Average quarterly user fee collection drops 7 percent

A strong validation of the projected drop in apparel production, controversies hounding garment manufacturing activities on Saipan pulled down the Commonwealth government’s average user fee collection in the first half of Fiscal Year 2000.

The Quarterly Economic Review, prepared by the commerce department’s Central Statistics Division, disclosed a seven-percent fall in the amount of taxes paid by garment manufacturers for apparel products exported by the Northern Marianas from October 1999 to March 2000 .

The CSD quarterly economic report quotes figures submitted by the Department of Finance on taxes and fees, business activities, government expenditures and volume of trade.

According to official DOF figures, quarterly user fee collection in the recent financial year dropped by almost seven percent to $9.15 million from last year’s $9.825 million.

During the first semester of the current fiscal year, the finance department has collected some $18.3 million in duties from United States-bound apparel products manufactured by about 30 garment companies on Saipan.

In 1999, DOF records disclosed that the garment manufacturing industry on Saipan contributed $39.3 million in direct revenues to the CNMI coffers through user fees. The figure was slightly higher than the previous year’s $36.8 million.

In 1996, the apparel manufacturing sector contributed only about $18 million in direct revenues to the Commonwealth government. User fee collection increased to $27.7 million the following financial year.

The suit filed against Saipan garment manufacturers and their mainland buyers halted the projected continued growth of the sector, which has become the Commonwealth’s largest revenue-generating industry since economic slump in Asia crippled the travel sector.

The drop in user fee collection has been anticipated by the government since early last year due to the billion-dollar class suit filed against the local garment manufacturing industry and their buyers in the United States.

Anticipated fall

The government is anticipating an average five percent reduction in annual earnings from user fee collection beginning this year, as finance managers raised concerns on the possible catastrophic impact of the impending departure of the Saipan garment manufacturing industry to the CNMI economy.

The Saipan apparel manufacturing industry is expected to uproot from the island when the agreements that created the World Trade Organization takes into effect in 2005.

The agreements eliminate trade quotas to the United States, thereby, stripping the Northern Marianas of its unique duty-free access to the mainland U.S.

Government revenues from apparel exports suffered a modest fall in the first eight months of the Fiscal Year 2000, dropping by 1.5 percent from last fiscal year’s $25.5 million to $25.1 million.

The CNMI government has consistently projected reduction in earnings from apparel exports since the billion-dollar class suit was filed in early 1999.

The apparel manufacturing industry in the Northern Marianas has persistently manifested resilience despite downturn in local and regional economies,. which has facilitated the Commonwealth’s efforts to weather hard economic times.

In Fiscal Year 1999, user fee collection from garment export certification soared by $2.5 million to $39.3 million from the previous year’s 36.8 million.

However, actual user fee collection was still lower than the original government projections of $41.1 million for FY-1999. The FY-1999 figure represents an average of $9.825 in direct quarterly government revenue from garment export certification, up from the year-ago’s average quarterly collection of $9.2 million.

In 1998, the CNMI government generated some $36.8 million from user fee collection. Department of Finance records indicate an increasing trend in fees collected from garment export certification since 1996.

Earlier growth in CNMI’s garment manufacturing industry filled up the decline in the tourism sector. The industry has been generating millions of dollars of direct revenues for the CNMI government, and a significant multiplier boost to the local economy.

The garment sector, composed of about 30 small-and-large-scale firms, is CNMI’s biggest employer, accounting for 21 percent of the 30,000 foreign workers employed in the Northern Marianas in 1995.

It was the fourth highest economic contributor, accounting for 12.7 percent of the $2.26 billion business gross revenues reported that year.