Guam Business Magazine reached out to leaders of the business community who work closely with a wide representation of business owners and managers in the region — through the Guam Chamber of Commerce, Saipan Chamber of Commerce, Guam Women’s Chamber of Commerce, Chinese Chamber of Commerce of Guam and Guam Korean Chamber of Commerce — to shed light on the top issues facing their members as they navigate the second half of 2019. Their comments create a dialogue of trends such as labor and workforce development, local legislation and representation, and infrastructure and permitting that point to a larger concern over the state of our economy and how to make doing business in the region easier and more attractive to potential businesses and investors.
Big picture: state and growth of the economy
George Chiu, president, Chinese Chamber of Commerce of Guam: How well is the economy of Guam doing? That’s the number one issue if you were to ask me. You keep hearing these glowing reports about our tourism numbers, but how’s the spending? How is the hotel occupancy? … Where are the people staying?
That’s the million-dollar question right now. … The numbers are up but the hotel occupancy is not correspondently increasing based on the numbers we’re getting from [the Guam Visitors Bureau]. So where are they staying?
I’ve heard other hoteliers complaining about the illegal [operation of] Airbnbs. … Airbnb is a legitimate competitor of the hotels — as long as they’re paying taxes and it’s a level playing field, then we’re fine. The question is, are they paying taxes? I don’t have the answer to that. I’m hearing grumblings within the industry saying they’re not, but I have no proof. All I can tell you is the overall hotel industry occupancy rate is not as high as it should be based on the arrivals.
Maxine Laszlo, executive director, Saipan Chamber of Commerce: At this time, the CNMI is a one-industry economy — tourism. This ever-changing industry, while having many opportunities for expansion and niche focus areas, will always be volatile. We have witnessed this due to different variations of extremity post natural disasters, most recently, after Super Typhoon Yutu. No one wants to visit a disaster-stricken island when they book their plane tickets to paradise; the numbers show it. In March 2019, the Marianas Visitors Authority reported a 47% decrease in the number of arrivals compared to 2018; however, in April 2019, the decrease was only 19% compared to April 2018 numbers. While the arrivals are slowly picking up, in general the money circulating through the Commonwealth has slowed down at a time when we had made plans for expansion.
Our business community is heavily interested in diversifying to attract other secondary industries to create a more stable economy. The addition of other industries to complement tourism would help mitigate the impacts of disasters and other global factors that affect our isolated island economy. By finding new industries that work well with our culture, values and community, we can continue to grow and stabilize to lift all industries higher.
Andrew Park, president, Guam Korean Chamber of Commerce: Investors and developers from Asian countries have been coming into Guam in waves. The first wave of foreign investors was the Japanese. Then the second wave of investors were from Taiwan, and now recent trends have seen Korean investors making their mark on Guam. Currently, Korean investors/developers have extremely high interest in investing into Guam, but they are always concerned about the permitting process in places outside of their country and in the case of Guam, the permitting process seems to be one the most unclear, slow and inconsistent processes. This has often turned away potential investors who opt for more permit-friendly countries like Vietnam, Thailand and other Southeast Asian countries. As an island that heavily relies on outside investors for large development projects, it is pertinent that the permitting process be re-examined and run more efficiently and transparently.
Digging deeper: the pathway to our economy
Laszlo: Businesses are heavily reliant on the physical infrastructure holding our community together and, as a whole, the NMI has not had the capital to invest in sweeping infrastructure upgrades. Major upgrades to our airport are needed to increase the number and size of flights that visit Saipan, as well as provide a positive experience for tourists as they are welcomed to our destination. Above ground powerlines impact businesses’ ability to access power and water for months on end after major typhoons, and wastewater upgrades are drastically needed in our tourist-prone district. Additionally, dilapidating and abandoned buildings limit the number of available units for both commercial and residential properties.
Our government agencies such as the Commonwealth Utilities Corp. and the Commonwealth Port Authority have been aggressively seeking grants to upgrade infrastructure systems, and many of their projects were prioritized in our most recent Comprehensive Economic Development Strategy. Until these projects are funded, our companies will be impacted in their ability to do business.
Antolina Leon Guerrero, president, Guam Women’s Chamber of Commerce: Barriers to health services pose a serious threat to the health of a community. With rising healthcare costs and limits on the availability of health insurance, access to health services is nearly impossible for an individual on her own … [as well as] for sole proprietors and, for the most part, [is] cost-prohibitive for women-owned small businesses.
Laszlo: As a business community we are stuck between a rock and a hard place. We are expected to sustain and grow the NMI economy, but we have limited ability to access labor due to our unique and often restrictive relationship with the U.S. government.
At the CNMI Education and Workforce Summit in October 2018, the Northern Marianas College presented data indicating our island would never be able to sustain our economy based solely on our local workforce. Additionally, we struggle to attract skilled U.S. workers to our isolated island, away from their families and at less competitive wages. While we can prioritize developing our local U.S. workforce, the supply will never match the demand for a healthy, sustained economy. Alternatively, businesses are forced to seek foreign labor and are often hit with roadblocks. This includes obstacles like limiting the number of acceptances for the CNMI Contractor Worker Visa, as well as phasing out the program by 2029, long visa application processes and short-term restrictions on H-2B visa holders from the Philippines.
Despite these challenges, there is pressure on the business community to continuously expand after massive economic growth in 2016. Businesses have continued to struggle to access skilled labor — most especially construction — to support the community’s expectations for growth.
Chiu: It’s not just the non-approval of H-2 workers, but China was banned from way back, so you really only have the Filipinos and Koreans. And now the Filipinos are also banned, supposedly. It makes it much more difficult.
We’re way out here, so bringing workers from the United States is difficult. Your other source of workers are the compact workers — you can train your local workers, you can train the Marshallese, the Palauan, the peopled from the Federated States of Micronesia; but how skilled can they be in the short term? It takes a long time to become a good carpenter. You look at some of the finishing work and you need some more skilled workers available.
Obviously if it drives the cost up, then as a businessperson your investment goes up and its harder to get your return back.
Park: There [is] one answer that repeatedly [arises]: the difficulty in recruitment and retention of quality employees at virtually all levels of business.
Our island’s relatively limited workforce likely accounts for much of the difficulty. Jobs that require more specialized training or knowledge by default have employers trying to recruit from a very small pool at an increased cost in either salary or through additional training necessary to have the employee meet the employer’s expectations.
At the other end of the spectrum, employers with less skilled workers report that even basic expectations such as showing up to work on assigned days and showing up to work on time, are often not met. Personal responsibility of course plays a role, but sometimes family, health and life take priority over work (and rightfully so).
These issues appear to be symptoms of much larger underlying issues; continued improvements in education, access to healthcare for the un/underinsured and transportation would likely go a long way toward employee skill sets and reliability.
Catherine S. Castro, president, Guam Chamber of Commerce: Our small businesses are the heart of our economy. Approximately 70% of our membership is made up of small businesses that are on the frontline of any regulatory changes and new statutes. Business owners not only run their individual companies but manage employees, pay bills, sell and market their products or services, and manage earnings and losses. They are also the first to bear the brunt of regulatory changes and mandates as passed by local and federal lawmakers. Last year’s 25% increase in the business privilege tax cancelled any tax relief a small business would have received from the Tax Cuts and Jobs Act of 2017, if eligible. If a business lost revenue, the BPT increase only exacerbated the circumstances.
Elected representatives often talk about supporting small businesses, but the increased regulatory climate espoused by our various government officials only makes it more difficult for small businesses to remain competitive and stay operational. In addition to the increase in BPT, the recent fee increases of the liquid fuel tax, truck enforcement screening station and real estate tax (for property/improvements of $1 million or more) have caused a significant burden on local businesses which then trickles down to individual consumers. There is heightened concern about how much more businesses can endure with the current discussion by our legislature on increasing the minimum wage and assorted permit fees. Taxpayers are additionally burdened when our government increases its debt service (currently at $100 million), which takes away from education, healthcare, public safety and other public services.
A way out: searching for
Leon Guerrero: Education and professional development are integral … By partnering with educators, business leaders can give students and their parents a glimpse into the future of career opportunities. The Guam Association for Career and Technical Education is in the infancy stage of such a program. We can show the link between a daughter’s love of math and science with problem solving, critical thinking and systems management. Or a son’s talent in language and fine arts with communication and interpersonal relations. Industry leaders can plant seeds that parents and teachers nurture in our future employees.
When they join our workforce, professional development continues. A business, after all, is only as good as its people. Investing in the continuing education and advancement of those who work in our organizations will lead them to excel and grow professionally. That growth and movement towards excellence are good for our teams, our customers and our organizations.
Castro: The government needs to do its part by making it easier for businesses to conduct and manage trade and industry by being more efficient. Cut the time, paperwork and expense involved in opening a business and renew license and permits by automating the process. Agencies such as the departments of Revenue and Taxation, Administration and Customs and Quarantine should streamline their operations. The current model is outdated and inefficient. Manual recording of transactions unnecessarily impedes progress and is burdensome on the agencies, consumers and private entities.
Our government should diligently and competently enforce current laws and regulations. Addressing compliance and revenue loss issues associated with BPT collections is still an issue. We need to equip our enforcement agencies and our public safety officials with resources to address inequities as well as the upswing in crime against our residents, tourists and businesses.
We encourage our government leaders to provide incentives and opportunities to boost entrepreneurship as well as review disproportionate cost burdens that impact businesses such as the BPT. The chamber had suggested in previous statements that the government should seriously consider converting to a clear and visible sales tax (which is spread across to all taxpayers) from our current hidden BPT (which is born only by businesses). By implementing the above measures, our local government would realize a significant amount of revenue dollars without further burdening the economic wheel of free enterprise which impacts the quality of life for every individual on Guam.
“We need to equip our enforcement agencies and
our public safety officials with resources to address
inequities as well as the upswing in crime against our
residents, tourists and businesses. “
Catherine S. Castro
Guam Chamber of Commerce