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[Floyd K. Takeuchi] ETG: Let’s Deal With The Issues

 

By Floyd K. Takeuchi

 

A recent online commentary in the Wall Street Journal by Neil Mellen raises philosophical issues about the nature of economic development in the Micronesia region, and why we face the challenges of a bloated government and lack of significant economic development in the Federated States of Micronesia. Mr. Mellen is no stranger to the region, having served in Yap with the Peace Corps and he remains active in Micronesia through his non-profit organization, Habele, which supports elementary school students.

The core of Mr. Mellen’s commentary, while focused on the so-called ETG resort project in Yap, was about finding the correct path for sustained economic development in the FSM (and beyond).  He posits that U.S. supplied funding, badly planned and managed by the FSM, is at the heart of a culture of big government and economic dependency. In Mr. Mellen’s view, the ETG project, which would result in a massive resort development on Yap by a Chinese developer, is an understandable Yapese response to decades of dependence on the U.S. dole.

I would suggest the discussion of the ETG project, which I find preposterous and believe to be unsustainable, if indeed it is every built, and why there is an admittedly abysmal record of economic development in the FSM are related but separate issues.

Indeed, the ETG project in Yap may offer some financial benefits for the Yapese and FSM national government, but I believe it is too large, and too reliant on development of an entirely new public works infrastructure to be sustainable. It should be filed in the nutty idea drawer with another “think big” project of past decades, the so-called Palau Superport, which would have transformed a small, pristine Palauan atoll into an oil transshipment port for East Asia. That idea, thankfully, never got off the drawing board. And today, Palau is moving quickly to position itself as an international leader in environmental awareness – a move that only further strengthens its active tourism industry.

But let’s look at the separate question of appropriate economic development in the Micronesia region. The biggest challenge has always been land and an investor’s ability to either own land or obtain a secure long-term lease. Any serious investor in the Pacific – not just the Micronesia region – needs to understand that land and culture are one and the same. History clearly shows that if you alienate land ownership from the indigenous peoples, the culture and language in many cases also are lost. That is why nearly every independent Pacific Island nation prohibits the ownership of land by non-nationals. In fact, even the U.S. territory of American Samoa and the U.S. Commonwealth of the Northern Marianas prohibit ownership of land by outsiders, though the Northern Marianas may change that provision in a desperate attempt to attract investors again.

And while foreign investors usually demand ownership of land to secure their investment, proper long-term and secure land leases in independent Samoa has not hindered the development of a strong tourism industry with most of the hotels owned by Samoan interests. In fact, some of Samoa’s best hotels are locally owned. Anyone who has ever visited Sinalei or the Aggie Grey hotels on Upolu will know that local investors can, if they are smart enough and have the capital, develop outstanding, world-class properties. And I would add that nearly every hotel in Samoa is staffed by Samoans, not imported foreign workers.

If you need examples of what happens to local cultures when land is alienated from the indigenous population, just look to Guam and Hawaii. It is a sad, tragic commentary on the plight of the indigenous culture in the Hawaiian Islands when people here, often in the tourism industry, refer to the “host culture.” That’s PC talk to blur the reality of the lack of power and control by the islands’ indigenous peoples.

The point here is that the Micronesia region, outside of Guam, has a well-deserved reputation for land-lease issues that have bedeviled tourism investors. There’s the example of Japan Airlines’ huge investment in the former Nikko Hotel at Saipan’s San Roque village. The massive property was built during the tourism boom on Saipan on land that JAL secured through a long-term lease, and paid in full at the beginning of the lease. At least JAL thought the lease was secure. Imagine its shock when a local court ruled a few years back that the lease was flawed. JAL ended up walking away from the hotel, and the Northern Marianas market, and today the hotel stands as a sad monument to investments gone bad.

Closer to home for Yapese, there is the tragic example of the soon-to-be demise of The Village Hotel in Pohnpei.  The Village, as its legion of fans worldwide call it, is closing because its owners were unable to secure a new lease with all landowners. A few holdouts, for their own reasons, figured it was better to shut down the FSM’s finest hotel and one of the Pacific’s pioneering eco-resorts rather than agree on a new lease. Bob and Patti Arthur, and in recent years their son Jamie, have shown the Micronesia region what it takes to develop a successful, world-class eco-resort.

This is not to say that the ETG project in Yap will face lease challenges. But if any FSM state has tricky land-ownership issues, it has to be Yap.

Mr. Mellen’s commentary takes particular aim at U.S. policy in the Micronesia region, and blames it for many of the FSM’s economic woes. Please, to continue assailing Washington for the obvious shortcomings of the national and state governments in the FSM in 2013 is simply absurd and quite frankly, tiresome.

Let’s look at the FSM — self-governing since 1979, independent since 1986. This means the FSM has been an independent nation (albeit receiving generous U.S. financial support in exchange for U.S. control of the nation’s defense) for 27 years.  Now, let’s see — the U.S. Trust Territory of the Pacific Islands existed from 1947 to 1986 in the FSM. That’s 38 years.  In real terms, this means the FSM has been on its own for nearly three-quarters of the time that the U.S. administered what is now the FSM, RMI, Palau and the Northern Marianas.

I think we can, at this point in history, reasonably assess responsibility and accountability to the national and state leadership for the clearly top-heavy bureaucracies we find in all of the former TTPI districts.  And there’s a related question: Would we wish upon the FSM (or the Marshalls or Palau) the reality that the leadership of the Solomon Islands and Kiribati faced when the Brits ended their parsimonious colonial rule? I doubt it.

Let’s use a specific example.  Look at the efforts in the FSM, during Compact 1, to develop a national fisheries industry. Rather than bring in the private sector to do what it does best — run profitable companies — the FSM chose to make the nation’s fisheries industry a government-run initiative. Some $400 million later (funding supplied by the U.S. but controlled by the FSM), all we have to show for it are a few rotting fishing boats in local harbors, and abandoned fish processing plants. And, of course, foreign fishing companies operating in the islands based on contracts with the respective governments.

Again, the disastrous fisheries initiative wasn’t a U.S. decision — it was an FSM decision. And it isn’t the only example of the national and state governments’ refusal to give up control (for whatever reasons) of economic development projects that should have been led by the private sector, which assumes most of the risk but also rightly expects a reasonable return on investment. Is it any wonder that in Compact II, the FSM is saddled with the unfortunate JEMCO board that requires a U.S. stamp of approval on how its funds are spent?

If someone wants to point a finger at outside interference in the economic activities of these nations, I would suggest they look to the World Bank and similar international lenders. Those lenders are imposing governmental and political structures and policies that, in some cases, make sense, but in other cases have little appreciation for the political or cultural dynamics of the governments. But because the national governments have dug themselves — with their own shovels — into deep holes, the World Bank and ADB and so on are the only option left.

Finally, the ETG project is on the money in that tourism is a logical industry to develop in the Micronesia region. But the FSM and Yap don’t even have to go as far as Samoa to find an example of tourism development that works, and benefits locals and the national government. Look to Palau, where the Palau Pacific Resort has set the standard for high-end, high-income Micronesian tourism since the mid-1980s.  PPR, as it is better known, was developed and is still owned by the original investor, the Tokyu Corp of Japan. It still offers outstanding service, still attracts high-spending Japanese (and others), and has maintained and improved its plant over the years. You may recall that Tokyu had to build the beach there — but made the investment.

I remember interviewing the first general manager of PPR in 1985 — he was working hard to get the hotel to international standards. The general manager made it clear to me that his brief was clearly spelled out by the chairman of Tokyu, who felt Palau deserved an international-standard resort: develop a hotel that the chairman could be proud of.  One of the best examples of PPR’s lasting success is the fact that it can charge rack rates in excess of $300 a night, and that the hotel staff that deal with the public — front desk, bellmen, wait staff, etc. — are Palauan, not foreigners as is the case in nearly every other hotel in Palau.

In the end, of course, the Yapese will determine whether the ETG project goes forward as planned, is scaled back, or is put to rest. The Yapese have a well-deserved reputation for reasoned decision-making, and I remain confident that common sense and a long-term concern for the state’s rich culture rather than the desire for short-term gain will prevail in regards to the ETG project. But as the issue is debated, let’s not confuse the facts or blame others for what is an FSM issue. Whether or not ETG goes forward will be the result of decisions made by the Yapese people and FSM leadership. They, and they alone, assume the responsibility for the decision, and they must also assume the accountability for its consequences.

Floyd K. Takeuchi is a journalist who has reported on the Micronesia region since the 1970s. A former editor-publisher of Pacific Magazine, he was born and raised in the Marshall Islands and his family also lived on Saipan for nearly 20 years. His work can be seen at www.floydtakeuchi.com.

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