Senate Report Spells Out Economic Impact Tuna Canneriesff

The following is a synopsis of a Senate assessment on the impact in the Territory if the two US tuna canneries, StarKist and Chicken of the Sea would relocate outside of American Samoa.

The report gives us not only a good idea about the consequences for the economy of American Samoa, but also the impact that tuna canneries have on the economies of many –tuna producing- developing nations around the world.

Canneries’ Influence

The report said the presence of the canneries “provides the stabilizing affect to prospective investors. It is the positive testament to American Samoa being the haven for investors.”

“It supplies investment confidence to the investor from the perspective that high investment yields can be achieved and the investment is secure,” according to the report.

It also says that the canneries presence is the most effective promotional tool to attract new investments and their departure “will send a very negative investment message to any prospective investors.”

Therefore “future economic prospective are very bleak” if the canneries relocate, which would also effect the agriculture industry and a new initiative still being pursued which is vacuum packing fish fillets testing for US market. 

Transportation/Canneries

”Without the back-haul of canned fish products and fertilizers, the current frequency of trips and the present freight rates to American Samoa, would not be sustained,” the report says about the canneries' impact on surface and air transportation systems.

“It is entirely possible that the number of cargo vessel trips to American Samoa could easily be reduced in half with the freight rates soaring beyond economic levels” if the canneries leave, it continues. 

The report estimates that more than 95% of American Samoa’s consumables are imported, causing absolute reliance on air and surface transportation. “It is the lifeblood of American Samoa’s economic system,” it says. 

The assessment further explains that transportation costs affect the financial ability of every resident and it will cause some to live in poverty. 

Infrastructure Systems
 

“The presence of the canneries on island has helped reduce the rates charged for the present infrastructure system,” the report said and noted for example, electricity with the total costs of producing it is 92.7% of ASPA sales.

According to the report, ASPA reported net sales for electricity of $34.2 million for fiscal year 2004. Compared to the $3.9 million of revenues generated from 75% of residential customers, it only represents 11.7% of ASPA’s total revenues.

It says that people of American Samoa “would have had to shoulder the burden of higher electric rates if the canneries were not customers.”

The report says that the canneries' departure from American Samoa creates a consumption void that will have to be met by increased rates and reduced production, which will increase the cost of electricity.

Additionally, the same reasoning applies to other elements of the territory’s infrastructure system, such as water, waste water, solid waste, roads, airports, ports, health, public safety and communication.

Fuel Imports

The fuel needs of the canneries, the fishing vessels, the government and the private sector have supported the present frequency and volume of fuel imported into the territory where the government receives about $5.1 million in annual revenue through the excise tax rate.

However, if the canneries and fishing fleets are factored out, the frequency of tankers bringing fuel to the territory will be noticeably reduced and the price will rise.

”The stability of American Samoa will be placed in a very delicate balance because electricity rates will rise, air fares will climb, gas prices will spiral out of control, the cost of riding the bus or a taxi ascends, the general cost of living will rise to levels that would force more residents to live in poverty,”  the assessment says. 

“Further, the economic development process for American Samoa will be severely stifled,” it adds. 

Private Sector

According to the report, the private sector is supported by the $233.4 million that the canneries inject into the local economy, and so is every mom and pop store in all villages, which are indirectly supported by the canneries. 

The report says this support also includes the Ronald Reagan Marine Railways, the independent machines' shops, the construction industries, the wholesale and retail outlets who is directly supported by the canneries through the $45.7 million in payroll. 

Government

Through their respective payrolls approximately $3 million to $5 million worth of individual income taxes are paid to ASG and their existence allows ASG “to achieve proper economies of scales for its utility operations in addition to direct financial contribution ($7.2 million) through the payment of utility charges and fees,” the report states. 

“Fuel imports, transportation systems, economic stimulation, internal land transportation system, others have been positively impacted by the presence of the canneries and certainly aiding the efforts of the government to forge a sustained economic development program,” it says. 

Upon termination of Section 936, the ASG "will face an unemployment rate of at 70%. At an average salary of $15,935, both the private and public sector total amount of income taken out of the economic is approximately $156,000 or 9,800 jobs lost.”

The report further states that the wholesale and retail outlets will be left with large unsold inventory which will force business closure for many. Restaurants, fast food operations, service stations owners, beauty salons, clothing outlets, bus owners, taxi owners, local airline owners, and other business activities will face bankruptcies. 

“The local banks have revealed that the majority of American Samoa’s population is in debt,” the report claims. "Abrupt termination of employment opportunities precipitated by the closure of canneries will severely impact the commercial banks loan portfolios.”

According to the report, the federal government will have to bear the financial burden of losses incurred by the financial institutions, while ASG will have to bail out the Development Bank of American Samoa for all defaulted home and business loans.

The canneries departure is the net result of the shrinking impact of federal incentive schemes that were available to improve economic viability, it says. “For American Samoa, the departure of the canneries invariably destroys any government capacity to push its economic, social and political goals.”