The CNMI’s ‘chicken—egg’ dilemma

By WILLIAM H. STEWART
Special to the Saipan Tribune

Sometime ago in this column I mentioned my belief that the economy will improve over time and that now is the time to enhance the area’s tourist infrastructure in preparation for those days. A suggestion was made that an increase in island attractions and, in particular, something similar to Hawaii’s Polynesian Culture Center and its Pacific Theater be considered. Realizing that the present reduced level of visitor entries is a definite constraint in encouraging such private investment under existing circumstances, I am reminded that someone once said, “The best preparation for the future is that the present be well seen to.”

Always there must be preparation for the future—and no small amount of vision—if one hopes to direct conditions and events for tomorrow. Such is also often the case with an area’s economic development aspirations. I can recall during the period of the Trust Territory administration that there were very few tourists visiting the islands. For that matter there were few aircraft seats to accommodate visitors and only a two or three small hotels totaling less than 75 rooms.

The proverbial “chicken—egg” debate at the time concerned the potential for a tourist industry. Many said it couldn’t develop based on the limited availability of aircraft seating capacity and the air carrier at the time wouldn’t add additional flights since there were insufficient hotel rooms to accommodate their passengers. You couldn’t have an increase in tourists without additional air service and you couldn’t have increased air service without additional hotel rooms.

Each side of the equation waited for the other to make the first move. It was a classic case of “Catch-22.” The “development egg” was finally broken by the Trust Territory administration when it embarked on a major policy change, which David M. Sablan as the catalytic agent brought about. He “cracked the egg” to free the “developing chicken.”

The government leased prime beachfront sites to two developers, each interested in constructing hotels. The terms of the leases were very advantageous to both interested parties. Second, the air route through Micronesia and the Northern Marianas was up for renewal and negotiation. The winning air carrier would receive exclusive air rights through the islands providing hotels were constructed in each of the then island district centers. The carriers were motivated (cajoled) into making the investments in hopes of obtaining the air routes. This was the carrot—the quid pro quo. The two carriers competing for the route award were Pan Am and Continental Micronesia. Pan Am’s hotel division constructed the Saipan Beach Intercontinental Inn in 1973 (now the Dai-Ichi Hotel Saipan Beach) and Continental Airlines constructed what is now the Hyatt Regency. These properties joined the existing 54-room Royal Taga (now the Diamond) and Joeten’s 10-unit, detached bungalows at the Hafa Adai in Garapan (later to be the site of the huge Hafa Adai Beach Hotel). Those were the days when Saipan’s Duty Free Shoppers (now DFS) located at the old Royal Taga had an area about half the size of a tourist bus.

At that time a tourism industry was only a dream since the Japanese could only convert yen to its equivalent of $743 for spending outside Japan. It was a period when a roundtrip ticket to Guam purchased at the Pan American Airline office in Susupe or from Continental Air Micronesia, was $28. Those were the days when there was only one flight a day and one cargo ship a month. The population of Saipan, Tinian and Rota combined was 12,256, including the employees of the Trust Territory Government, the islands’ major employer. By 1973 Saipan had only 2,000 private households with 10,185 people who considered the island as their “home area.”

The purchasing power of the dollar at the time would be equal to less that 20 cents today. There were 55 businesses in the Northern Marianas employing 673 people. The total annual government revenue was only $433,334 and the islands’ exports amounted to a mere $254,635. There was no private sector economy worth mentioning, no tourism, no garment factories, only government jobs for the most part. There were no traffic signals either—and only one stop sign. I remember it well because I ran it and was fined $2.50.

Still, in those early days, there were those with a belief in the island’s growth potential, confident in their vision for a brighter tomorrow and a conviction that their investment decisions were sound. Three such individuals were Dave Sablan, Bob and Ken Jones. What a difference 30 odd years has made! Sooner or later there will be better days and the time will come for an island cultural center of the type envisaged above, and an aquarium. The task is to find the investors with the vision—and a commitment to the future.

The government can help stimulate a rebirth by considering new, sweeping investment inducements just as the Trust Territory did when it broke out of the mold of traditional thinking and came up with attractive incentives to “prime the investment pump.”

While the intricacies are beyond my scope of knowledge, I suspect that the matter of increased air service on the part of foreign flag carriers lies in Washington D.C. with the U.S. Department of Transportation and the very complicated and political issues related to “landing rights.” The CNMI could use some leverage if the United States could pose the issue to any foreign carrier wanting to land in, say, Dallas or wherever in the United States, then service the U.S. Commonwealth as a “trade-off.”

If, in the geopolitical scope of things, the NMI has true geographic value to the United States—situated as it is in the western Pacific on the doorstep of Asia—then the U.S. departments of State, Defense, Interior and Transportation should “get off the dime” and assist in this vital and urgent matter of air service to the islands. Maybe, all that is needed is to bring it to their combined attention.

Anyway—possible or not—in my judgment, nothing ventured nothing gained. It’s worth a try in contacting the U.S. government for help.

(Editor’s Note: William H. Stewart is an economist. For a pre-investment analysis of the above cultural center and other potential tourist attractions see the author’s booklet, Tourism Investment Opportunities in the CNMI, published by the Department of Commerce in cooperation with MVA (circa 1995).)