| Politics/Northern Marianas: SAIPAN’S GARMENT SECTOR GASPING FOR AIR |
Minimum wage hike won’t help
Criselda B. Hernandez
A 27-year-old woman paid a recruiter in China 29,500 Chinese RMB or about US$3840 to work as a garment sewer in Saipan for US$3.05 an hour in November.
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Workers at Top Fashion... demanded a refund of a portion of up to US$4000 in recruitment fees they paid in China to secure a job on Saipan because many of them arrived here less than six months ago.
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Six months into her contract on May 3, the worker found out from the management of Top Fashion Corp. that the factory is closing down on July 2.
“I just want to go home. But I want my money back,” the worker told ISLANDS BUSINESS in broken English after she and about a hundred other workers walked miles from her company-provided housing in Tanapag village to Puerto Rico village to seek help from the Federal Labour Ombudsman’s Office on May 8.
That was a day after police broke into a barricade by workers in the factory premises demanding a refund of recruitment fees they paid in China to secure a job on Saipan.
She said she has yet to pay back the 29,500 Chinese RMB she borrowed in China for her recruitment fee which is supposed to cover a three-year employment on Saipan.
But her contract with Top Fashion, which manufactures Liz Claiborne, Sears and Kohl’s brands for US retailers, is good only for a year though supposedly it could be renewed every year. The company is closing on her eighth month on the job.
When she came to Saipan in November, 13 other factories had already ceased operations since January 2005. But hundreds more workers from China are still being allowed into the island for jobs in the remaining garment factories.
The CNMI government, Federal Labour Ombudsman Jim Benedetto told the local media, “has not learned from history” by still allowing workers from China to come into the Northern Marianas even if thousands had already been displaced by factory closures.
Last year, the largest and oldest garment factory in CNMI, Concorde Garment Manufacturing Corp., brought in a number of workers from China even after the management knew the factory was about to close and Labour allowed the hiring of these workers. The labour case against Concorde remains pending.
Top Fashion, just like the 14 other garment factories that closed before it, could no longer compete with other Third World countries that can now export their apparel products to the United States as a result of the World Trade Organisation’s lifting of quota on January 1, 2005.
Michigan Inc., which closed in March this year, cited “financial difficulties and deficit operations because of severe competition from low wage countries in Asia” for its decision to cease operations.
Michigan Inc. used to manufacture Gap and Banana Republic brands of apparel since its opening in September 1987.
“After many months of serious discussions and deep thought, we have determined that our company can’t compete with those low wage countries which can export their cheaper garments to the United States and therefore, we have decided to close our factory operations,” acting general manager, Sooho Jo, said in a notice to workers.
Historically, while garment exporters from other countries faced quotas and duties in shipping to the United States market, the CNMI’s garment industry benefited from quota-free and duty-free access to US markets for shipments of certain goods in which 50 percent of the value was added in the CNMI, according to the US Government Accountability Office in an April 19 testimony before the US House of Representatives Subcommittee on Insular Affairs which has jurisdiction over the CNMI and other insular areas.
Many of the Saipan factories moved their operations to Vietnam or Cambodia which pay wages much lower than the CNMI’s minimum wage of US$3.05 an hour.
Besides the lifting of the trade quota, garment factories on Saipan are also bracing for a proposal in the US Congress seeking to raise minimum wage in increments until it reaches the proposed US minimum wage of US$7.25 an hour from the current US$5.15 an hour.
Any increase in the minimum wage, according to Gov. Benigno Fitial’s special assistant for trade relations Richard Pierce, will kill the Saipan garment industry faster than the trade liberalisation has been doing to the business.
“We know, without a doubt, that an increase in minimum wage will eliminate the garment industry in Saipan,” he said.
He warned that between 6000 and 8000 garment jobs will be lost as a result of any wage hike. The garment industry used to employ 17,000 local and foreign workers, mostly from China.
Sharp drop
From over US$1 billion in its peak years in 1999 and 2000, the CNMI garment industry sales totalled only US$492.16 million in 2006.
This marked a 26 percent or US$170 million drop from the 2005 sales of US$662.7 million and a 40 percent decline from the 2004 sales of US$817.57 million.
Projected sales for 2007 are worse than the 2006 figure.
“We’ll be lucky to have US$400 to US$450 million this year,” Pierce, a former spokesman for the Saipan Garment Manufacturers Association, earlier said.
For the month of April alone, garment industry sales dropped by 43 percent from US$38.4 million to only $21.7 million.
Fitial, in his second State of the Commonwealth Address on April 27, said his administration expected the government revenue from taxes and fees from the garment industry to reach only US$30 million in 2007 compared to nearly US$80 million in 2001.
“The largest single garment factory tax, the customs user fee, has dropped from US$37 million in fiscal year 2001 to an anticipated US$11.5 million for 2007,” the governor said.
To address this, the Fitial administration continues to press US Congress members to amend Headnote 3(a) to reduce the value-added requirement for apparel manufactured in the CNMI destined for US consumers.
The local government also continues to ask the US Congress not to pass the federal minimum wage hike measure which will also affect CNMI and American Samoa.
But despite repeated pleas with the federal government, “quite the opposite is now occurring in congress,” Pierce told local media.
American Samoa Governor Togiola Tulafono asked for the support of members of the US Congress to stop provisions that would hike the minimum wage in American Samoa and CNMI, saying the passage of the measure would cause a collapse in the local economy.
The collapse of the garment industry, which accounts for about 35 percent of the local government’s revenues, is expected to aggravate its dwindling economy. The Fitial administration has proposed a US$30 million reduction in the fiscal year 2007 spending from US$193.5 million to US$163.26 million. This entails an additional 15.6 percent across-the-board budget cuts on various government agencies due to lack of revenues from both garment and tourism industries.
Labour situation
Despite the closure of factories one by one, as well as improvements in labour conditions, including a drop in the number of labour complaints filed and that the nature of those complaints is more mundane than it was years ago, garment employers continue to be involved in labour law violations.
In April last year, Rifu Apparel Corp., along with R&B Corp., was caught engaging in unlawful employment practices with the arrest of 55 illegal workers, most of whom were overstaying tourists and foreigners whose work permits had expired. The court ordered the workers’ deportation.
However, only a year later or on May 10, police again arrested 27 persons at the Rifu Apparel garment factory—including two managers—for illegal employment and immigration fraud.
In March, some garment workers told Department of Labour officials that they were directly and indirectly asked to pay US$1000 to US$1500 to be able to transfer to another garment factory before their 45-day transfer relief expires, prompting Labour to investigate.
“It’s illegal for any employer to ask for payment in exchange for a job,” Assistant Attorney-General Dorothy Hill, counsel for Labour, told the workers during an administrative hearing.
A garment factory that closed three years ago, N.E.T. Corp doing business as Pacific Coast, still has not paid over a hundred of its former workers over US$80,000 in back wages for work performed from February through April 2004.
Top Fashion garment workers, frustrated by the planned closure of the factory, held a sit-in protest on May 7 demanding a reimbursement of the recruitment fee they paid in China for a job at Top Fashion. About 70 of them arrived on Saipan only months ago. The peaceful protest, however, turned into a hostage situation when workers prevented office employees from leaving the factory premises.
Police were called in to pacify the protesters. As a result, seven male workers from China were arrested while a dozen employees were rushed to the hospital as a result of pepper spray, electric shock and physical force used by police officers to break the protest.
The workers alleged that police stepped the line in dealing with them.
Michael Dotts, lawyer for Top Fashion, and CNMI Press Secretary Charles Reyes Jr. said Top Fashion workers also crossed the line when they held hostage fellow workers at the factory. “You can’t stop workers from getting out of the office,” Dotts told local media.
Some of the female workers showed ISLANDS BUSINESS the bruises they sustained at the hands of the police.
One of them said she was already lying on the ground face down when a police officer stepped on her shoulder and her lower back. Others had their hair pulled before they were thrown against the wall.
Results of an investigation into the alleged police brutality had yet to be released when this edition went to press.
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