CNMI should prepare for takeover transition • Bank economist says federalization is inevitable

Government and business leaders should now begin planning for an orderly transition when the federal labor and immigration laws are applied to the CNMI to avoid economic disruption, said Dr. Wali M. Osman, regional economist of the Bank of Hawaii.

Saying that a federal takeover is inevitable, Osman said the most effective way to deal with this threat is to reach an agreement with Washington as to when such laws would be implemented. With the threat of a federal takeover hovering above their heads, he said the future of investors in the CNMI remains uncertain.

“The question really is what would make the CNMI a more predictable market if uncertainty over federalization is there? Markets perform best when people can see certainty. It is possible to minimize the impact if people would know that it will happen five, ten or twenty years from now,” said Osman.

The island’s appeal as a base of operations for foreign investors is the combination of below-minimum U.S. wage rates and duty-free access to US markets.

But businesses have always opposed moves to federalize local labor and immigration functions claiming that this would result in the collapse of the CNMI economy because of the removal of necessary access to labor supply and an expected 100 percent hike in the local minimum wage amid the downturn in the island’s economy.

“The bottom line from an economist’s perspective is that people must be able to understand the issue, plan ahead and do things with certainty,” said Osman.

While admitting that a federal takeover would severely hurt many businesses, Osman said the impact would be lessened if people are made aware of its disruptive consequence.

He noted that neighboring Guam, which is under the U.S. immigration control and follows the federal minimum wage, has created stability in the market there.

“I think the relevant issue is to remove the uncertainty surrounding what I call the regime change. And if we agree that the regime change should take place, let us work in making it happen,” said Osman.

Since proposals for the federalization of labor and immigration are now pending before the U.S. Congress, Osman said it is very likely that such laws will be extended to the CNMI, though in stages, and not without due process.

“With such a change pending, it is in everyone’s interest that CNMI business and government leaders look ahead and plan for an orderly transition,” he added.