From over $1 billion in sales to zero

From over $1 billion in annual garment sales, Saipan now has virtually zero income from its once mighty industry that produced clothing for global brands such as Tommy Hilfiger, Calvin Klein, Gap, Levi’s, Abercrombie and Fitch, Polo Ralph Lauren, Ann Taylor, and Liz Claiborne.

This month, not a single penny in garment sales was recorded, and government collection from user’s fee was zero.

The last time the CNMI government collected a monthly user’s fee was in February 2009—only $746.13, government data obtained yesterday by Saipan Tribune shows.

This is an incredible drop compared to as much as $3 million a month in user’s fee collection in previous years before garment factories started closing one after the other in January 2005 when the General Agreement on Tariffs and Trade expired, eliminating quotas on textile exports to the United States. The GATT had regulated all global trade in textiles and apparel since 1974.

From having 34 garment factories producing “Made in the USA” clothing, Saipan now only has dilapidated buildings that once housed garment factories from San Antonio to San Vicente, Lower Base and Tanapag.

Retail stores, other commercial buildings, housing complexes and apartments near former garment factories are also now eerily vacant.

The last monthly collection brings to only $476,799.33 the government’s user’s fee collection in the first five months of FY 2009 or from October to February, when the last factory was still operating, compared to almost $40 million annually in previous years.

Richard Pierce, the governor’s special assistant for trade relations and economic affairs, said 10 years ago, the CNMI collected nearly $40 million in annual user’s fee, and another $40 million in related economic contributions.

There were also approximately 25,000 total jobs in the CNMI working in garment factories, service companies, and government because of the garment industry.

Most of the foreign workers employed by the garment industry have gone back to Thailand, China, and the Philippines.

“Now, it’s just a part of the history of the Commonwealth of the Northern Mariana Islands,” Pierce told Saipan Tribune.

User’s fee is paid by businesses on locally manufactured and finished products, mainly garments, shipped out of the CNMI.

Between FYs 1998 and 2008, annual user’s fee collection ranged from $5.38 million to $39.26 million.

Without the garment industry, the CNMI’s once double-engine economy now relies solely on tourism which continues to see a decrease due to fewer flights, fewer tourists and the global economic turmoil.

Garment sales stood at only $13 million in FY 2009. This included only the first five months of the fiscal year, or from October to February when the last garment factory was still operating.

This is a small fraction of the annual garment sales of $146 million in FY 2008, $362 million in FY 2007, $531 million in FY 2006, and $705 million in FY 2005.

Between FYs 2001 and 2004, the annual garment sales ranged from $724 million to $964 million.

During its heyday, Saipan’s garment industry posted annual sales of over $1 billion.

In FY 1998, sales stood at $1.02 billion, followed by $1.06 billion in FY 1999, and $1.04 billion in FY 2000.

The CNMI’s crumbling economy is exacerbated by uncertainties associated with the start of the transition to federal immigration by June 1 unless extended, and another 50-cent increase in minimum wage by May when employers are already having difficulty paying their workers and staying in business.

From the ultimate globalization success story, Saipan now faces one of the fastest economic collapses in the history of America and the world because of the demise of the garment industry.

“What’s happening on Saipan is an extreme compressed version of what’s happening elsewhere in the US and the world; like a lab test of what globalization does for good and ill,” American journalist Adam Yamaguchi said in a documentary on Current TV, a cable network founded by former U.S. Vice President Al Gore.

The documentary features the birth and death of Saipan’s garment industry which fueled the CNMI’s economic boom, along with tourism, which is expected to get worse due to the global economic crunch and U.S. restrictions on emerging markets such as China and Russia come June 1.

The CNMI used to be an attractive place for garment manufacturers because of its exemption from such quotas and tariffs on goods shipped to the U.S.

But when the trade quota was lifted in January 2005, factories on Saipan started moving to China, Vietnam, Bangladesh, Pakistan and Cambodia where the minimum wage is way below the CNMI’s $4.05 an hour rate. Another round of 50-cent increase in minimum wage is set for May and every year thereafter until it reaches the U.S. federal level of $7.25 an hour as required by law.