CNMI makes a pitch against takeover

The CNMI government has taken advantage of the Year 2000 All Islands Tax Administrators Conference last week to lay down possible catastrophic impacts to the local economy of the proposed federalization of local labor and immigration laws before participants from American insular areas in the Pacific and the Caribbean, and interior department officials.

Special consultant for budget and finance Mike Sablan and Development Authority Executive Director Marylou S. Ada took turns in enumerating huge economic loss for the Northern Marianas once the Clinton Administration succeeds in stripping the Commonwealth’s control over minimum wage and immigration.

The Covenant, which established the Commonwealth in political association with the United States, allows the Northern Marianas to have local control over immigration which the CNMI utilized in importing nonresident workers from Asia to fill the need of the growing business activities on the islands.

Its current political union with the U.S. also allows the CNMI exemption from federal minimum wage which offsets the high cost of importing nonresident workers mostly from China and the Philippines.

The CNMI is also exempted from laws governing the U.S. Customs and the Jones Act, while enjoying duty-free and quota-free access to the mainland.

According to Mr. Sablan, these tools were provided for by the Covenant to allow the growth of the Northern Marianas economy which is more likely to collapse once taken back by the federal government as proposed by the Clinton Administration.

He said the Commonwealth economy has grown since 1978 that paved the way for the gradual reduction in federal assistance to the CNMI government’s operations between 1978 and 2000.

“We have registered a growth of at least 4,900 percent in local revenues between 1978 and 2000. In fact, total funds from federal appropriations required to run the CNMI government dropped to only 10 percent in 1990,” Mr. Sablan said.

He stressed that since 1990, 100 percent of the Commonwealth government’s operations have been funded by revenues generated locally.
Major areas of federal assistance currently extended to the CNMI include Capital Improvement Project funds for infrastructure, Medicaid, food stamps and highway programs.

He added the Saipan apparel manufacturing sector has been a major contributor in government’s efforts to replenish public coffers in the last three years when the tourism sector was not generating as much earnings.

In 1990, user fee collected from the exportation of finished apparel products comprised only five percent of the overall local government revenues. This has ballooned to 19 percent since then.

Blaming the double whammy caused by the Asian crisis and the proposed federal takeover of local immigration and minimum wage, Ms. Ada said the number of businesses on the islands dropped by as much as 32 percent in 1997 to 3,800 from about 6,000 in 1996.

The CNMI economy suffered yet another blow in 1998 when the number of existing establishments fell by an additional 10 percent, which totaled only around 3,410 businesses.

Overall business gross revenues between 1997 and 1998 dropped 14.3 percent. Only the apparel manufacturing sector registered growth of a whooping 22.2 percent between fiscal years 1997 and 1998.

Ms. Ada stressed pressures from the federal government have aggravated economic recovery potentials of the Northern Marianas, since proposals to strip the Commonwealth of its control over labor and immigration are considered detriments to luring foreign investors into the islands.

“Many argue that the wage increase will have a devastating effect on businesses as it will greatly increase operating costs. Highly concerned over the CNMI’s excessive use of foreign labor, the Clinton Administration is proposing legislation to takeover local labor and immigration control,” she said.