Steady growth for Guam but tough times for NMI

A bank economic forecast has predicted steady economic growth for Guam and tough times ahead for the Northern Marianas.

According to First Hawaiian Bank’s 2008 Guam-CNMI Economic Forecast, the prospect for Guam is generally bright, thanks to the planned military buildup. However, the economic outlook for the Commonwealth is not as optimistic.

“Guam’s economy continues to fire on all cylinders in anticipation of its coming military buildup. Preparing for that buildup is an enormous task for the isolated island economy, and that causes some on Guam to question how realistic the targeted timeframe is. Just to the north, the CNMI economy struggles with hard times brought on by serious blows to its major industries,” said FHB economic consultant Leroy Laney, a professor of economics and finance at Hawaii Pacific University.

Laney said the CNMI’s bleak economic condition may not get any better soon. He noted that both of its main industries—garment manufacturing and tourism—had suffered blows, and the CNMI must find some new economic growth engine to survive.

Tinian’s fledgling casino industry offers a glimmer of hope, despite challenges stemming from the island’s isolation and unreliable transportation. “Yet overall,” Laney said, “the CNMI economy is now left with few economic straws to grasp.”

Laney added that recent minimum wage hikes and the controversial immigration federalization bill contribute to the economic uncertainty in the Commonwealth.

The spokesperson for the Fitial administration said the FHB reports seems to be “a fairly realistic assessment” of the CNMI’s current economic challenges in view of federalization, forced federal minimum wage hikes, and the decline of the garment and tourism industries.

“This report appropriately concludes that federal wage hikes—imposed without adequate economic studies or support—are harmful to our local economy and federal immigration may pose further complications and challenges for our struggling island economy. The U.S. Congress needs to see this independent, non-partisan report and carefully consider federal policy in the islands,” Reyes said.

One measure that the CNMI could consider, according to Laney, is to review existing restriction on land tenure.

The CNMI Constitution limits permanent ownership of real property to persons of Northern Marianas descent. Those not qualified as NMDs can only lease public land for up to 40 years and private land for up to 55 years. There are initiatives underway to extend the leasehold interest for private land to 75 years.

Laney said the land tenure restriction introduces unique problems for residential buyers, outside investors, and lenders within the CNMI.

“Modifications of the land tenure limits, or even outright appeal, would help. At times like the present in the CNMI economy, no possibility for enhancing growth should be ignored,” he said.

As for Guam, Laney said, the expected huge increase in military presence on the island will have major repercussions for construction, housing supply, housing prices, and retail activity.

But Guam’s boom has its downsides. The increase economic activity is expected to bring higher inflation, more congestion, greater pressure on outdated infrastructure, and potential social problems of various kinds, Laney said.