Business operational costs aggravate economic hardships

In order to mitigate the aggravating effects of economic hardships to the ailing business sector and prevent the displacement of more establishments, the CNMI government should seriously look at initiating programs that would reduce the cost of maintaining business on the islands.

According to the Department of Commerce, the government can start with building up a strong local labor force which is seen to help mitigate current investor climate constraints in the Northern Marianas, considering the closure of thousands of small and medium scale businesses since 1997.

While labor cost in the CNMI is low compared with any of the 50 American states and the neighboring island of Guam, Asian businessmen who are more likely to infuse fresh capital into the CNMI looks at current figures as too high.

Factors that relate to the cost of starting up and maintaining a business on the islands have been identified by most businesses that have either ceased operations or currently in the brink of shutting down.

If the CNMI government can alleviate cost factors that are not market dependent, investors said local businesses that are carrying the burden of slow economic activities are more likely to stretch their available resources to keep afloat despite the crisis.

At present, efforts are being carried out by the CNMI Legislature and the Governor’s Task Force on Economic Revitalization to identify and institute strong incentives that would actually help efforts to entice foreign investors to infuse fresh capital into the Northern Marianas, and existing businesses remain afloat.

The commerce department said it backs efforts to institutionalize the government’s own training programs in support of particular types of new industries, or offer to subsidize the initial training of employees in startup firms.

A trained labor force is essential for the operations of any new business. Any deficiencies in the availability of skills could be remedied in this way. This type of program would also provide a concrete example of community support for new investment projects.

Compared with other countries in Asia, labor cost in the CNMI is higher which could be a deterrent in the government’s efforts to encourage foreign investors to consider the Commonwealth for their expansion or new business plans.

Recent threats from the United States government to extend federal immigration and minimum wage to the CNMI, which is higher than the existing rate in the islands.

Increased labor expense, coupled with the higher cost of doing business in the Commonwealth, tops the list of “disincentives” cited by corporate managers of companies operating in the CNMI.

Officials and businessmen are wary that companies in the CNMI may soon decide to seek greener pastures in other Asian countries like China and the Philippines, which have larger market for their products.

A study conducted for the Commonwealth Ports Authority has indicated that the eventual exodus of multinational garment manufacturing companies is a proof that the CNMI has difficulty maintaining its global competitiveness.

Foreign investors have been particularly turned off by the lack of a local skilled work force although he mentioned the Commonwealth’s control of its immigration which allows importation of foreign workers from neighboring Asian countries.

Bringing in skilled workers from Asian countries like the Philippines to the CNMI would mean additional financial burden to the investors, or could reach approximately $2,000 per worker.