SGMA sits down with DoC’s Salas on future of industry

Saipan Garment Manufacturers Association board members met with Department of Commerce Secretary Andrew Salas to discuss the industry’s economic contributions to the general fund of the Commonwealth of the Northern Mariana Islands.

“We respect Secretary Salas’ comments on the future of the CNMI economy, and even more so his insightful ideas on how our factories could be more productive through better application of CNMI labor laws,” said SGMA’s Richard A. Pierce.

Pierce and the board informed Salas that restrictive and antiquated labor permitting laws have lessened CNMI tax and fee collections to 80-85 percent of potential earning power from the factories.

SGMA contends that bureaucratic permitting delays, and a system not aligned with industry demands result in lost work hours in factories due to the lapse between workers being repatriated and new workers being allowed to enter the CNMI to replace them.

SGMA demonstrated how this cost the CNMI approximately $10 million in unrealized user fee payments alone in 2004 and 2005. Totals for excise tax, limited business gross receipts tax, various fees to government agencies from the industry and corresponding local spending were not calculated or presented.

The SGMA board and Salas agreed on a common goal: that getting labor laws more suited to business success and making factories more competitive is an avenue to a healthy CNMI economy.

According to SGMA, in December of 2004, garment factories paid $2,899,340.59 in user fees to the CNMI Customs Division for exporting what could be, if the current tariff privilege remains unchanged, the last big month of user fee payments to the CNMI.

October, November and December of 2004 user fee payments totaled $7.7 million. This is the largest October, November and December total since 2000’s total of $8.8 million.

SGMA contends this is for one reason only: On Jan. 1, 2005, WTO member countries no longer have quota restrictions into the U.S. marketplace, and foreign buying offices shifted orders to Saipan at last year’s end, the last year of quota restrictions limiting their sales to the U.S.

“We had a good year ending, and one we won’t experience for these reasons ever again,” said Pierce. “This quarter of sales totals have only one chance of recurring, in my opinion. By making changes to the value-added requirement of General Headnote 3(a), we could make the factories more competitive, get more orders, and keep user fee payments to the CNMI steady.”

“Unlike many statements made by some government and business leaders, I would much rather address how to keep the factories competitive and the CNMI economy healthy through a formula this industry has been offering for years, than resigning to the industry’s almost assumed inevitable demise, if we do nothing to save it,” he added.

“And, frankly, there’s no way additional tourists will even come close to making up for millions in lost revenue to the CNMI if nothing changes and this industry is sizably reduced.”