By Gerardo R. Partido
Variety News Staff

ALTHOUGH the economy is now in a growth mode, island businesses are bracing for a tough year because of the rising costs of doing business.
From higher utility rates, to more expensive shipping, and a new minimum wage law that kicks in the middle of this year, island businesses are facing the specter of runaway costs that may derail the economic growth being projected by the administration.
According to outgoing Guam Chamber of Commerce chairman Mike Benito, island businesses may have no recourse but to increase the prices of their products and services to recover their costs.
“Companies have been doing their best to minimize any increase in prices. But as the cost of doing business goes up this year, it may be inevitable and unavoidable to raise prices,” he said.
The costs of shipping goods to the island are expected to spike this year as the two carriers serving Guam increase their rates and the port raises its tariff schedule.
The Port Authority of Guam board has already approved four new charges in its tariff, an increase in transshipment rates, and a 15 percent increase in labor “charge out” rates. The new tariff is scheduled to be implemented by Jan. 29.
Matson Navigation and Horizon Lines will also be implementing a 2 percent increase in their fuel surcharges beginning this month due to the higher cost of bunker fuel.
According to the shipping companies, the increases are necessary to defray not only increases in vessel bunker fuels but also increases in the cost of fuels required to power yard equipment, tractors and other shore side equipment.
Horizon Lines is likewise set to implement a general rate hike in its Guam tariff starting February.
This will mean an increase of $125 per container for shipments served by truck from any point in the mainland United States to Guam. Shipments served by rail from the mainland to the Marianas will likewise be assessed an additional $200 per container.
Because of the higher shipping costs, Benito said clothing stores, grocery stores, and other businesses dependent on importing goods for sale on island are likely to adjust their prices upward.
In addition, gasoline prices and utility rates continue to go up.
If approved by the Public Utilities Commission, the Guam Power Authority will be implementing a 7.12 percent fuel surcharge increase this month.
For GPA’s business customers, this would mean an average increase of $293, according to sample billings provided by GPA.
Water rates are also set to rise if PUC approves the 14 percent rate increase petition made by the Guam Waterworks Authority to cover interest payments on bond money borrowed for the agency’s improvement projects.
The island’s big hotels, which are the biggest power and water consumers on island, will have to deal with higher utility bills. This, as visitor arrivals are already starting to reach a plateau.
“What’s worse, I don’t see gasoline and utility rates coming down after the increase. Moreover, insurance premiums are also going up. It’s really very discouraging for the business sector,” Benito said.
By the middle of this year, the minimum wage will likewise rise, adding another component to the cost of doing business. By July, the minimum wage will increase by 60 cents to $5.75 an hour.
“And this does not even include a federally mandated minimum wage legislation now pending in Congress. If approved, that legislation will implement an even higher minimum wage than that drawn up by our local lawmakers,” Benito said.
The federal minimum wage bill proposes to increase the minimum wage from $5.15 an hour to $7.25 by 2009.
As for the much touted revenues coming from the relocation of 8,000 Marines and their families to Guam, Benito said this is still a long way off and the economic impact of the move will not be felt immediately.
“So all in all, the business sector is facing a difficult year and we’re facing a lot of difficulties. But we are confident that the government will not exacerbate matters by not containing its own costs and serving as an impediment to business,” Benito concluded.