Pacific Notes
Pacific Notes
Jan/Feb 2007
CNMI
Largest Garment Factory Closes Its Doors
Saipan’s biggest and oldest garment factory, Concorde Garment Manufacturing Inc. closed down on December 12, two months earlier than originally indicated, thereby displacing more than 1,400 workers and costing the government millions of dollars in taxes and fees.
Concorde, which is part of Tan Holdings group of companies, is the 11th factory to close since January 2005 when a World Trade Organization (WTO) agreement went into effect, allowing Asian garment-producing countries to ship garments into the U.S. quota-free. More Saipan factories are expected to close this year.
Lieutenant Governor Tim P. Villagomez said the closure is another “big blow” to the CNMI’s downwards-spiraling economy and comes at a time when the government had already implemented strict austerity measures due to declining revenues. He noted that the CNMI’s total loss in taxes and fees could be about $13 million, not counting another $17.6 million in gross sales by other local businesses and possibly up to 700 jobs in the public and private sectors.
- ADVERTISEMENT -
Jerry Tan, president of Tan Holdings, said the company remains committed to its long-term business interests in the Northern Marianas and the region. “We have done business here now for 25 years on Saipan and 35 years in the region,” Tan said.
Before the WTO agreement went into effect in 1995, former Tan Holdings President Willie Tan told Pacific Magazine his company spent more than $2 million to upgrade and refit his factories to compete with Asian garment factories.
There were 8,000 garment workers on the industry’s payroll before Concorde announced its closure. At its peak in the early 1990s, the garment industry sold over a $1 billion worth of apparel to the United States and had 15,000 workers. After the U.S. federal government started pressuring the CNMI for labor reforms, the local Legislature enacted a law that capped the number of garment workers at 15,000 and allowed workers to transfer jobs between factories.
Following the WTO agreement in January 2005, U.S. buyers, citing the higher cost of products from Saipan, shifted their businesses to Asia, particularly mainland China. The local minimum wage is $3.05 an hour, already in its tenth year. There are strong signals from Washington D.C. that the Democrats, who now control both houses of the U.S. Congress, will raise the U.S. minimum wage and include the Northern Marianas.
Alarmed by that possibility, the local Legislature attempted to pass legislation to increase the minimum wage gradually over five years until it reaches the national minimum wage. But it ran into strong opposition from the business community. The business community has been arguing that the benefits paid to non-resident workers are more than $3.05 an hour, if roundtrip air transportation from the country of origin, life, medical and health insurance, lodging, ground transportation, and meals are taken into account. Locals who are employed in the private sector do not get the same benefits, the Saipan Chamber of Commerce pointed out.
Even the CNMI’s Washington Representative, Pete A. Tenorio, warned the Fitial administration and the Legislature about the possible inclusion of the Northern Marianas in legislation strongly supported by House Speaker-designate Nancy Pelosi and the most ardent and long-time CNMI critic, Rep. George Miller, a Democrat from California.
There are now nine factories left in the Northern Marianas, all operating on Saipan. At the industry’s peak, 23 factories were in operation.
Papua New Guinea
PNG government hands down record K7.2 billion budget
Papua New Guinea Opposition Leader Peter O’Neill called it an “election budget” but it is on record as being the largest ever handed down by a government since independence in 1975.
High world commodity prices contributed to the K1.1 billion (US$353.1 million) surplus, compelling finance and treasury officials to put together two supplementary budgets in addition to the national budget – the monetary value of the three money-plans swelling to an unprecedented K7.2 billion (US$2.311 billion).
The record budget capped another successful year for the Somare government spurred by economic growth of 3.7 percent (non-mining growth 4.2 percent). Inflation leveled at 1.7 per cent, public debt was down to 42.5 percent of GDP from 71.8 percent at the end of 2002, foreign reserves were at an all time high of US$1.48 billion, and employment growth in the non-mineral sector increased to 20.4 percent since March 2002.
Treasurer Sir Rabbie Namaliu said the 2007 budget’s objective was to turn PNG’s good fortune in windfall revenue to sound and planned investment in public infrastructure to enhance the country’s economic growth and future.
The biggest winners in the budget were:
Education infrastructure (including universities and national high schools)—K200 million (US$64.2 million)
Transport infrastructure (especially those linked to agriculture sector)—K120 million (US$38.52 million)
Health infrastructure—K110 million (US$53.31 million)
PNG government’s stake in the PNG to Australia Gas Project—K100 million (US$32.1 million)
Debt repayments—K100 million (US$32.1 million)
Tax incentives included a 10-year concessional tax rate of 20 percent for new investments in tourist accommodation where expenditure exceeds US$10 million. In the forestry sector, companies will now have to pay a new K8 (US$2.57) per cubic meter levy called “premium levy” – which replaces the K10 (US$3.21) per cubic meter royalty paid to landowners.
The government also changed the log export tax to a flat rate set at 28.5 percent, which tax experts say will see the state lose K40 million (US$12.84 million) in potential revenue to the forestry sector.
While the government has increased its funding on HIV/AIDS prevention from K3 million (US$963,000) in 2006 to K12.5 million (US$4.01million) this year, donors will contribute K78.26 million (US$25.12 million) and still provide the largest chunk of the K90.806 million (US$29.15 million) in total funding.
Prime Minister Sir Michael Somare was ecstatic that the government doubled its development budget from K846 million when they entered office in 2002 to K1.7 billion in 2007 but his rival O’Neill was adamant that the money-plan was a “huge investment” in the June general elections.
The decision to allocate K20 million (US$6.42 million) to the PNG Parliament to settle “election-related expenditure” is already raising questions in the community including anti-corruption agencies in the lead-up to the polls.
Region
Search Continues For Business Opportunities In The Islands
The desire for sustainable development in their island nations continues to weigh heavily on the minds of the seven leaders of the U.S. territories and freely-associated states as they led their delegations in search for deals at the 2006 Conference on Business Opportunities In The Islands, hosted by the U.S. Secretary of the Interior Dirk Kempthorne in Honolulu, Hawaii. They traveled to the conference in mid-November in search of what Marshall Islands President Kessai Note called “foreseeable tangible results” in a conversation with Secretary Kempthorne.
The seven territories and freely-associated states participating in the conference included American Samoa, Commonwealth of the Northern Mariana Islands, Federated States of Micronesia, Guam, Republic of the Marshall Islands, Republic of Palau, and the U.S. Virgin Islands in the Caribbean. Perhaps prompted by the smallness of their size, sustainable development for the seven island countries is of course a balancing act between economic growth and environmental protection. The seven leaders also refer to the concept of sustainable development as “investing in our islands’ futures.”
For his part, Secretary Kempthorne pledged to visit each of the territories and freely-associated states “sometime next year” to “follow up on economic developments” that may have resulted from the conference. He allowed that he would begin planning his trips in January 2007.
The conference also heard from six people who own businesses in the islands. None of them were born in the islands and none inherited land in the islands. All six readily agreed that the key requirements for doing business in the islands are, among others, patience and perseverance, dedication and ordinary sweat and hard work.
“There is opportunity in Palau,” says Kassi Berg, co-owner of Roll ‘em Productions, a film and video production company based in Palau. “But don’t be fooled—setting up may be a small financial commitment to start with, but there is also a large time commitment involved. You must be prepared for that. If your business is excellent, it will be embraced. I can guarantee that excellence and talent are universally appreciated and recognized.”
Ricky Delgado, chairman of the CNMI-based Pacific Telecom, Inc. said, “Now is a good time for investment. One should look at the CNMI now because the new administration is supportive in words and deeds. The new administration understands the private sector and is familiar with how it works. Because the CNMI is totally not on an investor’s radar screen, this is a time when no one is looking and a long-term investor could do well in the CNMI. I think PTI has cleared the way for you and I don’t think what happened to us could ever happen again in the CNMI.”
“As much as foreign investment is the true desire of the island leadership, it is not easy to succeed in private enterprise in the islands,” reflected Jerry Kramer, president of the Marshall Islands-based Pacific International, Inc., a multi-business company, and a longtime resident of the Republic of the Marshall Islands.
“Numerous economic reports recognize that deficiencies of government services are impediments for growth and for fostering new businesses. Legislatures are a hindrance in trying to facilitate an entrepreneur’s needs for them to encourage their time and money and expertise, but at the same time trying to respect traditions, customs and culture. In many instances, all through these islands, this is resulting in over-regulation in state-owned enterprises, such as communications, transportation, power generation, that keep private enterprise from developing into viable businesses.
“Also, be aware of the political oppositions of those who might be in power,” Kramer added. “Government is an important client because of its regulatory agencies—this is an important element when considering any project.”
Guam
“Enriched” Rice Barely Enriched At All
 |
| Tests by Dr Rachael Leon Guerrero at the University of Guam have found discrepancies between the claims of some rice packaging, and their actual contents. [Photo: Frank Whitman] |
At least 12 brands of enriched rice commonly sold in the Pacific do not contain the “enriching” nutrients thiamin, niacin, iron and folic acid as indicated on their labels, according to Dr. Rachael Leon Guerrero, a nutrition professor at the University of Guam. Leon Guerrero’s claim is based on the results of nutrient analyses performed by the U.S. Department of Agriculture laboratory in Virginia on rice samples she submitted.
Leon Guerrero was attempting to determine if the nutrients in rice were depleted by washing it before cooking. When the analysis of the first sample she sent indicated it did not contain the nutrients even before washing, she expanded her study to the 11 additional brands. The analysis results indicated that none of the brands she submitted met the enrichment standard minimum and almost all were well below nutritional content indicated on their packages.
The brands tested include Hakubai Sweet Rice, Safeway Medium Grain, Safeway Calrose, Diamond G Calrose, Diamond G Calrose (short), Pacific Pride Calrose, Guam Rose Calrose, Royal Phoenix Jasmine, Ko Ko Jasmine Fragrant, Ho Mai Calrose, Dynasty Jasmine and Maruyu. “The one that was the closest to what it should have been and what it actually claimed to have on the label was the Maruyu brand rice,” Leon Guerrero says.
While all 12 of the brands tested claimed to contain folic acid, only four actually did and those were in quantities “far below those stated on their labels,” according to a UOG release. Adequate folic acid in the diets of women of child-bearing age is widely associated with the prevention of birth defects. The U.S. National Center on Birth Defects and Developmental Disabilities recommends that “all women should get in the habit of taking folic acid daily even when they are not planning to get pregnant.”
Guam
Japan’s Ken Corp. Investing Heavily in Guam
With its purchase of the Hyatt Regency Guam on November 30, Ken Corporation of Japan now owns 20 percent of the island’s hotel rooms. In announcing the acquisition, the company also said it intends to invest $10 million “for renovation and added facilities to ensure that Hyatt Regency Guam remains the premier resort not only here on Guam but in the region.” The hotel will continue to operate under the management of Hyatt International. Japan’s Jiji Press news service reported that the Hyatt sold for $55 million.
The following day, December 1, another Ken Corp. property, the 403-room Palace Hotel Guam, changed its name and closed its doors for a four-month, $40-million renovation. The hotel, which was purchased on June 1, is scheduled to reopen in April as the Sheraton Laguna Beach Resort.
“The renovation plans include transforming the hotel’s current 368 standard rooms and 35 suites to 227 standard rooms and 84 suites and replacing the three food-and-beverage outlets with five outlets,” the company announced. The hotel’s wedding chapel will also be upgraded.
The acquisition is Ken Corp’s fourth in Guam since it purchased Guam’s largest hotel, the Pacific Islands Club (792 rooms), in May 2005. The company also owns the 110-room Hotel Santa Fe which it acquired in June 2005. The Pacific Islands Club and the Hyatt are on San Vitores Road, the center of the island’s Tumon Bay tourist district while the Sheraton is on Oka Point and the Santa Fe is on East Hagatna Bay, both about two miles from Tumon Bay.
The Nikkei Web site describes Ken Corp. as “a Japanese real estate organization involved in finding accommodation for foreign residents in Tokyo” and having $380 million in capital. In recent years the company has invested outside of Japan and also has hotels in California and Hawaii, as well as recent purchases of the Aqua Resort Club in Saipan.
Guam real estate consultant Nick Captain, president of the Captain Company, speculated on four factors that may be fueling Ken Corp’s interest in Guam:
relaxed Japanese foreign investment laws; extremely low interest rates in Japan; relatively depressed prices in Guam; and some possible synergy with Ken Corp’s core business involving its non-Japanese real estate clientele and foreign luxury resorts. The purchase is the latest in spate of tourism-related transactions in Guam with prices reflecting “heightened demand and optimism over Guam’s future,” said Captain.
Region
Islanders Derailed By Rugby Bureaucracy
The Pacific Islanders rugby team is still searching for its first international scalp after coming away from their Northern Hemisphere tour winless from three test matches. There were high hopes before the Pat Lam coached composite side of Tongan, Samoan and Fijian players departed for the United Kingdom last November but a disastrous buildup laid the foundation for the team’s three losses to Wales, Scotland and Ireland in consecutive weeks.
Not only were there delays in the announcing of the naming rights sponsor, coach and team, but the team also lost a bevy of first choice players through
injuries and contractual red tape.
The team’s undisputed, albeit unpredictable star, Rupeni Caucunibuca, ended up playing just one game in the 22-34 loss to Scotland, living up to expectations by scoring a try but ditching the tour before the final game against Ireland where the Islanders ended up getting hammered 17-61 in an ill-disciplined performance.
The team was denied a crucial two week team camp to prepare for their first match because European clubs refused to release their Pacific players a week early. As a consequence the team was in the unprecedented situation of having just four days to prepare for their first test match with many of the players unfamiliar with each other and the coaching staff. They came from all over the globe from different cultures and there were language barriers to boot.
The Islanders were outgunned by the better prepared Welsh, Scottish and Irish lineups but at least gave the crowds entertainment value, as expected, with some exciting running rugby and length of the field tries.
Where they let themselves down was their lack of discipline, especially in the games against Scotland and Ireland where they had players yellow carded. The breaches of discipline came about through reckless tackling and persistent infringing. But the issue was again raised that international referees tend to target island teams and players because of their physical style of rugby.
The tour’s standout player was undoubtedly Fijian up-and-comer Kameli Ratuvou who was impressive in all three games, drawing praise for his attacking prowess.
“The Digicel Pacific Islanders will never take the place of the three countries – but this is the best of the best—it is a fantastic opportunity for young guys —it’s a great concept and one that we want to continue,” Lam said.
The Islanders next assemble in 2008 but it is not confirmed where the team will tour. Pacific Islanders Rugby Alliance (PIRA) CEO Sakopo Lolohea has told Pacific Magazine that another tour of the Northern Hemisphere is on the cards, although there are other reports that the island unions are interested in a home tour to bring the team back to their home fans.
For the record:
Pacific Islanders 20-38 Wales
Pacific Islanders 22-34 Scotland
Pacific Islanders 17-61 Ireland
