The One Village One Product (OVOP) Model and Economic Development on Guam

Abstract

ABSTRACTGuam is a small island state in the western Pacific Ocean. The island's tourism industry has served as an engine for its economic growth. However, the local community of Guam is not maximizing the benefits of tourists' spending due to a high level of leakage. This paper proposes that the One-Village-One-Product (OVOP) strategy be implemented on Guam so that Guam residents may benefit more from the tourism industry by building up linkages with goods and services suppliers on Guam. Candidate products for each village on Guam are identified, indicating that Guam is ready for a One-Village-One-Product strategy. Policy recommendations are given for fostering Guam's tourism industry.INTRODUCTIONGuam is a tropical island in the western Pacific Ocean. It is the southernmost and largest island in the Mariana island chain. It is also the largest island in Micronesia. Yet Guam is still considered a small island state measured by its geographical size and population. Guam has an area of 212 square miles (549 km2). Inhabiting this tropical island are approximately 160,000 people with diverse racial and cultural backgrounds. In terms of racial breakdown of Guam, the largest group is Chamorro, which accounts for 37.1% of the total population. Other groups are Filipino (25.5%), White (10%), Chinese, Japanese and Korean (8%), and Pacific Islanders and others (20%).Besides commerce between the island's inhabitants, like many other small islands around the world, the tourism industry serves as one of the major sector of the island's economy. Guam receives more than one million tourists annually, among which about 80% are from Japan, about 10% are from Korea, and the rest are from Taiwan, Hong Kong, United States, and etc.Unlike many of the small island states, Guam's economy also benefits from its military-related service sector. Due to its strategic location, Guam hosts two military bases of the United States in this island, namely the Andersen Air Force Base and the U.S. Navy Joint Region Marianas. In addition, it has been forecasted that the impending relocation of U.S. Marines from military bases in Okinawa, Japan, to Guam may bring drastic changes to this island's socio-economic landscape. However, the changing political, social, and economic dynamics in Japan and the United States complicate this military relocation and, as a result, many critical issues relative to this military buildup remain unclear.This paper posits that although the proposed military buildup may provide good opportunities for Guam to boost its economy and enhance the living standard of Guam people, the extent and timing of the military relocation to Guam is still fraught with high level of uncertainty. On the other hand, Guam's tourism industry provides a more promising path of Guam's long-term economic growth. Further, this paper argues that implementing the One-Village-One-Product (OVOP) strategy will bring about positive results for Guam's economic growth by bringing in more tourist arrivals and encouraging tourist spending with minimal leakage of revenue. The remaining parts of this paper will review the significance of Guam's tourism industry, investigate whether Guam is ready for an OVOP strategy, and make some policy recommendations for fostering Guam's tourist industry.DEVELOPMENT ECONOMICS FOR SMALL ISLAND ECONOMYEconomic growth and structural change are key concerns of development economics. Various theories and methods that provide guidance for public policy-making and implementation at both domestic and international levels have been created. The aim is to ensure economic growth for developing economies and to improve living standard of the population. Among these theories, two strands of literature in development economics deserve special mention: the five-stage growth model and the structural change theory.The five-stage growth model was proposed by W.W. Rostow. In his classics The Stages of Economic Growth: A Non-Communist Manifesto, Rostow (1960) asserts that all countries must go through a series of five consecutive stages of development: (1) the traditional society in which products are primarily consumed by producers; (2) the preconditions for take-off under which increased specialization generates surpluses for trading; (3) the take-off, when industrialization increases with concentration in one or two manufacturing industries; (4) the drive to maturity, when the economy is diversifying into new areas; and (5) the age of high mass-consumption, when service sector dominates the economy. …

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