Northern Mariana Islands Economic Overview
The Commonwealth of the Northern Mariana Islands (CNMI) is a U.S. territory in the Western Pacific Ocean that is home to around 86,600 people, 90 percent of whom live on the island of Saipan. The average per capita income is $12,500, and the gross state product is approximately $900 million. The economy of the Northern Mariana Islands is heavily dependent on federal government aid. Tourism and garment manufacturing are very important to the economy as well, but as a new minimum wage law goes into effect, it is expected that the island's garment factories will eventually go out of business.
Ferdinand Magellan claimed the islands for Spain in 1521, and Spain sold them to Germany in 1898. During World War I, Japan occupied the Marianas, whose main industry at that time was growing sugar cane. Toward the end of World War II, the Mariana Islands were captured by the U.S. From the 1950s until 1962, the U.S. maintained a secret training base on Saipan and discouraged foreign investment on the islands.
In the 1970s the residents of the islands decided to remain a U.S. territory rather than become independent. Since then the U.S. has funneled some $1 billion in aid to the Northern Mariana Islands, although the area is still thought of as having the most fragile economy of any of the states and territories. This is partially due to recurrent natural disasters and the high cost of living on the remote islands, which entails high transportation costs for goods and people.
During the 1980s, Japanese tourism surged, and Saipan’s Royal Taga Hotel and a cattle ranch were built. In the mid 1980s, the garment industry blossomed, as workers could be paid much less than the U.S. minimum wage while the clothing could still be labeled "Made in USA." From 1986 to 2004, capital improvements were financed by the U.S., and the number of workers employed by the government increased. These improvements included paving roads, which encouraged businesses to open along them.
The agriculture industry on the islands is small, providing food mainly for domestic use and a limited amount for export. Around 250 farms and a few cattle ranches operate on the islands, and other products include poultry and eggs. Total sales of agricultural produce amount to some $2.4 million. About 180 tons of fish are caught annually, worth some $65,700. Root crops such as sweet potatoes, cassava, taro, ginger, and yams add up to $640,000, and nursery crops are worth about $180,000. Fruits and nuts such as breadfruit and coconut account for $400,000 annually, while vegetables and melons account for $630,000. Poultry and eggs bring in $215,000, and livestock accounts for $280,000.
BANKING AND FINANCE
There are eight banks operating in Saipan. The Bank of Guam (three branches) has assets of $801 million and net income of $3.4 million annually. The Bank of Hawaii (two branches) has $10 billion in assets and $96.5 million in income. The Bank of the Federated States of Micronesia has assets of $80 million and net income of $401,000, and the First Hawaiian Bank (two branches) has assets of $10.9 billion and net income of $80 million annually.
Three English-language newspapers are published in the Northern Mariana Islands, and there are seven radio stations and one television station. In addition, two cable services provide programs from satellite networks. There are nearly 25,000 landlines and 20,500 cellular phone lines on the islands, as well as nine Internet service providers. Digital fiber optic cables and satellites connect the Northern Mariana Islands to worldwide networks, providing a wide variety of services including broadband and dial-up Internet.
Around seven percent of the workforce is employed in the construction industry. An average of 330 building permits are issued annually for new structures, with some 180 for residential construction, and 150 for commercial construction. There are 50 construction firms on the island, which employ more than 500 workers at a total annual payroll of $6.8 million. Total revenues are around $31 million.
The CNMI public school system includes 12 elementary schools, three junior high schools, one combined junior and senior high school, and four high schools. These schools have a total of around 11,000 students enrolled. In addition, there are four private schools serving students in kindergarten through 12th grade. About 140 people are employed in educational services at an annual payroll of $1.2 million. Northern Mariana College is a two-year college with almost 1,000 students enrolled, and its affiliated Adult Basic Education Program offers computer literacy courses.
The Commonwealth of the Northern Mariana Islands imports petroleum to meet most of its energy needs, but has a goal of providing 50 percent of its energy from renewable sources by 2030. Petroleum products shipped in include liquefied petroleum gas, diesel fuel, distillate fuel oil, and gasoline. A small wind and solar energy plant was constructed in 2009 to provide energy for one of Saipan’s high schools. Some $19 million in energy grants was given to the Northern Mariana Islands from the economic stimulus bill for weatherization programs for homes, other energy-saving initiatives, and developing renewable energy projects.
A total of more than 550 residents work in the arts, entertainment, and recreation industry at a total annual payroll of $5.8 million. Annual revenues are around $22 million.
The largest insurer operating in the Northern Mariana Islands is Century Insurance, which offers a complete line of general insurance policies for individuals and businesses. Slightly more than 800 people receive Supplemental Security Income in the Northern Mariana Islands.
The leading manufacturing sector in the Northern Mariana Islands is the garment industry, which employs around 17,500 workers, although most are foreign workers from China. Some $98 million worth of garments were exported in 2008. Other manufacturing includes handicrafts such as woodcarving, coconut masks, and coconut-crab decorations. The 59 manufacturing establishments have an annual payroll of about $56 million and combined revenues of roughly $189 million.
MINING AND EXTRACTION
Although there is no mining in the Northern Mariana Islands, there is an ongoing controversy regarding whether a permit should be given for the mining of pozzolan on the island of Pagan. Pozzolan was exposed by the eruption of the Mt. Pagan volcano in 1981. Pagan's pozzolan, which is a sought-after additive for strengthening concrete, could yield up to $12 million in annual revenue for the government.
There are 36 nonprofit organizations reporting operations in Saipan (where 90 percent of the territory's population lives) with total assets of $880,000. The reported income of all of these organizations put together is $1.3 million. Of these organizations, some are charitable organizations, such as the Marianas Psychiatric Foundation; some are religious organizations, such as the Islands Mission Community; some are educational organizations, such as the Korean Community School of Saipan; and some are social organizations, such as the Saipan Tennis Association.
The retail trade on the Northern Mariana Islands consists of 255 companies employing 2,770 workers at an annual payroll of $28 million. Total revenues are around $271 million. Motor vehicles and parts dealers employ approximately 200 workers at an annual payroll of $3 million and account for revenues of $25.7 million. The four furniture and home furnishings stores have a total annual payroll of $90,000 and total annual sales of $591,000. The 14 electronics stores employ 2,500 workers at a total annual payroll of $1 million with total sales of $5.9 million. There are 54 food and beverage stores with roughly 500 employees, a total payroll of $4.3 million, and sales of $46 million.
The garment industry has slowed over the past few years as a result of the U.S. eliminating its quotas on textiles and apparel for other countries in 2005. Facing competition from China and other low-wage economies, 10 out of 27 garment factories closed by 2006, and more than 3,800 jobs were lost. The largest and oldest garment factory closed in December 2006. The passage of a new law mandating the payment of the same minimum wage as on the mainland U.S. is expected to drive more of the dwindling industry to relocate in countries with cheaper labor costs.
The Northern Mariana Islands have modern communications systems, but are undeveloped in other areas of technology.
More than 220 miles of highways have been constructed in the Northern Mariana Islands, and five airports and one heliport handle air traffic. Commuter flights among the islands take from 12 to 30 minutes. The only islands that have ports and harbors are Saipan, Rota, and Tinian, and 55-minute ferry service is available between Tinian and Saipan. A shuttle bus runs from hotels to major shopping centers, and taxis are also available. The transportation and warehousing industry employs around 1,100 people at an annual payroll of $15 million. Yearly revenues are $50 million.
TRAVEL AND TOURISM
Around half of the population of the Northern Mariana Islands works in the tourism industry, which brings in some $655 million annually. Popular tourist attractions are beaches, Suicide Cliff, Wedding Cake Mountain, volcanoes, monuments, and submarine tours of shipwrecks. In addition, diving, snorkeling, windsurfing, golfing, bowling, nightlife, and hiking are popular activities on the islands. Some half a million tourists visit annually, mostly from Japan. Popular hotels are the Hyatt Regency Saipan, the Aquarius Beach Tower, and the Hotel Nikko Saipan. Nearly 5,000 people work in the accommodation and food services sector, at a total annual payroll of $45 million. Total annual revenues are approximately $172 million.
-World Trade Press