CRISIS, TAKEOVER PROPOSALS BLAMED 50% of business establishments ceased operation

If you think everything about the Northern Marianas economy is starting to become brighter, think again.

It will take the CNMI longer years to recover from deep economic slump or at least come close to the 1997 level since more than half of all the islands’ existing establishments in 1996 have stopped operations since the Asian financial upheaval fanned towards the Northern Marianas in early 1998.

According to Commonwealth Development Authority Executive Director Marylou S. Ada, the number of businesses on the islands dropped by as much as 32 percent in 1997 to 3,800 from about 6,000 in 1996.

The CNMI economy suffered yet another blow in 1998 when the number of existing establishments fell by an additional 10 percent, which totaled only around 3,410 businesses.

In a presentation before the Year 2000 All Islands Tax Administrators Conference, Ms. Ada said overall business gross revenues between 1997 and 1998 dropped 14.3 percent.

Of all existing industries in the Northern Marianas, only the apparel manufacturing sector registered growth of 22.2 percent between Fiscal Years 1997 and 1998.

“Although there were dips in reported business gross revenues in 1992 and 1993, these were rather slight and less pronounced than the 14 percent revenue shortfall in 1998,” said Ms. Ada.

Revenue reductions in the same period ranged from a mere two percent in the shipping sector to over 50 percent in agriculture and fisheries, professional services and the fuel retail industry.

She stemmed the slowdown in business activities on the islands to several factors that include the Korean Air tragedy in 1997, as well as the collapse of both the Korean and Japanese economies due to the yen’s and the won’s depreciated value against the United States greenback.

“Many local businesses were not able to withstand the recessionary pressures. Many businesses that relied on tourism dollars collapsed,” said the development authority official.

She stressed pressures from the federal government have aggravated economic recovery potentials of the Northern Marianas, since proposals to strip the Commonwealth of its control over labor and immigration are considered detriments to luring foreign investors into the islands.

“Many argue that the wage increase will have a devastating effect on businesses as it will greatly increase operating costs.
Highly concerned over the CNMI’s excessive use of foreign labor, the Clinton Administration is proposing legislation to takeover local labor and immigration control,” she said.

Just a couple of months back, the turtle-paced recovery of the CNMI economy from the two-year currency crisis in Asia proved its might by driving two major retailers to cease operations in the Northern Marianas.

Since the beginning of the year, A-One shoe store held a series of inventory and clearance sale, to apparently mitigate further losses, before it finally shut its doors to customers earlier this month.

Businesses have been competing with each other over the dwindling size of the local and tourist market in the Northern Marianas. Those that were not able to brave the heated competition were forced to close down.

Japan-based Yokohama Okadaya earlier announced it is closing down its Saipan outlet, located at the commercial district of Garapan. Its store on Guam will remain in operation.

At least 812 establishments in the Northern Marianas did not renew their business licenses last year. A report obtained from the Business License Section of the finance department noted that out of 3,410 businesses in 1998, 812 establishments opted not to renew their licenses by end-December 1999.

However, the Central Statistics Division of the commerce department disclosed that 2,775 new business permits were issued by the Business License Section last year, exceeding the number of establishments that did not renew licenses.

Overall, the government’s business licensing office processed and approved 3,587 business permits last year which represented a trivial growth of 0.05 percent from the year-ago’s 3,410.