Osman: NMI economy better than expected

The Northern Mariana Islands is poised to benefit from the rebound of the Japanese economy and the emergence of the China market, making year 2004—and possibly 2005—better years for the economy, according to a new report by regional economist Wali M. Osman.

In his May 2004 Update on the Economies of Guam and the CNMI Report, Osman described the CNMI’s financial condition as less tenuous and that remedies needed to restore its financial health is more attainable.

According to Osman, the CNMI tourism industry expects a 20-percent increase in total tourist traffic this year, which would raise total arrivals to about 570,000. At the same time, he said the Northern Marianas is in an advantageous position to benefit from the economic recovery in Japan and the increased outbound travel from China.

“While better than 2003’s total, even that level of tourists would be far short of the 736,000 the CNMI received in 1996. Just as in the case of Guam, recovery to the previous peak may be some time away, but the improving Japanese economy will make it possible to move in that direction,” said the economist.

Osman said that beyond the uncertainty surrounding the apparel industry, a somewhat longer-term prospect for the CNMI looks more promising, mainly because of the emergence of China as a regional tourist supplier.

The report said that outbound tourist traffic from China is expected to increase substantially in the years ahead, and the CNMI’s edge is in the presence of tourist facilities already on the ground that cater to Chinese tourists.

Also, since CNMI-bound tourists do not need U.S. visas, as they do to enter Guam, the CNMI has the advantage of receiving Chinese tourists any time once China places the Commonwealth on the list of “approved destinations” and allows Chinese citizens to travel to the CNMI.

Osman also said that the hotel and casino on Tinian, although struggling to stay open since it started business in 1996, has the capacity to receive and entertain large numbers of Chinese tourists, particularly now that plans are in the works for expansion should circumstances call for an increase in capacity.

“The fact that the Tinian facilities are owned and operated by Chinese interests from Hong Kong is a plus for the operators. They know the Chinese gambling market and how to attract tourists from that market to the CNMI, which is a relatively short flight from either Hong Kong or Guangzhou (Canton), the main city in southern China,” the report said.

It added that, with Chinese tourists increasing in the years ahead, simply because per capita income is rising at the rate that occurred in Japan in the 1950s and 1960s and Korea during the 1970s and 1980s, the CNMI has both the facilities and the cultural and linguistic advantages to receive Chinese tourists. It may be some time before Tinian becomes a mini-Macao, but it certainly has the potential, it added.

The main comparative advantage the CNMI has as a tourist destination is that it has more than one island, and each has its own attributes and comparative strengths.

He said Rota is a preserved area and it may remain that way in the foreseeable future. Still, one of Rota’s most valuable uses may be as a meeting facility for world and regional leaders when the island has facilities for such a purpose.

Tinian’s infrastructure is currently geared mainly toward Chinese tourists, possibly Korean tourists as well, especially gamblers. Other tourists and local residents are just as welcome to the casino and hotel as anyone else.

On the garment industry, Osman explained that the industry faces different challenges as the lifting of quota restriction approaches.

Osman said that, as January 2005 nears, Saipan garment makers would be expected to search for other markets where production costs may be lower.

However, Osman believes that it is unlikely that Saipan garment makers would move abroad at once, even under the most difficult conditions. The most likely scenario for Saipan’s garments is that they will continue to produce at current levels (around $800-$900 million of gross sales) in 2004.

“If that is to be the case, CNMI’s economy will do better this year than in the last 2-3 years,” he added.