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CNMI economic report for 2010
Wednesday, April 07, 2010 - 8:31 PM
State of the Commonwealth

Federalization has addressed the international reputation of labor abuses and human exploitation in the CNMI. Federal officials have confirmed that workers are no longer tied to their jobs, and federalization proponents can thank the US Congress for ensuring that the democratic ideals of our nation apply to the CNMI. Only months into US intervention and Saipan has virtually no labor abuse, and not much is expected.

The cruelest form of labor abuse, however, is unemployment, and Saipan has catastrophic unemployment among aliens and citizens alike, the remnants of an economy driven by the textile industry. The CNMI is the most impoverished American region of the last half century. There may have been over 10k illegal aliens as well, but an umbrella permit was honored by the US, effectively stalling some aspects of federalization for two years. The Governor’s strategy to stall US intervention blanketed maids, dancers, illegal business operators, their employees, freelancers, and every immigration fraudsters who lined up, so they have a legal right to remain in the CNMI until November, 2011. There is little employment in Saipan for the near foreseeable future. Foreign owned businesses operating here must exit when their two year permit expires. CNMI investor visa holders have until 2014 to meet US investor visa requirements or restructure their business and move.

The status of guest workers is controversial. Many citizens say they came to work and improving their status will destroy the fragile economy by enabling thousands of impoverished persons to receive federal aid, paralyze the unemployed CNMI(and school system)with relatives from abroad, and grant thousands of unfunded foreign workers a right to operate businesses. Others believe workers, even those that committed immigration fraud, are entitled to an improved status or green card based on seniority. There were about 22,000 foreign nationals that registered at the Ombudsperson office and the major hotels and largest NMI employers have about 2,000 contract guest workers on the payroll. The number of freelancers, fraudsters, illegal business operators, and their employees in that number is speculative. The regulations governing guest workers are not final, but if they mirror the original version, the unique CW transitional guest workers program used in conjunction with the CNMI transitional investor’s visa program will make right what was long wrong in the CNMI. A bill floating in the US Congress would grant residency, not permanent residency green cards, to workers with US citizen children until they can petition their parents at age 21. Those effected persons could not bring additional relatives to the US. That plan could ease suffering if they are allowed travel privileges, because the laws of supply and demand will prevail in the job market. If the proposed law restricts travel for unemployed workers, then the US will have made Saipan a national disaster.

Guam needs 20k workers for the US military build-up, and some think NMI workers should be allowed to travel to Guam for work, but others think they will be subject to abuse there as well. Neither Guam officials nor residents want unskilled permanent residents from the NMI. The CNMI hopes the Guam build-up will employ citizens earning prevailing wages, which will stimulate the region and spill into the Commonwealth. Employing cheap alien labor would insult millions of unemployed Americans and may jeopardize the Democratic Congressional majority if highlighted.

Governor Fitial has lost much respect among local citizens not on his payroll due to his abuse of power, unqualified cabinet selections, embarrassing the NMI internationally regarding massagee-gate, inaction during a local exodus abroad, his belligerence toward the federal government, corruption including gouging potential foreign investors, corrupting the 2010 census, his exclusion from talks over military activity, his exclusion from drafting regulations, abysmal stewardship of our resources, control and plunder of the retirement fund, dreadful council and advisement, obsession to restrict guest workers, his control of the AG, failure to keep campaign promises, orchestration of a law reducing salaries of government workers that excluded the legislature and himself, and blanketing of all aliens with an umbrella permit that doomed opportunity for unemployed local citizens and forced the austerity salary reduction.

Austerity and reality demand CNMI constitutional changes. The CNMI spends an extraordinary amount for governance and has unnecessary bureaucratic waste. A small government would prove affordable, flexible, and able to adapt to a rapidity changing world. CNMI professionals would volunteer for a city council to aid in this transition. The land alienation law continues to prohibit growth and development, but impoverished residents have little confidence in the legislature’s ability to enact reform.

CNMI residents face four serious economic problems. First, about 50% of NMI residents send earnings abroad as remittances, undoubtedly the highest percentage on the planet. While Philippines survive by receiving money, the CNMI has an extraordinarily high percentage of people remitting their income abroad. Second, our banks send our depositors money to other shores to stimulate their economies, chiefly Guam and Hawaii, instead of investing where the wealth originated. Third, foreign workers are willing to accept jobs below prevailing wage, making local citizens unable to compete for jobs that they should be performing. This increases our numbers receiving US aid. The recent austerity measure reduced government workers hours by ten hours a pay period, or 12.5% of NMI government employees yearly economic wealth is lost. Lastly, illegal foreign businesses operate here without a US investor visa and send their profits off island as well, strengthening their East Asian homelands but paralyzing the CNMI. These businesses will close before 11-2011.

The post textile industry CNMI is a welfare territory and fraud to obtain US federal aid is evidenced by shocking statistics. According to the local news, the CNMI has roughly three households receiving US federal aid for every voter, an astonishing admission of fraud. Numbers indicate many residents must draw multiple pay checks per household. Food stamps are traded among guest workers and politicians alike. Former Senators in the NMI have been sent to federal prison for having 27 ghost employees on their payroll.(Below - Dane Hodges fishing Saipan)

Real estate sales are slow and leases realize record lows, upscale housing is limited, and there is a glut in substandard structures. Financing commercial or residential property is difficult and the cost of money is pricey. Accurate appraisals are tough to find, and many Saipan properties have expiring leaseholds from the boom time of the early 90’s. CDA loan default rates are nearly 90%, and title issues with unresolved probates are routine. A NMI Senate initiative seeks to change the Article XII land alienation law(restricts land ownership to persons of Northern Marianas Decent and all others can’t exceed a 55 year lease term) to allow 99 year leases. If passed, it would create real estate activity because FDIC banks consider a 99 year lease equal to a fee simple for financing purposes. Land value is based on supply and demand, and demand is largely based on the availability and cost of money. When people can easily qualify for a low interest loan, prices skyrocket, but high interest and difficult borrowing requirements create the stagnant mess that now exists. The advantage to the 99 years is that locals could get an extra bite at the apple, but the disadvantage is that it will lose in court the first time a US citizen, NMD or not, challenges the law after 11-4-11.

For short takes, restaurants and bars are suffering from high utilities, poor water, and rising minimum wages. Russian, Chinese, and Korean investors are funding small construction, chiefly personal homes, generally cash customers due to difficult financing. A bill to legalize marijuana has been offered by a lawmaker that could have economic merit if properly administered, unlikely for a legislature unable to manage a lemonade stand without federal funding. Being displayed in the cases of Amsterdam would provide more advertisement, economic development, and enhancement of tourism than MVA has ever accomplished though and could add an export product currently lacking in the economy! Casino talk for the outer islands has waned even though the island of Rota pays a casino commission. Tinian’s casino looks like a ghost town with a curtain closing half the gaming floor to reduce utilities. The only economic opportunity for young people on either of those islands is welfare or a ticket east. The House Speaker has proposed Saipan casinos again even though two straight referendums were soundly defeated. The long term trajectory of US intervention could unite Guam and the CNMI into the Marianas Province. A united MP could potentially become the 51st state and have two voting Senators in Congress. The CNMI legislature will not support this because it would jeopardize the gravy train they themselves are riding. The NMI landed the Marianas Marine Monument, but the visitor’s center for that wonder of the world may land in Guam. NW’s split with Continental has opened European and Asian ports offered by Delta, United, and all their partners, opening Saipan to vast new markets. CNMI involvement in the Marine relocation remains unclear.

Perhaps the brightest recent news for the CNMI is visa waivers for Russians and Chinese tourists, the only US soil with that distinction. Russian and Chinese arrivals are on the rise and have incredible potential considering that there are thousands of millionaires within short flight range. The market possibilities for winter residences are enormous. Korean tourism continues to improve, helping to offset a collapse in Japanese arrivals. There is a spark of investor confidence attributed to the stabilizing effects of federalization and the visa waivers.

Politics and economics aside, Saipan, the capital of the Northern Marianas Islands, is an enchantingly tranquil tropical delight of unimaginable beauty; highlighted by turquoise crystal water, fire red sunsets, panoramic views, and unparalleled weather. Saipan's has hosted 3/4 million tourists in a single year, entirely from East Asian, making Saipan a playground of seaside golf, scuba diving, sport fishing, snorkeling, parasailing, wind surfing, kayaking, biking, beach volleyball, and barbecuing on the remote pristine beaches. The friendly laid back nature of the inhabitants is as legendary as the tropical breezes.

Saipan’s economic strength is smallness and geographic location. With Saipan’s tiny number of citizens, a little improvement in the regional economy, a minute amount of US investment, or developing a second economic leg could have a dramatic positive effect on the economy.

Ron Hodges
Saipan Real Estate

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