‘Poor prospects for economic recovery’

[I]Editor’s Note: The Saipan Tribune will be coming out in the following days with a series of articles on the recently issued study, Economic Impact of Federal Laws on the Commonwealth of the Northern Mariana Islands, authored by Malcolm D. McPhee & Associates and Dick Conway. The 96-page report, prepared for the Office of the Governor under a grant from the Department of the Interior, traces the CNMI’s economic history and the potential impact of the federal takeover come June 2009. The following is a shortened excerpt taken from the Recommendations section of the study:[/I]

Economic recovery from the devastating depression in the CNMI may require decades. In fact full recovery may not occur for the foreseeable future.

The loss of the Commonwealth’s largest export industry, the garment industry, and a declining visitor industry will cut the CNMI economy in half, which in itself would have been difficult enough to overcome. When the U.S. Congress federalized the CNMI minimum wage and immigration, they probably killed what little hope there was for some reasonable and timely economic recovery through expansion of the visitor industry and economic diversification. This could decimate the CNMI’s investment climate for years to come.

This does not even take into account the instability implicit in the power of the federal government to intervene in the CNMI at will regardless of how the application of federal law might affect economic or investment conditions in the CNMI. Instability is the bane of investment and economic development.

There is a strong possibility that economic distress would remain very high in the CNMI for a long time, evidenced by very high rates of unemployment, business closures or downsizing and precipitous declines in local revenues. These conditions could have a variety of adverse effects on a community.

1. Declining local revenues for health, education and general public welfare

2. Rising poverty, falling incomes, unemployment and underemployment

3. Declining economic opportunities for youth entering the workforce

4. Rising economic dependence on the federal government

5. Fewer resources to preserve the indigenous culture and the physical environment

6. Increased family and social stress

7. Rising delinquency and crime

This could be an economic, political and social disaster in the absence of some relief from the burdens of the recent federalization of immigration and the minimum wage in the CNMI.

In the longer term the CNMI and the US must consider complete economic recovery. It must also consider what might be done to prevent such tragedies in the future. The CNMI’s prospects for economic recovery are very poor. The garment industry has virtually disappeared in the CNMI. Even if measures were now taken to improve its international competitive position, the federalization of immigration and the minimum wage would prevent reasonable recovery. This federalization will prevent new industries from developing in the CNMI to offset the enormous employment losses anticipated.

All of this was done with the full federal knowledge of the likely adverse economic effects on the CNMI. It appears now that the only real hope is to persuade the federal government, the Congress or the courts that the US must begin taking its territories and its responsibilities to them more seriously. It must remedy what it has done to the CNMI.

Recommendations for action are as follows:

1. Repeal the statute extending the US Immigration laws to the CNMI.

2. Provide emergency financial assistance to respond to the economic crisis in the CNMI.

3. Data Requirements: The CNMI could have made a stronger case for more appropriate application of the U.S. minimum wage and immigration systems if better local data had been available. The most important requirements are to gather selected information on key economic parameters in as timely a manner as possible and then build a data base as far back as possible for each data series.

4. Amend the statute extending the U.S. minimum wage to the CNMI.

5. Provide effective representation in the U.S. Executive Branch.

6. Create a stronger partnership between the private and public sectors.

7. Seek federal assistance to small investors.

8. Consider amending the Covenant.