Economic Conditions At The End Of 1996
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 for all except the construction and garment industry which is $2.90 per hour.
Per capital income increased 198 percent between 1980 and 1990 from $2,418 to $7,984 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 34,669 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.. Back
