A new start for the economy

Both domestic and foreign investment abhor uncertainty resulting from frequent changes in laws and regulations such as those which have occurred in the Commonwealth in recent years.

Many existing businesses and potential investors view the islands’ business climate as unstable. Judging from the many laws and regulations that have been enacted intended to govern business activity, a great many were later found to have been ill considered after the unintended, unanticipated consequences came to light which often required amendments to the original laws or regulations and sometimes—even amendments to amendments. It was a simple case of people passing laws who had little or no experience in business and thus were unaware of the needs of private enterprise.

What would your impression be of the islands as an investment location if your initial research into the area’s economic and political background revealed the following from newspaper archives, blogs, Internet web pages, GAO reports, audit investigations and independent confidential studies as undertaken by private consultants?

For example, a few years ago a prominent journalist lamented the attitude of some islanders who (and I paraphrase) appear to have been adversely influenced by “protectionist policies” of the local legislature which, according to that writer, fueled the poison of “disdain or hatred” toward those not of the islands who nevertheless established themselves in the Marianas.

Certainly a revealing statement offering an unusual and candid degree of insight from one who presumably had the pulse of many local islanders in the community who harbored such an attitude.

The journalist continued: “Our ill-conceived protectionist policies have done nothing but fuel the venom of disdain or hatred for foreigners who mean well and have openly established themselves here to partake in the growth of these isles. As much as I’d like to see locals partake in the spirit of entrepreneurship, only a few are willing to take risks in the provision of goods and services.”

Friends, any private economic consultant, if engaged by a potential investor, when looking deep enough will find that in the early ‘90s there was widespread adverse publicity surrounding Article XII which involved several large foreign investments. This avalanche of unfavorable publicity surrounding the Commonwealth Court’s decision relative to Article XII began to appear in the press throughout Asia and North America under headlines such as: “Indian Givers?” – Guam Business News (July,’91); “Northern Marianas, Land Alienation,” – Guam Business Almanac (‘92); “Paradise Postponed,” – Guam Business News (July, ‘92); “Saipan: Land of Disenchantment,” – Building Industry (May ‘93); “Gambling, Gangs and the Sleepy Marianas,” – Far East Economic Review (July 15, ‘93); “CNMI: Paradise for Gangsters, Lawyers,” – Pacific Daily News (Aug. 16, ‘93); “Asian Developers Bypassing Saipan,” – Marianas Variety (Aug. 23, ‘93) and other negative banners.

All this is public knowledge and available for review in the archives of the above listed publications.

Then there is the opinion of some who publicly state in response to the notice that the U.S. Congress had imposed an eight-year “phase-in” of the federal minimum wage in the Commonwealth that some within the resident business community long opposed—at which time an indigenous U.S. citizen advanced the following opinion (paraphrased) that the Northern Marianas should review an alternative to the present political relationship as a Commonwealth with the United States.

The author suggested as an alternative “a sovereign entity.” (Source: Chamorro.com, “Isla Telesis” dated Memorial Day, May 28, 2007) Well, that’s fine—review the relationship—but at the same time evaluate the economic loss that will occur if, and when, the relationship is terminated, which can legally occur when mutually agreed upon by both the U.S. and the NMI.

What is a potential foreign investor to think of the above suggestion to review the current relationship with the U.S. when he or she is unfamiliar with the Covenant and the history of the islands’ association with the United States? I’ll tell you what he is likely to think: “Whoa, this place may not be all that politically stable for my investment as the future unfolds. Goodbye.”

In May 1989, officials of the Commonwealth appeared before the United Nations Trusteeship Council and accused the United States of asserting “imperial territorial claims” over the Commonwealth by trying to turn the islands into a colony. The members of this group urged the United Nations to continue to maintain control until the United States granted full self-government.

Again in May 1990, the CNMI’s Trust Termination Task Force presented their position before the United Nations that the Commonwealth disagreed with the United States as to its rights under international law. Thus, more than a dozen years after achieving Commonwealth status in affiliation with the United States there was still some confusion as to the extent of the relationship and the degree of self-government and autonomy the CNMI could exercise.

I’m reminded that sometime ago when someone on Saipan advocated independence, a U.S. Congressman replied something to the effect, “Be careful what you wish for—it can be arranged.”

The matter of independence for the CNMI was brought to the fore several times in the early ‘90s when an Assistant Secretary of the U. S. Department of Interior remarked regarding the existing terms of the relationship within the Covenant between the U.S. and the NMI: “Freedom to choose a political status carries with it the responsibility, first, to make an informed choice and second, to live with the benefits and responsibilities of that choice.”

The official further stated, “For insular leaders to argue that what they freely chose several years ago is not what they thought they were choosing is a criticism of those who chose, not those who offered the choice. It is clear from the plain English of the historical documents involved that the United States has sovereignty in the Commonwealth—sovereignty is not conditional and does not lend itself to subject applicability.”

Again, what is a potential investor to think when such information comes to his or her attention? Some of them must wonder, “Am I going to be under the American flag 10 years from now, in 20 years?” Some of the more astute investors must think, “Is this place going to be with the U.S. over the long-haul, or just as long as they can maintain the financial pipeline to the U.S. Treasury?”

As I have stated previously in this column, make no mistake about it: The one thing that the NMI has to its advantage in generating foreign investment above everything else is American law.

When the American flag went up in the NMI it was a signal to all investors, domestic and foreign alike, that many major United States laws prevailed, which is the absolute bedrock of stability upon which confidence rests and which creates the investment atmosphere permitting individuals and businesses to prosper and grow. The American judicial system and its highly developed system of commercial law is a system proven to be acceptable to those who have not been previously acquainted with its jurisdiction. United States courts have inspired confidence in the international business community with a system of contractual law based on rules that are well known and respected throughout the free world.

The court is certain and not arbitrary in the application of a legal system that provides one of the most essential ingredients for creating business confidence and that is the absence of arbitrary power and the knowledge that unconstitutional change (as relates to the United States Constitution) will not occur.

Take that assurance away and you will most likely not have any foreign investment. The simple hard fact is that most politicians are simply not trusted to keep their word. Sorry, but that’s the way it is.

* * *