Saipan then and now

[B][I]Second of a four-part series[/I][/B] [B]Setting the stage for an economic take-off[/B]

As mentioned in part one I suspect there are many people new to the islands, along with some college students here and abroad who have little knowledge of the area’s relatively recent and turbulent economic history—not having lived it. These essays present some of the highlights in somewhat abbreviated form.

The following is a brief review of the government’s financial resources, which, over the period described below would, indicate that a larger portion could have been used to improve basic infrastructure but was neglected in spite of the huge sums of money available at the time to meet such needs.

During the period 1986 to 2004 (the period that has data) the CNMI government’s total internally generated revenue was $3.07 billion. During this period the total expenditures on capital improvement projects in the Commonwealth as generated from the islands’ own internal sources was a meager 3.2 percent ($78.4 million). Over the above period, other government expenditures were wages and salaries $1.6 billion (64 percent) and all other expenditures of $807.5 million (32.8 percent).

The vast majority of the total expenditures made on capital improvement infrastructure projects resulted not from locally generated revenues but largely as a result of U.S. financial assistance in the form of program grants and loans and Covenant funds. The result being that CNMI’s locally generated revenue permitted the NMI government to employ more people. According to census figures, at the time of the enumeration, government employment figures for 1990 were 3,116 and 10 years later in the year 2000, at a time when the economy was contracting, government employment totaled 4,996. The increase over the 10-year period was almost 30 percent.

Over the period 1986 – 2004 the total reported business gross revenue generated by the private sector was $31.3 billion. Add to the above $393.6 million in Section 702 Covenant grants from the federal government (from the 2nd and 3rd funding agreements) and it can readily be concluded that U.S. financial assistance has accounted for the bulk of the islands’ infrastructure and “freed-up” huge locally generated sums permitting an increase in government employment and, of course, its payroll.

The above sums do not include the myriad of federal program grants provided the islands in the form of education, health and human services, road improvement, transportation, housing and energy assistance, food stamps, etc., all provided by the U.S. government.

Since the inception of Commonwealth status, the precise amount of federal program assistance over and above Covenant funds is unknown but my estimate is certainly more than a half-billion dollars—actually closer to one billion. Again, these were funds for programs the CNMI did not have to finance from its own internally generated sources, which in turn freed up more local revenue for the government’s payroll amounting to $1.6 billion over an 18-year period for an average of $88.9 million per year.

The above is a brief cursory review of the island’s financial association with the United States. Prior to that political affiliation and following the devastation of Saipan and Tinian as a result of the war, the Northern Marianas remained remote and largely isolated for many years during which there was no economy.

[B][I]To be continued.[/I][/B] [I]Editor’s Note: Portions of the above text may have been previously cited elsewhere by the author. Bill Stewart is a former senior economist for the NMI and has privately authored several books, including Saipan in Flames, a World War II account; the Business Reference and Investment Guide to the CNMI and several hundred thousand tourist and historical maps of Saipan, Tinian and Rota distributed free by MVA and island businesses. His other investment promotional materials published by the government include Introducing the Northern Mariana Islands: An American Doorstep to Asia and Tourism Investment Opportunities in the NMI.[/I]