‘Spike in user fees may signal factory closures’

Garment exports from the Commonwealth rose significantly last month but hardly enough to prop up the collapsing apparel manufacturing industry, according to newly released government statistics and the governor’s chief trade adviser.

In an interview Monday, Richard Pierce, trade adviser to Gov. Benigno Fitial, noted a 27 percent increase in user fee collections for the month of June over May’s fees. June saw more than $373,000 in fees collected, according to the new statistics, but Pierce noted this is a mere “shadow” of the $1.03 million in fees collected in June 2007.

June’s increase is due to the seasonal ebb and flow of the garment industry, Pierce said, as the month historically has seen slight increases in garment exports. Yet the industry continues to struggle despite this slight jump with only six factories remaining on the island, including two that are poised to close.

“We have received unofficial comment from two of our remaining six factories that they will be officially notifying the appropriate government agencies of their intent to cease operations soon,” Pierce said. “This is all as a result of their inability to compete with cheaper Asian production facilities.”

Production costs are key the industry’s pending demise, Pierce added and the loss to the Commonwealth’s economy once it is gone could prove staggering.

“It all may be a very interesting chapter in CNMI history soon enough, where a minuscule amount of production, actually less than 1 percent of domestic capacity at our industry’s height, caused an uproar big enough to have those that could have allowed this industry to continue indefinitely decide to turn their collective backs and watch it set with the sun with all its jobs, money and government revenue,” he said.

Once a powerful economic engine for the CNMI, the garment industry is now facing a slow death as the costs of labor, utilities and production materials climb. The sector’s decline is evident in the precipitous drop in “user fees,” export taxes charged on garment shipments, which have seen a dramatic fall since the industry’s heyday in the late 1990s.

User fee collections earned the Commonwealth more than $35 million in 2001, for example, diminished at a more or less steady rate in the following years, according to government statistics. The steepest collection drop occurred from 2005, when the tax collected brought more than $26 million to the Commonwealth, to 2007, when revenue totaled about $13 million.