Selling The Commonwealth As A Business Location

Selling The Commonwealth As A Business Location

As a fervent believer in the old adage that, “it takes money to make money”, to my knowledge the Commonwealth has not financed the promotion of the CNMI as a business location among European and North American investors. In the past most of the effort has been directed toward Asia. A publicity campaign could be launched to introduce the islands as an investment location and promote the area in the United States, Canada and Europe as well as Asia.

That is, of course, assuming more diversified investment is desired. This would require researching possible opportunities in which investors from those areas might find a CNMI business location profitable and then make sales calls at the headquarters of each. Obviously, this requires money. Not only for travel, but also for promotional and presentation materials and – yes – money for entertainment, lunches, dinners, hotel space for investment seminars, etc., in much the same manner and style that a business client might be treated. It’s a sales job probably best undertaken by the Chamber of Commerce and certain departments of the government.

The Northern Marianas has to first be sold as a location from which to do business along with the area’s business investment incentives – then later – a particular island among one of three, followed by a individual site on the island . I was talking with my old friend Tim Bruce on Rota who wants to explore the possible interest among firms that produce computer software to consider the islands as a location for their 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. Clean air and water, golf, tennis and a wide variety of marine activities and other sports and recreation as well as a lucrative tax rebate on their earnings are incentives that should be of interest to software firms along with the copyright and trade mark protection afforded by U. S. laws. Something which I doubt many on the mainland are aware. It all comes back to the old truism, “nothing ventured – nothing gained.”

A possible new opportunity for Asian institutions, and in particular educational institutions, might be a tropical marine biological laboratory on Rota or one of the Northern Islands in association with a Japanese university as an extension of their campus in association 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. As mentioned in earlier articles, other opportunities might include 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, cultured pearls in the Northern Islands, and health spas to mention only a few. 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 as joint venture partners. A through analysis should be undertaken of suitable industries that could benefit from Headnote 3 (a), and the duty free entry privileges of qualified products into the United States.

To my knowledge no one 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. Not all products on the duty free list will. It’s one thing to offer tax and other benefits to businesses as an inducement to relocate in the area – it’s another thing to find new businesses to take advantage of such incentives. Otherwise the incentives are just so many words on paper. The Chinese market is a hot topic with their 1.4 billion people as are certain areas in eastern Russia. I venture to state that their are probably many enterprises in China unaware of Headnote 3 (a) benefits when exporting to the United States. Additionally, there are probably many of the smaller export oriented firms in the United States that are unaware of the advantages of a Commonwealth based export operation into the Asian market.

Again, it’s a sales job on both sides of the Pacific and it requires knocking on doors and personally visiting such businesses. Perhaps a program for the Chamber of Commerce to consider. A lot of work must be done and it’s not just overhauling existing laws effecting business – although that is an important part. An individual from the United States recently contacted me to inquire about the possibility of manufacturing fishing rods in the Commonwealth. Who would have ever thought that anyone would be interested in manufacturing such a product in the CNMI? After briefing him on the incentives, I asked, why he became interested in a Commonwealth location? He replied, “I’m looking for low labor costs and the use of the ‘Made in the U S A’ label – which many of our European buyers insist upon.” He wanted to lease a large building for his manufacturing and assembly area and I was unable to to advise him as to where he might locate such facilities. It’s one more of many details that would assist potential investors – an inventory of available buildings, office space and raw land for lease – all ready for review and inspection. An inventory of the above when made available to prospective investors would be helpful. Article XII Hangover In the early nineties an avalanche of adverse publicity surrounding the CNMI Court's decision relative to Article XII began to appear in the press throughout Asia and North America under headlines such as: Indian Givers?, Guam Business News, (July,’91); Northern Marianas, Land Alienation, Guam Business Almanac, (‘92); Paradise Postponed, Guam Business News, (July, ‘92); Saipan: Land of Disenchantment, Building Industry, (May ‘93); Gambling, Gangs and the Sleepy Marianas, Far East Economic Review, (July 15, ‘93); CNMI: Paradise for Gangsters, Lawyers, Pacific Daily News, (August 16, ‘93); Asian Developers Bypassing Saipan, Marianas Variety,( August 23, ‘93), and other negative banners.

The unfavorable publicity generated several years ago by confusion over Article XII which probably still lingers in the minds of many potential foreign investors could be overcome by placing appropriate, well designed, positive advertising announcements in the major news media throughout Asia and elsewhere such as the Asian Economic Review, Wall Street Journal and other business and investment oriented magazines. The fact that the issues which resulted in such adverse press comments has now been largely mitigated as a result of Public Law 8-32 (‘93) this good news has never been addressed in the media outside the CNMI. Foreign investment has become very cautious and frequently adopts a "wait and see" attitude before making an investment commitment. When management reviews the business potential of a new area, no factor escapes analysis, most of all the so called "business climate" and the experience of other foreign investors in the area. I note that CNMI investment laws and regulations may soon be under review to hopefully “stream line” and make the area once again more “investor friendly.”

As mentioned previously in this column it is worthwhile considering that development itself can not be "legislated" as is so commonly thought in the islands. Only the legal environment known as the "business climate" under which such investment is expected to thrive can be established by an area’s legislative body and even then there is no guarantee investment will result, but such legislation is, in a real sense, a "welcome mat." It’s all part of the “sales package” and once in place must be promoted outside the Commonwealth. Of course, the entire effort might be for naught if businesses continue to experience difficulty in recruiting non resident workers with skills not currently present in the islands as a result of Public Law 11-6. A law which requires non availability skill certification from the Employment Services Office of the Division of Labor. It’s a puzzling and confusing contradiction when, on the one hand, the Commonwealth appears to want to attract new businesses and on the other hand enacts laws to thwart the process. Any economic growth process incorporates three basic elements: land, labor and capital. Remove one from the equation and nothing works. In the case of labor the accompanying graphs illustrate our dependency on non resident workers.

A Plan Is Needed Areas interested in encouraging economic growth must have at least two basic ingredients for the process to work in attracting both domestic and foreign investment. These include a legal system incorporating business investment incentives that are as good, if not better, than those of competing areas and a comparative economic advantage of some sort. In terms of manufacturing endeavors the Commonwealth does not offer too many incentives to encourage investors other than the tax rebate provisions and the fact that the American legal system prevails which inspires confidence and security and engenders a stable government. Local establishment of the minimum wage and control of immigration are advantages – but no one knows how long that will last. Thus, there is a degree of uncertainty which is somewhat of a disincentive to additional investment. As far as a comparative advantage is concerned the CNMI enjoys the benefits afforded by a provision in the U. S. customs tariff schedule that permits duty free entry of qualified manufactured products into the United States as mentioned elsewhere. For manufacturers there is not much else that would give the area any great advantage over other locations in Asia. As a matter of fact the CNMI offers a major disincentive to potential investors and that, stated simply, is the time consuming and expensive difficulty of recruiting and maintaining an adequate work force. Since the population of U. S. citizens of an age to be in the labor force is severely limited in size and thus inadequate to meet the demands of the economy employers have no alternative but to recruit foreign workers.

I have yet to meet a single employer that didn’t have a complaint about the process. Somewhere along the line, fifteen years or so ago, a decision was made to accept the “trade-offs” and authorize the employment of foreign workers in exchange for a larger economy that would result in improved infrastructure; encourage the leasing of land that previously lay fallow; increase tax revenues there-by permitting expanded government employment which in turn reduced an already limited labor pool for the private sector. All of this was done without a plan and without any thought as to the unanticipated, unintended consequences on the society, on relations with the United States Government and on the long range viability of investment that was encouraged to establish in the Commonwealth. Band aid solutions have been promulgated to attempt to solve one problem after another which arise with the employment of foreign workers. It’s like trying to push a string – push in one direction and it goes in another.

Solve one problem and the solution begets another problem. It reminds me of the rule which states, “when working toward the solution of a problem, it is helpful if you know the answer providing, of course, you know there is a problem.” We all know there is a problem but can’t agree on the answer. If continued investment is to be forth coming, in my judgment some “trade-offs” will have to be accepted.