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U.S. report shows economy and population shrank

By Haidee V. Eugenio SAIPAN, CNMI (Saipan Tribune, May 7, 2010) - A federal report on the islands' first ever gross domestic product (GDP) data confirmed what everybody already knew: the Commonwealth of the Northern Mariana Islands (CNMI) economy, as well as its population, had been shrinking. It also highlighted an unpleasant fact: Of the four U.S. territories, it was only the CNMI that experienced an economic contraction.

The CNMI's real GDP decreased at an average annual rate of 4.2 percent between 2002 and 2007, the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) said Wednesday.

The total amount of products and services produced in the CNMI in 2002 was US$1.32 billion as measured in the inflation-adjusted GDP, and steadily declined since then until it reached only US$962 million in 2007, the U.S. Commerce report shows.

The CNMI is the only one among four U.S. territories with an average annual drop in GDP, which represents the total value of goods and services produced by a country or territory.

Guam's GDP grew at an average of 1.8 percent, while American Samoa increased at an average of 0.4 percent between 2002 and 2007. The U.S. Virgin Islands also posted an annual average GDP growth of 2.9 percent in the same period.

The CNMI population shrunk at an average of 4.6 percent between 2002 and 2007. Federal data shows the population was at 74,372 in 2002 and began shrinking in 2005 until it reached only 58,629 in 2007.

These are all part of U.S. Commerce's first-ever official analysis of GDP in the four U.S. territories.

"Objectively gauging changes in economic activity is difficult in the absence of comprehensive economic metrics, such as GDP. Until now, a framework did not exist to estimate the GDP of these four U.S. territories," U.S. Commerce's BEA said.

It said the "estimates show that real GDP-GDP adjusted to remove price changes-grew over this period in each of the territories except the CNMI."

Gauging the size of the CNMI economy and population comes at a critical time when it's in the middle of debate as to what to do with over 20,000 foreign workers that remain on the islands. The U.S. Department of the Interior wants the U.S. Congress to grant long-term status to workers who have been lawfully residing in the CNMI for at least five years.

Lt. Gov. Eloy S. Inos, in an interview yesterday, said the results of the first report on the CNMI's GDP did not come as a surprise.

"This is a very interesting result, but something that's also expected," Inos said in an interview after signing a proclamation yesterday on Capital Hill declaring May 7 Provider Appreciation Day.

CNMI Commerce Secretary Michael Ada, in a separate interview, said future GDP data will also become available.

He said one of the goals is to build capacity, to also enable the U.S. territories to work on their own GDPs.

Inos said the report confirmed negative growth of the local economy, which he attributed to the demise of the garment industry, which used to post up to US$1 billion in annual sales, the Japan Airlines pullout, the 9/11, Severe acute respiratory syndrome (SARS), the devaluation of currencies of Japan and Korea which are the CNMI's main tourism markets, as well as federalization and minimum wage increase.

But he said the CNMI government sees economic growth spurred by the American Recovery and Reinvestment Act (ARRA) grant funding of close to US$100 million.

Inos also pointed to the US$40 million to US$50 million in capital improvement projects (CIP) in the pipeline.

"Most of the projects have been approved and ready to go to bid. Hopefully, within the next 18 months we'll be able to get not only the projects but those CIP monies circulating in the economy. These are water, roads and power projects. One big project is the Puerto Rico dump [final] closure which unfortunately ran into another snag, that's US$11 million to US$13 million project," Inos said.

CNMI Delegate Gregorio Kilili C. Sablan, in a statement, said the inaugural release of the GDP data "is a good start."

He said what is needed is to have this kind of data available on a quarterly basis, just as it is for the rest of the United States.

"Unfortunately, today's news only confirms what people in the Northern Mariana Islands already know: our economy has been in serious recession. At the same time, the data show us that the drop in GDP became less severe in 2006 and 2007," he said.

Sablan said it will be very interesting to see if that trend continued into 2008 and 2009 and whether the tens of millions of ARRA dollars provided the CNMI have contributed to any improvement in the economy.

U.S. Commerce Undersecretary for Economic Affairs Dr. Rebecca Blank, along with Interior's Office of Insular Affairs director Nikolao Pula, led the release of the GDP reports in Washington, D.C. on Wednesday.

"On behalf of Secretary Salazar and Assistant Secretary Babauta, I want you to know that the Department of the Interior is very pleased to have been able to partner with the Department of Commerce and the [BEA] in funding the Statistical Improvement Program and collecting this much needed data. We are also pleased with the strong interest and cooperation we have received from the leaders and pertinent officials of the governments in the territories in making this happen," Pula said in a statement.

CNMI's Sablan, Guam Delegate Madeleine Z. Bordallo, American Samoa Delegate Eni F. Faleomavaega and U.S. Virgin Islands Delegate Donna Christensen each provided remarks at the report presentation, as well as executive director Kiran Ahuja of the White House Initiative on Asian Americans and Pacific Islanders.


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