Guam Economy Stable, CNMI Tourism Growing: Bank Report

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Visitor arrivals in Marianas grew by 12% in 2012, 9.6% in 2013

By Lexi Villegas Zotomayor

SAIPAN, CNMI (Marianas Variety, July 2, 2014) – The latest First Hawaiian Bank report says Guam’s economy is "stable," "resilient" and remains "promising" while noting "continuing solid growth" in the CNMI’s only industry, tourism.

In her report, University of Guam-Pacific Center for Economic Initiatives resident development economist Dr. Maria Claret M. Ruane said there are several factors affecting the CNMI economy in 2014: the settlement agreement that reduced the retirees’ paychecks by 25 percent; the Saipan casino law; and the impending wage increase.

CNMI visitor arrivals, Dr. Ruane reported, grew by 12 percent in 2012, and by 9.6 percent in 2013.

"Data for 2014 show promise, with 89,992 visitors arriving in January and February, up 6.75 percent from a year earlier," she added.

The numbers show that the CNMI is approaching the numbers posted prior to the Japan Air Lines pullout in 2005.

Guam’s tourism numbers have grown tremendously with 1.334 million arrivals.

Dr. Ruane cited factors that could affect the CNMI’s economic recovery: the Retirement Fund challenges and the federalization deadlines.

Owing to the government’s failure to pay its contributions to the pension fund due to declining revenue collection, retirees brought action in federal court in 2009 culminating in a settlement agreement that effectively deferred 25 percent of retirement benefits and guaranteeing the entry of a $779 million consent judgment in the event of the government’s failure to make its annual payments to the Settlement Fund.

The government is mandated to make minimum annual payments to the settlement fund: $25 million in 2014; $27 million, 2015; $30 million, 2016; $33 million, 2017; $45 million, 2018; $44 million, 2019; $43 million, 2020; $42 million, 2021; $41 million, 2022; $40 million, 2023; and $39 million 2024.

Dr. Ruane said these obligations and other annual payments necessitated the revision of the CNMI budget, "created the pressure to legalize casino gambling on Saipan" and authorized the Commonwealth Development Authority to float pension obligation bonds for the first time.

Moreover, the federalization deadlines continue to add to the mix of uncertainties in the CNMI.

Dr. Ruane said another round of federal minimum wage increase is set for September 2014 which will bring the CNMI rate to $6.05 from $5.55 an hour.

"The CNMI economy continues to hang in the balance, with the pending minimum wage increase and deadline with regard to CNMI-specific visa categories for hiring foreign workers and attracting foreign investors," she added.

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