Commonwealth
of the Northern Marianas
Economic Environment
Two major demographic factors affect CNMI’s economy: its
explosive population growth and an unusually large foreign workforce.
From 1980 to 1999, the country’s population has grown 373.4
percent, an annual increase of about 8.5 percent. Total population
in 1999 was 81,126 with 90% of the total on the island of Saipan.
Currently, over half of the population is foreign workers. Only
42% percent of Saipan’s 73,300 people are US citizens;
the rest are temporary foreign workers. Only 23 percent of those
in
the labor pool (16 years and older) are US citizens; 77% are
temporary foreign workers.[top]
Today, CNMI faces
an uncertain economic future. The Asian economic downturn that
began in mid-1997 has forced many businesses to
close, as the numbers of East Asian tourists plummeted. The September
11th incident has worsened the overall affect of the economic
downturn. Businesses that have survived face other challenges,
including a probable minimum wage hike, tighter federal immigration
control, and even more frightening, the loss of one of its major
industries, garment manufacturing.[top]
CNMI’s economy expanded rapidly after the Commonwealth
Covenant was signed in 1978, largely due to the expansion of
the tourism industry. Between 1988 and 1996, tourist arrivals
rose from 245,505 to 736,177, an average annual increase of 14.7%.
A construction boom ensued, hotels and restaurants were built
continuously, as well as improvements made to CNMI’s infrastructure,
all contributing to CNMI’s rapid economic expansion.[top]
In 1988-96 tourism
become CNMI’s largest industry. The
sharp decline in 1997-98 and only modest recovery, before the
9-11 incident, has shown how fragile and vulnerable this industry
is. In the four months of 2001, tourist traffic was down 1.4%
from the same period in 2000.[top]
Today, the garment
manufacturing has grown to become CNMI’s
largest income and tax revenue source. In terms of direct employment,
the garment industry surpassed tourism in 1977. New global trade
rules, along with pressure from the US to increase the minimum
wage of garment workers, may soon alter CNMI’s competitive
advantage. If the garment industry were to leave suddenly, the
economic and financial consequences for the CNMI will be disastrous
because there is no immediate use for the infrastructure by other
industries.[top]
Another major uncertainty
facing businesses in the CNMI is the proposed raising of the
minimum wage from its current rate of
$3.05 per hour to the federal minimum wage level of $5.15 per
hour. The proposed $2.10 increase would severely increase most
business’ operating costs, especially those employing low-skilled
workers who provide the bulk of services in the labor-intensive
tourism industry. The minimum wage hike would probably also drive
the garment industry out of the CNMI, as manufacturers relocate
to lower labor-cost areas. While this legislative proposal has
not passed yet, its supporters continue to lobby for its passage.[top]
Many people in the
CNMI believe it is only a matter of time before the garment
industry will leave and have sought to bolster
and expand the tourism base into other foreign markets. There
is a movement within both the public and private sectors to further
develop this industry.[top]
With all of these
uncertainties, CNMI leaders have begun in earnest to find other
industries to help diversify the economy.
A wide variety of new industries are being analyzed, some of
which include telecommunications and data processing, retirement
villages, pharmaceuticals, insurance, and scientific research.[top]
Most agree that the
diversification process requires a long-term investment before
results are realized. With the possible departure
of the garment industry in the next five years and no immediate
recovery foreseen of the tourism industry, time is running out
and a viable alternate economic strategy must be developed and
implemented soon. [top]
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