The Guam Chamber of Commerce has begun exploring new possible industries to keep the island's economy bustling without relying on the volatile tourism sector.
"The current economic crisis caused by Covid-19 has crippled our visitor industry with almost zero economic activity in the second and perhaps even the third quarter of 2020," said Catherine Castro, Chamber president. "Business closures associated with the pandemic have left thousands of our residents unemployed for the unforeseeable future."
Tourism, Guam’s largest industry, generates $1.4 billion annually and representing 60 percent of the island's annual business revenue. The industry employs over 18,000 island residents or 31 percent of non-federal employment.
Over the years, however, tourism has seen its ups and downs, depending on factors beyond the isand's control.
The uncertainties of this situation reminds us of how vulnerable our current economic model is and how imperative it is that we develop and sustain new industries that will capitalize on our existing strengths and encourage our workforce to seek higher skill-sets.
The Government of Guam has recently released a Consolidated Revenue/Expenditure Report (for the period ending May 31, 2020) which reported a shortfall of $51 million in government general fund revenues. The Bureau of Budget and Management Research (BBMR) Director commented in a local publication that much of the shortfall was attributed to the movement of the tax filing date to July 15th from April 15th.
The report indicates that year to date, corporate and individual tax shortfall is roughly $41 million. While we will need to wait until the July 2020 report to understand the true impact of these taxes on government revenue, the remaining $10 million shortage in collections which support the Government of Guam’s operations is concerning. In addition to General Fund Revenues, Special Revenue Funds are also significantly behind as compared to prior year.
The May 2020 Special Revenue report already indicates that there is a combined $8.4 million shortage in major funds which support government operations. As of May 31st, there is a $2.7 million shortage in the Guam Highway Fund; $3.6 million shortage in the Tourist Attraction Fund; and a $2.1 million shortage in the CQA Inspection Services Fund.
A review of all special funds illustrates that government revenue is tracking well below prior years in almost all funds. Given that 33% of our economy is driven by tourism, it is highly unlikely that these revenue shortages can be recovered in the near future. Therefore, it is imperative that we push forward to develop other industries and take advantage of opportunities to diversify our economy.
The Guam Chamber of Commerce in keeping with its vision of “Being the catalyst for sustainable economic growth that improves the quality of life in Guam” has embarked on a mission to identify industries and ideas that can help with Guam’s economic recovery as the island works to rebound from the Covid-19 pandemic.
For a number of years the Guam Chamber of Commerce has recognized that industry diversification is vital to sustaining our local and regional economies in the Marianas and in Micronesia.
As fruitful as tourism has been for Guam and our neighboring islands, the fragility of the industry has tested Guam and the region’s business community over the years through natural disasters and global crises.
The ongoing infrastructure buildup and improvements associated with the realignment of U.S. forces to the Marianas Islands has brought enormous investment to Guam and will continue to be a source of essential funding for our government and our people in the form of jobs and related diversification in the demand for services.
While we see a gradual return of tourism to our island, the focus of the Chamber's white paper is to look at industries outside of tourism to grow our economic base with the support of our public sector in the hopes of mitigating the vulnerabilities associated with travel restrictions, mandatory lock down measures or business closures.
The objectives of this paper are to:
Identify potential new industries or ideas;
Identify and address any barriers;
Provide a suggested action plan for the implementation of each idea of industry; and,
Demonstrate the benefit of each industry to our island.
Below are some of the ideas and industries that the group has identified as attainable:
Alternative Dispute Resolution (ADR)
Captive Insurance
Guam Trust Law
Relocation of High Wealth Individuals & Business from Asia
Pharmaceutical manufacturing relocation to US Territories
Construction, Ship Repair and Labor
Safe Haven Port
Satellite Launching
Silicon Village Initiative
Key to pushing many of the ideas forward is working with our local government to elevate Guam service levels by streamlining our government operations and processes. Further, a commitment from our government partners to work toward these goals collectively will determine how quickly we can attain them.
Onward Together,
Catherine Castro
President
Guam Chamber of Commerce