I was thinking about the many firms that have invested in the
Commonwealth which have since gone out of business. Numerous restaurants
and construction firms, gift shops and Karaoke establishments, ground
tour operators and many others have come and gone in recent years. Most,
but not all, were rather small businesses dependent upon the vitality of
the tourist sector.Then there were the land speculators. Many of whom
leased, or purchased, raw land for eventual sale or sub lease at some
point in the future to outside project developers. During the “boom
period” near the end of the last decade some land was acquired as
leasehold with the sole intent of retaining it until the price increased
beyond that of the original acquisition then selling it to a developer -
which is, of course, normal business strategy - otherwise why bother.
     There are  some instances where such land was acquired ten years
ago with a 55 year lease. Today, some land parcels still remain
undeveloped and the price has fallen from previous high levels. In terms
of Japanese and Korean investors, formerly the islands’ principle source
of foreign investment capital, few are now in sight. In 1988, a time
when many speculators originally planned to offer developers 55 year
leases, the remaining period on several undeveloped leaseholds has now
been reduced to 45 years. Considering that the economies of Japan and
Korea are three to five years away from regaining their former capacity
to permit the export of hard currency for foreign investment, this in
turn will have the effect of further reducing the “usable” term
remaining for occupancy on many such leaseholds to 40 years. Deduct from
this period about two years for the construction of large projects and
the period becomes about 38 years or 69 percent of the original term
remaining. The question then becomes, where will investors be found who
are willing to lease land for 38 years of useful income generating
operations when they can lease other so-called “fresh” parcels for the
full 100 percent of 55 years or, indeed, go to Guam where they can own
land in fee simple? Add to this the adverse publicity a few years ago
resulting from Article XII litigation and the possible adverse
impression left on potential investors along with current labor and
immigration issues with the United States as well as frequent changes in
local laws and you begin to appreciate the problem in dealing with
future investors. For the most part large investment that occurred
between the mid eighties and early nineties took place before any of the
above issues had surfaced.
     As one who has observed and recorded the Commonwealth’s recent
economy history, it is my opinion that the development that has occurred
in the Northern Marianas was largely a result of what I call a
“fortunate accident” occurring as a result of the devaluation of the
dollar in relation to the yen in 1986 at the Plaza accords in New York.
The Japanese had more money than they could digest domestically and
their capital flowed abroad. Those days are long gone. The investment
rush at the time was largely precipitated by “word of mouth” discussion
(promotion) among early foreign investors and their network of
associates since, with few exceptions, promotional advertising has only
appeared in the Guam Business Magazine and an Australian journal, and
those only in the past two or three years. The CNMI has not engaged in
an aggressive advertising campaign targeted to specific audiences in an
attempt to publicize its investment opportunities. The next time you
pick up the Wall Street Journal, Asian Economic Review, Economist
Magazine or other similar business publications examine the ads
extolling the advantages of investing in various countries and the
invitation to consider their particular areas.
     The Commonwealth needs to diversify its economic base as is now
evident from the Asian crisis.
      So what is needed?
- identify investment opportunities which compliment the tourism sector
such as visitor attractions as well as those outside this sector  that
appear to be financially viable such as light manufacturing,
exploitation of marine resources, etc.;
- consider the possibility of offering additional, and in some
instances, industry specific incentives;
- establish an office staffed with competent and highly motivated
individuals charged with identifying potential business opportunities,
(recruit them from anyplace but Washington, D. C.);
 - identify and locate potential investors which might be interested;
- invite them to consider the CNMI and then service their inquiries and
“sell” them on a Commonwealth location, its incentives, etc.
      Such an effort takes money, dedication and a long term commitment.
No one else but the Commonwealth can do this because no one else outside
the NMI, not presently an investor in the local economy, is interested.
     The effort has to be realistic considering that most component
parts or raw materials for manufacturing activities will have to be
imported and possibly the skilled workers as well.  Add to this
recognition of our geographic location, the distance to market or
sources of supply and the transportation costs so associated and you can
begin the appreciate how these factors influence investment location
decisions. To illustrate the vastness of the Pacific at our latitude and
the relationship to transportation visualize the Asian continent
represented by the Circle of Honor at American Memorial Park and the
western edge of the North American continent being situated south on
Beach Road in the vicinity of the DFS traffic light with 8,835 miles of
Pacific Ocean between these two points. The width of Saipan would be
about 1/1,039 of this distance located in the area of the Voter’s
Registration Building. Saipan would be about the size of a water melon.
Or, stated another way, about the size of a coin in an average hotel
swimming pool. This is where we are in the world and this geography will
exercise major influence on those business enterprises that are viable
and those that are not.
     In order for the Commonwealth to compete with other locations for
additional investment capital it must offer some competitive or
comparative advantage. Just exactly what that might be must be
determined from a thoroughly realistic and objective analyses. We must
find out and then go out and “beat the bushes.” For some, an additional
tax incentive may be one. If it turns out that the government can’t
presently afford to forego tax generated revenue at present levels then
one alternative would be to reduce the government payroll, use the
difference in savings for operations then offer reduced taxes as an
incentive.

Back