Military Buildup Will Lead to Economic Boom on Guam

In 2005, the Pentagon announced its plan to relocate the Third Marine Division, now stationed in Okinawa, Japan, to Guam. This move, along with the augmentation of Air Force and Naval forces already stationed on the island, is expected to increase the total number of military personnel and dependents on Guam from 14,000 to 38,000 by 2014. In addition to military personnel and dependents, the buildup of U.S forces on Guam is expected to attract another 20,000 construction workers, doctors, lawyers and other professionals. If all goes according to current projections, the move will balloon Guam’s present population of 173,000 to over 200,000 and increase the island’s annual tax revenue from $500 million to $700 million.

The move, projected to cost $12-15 billion and funded in part by a $6.1 billion contribution from the Japanese government, should prove a boon not only for those firms selected by the federal government to participate, but also for those smaller entities who specialize in subcontracting and supply. In addition to the required military operations facilities, the federal government is planning a major access road to connect the Anderson Air Force Base located in the northern part of the island with the Naval Base located in the southern end. The local government, too, in anticipation of the population surge is planning significant improvements to the current roadway system. Also necessary will be housing and recreational facilities for the thousands of military personnel and their families who will be stationed on the island. Additionally, the buildup’s effects will not be limited to Guam – indeed, plans are underway to develop training facilities for the relocated forces in the nearby Commonwealth of the Northern Mariana Islands, another United States jurisdiction, as well.

To help with the lack of sufficient workforce personnel for the various construction projects that must be completed prior to the completion of the Marine relocation, the federal government has moved to exempt Guam and the CNMI from the national cap on H-visas. This exemption, currently scheduled for implementation in 2009, will allow contractors to bring in the skilled labor that will be required to satisfy the demand from federal and local projects generated as a result of the buildup.

Even as Guam prepares to assume its new role as the military’s principal operational platform in the Western Pacific, it also anticipates a significant increase in both direct investment and commercial activity arising out of its trade relationships with East Asia. Since the mid 1970s, Guam’s economic fortunes have moved in close tandem with the Japanese economy and the resultant inflow of Japanese tourists and investment money. After slumping into a prolonged recession following the collapse of its real estate market in the early 1990s, Japan appears to have finally regained its feet. In Guam, this is manifest in the steady increase in Japanese visitors to the island, which in 2008 will likely exceed the high water mark of 1.1 million set in 1997. Japan has also reemerged as a major investor on Guam, principally in the hotel and resort sector. In fact, Tokyo-based Ken Corp. and its affiliates, which began investing in Guam in 2005, now own some of the finest oceanfront hotels on Guam and Saipan (the capital island of the CNMI), including luxury resorts such as the Hilton Guam Resort and Spa, the Hyatt Regency Guam, the Sheraton Laguna Guam Resort and Saipan’s Aqua Resort Club. Attorneys at Calvo & Clark handled all of these transactions.

But unlike the boom which spurred much of the island’s new growth in the late 1980s, investment in Guam this time out will be supported by more than Japan alone. In addition to mature economies such as Korea and Taiwan, the rapid growth of China, the Philippines and Vietnam, all within a four-hour flight to Guam, should contribute greatly along with Japan toward boosting Guam’s trade, tourism and investment sectors.

Guam’s attraction to foreign investment is further enhanced by the fact that, as a U.S. jurisdiction, it is governed by a well developed body of statutory and common law. Investors and creditors that put their assets in play in Guam know that their contract rights will be fairly and expeditiously enforced.

Additionally, in an effort to cater to the growing military population and other new arrivals to the island from United States mainland, more American businesses are making their way to Guam. This growth in interest is highlighted by the recent opening of the first Home Depot on island. The store’s arrival filled a void in the local hardware and house goods marketplace. Already, the local real estate market has risen considerably in anticipation of the coming demand for housing and commercial retail and wholesale space.

For companies interested in doing business on Guam or in the CNMI, an important first step is to select and retain local counsel. Calvo & Clark was founded in 1992 and has offices in Guam, Saipan and San Francisco. The firm’s general commercial practice embraces complex civil litigation, international law, finance, real estate, land use and development, communications, business licensing, bank regulation and licensing, and government regulations. While its clients include many of the largest and most prominent local companies in Guam and Micronesia, much of the firm’s work involves the representation of U.S. mainland and international businesses. As such, Calvo & Clark is unique among law firms practicing in Guam and Saipan. It is a national firm engaged in the representation of some of the largest companies in the U.S. and Pacific Rim in litigation and transactional matters. And yet, it is also a local firm, adept in dealing with matters unique to Guam and the CNMI, such as the local court systems and regulatory agencies.