GUAM: China Impacts Guam, Saipan, Palau Tourism

China’s economic growth has slowed down, but its multitrillion-dollar economy still affects Guam and other islands in the Western Pacific, said a local economist.

When China’s economic growth slows, it tends, like other countries would, to rattle its military sabers, said Joseph Bradley, senior vice president, chief economist and business continuity officer at the Bank of Guam.

Bradley and two other experts were guest speakers Friday at an economic forum sponsored by the Guam Chamber of Commerce Small Business Focus and Development Committee, in partnership with the Guam Small Business Development Center. The forum was held in the Outrigger Guam Resort.

China’s saber-rattling such as its current territorial disputes with smaller neighboring countries in the South China Sea — could lead to increased U.S. military presence and spending in Guam, Bradley said.

He’s neutral on U.S. military expansion on the island, but Bradley said if U.S. military spending does increase significantly, more economic opportunities could open up on the island.

Increased U.S. military presence in Guam could add jobs, more income for island residents and increased tax contributions from the paychecks of military and support personnel, he said.

Tourism and defense spending are key drivers of Guam’s $4 billion-a-year economy.

The number of tourists from mainland China isn’t huge; it’s just above 1 percent of Guam’s 1.4 million visitor arrivals last fiscal year, Bradley said.

However, Guam’s visitor industry has been hoping that the mainland Chinese tourism market could become a major source of the island’s tourists.

Guam has spent years trying to pursue a visa-waiver program for mainland Chinese visitors, but has so far been unsuccessful.

Chinese investments are already dominant in Palau and Saipan, local experts said.

In the island Republic of Palau, Bradley said, Chinese investors have brought in “buckets full of money.”

They’re buying up hotels and apartment buildings and converting them into bed-and-breakfast places, Bradley said.

Some of the small, local tourism operators in Palau, however, are beginning to feel pinched by the massive foreign investment.

Bradley said Chinese investors are also bringing in their own tour boat and tour bus operators in Palau, so local small businesses are struggling to compete.

In Saipan, Chinese investments include proposed massive hotel and casino development projects.

If all of the proposed hotel developments in Saipan materialize, Saipan would have more hotel rooms than Guam, said money management expert David John, another speaker at the “Guam Economic Outlook” seminar.

Guam outlook

Gary Hiles, chief economist at the Guam Department of Labor, said government of Guam General Fund revenues increased 3.8 percent to $699.6 million in fiscal 2015.

However, while individual income tax payments increased 30 percent, business tax collections and corporate income tax payments decreased 4 percent, according to Hiles. Corporate tax credits were part of the decrease, he said.

Hiles and Bradley agreed that the economy is progressing, but not at a robust pace — yet.

There’s about $1.3 billion sitting in accounts and for military construction projects in Guam, but the projects haven’t been contracted out yet, Hiles said.

Japan has contributed more than $1 billion to help the United States move some of the Marines in Okinawa to a new base in Guam. That relocation is expected to cost more than $8 billion.

If the military starts awarding contracts, the local economy is poised for an upswing, Hiles said.

The good news about Guam’s economy this year is there hasn’t been any glaringly bad economic news locally, John said.

A few hundred jobs were added to the local economy, and in addition to an increase in the number of working Guamanians, many island residents are working more paid hours, John said.

Hiles said the private sector job numbers increased 2.4 percent, local government job numbers increased 1.4 percent, while the federal government jobs total increased 1 percent.

Private sector employers had more than 46,970 people on payroll, GovGuam had 11,760 personnel, and the federal government employed 4,030 in Guam, as of March this year, Hiles said.

Lower gasoline prices also have added spending money in the pockets of island residents, John said.

Island residents buy about 5 million gallons of gasoline at the pumps each month, and prices at the pumps are at least $1 lower than they were over a year ago, John said.