Garment sector pitches in $62-M to local businesses

The Saipan garment manufacturing industry contributes more than $62 million to the Northern Marianas economy through direct and indirect procurement of goods and services from local businesses, disclosed a recent private sector study.

This figure does not include $73 million which the apparel manufacturing sector directly pitches in to the Commonwealth coffers through payment of various duties and fees, particularly on exports, labor, utilities, medical services and ports.

The study commissioned by the Saipan Garment Manufacturers Association and was conducted by Burger & Comer involved only 22 of the 30 apparel production companies on the island, which means actual figures could be higher.

The sector’s local purchases of food, gas and supplies in 1999 amounted to about $19 million, as it paid some $15 million in freight and transportation charges for its apparel exports to the mainland United States, as well as the shipping of raw materials into Saipan.

Employee housing rental payments account for $5.2 million of the total direct contribution of the sector to the local business community, while education and professional fees amount to $5 million in the same period.

Other services availed by the apparel manufacturing sector from CNMI businesses include repairs and maintenance, insurance premiums, travel expenses, land lease payments, telephone charges, security services, bank charges, refuse collection and advertising.

The same study also noted that the 22 garment companies which were respondent to the survey have spent almost $10 million on capital improvements in 1999.

The garment industry provided nearly $73 million in direct payments to various government agencies in 1999, paying over $41 million in user fees and excise taxes; close to $17 million in wage and salary income tax; $7 million in utilities; $4 million in labor payments; $1 million in medical expenses; and $2.4 million in port fees.

“Given the CNMI government’s budgeted revenues of approximately $216 million for fiscal year 1999, the payments would approximate 34 percent of total government revenues,” the study said.

The local economy stands to lose between $100 million and $150 million in total revenues every year once apparel manufacturers on Saipan uproot their factories from the island due to world and regional trade liberalization.

The garment industry played a major role in preventing economic depression in the CNMI when the travel sector reached rock bottom due to currency crisis in Asia, particularly Japan and South Korea.

Changes in tariffs, import duties and subsidies, which are the Commonwealth’s most comparative economic advantages, may however drive garment manufacturers away, “possibly without notice.”

Some garment manufacturing companies have already started establishing factories in Mexico. Cambodia, the Philippines and other Latin American countries.

This early, observers already anticipate no more than five- to seven-year life for garment production on the island, citing the absence of specific advantages offered by the CNMI government to garment manufacturers other than the existing tariff and quota exemptions.

The sector has been expected to pull out of the CNMI in seven years when the agreement which created the World Trade Organization takes into effect. A kin to this, the United States will have to phase out its garment quota system by 2005.