Measuring The CNMI’s Success In Accomplishing The Goals Set Forth In The Covenant Negotiations Of 1973
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.
