Tuesday, January 29, 2008

A conversation with Jim Arenovski

When Bill Clinton was running for president in 1992, his senior staffers had a sign in campaign headquarters famously reminding them "it's the economy, stupid," to keep the campaign focused on the big issue of the time. Here in the CNMI, the collapsing economy continues to be the big issue. To get a longtime businessman's viewpoint on economic issues, I interviewed Jim Arenovski, the newly chosen Chamber of Commerce president. Arenovski is president of Delta Management, which manages service stations here in the CNMI and in Guam. Arenovski gave his own personal thoughts on economic issues surrounding us, and is not speaking on behalf of the Chamber in this interview.

JCT: What is the most important thing the local government can do, or not do, to help foster economic development on the islands?

JA: The Chamber has been invited to sit on the recently formed Commonwealth Economic Development Study Committee. The study is required in order for the NMI to receive federal grants at all levels, and this plan is reviewed every few years. One part of the process is getting input from the business community about what projects we feel most likely would aid economic recovery. Although we have not begun to gather such information yet, I will speculate that securing and implementing a plan for reliable power at a fair per-kilowatt-hour rate will be on most of our members’ lists. A sound infrastructure, especially power, is necessary in order to attract, and keep, investors.

JCT: What specific feedback do you get from Chamber businesses on exactly how the unstable and expensive power on island is impacting business?

JA: From personal experience and discussion with member businesses, there is a high level of frustration. Paying such exorbitant rates and still having outages; all among a strained economy is devastating for some businesses. Where there is a shrinking number of people (customers) dining out or shopping to begin with, restaurants and other establishments (especially those without generator power), see lower numbers of customers and a loss of business. Power outages hurt this situation even more. Many of our members have invested in power generation systems and see some opportunity, since many residents venture out of their houses to establishments that have power, when there are outages. But even this is affected by the cost of driving to the restaurant or shopping location (not to mention the cost of running the generator itself) and the fact that residents simply have less money due to the high cost of CUC power.

Many companies struggle with essential equipment for their operations, which is strained by “load shedding,” scheduled or unscheduled, that causes problems with the efficiency and longevity of the equipment.

One of the intangible aspects of expensive and inconsistent power is the negative effect on the morale of both private citizens and business owners, which causes a variety of other business and social problems.

JCT: Do you think there will be a day when there will be a vibrant private sector paying wages somewhat comparable to the mainland instead of this government job model that, to me at least, sure looks broken and unsustainable? Can island economies really work given geographic isolation, lack of economy of scale and a seemingly endless up tick in the cost of fossil fuel?

JA: I do think there will be better wages in the NMI, but that comes at the end of a number of changes. Getting investors into the NMI and finding additional industries is key, but to do this we need better infrastructure, and a review of our property laws, Articles 11 and 12. Will we ever be able to sustain a minimum wage as mandated by the Federal Government? I think once the studies come out we’ll have better qualitative and quantitative data to make that determination. I know that now, in this economy, many small businesses will find it hard to generate the sales revenue increases necessary to be able pay such wages.

JCT: Other than revamping the tourism industry, do you see another industry that can potentially come in and replace the rapidly decreasing garment factories?

JA: I am not an economist, nor do I have a crystal ball, but I find it hard to believe we will find another single industry to replace the tax revenues and “trickle-down” benefits brought in by the garment industry. I think this is why we fought so long and hard to keep that industry here. My personal hope is that any future industry be required to be compatible with our beautiful islands and not negatively impact our tourism industry.

Education could possibly be one aspect of a “new industry.” We already see students from Korea and elsewhere coming to the NMI for education and I have heard discussions about promoting education tourism. This is an industry that is environment-friendly, but it does not nearly match the financial impact of the garment industry.

JCT: What is Guam doing right that we can't seem to duplicate and why?

JA: I have businesses in Guam and there are strains there too. Guam has indeed done some things right, but they have their share of ups and downs. They have retirement fund issues, sizable deficit issues, taxation problems and an increasing drug and crime problem. Some have said if it was not for the impending military build-up there would be more reason for concern in Guam. Others have indicated that this build-up could bring more ills to Guam. Certainly the build-up has caused housing prices to skyrocket from just a few years ago and businesses, even some from the NMI, are positioning themselves to benefit from the estimated $14 Billion in projects and the estimated 20,000 additional people on Guam.

One thing to remember, in the early and mid 90’s Guam was infamous for GPA’s “load shedding.” There was a real power crisis at the time, and they came out of it with the help of a public/private partnership, among other factors. I believe the NMI can do the same as long as we have the vision and the resolve to make sure it is fixed.

1 comment:

The Last Weatherman said...

Who sprung for the food?