U.S. -GAO report defies OIA findings • Report underpins contribution of tourism, garment industries

If it is any consolation to the harsh accusations hurled by the federal government against the Commonwealth’s heavy reliance on foreign labor, the United States General Accounting Office has reported positive developments in the CNMI economy buoyed by the presence of guest workers in the islands.

A February 2000 report prepared by the U.S.-GAO said the presence of foreign workers in the islands has been directly and indirectly paving the way for the continued survival of the government and businesses in other sectors.

The GAO report questions findings by the Office of Insular Affairs that the garment and tourist industries and the workers they employ require government spending for services and infrastructure that exceeds what they contribute in revenue.

“[The OIA economic] study had a number of methodological weaknesses, in particular, understating the contributions made by the garment and tourist industries to the economy and overstating the industries’ impact on government spending,” the GAO report emphasized.

The local labor pool, including those already employed and U.S. citizens not born in the CNMI and non-U.S. citizens from the Freely Associated States who have the right of residency in the islands, is not sufficient to support the scope and size of the economy that exists in the Northern Marianas.

There are only about 12,800 resident workers on Saipan in 1999 while the island’s economy employed some 43,700, which explains the tourism and garment industries’ dependence on foreign manpower.

GAO validated the multiplier effect of garment and tourism industries to other business sectors, as well as to the growth of the local government which received over $50 million from the apparel manufacturing and $34 million from the travel sectors in 1998.

“These industries [garment and tourism] are linked to the rest of the economy through the purchases of goods and services from other industries, tax revenue paid to the government and workers’ spending,” the report pointed out.

The two sectors are responsible for about 85 percent of the total economic activity in the Northern Marianas, producing at least 96 percent of the Commonwealth’s exports.

Self-sufficient

Primarily fueled by growth in the garment and tourism industries, CNMI has risen to be the most fiscally self-sufficient among other U.S. outlying areas like Guam, Puerto Rico, the U.S. Virgin Islands and the Freely Associated States.

The ratio of locally derived government revenue to gross domestic product in the CNMI is also higher than that of most other outlying areas and is larger than the comparable ratio for all levels of government in the U.S.

The GAO report said the Commonwealth government obtained about 87 percent of its general revenue from local sources while payments from the U.S. Treasury accounted for 13 percent.

In 1998, the garment industry contributed 22 percent of the government’s $234 million budget. The tourism sector pitched in 14 percent of the Commonwealth’s $248 million budget in 1997.

A study funded by the Department of the Interior noted that about 21,600 jobs in the CNMI economy were dependent on the garment industry, which constituted nearly one-half of all employment in the Commonwealth.

When international trade quotas are finally lifted, the apparel industry on Saipan will finally relocate to Latin America and Asian countries in at least six to seven years.

This may be translated to the CNMI losing an average of 3,090 jobs per year, including 2,030 in the half-a-billion-dollar garment industry.

If the travel sector improves at the expected rate, there may be an additional 560 jobs per year in the industry and at least 960 new employment opportunities in the CNMI economy.

The economy is likely to lose on net 2,130 jobs per year over a seven-year period or nearly 15,000 jobs overall. As a result, by 2005, the CNMI economy would have roughly one-third fewer jobs than it does today.

Although the eventual demise of the garment sector would be harder on guest workers, 2,500 permanent residents working for apparel manufacturing companies would also be rendered jobless.