A full-blown economic disaster
Saipan — As I write this, the CNMI is getting ready for the gubernatorial runoff which will be held on the day after Thanksgiving. If it’s a close race, then we’ll have to wait for the tabulation of absentee ballots after Dec. 9th to know who won.
Whoever wins, in any case, will have to find ways to improve one of the primary sources of CNMI government revenue: the local economy which, like other economies around the world, shut down during the Covid-19 pandemic.
Recovery has been slow due to the many adverse global events that are beyond the CNMI’s control: the Russian invasion of Ukraine, the worsening U.S.-China relations, inflation, recession, the “strong” U.S. dollar, the energy crisis, etc., etc.
The CNMI will soon run out of ARPA funds, and the commonwealth government will once again face a massive funding shortage that will likely result in furloughs, pay cuts and other austerity measures. What is to be done?
In 1999, after more than a decade of spectacular economic growth, the CNMI found itself in a deep financial hole created by the Asian currency crisis. To come up with “solutions,” the CNMI convened an economic summit funded by the U.S. Department of the Interior’s Office of Insular Affairs. The event, “Planning for the CNMI’s Economic Future,” was held at the Hyatt over 23 years ago, and among the speakers/presenters were U.S. economic consultants, economic professors and business executives.
In his introductory remarks, J.M. “Jack” Peters, the director of Northern Marianas College’s Small Business Development Center, said:
“Historically, the CNMI has economically outperformed every U.S. territory or insular area, some states, and most of its Pacific island neighbors. As my friends on Tinian might say: the CNMI took the hand it was dealt and responded accordingly. It used its status as a commonwealth under the sovereignty of the United States. It used its proximity to Asia; it used its conditional duty-free access to U.S. markets; it used tax incentives; it used its access to foreign capital; it used its ingenuity; and it sharpened its entrepreneurial spirit. No transgression or allegation, by any industry, by any company or by any individual can nullify this achievement by the CNMI.”
However, he added, “it now looks as though the CNMI has been dealt a new hand. As we are all aware, things have changed…. The CNMI visitor industry has been hit hard by the Asian downturn.”
Peters also warned that the departure or decline of the garment industry “could have serious depressive effects on the CNMI economy for several years.” (The island’s last garment factory closed in 2009.) He said economic analysis “reminds us of something else we should never forget: This is the CNMI. It is not the U.S. mainland. While economic theory doesn’t really care where it is applied, specific business location conditions matter a great deal from a policy, program or development standpoint. [There are] some important business location differences between the CNMI and the average U.S. city; differences, which, quite understandably, might call for different local and federal policies or programs.”
Peters said an NMC- SBDC study team was examining existing and new industry opportunities. “We are not so interested in low wage, low productivity, third-world industries. No, we think the CNMI is better than that.” But aside from identifying development opportunities, “we must know if the CNMI can accommodate them. Do we have the land, the infrastructure, the skilled workers, the capital, transportation in sufficient quantities and qualities to exploit…development opportunities? If we do not have what is needed, we have to find out how we can get it. We will have to determine which industries could feasibly operate and flourish here with what we already have to offer.”
Peters added another caveat: “This whole matter of identifying opportunities and constraints concerning economic development is difficult enough in an increasingly competitive world…. We are all, to some extent, affected by market and cost forces beyond our control. To a large extent, the prices and costs…will be dictated to us by others or the market mechanism…. We have to design or identify productive processes that are feasible in the CNMI. Because of prevailing competitive conditions, even this may not be enough.”
He added, “You have all probably noticed that investors are not, or maybe no longer, stampeding to invest directly in the CNMI. This brings us to a quite critical and final issue, the broad issue of the CNMI’s business and investment climate…. This is important because, where cost and price conditions might be roughly equal with competing areas, the CNMI’s business climate might be decisive in an investment decision.”
Economic development, Peters said, “is difficult enough in the Pacific islands. There is a great deal going against it including distance, scale considerations and limited resources. Add in a serious recession and we have a recipe for a full-blown economic disaster.”
He was talking about a pre-Covid-19 CNMI that still controlled its immigration and minimum wage policies. Both are now under direct federal supervision which has further shrunk the islands’ economic options — and ability to pay their mounting obligations.
What is to be done?
Well, as U.S. citizens, local residents can always vote…with their feet.
Zaldy Dandan is editor of the NMI’s oldest newspaper, Marianas Variety. His fourth book, “If He Isn’t Insane Then He Should Be: Stories & Poems from Saipan,” is available on amazon.com/.