By Zaldy Dandan – Variety Editor
That is the question
IT is good news that taxes collected from the construction industry will provide additional revenue to the CNMI government — an “early Christmas,” indeed, to paraphrase the governor. But this welcome increase in tax collections is not enough, and construction activity cannot go on forever. (Witness the Beach Road improvement project which, after two long years, has finally been completed.) As the local business community reminded CNMI leaders in October 2023, tax inflows can only be “as high as the revenue and activity of individual businesses in the economy,” and government spending on construction is not enough to replace the revenue generated by the islands’ tourism-based economy.
The Marianas Economic Roadmap explains how tourism’s “economic multipliers” play a crucial role in the economy:
“When tourists spend money on various services such as hotels, restaurants, attractions, and transportation, this spending generates additional economic activity beyond the initial expenditure. This is because the money spent by tourists is then re-spent by businesses and their employees in the local economy, creating a cascading effect. The economic multiplier effect quantifies how many times money spent by a tourist circulates through a country’s economy. For example, if a tourist spends money at a hotel, the hotel then uses some of that money to pay its staff, who may spend it in local shops, thus further stimulating the economy.”
It is the drastic decline in these “economic multipliers” that has kneecapped the local economy.
As the Roadmap also notes, government “contributions to growth…are vastly outweighed by private sector development over the last years of data…. This data provides somewhat of a contrast to the prevailing thought that government spending, either through government expenditure or employment, is a primary driver of economic activity in the CNMI.”
In other words, if the tourism industry remains in a nosedive, how can the government meet its financial obligations in the next fiscal year?
The ‘real problem’
SOME say the “problem” is that the tourism industry is subject to global events beyond our control. But this begs the following questions: What economic sector is not affected by unforeseen international incidents? What economy is not subject to fluctuations and the boom-and-bust cycle?
Here’s another question: Realistically speaking, what other type of economy could exist on remote, typhoon-prone islands with very few natural resources and a small (and shrinking) local population/workforce — one that, if it chooses, can simply move elsewhere in its nation, the United States, which happens to have the world’s largest and most dynamic economy?
The “volatility” of the tourism industry is not the CNMI’s real problem. Its government’s uncontrolled spending is. When the economy is down, the government must make difficult financial adjustments — like everyone else. When it refuses to do so, it has only itself to blame.
Zaldy Dandan is the recipient of the NMI Society of Professional Journalists’ Best in Editorial Writing Award and the NMI Humanities Award for Outstanding Contributions to Journalism. His four books are available on amazon.com/.
