Jones Act Reform Key Element of Guam's Economic Plan

by Michael Hansen

The Governor of Guam, the Honorable Eddie Baza Calvo’s Council of Economic Advisors has recently released the outline of their new economic plan, and Jones Act reform is a key element of that plan.

The plan states that Governor Calvo has instructed his economic team to pursue a Jones Act exemption to return competition to the domestic Guam trade.

This is of course in direct response to the termination of service in November 2011, by the largest domestic ocean common carrier, Horizon Lines Inc., which ended its westbound container service to Guam, leaving them with only a single carrier, Matson Navigation Company, Inc., on that trade lane, which is so critical to them.

As a consequence, for the first quarter 2012, Matson’s container volume to Guam increased by 94% and their company-wide profits by 50% over first quarter 2011 clearly demonstrating the power of a true monopoly.

Had Horizon been allowed to carry cargo between the contiguous U.S. and Hawaii with the five U.S.-Flag containerships it operated to Guam; that service would still be operating today and providing competition not only to Guam but also Hawaii.

Our proposal to exempt all the noncontiguous domestic trades – Alaska, Guam, Hawaii and Puerto Rico – from the U.S.-build requirement of the Jones Act for large self-propelled ships would materially assist Guam to revive competition in their domestic trade lane, and we look forward to their support.

Michael Hansen is the President for the Hawaii Shippers Council

Here is a copy of the April 1, 2012 news release from the Office of Guam Governor Eddie Baza Calvo

Economic Advisors Have New Leaders, Ready to Pursue Robust Agenda

Businessmen concentrating on lowering prices, building wealth for Guamanians, making government more business friendly

FOR IMMEDIATE RELEASE

April 1, 2012

The Governor’s Council of Economic Advisors elected its first officers, who will be guiding the team toward process improvement in the government and the development of several industries.

The new chairman of the council is businessman Peter R. Sgro, Jr. Banker Philip J. Flores and President of the Chamber of Commerce David Leddy are the new vice chairmen. The Governor created the council on March 21, 2011 through Executive Order No. 2011-06.

“We’re not going to hang our hats on the military buildup,” Sgro said. “The Governor was very clear about his economic policies. We are not to look at the buildup as the ‘be all end all’ of our prosperity. So we’re going to move forward with what we’ve got. And around the table, there are some very successful businessmen and women who believe there’s a lot of untapped potential.”

This untapped potential is what the Governor is keen on honing, especially as he simultaneously pursues education, affordable housing, and drug initiatives to fight poverty and help the poor. It includes:

1. Helping businesses get through the maze of regulations and permitting processes faster;

2. Seeking an exemption from the Jones Act to make the price of nearly everything on the island cheaper;

3. Developing the captive insurance industry to get more Asian capital to the island;

4. Pursuing easier ways for Chinese tourists to get to Guam through the visa waiver program or a compromise on it;

“There was such a rush of outside interest in the island because of the military buildup that, unfortunately, people in the past forgot about our local businessmen,” Governor Calvo said. “I want to see permitting processes streamlined so local construction companies can build homes and store fronts. I want our secured and guaranteed loans to be marketed and to make way for young Guamanians who want to open restaurants or cottage industries. I want us to take advantage of our strategic location so that billion-dollar companies in Asia can open captives here on Guam and park their millions here.”

The work of the Council of Economic Advisors takes its place among a triumvirate of initiatives all geared toward building a sustainable future for the island and fighting poverty.

1. CEA: Government regulatory and process improvement matched with efforts to strengthen and build industries today are part of the Governor’s strategy for short-term growth.

2. Education Task Force & Career Technical Education: The Governor’s education task force and Sen. Mabini’s CTE efforts are designed as the Governor’s strategy for mid-term sustainability as the island transitions and prepares for decades-long robust growth through the IMAGINE Guam initiative.

3. IMAGINE Guam: The development and implementation of a long-term strategy for community development will go beyond the economy we know today. It will take projections for industry growth and career needs and blend these needs with the curricular focus of Guam’s public and private schools and colleges. This is a strategy to build Guam and make her sustainable for the next 50 years.

“If we can produce wealth on Guam now by developing industries while the Governor is making our education system more robust and finding homes for more Guamanians, then we’ll have seamless prosperity into the long term,” newly-elected vice chairman David Leddy said.

“It all starts with the CEA because as we address our mid- and long-term strategies, we can’t forget that there are a lot of people suffering right now,” Governor Calvo said. “We have high unemployment, prices keep going up, gas and electricity are killing us, and government is inefficient in how it serves the business community. That’s why I’m very excited about some of the early initiatives of this young council.”

The CEA is pursuing:

1. An exemption from the Jones Act. The Governor asked the council to pursue economic policies that can lower the price of gas, electricity, and the shipment of goods for Guamanians. “The price of oil affects nearly everything we purchase on Guam and it’s just strangling our people,” the Governor said. The CEA, in turn, agreed to begin pursuing a Jones Act exemption, which would markedly lower the price of gas, electricity and the shipment of goods to Guam.

2. Captive insurance industry development. “There’s a lot of potential for Asian big business to park their money in Guam’s banks as a captive. They’ll have to hire lawyers and a slew of financial people to manage that money for them on Guam. It’s a win-win,” Sgro said.

3. Regulatory streamlining & process improvement. The members of the council, all successful businessmen, believe that investment and development will increase dramatically if GovGuam’s regulatory and permitting processes are streamlined. It was found in one instance that more than 70 signatures were needed for the approval of one permit. This is just one example of the burdensome processes that have evolved in GovGuam and that make Guam unfriendly to business.