Those new to the Commonwealth may be interested in a little economic
history. Having followed the evolution of the economy from that of a
stagnate economic base in the seventies, through the boom of the mid ‘80’s,
when every sector of the economy grew at an annual rate of sixteen percent,
to the slower construction pace presently being experienced it has been
like riding an “economic roller-coaster”. The great growth period of the
mid - eighties and early nineties is over and we may not see such growth
again within the remainder of this century or for some distance into the
next.  It is almost as if the CNMI experienced a rate of growth compressed
into five or six years that would normally occur over a span of two decades
or more. The basic development issue several years ago was - must the
islands be forever doomed to a small economy because they had a small local
population?  The Commonwealth now finds itself in the strange, if not
unique, position of having an economy that has far outstripped the capacity
of the indigenous population to provide the necessary workers for the labor
force. I know of no other area or country, with the possible exception of
Saudi Arabia, that is in a similar situation. For almost all other areas
throughout the world the exact opposite is true, not enough jobs for the
available work force to occupy.
     It was only a few years ago that the islands had no economy to speak
of and the only employer of size was the Trust Territory Government.  By
1973 the Japanese lifted the limit on the amount of foreign exchange, (then
the equivalent of $743.), that a Japanese tourist could take abroad. Many
that had the money to travel sought the sun, sand and sea and the travel
industry in the Northern Marianas was born. As recent as 1976, (the year of
the Carter - Ford campaign), the Northern Marianas’ government collected
only $3.9 million in local revenues, 22 years later the economy had grown
to the point where it produced almost 50 times that amount internally  for
government use, (an estimated $190 million in FY‘95). The “boom” started
around the mid-eighties. In 1980 there were only 740 hotel rooms and
tourist expenditures were a low $58.8 million. By 1994 the industry had
grown to 3,362 rooms and the combined expenditures of 583,557 visitors was
estimated to be $463.5. million. For those that may not have given it much
thought, without an income producing private sector there would be no
internally generated revenues of any size for the government to spend on
employment, infrastructure, education, health, etc., other than that
permitted by the limited grant funds from the United States Government and
those funds usually require  that they  be used for the specific purposes
Washington considers appropriate and only then within confined  perimeters.

     With few exceptions the growth which has occurred has been largely a
result of outside investment that decided to establish in the islands over
the past few years based on conditions that prevailed at the time,
conditions which were considered to be very satisfactory - a time when
there was no confusion over Article XII, (confusion which still seems to
prevail). The source of such investment capital in those days came from
countries that were awash with money and from which their businessmen and
women actively sought areas with business and investment environments that
offered profitable opportunities. The new Commonwealth was one such place.
Not only did it offer very generous incentives with a minimum of regulation
and “red tape” but it was geographically situated to have been in the right
place at the right time when the U. S. Dollar was devalued in 1986 which
doubled the value of the Yen. The situation has been slowly changing and it
is becoming more difficult and time consuming for new businesses to start
up in the islands  and there is much more controversy surrounding the
leasing of private land - something that did not exist several years ago.
Today, foreign investors are much more prudent and selective in the
locations around the world  where they apply their money with the hope of
earning a return on their investment plus a profit. The return must be more
profitable than the interest rate offered by a bank - otherwise why take
the risk? An investor could deposit his capital in the bank, forego taking
a risk, experience a minimum of "hassles" and collect the interest.  Those
that do not chose to do this we call "risk venture capitalists" and there
are not too many of this "breed."
      As one who has worked in many developing countries of the world, all
of which have been struggling for decades and which many still struggle for
economic growth and self sufficiency, it seems to me that we should take
care not to “over-cook our own golden goose” by excessive regulation which
often adds to the cost of doing business, costs which are ultimately passed
on to the consumer. Too many regulations can smother business expansion
plans and often discourage new, outside investment.
      Many of  the islands of the former Trust Territory, of which the
Northern Marianas was once a part, are still economic backwaters because
they never offered the investment incentives that the new Commonwealth
decided it would offer in the early eighties. These investment incentives
are well known and remembered within the business community and briefly
consisted of: the security offered by the American Flag, low tax rate,
ability to import nonresident workers, low minimum wage, local control over
immigration and customs, the opportunity to export certain qualified
products to the United States’ mainland market and proximity to the huge
Asian market. That some abuses have occurred along the way cannot be
denied, but these either have been or are being corrected.
     During the “boom” period of the ‘80’s the CNMI experienced an increase
in housing units of 139 percent while the owner occupied rate dropped from
a 1980 level of 60 percent to 43 percent in 1990 indicating a significant
increase in indigenous owned units constructed for rental purposes. Renter
occupied units rose 219 percent as compared with 65 percent for owner
occupied units. Those units with air conditioning increased by 28 percent
over those of 1980. Median household income rose 43 percent over the decade
from $14,425. to $20,644.  Median income for owner households rose 94
percent from $13,353. to $25,960. while that of renter households increase
about 5 percent from $16,403. to $17,149. , (in 1989 dollars).
     The median value of owner-occupied, one-family houses increased 1,525
percent over the decade of the ‘80’s from $10,400. to $169,000. This was 22
times as great as the average increase in the United States which rose 68
percent from $47,200. to $79,100. Median contract rent rose 207 percent
during the last decade from $125. to $384. as compared with an 89 percent
increase in the U. S. over the same period, ($198. to $374.). Both median
value and rent in the Commonwealth rose much faster than inflation in the
U. S. during this ten year period, (1980 - ‘90).
 Between 1980 and 1994 there were 51,301 land transactions recorded, (not
all involved leased).
      In 1980 the number of housing units in the islands totaled 3,373 of
which 3,028 were occupied units. By 1990 the total number of occupied units
had grown to 6,873 of which 2,981 were “owner occupied”, 3,892 “renter
occupied” and 1,337 were vacant or under construction. In terms of
residential use alone and considering the vacant units that are now
occupied for a total of 8,210 residential consuming units (not including
apartments, or condominiums), the  demand for water (fulfilled and
unfulfilled) for these units at an average daily consumption of 145 gallons
per day is equal to 1.2 million gallons per day or 438 million gallons per
year. Pro-rated for an average family size of 4.2 persons per household the
average daily per capita consumption is about 35 gallons. As an interim
solution to the water problem, if the banks won’t do it, perhaps the
government should offer medium term, low interest loans to permit
homeowners to build water catchment systems or offer such investment as a
tax credit.
     By 1995 the number of residential units as well as the population
increased substantially and the precise pace of growth will soon be know
once the census planned for this year has been completed.
      As the 50th anniversary of the conclusion of hostilities was recently
observed, one is struck by a strange irony - United States Government
expenditures within the Northern Marianas aside - large, private, mainland
American investment is somewhat conspicuous in its absence in the islands.
It is something of a paradox that it has been largely private capital from
a  former defeated adversary rather than the wealth from the victor that
has resulted in the reconstruction of Saipan's economy. Considering that
the Japanese presence in the islands extended for a period of only 30 years
as compared to one half century for that of America, it is interesting and
fortunate that the economic ties between these islands and Japan were
reforged in the seventies and eighties.  On any given day in the
Commonwealth there are more Japanese present than non-indigenous, native
born Americans. Today, the Commonwealth's economy  functions between two
economic forces - as  a political entity affiliated with the United States
a  thriving U. S. economy and a strong dollar is desired when Americans
travel abroad -  but the reverse is true with respect to the Commonwealth’s
tourism based economy since a strong dollar erodes the competitiveness of
the area's Japanese based tourist industry there-by making the islands more
expensive for the visitor when an increasing amount of yen is required to
purchase the dollar. In 1970 a Japanese visitor had to pay 350.8 yen to
purchase one U. S. dollar,  today he or she need only pay about  100 yen.
     It is curious that the Marianas archipelago and the Philippines are
the only western oriented societies situated in the eastern hemisphere.
There is no equivalent comparison of an eastern oriented society within the
western hemisphere. Aside from the beauty of the islands this unique
geographic and cultural anomaly will always make the islands an interesting
destination for Asian visitors.

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