Seaport posts zero growth

The Commonwealth Ports Authority has begun to feel the impact of the slowdown in the Commonwealth’s garment industry, with seaport activities recording zero growth in terms of revenue tonnage in the first seven months of fiscal year 2004.

CPA executive director Carlos H. Salas disclosed Friday that from October 2003 to April 2004, seaport revenue tonnage was only 17 percent of last year’s record and posted zero increases due to slow garment activities at the Saipan harbor.

He urged the CPA board of directors to begin looking at other possible revenue sources to augment the losses that the Saipan harbor would experience in 2005 when the local apparel industry faces stiffer competition due to the worldwide lifting of quota restrictions.

“What is alarming is, despite the 4-percent increase in seaport revenue from last year’s record and seaport meeting bond ratio coverage, is the zero growth in our revenue tonnage because of the slowdown in the garment industry,” said Salas.

He explained that the Saipan seaport’s outbound cargo used to comprise 21 percent of the outbound revenue tonnage in the last few years. Since the start of this fiscal year up to April 2004, this only reached 17 percent. Outbound revenue tonnage last year was only 20 percent.

Salas said the rate is alarming and the trend is continuing for several months now beginning last year when the garment industry noted the increased competition from other countries.

The executive director predicted that this trend would continue and that CPA should now explore other possible revenue sources, including non-harbor activities, to augment losses in seaport revenue.

“We need to prepare for the coming events and these are all due to [what is happening with the] garment [industry] and this might affect our bond ratio service,” said Salas.

He pointed out, though, that the Saipan Seaport Division still has an $8-million reserve fund that may carry up to five years, which would sustain bond obligations of the Saipan harbor even if seaport activities slow down.

“Whatever figure we have here, increase in seaport revenue and seaport operational costs, we need to balance it with seaport activities. We would have to monitor closely and look at ways on how to increase our revenues,” said the executive director.

The possible pullout of the garment industry has been predicted to severely affect the shipping industry in the CNMI. In terms of revenue, the industry contributes:

50 percent of CPA port fees

37 percent of incoming revenue tonnage;

95 percent of outbound revenue tonnage; 65 percent on incoming sea freight; and

99 percent of outbound apparel cargoes that goes through Guam.

The CNMI garment industry has been paying an estimated $900,000 in ports fees while indirect revenues to the CNMI was recorded to reach $47.3 million, including $16.6 million in gas, $6.8 million in freight and transportation; $4.7 million in house rentals; $3.0 million in education; $2.9 million in insurance; $1.8 million in land leases, among others.

Also, cargo traffic at the Saipan International Harbor is anticipated to drop by 20 percent, as a result of the expected slowdown in garment manufacturing-related activities on the island in 2005.

Because of the grim picture ahead, Salas said CPA would continue to explore other revenue sources including plans to develop Saipan as Micronesia’s transshipment hub by tripling the allowable number of containers currently being hauled at the existing yard at the Saipan seaport.

He said the project would provide the seaport division a diverse revenue base and would lessen the heavy reliance on wharfage fees to pay port operations and obligations.

In addition, Salas said CPA is also looking at reviving the fishing industry on Tinian, which would make the island a fishing transshipment point in Micronesia and the western region of the United States.

On Rota, the ports authority would proceed with its harbor rehabilitation project to accommodate bigger sea vessels. The project would develop the port efficiently as well as improve its protective basin. It will also include repair of the port area, dock, and the breakwater.

Earlier, the Saipan Garment Manufacturers Association issued a recent sales and tax revenue report to the public, showing that economic activity continues to drop at a rate predicted by industry leaders last year.

January 2004 sales and user fee payments dropped 13.36 percent from December 2003 figures, while January sales figures were down by 15.8 percent from January 2003. Sales and user fee payments to the CNMI government dropped another 3 percent in the first four months of this fiscal year from 2003. Prior reports showed that 2003 totals were down 3.3 percent from 2002; 17.5 percent from 2001; 21.8 percent from 2000; and 25.1 percent from 1999—the industry’s peak year in sales.