Building a resilient economy, together

By Arnold I. Palacios

Though I appreciate the recent efforts by the Chamber of Commerce to gather local businesses and decision-makers to put forth ideas to accelerate the Commonwealth’s economic recovery, I am disappointed by the narrative that continues to be pushed in the press and by certain business interests, that the People’s Republic of China (PRC) is the only answer to our current economic struggles.

This narrative ignores the geopolitical realities in which we live and which I as governor cannot so easily dismiss. It ignores the fraught adversarial relationship between our nation and the PRC, and the fact that the Mariana Islands sit smack in the middle of a brewing conflict in the Indo-Pacific. It ignores lessons we should have learned from our own history.

In the CNMI, our overdependence on Chinese-backed investment runs deep and goes back decades: from poker to the garment industry, tourism, and casino gaming. These investments often perpetuated dependence, so that even when those industries proved detrimental – whether to the social fabric, the environment, or national security – many of our business and political leaders were willing to look the other way. And it was hard to imagine alternatives.     

Overdependence makes us vulnerable – to external shocks as well as political and economic coercion by malicious foreign actors. Public corruption and financial recklessness have also made us vulnerable. The Commonwealth is navigating such rough waters today largely because my predecessor squandered hundreds of millions of dollars in federal aid in less than two years before his term ended. And some of the biggest beneficiaries of that squandering are the same people telling us today that they have the solutions and China is the key.

Those federal recovery funds were intended to cushion the impacts of natural disasters and a global pandemic, and the difficult economic challenges that lay ahead. For the most part, those funds are gone now. No other state or territory has blasted through its recovery money so quickly, and so carelessly.

My predecessor, the sole expenditure authority for nearly half a billion dollars from the American Rescue Plan Act, chose to spend those funds on short-term ventures with dubious results – like travel bubbles, airline subsidies that actually incentivized half-empty planes, free money for tourists, subsidies for a short-lived start-up airline, and the notorious and embarrassing BOOST program. The Commonwealth Ports Authority (CPA), under his appointees, chose to hire a Washington, DC firm at $1,000/hour to lobby for unlimited flights from mainland China, while also at the same time squeezing our remaining airlines by increasing fees up to 90%.

These were not prudent decisions, and we are still dealing with the repercussions today.    

I can’t stress enough that we’re in this together. I urge our business community and media partners to recognize that recovery will take time, patience, and collective commitment. Yes, the PRC is a significant source market for tourists and investors, but it is not the only one. We cannot afford to ignore the geopolitical realities and persistent threats associated with the PRC that impact our long-term recovery and national security. Even if implemented today, all of the China tourism tools that dominate the Chamber’s list of priorities can be yanked from us at any time, for national security reasons or other reasons. We must diversify our economy beyond a single reliance on one country, and commit as a Commonwealth to developing more stable, reliable markets among our democratic allies in the region.

We also have to project a positive, unified image of the Marianas to attract visitors and investors globally. Gloomy forecasts and false “China or bust” narratives are unhelpful. Constant negative messaging undermines investor confidence and our efforts to achieve long-term stability and resiliency.

The relationship between our nation and the PRC is tense, complex, and ever-evolving, and our islands play a unique, strategic role in preserving national security and peace in the region. That was part of the deal when we embraced our Covenant and became part of the American political family. As governor, I have an obligation to balance multiple imperatives to responsibly manage our resources, develop our economy, and ensure the safety and security of our people.    

The CNMI is a safe, friendly, and beautiful place, and we welcome visitors and investors from all over the world. Recovery takes time, but we are recovering, and making sound investments today to enhance our islands, develop our infrastructure and our workforce, and strengthen our relationships with federal partners and regional allies. Building a resilient economy requires us to recognize realities – both threats and opportunities – and to make wise choices about how we invest our resources. It also requires us to be all in, together, for the long haul.

May God bless the people of the Northern Mariana Islands.

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Arnold I. Palacios is the governor of the Commonwealth of the Northern Mariana Islands