Towering fog of bankruptcy


There’s only one difference between the good economist and the bad one: The bad economist confines himself to the visible effects; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
—Frederic Bastiat, French economist.

Retirees opted to see the effects of the instant soba solution—survived the donation of a casino licensee—of $30 million. We ate the dangled fruit, failing to look beyond instant gratification massaging our myopic view smiling on trips to the bank.

But did you know that the program would be bankrupt or broke in about two years time? Aren’t we sitting at the edge of permanent financial ruin?

For years we recklessly avoided protecting the solvency of the Retirement Fund. Politicians did everything to sink it. We avoided paying government obligations all along. Today we inch our way in the thick fog of bankruptcy. It’s a perfect set up for an implosion.

Moving forward, the court settlement requires the NMI to pay $30 million for fiscal year 2016, $33 million for fiscal year 2017 and $45 million in fiscal year 2018 for a total of at least $1.08 billion. Mirrored against a huge decrease in revenue generation, is there room to maneuver so these obligations are paid on a timely basis? I’m guardedly keeping my fingers crossed! What if the answer is in the negative?

When the program goes broke as a result of insufficient local revenue, it means retirees will not receive their paychecks. The negative impact is horrendous. The direct effect is payless paydays for retirees and the automatic removal of some $70 million from the local economy.

Indirect impact include the banks who’d see reduction in monthly installments, health insurance firms where families pay so they could seek medical help at CHC, more delinquencies at CUC and a near standstill in grocery stores.

It means far less revenue for the local coffers or treasury, translating into the inevitable reduction-in-force of employees. There’s also the challenge to meet government obligations. Assuming that the revenue projection for fiscal year 2016 hits around $160 million, minus 65 percent from the total for public payroll, that leaves the NMI with some $56 million.

CHC needs at least $38 million, PSS $30 million, CUC $28.7 million and other departments and agencies. After CHC, PSS, and CUC, there’s nothing left for anything else.

Sure, there’s the announcement of investor interests moving into the island. This is still at the discussion stage. None has been established and generating revenue as yet. How do we meet their needs with outdated basic infrastructure? Or is this another we could relegate with our usual sleepwalking on significant issues?

At least I’ve seen the impending effects of the “unforeseen” insofar as the future of the Settlement Fund is concerned. It looks woefully dim! If nothing happens to perk up revenue generation we’d be shivering in the cold winter of uncertainty and, yes, bankruptcy!

How interesting, though, every Republican governor’s sterling accomplishment of avoiding remitting government obligation to the Fund. And we put them right back on the driver’s seat? Or did I just get out of a coma?

Manila’s ‘City of Dreams’
Recently, a new mega-casino opened in the Philippines as the fast-growing Southeast Asian nation ups its bid to become a world gaming destination, according to an AFP news account.

Known as the “City of Dreams,” the new casino aims to rival Macau and Vegas in terms of gaming revenues.

“The casino is a joint venture between the country’s richest man, Henry Sy, Australian billionaire James Packer, and Lawrence Ho, son of Macau casino mogul Stanley Ho.

“The goal is to find the best [sites] in Asia… The Philippines is one of the fastest growing economies anywhere in the world. We’ve seen the market really pick up,” Ho told reporters.

“Ho also acknowledged the huge cost of building the resort. The Philippine government requires a minimum $1 billion investment for new casinos built in the area.

“The Philippine economy grew at more than 6 percent in 2014 for the third straight year, prompting economic planning secretary Arsenio Balisacan to comment that the country has shaken off its reputation as the ‘sick man’ of Asia.”

The new casino is supported or paid for by three billionaires. Don’t know what to make of the NMI’s $7.1-billion mega casino resort. It inflates and deflates my pride but I’ve warned my Pinoy brothers and sisters that ours is more expensive by six billion dollars, never mind that it may never be built!

John S. Del Rosario Jr. | Contributing Author
John DelRosario Jr. is a former publisher of the Saipan Tribune and a former secretary of the Department of Public Lands.

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