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Commentary: Shipyard should be a government owned corporation

What should be done with the Shipyard? At present, it is a government authority. Other authorities include ASTCA, ASPA, and LBJ.

Those other authorities provide critical, essential services to American Samoa residents.

By contrast, the Shipyard serves boat owners.

The Shipyard should not be an ASG authority. But privatization of the shipyard might not be in the best interests of American Samoa, and here’s why: there might be a big difference between the goals of the Shipyard operator and the goals of the American Samoa Government and its people.

American Samoa needs a busy, busy shipyard so that many, many boats come here more frequently and stay for longer, spending more money on more things (taxis, hotels, restaurants, bulk fuel, machine shops, etc.)

A private shipyard operator merely wants to maximize profits while minimizing their investment (an operator would be especially uninterested in long term investments because they would not be the owner of the shipyard, and would only be leasing the facility).

A private shipyard operator might conclude that it best for them to be a small, high-priced shipyard (as opposed to being a large, low-priced shipyard).

That might be best for the shipyard operator, but it might mean hundreds of fewer jobs in the territory and millions of dollars in lower tax revenues (especially if the boats refuel elsewhere).

Thus, ASG should do all it can to promote a shipyard that is large and busy. Low prices are a critical element of creating a large, busy shipyard. (Although, it must be pointed out, that low prices without high quality and fast turnaround, is not enough).

That’s why ASG must ensure that the shipyard tries to be large and busy, even if that means low prices. Usually, an owner makes the decisions about how big they want their business to be, and whether they want to offer low prices or high prices.

So maybe ASG should be the owner of the shipyard. We need the shipyard to be a “loss leader” for the rest of the economy.

Grocery stores use “loss leaders” to lure shoppers in with a low price on a critical staple food item, like a 5-pound box of chicken. The stores hope that after buying the low-priced chicken (which they might be selling for less than their own wholesale cost) you will stay and spend money on more profitable items like beer and pisupo.

ASG needs to use low prices (with high quality and fast turnaround) to lure high-spending boat owners to come to Pago Pago more frequently and stay in Pago Pago longer.

That is why ASG should continue to own the shipyard.

But running the shipyard as an authority is not right. It should be a simple corporation, with shareholders. ASG should be the largest shareholder. Maybe the only shareholder. The Board of Directors would be given a corporate mission of developing a large, busy shipyard with maximum spinoff benefits to the rest of the territory. Their mission should include a goal of never being a financial burden on the government. They should pay income tax on their profits, like any other corporation. They should have insurance and worker’s compensation and be subject to the same rules that other corporations are subject to.

But they should be owned by the government, to ensure that their corporate objectives support the economic development interests of the territory.

The same model should be considered for other activities. Foremost, in my mind, is the ASH fiber optic cable connecting American Samoa to Samoa and the rest of the world. ASG presently owns one-third of the shares in the ASH corporation. I think it should own a majority of the shares, so it can establish corporate goals that maximize low cost, high speed Internet in American Samoa, as opposed to the current corporate goal of maximizing profits for the ASH owners (ASH is majority-owned by the parent company of Bluesky).

In the “old days,” governments trying to build up their domestic tourism industry owned their own airlines because their tourism industries needed high frequency, low cost air travel to their shores. That is why the Samoa government owned Polynesian Airlines and directed it (in days gone by) to fly to Apia from New Zealand and Australia.

Polynesian Airlines was a loss leader on behalf of Samoa’s tourism industry. When Samoa’s tourism industry got big enough to attract private airlines (e.g., Virgin), the Samoa government cut its losses and moved on.

Today, a fiber optic connection is similar to an airline. An isolated country needs high speed low cost data connections to develop its economy.

A large economy like the USA might not need its own airline or fiber optic cable, but even the USA has “loss leaders” to encourage and funnel desired investments. The USA uses different loss leaders (e.g., accelerated depreciation schedules for oil and gas exploration), but it amounts to the same thing: using the resources of the government to encourage a community goal that might not be aligned with a private company’s goals.

In a small economy such as ours, we need lots of tools to encourage private operators to take on risk and projects that benefit the community. That’s why we have tax incentives and industrial parks and guest worker immigration programs and other things.

It might be time to add a government-owned shipyard corporation to the list.



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