January 27, 2021

Guam Daily Post Staff, 1/13/21

Guam’s economy declined by as much as 18.9% last year compared to 2019, a new economic report estimates.

The island's economy would have shrunk 42% to 49% without the infusion of $1.6 billion in financial assistance from the U.S. government, the report estimates. That would have been worse than what occurred during the Great Depression in the United States between 1929 and 1933 when the economy contracted by 25%.

The “2020 Guam Economic Report” was released Wednesday by economics professor Maria Claret Ruane and a team of faculty, students, and alumni from the UOG School of Business and Public Administration. 

The estimate foreshadows Guam’s real Gross Domestic Product figure for 2020, which may not be released from the Bureau of Economic Analysis under the U.S. Department of Commerce until late 2021 or early 2022.

“Guam’s real GDP for 2020 … is expected to decline, which would reflect the economic impact of this COVID-19 pandemic to include the decimation of tourism and the resulting loss of output, income, employment, and tax revenues in other sectors of Guam’s economy,” the report states.

The decline in Guam’s economy compared to 2019 is based on the following factors:

• Guam’s 76% decrease in tourism from 2019, as reported by the Guam Visitors Bureau, which the report estimates resulted in a loss of local income and spending of $1.38 billion; and

• The $1.38 billion loss from tourism was more than offset by the $1.6 billion Guam received in various forms of federal assistance through the CARES Act.

The authors calculated the unemployment rate to be 19.8% using one approach and 26.6% using another. This supplements an official unemployment rate released by Guam’s Bureau of Labor Statistics for June 2020 of 17.3%.

The authors calculated that household spending decreased between 30% and 50%, while business spending decreased 50% to 70% in the absence of federal assistance.

Crisis in self-identity

The report notes that the pandemic has been a “wake-up call” for the island to reduce its reliance on the tourism industry and that the pandemic highlighted the advantages and disadvantages of Guam’s relationship with the United States.

“The COVID-19 pandemic of 2020 is not just a health crisis. It is an economic crisis and a crisis in self-identity,” Ruane said. “Although the relationship with the U.S. may have limited the island in its response efforts toward COVID-19, Guam received funding and aid from the federal government, which mitigated the economic impact. All factors must be considered when discussing self-determination.”

The report states that “an independent Guam characterized by a weak tourism industry and a lack of new local industries to diversify our current economic structure would [have forced] us to learn to live with much less material security and opportunities than our current relationship with the U.S. affords us, even more so during this pandemic.”

Delayed availability of economic data

The report notes that the authors could not reference some of the typical primary sources of economic data due to limited or delayed availability. Instead, the team used media reports and educated assumptions based on best practices to produce their own estimates.

“I commend Dr. Ruane and her writing team for producing one of the first reports to analyze the impacts of COVID-19 on our economic landscape,” stated Annette T. Santos, dean of the School of Business and Public Administration. “Though faced with limited access to data, the authors — most of whom are students — were able to produce a resource that we hope provides significant public value.”

About the authors

The “2020 Guam Economic Report” is co-published by the University of Guam School of Business and Public Administration and the Omicron Delta Epsilon International Honor Society for Economics – Alpha Chapter of Guam. It was a collaboration among faculty Maria Claret M. Ruane and Leila C. Kabigting; students Celia J. Anderson, Nathaniel J. Dela Cruz, Kamerin M. Guerrero, Steve Eric S. Terlaje, Laarnie D. Vinca, and Mary Catherine Wiley; and alumni Grace C. Donaldson and Prairie Rose Garrido. 

Allison Shaefers, Honolulu Star-Advertiser, 1/25/21

The Champagne bubbles that marked the start of 2021 have already begun to go flat as businesses across the state hit economic plateaus.

Carl Bonham, executive director of the University of Hawaii Economic Research Organization, said Hawaii “has likely seen the end of significant improvement in the labor market for the next several months.”

His forecast was based on UHERO’s economic pulse index, which predicts job market movements by aggregating several indicators of economic activity, tinyurl.com/UHERO-EP.

As of Jan. 16 UHERO’s economic pulse was at 42, which means that Hawaii’s economy had recovered 42% from the pandemic lows experienced during the first COVID-19 government shutdowns in April and May.

Bonham said in an email to the Honolulu Star-Advertiser that the key takeaway from the most recent economic pulse is the stagnation.

“It has essentially hovered in the 40s since the end of October,” he said.

Bonham said in a video message posted on covidpau.org that recent stability in the economic pulse index suggests that “for the first part of the year, we’re looking at a relatively stagnant or stable picture.”

Hawaii’s travel demand hasn’t returned as strongly as some had hoped when the state introduced Safe Travels Hawaii, a travel entry program aimed at creating a safe way for travelers to return to Hawaii.

Beginning Oct. 15, Hawaii allowed trans-Pacific and inter-county passengers to bypass the travel quarantine if they had a valid negative COVID-19 test from one of the state’s trusted testing partners. However, COVID-19 fears and surges as well as government restrictions have tempered travel demand for Hawaii.

November, the first full month that travelers to Hawaii could arrive without quarantining, brought just 183,779 visitors, compared with 809,076 in November 2019.

Starting Nov. 6, travelers from Japan could participate in Safe Travels. But only 524 came in November, partly because Japan still required that most Japanese travelers to Hawaii quarantine upon their return home.

The first 11 months of 2020 brought only 2.48 million visitors to Hawaii, a 73.7% drop from the 9.43 mil- lion who came during the same period in 2019.

Bonham said Hawaii will need to keep the Safe Travels program open, while still emphasizing public health, to avoid backsliding into tighter travel restrictions.

“The increasing case counts that we’ve seen over the last several weeks are a concern,” he said.

Bonham said rising case counts hamper economic recovery even if the state and counties don’t change policies or tiers or enter into lockdowns. As coronavirus cases rise, Bonham said, people begin to reduce their economic activity, translating into “additional job losses, which means other people not going back to work, lost income, and it hits us directly in the pocketbook — so controlling that is really paramount, and keeping the Safe Travels program working is really paramount.”

From the pandemic’s start to Jan. 8, the state Department of Labor and Industrial Relations estimates, 575,352 unemployment claims were filed. From Jan. 4-8, DLIR’s unemployment insurance call center was still averaging 2,149 calls per day.

“What we need is a plan to bring tourism back safely. If it’s just locals, it will keep you floating for a while, but you aren’t making the funds that you need to sustain your business,” said Ernie Kanekoa, who along with his partner, Carolyn Fredrickson, made the difficult decision to close their Kauai restaurant, Kalaheo Steak & Ribs, in July. Kauai has the strictest travel restrictions in the state.

Kanekoa said he and Fredrickson tried everything they could to keep their 2-decade-old restaurant open. Each time COVID-19 restrictions hit, the pair changed their business model, Kanekoa said. They received federal stimulus as part of the payroll protection program but were able to keep their employees on only through June.

Revenue declines related to Kauai’s tourism and economic downturn, coupled with soaring prices — like meat, which went from $850 a case to $1,200 — meant there still wasn’t enough left to pay bills, taxes or employee benefits, Kanekoa said.

“I had forecast 2020 would be pretty good for us due to new contracts with conventioneers. But it didn’t turn out that way. It was like watching something out of a pandemic movie — everything bad just kept unfolding,” Kanekoa said. “I felt bad that we couldn’t hold on longer. When I saw all the other businesses closing, I knew that we had made the right decision to close before we got into more debt.”

From the start of the new coronavirus, states and counties across the nation have struggled to balance public safety needs against the need to keep the economy open. Balancing these competing interests is challenging, said Mike Turner, director of sales and marketing for Kauai Shrimp, which has experienced pandemic-related business challenges across the globe.

“There’s nothing extra special about Hawaii when it comes to this disease,” Turner said. “The struggle to balance is everywhere, and it’s the same story.” Turner said Kauai Shrimp kept its workforce going by pivoting to the retail side after experiencing an 80% drop in wholesale sales when restaurants and hotels in Hawaii and elsewhere closed in March.

Coronavirus-related freight challenges also led to losses, he said.

“We lost a $120,000 load this December when the UPS plane was backing off the gate in Honolulu and the pilot and co-pilot both tested positive for COVID. The shrimp was a complete loss. It’s certainly been a huge challenge,” he said. “It’s not for the weak of heart.”

Turner said the company’s performance has fluctuated along with Hawaii’s tourism-dependent economy, which will need to improve for businesses to have a sustainable future.

“We noticed an uptick when assistance money was available and when people were getting the $600 weekly plus-up in their unemployment checks,” he said. “It helps when restrictions are offset by economic stimulus. We also have to find a way to reopen tourism safely.”

Marine Technology News, 1/25/21

A new record size coral colony at Ta’u Island in American Samoa identified by NOAA-funded researchers is said to be even larger than the island’s Big Momma colony, one of the largest in the world.

The colony was measured and described during a monitoring survey conducted by a multi-agency team including NOAA’s National Marine Sanctuary of American Samoa (NMSAS), American Samoa’s Coral Reef Advisory Group, American Samoa’s Department of Marine and Wildlife Resources, and the National Park of American Samoa, and funded by NOAA’s Coral Reef Conservation Program. The findings were published recently in Nature.

“We are always learning more about coral reefs and ways to conserve them,” said Jennifer Koss, director of NOAA’s Coral Reef Conservation Program. “This is precisely why NOAA continues to have hope for the future of coral reef ecosystems.”

More than 80 of these exceptionally large corals are scattered around the island of Ta’u, under many different environmental conditions. These unusually large coral colonies could be due to mild wave or atmospheric climates and minimal human impacts, the researchers said.

"Many of these large corals, including the coral known as Big Momma, are located within the sanctuary," said Atuatasi Lelei Peau, acting superintendent of NMSAS. "It was exciting to learn of another exceptionally large colony on the opposite side of Ta'u. We will continue to work with our partners and the local community to protect these valuable reefs."

While U.S. coral reef ecosystems cover an area slightly larger than the state of Rhode Island, they provide billions of dollars annually in food, jobs, recreation and tourism, and coastal protection. A U.S. Geological Survey study determined coral reefs annually provide flood protection to more than 18,000 people and $1.8 billion worth of coastal infrastructure.

NOAA’s National Marine Sanctuary of American Samoa is the largest American marine sanctuary and protects 13,581 square miles of shallow water coral reefs and open water.

NOAA’s Coral Reef Conservation Program awards at least $8 million annually in grants and cooperative agreements for coral reef conservation research and activities.

K-Andrea Evarose S. Limol, The Guam Daily Post, 1/25/21

SAIPAN — Northern Marianas Technical Institute Chief Executive Officer Agnes McPhetres said trade schools are as essential as colleges and universities, and vital for economic development. 

She said although trade institutions come with a hefty price tag, the investment is worth it because the students would contribute greatly to the local workforce. NMTI, which is a Commonwealth of the Northern Mariana Islands government entity, recently reopened its doors to students.

Although it is operating at a limited capacity, NMTI offers a variety of courses, including electrical, automotive, plumbing and welding. Noting that NMTI has the lowest cost per student nationwide, McPhetres said the institute has been stretching every penny it receives from donations and funds that were carried over from previous school years 

She said, despite constant pleas to the executive and legislative branches, the institute has not received the funding it desperately needs. McPhetres said the CNMI government also needs to "step back" and allow the institute's board to do its job without "interference."  Otherwise, the institute's chances of receiving accreditation could be jeopardized, she added.

"They like to treat education as a political animal," McPhetres said, "but not enough attention is being given" to NMTI.

Northern Marianas College is accredited, and so its students are eligible for federal Pell Grants, said McPhetres, a former NMC president.

NMTI is not accredited, she added, so its students cannot avail themselves of such funding assistance from the federal government. NMTI students also could not apply for the federal apprenticeship program that was offered in the midst of the global COVID-19 pandemic, she said.

She said whenever funding allocations are determined, the CNMI government tends to prioritize the college before the institute. NMTI needs to be adequately funded, she reiterated, because it must have the required trades equipment and gear.

"We are not YouTube university," said Ross Manglona, NMTI director of continuing education and workforce development. He said trade students learn through hands-on training and not by just watching presentations and reading textbooks.

Dante Yumul, NMTI director of instruction, said despite its many challenges, the trade school has come a long way since its early days.

NMTI is currently working to further expand its internship program with local businesses.

Founded as a nonprofit institution in 2008 by the late local businessman Anthony Pellegrino, the trade school became a government entity with the enactment of Public Law 20-92 in February 2019.

Guam Pacific Daily News staff, 12/29/20

Gov. Lou Leon Guerrero, in partnership with the Guam Economic Development Authority and the Guam Chamber of Commerce, has established the governor's economic diversification working group, which will execute new industries to rebound from the adverse effects of the COVID-19 pandemic. 

Over the summer, the Guam Chamber of Commerce formed an ad hoc committee to conduct research and create an economic diversification plan. The result was a white paper that identified potential industries, discussed barriers to entry, provided implementation recommendations, and articulated potential benefits.  

“We are honored to have been appointed to work through many of the ideas set forth in the white paper. We can achieve a more diverse economy for the people of Guam and attain a more competitive position in the region across a number of industries,” said Siska Hutapea, co-chair of the economic diversification working group. 

Proposed alternative industries include: 

• Alternative dispute resolution 

• Guam captive insurance

• Guam trust incentives act program

• Relocation of high wealth businesses and individuals from Asia

• Pharmaceutical manufacturing

• Construction & labor

• Ship repair industry

• Safe haven port

• Silicon village initiative

• Satellite launching industry 

• Aquaculture and agriculture

“From the start of our administration, we worked with Guam Economic Development Authority to implement an economic diversified strategy that aligned with our campaign platform,” Leon Guerrero said. “It was critical to diversify and add multiple industries that will strengthen our economy." 

“COVID-19 has undoubtedly changed how we do business, not just here at home but all across the globe. This pandemic has presented us with an opportunity to show the rest of the world what Guam has to offer,” said Lt. Gov. Josh Tenorio. “Some of these initiatives are new and some have been introduced in the past, but not received much attention. We look forward to seeing the work of the group and how Guam may carve a niche for itself in industries outside of our existing main ones.” 

Committee members were nominated by the Chamber and will be reviewed and approved by the governor. 

On January 26, the Pacific Islands Regional Climate Assessment (PIRCA), a consortium of several government, NGO, and research entities, published its latest report, “Climate Change in the Commonwealth of the Northern Mariana Islands: Indicators and Considerations for Key Sectors,” which provides guidance for decision-makers seeking to better understand the implications of climate variability and change for the CNMI and its communities.

Key climate change issues affecting the CNMI include more destructive typhoons, threats to ocean ecosystems, and mental and physical health risks. Climate change is expected to disrupt many aspects of life in the CNMI. Those who are already vulnerable—including children, the elderly, low-income families, and individuals with disabilities—are at greater risk from extreme weather and climate events. 

Encourage people to keep up on our Facebook site where you will get daily news articles on economic development issues about Guam, American Samoa, the CNMI, Hawaii, and the region.