July 08, 2009

By Bill Jaynes
The Kaselehlie Press

Peilapalap, Pohnpei-When the Association of Pacific Island Legislators met in Pohnpei in June their main topic of discussion was the US military buildup in Guam and how it will affect the Pacific region. The gathered legislators heard presentations from many speakers on various aspects of the buildup.

Carlotta Leon Guerrero, Chief of Staff for Guam's Lt. Governor's office said that Pacific Island governments and business people should be proactive in seeking opportunities for themselves both before and after the military buildup. She said that businesses in Guam in order to be competitive might look to outsource some services to Pacific Islands businesses. With that in mind, she said, business minded people in the Pacific islands ought seriously to consider joint ventures with Guam businesses.

She recalled a conversation with a business person from a Fortune 500 company who boasted that his company would likely provide aggregate for the buildup that would be shipped from the US state of Texas because Guam's aggregate is not the type that is needed for the construction. She said that rather than importing aggregate from so far away, Pacific islands and particularly Pohnpei ought to look into whether or not aggregate that could be provided from the islands would be suitable for construction requirements in Guam.

She said that land use issues surrounding the buildup have in no way been fully resolved and that it may well be that the US will need to seek additional space on other Pacific islands.

Pacific Island legislators asked her dozens of pointed questions most of them centering on how they can get the information needed to make good moves for their home islands related to the buildup. She said that getting information is often quite difficult and that even the military leaders based in Guam don't have all of the answers. The majority of decisions regarding the buildup are being made at the Pentagon. Guerrero said that she has been able to find out most of what she needs to know by keeping her ears open and by utilizing the Internet.

She encouraged the members of APIL to be creative in their thinking regarding opportunities surrounding the military buildup in Guam.

Joseph P. Bradley, Senior Vice President of the Bank of Guam and the Bank's chief economist gave a presentation entitled Shelter from the Global Economic Storm. With wry wit and a dry sense of humor Bradley gave a detailed presentation on the world financial events and poor decisions that led to the meltdown of financial markets. He said that he disagreed with the economists who are saying that the world economy is already well on its way to recovery. His view is that the world economy will take years to recover from the events that on the surface seemed to have developed over night but had actually been building for the last 50 years of expansionary US fiscal policy and shortsighted monetary policies.

Bradley said that at least for the next few years the Pacific region will have a bit of a shelter from the global economic storm due to the US military buildup in Guam. The economic possibilities from the buildup will not be reliant on internal building of economic resources in the area but will come from the billions of dollars that the US and Japan will need to spend in order to accomplish the relocation of the Okinawa military base.

Bradley said that approximately $787 million will be appropriated for military construction in Guam in fiscal year 2010.The economic impact of the military buildup is already happening in Guam.

Bradley said that in 2007, real estate speculators drove up Guam market prices based on the news of the impending military move. Speculators did not take into account the timing of the move nor the fact that details of the move might change. Many of the details of the move have changed substantially since the move was first announced. Bradley said that real estate prices have moderated for now in Guam but that he expects them to begin to rise again during the next fiscal year. Minor preliminary construction has already begun. Already the economic impact of the buildup includes a large number of consultants traveling to Guam all of whom must spend money to live when they visit the island. An environmental impact statement is being prepared and facilities engineering work has already begun. Some outside contractors have already established offices in Guam in anticipation of the possibility of lucrative construction contracts.

Local firms are encouraged to bid on federal contracts, and training sessions on how to succeed at that have been frequent, Bradley said.

He said that besides the specific military needs, the government of Guam estimates that it will need $2.6 billion for infrastructure improvements related to the buildup for roadways, power transmission, water production and distribution, wastewater treatment, port facilities, and airport facilities. He said that in addition, hospital and medical clinic capacity will need to be expanded. During the construction phase of the buildup more schools will be needed. Law enforcement personnel and capabilities will need to be expanded and improved.

To ensure that all taxes due to the government are being collected there will need to be expanded governmental abilities for revenue collection and enforcement. Bradley said that even bigger economic developments in Guam should begin by later this year. He said that the Bank of Guam has already received a financing proposal for the construction of 20,000 housing units. He said that more housing units will be needed to house construction workers, and ancillary staff related to the buildup. "Hopefully," he said "the design will meet affordable housing needs post-construction."

Bradley said that US citizens will have first priority for construction jobs in Guam including citizens of Guam, CNMI, Hawaii, American Samoa, and the mainland of the United States where unemployment in the field of construction exceeds 19%. Citizens of friendly nations will have the next crack at jobs including workers from Japan, Philippines, Taiwan, South Korea, and the Pacific Islands.

Bradley said that due to reasons of national security the workers would not be from China or from Russia.

He said that "huge amounts of money" will be flowing through Guam during the buildup and that much of it will be flowing through the hands of transient construction workers. He said that businesses of all types should see expansion and he expects to see many more businesses open up. There will be a huge demand for businesses that provide warehousing and transportation of goods, such as trucking businesses. There will be room for new and expanded businesses in almost every category: wholesale, manufacturing and fabrication, transportation, personal services, professional services, restaurants and bars, entertainment, and many more.

Bradley warned that the boom will not last forever and equated it to the days when foreign investors began to build hotels in Guam. The number of construction workers peaked at approximately 12,500 in 1991 at the height of the boom and gradually declined to a low of 2500 construction workers in 2001. By 2007 there were just over 6000 construction workers in Guam. Bradley anticipates that by 2013 there will be over 26,000 workers in the construction field alone before the boom days begin to slack off.

When the construction is over, he said, most of those jobs will disappear though a few will remain because of the population increase. The Marines have said that they will only need about 500 additional civilian workers but that most of those would be military spouses and local residents.

He said that when the construction is over the surge in incomes and property values will be quickly thrown into reverse. Remittances will fall off, government revenues will drop, unemployment and its associated problems will rise, and skilled workers will relocate for better job opportunities.

He further warned the gathered Pacific Islands legislators that the workers who relocate to Guam will not be available to work on their home islands. Those workers are likely to be the best and the brightest and it is possible that they may never return to their home islands. Worker remittances to their home islands will stop when the buildup projects are completed and those workers who do return will have changed and will have new expectations including an increased expectation for their own standard of living.

Guam, he said, would change along with the entire Pacific region as a result of the buildup.

On a positive note Bradley said that the buildup would generate huge amounts of income for the Pacific islands, not just for Guam.

He said that once the buildup is complete there will be a larger transient population interested in travel and in exploring the islands. Tourism opportunities will, by his estimation, persist well beyond the actual buildup period.

Depending on how one looked at the situation, he said, the Pacific region would be more or less secure because of the presence of the US military.