Two major Saipan retailers closed shop

The turtle-paced recovery of the CNMI economy from the two-year currency crisis in Asia continues to take its toll on the local business community, forcing two major retailers to cease operations in the Northern Marianas in the last few weeks.

While company officials remain mum on the reason that triggered the closure of the establishments on Saipan, business analysts said weaker consumer confidence and the sudden change in the spending behavior of tourists are major factors behind the slow rally of the local economy.

Since the beginning of the year, A-One shoe store held a series of inventory and clearance sale, to apparently mitigate further losses, before it finally shut its doors to customers earlier this month.

Businesses have been competing with each other over the dwindling size of the local and tourist market in the Northern Marianas. Those that were not able to brave the heated competition were forced to close down.

Japan-based Yokohama Okadaya earlier announced it is closing down its Saipan outlet, located at the commercial district of Garapan. Its store on Guam will remain in operation.

Company officials did not cite reasons behind the closure of the Saipan outlet although the store has been struggling for customers in the last couple of years due to the decline in visitor arrivals into the Northern Marianas since 1997.

Yokohama Okadaya insiders said the decision to cease the store’s operations on Saipan came from the parent company in Japan. They said sales figures have not been very encouraging.

In what appears to be an indication of another round of fierce economic upheavals, at least 812 establishments in the Northern Marianas did not renew their business licenses last year.

A report obtained from the Business License Section of the finance department noted that out of 3,410 businesses in 1998, 812 establishments opted not to renew their licenses by end-December 1999.

Business analysts fear the decline in the total number of businesses in the islands may result to higher consumer prices since the collapse of too many establishments would virtually lessen the competition for customers among the trickling number of existing shops.

Consumers are eventually faced with costly products since there will be lesser competition in the market, and lesser competition means higher prices. This may lead to a monopoly especially when the number of establishments involved in a particular field of business is trimmed down further.

Bigger companies are more likely to survive the competition which are also more presumably to dictate prices. But as it is to a wheel, doing business is a cycle. A monopolistic approach in conducting business in a free market as the Commonwealth is not going to be a long-term problem.

However, the Central Statistics Division of the commerce department disclosed that 2,775 new business permits were issued by the Business License Section last year, exceeding the number of establishments that did not renew licenses.

Overall, the government’s business licensing office processed and approved 3,587 business permits last year which represented a trivial growth of 0.05 percent from the year-ago’s 3,410.

Before the Asian currency crisis fanned into the Northern Marianas, CNMI was enjoying a steady growth in business and economic activities with close to 6,000 existing establishments four in 1996.

The figure dropped by 32 percent to 3,800 business in 1997. It soaked deeper to 3,410 the following year only to show good signs of stability with last year’s tally reaching 3,587.

The Department of Commerce reported that overall investments dropped by 39 percent to 2,854 two years ago, posting a deficit of at least 1,799 compared with the previous year’s tally.

In 1997, the commerce department recorded a total of 4,653 businesses in the CNMI. Of this, 922 were new investments while 3,731 establishments renewed their business licenses.