Saipan—One of the most pressing matters that should be discussed at the next U.S.-CNMI Covenant Section 902 consultation talks is the need to resuscitate the non-performing economy of the CNMI, particularly over the past five years. The only industry that the CNMI now has, and which is still viable, is the visitor industry. But this industry has been on life support since the Covid-19 pandemic that began in late 2019.
The visitor industry started to make a slow recovery at the start of 2024, but it is still performing poorly at about 30 percent. The primary source market is mainly South Korea. In the ‘80s and ‘90s, the primary source country was Japan. But since the start of the 21st century, visitors from Japan have decreased dramatically.
During the mid-1980s, Chinese garment manufacturers began relocating some of their garment-manufacturing production to Saipan because the CNMI was exempted from the U.S. textile quota imposed on foreign countries. The CNMI was then in control of its immigration affairs and was not covered by the federal minimum wage law, making it an ideal location for Chinese and Korean garment manufacturers.
Garment manufacturers left the CNMI in 2005, following the World Trade Organization’s lifting of the textile quota restrictions in 2004. They returned to China or South Korea, where the wages are cheaper and manufacturing costs are much lower. Even the locally-owned garment manufacturer, Tan Holdings Co., relocated to China.
For the next decade, the CNMI economy was limping on one foot, with tourism as the only remaining industry. The government’s annual tax revenue dropped by at least 40 percent.
Desperate for ways to turn around the local economy, the CNMI government decided to try its luck with the casino industry, with the exclusive license being awarded to Imperial Pacific International Holdings Co. Ltd.
Controversy arose with the use of public land for a casino because it contained ancestral remains of ancient, indigenous islanders. Notwithstanding this sacred, cultural and historical concern, construction on the structure began.
But once the construction reached the point where the first floor was completed and furnished, IPI decided in 2017 to close its temporary facility at the DFS premises and move its operations to the first floor of the new, permanent facility.
When construction stopped in 2019, the unfinished structure posed a danger to public safety.
Casino activity was neither as brisk nor as profitable as the IPI’s temporary casino operations had been at its initial DFS location. By the end of 2019, business trickled to a halt.
A series of lawsuits were filed against IPI for unpaid wages, unpaid invoices from vendors and suppliers and other outstanding obligations.
Today, in the middle of downtown Garapan, the colossal structure remains uncompleted and continues to pose serious danger to public safety as it decays.
With the demise of the Saipan casino industry, the CNMI’s economy is back to square one, with only one industry—again, tourism—having a reasonable chance to revive itself.
But for the visitor industry to return to life, the CNMI must formulate a clear vision. Private and public sector leaders must sit together and formulate a realistic plan to revive the industry. This must be followed by subsequent steps needed to ensure long-term success.
When we begin to see some degree of success with our renewed efforts, we must not fall asleep at the wheel because this was apparently one of the underlying reasons why the visitor industry died during the past decade or so.
Among the issues that should be addressed at the next Covenant Section 902 consultation talks is immigration and the CNMI’s labor needs. As one of the most critical issues affecting the CNMI, federal immigration and labor laws must be tailored by the U.S. Congress so the CNMI can develop and maintain a productive, insular economy.
Under the NMI Covenant, the CNMI had control over immigration between 1978 and 2008, enabling the local government to facilitate the hiring of foreign workers into the commonwealth.
Unfortunately, the government did not provide the necessary degree of control and discipline regarding the influx of foreign workers. Our leaders did not address labor abuses despite repeated warnings from the federal government.
In 2007 and 2008, Congress passed two pieces of federal legislation that removed the CNMI’s control over immigration and applied the federal minimum wage law to the CNMI.
The federal takeover has had a devastating impact on the local economy because it restricts the CNMI’s ability to hire much-needed foreign workers. The federal takeover laws stifled the introduction of any other new industry requiring foreign workers, and thus stymied the CNMI’s economic growth.
The federal takeover legislation should have been tailored in a way that would address the CNMI’s critical manpower needs, as well as the federal government’s obligation to help spur the Pacific islands’ fragile, insular economy, situated thousands of miles away from the continental United States.
With an indigenous population of approximately 30,000 residents and a foreign workforce that has dwindled to about 15,000 workers at the start 2024, there is no way for the CNMI to service the visitor industry, to introduce a new industry to the islands or to provide skilled and unskilled workers for any industry.
While the CNMI needs more visitors to improve the tourism industry, it also needs skilled and unskilled foreign workers to fill the industry’s labor needs.
A thorough review of the existing U.S. immigration and labor laws applicable to the CNMI must be conducted by both the CNMI and the U.S. government at this year’s consultation talks and culminate in drafting a new set of laws tailored to meet the CNMI’s manpower needs to bring in more visitors from countries other than just Korea and Japan.
This would reduce the CNMI’s dependence on federal financial assistance that, after the last two devastating typhoons and the pandemic, saved the local government from falling into bankruptcy.
But the CNMI is a self-governing entity under the U.S. flag, with the right to internal self-government similar to the 50 states. As such, the CNMI has an obligation to develop its own economy and should not rely entirely on the U.S. for all its financial needs.
It is extremely important that any federal legislation or regulations affecting the CNMI be tailored to address the unique needs of, and the deficiencies present in, its insular economy.
In this way, the CNMI will have the ability to become a productive and contributing member within the American political family, with the capability to shoulder its basic financial needs and obligations and halt its dependence on federal financial assistance and grants.
Jose S. Dela Cruz is the former chief justice of the CNMI Supreme Court. Send feedback to firstname.lastname@example.org.