Is It Possible To Plan Development?

Is It Possible To Plan Development?

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.