Guam Economist Warns Against Planning Around Uncertain Buildup

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Economist tells businesses to ignore promises of buildup

By Mar-Vic Cagurangan

HAGÅTÑA, Guam (Marianas Variety Guam, May 4, 2012) – With a host of uncertainties continuing to lurk in the background of the revised Asia-Pacific troop realignment plan, Guam can’t be too optimistic about the prospects of military buildup, Bank of Guam chief economist Joseph Bradley said yesterday.

And while tourism is showing signs of strong recovery – with arrivals projected to increase from 1.1 million last year to 1.25 million this year – Bradley warned economic planners to be more cautious.

"The military buildup? Never mind," Bradley said, advising the business community not to count on the supposed promises of the military buildup when making business plans.

"I’m ignoring it right now because there is nothing there to hang my hat on," Bradley said, speaking at the Bank of Guam-sponsored economic update presentation at the Guam Hilton Resort and Spa.

Despite the U.S.-Japan Security Consultative Committee’s recent announcement about the revised posture under the Realignment Roadmap, the planned redeployment of 5,000 Marines from Okinawa to Guam remains a problematic component of the plan.

Joint Guam Program Office Executive Director Joseph Ludovici on Wednesday disclosed the Navy’s plan to expand the supplemental environmental impact statement, with a final study targeted to be released in 2014, and the Record of Decision (ROD) in early 2015.

"I won’t be fooled again," said Bradley, who made an optimistic projection when the first record of decision was signed in September 2010.

He noted that the military buildup has taken a series of "now-it’s-on-now-it’s-off" twists since the ROD was released.

"For business planning purposes, I want to know what’s going to happen next week, next month, or maybe next year," Bradley said. "But three to five years from now, I can’t make full plans, particularly when I don’t know how much impact it will have on the civilian economy."

Without firm details, Bradley added, "we can’t make solid decisions because we don’t know what is going to happen; even JGPO doesn’t know what’s going to happen."

On the mark

"You’re right on the mark," Rey Llaneta, Chugach World Services manager for the Western Pacific region, told Bradley, adding that calculating business moves has become more imperative for his company.

"Our company’s presence on Guam wasn’t buildup-related but because of promises and briefings that went on – in three industry forums it was said that [the military buildup] was going to happen – we made business decisions in preparation for the buildup," Llaneta said.

He added Chugach is starting to make business adjustments in a bid to find new opportunities outside of the troop buildup. He agreed it is imprudent for any business to wait for 2015. "It’s so far away from now," Llaneta said. "I’m hopeful but not as optimistic as I was two years ago. When there is a time gap, there will be changes in people who have the ability to make decisions. There will be new senators and new [Department of Defense] managers who might change previous decisions."

For the most part, Bradley said, Guam’s economy is showing signs of slight improvement. But just the same, it remains at the mercy of the sluggish national and global recovery, he added.

"Businesses are not investing too much in the states; they are sitting on piles of cash because they know that the yields they can get out of any investment – whether financial or in equipment – are quite small," the economist said.

Tourism

Bradley noted that the tourism market is seeing a slow but steady growth. In March, Guam had 126,377 arrivals. "This is the highest level we’ve had in the last three years," he said.

Making a tentative forecast, Bradley said the number of arrivals is likely to hit 1.25 million in 2012 with the Japanese market pulling through and the Russia visa waiver having been granted.

"If the projection pans out, we would see a 7.5 percent increase in arrivals," Bradley said. However, he added, "three months do not make a trend."

Tourism growth won’t mean much unless it translates to an increase in local employment, Bradley said. "We’ve seen a recovery in tourism but it’s not showing in payroll employment," he said.

Between the first quarter of 2010 and the first quarter of 2011, Guam saw 1,350 additional jobs, but has since lost 310 jobs. In 2011, the lost jobs were replaced by 70 jobs in the government of Guam and 240 positions in federal civilian employment. "It’s not promising," Bradley said.

"We do have another side of the economy: the consumer price index, which continues to rise," he added. In the first quarter of 2010, Guam’s CPI was at 107.8, which increased to 109.8 during the same period last year, and 116 during the first quarter of this year.

"Be careful," Bradley told his audience. "I’m still not particularly optimistic."

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