Workforce uncertainties could wobble Guam’s economic legs

January 3, 2017

 

 

Along with tourism, U.S military spending prop up Guam’s economic stool, but recent developments regarding the receding of a proposed amendment to the 2017 National Defenses Authorization Act lifting restrictions on temporary workforce recruitment could destabilize growth in this sector.

 

Guam stands to receive $248.658 million worth of military projects this year under the federal budget legislation. But while funds for projects are to be made available, manpower remains a challenge. The Senate thumbed down Guam Delegate Madeleine Bordallo’s request to provide the US Customs and Immigration Service with flexibility in administering the H-2B program on Guam.

 

Guam previously enjoyed a nearly 100 percent approval rate and was exempted from the annual national cap of 66,000 H-2B visas. Historically, construction companies recruit temporary workers to boost their local workforce. But the spate of H-2B visa disapprovals, which has reached more than 90 percent, and now the NDAA amendment drop, further crippled chances of recruiting enough skilled workers. Before the passage of the agreement, a dozen local companies from construction and other industries filed a lawsuit against the U.S. government in the District Court, with a hearing expected to be held this month.

 

The FY2017 NDAA authorizes funding for military construction projects, including $78 million military housing project in Andersen Air Force Base, and $8.5 million for energy conservation projects, among others. A dearth of skilled workers will definitely impact capacity to fulfill construction timelines and other requirements.

 

Funding appropriations imply an increase in construction activity but actual project schedules and amounts may vary. In the “Economic Outlook for Guam Fiscal Year 2016,” Gary Hiles, chief economist at the Department of Labor, noted that “an analysis of the FY 2010 defense appropriations for construction found the lag from the time of appropriations to contracting ranges from about five to 11 months, with construction averaging about two years for most projects and three years for major projects.” He added that not all of the appropriations were contracted, and some contracts were awarded below the appropriation amounts.

 

While the construction sector faces uncertainty in 2017, tourism continues a positive growth curve. GVB is targeting 2 million visitors in 2017, with plans to rebrand Guam from “cheap budget destination” to “a world-class, first tier resort destination of choice” for business and leisure visitors.

 

At the end of fiscal year in September 2016, arrivals to Guam posted at 1.5 million, surpassing a near-20 year record in 1997 with 1.4 million. Between 2011 and 2016 alone, tourism grew 70 percent. The Pacific Asia Travel Association annual summit and Festival of Pacific Arts were two of the biggest events that gained worldwide attention and brought thousands to the island in 2016. The military, also Guam’s main economic driver, has contributed to this performance. The Valiant Shield exercise in September brought 6,000 military personnel who came ashore for the duration of this military training.

 

Nathan Denight, president & CEO of the Guam Visitors Bureau, noted in his presentation on “Repositioning Guam v 2.0” that the industry provides 1 out of 3 or at least 20,000 jobs on Guam. And the sector produces business revenues of $1.5 billion or nearly 60 percent out of the total island revenues on island.

 

GVB also seeks to increase tourism sales from 2013 figures of $1.4 billion to $3.4 billion, industry-related jobs from 18,000 to 30,000 and tax revenues from $150 million to $250 million to $425 million by 2020. The bureau follows the Guam Tourism 2020 roadmap and its eight core objectives.

 

Despite the construction workforce crisis, Guam registered a 0.4 increase in its gross domestic product in 2015, according to the Bureau of Economic Analysis. The growth in Guam economy reflected increases in consumer spending, exports of services, and federal government spending.

 

The report said exports of services, which consist primarily of spending by tourists, grew for a second consecutive year. The increase reflected growth in Korean visitor arrivals and average spending by Korean tourists.

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