A stick up, basically
SAIPAN Chamber of Commerce and HANMI officers met with House members recently to follow up on a letter that the business organizations sent last month to the governor, the congressional delegate, and the Legislature’s presiding officers. The letter was about the precarious state of the local economy — the CNMI government’s primary source of local revenue — and how it could be addressed.
“All our numbers are way down,” the business leaders told lawmakers. “When you have a group of your largest investors on the island suffering like this that also translates…into employment reduction of hours, reduction of ordering food for the buffet, reduction of car rentals — you name it, the entire value chain is impacted,” which means significantly less tax revenue for the government.
According to a small-business owner, “I’m hurting…. I’m down 25%. I don’t know how long I can last. Honestly, I really don’t know how long I can hold on. At a 25% reduction in sales and [as a small] business, I don’t have a big line of credit.”
Now here’s another big problem. Tourism is the CNMI’s only industry, and arrivals are about 64% down compared to what they were before Yutu and the pandemic. But current CNMI government spending is not 64% down.
FY 2018 budget: $145.26 million available for government appropriation.
FY 2024 budget: $119.19 million available for government appropriation.
Which is a decrease of about 18% only.
And as the governor has pointed out, $119.19 million is not enough. He wants lawmakers to pass tax-hike measures to prevent a $9.1 million shortfall.
Now if a household or a business entity is not earning enough it would make painful adjustments. But if government is in a financial hole (of its own making), it expects you to make painful adjustments.
A pivot…to a larger financial black hole
HANMI also informed lawmakers that MVA is already “doing everything under the sun,” to revive the Japan market. “I can assure you that there isn’t a play they haven’t ran if we’re talking in football terms. I mean, they’ve gone through the entire playbook and there’s just nothing short of subsidizing travel because of the foreign exchange being so weak,” referring to the Japanese yen vis a vis the U.S. dollar. There were over 2,000 arrivals from Japan in 2022, but HANMI said the market may finally show signs of improvement…in 2025.
What about Taiwan? Each year, about 30,000 Taiwanese visited Guam before the pandemic. The number may include the Taiwanese who reside in Guam. And these are the two countries — Japan and Taiwan — that are supposed to provide the CNMI with enough tourists, as soon as possible, to “offset” the loss of over 185,000 Chinese tourists who visited the Commonwealth in 2019.
The governor is also hoping that the feds and/or the U.S. military would provide enough money to make up for the loss of the CNMI’s second largest tourism market.
Meanwhile, as we wait for manna from federal heaven, what then? We pay higher fees and taxes?
What about the CNMI government significantly reducing its expenditures, for once, to reflect its current and actual revenue collection in this bad economy?
What the NMI needs
“WE need all [tourism] markets,” the business leaders told House members. And “all” includes China. To quote U.S. Commerce Secretary Gina Raimondo, the restoration of the U.S. as an approved destination for travelers from China “is a significant win for the U.S. travel and tourism industry.” She noted that before Covid, as many as 3 million Chinese travelers visited the United States annually, contributing more than $30 billion to the U.S. economy. “We look forward to once again welcoming Chinese group travel to the United States,” she added.
The governor said his “pivot from China” policy will advance U.S. national interests in the Pacific region. But surely that doesn’t mean that Chinese tourists can no longer visit the CNMI.
As the chamber and HANMI have pointed out in their letter to the governor, “excluding Chinese tourists as the primary strategy for greater resilience against geopolitical threats is at odds with current American foreign policy…. Destinations like Los Angeles…have led delegations alongside the California Tourism Board to rebuild the [China] market that represented the top market for LA tourism prior to the pandemic.” Moreover, Secretary Raimondo’s visit to China “joins with recent diplomatic dialogues with China led by U.S. Secretary of the Treasury Janet Yellen, [Senate] Majority Leader…Chuck Schumer, and the announced meeting to be held in San Francisco between Chinese leader Xi Jinping and President Joseph Biden. These meetings have brought to light our country’s policy with relation to interactions with China, with Secretary Yellen remarking that ‘We do not see our relationship in terms of great power conflict…we do not seek to decouple [our economies].’ ”
In an interview in August, the governor told reporters that he was not saying that tourism activities from China should stop. “If they come, that’s great,” he was quoted as saying.
OK then. But again, if the governor refuses to tap an already existing tourism market, then the recovery of the industry will not be fast enough to provide the government with the revenue it needs now. The government should then reduce its spending and not impose additional burdens on taxpayers.
