March 26, 2021
Today, as we face the crisis of the COVID-19 pandemic, looking back provides some perspective for a path forward.
In 2006, amidst a global financial crisis, Kumho Asiana acquired Laolao Bay Golf & Resort from UMDA, and in three years, it completed a $60-million golfitel facility in Kagman.
In 2015, South Korean conglomerate E-Land opened its first overseas hotel development, Kensington Saipan, less than a year after Typhoon Soudelor caused widespread devastation in our islands.
Another company that has shown commitment to the CNMI through its long-term investment is Ken Corp., which has been operating Aqua Resort Club since 2004. The Japanese company is also a key regional investor, with six major hotels in Guam.
Today’s pandemic crisis has certainly struck again at the core of our economy, but investors like Kumho Asiana, E-Land, and Ken Corp., who have the capability to see beyond the crises of the day, are possible and would be very encouraging for the CNMI.
So how can we attract more legitimate investors and diversify our economy to help fast-track our recovery?
More immediate solutions include designating a lead agency that will be in charge of promoting the CNMI as an investment destination and restructuring the Commonwealth Development Authority (CDA) into the Commonwealth Economic Development Authority (CEDA). House Bill 22-21, now calendared for action in the House, calls for the transformation of CDA to CEDA and giving the new agency additional tools needed to attract, retain, and expand private sector investments in the CNMI.
When it was created in 1984, the CDA was well-intentioned to "stimulate economic development" in the CNMI. However, in practice, the agency’s focus on this critical mandate was distracted by other directives also placed upon it. The CDA administers commercial loan programs and facilitates small business start-ups. While these are very important, they diverted focus needed to promote the CNMI to investors on the regional and global stage.
CDA’s focus on economic development was further diluted in 1994 when its board of directors was also assigned responsibility for the Northern Marianas Housing Corporation. At the recommendation of the Governor’s Council of Economic Advisers, Executive Order 2020-21 was implemented in September 2020 to establish separate boards, allowing CDA greater focus on economic development while also enabling NMHC to concentrate more on mobilizing some $244 million in critically needed CDBG-DR funded projects.
Many government agencies have gone out of their way to promote the CNMI as a viable investment destination, but as I have mentioned in my previous column, these efforts can be better coordinated. We need a centralized agency to conduct a proactive outreach and promotion of the CNMI as a location for private investment. CEDA will do this and more.
Revisiting QC program
Included among CDA’s mandates is the implementation of our Qualifying Certificate program, which offers tax incentives to attract investors.
We understand there are currently only two companies who are beneficiaries of the program, with the last QC application made in 2017. Only three applied in the last five years. Twenty years after its creation through the Investment Incentive Act of 2000, the QC program that was designed to attract investors seemed no longer attractive.
It’s time to revisit this important incentive tool, evaluate its successes and shortcomings, and reassess its effectiveness given the changing dynamics and increased competition in the investor market. Through the help of the Legislature, we hope to expand the incentive packages we offer investors beyond the typical tax relief and abatements. The packages could be designed to attract targeted investors with incentives like identified public and private land parcels, expedited permit approvals, and identification of trained and locally available workers.
TOGETHER, WE CAN help bring quality investments to the CNMI to generate much-needed revenues and provide jobs to all.
For more information, visit the GCEA on Facebook and Instagram (@cnmigov.economy) or contact them at email@example.com.
By MIKE SABLAN
Mike Sablan is the Vice President of Triple J Enterprises, Inc., a certified public accountant, chairperson of the Domestic Policy and Recovery Committee of the Governor’s Council of Economic Advisers. As an advisory council for Gov. Torres and Lt. Gov. Palacios, the GCEA’s mission is to improve the quality of life in the CNMI for all residents.