The CNMI’s economic prospects through 2014, however, “appear to lack promise.”
The report was prepared for First Hawaiian Bank by Dr. Maria Claret M. Ruane, resident development economist at the University of Guam-Pacific Center for Economic Initiatives, or PCEI.
“2010 rolled in with improving consumer and business optimism on the prospects for Guam’s economy,” Ruane said, citing surveys of business and consumer confidence. A survey of 43 local business owners and/or managers conducted for the PCEI in April 2010 showed 60 percent holding positive expectations for the Guam economy in the next 12 months. More than 52 percent of the 286 local consumers surveyed in May 2010 expressed positive views about income and employment prospects for the Guam economy in the next 12 months.
“This report confirms our own belief that Guam has a bright future indeed. We are committed to continued support of our island communities in both the CNMI and Guam,” said Laura Dacanay, senior vice president and Guam/CNMI region manager.
Ruane said hopes were raised for progress soon on the military buildup when a controversy was defused concerning relocation of Okinawa’s Futenma Air Base. “This decision by the Japanese government paved the way to addressing the 2006 Agreement between Japan and the U.S., including the Marine relocation from Okinawa to Guam,” Ruane said.
The 2006 agreement calls for relocation of Marines and their dependents from Okinawa to Guam, construction of a wharf in Apra Harbor to support a transient nuclear power aircraft carrier and construction of facilities to support the Army Missile Defense Task Force.
U.S. implementation of the proposed buildup appears to be progressing, the report noted.
The U.S. Department of Defense released its final Environmental Impact Statement in July, a Record of Decision on the proposed buildup was announced this month and physical activity related to build-up construction will commence a few months later.
Challenges
“The Commonwealth of the Northern Marianas Islands continues to face economic challenges. Its economy has yet to return to its business peak in 1997 and the economic trends since and over the past five years, in particular, have not been positive. Looking ahead, economic prospects through 2014 appear to lack promise as well,” Ruane reported.
She noted that shipping costs, which had always been high, doubled in the aftermath of the end of the garment industry in March 2009. In addition, labor costs have increased significantly since 2007 as a result of minimum wages in the CNMI being gradually brought up toward the federal minimum.
Her report noted significant decreases in Gross Island Product and Business Gross Receipts, with increases in the cost of living.
The last of the CNMI garment industry closed down in March 2009 after a trade agreement expired, opening up U.S. garment markets to manufacturers in developing countries, most notably China.
“It was just a matter of time when the garment industry in the CNMI would not survive competition from much lower-cost manufacturers,” Ruane said.
“With the end of the garment industry, tourism became the predominant source of economic activity in the CNMI. Unfortunately, prospects for tourism are not encouraging,” Ruane said, noting the cancellation of flights by Japan Airlines in 2007 and higher airfares.
More than a half million tourists visited the CNMI in 2005, but visitor arrivals were down by 30 percent to 353,956 by 2009 — an 8.58 percent annual decline.
