Worst is over for NMI – economist • Garment industry cushioned impact of the plunge in tourism, says Bank of Hawaii executive

Citing improvements on the island’s gross revenue and gross business receipts, the worst of economic decline is probably over for the CNMI, according to Wali M. Osman, vice president and regional economist of Bank of Hawaii.

Osman explained: “We are literally at the trough of the cycle. But the question is when do we get out of the trough and how rapidly?”

With the changes in the region’s economy, Osman believes that the Northern Marianas may find it hard to recover from the present economic slump. For one, the garment industry, which sustained the island’s economy during the crisis, has already reached its maximum capacity.

The garment industry pumped in nearly $50 million directly into the government coffers through user fees and business taxes in 1997 alone. It also made another $56.6 million in other payments to the Commonwealth.

“I think people have to look at this in a realistic and balance perspective. Without the garment industry, the drop would have been very serious,” said Osman, who is currently preparing a biennial economic analysis of the region, including the CNMI, for Bank of Hawaii. The report will be released in October.

Recovery of the tourism market may be difficult too because of the huge loss from tourists in Korea and the decrease in traffic from Japan. The CNMI, Guam and the rest of the Micronesia should work as a region to be able to get more seating capacity since it will not be easy to convince airlines to operate the way they used to be, said Osman.

Tourism officials have blamed the reduction in seat capacity as one of the reasons for the decline in visitor arrivals. Currently, there are 8,122 airline seats from Japan on a weekly basis, which is a 21 percent decline compared to the period of the previous year.

Asked to comment on the issue of minimum wage, Osman refused to be drawn into the controversy except to say that he believes government and business leaders must separate the issue of politics and economics. While U.S. Congress may insist on implementing an increase on the minimum wage, he said it may be carried out over a long period of time.

A Special Industry Wage Review Committee is currently gathering data from various sectors to find out their views on the planned minimum wage increase. The review is being undertaken amid fresh moves by U.S. Congress to federalize labor and immigration.

In his 1997 CNMI economic report, Osman already advised CNMI business and government leaders to plan for the island’s future to take into consideration Washington’s plan to takeover local immigration and labor functions.

“By ending CNMI’s special status with respect to immigration and the minimum wage, the federal government will in effect bring about a regime change, that is, a large and potentially disruptive change which alters market behavior and in which nearly all usual activities of trade and commerce are affected in one way or another,” he said.

The long-term comparative economic advantage of the CNMI lies in tourism and related services, said Osman. .Although garment manufacturing has made huge contributions to the CNMI economy, it now faces serious risk as regional and global trade organizations pursue various paths to liberalization.