CNMI: Rising from economic collapse

January 3, 2017

 

Saipan — A few years ago, the CNMI’s economy was like a patient in a coma, dependent on life support. Businesses experienced hardships during the 2000s with companies from the once flourishing garment industry slowly closing their respective factories and moving to other countries that offer cheaper labor costs.

 

Business activity was slow. Japan Airlines decided to end its direct flights to Saipan. Tourist arrivals were down, resulting in a huge drop in hotel occupancy rates. Commercial establishments cut their working hours with workers getting paid less. Some locals relocated to the mainland to find better luck.

 

Residents tightened up their belts and had to pinch every penny in order to survive. The CNMI’s gross domestic product was at the negative level, even going as low as -17.5 in 2009 and fluctuated in the next two years before finally showing signs of recovery in 2012.

 

Three years later, the CNMI’s economy continues to grow based on data compiled and released by the Bureau of Economic Analysis. The commonwealth’s GDP rose by 0.7 percent in 2015 or 3.5 percent from 2.8 percent in 2014. The 2015 data was a good sign despite Saipan being hit by Typhoon Soudelor, crippling the entire community and the Internet outage that paralyzed businesses.

 

Adding consumer spending, investments, government spending minus the taxes, and the value of exports minus the imports do calculating the GDP. The CNMI government provided USBEA data from the investments that stated to pour in, the new gaming industry, and the increase in tourism activity based on the growing number of air carriers flying to Saipan.

 

Gov. Ralph DLG Torres said the administration is pleased that the consecutive disasters — Internet outage in July and Soudelor in August — did not gravely affect the CNMI’s performance.

 

Increase in consumer and territorial spending and funds provided by the Federal Emergency Management Agency sped up Saipan’s recovery efforts after being hit by one of the strongest storms in recent years.

 

“To put this all into perspective, 2009 saw the lowest GDP for the CNMI. It wasn’t too long ago that we were in the midst of a deep and persistent economic depression. Our tourism industry was struggling with low numbers of arrivals. Large and small businesses were also struggling,” Torres said. “Things now are not only different, but also better. Large businesses have regained their footing. More small businesses are popping up. Unemployment has dropped. And there’s an increased feeling of financial security and inclusion within our community.”

 

Delegate Gregorio “Kilili” C. Sablan noted that 2015 was fourth year that CNMI saw increased economic activity. “I look forward to continuing the federal spending and immigration policies that are major contributors to this growth,” he said.

 

Lt. Gov. Victor B. Hocog said 2016 figures would show the CNMI’s economy is getting stronger. “I’m pretty sure that fiscal year 2016 would be an indicator of further increase. That’s why with the administration and legislature working together, we can achieve more and address the concerns of all sectors of our community.”

 

Commerce Secretary Mark O. Rabauliman said they see a promising future in the CNMI’s economy based on the latest GDP report. “Seeing the continuous growth of our economy as shown by our latest GDP report is promising,” he said.

 

House Speaker Rafael Demapan said the 11-month economic activity in the CNMI is a strong indicator of more positive growth for next year. “That’s why, we as legislators should come together and make sure to work on that success. The government depends on how the economy would perform in order to deliver basic services and fund its departments,” he said.

 

Rep. Angel Demapan, vice chair of the House Committee on Commerce and Tourism, said fees collected from the lone casino licensee contributed heavily on the CNMI’s economic revival. “It has a ripple effect. A lot of businesses are seeing positive economic gains. We see a lot of sales of goods and other services go up along with an increase of employment. Hotels are now full and occupancy rates are high. And this has a trickle-down effect when more people travel here, more people would spend money.”

 

Demapan said more revenues going into the government’s coffers would give them the chance to provide basic services. The CNMI’s fiscal year 2017 budget was at $142,209,601 while a supplemental budget of $40,967,307.88 was recently passed making it one of the highest in recent years.

 

“In turn, the government is in a better position to increase its services particularly in law enforcement, health care, education, and other critical services that can be delivered to the people. Every time revenues go up, the government is always in the better position to take care of its people.”

 

The Division of Customs Services also had a huge contribution as the agency under the Finance department collected a total of $43.3 million in taxes for fiscal year 2016, which is a 24.9 percent jump from FY 2015’s $32.5 million.

 

What the CNMI government seems to lack, however, are safety nets or precautionary measures — especially in the gaming industry — to prevent it from becoming a bubble waiting to burst like what happened to the garment factories.

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