Garment sales slide to $49M

Garment sales declined to $49.4 million in April, the lowest in the last five months, as the CNMI’s garment players struggle to win buyers’ orders amid the lifting of trade quota on apparel.

If nothing is done to stem the slide, the Saipan Garment Manufacturers Association said this could lead to a collapse in the garment sector, which would lead to loss of thousands of jobs, significant government revenue, and possible bank run.

“Garment workers are estimated to have $90 million in direct deposits. Displaced garment workers will withdraw their monies from local banks in the CNMI,” SGMA executive director Richard Pierce told businessmen during the Saipan Chamber of Commerce’s membership meeting Wednesday.

“An estimated $200 million in deposits from the garment industry and the garment workers that finance CNMI bank operations, particularly loans to local borrowers,” he said.

Pierce said a swift withdrawal of garment factories would also endanger the ability of the CNMI government to provide essential services, such as public health and education.

In April, the government’s user fee collections totaled less than $2 million, the lowest monthly collection so far this year.

“The cash-strapped public utility [Commonwealth Utilities Corp.] would swiftly lose a major source of power sales. Even if 100 percent [of power users] hooked up, there is not enough other business on the island to make up the difference of 22 factories and all of their employee dormitories,” he said.

Citing findings of the U.S. Department of Interior, the SGMA said the flight of factories from the CNMI could take with it about one-half of the jobs in the CNMI, including one-third of the jobs of permanent residents.

The SGMA claims to contribute about $69.9 million to the government in the form of taxes and fees and an additional $47.3 million in industry spending.

“The total direct contribution to the economy, both in generating revenues for the government and income for the private sector is estimated to be from $229.3 million (low) to $292.6 million (high), omitting remitted employee salaries,” Pierce said.

The SGMA said the federal government could assist Saipan’s garment sector by granting the insular areas treatment equivalent to that of the United States’ free trade partners.

The SGMA wants the U.S. Congress to amend the U.S. Tariff Code to reduce value-added requirement on garment imports from 50 percent to 30 percent for local manufacturers to avail of duty-free treatment.

The U.S. Tariff Code requires that 50 percent of the value of the garment has to be added locally by transformation, in terms of additional labor, packaging or other overhead costs, so that garment products coming from U.S. exporters like the Commonwealth could enter the United States duty-free.