Deloitte & Touche noted in its latest CNMI audit report that there are no statistical data indicating that the CNMI’s economic recovery is going to be achieved soon.
“The fiscal 2008 estimated available resources have been reduced to $160.1 million. Estimated resources for fiscal 2009 are expected to be similar to 2008. Economic conditions are expected to begin to improve after 2009 as tourism from major markets, particularly Korea and China, continues to increase and with the impact of the military buildup on Guam,” the auditing and accounting firm reported.
A lot of factors contributed to the CNMI’s economic woes and recovery is not sight in the near future especially with the continued increase in fuel prices.
Deloitte & Touche said the sharp drop in tourist arrivals rate and garment production on Saipan will mean a further decrease in revenues for the cash-strapped CNMI government.
Only six garment factories are remain in operation on Saipan from over 30 during the 1990s.
The remaining factories also anticipated to close any time soon due to their difficulty to compete with manufacturers based in developing countries that offer lower wages and production costs.
These countries can now export their apparel products to the U.S. following the lifting of the garment quota imports in 2005.
“The garment industry decline has accelerated in FY 2008 with the incremental application of the U.S. minimum wage to the CNMI beginning July 25, 2007. The garment industry is not expected to be a significant sector of the economy in 2009,” the report said.
The local tourism industry was nearly crippled in the late 2005 when Japan Airlines pulled out its 14 weekly flights between Tokyo and Saipan.
The reduced air seats from Japan, the main market of the industry, will continue to negatively affect the overall economic activities on the islands.
But the report said Japan’s outbound travel market may see an upsurge once the Narita International Airport’s expansion project is completed.
“Tourism from Japan is expected to rebound once Narita Airport expansion is completed and other airlines can add flights to the CNMI. In addition, the continuing increases in fuel prices have put a strain on both the local economy and the commonwealth’s budget,” it said.
The CNMI’s general fund cumulative deficit has gone up to $218.2 million in FY 2007 from $188.1 million the previous year.
The increase was largely attributed to the government’s failure to remit contributions to the local pension program.
This trend is projected to continue unless the economy improves.
