CNMI faces more economic challenges ahead

Although I hate to be the bearer of bad tidings, some unpleasant economic facts simply cannot be ignored. As I pen this screed, the Dow Jones Industrial Average is off some 317, closing below 10,000 at 9,973.46. The NASDAQ index, which was at 5,000 this time last year, closed at 1,972.09 today, falling below the 2,000 level, off 42.69 points for Wednesday, 14 March. All of the major U.S. stock market indexes are down. U.S. corporate profits are down, and the US economy is “rapidly slowing.”

Because the US economy is weakening, American consumer confidence may falter and our garment exports may be in jeopardy. A weak American economy is bad for our economy.

The Japanese economy is also suffering badly, and American economic weakness should only compound Japan’s protracted economic problems.

When US equity markets falter, Japanese stocks tend to follow. Japan’s Nikkei Stock Average, the nation’s benchmark, fell 165.30 on Wednesday, hitting a 16-year low at 11,652.21.

The Japanese Yen currently trades at around 119 to the US greenback. With Japanese interest rates as low as they are (around 1% at most), the Yen might weaken even further, cutting sharply into our struggling tourism industry.

If America’s economy slows, Japan’s exports may be compromised. Both economies are inextricably linked, joined at the hip. And if Japan and the US fall into economic recession, the rest of the world will feel the pinch too–including the CNMI.

A weak American economy would likely hurt our garment industry. A weak Japanese economy would further imperil our tourism industry. A weak American economy and a weak Japanese economy would, in our economist Ed Stephens’s parlance, constitute an “economic double whammy,” crippling both legs of our economy (garments and tourism).

A weak America and Japan would certainly also affect Korea, China, Hong Kong and Taiwan. These nations would be forced to curtail their investment and tourism flows into the CNMI.

What can we do about it?

We can tighten our belts and improve our overall efficiency. Government spending has to be drastically curtailed. Bloated government budget deficits should be radically reduced, if not entirely eliminated.

The private business sector must be enticed with crucial economic incentives. Cumbersome government regulations should be erased. We must court investment through a free market. The three-year labor limit must be repealed immediately.

Above all, the CNMI needs new political leadership—new leadership that must come from the results of this year’s general elections. Vote for change.

Strictly a personal view. Charles Reyes Jr. is a regular columnist of Saipan Tribune. Mr. Reyes may be reached at charlesraves@hotmail.com