BY MARK RABAGO
SAN ROQUE, Saipan— “Economic development in CNMI is very, very hard. But I think it’s possible.”
That’s what Northern Mariana Islands economist Matthew Deleon Guerrero, owner of Hive Analytics, said during his presentation at the Saipan Chamber of Commerce’s Inaugural Economic Forum Feb. 22 at the Kensington Hotel Saipan.
Deleon Guerrero was part of a lineup of panelists that tackled ways to resuscitate the CNMI economy. Other speakers also included representatives from the Department of Commerce, the Marianas Visitors Authority, the Hotel Association of the NMI, the Commonwealth Economic Development Authority, Burger and Comer, Mallari LLC, the Northern Marianas College, and the chamber itself.
In making a reality check on the current CNMI economic landscape, which he showed using graphics, Guerrero said, “Federal government spending is declining from 2021, tourism arrivals are beneath 1980s levels, business gross revenue has declined to 2011 level and below. if you just adjust by inflation, the population is below 1990s levels, prices are increasing, and economic development in the CNMI is very hard.”
One way of driving the NMI’s economic growth, he said, is attracting more airlines to bring in more tourists to the NMI.
He adopted the late NMI economist Bill Willens using factories as a metaphor for airlines.
Using Willen’s analogy, Guerrero said, “In a factory, if you’re making an iPhone or whatever, you take different parts from different places and combine them together into a single factory. Airplanes have the same function. All the different components of a single product are assembled to the world in the form of restaurants, bars, hotels, all of these individuals are producing this thing combining it together. The thing that combines it together is the airplane.” Simply said, the CNMI needs more “factories” to spur economic growth, according to Guerrero.
“[With] more factories [there will] be more products. If you want to get economic growth [you have to] produce more products. You purchase more products by getting more airlines into the system. How do we get more airlines? That’s another conversation in itself. We should not push away from the idea of incentivizing by building and enticing new factories to combine all products that we’re developing and selling into the [market].”
Guerrero also said the old metric of measuring tourist arrivals rather than tourists lengths of stay is antiquated.
“We’ve always talked about quality over quantity. But we’re only measuring quantity. One of the areas that we should be looking at is the average length of stay of tourists. When tourists have more things to enjoy here, they will stay longer. When they stay longer, they will spend more.”
As to what particular tourism market the NMI should continue to pursue, Guerrero said China continues to be the world’s largest tourism market. “This is the world’s largest market for consumer items and exports for anybody. Every factory in the world is producing products for the Chinese market. If you want to be a billionaire all you have to do is sell a $1 product to everybody in China one time, right? We’re selling our products at $215,000 pre-pandemic for $600 a night. That’s a significant revenue, if we’re just talking about numbers and economics.”
Guerrero, however, said the NMI can’t really pump out products (restaurants, hotels, car rentals, retails stores, groceries, optional tours, etc.) for its factories with a diminished workforce
Due to the COVID-19 pandemic, applications for CW workers have waned and this has translated to diminished funds to train the local workforce.
“That’s $200 per employee that goes into a training fund. We lost potentially $2 million in training funds that we will never see again because of the pandemic. That $2 million could have helped us as we transition to 2029 (the end of the CW program),” he said.
NMC president Galvin Guerrero also offered three solutions aside from attracting more “factories” to revive the CNMI economy and that’s through building intellectual capital.
These are accelerated cohort-based programs with experiential-based credits and interdisciplinary courses; increasing academic research capacity; and investing in the reskilling and upskilling of the workforce through the college’s Community Development Institute.
In addition to providing these solutions, Deleon Guerrero also emphasized NMC’s commitment to cultivating entrepreneurship and business growth through the CNMI Small Business Development Center, while harnessing agricultural and aquacultural programs at NMC’s Cooperative Research, Extension, and Education Services to diversify food industries and increase food security in the NMI.
“One of the things that we’re looking at is Accelerate CNMI, where we’re going to take the success of our law enforcement academies and we’re going to bring them to the private sector and other government entities. This means that we’re going to have our site-based and forward-based programs that are accelerated and we’re going to also include competency and experience based-learning. So basically, anything you’ve picked up on the job, we’re going to help you get that done on your credit score,” he said.
Guerrero also said NMC is also “going to try to speed things up by integrating courses so that instead of taking the three, four classes, you take one class, and that’s how we want to kind of meet the workforce needs of the CNMI.”
He also is headed to Washington, D.C. on a federally funded trip to petition to begin the process for NMC becoming a sea grant institution. “We’re currently on a land grant, and that’s what allows us to do all that cool stuff CREES so to imagine we could do all the stuff that CREES does but in the ocean, which kind of makes sense when you consider where we are.”
He said NMC also continues to invest in the economy. “That’s one of our new strategic goals. We only have seven goals and one of them is to invest in the economy. So we’re doing great work with the Small Business Development Center.”
Delivering the opening remarks at the Economic Forum, Gov. Arnold I. Palacios told chamber members that it “cannot be business as usual” as the CNMI tackles the current financial crisis.
He said in the last six weeks he and Lt. Gov. David M. Apatang appointed qualified individuals to critical cabinet positions and agencies as well as shored up relationships with federal partners and allies in the region.
The governor also announced his plan to form the Governor’s Small Business Advisory Council.
Department of Labor acting secretary Leila Staffle said current challenges within her agency include filling in the big hole left by American Rescue Plan Act funding, lack/limitation of real-time data, desire to work with U.S. Citizenship and Immigration Services on the CW renewal process, as well as need for legislation and policy review on the following: establishment of a state apprenticeship program establishment of a contractors licensing to fund apprenticeships in construction trades, establishment of a CNMI Unemployment Insurance Program, updates to enforcement statutes, and updates to the CNMI minimum wage law.
Piling on the downward trend of the local economy, Employment Services director Eugene Tebuteb said that NMI unemployment rose from 10.5% in 2017 to 14.1% in 2020, according to the 2020 U.S. Census. He said Saipan has the biggest number of unemployed at 10.8% followed by Rota at 9% and Tinian at 6.8%.
Marianas Visitors Authority chairwoman Gloria C. Cavanagh discussed the current challenges in improving tourist numbers from the CNMI’s main tourist markets of South Korea and Japan.
Challenges from the Korea market are airline operating cost, the vaccination requirement to enter the CNMI, and MVA’s limited marketing budget.
Factors hindering Japanese from traveling to the CNMI include Japan’s national travel discount program that has made domestic travel affordable, limited and negative media coverage of overseas travel, the exchange rate has changed over 20% compared to December 2019, low vaccination rate among children, family market in Japan, and fuel surcharge and high travel cost. To help the MVA, she wants the government to restore the hotel occupancy tax, improve blighted property by enforcing a minimum standard for building conditions, fully reopen Managaha Island, and create more authentic heritage experiences.
Hotel Association of the Northern Mariana Islands chairman Ivan Quichocho said the “current pipeline of air seats can only muster 34% across the hotel industry at best.” To alleviate this, he wants the CNMI to reopen the China market while also continuing to grow the Japan and Korea markets.
Quichocho also supports the repeal of the CW touchback provision and added that the CW cap reducing worker numbers every year coupled with the emigration of the local population, “constrains the local labor market and economy.”
To this end, Saipan Chamber of Commerce president Joe Guerrero reiterated the CNMI’s need for a nonimmigrant worker program that is “sensible and flexible” with local input and perhaps co-management with the CNMI government “rather than one-sided program determined by the federal government.
Burger, Comer, Mallari LLC managing partner David Burger said the CNMI has tax incentives to attract more investors, which are better than other jurisdictions. He added that he plans to sit down with the new Finance secretary to attract investment firms by revamping the local tax laws.
Commonwealth Economic Development Authority Economic Development manager Robert Guerrero talked about proposed investments that have come through the new division. Among them are proposed investment in the space industry (a satellite launch because the NMI is near the equator), airlines (Marianas Southern Airway/Northern Pacific Airways), agriculture (pork and cattle industry), labor industry (working remotely, work/life balance), renewable energy (Marshall Holdings CNMI LLC ), tourism: Saipan Global International Group, and film industry (Hollywood film producer, entrepreneur, and founder and Motion Picture Corp. of America chairman/CEO Brad Krevoy). mbj