Financial Typhoon Condition 2 – The Gathering Storm – Protecting The Economy
It was only several months ago that projections were made of the number of hotel rooms that would be needed in the Commonwealth by the year 2001 – only three years away. At that time it was estimated that by the year 2001 visitor arrivals to the Northern Marianas could number between 1.1 and 1.4 million providing a total of 6,000 to 7,500 rooms were available to accommodate that number of guests which, it was calculated at that time, would spend between $1.4 to $2.7 billion.
The projections were based upon the Marianas Visitors Bureau’s low and high estimates of the annual percentage growth in visitor entries and at the time considered conservative. With the use of simple extrapolation, the total number of visitors and thus the number of hotel rooms required in the next century was made. How things have changed! Now – with recent events in Southeast Asia – all bets are off and a new set of projections are required. As is well known, many United States, European and Japanese firms manufacture products in Southeast Asia. It’s those workers and their executives that take vacations. The economic “meltdown” in Korea now effecting the Commonwealth’s economy can roll back on Japan’s economy which in turn can have unpleasant consequences on the U. S. economy and the world.
Things changed almost overnight due to the devaluation of currencies and economic difficulties in Japan and elsewhere in Asia. The rules have changed and we must change with them. What can be done? One thing is to take some of the bitter medicine that Asian economies are being forced to take – but, hopefully, it can be accomplished voluntarily to make the Northern Marianas a more competitive destination. Consider that a tourist can now go to Thailand, Philippines, Vietnam or elsewhere in Asia, stay in a first class hotel, dine on fine cuisine and purchase exotic ground tours for half the cost of what they had to pay six months ago. Being a dollar oriented economy the CNMI, by comparison, is a very expensive place to vacation. Several things can be done to preserve our share of the market: – Encourage businesses to examine where they can voluntarily reduce prices to make the island more competitive with other destinations. Accept a smaller profit margin if it is possible to do so. This will obviously mean a reduced Business Gross Revenue Tax paid to the Government and fewer new or renewed non resident workers; – Educate the people in our community to consider the island for for it is – a tourist resort area. I’m afraid that many of our citizens do not consider that they reside in such an area; – Recognize 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, the dollar yen and other currency ratios and a myriad of other factors; – No economy should be dependent on a single industry – especially tourism.
Every effort should be made to diversify the island’s economic base with small manufacturing, fishing, agricultural and foreign sales corporation activities; – Work with the government to develop a long range plan for infrastructure improvements and stick to it; – Review investment laws with a view toward streamlining them, offer more investment incentives, perhaps a tax holiday and repeal burdensome restrictive regulations; – Identify “development zones” to encourage more diverse tourist attractions; – Encourage those businesses importing commodities from the United States to explore the advantages of the Jones Act and the lower freight rates levied by foreign flag carriers; – Evaluate the possibility of free trade export zones with excise tax free imports of raw materials; – Form a group of influential private businessmen and women to suggest ways to weather the economic storm that may be just over the horizon and heed their advice and recognize that just as a chain is only as strong as its weakest link any “grand plan” is nothing more than the sum of the smallest elements.
A government – like any business – has only two way to make money: hold expenses and increase income. If it is not possible to increase income in a shrinking economy, then if at all possible hold income levels and reduce expenses. Remember, nothing lasts forever. Even if it doesn’t hit us too hard we would still be better off, in most cases, for the steps taken.