Economists, industry stakeholders says Guam not reliant on defense spending

BY SKYLER OBISPO  
Journal Staff  
 
A panel of economists and industry stakeholders said that Guam is not over-reliant on military spending.  
 
Melanie Mendiola, director of investor education and guidance of BG Investment Services and panel moderator, disagreed. She said that more than a third of Guam’s [GDP] is defense spending, the highest share in the U.S. for any state or territory.  
 
“With construction spending projected to peak soon, we’re entering a period of unprecedented infrastructure investment from missile defense, port improvements, and military housing,” she said. Roughly 25% of land on Guam is owned by the Department of War and more than 6,000 active-duty personnel are stationed on the island with another 5,000 expected in the near future.  
 
Roseann Jones, dean of the School of Business and Public Administration at the University of Guam, said that defense spending will become a mainstay of Guam’s economy.  
 
Jones said that with the military buildup, the island will see new public sector development and private sector opportunities and will likely bring new industries to the island transforming the workforce.  
 
Tae Oh, chairman of the Guam Chamber of Commerce, said that the private sector provides a lot of the innovations and solutions to support military activities on the island. An example that was brought up was hotels in Tumon serving a double role in the tourism industry while also hosting military servicemen during large scale exercises.  
 
The military buildup has four channels that shape the island’s economy, Mendiola said.  
 
“Defense buildup creates direct jobs in uniform and civilian service, and indirect jobs through contractors and suppliers, infrastructure projects like access roads, utilities, and housing. Small business ecosystems, so military procurement [and] service member spending can stimulate local entrepreneurship and supply chains. Innovation and spillovers, technology developed for defense, often fields civilian applications,” she said.  
 
Christina Garcia, the administrator for the Guam Economic Development Authority, said that GEDA’s role in the buildup is to ensure that the island’s small businesses have an opportunity to have a role in the defense industry through financial assistance and workforce education.  
 
Mary A.Y. Okada, president of Guam Community College, said that the college is positioning itself to help develop a workforce to support the military and local economy. 
 
Mendiola asked panelists what industry would carry Guam forward if military spending were to slow down and what would be the island’s next steps.  
 
Oh responded, saying that there will likely be a tax revenue cut since the military has been holding up Guam’s economy at a time when tourism is still recovering.  
 
The Business Privilege Tax represents about 20% of the Government of Guam’s general funding and defense spending has boosted tax collections in the past few years.  
 
Despite the impact the industry has on public spending, he remained optimistic that the island would find a substitute.  
 
“I truly believe that … we’ll figure out a way,” he said. “There’s a lot of innovation and there’s a lot of potential that Guam has with the strategic location we have, I think we’ll eventually figure out a way to revive our economy.”  
 
Tina said that GEDA has been looking at expanding the island’s agriculture and aquaculture industry as well as looking into transshipment and pharmaceuticals. She echoed Oh’s position of Guam’s geographic position to Asia and how that could be leveraged.  
 
Jones said Guam could rely on its financial services and telecommunications industry and for new industries, Guam could be a hub for advanced manufacturing in the region.  
 
A worry exists among communities near military bases that the military will take jobs from the private and public sector.  
 
Oh said he does not see it that way. He said instead there is a lack of opportunities for Guamanians to get employed into specialized careers.  
 
“When I first grew up here … there wasn’t an engineering school, so I had to go off island to go to an engineering school,” he shared. “Thanks to UOG’s engineering school and GCC’s development of their engineering technicians and survey technicians, we’ve been able to meet some of that.”  
 
But demand remains high.  
 
Guam’s 65,000 strong civilian workforce operates nearly all of its public infrastructure from hospitals to ports, and its private businesses. Jones said that looking forward, planners need to look at the younger generation and consider what they bring to the table and how to advance local talent. 
 
Okada said GCC’s bootcamps are helping prepare its students for careers in the defense industry. Additionally, she proffered that extra tax revenues could go towards making the first two years of college free.  
 
Panelists put forward different ways to measure how military investments are impacting the island.  
 
Jones said to look at the defense multiplier, a measure of how much money is retained in Guam from defense spending. Currently, that number is at 0.75, according to Jones.  
 
“So for every dollar in defense spending, we retain 0.75,” she said. “It may sound good, but it means that we’re not fully maximizing that … there’s leakage there.”  
 
Leakage can come from a number of things from imported supplies to support the buildup to an inefficient or lack of a workforce. 
 
Oh said it could be measured by the amount of money that stays on Guam.  
 
Outsourcing work from outside of Guam does not improve conditions for the island.  
 
“When we have companies that come here, hire local people, [we should] spend that investment into improving the island," he said. 
 
Similarly, Okada said that military development could be measured by the amount of savings accrued and it should go towards supporting immediate infrastructure.  
 
Garcia added that more timely GDP, tax collection, and job growth data could be an indicator of impact. mbj