The “Analysis Of The Negotiating History Of The Covenant”  and
specifically the May 14, 1973 summary stated,”In its first position paper
regarding the economic aspects of the future relationship with the United
States, the Northern Marianas negotiators stated that their long range goal
of economic self-sufficiency could not be met from internal financial
resources until an expanded tax base was developed. The paper concentrated
on transitional planning required, the infrastructure needs of the
community, the operational costs of local government, and the need for a
development corporation funded by the United States that would enable the
Northern Marianas to foster economic development without surrendering
control to foreign interests.”

The Broad Economic Goals Established In 1973:
     The “first position paper” mentioned above along with others were
destroyed in the Legislative Building in Susupe by typhoon Kim in 1986.
However, some thirty boxes of historical records were donated by Howard
Willens and are now housed in the archives of the Northern Marianas
College. These documents, as specifically referenced below, will form the
basis for the economic analysis which follows.
     Local control over immigration was recognized as essential to achieve
any meaningful economic development given the limited population (about
14,000) and other constraints operative in these small and isolated
islands. During the negotiations the Northern Marianas representatives set
forth  projections of economic growth that reflected substantial reliance
on alien laborers to support the anticipated growth in tourism, to build
the infrastructure necessary to support a growing economy, and to achieve
an acceptable level of per capita income and standard of living for the
Marianas people. These projections showed a 500% (sic) increase in aliens
between 1973 and 1981 (from 1500 to 7500) and estimated that more than 5000
of these would be employed in the private sector by 1981.
 A. Objectives of the Mariana Islands (1):
1. To achieve a physical standard of living more comparable to that of the
continental    United states within ten years.
2. To maintain the quality of the natural environment indigenous to the
Marianas.
3. To implement a physical improvements plan based on a growth economy
through a comprehensive, phased program.
4. To establish local regulatory control of the planning design and
construction of physical improvements.
B. Assumptions:
1. That tourism as an industry can be expected to flourish, particularly on
the island of Saipan.
2. That the population of Saipan will not exceed 50,000 people by the end
of the 10 year period.
3. That there will be local acceptance on the islands of a non-resident
population directly related to that industry.
4. That the island of Rota will maintain its present agrarian economy with
a limited  increase in tourism.
5. That the island of Tinian will be developed primarily as a military
installation with a limited population.
The Status Of The Economy In 1973:
       In 1973 the Mariana Islands’ total internally generated revenue from
all sources was $1.3 million of which $536,643 was derived from income
taxes and $211,691 was generated from the business gross revenue tax,
$536,526 was produced from other sources, e. g., vehicle licenses, land
lease payments, etc. Exports in 1973 totaled $222,789 while imports were
$8.3 million. It should be remembered that at that time Saipan was the
Headquarters for the Trust Territory (TT) Government and most of the import
bill was a result of TT purchases of supplies and materials necessary for
the administration of a vast, far flung area encompassing the Marshall
Islands and the Eastern and Western Carolines Islands.
      In 1973 2,081 acres of land was cultivated for agricultural and
garden crops. The electric generating capacity of the islands was as
follows: Saipan - 10,180 Kw; Rota - 600 Kw; Tinian - 600 Kw. There were
4,718 registered vehicles including motor scooters and only 21 buses,
(mostly school buses). The few automobiles that were  on the island
consisted mostly of second hand, rusted pick-ups. There was only one
registered motor vessel (25 ft. in length or over). Saipan had only a
single local bank consisting of 4,016 accounts with aggregate savings of
$562,000. The four cooperatives and credit unions had 1,761 members with
total savings of $422,048. There were two theaters and two weekly papers
with a total circulation of 1,500.  Eight hundred ten (810) workers
(including U. S. citizens) for the private sector were recruited from
outside the Marianas: 575 Filipinos; 99 Japanese and Okinawans; 85 U. S.
citizens; 24 Koreans and 27 others.
     The total population of the Marianas in 1973 was 14,333 of which
12,581 were Trust Territory citizens (including indigenous Chamorros and
Carolinians, Marshallese, Ponapeans, Palauans, Yapese and Trukese), 1,752
were non TT citizens, 11,904 indicated the Marianas as their home area and
thus are presumed to have been indigenous, (the U. N. Report estimated
11,340 for this segment of the population).  There were 27 group households
and 2,326 private households with 1,733 wage earners employed by the
government and 972 employed in the private sector.
      The private sector consisted of 55 licensed business firms with total
assets  estimated at slightly less than $2 million. The employed indigenous
workers in the Marianas had wages that totaled $1.5 million annually. The
Trust Territory  Government, with it's large expatriate payroll, was the
major employer. There was no foreign investment in any substantial amount.
      The islands were almost devoid of the amenities of the last quarter
of the twentieth century. There was one black and white television channel
available operating only a few hours each evening; there were only three
food stores of any size with a very limited inventory; one cargo vessel a
month called at the port. The airport was an open-air tin shack with one
aircraft a day. Since the airstrip was not lighted and had no navigational
aids, aircraft had to overfly the strip at a low altitude prior to landing
to check the wind direction and to frighten stray dogs and cattle from the
landing strip. There were no recreational craft in the lagoon except for a
single glass bottom boat operated by a Palauan. There were only two hotels,
the 73 room Royal Taga Hotel and the Hafa Adai Hotel in Garapan which
consisted of ten plywood bungalows each slightly larger than a shipping
container.  The number of island restaurants could be counted on  one hand.
The Fire Department had a single red jeep with a garden hose and there was
only one stop sign on Saipan's roadways at the entrance to the Royal Taga
Hotel. Visitor entries in 1973 totaled 32,467. To make an overseas
telephone call one had to drive to the RCA office in Susupe and make the
call from a booth.The economy was minuscule.
Comparing the Economic Projections Of 1973 With The Most Recent Actual Data
Available
Population (Micronesian and alien)
     The projections of the Northern Marianas’ future population as made in
1973 by the consultant to the Marianas Political Status Commission ( MPSC)
were subject to considerable error as is evident when reviewing the actual
figures as resulting from the various censuses of population in 1980, 1990
and 1995. A comparison of the 1973 projections to the years 1990 and 2000
with the actual population recorded in the intervening years to 1990 (
along with a projection to the year 2000) reveals the following:
- the 1973 population projection was 4.3 percent higher than that recorded
in the 1973 census; the projection for ‘75 was 12.2 percent higher; 1976 -
18.3 percent higher ; 1977 - 23.8 percent higher; ‘78- 28 percent higher;
‘79 - 32 percent higher and by 1980 the ‘73 projection was off the actual
mark by a shortfall of 33 percent.
- by 1990 the earlier projection (1973) was 35 percent lower than the
population actually enumerated, ( 32,000 {‘73} as opposed to 43,345,{‘90}).
The projection between  the two data sets  for the year 2000 indicated that
the 1973 projection missed the mark by an underestimate of 34,866 persons
or by 89 percent.
Employment (Micronesian and alien)
     It is not possible to evaluate the difference in the employment
projections for the years between the initial estimates made in 1973 with
actual figures prior to 1980. This results from the lack of recorded
statistical data between these two reference periods. Only after the 1980
census of population are there accurate data to permit comparison with the
earlier projections made in 1973. Thus the ‘73 projection of 12,380 was
13,585 less than the actual employment total recorded for the year 1990, a
difference of 110 percent from the figure projected 17 years earlier.
      The difference in the projections made in 1973 with that made for the
year 2000 reveals that the earlier projection of 15,846 (‘73)  could  be
underestimated by as much as 24,780 persons or 156 percent for a projected
total in 2000 of 40,626 employed Micronesian and alien workers, a total
which, of course, includes indigenous workers and other U. S. citizens.
Per Capita Income (Micronesian and alien)
     Per capita income in 1973 was recorded at $1,000. No information is
available relative to the actual per capita income between the years 1974
and ‘79, we only have actual data for the years ‘80; ‘90 and ‘95. In 1980
the consultant for MPSC underestimated income by only $102 or 4 percent. By
1990 per capita income had been underestimated by $2,949 or 69 per cent
from that estimated 17 years earlier for a total of $7,199.

Public Revenue
     Public revenue for 1973 was underestimated by MPSC’s advisor by 8.3
percent.  By 1975 the actual local revenue generated was 74 percent less
than the earlier estimate; 88 percent less in ‘76; 71 percent less in ‘77;
60 percent less in ‘78; and 48 percent less in ‘79 and 35 percent  below
that estimated for 1980.
      By the year 1990 the 1973 projection for that year, i. e., ‘90,
exceeded the earlier projection of $44.9 million by $65.9 million or 147
percent  for a total of $110.8 million in locally generated revenues in
1990 .
     The earlier 1973 projection to the year 2000 of $99.9 million may be
exceeded by $200.1 million or by 200 percent for a total of $300 million if
current trends continue and there are no significant adverse changes in the
economy.The projection is based on an evaluation of the present general
economy of the Commonwealth and does not take into account, or make
provision for, the effect of sharp changes in the Northern Marianas’
economic base, the business climate, current laws and regulations or the
areas major Asian tourist markets - all of which are not presently
foreseeable. It should be recognized, however, that the departure of the
garment industry from the Commonwealth for whatever reason will require a
downward adjustment of this projection.
Economic Conditions At The End Of 1996 As Measured From 1986  - Ten Years
Of Growth
Tourism Sector
     The Commonwealth's economy with its 4,257 licensed businesses
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. Sixty one percent (61%) of the
visitors to the Northern Marianas are Japanese;22 percent Korean; 12
percent U. S. citizens with the remaining 5 percent consisting of all
others.
   The visitor industry is expected to continue to experience significant
growth  over the remaining years of this decade and well into the twenty
first century. Influencing the growth of this industry are the increasing
number of cities served by Continental Airlines, Northwest, Korean Air,
Asiana Airways, Japan Airlines and All Nippon Airlines. These flights have
made more seats available to Commonwealth island destinations. The
availability of more air routes to Japan and other tourist markets such as
Korea, Taiwan, Hong Kong and mainland China opens a vast tourist market.
   Ocean  going  cruise  vessels  such  as  the  Nippon  Maru,
Sunflower-7,  Utopia  and  the  New Utopia  and  the  Micronesian Princess
make calls at Commonwealth ports.
     It has been estimated that in 1996 visitor expenditures totaled $587.8
million and that  more than 5,000 jobs in the Commonwealth  were  directly
related to tourism. By  early 1997 there were more than 3,800 hotel rooms
on the three islands of Saipan, Tinian and Rota. In 1996 an average of
7,000 visitors were within the islands on any given day. The average annual
increase in tourist arrivals between the years 1977 and 1996 has been 14.5
percent per year.
       Sixty two percent (62%) of the hotel rooms in the Commonwealth are
owned by the Japanese, 14 percent are Korean owned, 12 percent Chinese,
with the balance owned by U. S. citizens. Some local residents do own
shares in several of the large hotels. Several of the smaller hotels are
owned and managed by  US/CNMI citizens. A wide variety of restaurants and
other tourist catering businesses are owned and managed by the Japanese and
other foreign investors. Each of Saipan’s major hotels have untaken and
completed three major expansions since their initial investment. Each
expansion has involved a significant investment in additional rooms and
facilities. Several major resort hotels are planned for construction in the
near future.
   Saipan has one - nine hole golf course and four world class 18 hole golf
courses one of which is being expanded to 36 holes. A  fifth golf course is
planned. One course on Rota has been completed with a second golf course
planned. The island of Rota has a new 18 hole golf course which is expected
to generate an increase in tourists and Tinian is the site of a $40
million, 400 room hotel and casino under construction together with a $20.4
million Voice of America relay station both of which are expected to
provide a substantial boost to that island’s economy.
Without question the Marianas will soon become the premier golf destination
in the world.
     Korea should also join the ranks as a major generator of tourists.
Throughout the remaining years in this last decade of the twentieth century
the Marianas is expected to witness a dramatic increase in visitor arrivals
provided, however, that additional accommodations are in place to sustain
this volume of visitors.
     Since 1980 the increase in visitor arrivals has averaged 11.6 percent
annually. Only one year (1982) in the past seventeen years witnessed a
decline in arrivals and that was a minuscule 3 percent drop.
     Air craft landings at Saipan International Airport  increased  25
percent over those of 1995 for a total of 36,852 in 1996.
     Conservative projections of low and high scenarios to the year 2001
indicate that the Commonwealth can expect  from 1.0 to 1.4 million
visitors  providing additional hotel rooms are available to accommodate
this market. A total of 7,000 to 9,000 hotel rooms will be required in the
Commonwealth’s inventory.
     Visitor arrival information reveal that the Commonwealth’s visitor
industry in 1996 remained a vibrant sector. Air and sea entries were
736,508 for the calendar year representing an increase of 9 percent over
the previous year.
     Projections to the year 2001 indicate visitor expenditures for air
arrivals will be in the vicinity of $1.4 billion (low) to $2.7 billion
(high). At that time the CNMI could expect to accommodate from 10,700 (low)
to 13,400 (high) visitors on the islands on any given day.
Other Economic Sectors
     Business gross revenue for other sectors of the economy was as
follows: 1995 - construction: $117.5 million for an increase of 39 percent
over the $84.4 million reported in ‘94; retail:  increased 45 percent over
1994 to $502.8 million; hotels up 57 percent in 1995 to $171 million;
wholesale: increased 33 percent over 1994 to $167.5 million in 1995 with
all other activities climbing 90 percent over ‘94 to over $1.0 billion for
a grand total of reported business gross revenue in 1995 of $2.26 billion.
     The current minimum wage in the Commonwealth is $3.05 per hour ( as of
July 1, 1997) for all sectors of the economy. Per capita income increased
198 percent between 1980 and 1990 from $2,418 to $7,199 and declined by 3
percent between 1990 and 1995 to $6,984. This decline is attributed to an
increase in the number of minimum wage, non resident workers primarily in
the garment industry.This industry reported business gross revenue of
$286.9 million in 1995 for an increase of 14.6 percent over 1994’s total of
$250.3 million. Wages paid by this industry in 1995 totaled $73 million.
     The work force increased 33.7 percent from 25,965 in 1990 to 34,723 in
‘95 while nonresident work permits (new, renewal and transfers) increased
22 percent to 28,829 in 1995. Wages and salaries in 1995 totaled $464.8
million for an increase of 12 percent over 1990. Within the banking and
finance sector  year end deposits of $425 million registered a modest gain
of 3.3 percent at the conclusion of 1995 while loans of $200 million were
up 8 percent over those at the end of 1994.
Population Growth
       The Commonwealth’s population increased 35.8  percent to 58,846 by
late 1995.This was an increase of 15,501 over the 43,345 people enumerated
in 1990.  The 1980 census recorded 16,780  people residing in the islands
resulting in an increase in the population by 1995 of 42,066 or 250.7
percent since that period for a total population of 58,846.
     United States citizens account for 46.7 percent of the inhabitants
(with those born in the CNMI equal to 37.7 percent while the remaining 9
percent was made up of other ethnicities). Those of Chamorro ethnicity made
up 23.5 percent of the population; the Filipino community equaled 33.1
percent followed by the Chinese at 11.5 percent; Carolinians registered 4.0
percent; Koreans at 3.9 percent and the Japanese only 1.6 percent. The
remaining 22.4 percent consisted of other Pacific islanders and Asians,
whites and blacks , (the two latter groups at 0.04 and 0.01 percent
respectively). Several other ethnicities made up the balance of the
population.
     In 1995, 11,525 students were enrolled in school. The work force
consisted of 34,723 people 16 years of age and over, working 35 hours a
week or more.  The unemployment rate was 7.5 percent within a labor force
of 35,664, (comprised of those between the age of 16 and 64 years of age
who are either employed or unemployed). This is in contrast with 1990 and
that year’s working population of 25,965 within a labor force of 28,664 and
an unemployment rate at that time of 9.4 percent. How the Commonwealth can
have a nonresident work force of the size it currently sustains and still
have unemployment is an interesting contradiction and partly a result of
unskilled individuals from neighboring islands entering the Commonwealth as
permitted under the Compact of Free Association.
Government Revenues
    The Commonwealth’s economic “boom” started around 1986. Several
indicators of the Commonwealth’s phenomenal growth over a ten year period
can be observed from the increase in locally generated government revenues.
Business gross revenue tax collections have increased from $19.3 million in
1986 to $67 million in 1996 for an average annual increase of 16 percent.
Revenues collected from the wage and salary tax have jumped from $7.4
million in ‘86 to $53.9 million in ‘96 for an average annual increase of 40
percent. On an annual basis, government income from the import and export
tax averaged 18.7 percent and 20 percent respectively. Revenue generated
from the hotel tax has averaged an annual rate of  growth of 31.5 percent.
On the expenditure side, in 1986 revenues required for government
commitments were $40.5 million. Ten years later, by 1996, they had
increased five times to $216.8 million with the average annual growth rate
of 19.2 percent. Expenditures have also increased three and one half times
from $59.3 million in 1986 to $209.8 million by 1996 for an average annual
increase of 13 percent. It should be kept in mind that the Commonwealth,
unlike Guam, has three principal islands which requires a tremendous
duplication of services, three airports, three medical facilities, three
public safety operations, etc. These services can’t be consolidated and
thus the high cost of government operations.
     This growth in government revenues was a result of two factors: an
increase in taxes in 1995 but more importantly the striking performance of
the private sector and the reported business gross revenue (BGR). In
reviewing the most recent data available the reported BGR was nine times
larger in 1995 than in 1985. In 1985 the BGR totaled $244.4 million and
increased to $2.26 billion (est.) by 1995 for an average annual increase
over the period of 21 percent. In terms of wages and salaries paid, these
jumped from a total of $77.5 million in 1985 to $464.8 million in 1995 a
six fold increase for an annual average over the period of 20 percent.
Sources: 1973 Census of Population for the Trust Territory of the Pacific
Islands
1973 Annual Report of the Trust Territory of the Pacific Islands to the
United Nations
(1) Wilmer, Cutler & Pickering, Negotiations Between The Northern Mariana
Islands And The United States, 1972 -75, Vol. III, December 1973,
Preparation For Round III, (Part 2), “Proposed Planning Program For The
Development Of The Mariana  Islands”, Marianas Political Status Commission,
Working Paper, August 29, 1973. The above courtesy of Mr. Howard Willens,
Attorney At Law, Washington.

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