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Concern that $40 fee will discourage visitors

By Giff Johnson MAJURO, Marshall Islands (Marianas Business Journal, Feb. 28, 2011) – The proposed increase in various airport fees - including an initially proposed doubling of the passenger departure fee - sparked a spirited debate at the Marshall Islands Chamber of Commerce earlier this month.

Several business people expressed concern that increasing the various fees would make the Marshall Islands less attractive as a destination for tourists, international aircraft being ferried across the Pacific, and other visitors.

To solve an expected operations deficit of nearly US$1 million, the Marshall Islands Ports Authority has proposed increasing more than two dozen fees. These included increasing the:

Most businesspeople at the Feb. 9 chamber meeting objected to the US$40 departure fee as too high, urging the Ports Authority to consider a smaller increase to US$25. In the final draft prepared for Cabinet review in late February, the ports authority reduced the proposed departure fee increase to US$25.

Marshall Islands Ports Authority Director Jack Chong Gum told the chamber that the ports authority is able to draw in tens of millions of dollars in U.S. Federal Aviation Administration (FAA) funding - that translates into jobs and tax revenue - but has to provide a 5 percent match to each FAA grant it receives.

He said that the ports authority is facing a deficit of US$866,000 in the current fiscal year if it does not increase fees - and this deficit is without including the US$500,000 that the Marshall Islands government is requiring the ports authority to contribute to the government's General Fund and an approximately US$240,000 payment that the cabinet has directed the ports to pay to landowners for back rents.

"The airport loses US$300,000 a year," Chong Gum said. "Without the revenue from the seaport, we would have to raise fees to break even. The airport requires a lot of money to maintain."

Chong Gum said that this year, the agency is taking aggressive steps - including hiring an attorney - to collect outstanding debts. The ports authority is owed US$2.6 million and is aiming to collect US$750,000 of this old debt in 2011. "We'll be taking legal action (on debts)," Chong Gum said.

Two key projects happening this year are a US$17 million FAA-funded road realignment project at the western end of the runway at Amata Kabua International Airport and a US$1 million channel marker installation project. Both are being performed by Pacific International Inc., (PII) Majuro's largest construction company, which also has work in Guam, Chuuk and Pohnpei.

"These CIP projects bring in a lot of money and create revenue and taxes for the Marshall Islands," Chong Gum said. PII chief executive offer Joseph "Jerry" Kramer said he estimates that construction projects generate up to 17 percent of their value as tax revenue. "The government gets big bucks from CIP projects," Kramer said. "So it's a double hit for the government to ask the ports authority for additional money."

Marshall Islands Resort General Manager William "Bill" Weza said he felt the increased charges would hit a small but important tourism-related sector: ferry flights that use Majuro airport as a stop off for fuel, food and other services while bound for America or Asia.

"We've seen a dramatic increase in ferry aircraft," Weza said. "The new fee structure will discourage new business." Weza raised concerns that neighboring Pohnpei, which is undergoing a Japan-funded airport expansion, will take business away from the Marshall Islands.

But Chong Gum said he didn't think so and that Pohnpei's and Majuro's airport facilities were not comparable.

While the ports authority, subject to cabinet approval, is planning to raise many fees, one fee it is not touching is Continental Micronesia's landing fees and related charges. Chong Gum confirmed that the fees will not impact Continental. But one business person at the meeting suggested that the planned increase in departure fees be directed instead at Continental so that the amount would be wrapped into the price of a ticket and not be an extra charge that requires travelers to pay cash at the airport.

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