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79 percent of stores owned by Chinese, Taiwanese

By Giff Johnson HAGÅTÑA, Guam (Marianas Business Journal, Jan. 18, 2010) – In the 1980s, one had to look hard to find retail businesses in Majuro - especially neighborhood takeout stores - that were not owned by Marshall Islanders. Fast-forward to 2009 and the retail businesses owned or operated by natural-born Marshall Islanders are in the minority in the capital of the Marshall Islands.

A survey of 146 retail businesses in the downtown section of Majuro conducted by the weekly Marshall Islands Journal newspaper at the end of November produced the startling result that foreigners - many of whom have Marshallese citizenship - now dominate the retail sector. Of 146 retail stores checked, 54 percent (79) of the stores are now owned by foreigners, mainly Chinese and Taiwanese. These 146 stores are crammed into a two-mile strip of land in the downtown area affording residents a choice of several stores within a stone’s throw of each other.

The competition has been generally good for consumers, with lower prices and choice selection expanded. But persistent problems of smuggling and tax evasion have hit government revenue. Despite numerous complaints since the mid-2000s from tax-paying firms about an uneven playing field created by many tax-dodging businesses, it wasn’t until the end of November this year that the first criminal smuggling charges were filed against two Asian-owned firms. Neighborhood takeout stores for many years have sold cigarettes and other products at bargain prices that confirm the stores are not paying taxes on these products, but enforcement of laws in the capital has historically been lax, a condition that makes Majuro an attractive destination for business people from outside.

There was a handful of non-Marshallese from different countries married to locals who had been established and run long-term business enterprises in Majuro, some dating to the 1970s and before. But they were the few among many Marshall Islander-owned companies. The growing Asian influence flourished as a direct result of the government’s promotion and sale of Marshall Islands passports in the 1990s. No one knows how many passports were sold, though the estimate is around 2,000. Passport sales were finally ended in 1996 after the U.S. State Department demanded a halt because naturalized Marshall Islands citizens were trying - illegally - to use their new passports to gain entry to America.

Initially, only a handful of passport purchasers moved to Majuro to set up businesses in the late 1990s. But the real impact of the passport sales program was to put Majuro on the Chinese radar as a place of interest, resulting in dozens more Chinese arriving this decade, with passports and relatives in hand.

The Marshall Islands switched diplomatic recognition from China to Taiwan in 1998, and the ties with Taiwan have stimulated some large business developments in Majuro - including Koo’s Fishing Company reflagging its six purse seine fishing boats in the Marshall Islands and establishing facilities in Majuro, and plans of a large Taiwan shipbuilding firm, Ching Fu, to establish a drydock in the capital. Nearly all Taiwan-owned retail stores in Majuro are large, employing significant numbers of Marshallese, while most of the Chinese-owned businesses are smaller takeouts, taxi companies and auto repair shops, though increasingly there are bigger wholesale firms run by Chinese nationals.

There are 96 small takeout stores in the downtown area. Marshall Islanders are still in a slight majority, owning or running 52 percent of these small businesses. When it comes to medium and large business, Marshall Islanders are in the minority. Together, Chinese and Taiwanese own a total of 56 percent (20 of 36) of the medium size stores.

While the profusion of stores selling everything from zories and plastic flowers for funerals to corned beef and rice has generally been good for the consumer, the same cannot be said of its impact on Marshall Islander-owned stores, now in the minority. There is no sign that the trend of increasing Asian dominance of Majuro’s business section is slowing, and the laidback attitude toward government enforcement suggests that Majuro will remain a friendly destination for foreign businesses.

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