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By Edith G. Alejandro

SAIPAN, Northern Mariana Islands (April 4, 2002 – Saipan Tribune)---By 2005, the Commonwealth government is projected to lose a significant amount of revenue from the apparel industry as global competition surges due to the elimination of quota restrictions.

Citing the gross economic impact of the quota elimination to the Northern Marianas, the Saipan Garment Manufacturers Association (SGMA) urged the CNMI government to start instituting changes that would minimize its adverse financial effects.

In a briefing conducted before members of the Saipan Chamber of Commerce, SCC president and SGMA Executive Director Richard Pierce underscored the need to explore alternative means that would assist the island’s apparel industry weather stiffer competition come 2005.

Pierce pointed out that the negative impacts of the lifting of the quota restrictions on the CNMI range from higher consumer prices to lower airline traffic.

"Without the apparel industry, there will be an increase in port costs, decline in sea freight frequency, 30 percent increase in traffic costs, loss of local jobs, and downsizing of air service to the CNMI," Pierce explained.

He said that, with less money to operate, there would be fewer jobs, a serious decline in shipping activities, and an increase in consumer costs -- including utility expenditures.

In line with the anticipated economic decline, the SGMA recommended several options, such as the creation of an office that would gather industry data and monitor global trends.

The SGMA also encouraged the holding of a joint marketing effort that would promote the Saipan apparel industry to other parts of the world.

"Government support will increase the comfort level of the buyers," noted Pierce, adding that there is also a need to keep the cost of doing business in the CNMI low.

Part of the recommendation is the reduction of value added requirement from 50 percent to 30 percent to qualify for a duty free access and to develop a compliance system that would pre-clear goods in the CNMI.

According to reports presented by the SGMA in yesterday’s meeting, the CNMI has the highest wage rate given to garment workers, with employees receiving at least $900 a month. In Vietnam, an employee is paid $50 a month; in China, $110; in Guatemala, $200; in the Philippines, $300; and in Bangladesh, $40.

From the original 34 factories in 1999 and over $72.8 million in direct contribution to the CNMI coffers, Saipan is now home to only 31 garment factories, with at least 10 small factories expected to close shop by 2003.

The "Overview of Saipan’s Apparel Manufacturing Industry" report further said that, in the next two years, the CNMI will witness the death of the industry, adding that the clothing industry will be relocated elsewhere unless something is done.

The report said that the apparel manufacturing industry in the CNMI contributed $72.8 million to the government’s coffers, or about 34 percent of the government’s $216 million revenue for that year. Since 48 percent of all government revenue is spent on personnel alone, that $72.8 million was enough to pay for the salaries of 1,680 government workers.

In addition to this, the industry also contributed $62.4 million in local purchases made by garment factories annually.

The report said garment manufacturers in the CNMI, on an annual average, buy $18.6 million worth of food, gas and other supplies; spend $14.98 million in freight and transportation, $5.2 million in employee housing rentals, $3.4 million in insurance, $2.7 million in annual land leases, and $17.52 million in other expenses.

Besides the public sector, Pierce said the garment industry is also the number one provider of jobs in the Commonwealth, with 17,500 local and foreign workers directly employed in the sector.

The expected worldwide implementation of the General Agreement on Tariffs and Trade in 2004, which would effectively pave the way for the quota-free entry of foreign goods into the U.S., will further degrade the economic status of the CNMI, the report stressed.

"The GATT erases any competitive trade advantages we may have with other countries. Other countries will have quota-free entry to the U.S. by 2004," Pierce said.

For additional reports from The Saipan Tribune, go to PACIFIC ISLANDS REPORT News/Information Links: Newspapers/The Saipan Tribune.

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