The depressed state of the CNMI economy: A realistic plan is needed to turn it around

The COVID-19 pandemic that began about six months ago, instead of subsiding, has apparently started its “second wave,” as Dr. Anthony Fauci of the National Institute for Allergy and Infectious Disease predicted with a degree of certainty a few months ago. This worldwide pandemic is probably the most serious public health crisis threatening the lives of millions worldwide.

The Northern Mariana Islands, with its small population of 60,000 people, has a fairly isolated location in the Pacific, which has spared our people from the brunt of this infectious and deadly disease. And for this, our people should all be grateful. Our distance from major population centers such as China, Japan, and Korea has apparently helped stem the spread of the virus to our islands.

The CNMI also has a low infection rate due to the preventive efforts taken by CNMI public health authorities. They took steps to prevent the spread of the deadly virus through the enforcement of social distancing measures, the wearing of face masks, and limiting social gatherings. Until an effective vaccine is developed to treat the coronavirus, such public health measures have been effective in slowing the spread of this unusually infectious disease. We should continue practicing such public health measures religiously.

A few weeks ago, the governor mentioned that “maybe now is probably a good time” to reassess our government priorities in terms of how the CNMI government dispenses public service. He apparently made this observation because one of the most adverse effects of the COVID-19 pandemic has been the dramatic decline in the overall economy of the Commonwealth. As we have seen over the past several months the CNMI economy has literally been stagnant and government revenue collection has correspondingly fallen flat.

This week we learned that the CNMI government is experiencing a huge shortfall of over $90 million in revenue collection for this fiscal year. This revenue shortfall is roughly 50% less than the previous fiscal year revenue collection, a huge decline that will undoubtedly affect essential public service, such as public health, education, public safety, and so forth. We should realize by now that the proverbial “seven fat years” that the Commonwealth enjoyed in the ’80s and ’90s left the CNMI a long time ago.

CNMI revenue collection, as we should recall, took a major dip (about 40%) soon after the garment industry left the CNMI in 2004. Four years later—in 2008—the national “housing crisis” took place in the U.S. This economic crisis toppled the national banking industry, the country’s mortgage industry, the U.S. automobile industry, and the giant insurance industry, among others. To save those industries and others from collapsing, the federal government had to step in and “bail out” these industries; otherwise, the U.S. would have fallen into another great depression, similar to the Great Depression of 1929.

During the first decade of this new century, we were shocked to learn that both United Airlines and Delta Airlines no longer found it profitable to continue servicing the Northern Marianas Islands. This major economic setback was preceded in 2004 by Japan Airlines, which abruptly stopped servicing the CNMI for the same reason. The CNMI market was no longer profitable enough to continue sustaining the three major air carriers.

As the youngest and smallest member of the American political family 40 years ago, the people of the CNMI looked with pride at the fact that we directly negotiated the terms of our political relationship with the United States, the most powerful country in the world. But as in any political relationship, we should realize that the Northern Marianas Covenant is not a perfect political instrument. Like the U.S. Constitution—considered the model for the institution of democracy—the Northern Marianas Covenant is simply the work of man trying to achieve what we believe would be the best possible governing terms for purposes of carrying forth our political relationship. But we should also realize that even the U.S. Constitution has been amended a number of times to adjust its terms either to include what was forgotten by the Framers (i.e. the Bill of Rights) or to address major issues due to changing times and values. One of the best examples of the subsequent amendments is the 14th Amendment’s “Equal Protection Clause” and the 19th Amendment, which allowed women to vote.

In my book, From Colonialism to Self-Government: The Northern Marianas Experience (2010), published exactly a decade ago, I mentioned the importance for the leaders of the Northern Marianas to develop, draft and adopt a set of basic priorities and principles that the people of the CNMI should adopt at a general referendum. These basic priorities and principles should then serve as benchmarks for our leaders in the executive and legislative branches to follow and be guided by. These priorities and principles should set forth what we the people of the CNMI want to achieve, what we want to accomplish, and where we want to be as a group of people—40, 50, 60, and even a hundred years from today.

In particular, these priorities and principles should relate to such basic matters as having a viable and productive economy, an educated and skilled citizenry, a state-of-the-art public health system, a vibrant culture, a fostering of our unique customs and languages, and a respect and tolerance for all people who make our islands their home or who simply come here to visit. We should realize by now that prejudice, racism, hatred, and intolerance should not and must not have any place in our islands, or in the way we live and relate to each other.

We have already gone through 42 years of local self-government. But after all these years, what do we have to show for it today? What have we accomplished during the past 40 years? Very little, if any, as we all know. (And I’m not talking about the nice paved roads or about some of the so-called nice buildings we have, or even about the food stamps we receive from federal financial grants that some of my ardent critics believe are “proof of progress” made by the CNMI to date.) I’m talking, instead, about many of the industries that we have tried to develop and implement—and almost all of which have eventually failed.

Our first major economic failure, of course, is the garment/textile industry that we had in the ’80s and ’90s. We began that industry in the mid-1980s, with the garment industry established by one of our local entrepreneurs. During the same period, other textile companies from China and Korea started setting up shop in the CNMI in order to take advantage of the exemption given the CNMI from the U.S. textile “quota restriction” that a foreign country like China and Korea cannot exceed. So these foreign textile companies set up shop here because there is no textile quota restriction for the CNMI. General Head 3(a) exempted the U.S. territories from the textile quota restriction. In addition, goods manufactured in the CNMI are exempted from paying duty upon entry into the U.S. mainland.

In 2005, however, the World Trade Organization lifted the textile quota restriction and, within a year, all of the textile garment companies in the CNMI immediately left the Commonwealth without batting an eye. Why? Because labor is cheaper in their own country: China and Korea; even taking into account the customs duty that they would have to pay to enter the U.S. In the wake of their departure, these garment companies left abandoned buildings, warehouses and apartments, which to this day remain as eyesores around the island.

The next major industry that CNMI leaders worked ambitiously to bring into the Commonwealth, notwithstanding the overwhelming opposition by the general electorate to casino gaming at two previous public referenda, was the establishment of a casino gaming industry on Saipan. But the CNMI Legislature went ahead and met secretly, voted (literally “in the middle of the night”) and passed the casino gaming legislation. Never in the history of the CNMI had there ever been any legislation passed that was apparently drafted exclusively by the proponents of the casino industry for the sole purpose of granting an exclusive casino license to only one licensee, effectively creating a monopoly for this industry. But this is exactly what CNMI elected leaders did.

This major piece of legislation was conceived, proposed, drafted, and passed with lightning speed from the time the idea was apparently first conceived in Macao. And what was the casino legislation’s crowning glory? It would grant to one exclusive licensee a monopoly on the entire casino industry on Saipan. This licensee would hold a strong sway over the independence of our elected leaders, both executive and legislative, as well as the regulatory commissions whose members and employees would be funded entirely by the licensing and other fees that the exclusive licensee/operator would be paying the CNMI government and the Commonwealth Casino Commission.

Astoundingly, the exclusive casino licensee—Imperial Pacific, Inc.—stated from the very beginning that it would invest $7.1 billion in the CNMI. This is the extraordinary amount of money that the exclusive casino licensee promised to invest in an island measuring roughly 47 square miles and having a population of only 60,000 people. It leaves any person with a sound mind wondering whether such huge investment is “too good to be true.” But, as we have since found out five years later, this promised “investment” did turn out to be “too good to be true.”

Five years after the company was issued the exclusive casino license, it is now apparent that the sum promised to be invested was simply a wish. It was simply the casino licensee’s offer to invest such huge sum of money, apparently when and if it has such money. The fact of the matter is that the licensee apparently never had this amount of money. Ironically, this was the most critical issue that the Commonwealth Lottery Commission/Commonwealth Casino Commission should have looked into more carefully. It appears now that the commission did not perform the requisite amount of “due diligence” needed to determine the investor’s ability to carry out a project, the magnitude of which has never been carried out in the entire history of the CNMI. The commission apparently never investigated or audited carefully where this $7.1 billion was coming from.

And how do we know this critical failure to conduct due diligence on the part of the commission? As the saying goes, “the chickens are now coming home to roost.” IPI, based on a number of recent federal court filings, today cannot even pay its contract workers, vendors and contractors. Over the past several months this year, we have seen case after case being filed in federal court by IPI contractors, vendors and workers seeking payment for services rendered or for work performed for IPI. As a result, the federal court recently issued several writs of execution against IPI to satisfy the various judgments rendered against IPI. And the flimsy excuse given by IPI for not paying the workers is this: Blame the federal court because it is the one which seized all the money that IPI has been keeping to make payroll for the workers.

Thus, this recent set of events that we are now learning appear to presage the demise of the casino gaming industry on Saipan—in real time.

The most viable industry for the CNMI, as we all know—with a proven track record of over 40 years—is, hands down, the visitor/tourist industry. But in order to make the visitor industry viable we have to work hard to make this industry successful. We all know this. But we also know that, every now and then, a major typhoon would hit the islands and set back the visitor industry. So after every major storm, we need to immediately clean up the islands: clean up all the debris on all the beaches; clean up and maintain all the time all the public restrooms at the various park facilities; clean up Marpi, Bird Island, Managaha, Suicide Cliff, Banzai Cliff, Obyan Beach; and so forth. We must make sure that the all the tourist spots are safe and are adequately policed. For it only takes one tourist whose money and valuables are stolen to put a black eye on the entire CNMI tourist industry. It is a very competitive industry—but it is also a fickle industry.

The Marianas Visitors Authority must conduct effective meetings for all of its stakeholders: the tour bus operators, the hotels, the airlines, the community leaders, the taxi operators, the restaurant owners, DPS, golf courses, etc. We need to hear everyone’s concerns and needs. We also need to put on the front burner the idea of having a CNMI Cultural Center. Why can’t the CNMI have a cultural center? Why can’t we build a cultural center, say, within the next three years? If there is a loan that can be given by the Marianas Public Land Trust, why can’t the first loan be one for at least FIVE MILLION DOLLARS ($5,000,000.00) to build a cultural center to showcase our Chamorro and Carolinian cultures? The proceeds from this cultural center could be partially used to pay off the cultural center loan. We clearly need to showcase our local dances, local songs, local food, and our arts and crafts. We need to coordinate with the Department of Public Safety and other agencies so that the safety of visitors is assured at all times. We should also provide other tourist amenities and recreational activities for residents and visitors alike. We just have not been doing this. Why? CNMI leaders and MVA—where are you guys?

After we finish the CNMI Cultural Center project, why can’t we go on and plan for, develop and construct, say, an “underwater aquarium” like the one they have in Palau? Maybe at the Grotto? How about planning for and developing a CNMI arboretum for native plants and flowers, including local medicinal herbs? And how about expanding the Saipan Museum so that we could depict in some detail our past history under the Spanish, German and Japanese regimes?

I mention all of the foregoing as constructive criticism in order to stimulate discussion among our people and leaders. We need to remember that we cannot be forever relying on Uncle Sam to provide federal grants for all our financial needs. We need to start being self-reliant. We should not continue relying on hand-outs from the federal government for all our needs.

To our elected and appointed leaders: you were elected to lead. So please do your job and lead—not react to others telling you what to do for fast money or for a quick buck. Your primary obligation is to improve the livelihood of our people. This requires a lot of hard work and a lot of planning and thinking. Remember that the CNMI government, as Finance has told us last week, is $90 million in the hole. Your job is to get us out of this hole.

Jose S. Dela Cruz (Special to the Saipan Tribune)
Jose S. Dela Cruz is a former justice of the CNMI Supreme Court.