Diego: Economy showing good numbers

The CNMI economy is slowly picking up and signs of development abound despite reports of an impending massive layoff at the apparel industry, according to Lt. Gov. Diego T. Benavente.

He also expressed confidence that the garment industry would never totally pull out from the Northern Marianas, noting that the industry is here due to the advantages offered by the CNMI.

In fact, seven months before the worldwide lifting of the quota restrictions in January 2005, Benavente said the CNMI economy is getting better.

“I see a lot of improvements and the number is showing it already. Obvious sign is better and steadier number in garment and tourist from the additional charter flights. These are signs that things are coming back,” said Benavente.

He said most of the apparel companies are on Saipan due to these advantages and most of them would stay.

“It is because of the U.S. label that high end brands are coming in. The quality of the products that we are making here are better than the competition. There is still the advantage of the made in U.S.A., made in the CNMI label, than those products that are being made in other countries,” said Benavente.

Despite reports of large-scale reduction in orders and possibly in revenue, Benavente stressed that CNMI would still be okay even with garment factories streamlining their operations and personnel.

He added that other factories may lay off workers but it is because of the new technology and additional labor requirement that are being enforced at the apparel industry.

Regional economist Wali M. Osman had said that, as January 2005 nears, Saipan garment makers would be expected to search for other markets where production costs may be lower.

However, he said it is unlikely that Saipan garment makers would move abroad at once, even under the most difficult conditions.

“The most likely scenario for Saipan’s garments is that they will continue to produce at current levels (around $800-900 million of gross sales) during 2004. If that is to be the case, CNMI’s economy will do better this year than in the last two to three years,” he said in a recently released report.

However, the effects of the impending lifting of quota restriction are now being felt in the CNMI, with the Commonwealth Ports Authority reporting that the Saipan harbor recorded zero growth during its first seven months in fiscal year 2004.

CPA executive director Carlos H. Salas disclosed recently that from October 2003 to April 2004, seaport revenue tonnage was only 17 percent of last year’s record and posted zero increases due to slow garment activities at the Saipan harbor.

He urged the CPA board of directors to begin looking at other possible revenue sources to augment the losses that the Saipan harbor would experience in 2005 when the local apparel industry faces stiffer competition due to the worldwide lifting of quota restrictions.

“What is alarming is, despite the 4-percent increase in seaport revenue from last year’s record and seaport meeting bond ratio coverage, is the zero growth in our revenue tonnage because of the slowdown in the garment industry,” said Salas.

He explained that the Saipan seaport’s outbound cargo used to comprise 21 percent of the outbound revenue tonnage in the last few years. Since the start of this fiscal year up to April 2004, this only reached 17 percent. Outbound revenue tonnage last year was only 20 percent.

Salas said the rate is alarming and the trend is continuing for several months now beginning last year when the garment industry noted the increased competition from other countries.

The executive director predicted that this trend would continue and that CPA should now explore other possible revenue sources, including non-harbor activities, to augment losses in seaport revenue.

The possible pullout of the garment industry has been predicted to severely affect the shipping industry in the CNMI. In terms of revenue, the industry contributes: 50 percent of CPA port fees; 37 percent of incoming revenue tonnage; 95 percent of outbound revenue tonnage; 65 percent on incoming sea freight; and 99 percent of outbound apparel cargoes that goes through Guam.

The CNMI garment industry has been paying an estimated $900,000 in ports fees while indirect revenues to the CNMI was recorded to reach $47.3 million, including $16.6 million in gas, $6.8 million in freight and transportation; $4.7 million in house rentals; $3.0 million in education; $2.9 million in insurance; $1.8 million in land leases, among others.

Also, cargo traffic at the Saipan International Harbor is anticipated to drop by 20 percent, as a result of the expected slowdown in garment manufacturing-related activities on the island in 2005.