CNMI BUSINESS REVENUES DROP 14 PERCENT

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By Haidee V. Eugenio

SAIPAN, CNMI (Marianas Variety, Sept. 4) - The decrease in tourist arrivals, the closure of 10 garment factories and consumers’ limited spending resulted in a $75 million or 14 percent drop in the Commonwealth of the Northern Mariana Islands’ business gross revenues in the second quarter of calendar year 2006 compared to the same period last year.

Gross sales figures have been in a steady decline for several years.

Business gross sales reached a record quarterly low of $448.6 million between April and June, compared to $523.6 million during the same quarter last year, the latest data from the Department of Commerce shows.

This also marked a $54.6 million or 11 percent decrease from the preceding quarter of January to March.

"The government should initiate new ways to stimulate the economy," said Wilfredo Ching, who has been a businessman on Saipan for 16 years.

Ching, who operates two pawnshops, one jewelry shop and a boutique, and is also a wholesaler of medical supplies, said the government should limit transacting business "with those that do not have offices here because every time they make sales, they don’t pay taxes here and don’t generate employment unlike us who are based here."

Ching said the distribution of tax refunds and rebates on time would also lead to a surge in economic activities that would benefit businesses and, in turn, the government through taxes.

Glen Manglona, economic development analyst of the Department of Commerce, on Friday said the number of tourists arriving here has a direct impact on the total business income in the CNMI "which trickles down to lower taxes paid by retail and service industries," coupled with the closure and reduction in production of garment manufacturers.

The other culprit, he said, in diminishing business gross revenues is that "consumers in general are holding on to their cash."

"They are not buying big ticket items. Their hard-earned dollars are directed toward necessities like rice, bread, milk and fuel. The global competition in the garment industry has negatively impacted our local garment sector and thus the lower user fees collected by the CNMI government," he told Variety.

Ten garment factories have shut down their Saipan operations since January 2005 when the World Trade Organization liberalized trade rules that now allow Third World countries to export more of their cheap garment products to the U.S.

As a result, garment industry sales posted a 24.6 percent or $146 million drop in the first 10 months of fiscal year 2006 compared to the same period last year. Garment sales reached only $448.6 million between October 2005 and July 2006, compared to $595 million from October 2004 to July 2005.

Tourist arrivals also went down by 14.22 percent in July compared to the same period last year, from 46,107 to 39,552.

This downward trend in arrivals is expected to continue with Northwest Airlines’ decision to suspend its Osaka-Saipan flights starting in October.

Government spending exceeds revenues

Government expenditures exceeded its revenues by 2 percent or $870,000 between April and June.

The second quarter spending of $47.8 million under the Fitial administration, however, marked a drop from previous quarter levels which were above $50 million every three months.

The government collected only $46.93 million between April and June, a 15 percent drop from the same quarter last year and a 3.5 percent decrease from the previous quarter.

Except for a 6 percent increase in excise tax collections, all other sources of revenues saw decreases during the second quarter compared to the same period last year, including collections from business gross receipt taxes, wage and salary taxes, Chapter 7 or corporate income taxes, garment user’s fees, hotel occupancy taxes, fuel/container/bar taxes, and fees, charges and other revenues.

September 4, 2006

Marianas Variety: www.mvariety.com

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