House eyes IT potential of CNMI

The House leadership under Speaker Benigno R. Fitial is eyeing Asian companies to develop information technology (IT) industry in the CNMI in a bid to boost the local economy, according to his memorandum issued to members of the lower chamber.

It cites several advantages of the Commonwealth that can attract IT investors here, including its duty-free access to the U.S. — the biggest market for both software and hardware components of the sector.

Other assets of the island are the English language, local immigration control and its location being the closest U.S. territory to Asia as well as having a lower-cost structure than the mainland, while maintaining the same political and economic stability.

“The CNMI clearly has marketable attributes for IT firms,” said Mr. Fitial in the memorandum. “With these elements, it may be possible for the CNMI to develop a marketable product to IT companies.”

He also noted potential benefits of developing the industry on the island, such as highly-skilled labor needed to produce goods and provide services, higher wage rates, complementary investments on educational facilities and its appeal to younger generation of local residents.

While IT has continued to expand in the mainland in the last few years, the sector is facing difficulties in terms of having enough workers since the U.S. immigration limits entry of foreign labor.

But several Asian countries have picked up on the booming industry, becoming the fastest big emerging markets which can export IT products and services to the mainland.

CNMI’s aces

Because the Commonwealth enjoys duty-free access to U.S. markets, it could entice companies to develop IT facilities here, according to the memo. Although mainland companies have begun to out-source products and services to meet increasing demand, there is a need to maintain lower-cost operations.

“The CNMI would have a comparative advantage in its wage structures over the mainland U.S.. Moreover, the U.S. political and legal system would provide many protections that would be absent in foreign countries, thereby providing additional benefits to companies ‘out-sourcing’ business to the CNMI,” it said.

Asian IT companies, which do not have the same trade privileges as the CNMI, will find it an incentive to invest here in such computer components as semiconductor as well as assembly markets for exports to the U.S.

At present, many individual components are manufactured and then assembled overseas. The CNMI can come in and attract businesses that specifically cater to these markets to help launch the industry on the island.

Because of the CNMI’s lower cost wage structure compared to Japan, Taiwan, Hong Kong and other Asian countries, companies could employ workers here at rates lower than the mainland and yet still have unrestricted access to the U.S. markets for their products, Mr. Fitial said.

“This would allow them to remain relatively competitive on the global marketplace, while retaining the political and economic stability of the U.S.,” he emphasized, adding that local control of its immigration guarantees access to highly-skilled workers in Asia.

“Many companies are looking at access to [Asia], and the CNMI could be a stepping stone to such access. The CNMI would reap many of the benefits of companies relocating to” the island, he said in the memo.

A study

To set the plan in motion, Mr. Fitial recommended a comprehensive study on the viability of the IT industry here with the Commonwealth Development Authority or an independent consultant as a led agency.

The proposed study will determine whether the island has infrastructure to support IT firms, like modern telecommunications service, and whether educational facilities will be needed.

A business plan will detail the proposal and highlight comparative advantages of the CNMI has over other investment sites and the incentives the government will have to offer to entice IT companies.

“The CNMI may have certain limited opportunities to attract information technology companies to the islands. The Commonwealth will face significant hurdles in such cases. Specifically the state of both the local telecommunications infrastructure and, Commonwealth’s educational facilities will be critical to success,” said the memo.