A look at the past—and a vision for the future

First of six parts

Selling the CNMI as an investment location a la trade missions

The CNMI owes the Interior’s Office of Insular Affairs an expression of appreciation and thanks for their effort in assisting in organizing a business investment conference this week and for introducing several local business opportunities to a group of private business people currently visiting Saipan. But there is a lot local authorities can do to assist in making this effort a success and to follow-up with additional action to continue the momentum.

Changing conditions demand changing methods. If the people of the CNMI hope to see a return to even moderate levels of increased annual economic growth outside the tourism sector an aggressive development program must be undertaken. While recent CNMI trade and investment promotion missions to various Asian nations were designed to generate increased investor interest I suspect very few of the private participants in the effort had prepared specific, documented project investment proposals to introduce to a potential investor.

In my judgment well designed, positive investment promotion announcements should also be placed in the major news media throughout Asia and elsewhere such as the Asian Economic Review, Wall Street Journal and other business and investment oriented magazines. Those with suitable property available for lease, that is to say, sites which could be exposed to foreign investors should be prepared to document that such land is free of any Article XII problem or otherwise be prepared to offer some form of guarantee against such. If the site is suitable for hotel or some other form of development the land owner should give such projects a “paper personality”, (the proper term being an investment prospectus). The preparation of such “tools” are simply standard promotional documents that greatly enhance the possibility of leasing land to foreign investors for those in the Commonwealth who still wish to do so.

The government should assist its citizens with the preparation of such valuable and useful promotional material. A special “investment promotion office” could be established either within MVA, CDA, the office of the Governor or even the Free Trade Zone (FTZ) if it ever has any life breathed into it. Such an office could serve as a “one-stop” point where all permitting requirements could be coordinated and appropriate assistance provided the potential investor including briefings on the CNMI’s economy, its tourism market and its investment incentives.

The Commonwealth must take steps to improve its promotional efforts if it is to compete effectively in the future with Palau, Guam, Vietnam and other locations for the foreign businessman‚s confidence and investment capital.

As a fervent believer in the old adage that, “it takes money to make money”, to my knowledge the Commonwealth has not financed the promotion of the CNMI as a business location among European and North American investors. In the past most of the effort has been directed toward Asia. A new publication entitled: “Mapping the Global Future” is a report of the National Intelligence Counsel‚s 2020 Project — a long-term view of the future. The report point‚s out that by the year 2020 “globalization is likely to take on much more of a “non-western‚ face” and that “China and India will be among the economic heavyweights or “haves‚ ..”

Certainly there are potential investors within the EU countries that probably would be interested in positioning themselves on the “doorstep” of Asia while at the same time remaining under the protective umbrella of the American Flag and the United States judicial system. But I doubt seriously if the Commonwealth is anywhere on their radar screen. An effort should be undertaken to introduce the NMI to European businesses and our embassies in EU countries can assist in this endeavor.

A publicity campaign could be launched to introduce the islands as an investment location and promote the area in the United States, Canada and Europe as well as Asia. This will require researching possible opportunities in which investors from those areas might find a CNMI business location profitable and then make sales calls at the headquarters of each. Obviously, this requires money. Not only for travel, but also for promotional and presentation materials and—yes—money for entertainment, lunches, dinners, hotel space for investment seminars, etc., in much the same manner and style that a business client might be treated. It‚s a sales job probably best undertaken by the Chamber of Commerce and certain departments of the government. The Northern Marianas has to first be sold as a location from which to do business along with the area‚s business investment incentives—then later—a particular island among one of three, followed by an individual site on the island.

Firms that produce computer software might be interested in considering the islands as a location for their largely cerebral work. It‚s a high value, clean industry. People who earn their living by mental creativity work best in an environment such as the CNMI can provide. Clean air and water, golf, tennis and a wide variety of marine activities and other sports and recreation as well as a lucrative tax rebate on their earnings are incentives that should be of interest to software firms along with the copyright and trade mark protection afforded by U. S. laws. Something which I doubt many on the mainland are aware.

It all comes back to the old truism, “nothing ventured – nothing gained.” A possible new opportunity for Asian institutions, and in particular educational institutions, might be a tropical marine biological laboratory on Rota or one of the Northern Islands in association with a Japanese university as an extension of their campus in association with our own college. This would permit foreign and U. S. students of marine science to study and gain actual experience in the field. Such activities contribute to diversifying the economic base. Who knows even a cure for cancer or AID might be serendipitously discovered within some marine organism.

As mentioned in earlier articles, other opportunities might include the manufacture of pharmaceutical products, toys, beach wear, Hafa Adai shirts and dresses similar to the Hawaiian “mu mu,” commercial fishing, cut flowers (which have high value in relation to bulk and can thus be flown to Asian markets), fishing vessel repair facility to service Asian fleets operating in the western Pacific, shrimp mariculture, cultured pearls in the Northern Islands, and health spas to mention only a few. Nothing should be so small as to be overlooked remembering that any grand plan is but the sum of its smallest elements. And it‚s the smaller projects where the local people have the financial capacity to participate as joint venture partners.

It’s one thing to offer tax and other benefits to businesses as an inducement to relocate in the area—it’s another thing to find new businesses to take advantage of such incentives. Otherwise the incentives are just so many words on paper.

The Chinese market is a hot topic with their 1.4 billion people as are certain areas in eastern Russia. I venture to state that there are probably many enterprises in China unaware of Headnote 3 (a) benefits when exporting to the United States.

Additionally, there are probably many of the smaller export oriented firms in the United States that are unaware of the advantages of a Commonwealth based export operation into the Asian market. Again, it‚s a sales job on both sides of the Pacific and it requires knocking on doors and personally visiting such businesses. Perhaps a program for the Chamber of Commerce to consider.

A lot of work must be done and it‚s not just overhauling existing laws effecting business—although that is an important part. Some years ago an individual from the United States recently contacted me to inquire about the possibility of manufacturing fishing rods in the Commonwealth. Who would have ever thought that anyone would be interested in manufacturing such a product in the CNMI? After briefing him on the incentives, I asked, why he became interested in a Commonwealth location? He replied, “I’m looking for low labor costs and the use of the “Made in the U S A‚ label—which many of our European buyers insist upon.”

He wanted to lease a large building for his manufacturing and assembly area and I was unable to advise him as to where he might locate such facilities. It‚s one more of many details that would assist potential investors—an inventory of available buildings, office space and raw land for lease—all ready for review and inspection. An inventory of the above when made available to prospective investors would be helpful. Packaged, pre-investment project analyses can be valuable tools in promoting the Commonwealth‚s Free Trade Zone. These reports identify possible projects and often depict capital investment requirements and estimated statements of income and expenses based on well researched and thorough evaluations of the business elements involved in the operation. Once prepared they are available for critical examination by any potential investor, development banker or their technical staff. It‚s an accepted technique in giving proposed investment opportunities a “paper personality.”

Of course, these promotional packages are supported by the area‚s investment incentives which are well known in the CNMI but less so abroad. The FTZ itself is one such valuable investment incentive since it can offer potential investors the convenience of business sites ready for ground breaking, with fixed lease terms and rates. It offers ready access to sea and air terminal facilities of which the latter may be of particular interest to those involved in manufacturing high value products which, by their very nature, can be flown to market. Additionally, a location within the FTZ offers ready access to water, power and sewage lines already in place or adjacent. An FTZ location avoids any future disputes over boundaries and potential Article XII problems.

Considering the length of time that has passed since the inception of the Free Trade Zone concept—some seven years if my memory serves me correctly—it is unfortunate that so little interest has been displayed toward the preparation of such pre-investment promotional tools so necessary in exposing business opportunities to potential investors. This may be because only a few in government have ever seen such basic promotional tools. Normally the only people who would ever examine such work are those that understand the purpose of such presentations. These reviewers usually consist of: economists, CPA’s, bankers and developers. Few others would be interested. Once this basic investment information is presented critical and serious reviewers can then work out cash flows, determine internal rates of return, run sensitivity analyses and other profitably tests. Entrepreneurs usually examine three levels of economic geography in arriving at an investment decision. First—the country and its laws—in this case the United States; second, a specific area or region such as the Commonwealth along with its local laws, regulations and incentives; the product’s market and any comparative advantage which may exist and finally, a specific site as may be situated in the FTZ or elsewhere. Ideally, business location data should be collected and presented in a portfolio complete with a site description, oblique and vertical aerial photographs, topographic and cadastral maps depicting English, Japanese, Chinese and Korean systems of measurements and, of course metric, along with utility lines shown, access roads and lease costs, all designed to permit an initial office reconnaissance and review. The potential investor could then identify several locations that appear to meet his criteria and subsequently make direct contact with the responsible party and negotiate the terms with the owner, agent or management of the FTZ. The site portfolio could be made available for inspection by anyone, the potential investor, chamber of commerce, island realtors, attorneys – anyone servicing an interested client. When participants of trade missions meet with potential investors in Tokyo, Seoul or where-ever, all the basic information is available for examination and discussion in the board room. People who participate in trade and investment missions abroad who do not go armed with such basic information and documented investment proposals are “silently” considered by potential investors as simply not being prepared with the result that credibility is less than it should be. The existence of the FTZ must be made known to potential investors and the media best suitable for this promotional activity selected. Newspaper ads can be very expensive and the results questionable. Care must be taken to select the appropriate publication. For example, a 1/2 page ad in an airline magazine costs about $600 per month with a 3 month minimum run and reaches a wide and varied captive audience. A small ad in, say, the Japanese Mainichi Daily News (a “shotgun” approach) costs about $19,000 for a one time insertion. In my judgment this is not the best media in which to advertise as the readership is too diverse with “scattered” interests. A better approach would be to advertise specific investment opportunities in “industry specific” trade journals. Such ads are less expensive and a selected audience can be targeted. It’s known as the “rifle” approach.

Another technique which results in free publicity involves issuing press releases relative to specific investment opportunities. These are frequently published as news items in trade journals. The task is to identify those industries that might be interested in what the Commonwealth has to offer. (William H. Stewart)