Investors take note. After a long rocky decade Guam’s economic future is definitely looking up. That’s the message private investors and regional leaders will hear at the U.S. Department of the Interior’s 2006 Conference on Business Opportunities in the Islands scheduled for Nov. 13 and 14 in Hawaii. The conference will target seven U.S.-affiliated insular areas including Guam.
Guam’s economy is dependent on two major industries: tourism and national defense. Starting in the late 1990s both sectors experienced significant declines. Federal defense spending in Guam contracted almost 10% from 1996 to 2001 and tourism suffered a succession of devastating blows. As recently as 2003 economic experts were painting a dire picture for Guam’s economic future.
What a difference three years can make. In the words of David B. Cohen deputy assistant secretary of insular affairs at the Department of the Interior "The overall future of the economy looks better than any time in the last decade."
By far the biggest factor in Cohen’s assessment is the planned movement of approximately 8 000 Marine Corps troops from Okinawa to Guam. To give investors and community leaders a clear picture of what the military on Guam will soon look like the conference will feature a presentation by Adm. William Fallon commander of the U.S. Pacific Command on the Guam Integrated Military Development Plan.
Gov. Felix P. Camacho is clear about what’s at stake with the planned move.
"The Marines’ relocation provides a once in a lifetime opportunity to capitalize on major growth potentia. The simultaneous growth of both tourism and the military creates the conditions for economic diversification that can lead to sustained growth well beyond the Marine build-up " he said.
Camacho said the most immediate benefit will be the speed up of infrastructure projects. "Major renovations to all 27 major highways and fixtures to more than 280 village roads are underway. We’re fixing our water and wastewater systems and placing the power system’s transmission and distribution system underground while increasing baseload capacity " he said adding that the South Finegayan and Barrigada areas will get "special attention" as the government plans for the military relocation.
The governor also expects the quality of island education to benefit from the increased military presence. "The military expansion will require jobs in civilian support services for the greatest and most technologically advanced military in the world. This opens the doors to career and trade opportunities in telecommunications journalism high-speed technology engineering architecture planning and so much more."
Improved training and education opportunities are the first step toward improving Guam’s private business environment according to Michael T. Benito chairman of the Guam Chamber of Commerce and general manager of Pay-Less Supermarkets Inc. "Having a ready and able workforce is first and foremost " he said. "We need to continually improve our educational system from the elementary level through the collegiate level including trade schools so that our citizens can take advantage of the job opportunities that come along with new businesses."
Argosy University-Hawaii already invested in Guam’s education industry. After a AUH representative attended the 2005 Department of the Interior’s business opportunities mission to Guam Saipan and Palau the university decided to develop programs in Guam and Saipan. AUH now offers a doctoral program in education leadership in Guam and Saipan. Currently 17 doctoral students are enrolled in the Guam program which is hosted on the Guam Community College campus.
"This initiative along with other initiatives by GCC the University of Guam and several private-sector institutions of higher education on Guam are enhancing education as an industry in and of itself " Camacho said.
But the hottest topic surrounding the military buildup is of course construction. More than 20 000 Marines and dependents are expected to relocate to the islands and the governor’s office estimates that the military will invest around $15 billion in housing and other facilities.
"Construction is the biggest industry that will blossom over the next decade " Benito said. Cohen said the relocation "makes military construction an even hotter topic than it has been in the past."
John G. Carlson president of Bridgecreek International a division of the real estate development company Bridgecreek Group Inc. attended the 2005 business opportunities mission intending to explore the market in Saipan for retirement communities for wealthy Asians. Now his company is looking at construction in Guam.
"Guam is fabulous. I’m very optimistic about Guam’s future " Carlson said. "We’re looking at base and off-base housing. These are things we are experts at doing."
The benefits go beyond new buildings. According to the East-West Center the multiplier effect for federal defense spending is much higher than for tourist spending. That means that every federal dollar spent in Guam has a far greater economic impact than a tourist’s dollar.
International company Tan Holdings Corp. owns several service businesses on Guam including amusement venues and hotels. The company’s president Jerry Tan is very aware of the opportunities to expand. "The next few years should be a time of great opportunity for investors and existing businesses " he said.
The sense of elation is pervasive. Camacho believes that the demand for goods and services in every industry will increase "exponentially." Even Cohen in a March 2006 report to a U.S. Senate committee on the state of Guam’s economy said "It just may be that the military’s transfer of personnel and dependents to the island will take Guam back to its economic heyday."
Underpinning that elation is the steady recovery of Guam’s tourism industry. After reaching record numbers in the mid-1990s tourist arrivals tumbled with the Asian financial crisis. A series of other catastrophes including the terrorist attacks of September 2001 Supertyphoon Pongsona in 2002 the Iraq war and the SARS outbreak kept arrivals down. From 2000 to 2003 hotel occupancy averaged around 50% to 65% and 2003 brought only 909 506 tourists to Guam. It was the first time in a decade that tourism dropped below 1 million arrivals.
Since 2003 slow but consistent growth in Japanese travel which accounts for almost 80% of Guam’s tourism market reversed the downward trend. In 2004 around 1.1 million tourists came to Guam and 2005 saw over 1.2 million arrivals. The governor’s office reports that tourist spending has increased 37% since 2003.
Camacho is confident about the future of the tourism sector. "Investments from Japan continue to pour in and we see the results with hotel buy-outs major renovations and the return of travel bureaus to the island " he said. "The most notable progress can be seen in Tumon where major Japanese companies are investing into entire hotels and hundreds of millions of dollars in transactions are taking place with such places as the Hilton Guam Resort & Spa the Guam Marriott Resort the DFS Galleria and the Fiesta Resort Guam."
Despite the rosy predictions for Guam’s economic future some significant underlying problems remain. For years the government operated at a deficit. Guam’s per capita income is lower than any of the states and only 57% of the nation as a whole. Unemployment hovers around 10% to 15% and from 1992 to 2002 an average of one-third of civilian employees worked for either GovGuam or the federal government. During that same period private sector employment declined 20%.
Even estimating just how serious these problems are is difficult since as part of cost-cutting measures in the late 1990s GovGuam stopped gathering extensive financial and economic data. Now the Department of Interior is working with Guam to improve its economic and statistical reporting capabilities.
"To me this is a good way that the federal government can support the island " Tan said. "I have been impressed with the level of commitment of Assistant Secretary David Cohen and his team in how they have been trying to help the local economies."
Benito has additional concerns about the infrastructure of the island. "It may be a good time for private utility companies to come to Guam and create private-public partnerships to run our water and sewer system and improve the distribution of both " he said. "In addition we need to improve our quality of life issues such as the hospital and ensure that it is completely funded and well managed."
According to Camacho many challenges remain but he is looking to the military build-up as a springboard for future economic sustainability. "We are not settling for the $15 billion investment alone " he said. "We will build the capacity for strengthening industries and new ones too. What we will establish is a highly skilled highly qualified workforce that will carry on trades skills and careers from generation to generation."
Whatever the long-term impact of the Marine Corps relocation one thing is certain: the immediate future is definitely looking good for Guam’s economy. Comparing his company’s home base the Northern Mariana Islands with Guam Tan said "The region’s economy may be lopsided for a time as Guam booms." MBJ
