Business Forum
'Better Late Than Never'
Can American Samoa Avoid Economic Disaster
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| David Robinson President American Samoa Chamber of Commerce |
Gary Ayre Chief Executive Officer ANZ Amerika Samoa Bank |
Avamua Dave Haleck President and Chief Executive Officer Haleck Enterprises |
In response, Governor Togiola T.A. Tulafono last November set up an economic advisory council to look at potential areas of new investment such as agriculture and fisheries, light manufacturing, environmental technologies and the information and knowledge industries. The council also has the mandate to look at policy reform, tax and immigration, privatization and education and development of the workforce.
We asked a number of key players in American Samoa's business community about what they think should be done to keep the economy on track.
Pacific Magazine: Will the canneries leave and if so, when is this expected to happen?
David Robinson: The thing that seems to be the trigger for whatever they plan to do in the short or medium term is the next 50-cent increase in the minimum wage and that is due to hit us on the 25th of May. And the canneries have both said (that if the minimum wage) should ever continue up to the maximum of $7.25 cents an hour, then the rising minimum wage, combined with other factors, may lead to the closing of the canneries.
They have also both said that the last 50-cent increase that went on in July last year probably added something like $2 million to each of their respective wage bills and they just cannot foot another $2 million or more this time.
Gary Ayre: The answer is nobody knows. They have been threatening it for many years and have never done anything about it, to the best of our knowledge, but of course there will come a time when the straw that breaks the camel's back will occur. Whether it is another increase in the minimum wage or whether it be a non-extension of the duty exemptions that they have, whatever it may be, something will tell them that it is no longer profitable to operate a cannery in American Samoa. I think there is an inevitability about it, when it will happen is anyone's guess. The canneries have I think backed themselves into a bit of a corner though in that they have been asked many times what will you do if minimum wages increase, if Section 936 is not extended, if section 30A is not extended and their answer has always been we will seriously consider leaving, we cannot be profitable without them.
Avamua Dave Haleck: I believe the canneries will leave American Samoa eventually, and I feel it is probably within the next three to five years. I think they will leave sooner if the minimum wage issue is not resolved.
Many people have mixed feelings about the canneries and I think everybody wants to earn a higher wage. But in order to do that you need to make sure there is going to be jobs available.
I think there are other economic factors that are going to cause the canneries to eventually leave, but I think we need to try and have them stay as long as possible while we shore up the call centers or other industries for American Samoa.
No one's against raising minimum wage, (but) that should be American Samoa's decision—to raise minimum wage at its own pace—rather than having to be dependent on the U.S. economy.
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Robinson: I think the onus is not perhaps so much on the federal government but on the American Samoan government. At the end of last year in order to try and do something about this the governor set up the economic advisory council. That is a public – private sector partnership tasked to prepare a long-term strategic plan for new investments in order to stimulate the economy.
One thing we are really looking seriously at is the alternative to the U.S.A. While the Americans have put a lot of money into this place, they haven't actually done anything obvious to encourage new industry and new business development. So we're looking to other areas in the Pacific such as New Zealand, which we consider to be a fairly fertile ground, Australia and other Pacific countries who we feel could take advantage to come here and do the manufacturing and processing here, and then to be able to put a “Made in the U.S.A” label on the thing so they can get into the U.S. mainland without the usual import duties and quota restrictions.
Over the last five or six years there has been quite an endless stream of economic reports, some of them have been financed by the (Department of the Interior), and nearly all these reports have been very good in analyzing what the historical situation has been and writing up the conclusion, which is really how nice it would be if these other things were developed, but in none of those reports have they said “this is what you should do, and this is why you should do it and this is how you should do it.” The Economic Advisory Council has addressed those three points. We're the can-do council in a way; we're going to make some of those things happen.
Ayre: Obviously getting some alternative industry going would be sensible but it is too late. Whatever they want to do now, whether it's the call centers, whether it be import substitution, whether it be other manufacturing operations, it's too late, it should have been done 10, 15 years ago and it would be established and working now. But having said that, better late than never. So getting something going to provide some sort of alternate would make sense.
The bottom line is this economy will be decimated for some period of time. What will the implications of that be? Let's do some planning for that. And it may mean that we need to get some government grant support, it may mean that we need to get America to come in and provide some kind of social security network. I don't know what the answer is but I'd like to see the government come in and do something about finding one.
Haleck: The territorial government is making efforts to land a fiber optic cable here in American Samoa later this year and that's going to be key to another industry that the local government is supporting, which is call centers. And obviously the territorial government is open, I believe to any other form of industry.
As far as the federal government is concerned, I don't think that they are going to go along with any stoppage or setting aside of minimum wage, that's just my personal view. It's become a political football for Congress to kick around the idea without really knowing what the economic impact will be to American Samoa.
I think the Federal government should prepare themselves. If they do want this minimum wage to go through, then they should be prepared to also assist in providing some form of relief to the economy of American Samoa.
The canneries are the industry for American Samoa. They employ many people. Although the majority of those people are from Western Samoa, they spend their paycheck locally as well as sending money back to their families to Western Samoa.
But the canneries do so much else for American Samoa. They're probably the major customer of the utility company here, they're certainly the major customer for the shipping agency, they rent houses, their people shop locally, so I think it would just be like a domino effect, it would be devastating to the economy if the canneries were to leave.
PM: What three things must be done to ensure a stable, healthly economy for the territory?
Robinson: We need new investment attraction, an improvement in education and training so we've got a suitability qualified workforce in order to be able to do some of these activities. The third area is policy reforms. That would include our current tax code, things like immigration, land tenure and privatization, which is a very important part of economic development for the territory. I think it's also a heading that is not necessarily well known or well understood by people in government. But if we took a gradual approach to privatization, which is not to privatize entities straight away but to privatize some of the peripheral activities that those entities are involved in, that would give strength to their current businesses.
Haleck: Well I think we need to diversify the economic base of American Samoa in many industries, not just one. I think that pretty much says it all! I think we need to do that pretty quick.
Ayre: I'd probably focus on privatization again because I'm a bit of a fan of it. I just think getting commercial assets out into the private sector just makes sense. The government payroll is a bit of an embarrassment and I think the government has to start looking at that sooner or later. The third thing is to somehow manufacture a desire to make a difference. We've talked and talked and talked, but ultimately not a lot has changed and the talk starts to fall on deaf ears when people just don't see anything happening.
So some firm decision making is necessary, I believe, and if some decisions were made, assuming them to be good decisions that would lead to some more investment being made into the place. Foreign investment in American Samoa is virtually nil and that is because it's not sought, it's not made easy. That would be the forth thing actually, to promote investment. The tax rates here are the highest in the Pacific and some of the highest in the world. We've got poorly drafted withholding tax legislation that becomes a double tax on corporate entities. So tax reform would make a big difference in trying to get some investment dollars over here. If you enter an industry you want to be sure that what you do is the same as what your opposition does, so that you know you only have to compete on price and service, not on who has the best connections with the government to get the best tax advantages.
Comments on this story? Email samantham(at)pacificmagazine.net
