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Palacios takes economic challenges to DC

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(Office of the Governor) — Lt. Gov. Arnold I. Palacios has returned from Washington, D.C. following a series of meetings and forums where he discussed the CNMI’s financial and economic downturn.

Lt. Gov. Arnold I. Palacios, right, with Douglas W. Domenech, the U.S. Department of the Interior’s assistant secretary for insular and international affairs, in Washington, D.C.  Office of the CNMI Governor

At the U.S. Department of the Interior’s Interagency Group on Insular Areas Plenary Session at the White House Eisenhower Executive Office Building, Lt. Governor Palacios presented on the state of the CNMI economy in the wake of both Super Typhoon Yutu and the outbreak of the novel coronavirus.

In his remarks for the session, Lt. Governor Palacios highlighted the need for a broad-scale recalibration of ways in which the federal government supports economic development in the territories, requesting support to better incentivize American corporations to establish in the CNMI and aid in supporting the Administration’s economic recovery diversification efforts.

“America is the largest economy in the world,” Palacios said in his remarks to federal officials. “We have American companies investing in the east while the CNMI relies upon foreign investment from Asia to support its struggling economy.”

He lamented that the CNMI, like the other territories, have much more obstacles to overcome given their remote geographic location and limited access to resources otherwise easily availed of by the contiguous States.

“I firmly believe that being a part of the American economic community is a goal that will benefit our people, and recent years have shown that the federal government has recognized the need for a new policy to govern development within the unique and difficult circumstances of small island economies like the CNMI,” added Palacios.

Following the IGIA Plenary Session, Lt. Governor Palacios testified before the U.S. House of Representatives Committee on Natural Resources Hearing on the Fiscal Year 2021 Budget Proposal for DOI’s Office of Insular Affairs .

At the hearing, Palacios further stressed on the adverse impacts of the novel coronavirus outbreak on the CNMI’s visitor industry and more importantly, on the overall economy. He explained that to date, the CNMI is projecting a significant loss of more than 150,000 tourist arrivals from China.

“This estimated loss represents more than 30% of our expected total annual arrivals for this fiscal year. This loss of income for our economy is and will be painful, but is not solely contained to the China market,” stated Palacios. “This year has proven that our economic development trajectory, inclusive of the effects of federal laws, has led us to a position that is the definition of fragile.”

Palacios also requested Congress and the Administration to recognize that the Capital Improvement Project Grants provided under the CNMI’s Covenant agreement with the United States must adapt to the circumstances of today.

He urged the review of the CIP Grants Program and batted for an increase in the budgeted amount that adjusts for inflationary costs and current infrastructure needs of the U.S. territories.

“The CIP Grants Program has been one of the most successful federal programs for the CNMI, Guam, American Samoa, and the U.S. Virgin Islands for infrastructure projects, and has had a significant impact on the advancement of quality of life and economic development in the islands,” added Palacios. “Given that the program has been $27.72 million since its inception for the CNMI in 1978 under Section 701 of U.S. Public Law 92-241, and continued at this level when it was modified to include Guam, American Samoa, and the U.S. Virgin Islands under U.S. Public Law 104-134 until today, a review of the CIP Grants Program is timely given the priority of infrastructure for the smaller U.S. Territories and the severe economic conditions that have presented themselves in recent years.”

Palacios also shed light on the ongoing workforce challenges of the CNMI despite the enactment of the U.S. Public Law 115-218, or the Northern Mariana Islands U.S. Workforce Act.

“We have made tremendous progress in committing ourselves to building a strong and vibrant economy based on the strengths of U.S. workers, but this ongoing transition period should be one of fluidity and willingness to be flexible toward accomplishing the intents of the law,” explained Palacios. “I must raise concern about the unintended consequences that must be averted at the risk of damaging our struggling economy further and imperiling the many U.S. jobs we have created thus far.”

In his efforts to illustrate the challenges plaguing the CNMI’s workforce capacity, the lt. governor noted that the CNMI has every interest in creating more jobs and opportunities for U.S. workers, but the counter intuitive nature of the CNMI economy has showcased that the best way to create opportunities for U.S. workers is to continue to build the economy alongside foreign workers.

In an effort to continue the pursuit of greater levels of U.S. workers in the CNMI’s economy, Palacios offered several recommendations to consider.

“The CNMI government should be allowed to participate in the labor certification process in a similar manner as is allowed for in Guam,” said Palacios. “The United States Department of Labor does not produce labor force data for the CNMI, the Bureau of Labor Statistics does not conduct labor market surveys in the CNMI, and the CNMI is not included in USDOL’s Occupational Employment Statistics program.”

To remedy this deficiency and to ensure labor market decisions are being made with the most relevant and locally contextualized information, Palacios disclosed that providing the same authority as Guam to certify wage and labor needs prior to submission of a CW-1 petition would be logical and efficient.

Secondly, Palacios recommended that fully lifting the exclusion of construction workers (Standard Occupational Classification Code 47-0000) from the CW-1 program and further recognizing the limited number of U.S. construction workers and the inapplicability of alternative visa classification on the labor force needs of the CNMI community.

“A full relief on this restriction will help support the development of new homes to combat the housing shortage caused by the destruction of Super Typhoon Yutu and to further develop the economy toward increased jobs and opportunities for U.S. workers,” noted Palacios.

Third, he discussed the importance of eliminating the touch-back provision to prevent a quarter of the labor force from departing the CNMI for an indeterminate number of months at the start of Fiscal Year 2021.

“At this time of severe financial difficulties, a dramatic reduction in the size of the labor force will compound our mounting challenges into a potential collapse of our economy,” lamented Palacios. “Removing the requirement for foreign workers to return to their country of origin following the second renewal period does not create a pathway to citizenship, but the periodic loss of a large segment of the workforce will create unnecessary complications within the economy and hurt U.S. job seekers entering into the labor force.”

Palacios further noted that limited resources, high transportation and trading costs, diseconomies of scale all play a significant role in leading the CNMI to the position it is in today. Global forces, unprecedented natural disasters, and a litany of impediments the CNMI from realizing a progressively higher standard of living for its people as a part of the American economic community.

“We can do so much if we work toward a shared understanding of who we are,” concluded Palacios. “The American economic community promised to our forefathers is not defined by the rigor of our regulations. It is defined by the promise of our ideals.”

November 2020 pssnewsletter

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