When it comes to business in the 21st century the Northern Mariana Islands had a rocky start.
The NMI’s economy is a two-legged stool balancing precariously on tourism and the garment industry. But in the last several years tourism has faced multiple challenges: the decline of Asian economies repercussions from terrorism competition with other destinations spiraling fuel costs and Japan Airlines’ pullout from the NMI. The garment industry continues to struggle with new World Trade Organization regulations and factory after factory has closed.
There are bright spots however and the U.S. Department of the Interior’s 2006 Conference on Business Opportunities in the Islands scheduled for Nov. 13 and 14 in Hawaii will focus on those opportunities. The NMI is one of the seven US-affiliated insular areas targeted by the conference.
Already the NMI has benefited from the department’s efforts to bring private sector investment and development to the area. The 2004 Conference on Business Opportunities in the Islands held in Los Angeles and the subsequent 2005 Business Opportunities Mission to Guam Saipan and Palau have brought new enterprises to the Marianas enterprises that reflect alternative directions for economic development in these islands.
Cecelia Burrill campus president for Argosy University/Hawaii believes education will become a key industry for strategically located islands like Saipan and Guam. After an AUH representative attended the 2005 business opportunities mission university leaders became convinced that Argosy found rich new ground for expansion. As a result AUH now offers a doctoral program in education leadership in Guam and Saipan. Students in Saipan with associate’s degrees can also enroll in AUH’s bachelor of science in business administration completion program to get their four-year degree.
“Expanding our mission to the Pacific Rim coincides with our commitment to prepare professionals to work with diverse marginalized and underserved populations ” she said. Currently 17 doctoral students in Guam and five in Saipan attend classes at local college campuses and 10 Saipan students are expected to enroll in the business administration program this fall.
The AUH courses are a combination of online and classroom instruction and fulfill approximately half of the degree requirements. To complete the degree students must travel to Oahu for intensive two-week courses offered during the summers.
So far travel to and from Hawaii has been the only significant obstacle to the programs’ success. “The major difficulty seems to be in the expense of travel airfare to the islands for our instructors ” Burrill said. “And since our programs include a residence portion some students have expressed financial challenges in coming to Hawaii for these courses.”
Yet the island’s positions are ideal for another area of expansion Argosy University/Hawaii is considering: Asia. “It seems that the international particularly Asian market is a huge opportunity due to the desire for U.S. degrees. The MBA and accounting certificate programs may have substantial opportunities ” Burrill said. She cited current projections that 124 million Chinese will reach college age by 2008 an educational challenge the Chinese government said it is not ready to meet. Although AUH is not yet announcing future plans Burrill said “I will say that as long as there is a need for our programs and it makes sound business sense we will continue to expand our reach.”
The concept of the NMI as an educational rather than tourist destination also attracted the attention of Sedy Demesa executive vice president of Pleasant Care Corp. one of the largest privately owned chains of skilled nursing facilities in California. Demesa is tackling her company’s workforce shortages by establishing a nursing school on Saipan a move she was inspired to make after attending the 2005 business opportunities mission. “Since most of the nurses in California and Nevada where we also have a convalescent hospital come from the Asian-Pacific countries I thought why not bring the school nearer to them? I feel that Saipan is strategically located and a lot of prospective students from nearby countries like the idea of finishing school from a US-based college ” Demesa said.
The nursing school will be open to both locals and foreign students but Demesa expects that most of her students will be from Asia. “I still believe that the CNMI can be the education hub of the Asian Pacific region. Just give me time and I believe I can prove that ” she said.
A burgeoning education industry will not answer all of the NMI’s woes however. Lt. Gov. Timothy Villagomez said that although the government’s efforts so far have concentrated on reducing government costs the leadership’s attention is now turning to private sector enhancement.
He pointed to several measures the NMI government is undertaking to encourage private sector investment including privatization of the Commonwealth Utilities Corp. continued financial support of the Marianas Visitors Authority and legislative reforms to improve land lease and ownership issues as well as to facilitate the entry of new educational institutions. “The Department of Interior provides considerable assistance but our economic success will ultimately depend on our local government’s ability to foster a strong private sector through free-market-oriented business-friendly tax and regulatory policies. We need to provide the physical and legal infrastructure for economic growth and development ” Villagomez said.
John Carlson president of Bridgecreek International a division of the real estate development company Bridgecreek Group Inc. is more pointed in his critique of the NMI’s business environment. At the invitation of the Department of the Interior Carlson attended the 2005 business opportunities mission intending to explore the market for retirement communities for wealthy Asians. Discouraged by the lack of economic activity in the islands he instead became interested in pozzolan mining on Pagan. Soon afterward Bridgecreek and JG Sablan Rock and Quarry Inc. began working on a partnership to extract the pozzolan a project that would create 50 to 75 jobs. Thus began a controversy that is still roiling the NMI.
While JG Sablan and Bridgecreek claim they did everything by the book including paying up delinquent lease dues with interest and paying 2006 lease fees early the governor’s office claims that several breaches of the lease justified its move to cancel the lease earlier this year. JG Sablan and Bridgecreek successfully lobbied the legislature to overturn the governor’s decision a vote that the governor promptly vetoed. Muddying the waters is the fact that most of the agreements JG Sablan and Bridgecreek reached with the government occurred under the former Babauta administration.
The administration is preparing a request for proposal to offer the mining lease for public bid a move that Carlson said is illegal because JG Sablan was told by government that its lease is valid since all back payments have been paid.
Other issues are tied up in the controversy including indigenous land use rights royalty fees for the government environmental impacts and alleged corruption in the Marianas Public Lands Authority.
All in all the controversy discourages foreign investment Carlson said. “They cannot change the rules every time a new governor gets in office. It’s like a banana republic in South America. No investor will come in under those circumstances.”
The administration counters that what they are doing is cleaning up past corruption and making the process more transparent. “The administration had to enforce the regulations and the conditions of the JG Sablan permit ” said NMI public information officer Charles P. Reyes Jr. “We wanted the Pagan mining bidding process to be open and competitive with clear guidelines.”
While Carlson said he admires Fitial’s efforts to eliminate waste and inefficiency in the government — “He inherited a mess”. He said the administration’s reasons for revoking the permit do not stand up to scrutiny. “If the government was going to terminate the Sablan lease is it fair to take his past due money tell us everything is fine and take our $20 000 [in 2006 lease payments] and then terminate the lease? What message does this leave for future investors?”
Carlson said Bridgecreek which has so far spent over $150 000 on the mining venture will continue to monitor the situation. But for now the company is looking for other opportunities.
“We’ll be turning our sights from Saipan to Guam ” he said.
Dennis Yoshimoto executive vice president and chief operating officer of Joeten Enterprises Inc. believes a more business-friendly regulatory atmosphere is critical to future investment in the NMI. He said that the government should “try to minimize the hurdles and uncertainties for qualified investors to have more confidence that the government wants them to succeed here.”
Demesa also sees room for improvement in the regulatory arena. “The government should make their requirements to do business in the CNMI more clarified and not subject to change with every person you talk to in the same department ” she said. “I think I just got used to the processing in mainland USA where the process and requirements remain the same regardless of who you talk to. “
According to Demesa she does appreciate the more personal touch of working with NMI officials. Overall she said the regulatory process in the islands is “satisfactory.”
As for the key industries of tourism and garment manufacturing the NMI is fighting to improve business. The Marianas Visitors Authority which completed a new five-year master plan this year is concentrating on improving island amenities and air service to the islands as well as sharpening its marketing strategies. The Tinian Gaming Authority has given the go-ahead for Chicago-based Bridge Investment Group LLC to begin the first phase of its hotel and casino project. That company is working to clear legal hurdles to bring Chinese tourists to Tinian.
Jerry Tan president of Tan Holdings Corp. will attend the 2006 conference in his capacity of chairman of the Marianas Visitors Authority board.
“By the time of the conference we’ll have a number of projects prepared in detail along with prospective drawings to present to potential investors ” Tan said. “I think that by presenting the specific projects we have envisioned we may find the right investors to join us in our tourism industry.”
The government is lobbying the U.S. Congress for trade amendments that will make the garment industry more competitive and the NMI still controls its own immigration and minimum wage level two factors that continue to benefit private enterprise.
Burrill Demesa Yoshimoto and Villagomez all agree that the Department of Interior has done a good job of bringing qualified investors to the NMI and educating them about the unique opportunities available. “What we need now ” Yoshimoto said “are a few success stories to get other investors interested.” MBJ
