college. U. S. grants
are available for this purpose). Provide access roads to business site
locations not presently located  adjacent to a public highway. Provide
utility lines (water, power, sewer) to the business property line when
such sites are not located along such lines. Assist with the
construction of shell buildings for either lease, lease with an option
to buy or out-right purchase for up to 55 years. Duty free importation
of raw materials equipment and supplies (when not for resale within the
area). Establish “free trade zones” at the airport and seaport to
accommodate light, export oriented manufacturing, bonded warehouses,
etc. Suspend, at least, temporarily all developer impact fees.” (#7) -
More attractions are required for the tourism sector such as: an
aquarium, a cultural and performing arts center, an  aerial cable tram
to the Marpi cliffs or Mt. Tapotchau with a revolving restaurant and
gift shops, a glass observation elevator up the face of Suicide Cliff
and a sound & light show (ancient Chamorro culture). (#8) - The
Commonwealth is a western oriented society situated in the eastern
hemisphere and should build upon and promote that difference in our
Asian tourist markets just as Guam appears to be doing. Enhance the
appearance of our over-all tourist plant, make Hotel Street a walking
mall, establish regulations governing outdoor advertising signs, add a
few circulating water fountains, etc., - in short improve beautification
efforts. (#9) - Review U. S. laws and regulations as may be related to
potential investment in the CNMI. Undertake a through analysis of
suitable industries that could benefit from Headnote 3 (a), and the duty
free entry privileges of qualified products into the United States. It
is doubtful that anyone on island has ever reviewed the entire list of
more than 2,500 eligible products for the few that might possibly
benefit from an island production location. This effort should be
undertaken to determine those selected enterprises that might “fit” into
a CNMI location. Of course, not all products on the duty free list are
suitable - but some will fit.
     In terms of economic diversification, the CNMI must do everything
possible to protect its  ability to export qualified manufactured
products duty free to the U. S. mainland market before U. S. trade
barriers against many countries drop in the next century as a result of
World Trade Organization, (WTO), agreements. This means resisting all
pressure from members of the U. S. Congress who threaten to withdraw or
modify Headnote 3 (a) benefits within the U. S. harmonized custom tariff
schedule.
   Unfortunately the U. S. Alien Entrepreneur Program does not apply in
the Commonwealth. It could possibly - if the U. S. law were modified.
This law relates to citizens of other countries seeking permanent
resident visas in the United States.  These people may apply for such
status in one of the fifty states but currently not in the Commonwealth
since the Northern Marianas administers it own immigration laws. This
program is administered by the U. S. Immigration and Naturalization
Service for those individuals that can qualify by investing at least $1
million in a new or existing business that will employ at least ten
people. The requirement is only $500,000 if the business is located in a
rural or economically distressed area in the United States mainland or
Hawaii. It may be that the CNMI could obtain a wavier and qualify should
the program be deemed to be of interest. (#10) - Support a long range,
comprehensive master development plan to encompass all facets of
economic development as well as the needed physical infrastructure
required to support the economy. Tools for implementation are, zoning,
building codes and the budget process.
(#11) - Take advantage of the Jones Act. This U. S. legislation
prohibits a foreign flag surface vessel from picking up or discharging
passengers or cargo between two U.S. ports, as for example, between the
U. S. west coast or Honolulu and - or Honolulu and Guam.  The Jones Act
has had significant adverse impact on both Hawaii and Guam particularly
during strikes by longshoremen on the U.S. west coast during which time
no American flag vessels and no foreign flag vessels service the islands
direct from a U. S. port. Additionally, U. S. vessels operating on this
route have allegedly charged exorbitant freight rates. This portion of
the law does not apply to the Northern Marianas with the result that
cargo can be picked up at any mainland U. S. port or Hawaii - by any
foreign flag vessel - and transported to the Northern Marianas. The
above are just a few ideas of efforts that could be undertaken. However,
none are a “quick fix.”

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