There are no shortage of opinions on the economic future in the islands. Experts from an array of industries have some thought-provoking opinions on economic prospects in the islands for 2022 that may or may not resonate with your own.
By Morgan Legel
While the U.S. mainland and much of the world continues to do business, on the cusp of the year, the Asian-Pacific region took one step forward and two steps back. With Omicron now affecting Asian tourism in the region, labor issues across the board in the islands, and more, how optimistic should we be?
Looking both back to 2021 and forward to the rest of 2022, the answers lie with the numbers.
In an economic survey, Guam Economist Maria Claret M. Ruane*, estimates that the U.S. federal government spent $4.5 billion on Guam in the previous year. This amount includes all funds for pandemic assistance including two programs, the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, which combine to an estimated $1.9 billion federal funds to Guam.
However, the report states, “In the absence of the $1.9 billion from the U.S. government, Guam’s economy would have declined by 9.9% in 2021 compared to 2020 and instead of the 26.7% growth. The worse scenario would be if all $4.5 billion were to be eliminated, which would have shrunk our economy in 2021 by 59.7% compared to its size in 2020.”
Clearly, without any of the federal funds, Guam’s economy would be ravaged, and since there is no groundwork for 2022 federal funding yet, the island continues to lay in wait-and-see mode, residents hoping to reach the other side of the pandemic, hopefully relatively unscathed.
The loss of tourism over the past 22 months hasn’t helped matters either, with the tourism industry losing $208 million in 2021, and an even larger estimated $1.38 billion in 2020, in Guam?
The same scenario is playing out across the Mariana Islands and beyond.
Experts from an array of industries have some thought-provoking opinions on economic prospects in the islands for 2022 that may or may not resonate with your own.
*Editor’s note: Ruane, a professor of economics at the University of Guam, has compiled the 2021 Economic Report in her “personal capacity.”
“I see some things to be optimistic about… I think that prior to Omicron, we were all getting very optimistic, with us seeing a window that maybe some travelers were going to start coming back and the tourism economy was going to be able to start to slowly recover. I think that Omicron —as we’re seeing in real time — is very different that everything else we’ve seen, so the short-term results of that will show what happens in 2022.
Our business is a little unique in that we saw two sides of this pandemic — one being that, with the traveler market going away, all of our roaming business went away and that’s a big part of it; two being that we went from being a service provider to being a utility provider, with everyone desperately needed good internet connectivity.
A lot of companies had a propensity to sit back and see what happens, but in our case, we went virtual immediately — because we could — and our people already had that great connectivity at home.
I think 2022 will see that people come to grips with this new way of doing business, being completely virtual or in the office only a couple of days a week. I always believed that if we don’t come out of this thing better, having learned a lot, what’s the point of it?”
– Roderick A. Boss, president and CEO, Docomo Pacific
“My recommendation to companies [in 2022] is to preserve capital to cover shortfalls in revenue. Most firms have cut expenses to the bone, so either you cover shortfalls with preserved profits, or you go out of business… Unfortunately, it looks like another year of stagnation, layered with inflation, which will hit businesses and families hard.
“Tinian direct flights are vital to the economy’s rebound. In my opinion, without daily scheduled flights there will be no way to feed daily tours from Saipan to Tinian when they are expected to return in 2023. The Tinian economy comes to a halt without flights. The government let Tinian residents down when flights were cancelled for two weeks. Our leaders need to do more to ensure that the people of Tinian and our economy are not left stranded again due to someone not paying attention.
“Tinian expects a slight uptick in economic activity, but far shy of the 36,000 visitors they hosted per year when the Dynasty Casino was in operations. Tinian has had to adjust to lower expectations and with zero tourism, the construction activity resulting from the first phase of construction [on the new divert airfield project] will be a good start… The divert airfield isn’t expected to be operational until 2026, so the people of Tinian have another four-year wait to see what, if any, positive economic impact operational spending will be.
“One other major economic issue is the exhaustion of the American Rescue Plan funds in the region. These funds are expected to be gone by late 2022, both governments will see a gigantic decrease in available funding and will have to adjust accordingly. This is of course with the caveat that the federal government doesn’t send another billion to our region to keep our governments running at 100%. If that dream doesn’t come true, our island economies will be facing some of the toughest times they have ever seen. The conservative play in all of this is for companies to stay lean, preserve capital and be agile enough to immediately respond to market downturns. Good luck everyone. This is going to be a hell of a ride for 2022.”
-Phillip T. Mendiola-Long, CEO and managing member of Sherman Consulting LLC
“I am not very optimistic on Guam’s economy in the short term. With 60% of our gross domestic product traditionally coming from tourism, I hold little hope that the military visits can make up enough to support our local hotel, restaurant, retail and tour businesses.
“As far as the real estate industry is concerned, Guam’s shortfall of construction labor over the past number of years has resulted in a shortage of homes for willing buyers. The lack of inventory, combined with low interest rates that give borrowers more buying power are driving prices up at an alarming rate. On the commercial side, we are seeing more construction than straight sales. It will be interesting to see if office space remains at low occupancy as people continue to work remotely.”
-Kim Anderson Young, president of Security Title Inc.
“According to a global survey, despite the arrival of the Omicron variant of COVID-19, people worldwide are feeling surprisingly optimistic about the new year.
“I believe 2022 will be a bright year for our island economy. With most expecting life to return to normal within a year, there is a strong sentiment that visitors should be welcomed back to our island. This will help our lagging tourism industry substantially.
“Keep an eye on the long-term to weather uncertainty. The past two years have shown that forces beyond anyone’s control can undo the best of plans. Investors with a long-time horizon may find some comfort in the fact that there’s a 50% chance the market will go up on any given day. But if you extend that time horizon to five years, historically the market has gone up 80% of the time. Over ten years, it has historically gone up 90% of the time. With those kinds of odds, investing in stocks in today’s inflationary environment continues to make sense.”
-Candy C. Okuhama, president of ASC Trust LLC.
“I am less optimistic than before the introduction of Omicron — we were beginning to see increases in arrivals from Korea which have since stopped, and the beginning discussions about a travel bubble with Japan but that has been obviously dampened; this, combined with little federal help for businesses and individuals like in 2020 and 2021, 2022 will be another challenge with its fair share of uncertainty.
Nothing can truly happen until flights and tourists returns, with federal and local funding only a short-term help, and not the making for an economy.
For the future, I believe businesses will see it’s more difficult to get the manpower they need to run at ‘full steam.’ Continued investment in training, internships and apprenticeships will be needed, along with greater competition for key staff causing businesses to most likely pay higher wages for the staff they do need.”
-James Arenovski, president, Delta Management Corp.; owner, Island Training Solutions
“Military build-up related construction projects will generate revenue for Guam through gross receipt taxes and income taxes; and the residential rental market has always stable over the years. Core Tech has a construction project backlog of over $1 billion that will keep us busy for the next five years. Also, the military construction workload related to the marine relocation will keep Guam busy for the next five years as well — but with a declining average of 20% every year.
COVID has specifically impacted the hotel industry on Guam and elsewhere, and we can only be hopeful it will end sooner rather than later.”
-Ho S. Eun, chairman of Core Tech International Corp.
“I don’t think we are out of the woods and our economy will continue to have challenges due to the pandemic, including labor force issues as well as the depressed tourism market.
“The cost of goods and freight have increased globally which will be reflected in consumer prices. We have also seen substantial cost increases in every major grocery category — major manufacturers have already started the process of raising prices across the board; the meat category is volatile and the disparity is probably the most obvious.
“The supply chain issues and shortages that we saw at the start of the pandemic have become more stable in comparison to the onset. As a company we were able to mitigate long gaps in shortages by adding multiple vendors as suppliers. We are now reverting back to our primary suppliers as the market starts to stabilize. However, periodic disruptions will continue to occur as external market forces impact the industry.
“Technology and e-commerce have seen huge growth nationally during the past few years and Pay-Less Markets is no exception. We launched the online shopping program in 2021 and plan to expand to online delivery in 2022. Maolek Rewards — our new customer loyalty program will continue to be enhanced to provide additional savings to our customers through e-coupons, product redemption and discounts.”
-Katherine R. Calvo, CEO of Pay-Less Markets
“I’m cautiously optimistic about the economy of the island as we enter 2022. It’s unclear when the COVID-19 pandemic will be behind us, but it is apparent that its impacts will reverberate in our economy for years to come. Although I’m more bullish about the economy than bearish, I foresee challenges to our businesses. As of this moment, there are about 850 applications for the Local Employers’ Assistance Program for small businesses on a status listing posted on the Guam Economic Development Authority’s website.
“According to the U.S. Small Business Administration, as of 2019, there were 3,504 small businesses establishments in Guam — that’s almost a quarter of Guam’s businesses to apply for this assistance program. To me, this number really underscores how deeply our businesses were affected.
“Then, once the $50 million in funding has been allocated and depleted, we will have some huge concerns as businesses face the challenge of adapting to a changed economic landscape.
“Recovery from the impacts of the pandemic will be slow, and the economy will not be where it once was anytime soon. Businesses have adapted and will continue to do so based on the needs of people and laws of the government. To survive, people get crafty. We already see that.
“Even now, while we are ramping back to normal, resiliency of individuals and business is being witnessed everywhere. Some industries have not felt the sting of COVID as much as others. This has helped the overall economy from cratering. If COVID becomes something that we can live with and we stick together, buy more local goods and services, and spend wisely, we should eventually end up all right.”
-Jay R. Shedd, executive vice president of Citadel Pacific, the holding company of IT&E, IP&E, and Fujita Properties
“Most of the economic projections expect that tourism will not be fully recovered until at least 2023. Guam’s current effort on economic diversifications is not going to make huge progress any time soon to cover tourism’s loss. Our business loss due to the decline of tourist numbers will still impact the company’s operations a lot in 2022.
“However, the island’s business community did see Korean tourists were gradually coming back in November 2021 before the Omicron variant caused a new worldwide chaos. The Korean government is obviously more aggressive on reopening, recovering and returning to normal. So, we are hoping to see some Korean tourists coming to visit Guam in 2022 after the Omicron panic is gone.
“Selling ‘Made-in-the-USA’ wellness and fitness products that always attract tourists’ eyeballs, our stores did have a lot of tourist customers. After the island’s first lockdown in March 2020, our sales numbers declined by 65%. Fortunately, we have been having local and military customers too and the pandemic has really reminded people to put more attention to health. So, our customer base of the local and the military have been actually increasing gradually during the pandemic and our sales numbers in 2021 were roughly reaching 50% of the ‘before pandemic’ numbers.
“However, some employees of our company actually moved to the states with family to look for new opportunities because of Guam’s economic downturn. We are expecting it will get difficult to find qualified employees to work for our specialty stores.”
-Edward Pingyuan Lu, owner and chief nutritionist of Globest LLC, which operates as GNC, an American supplement chain, in Guam as franchise stores and in Saipan and Palau as a wholesaler.
“I am cautiously optimistic. We expect the economy to improve somewhat at the back half of 2022. The recent news on the COVID variant and the spike in hospitalizations are concerning as our island looks to pivot out of this. We need our Asian tourism back and we need our small businesses back.
“Working from home and being flexible with our workforce is something we are monitoring; it hasn’t been easy for our workforce that is managing home, school and work. We have to continue being as flexible as possible, but we are aiming to get our business back to pre-pandemic levels by the end of 2022.”
-Roland Certeza, president and CEO of TeleGuam Holdings LLC, which does business as GTA
“As a business, I’m less optimistic about 2022. Despite the growing number of visitors, it’s barely a drop in the bucket compared to pre-pandemic. With the ceasing of [Workforce Innovation and Opportunity Act] benefit payments in September last year, the windfall of that $35 million is dwindling, and with no other major injection into the economy, I expect 2022 to be much harsher, especially for the small to medium businesses that have depleted savings to maintain operations in the last two years.”
– Leilani N. Reklai, owner of PRA Shell Gas Station, a subsidiary of PRA Inc., which does business in Palau and publisher, Island Times.
“One of the most common things that the Marshall Islands has discussed over the last 30 years is developing tourism to boost the economy. It can benefit grassroots-level small and large businesses, rental car companies, hotels, restaurants, bars, convenience stores in Majuro and in outer islands.
“To promote this, the government has to have a strong view and involvement with a proper team of people strictly reporting to the appropriate ministry or to Cabinet. The organization set as tourism developments has so far not been able to put up significant progress in this sector.
“From 2008, I have been working very closely and trying to get airlines to RMI. An example is Nauru Airlines, which was pretty much in operation from November 2010 to February 2020 — prior to Covid-19 travel restrictions that halted (travel to and from) South Pacific destinations such as Australia, Solomons, Fiji, Nauru, and Kiribati.
“If full attention is given, there can be lots of growth in this area to get tourists. Palau is a good example for last 30 years, development and growth in this sector in Palau has been evident.”
-Anoop Kumar, owner of Majuro Motors
“2022 is difficult to evaluate since Covid takes everything out of our hands. It is causing tremendous grief.
“The Marshall Islands is experiencing the effect of increased costs. Our people are suffering because of the U.S. COVID situation. But we don’t have a vibrant economy that can support increased wages to keep pace. It is a motivating factor for people to migrate out of Marshall Islands to meet their basic needs. There is no aggressive program to reverse this trend.
“We need proactive solutions to the COVID crisis that don’t compromise the safety of Marshallese. PII must have essential workers. We asked the government for 80 (foreign workers needed for a variety of construction projects) and they gave us three. Two-to-three per month doesn’t work. These skilled workers are needed for development of the economy for major projects to improve life of the people. We need more cooperation with the government’s National Disaster Committee. There are things we can do in the private sector but they need collaboration from the government.
“The restrictions in place to protect the Marshall Islands result in difficulty for evaluating the economy in 2022. When COVID restrictions are lifted, we can talk about economic development in the Marshall Islands.”
-Joseph “Jerry” Kramer, CEO of Pacific International Inc.