Economic Opportunities For Future Generations – A Few Random Thoughts

Economic Opportunities For Future Generations – A Few Random Thoughts

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. That is not to say that foreign investment was not desirable since everyone knew at the time that the limited financial resources of many local people was such that large projects were simply beyond their financial capacity to implement. In those days it was hoped that the smaller “mom and pop” businesses would be identified and undertaken by the Chamorro and Carolinian people.

To an extent some did enter the world of business and develop thriving enterprises. But it seems not enough people were willing to accept the risk that all entrepreneurs recognize when they embark on their own business venture. When the old Trust Territory law governing foreign investment was repealed in the early eighties nothing was put in its place to encourage and direct “selected” outside investment.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. While large “outside” investment was welcome and, hopefully, will continue to be so saluted, one is astonished at the large number of smaller, lower capital investment enterprises that are foreign owned which have also 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 was hoped 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 had to be 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. 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. 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? Currently a foreign investor need only demonstrate that an investment of $50,000 has been made in the Northern Marianas. I once thought the amount far too low and that the minimum investment threshold should be several million dollars. But then what about such desirable investment as, for example, watch or shoe repair, portrait photo studios, tailor shops and hundreds of other small businesses? These activities require a small capital outlay – far less than $50,000. Are we to forego these services if no local person seizes the business opportunity? When you think about it – you can begin to appreciate the dilemma. Such outside investment results in leased land or space rental, pays taxes, contributes to a competitive environment and culturally enriches the community and it has a significant multiplier effect throughout the economy. 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. At the end of 1995 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. 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. In the 1994 -’95 school year there were 3,767 secondary and 9,767 elementary students enrolled in both the public and private school systems. Assuming only 50 percent will enter the world of work upon graduation, in a few years this economy will need to either generate more than 6,700 additional jobs or reduce the number of nonresident workers by a similar amount. With the latter there will always be some jobs performed by nonresident workers that local people don’t want. There is one other factor in the equation to be considered and that concerns the large influx we can expect from the Federated States of Micronesia once U. S. financial assistance to that area is cut off or reduced substantially.

As one who has watched the FSM economy, what there is of it, since 1970, I have never believed the nation was economically viable and could stand alone and sustain itself very much beyond the subsistence level without considerable financial assistance from donor nations. As this money declines we can expect to see FSM youth migrating to the Marianas for jobs. 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. Certainly it is not difficult to identify matters that need addressed. But to suggest possible remedies – that’s the hard part – and that’s when one must come face to face with one’s own deficiencies of not being able to suggest reasonable and fair solutions that please everyone.