Academic journal article Journal of Economics and Economic Education Research

The Making of the Pacific Tiger: Lessons from the Celtic Tiger

Academic journal article Journal of Economics and Economic Education Research

The Making of the Pacific Tiger: Lessons from the Celtic Tiger

Article excerpt

INTRODUCTION

Guam is at the crossroads of major economic changes that are expected to result from the impending military build-up on the island. These changes offer both challenges and opportunities to our island and our people. They also call upon us to respond so that these changes lead to long-lasting improvements in the lives of our people. One such opportunity presented by the military build-up is that for reviving the island economy and positioning it for higher economic growth that can be sustained well after the five year time frame associated with the military build-up (2010-2014).

Guam has had a stagnant economy since 1996, owing partly to the reduction of military presence on the island (aka Base Realignment and Closure (BRAC)) in the early 1990s. Then in 1997, the Asian Crisis negatively impacted the island's main economic sector, tourism. The island also experienced a series of natural disasters. Since then, economic developments mimicked the fate of the tourism sector, which recovered somewhat owing to the U.S. and global economic recovery in 2002. Increased foreign investment flows, mostly toward real estate, around 2003 also contributed to the island's economic activity. There was some optimism in late 2005 in anticipation of the $13 billion and 30-40% population increase associated with the military build-up. Although construction projects will commence in 2010, there were anticipatory construction booms as early as 2006.

For years, Guam has investigated strategies to develop its economy, but has yet to define one. Instead, what appears to be the 'default' strategy has been a heavy reliance on the tourism sector, which has not returned to its peak in 1996. Especially with the current global economic challenges, where incomes in major tourist markets have stagnated or declined and tourist arrivals have dropped significantly (down by 30% in May 2009 on a year-on-year comparison), this default strategy needs to be supplemented by other sources of growth by diversifying the economy, which would likely be a cleverly designed and hopefully effective industrial policy. Such policy will form a crucial part of what could be Guam's clearly defined economic development strategy.

This is an opportune time to seriously evaluate what economic development strategies might work well for Guam, keeping in mind the challenges of the current global economy on the island's economy and the opportunity presented by the impending military build-up. What economic development strategy can Guam adopt in order to sustain the growth of the island economy and improvements in its residents' standard of living beyond the construction boom and activities related to the military build-up? In this regard, we ask the questions: What is the way forward for Guam? What examples should Guam follow?

The paper is organized as follows. The next section will look closely at the characteristics of Guam's economy as a starting point in identifying which tiger economy has characteristics similar to Guam's. Having identified Ireland as this tiger economy, the paper goes on to study Ireland's Celtic Tiger strategy, starting with the question of whether the Celtic Tiger strategy continues to be valid in light of Ireland's current economic crisis, followed by a closer look at select elements that comprise the Celtic Tiger strategy. This is then followed by an evaluation of how well Guam fares and what would be required to meet each element and some concluding comments.

IN SEARCH OF THE 'IDEAL' ECONOMIC DEVELOPMENT STRATEGY FOR GUAM

An economy that undergoes rapid economic growth over a relatively short period of time has been referred to as a 'tiger'. Could Guam be the first to earn the title 'Pacific Tiger'? Which of the other tiger models would provide Guam with an economic development strategy that would work best for Guam, given specific characteristics of its economy?

The most well-known and the first-to-be-called tigers are the 'Asian Tigers', comprised of Hong Kong, Singapore, South Korea and Taiwan. …

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