DUE TO GARMENT PULLOUT CNMI economy bound to lose $150-M per year

The local economy stands to lose between $100 million and $150 million in total revenues every year once apparel manufacturers on Saipan uproot their factories from the island due to world and regional trade liberalization.

The garment industry played a major role in preventing economic depression in the CNMI when the travel sector reached rock bottom due to currency crisis in Asia, particularly Japan and South Korea.

A 1999 economic report prepared by the Bank of Hawaii noted that the garment sector produced 29.3 percent of CNMI’s total gross revenues of $2.238 billion in 1998.

The apparel manufacturing industry contributed 25-30 percent of all CNMI public revenues, the BOH economic report disclosed, adding that the garment sector may have been contributing up to $150 million in the local economy.

The figure includes wages and benefits, taxes and fees and local purchases from the garment industry’s employees and the apparel makers themselves.

“Calculating all of its direct and indirect benefits to the CNMI economy, garments easily comprise one third of the economy today,” the report added.

It said exports in excess of $1 billion amount to 2.5 times the estimated total of $400 million spent by CNMI visitors in 1998.

During the fiscal year 1999, the garment manufacturing industry contributed over $39 million in total revenues to the public coffers. It has emerged as a primary source of government revenues during the time tourism is down.

The $39 million generated by the government from the garment certification fees during the last fiscal year was 6.68 percent higher than the previous year’s $36 million.

Changes in tariffs, import duties and subsidies, which are the Commonwealth’s most comparative economic advantages, may however drive garment manufacturers away, “possibly without notice.”

Some garment manufacturing companies have already started establishing factories in Mexico. Cambodia, the Philippines and other Latin American countries.

This early, observers already anticipate no more than five- to seven-year life for garment production on the island, citing the absence of specific advantages offered by the CNMI government to garment manufacturers other than the existing tariff and quota exemptions.

The sector has been expected to pull out of the CNMI in seven years when the agreement which created the World Trade Organization takes into effect. A kin to this, the United States will have to phase out its garment quota system by 2005.

Indirect cargo volumes will accordingly decrease when the garment sector leaves the island since there will be fewer consumers. Nearly 20 percent of all CNMI wages are paid to garment workers who comprise about a quarter of Saipan’s population.