By William H. Stewart

WHY doesn’t the garment industry leave the Northern Marianas? Why does the industry continue to try to conduct business on Saipan when there are other countries in Southeast Asia and elsewhere that would welcome the investment along with the jobs it would create, the tax revenue it would generate and the foreign exchange it would earn through its exports?
From what I have observed there appears to be many people who seem to no longer want the industry to prosper, nor do they appear to want the continued presence of nonresident workers on which it depends. This might be denied — but that is the message that is being sent.
This is so obvious to even the most casual observer that one wonders why any such investment would continue to want to operate under similar circumstances. It is apparently lost on the industry’s detractors that the land on which the facilities operate will, in all probability, lie idle once the businesses depart. Thousands of nonresident workers will no longer be present to consume what brackish water there is available for them — that is — when it is available. From what I have observed in recent years its just been one headache after another for these investors. The onerous permitting requirements, the immigration red tape, the constant necessity for explaining the value of its local expenditures and their impact on the multiplier effect upon the economy. All of which indicates to me that this manufacturing sector is not wanted by a lot of people and I suspect the problems the industry has had to face and overcome is not lost on other manufacturing businesses that may have at one time or another considered the area as a place to invest. I wonder where they are now?
I know for a fact that at one time the industry contributed $119.1 million a year in circulation as a result of the multiplier effect which, simply stated, is the result of its initial local expenditures becoming the taxable income of other businesses on island and the expenditures of those businesses flowing through the economy. This figure doesn’t include the $89.5 million that eventually circulated through the economy as a result of direct payments to the government. I know this because I made the independent, impartial analyses several years ago.
Only the Chamber of Commerce and a few others have come forward in defense of the industry. I suppose the rest of the local businesses don’t need the income otherwise attributed to the garment industry’s local purchases.
Recent events have proven the necessity for economic diversification and particularly so with the decline in tourism and the growth of competing destinations for those tourists still traveling.
But it seems the garment industry is not the type of economic diversification that is satisfactory to some people in the Commonwealth. Do I hear the lament that the industry depends too much on nonresident workers? What business in the CNMI doesn’t? The government knew in the beginning in the early 1980s, or it should have known, that the local labor force was insufficient in size to provide the staffing for the industry.
In spite of NAFTA and WTO the industry still remains. Why — I don’t know, considering the many hassles with which it must contend and a general lack of public support and encouragement.
If you happen to be among the 1,500 retired from the CNMI government or among the 3,000 or so planning to do so in the future don’t think you are totally immune from possible misfortune as may relate to retirement annuities. The revenue the industry generates for the government indirectly pays the salaries of many employees. These employees pay into the Retirement Fund. Less government revenue will eventually mean fewer government jobs which in turn means reduced money contributed to the Fund. It might be thought of as a multiplier meltdown.
I’m not a spokesman for the garment industry. I am, however, puzzled at the general lack of appreciation for the benefits the industry has brought to the CNMI which I believe if tallied would outweigh the problems created. If business conditions continue to erode the profitability of the industry and it abandons the commonwealth, I’m willing to bet that there will still be water shortages — but that particular industry scapegoat will be gone. A new one will have to be found. Ill bet that the firms that will be issued qualifying investment certificates will not be expected to provide infrastructure improvements. They wont even be paying taxes to provide funds for the government to meet the need for such improvements.
It would certainly be a wonderful thing if the CNMI could find a clean, acceptable industry other than tourism as a replacement after 2005 when the last barrier to free trade falls and the garment industry no longer has the advantage of exporting duty free to the U. S. market. But there will still be a need for nonresident works — and potable water on a 24 hour basis.
Potential investors review an areas investment, political and social track record long before making their business decisions. Today this information is on the Internet or spread by word of mouth. I don’t get any pleasure from the following assessment but the commonwealth is no longer the end of the investors rainbow. Far from it. I suspect that if the garment investors knew at the time of their initial investment what they now know about conditions in the CNMI it is extremely doubtful they would ever have based their factories on the island. The CNMI does not now have a favorable business climate and even the areas tourist reputation has been tarnished — and I don’t have to tell you why. Only an ostrich would fail too see it. I often wonder if the U. S. Congress had it to do over again if commonwealth status would be offered because of the many self made problems?
Looking at it from an unbiased point of view — and from the perspective of three decades as an observer of the islands economy — I don’t see where there are too many high income generating options for the replacement of the garment sectors contribution other than tourism. Of course, I’m not a politician. My repertoire of bovine solid waste is somewhat limited.
(The author has served as an economic advisor to development finance institutions such as the African Development Bank, the Bahamas Development Bank, the Royal Kingdom of Thailand’s Board of Investment, the Tunisian Development Bank, the Inter-American Development Bank as well as the general staff of the U. S. Army Corps of Engineers on the $142 billion Saudi Arabian development plan.)