While investors in Guam and other areas eye expanding their operations in the CNMI now that the local economy is recovering, the one thing that holds them back is Article 12 or the NMI Constitution’s provision restricting landownership only to people of Northern Marianas descent, visiting Guam Chamber of Commerce board chair Gerald S.A. Perez told Commonwealth businesses yesterday.
Under Article 12, only those with at least 25 percent NMD Chamorro or Carolinian blood can own land.
Perez, who considers himself a longtime friend and avid fan of the CNMI, hopes that his remarks about Article 12 “would be taken in the constructive spirit intended.”
He said Article 12 is the “secular drag and anchor holding back any meaningful and long-term economic growth in the CNMI.”
Perez was one of the guest speakers at the Saipan Chamber of Commerce’s general membership meeting yesterday at Fiesta Resort & Spa in Garapan.
In his presentation, he pointed to the “twin problems that Article 12 pose for serious investors in Guam, or elsewhere for that matter.”
These are the lack of freedom in maximizing use of real property, and the inability of financial institutions to be comforted by a security interest on money loaned out to businesses and individuals.
He said fee simple ownership of land is central to investment possibilities.
Fee simple ownership grants an owner total and absolute legal title, and is therefore the highest and strongest form of ownership that exists.
“Free market real estate transactions grant fee simple ownership to protect maximum use of this asset for the owners or investors, and to protect the security interest of mortgage lenders who provide risk capital. Absent these guarantees, economic growth in any jurisdiction is seriously impaired and severely disadvantaged in attracting outside investments,” he said.
He added that potential investors and businesses rely on their ability to grow value and worth of their enterprises.
David M. Sablan of the Citizens for Change of Article 12, in an interview, said he’s glad that an “outsider looking in” shares the sentiments of many in the local community.
“It’s high time the CNMI take a strong position in repealing Article 12… I can see a change in attitude towards Article 12,” Sablan told reporters in a brief interview at the Chamber meeting.
Perez reciprocated Saipan Chamber of Commerce president Alex Sablan’s presentation before the Guam Chamber of Commerce membership on July 31.
“It is not for me or others outside of the Commonwealth to decide what’s best for you and your long-term economic security. And it is not I who must evaluate the costs and benefits of Article 12… But as the new world order evolves, and as global competition intensifies, the CNMI has to make one of two fundamental choices,” Perez told the crowd.
One, “do you keep the past, maintain the status quo and risk getting left behind?”
Two, “do you embrace the risk, take a chance on the abilities of your people, and leap into a future that you can impact to your benefit?”
“The difference between these two choices,” Perez said, “is leaving to chance what comes your way, because of your fidelity to an outdated policy; or influencing the outcome of your economic destiny by trusting your entrepreneurial spirit.”
Now the question before the CNMI, Perez said, is “which of these two choices will you make?”
Perez’ presentation centered on the “destructive nature of unintended consequences”—and that Guam and the CNMI’s story are basically that.
“Frankly, it is a story about many good intentions gone awry. And it is a story that has no shortage of blame to go around, whether local or off islands, and whether by active involvement or complicity,” he said.
An example of “unintended consequence” is also Article 12.
Perez believes that the framers of the NMI Constitution wanted this provision as a protection from outside control.
“But the unintended consequence, I will hazard to say, has been less than helpful to the Commonwealth’s economic vitality,” he said.
Perez said the federal takeover of CNMI labor and immigration, while a well-intentioned policy, cost the CNMI millions in lost tax revenue and weakened the business community’s vitality.
He said in Guam years ago, a small band of political activists stormed a military airfield in Guam, and their cause had to do with political status, access to federal property, and cultural sovereignty.
“But the uprooting and relocation of Guamanians to places like Bremerton, San Diego, Vallejo and Honolulu, where their well-paid skills were needed, was the unintended consequence of their agenda. And it came at the expense of Guam losing more than $100 million in annual payroll and millions more from the forfeited economic activity that would have been generated,” he said. He went on to cite a few more examples.
Perez also said that, just like Guam, the CNMI economy is indeed showing signs of recovery. He cited examples to illustrate Guam’s “rollercoaster” economy and its similarity to the CNMI in many respects.