[Senate Hearing 110-50]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 110-50
 
     CONDITIONS IN THE COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS

=======================================================================



                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   TO

 RECEIVE TESTIMONY ON LABOR, IMMIGRATION, LAW ENFORCEMENT AND ECONOMIC 
     CONDITIONS IN THE COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS

                               __________

                            FEBRUARY 8, 2007


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    CRAIG THOMAS, Wyoming
TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          RICHARD BURR, North Carolina
MARIA CANTWELL, Washington           JIM DeMINT, South Carolina
KEN SALAZAR, Colorado                BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel
                 Al Stayman, Professional Staff Member
           Josh Johnson, Republican Professional Staff Member


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Akaka, Hon. Daniel K., U.S. Senator from Hawaii..................     4
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     1
Cohen, David B., Deputy Assistant Secretary for Insular Affairs, 
  Department of the Interior.....................................     6
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     5
Entena, Kayleen D., Resident, the Philippines....................    72
Franzel, Jeanette M., Director, Financial Management and 
  Assurance, Government Accountability Office....................    13
Guerrero, Juan T., President, Saipan Chamber of Commerce.........    73
Mangona, Sister Mary Stella, Sisters of The Good Shepherd........    67
Murkowski, Hon. Lisa, U.S. Senator from Alaska...................     2
Ogumoro, Lauri, MSW, ACSW, Karidat Social Services, Saipan.......    58
Tenorio, Pedro A., Office of the Resident Representative.........    28
Tester, Hon. Jon, U.S. Senator from Montana......................     5
Villagomez, Hon. Timothy P., Lieutenant Governor, Commonwealth of 
  the Northern Mariana Islands...................................    32
Williams, F. Haydn, Ambassador, Former Covenant Negotiator.......    55

                               APPENDIXES
                               Appendix I

Responses to Additional Questions................................    83

                              Appendix II

Additional Material Submitted for the Record.....................   107


     CONDITIONS IN THE COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS

                              ----------                              


                       THURSDAY, FEBRUARY 8, 2007

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:30 a.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. Okay, why don't we try to get started here? 
We've got quite a few witnesses this morning and want to give 
everyone a chance to make their statement.
    Let me welcome all the witnesses, first of all. This is a 
hearing on the Commonwealth of the Northern Mariana Islands. 
This is the fourth hearing of this committee in the last 10 
years on the issues of labor and immigration and law 
enforcement issues in the Islands. In many respects the 
discussions started in 1986 with the letter from the Reagan 
administration to then-Governor Pedro Tenorio stating ``the 
tremendous growth in alien labor is extremely disturbing.'' 
That administration, the Reagan administration, urged ``timely 
and effective action to reverse the situation'' and warned 
``the uncontrolled influx of alien workers can only result in 
increased social and cultural problems.'' Efforts to respond to 
these concerns led this committee to report legislation three 
times during the period 1998 through 2001, and it led the 
Senate to pass legislation in the year 2000. Legislation 
received strong support from this administration in 2001, but 
no further action was taken.
    The purpose of today's hearing is to determine, given the 
passage of time and the new information and new circumstances, 
whether a bill along those lines should be reconsidered. During 
the intervening 6 years the Nation's security situation has 
fundamentally changed. The Federal Government released several 
reports dealing fully or partly with conditions in the 
Marianas. Based on this additional information, I believe that 
the case for legislation is at least as strong and probably 
stronger today then it was 6 years ago. However, complicating 
this need for reform is the fact that the local economy is 
shrinking. The garment industry that accounts for about 40 
percent of local revenues is departing because global garment 
quotas ended in December 2005. In addition several factors have 
contributed to the decline in the tourism industry, another 
major sector in the economy. Finally, consideration of minimum 
wage legislation in the Congress is creating uncertainty about 
future wage policy in the Islands.
    The Covenant between the United States and the Marianas 
began 30 years ago in a spirit of partnership. The Marianas are 
beautiful islands with industrious people and tremendous 
potential. It's my hope that today we can rekindle that spirit 
of partnership and pull together to better understand these 
problems and build a sound foundation for the Island's future.
    We've got several other Senators with us. Senator 
Murkowski, let me call on you to make any statements you would 
like, and then Senator Akaka, any statement that he has.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I appreciate 
you holding the hearing this morning and welcome those of you 
on this panel and the panel that will follow this.
    As you've noted the ranking member, Senator Domenici, is 
not here because he's in budget hearings. I think it's 
unfortunate that this is the time of year that we all seem to 
have conflicting hearings, so I won't be able to stay for the 
full hearing this morning, but I will be paying very close 
attention to the testimony that we receive.
    I have a series of questions that I will submit for written 
response and look forward to those. In many respects, and you 
mentioned this Mr. Chairman, today's hearing is a follow-up of 
so many of the hearings that we have had over the years.
    It's been almost 11 years to the week after the issue of 
immigration worker abuse in the CNMI first surfaced before this 
Energy Committee. Back in 1996, my father, then-Senator 
Murkowski, accompanied you, Senator Akaka, on a trip to the 
CNMI. In Saipan you both toured the garment factories where the 
guest workers were literally toiling in sweat shops. I was told 
by my father's staff that at one plant, literally as they 
walked in to the shop, the fans were just then coming on in 
anticipation of the delegation. On that trip they met foreign 
workers, construction workers, and security guards who were 
recruited to come to the Island and sometimes faced the 
problems found in classic company towns that we would have 
found in America's Wild West. Situations where workers were 
paid, forced to pay much of their low wages for their room and 
their board, having to work off recruitment fees before they 
could change their jobs. Additionally, there were workers who 
would not get paid for months on end, who ended up in unsafe 
working conditions and in some cases were coerced into 
prostitution, or into having abortions so that they could 
continue to work without interruption. These abuses prompted 
the legislation--legislation that passed the Senate--but 
ultimately it did not become law. They also spawned a variety 
of actions intended to remedy the concerns and protect guest 
workers in CNMI.
    In 1999, the Federal Ombudsman's Office was created to give 
guest workers a place to file complaints, and in that same 
year, 23 of the garment factories entered into a strategic 
partnership with the U.S. Department of Labor's Occupational 
Safety and Health Administration set up safety and health 
standards for each work site and the staff housing. It was 
then, in 2003, that the independent Garment Oversight Board was 
created as a result of a class action lawsuit and it now 
monitors the remaining garment factories in the CNMI. Also, in 
2003, the CNMI Government also worked with the Department of 
the Interior's office to establish a refugee protection system. 
I hope that we will hear today whether that system is really 
sufficient to prevent refugee asylum problems.
    Following 9/11, there has been progress on improving 
immigration entrance inspections to CNMI--from where access to 
the mainland is much easier--both to protect against terrorists 
and also to combat against human trafficking. Although, I 
understand that there may still be questions about the 
enforcement of immigration rules and adequacy of staff and 
funding to enforce the CNMI's rules. The CNMI Government has 
negotiated agreements with the Chinese Economic Development 
Association to prescreen Chinese Nationals coming to work in 
the CNMI to limit the fees that workers can be charged. The 
question really is, though, whether these changes have gone far 
enough to protect the guest workers from abuses.
    We've certainly been told that the problems have been 
remedied and I would like to believe that is the case, but in 
preparation for this morning's hearings, we have seen 
relatively recent letters from the Ombudsman's office 
attempting to remedy cases where businesses in the CNMI have 
not paid workers on a bi-weekly basis. Security guards are 
again facing problems. We've seen complaints where construction 
workers were not paid for the work performed. We've heard new 
complaints about garment workers being recruited to come to the 
Islands and perhaps being pushed into prostitution as a result. 
This sounds far too much like many of the problems that were 
faced a decade ago. I'm hopeful that this hearing will attempt 
to resolve whether these are isolated incidents or whether 
there are still widespread problems in the CNMI that will 
require additional reforms to address.
    I don't want to worsen economic conditions in the 
Commonwealth needlessly. I understand the pain that could be 
caused by Congress addressing both the minimum wage and 
immigration and placing difficult burdens on the Commonwealth, 
but when it comes to the immigration matters, I clearly do not 
want to look the other way if worker abuses are continuing. 
I've got a lot of questions. I'm a long way from feeling 
comfortable that I know what is in the best interest of the 
citizens of the CNMI, what is best for the guest workers in the 
Commonwealth, and really what's best for America here, but I do 
know that coming from Alaska, being born in that State when it 
was still a territory, I'm, along with Senator Akaka and 
Senator Inouye, among the relatively few in the Senate that 
understands the frustration that residents feel when their 
futures are determined by lawmakers who are very, very far away 
both geographically and mentally, in terms of understanding the 
conditions on the ground. We are being legislated by those who 
have never seen where we live and never really understand so 
many of our issues.
    I look forward to the testimony that will arise from this 
hearing--and the debate that it may engender--that is helping 
me to decide how we move forward with the issues that face the 
CNMI in this Congress. I thank you Mr. Chairman.
    Mr. Chairman. Thank you very much.
    Senator Akaka.

        STATEMENT OF HON. DANIEL K. AKAKA, U.S. SENATOR 
                          FROM HAWAII

    Senator Akaka. Thank you very much, Mr. Chairman, and thank 
you for having this hearing. I want to first welcome our 
panelists, all of you, as well as those who have traveled so 
far to be here at this hearing.
    As many of you know I travel, as was mentioned by Senator 
Murkowski. I traveled to the Marianas twice in the 1990's with 
the then-Chairman, Frank Murkowski, to investigate allegations 
of labor abuses at that time, and what we saw was very 
troubling. Workers had gone months without pay. I remember one 
of them that we talked to showed me a wad of checks and said, 
``I can't cash them.'' To not receive any pay, they lived in 
horrible conditions and the local government bureaucracy 
appeared overextended by trying to manage a massive guest 
worker program. We developed legislation to respond to those 
problems by extending Federal immigration law with special 
provisions to guest workers and other provisions to make the 
needs of the CNMI.
    Today is this committee's first hearing on labor 
immigration and law enforcement in 7 years, Mr. Chairman. I 
share the concerns of my new Chairman, that the war on terror 
and evidence in several recent reports indicate that serious 
labor problems continue to exist. Also of concern to all of us 
is that the CNMI economy is in a serious downturn because of 
the steady departure of the garment industry that accounts for 
about 40 percent of the government revenue. This shrinkage in 
the economy will almost certainly aggravate the problems 
associated with the guest program because government resources 
will be reduced and the number of laid-off workers will 
increase. Is the CNMI prepared to deal with this without 
Federal help? I don't think so, and I look upon a hearing like 
this and what we do in the future to not only help this country 
deal with these problems, but to help the people of CNMI toward 
a better life.
    We also have to think about CNMI's future development. Last 
year I joined with the Chairman, Senator Domenici and Senator 
Murkowski to urge the Finance Committee to consider certain 
trade and tax measures to improve the CNMI's investment 
attractiveness and to increase the transfer of Federal taxes 
paid by CNMI residents. Some argue that the extension of 
Federal immigration law will deprive the CNMI of the work force 
it needs. That was certainly not the intent of the previous 
legislation and I believe that those who have studied it 
closely would agree that it was carefully crafted to meet the 
CNMI's special needs.
    For the next several years the CNMI will be facing a very 
difficult economic situation and labor immigration reform is 
certain to be a part of building a new foundation for the 
Island's future economy and we need to address and look at that 
as well. You know it's been 30 years now, 30 years ago the 
Covenant between the United States and CNMI established, as was 
mentioned, a new partnership, and this is something that we 
need to build on and to make it better. I look forward to 
working, Mr. Chairman, with CNMI and the administration 
officials in that same spirit. Aloha.
    The Chairman. Thank you very much. Senator Tester, did you 
have any statements you'd like to make before we hear the 
witnesses?

          STATEMENT OF HON. JON TESTER, U.S. SENATOR 
                          FROM MONTANA

    Senator Tester. Very, very quickly, Mr. Chairman and I to 
want to thank you for putting this hearing together. I want to 
thank the panelists for being here.
    I can tell you that there are a lot of issues that deal 
with the Commonwealth that are very concerning to me. The drug 
smuggling, organized crime, the ability to take the active 
ingredients of methamphetamines and bring them into this 
country is a huge issue. It's a huge issue for not only this 
country, but for Montana where we have a significant meth 
problem. Illegal immigration, labor abuse, as Senator Akaka has 
talked about, these are all critically important issues and I 
really want to thank you, Mr. Chairman, and I want to thank the 
panel, and I look very much forward to what you have to say.
    [The prepared statement of Senator Domenici follows:]
  Prepared Statement of Hon. Pete V. Domenici, U.S. Senator From New 
                                 Mexico
    Over the last several years, our Committee has held oversight 
hearings on the economic situation of the territories of the United 
States. I am pleased to see that Chairman Bingaman is continuing this 
focus. Last year, the Resident Representative, the Honorable Pedro A. 
Tenorio, of the Commonwealth of the Northern Mariana Islands (CNMI) 
testified about the economic challenges in the CNMI, and the mechanisms 
they were implementing to control them. In addition to the local 
controls being undertaken, the CNMI requested that Congress provide 
guidance as well. To date we have done the following:

   We have asked the Department of the Interior to provide an 
        update on issues concerning immigration and options to help 
        ameliorate some of the economic challenges confronting the 
        CNMI. The DOI has since responded, noting improved developments 
        regarding matters on labor and immigration; however, they note 
        that more needs to be done to address the serious fiscal and 
        economic challenges in the CNMI.
   In addition, we directed the Department of the Interior to 
        provide the Committee specific information regarding both 
        immigration and financial data.

    I am pleased to note that the Department of the Interior has begun 
a process to develop the data, concerning immigration and the economy, 
and has provided the Committee answers to our questions. I look forward 
to working with the Department in analyzing the data, and to develop a 
road map for addressing the challenges faced in the CNMI. I take very 
seriously our oversight responsibility for the CNMI, and I intend to 
make sure that we address the problems they face.
    Again, I believe that any formal change in policy that impacts the 
CNMI either administratively or legislatively should proceed 
cautiously, and in a manner that allows for participation from all 
interested parties, federal and local, and that takes into 
consideration the current conditions of the CNMI. I look forward to 
hearing from our witnesses.

    The Chairman. Well, thank you very much.
    We have a very distinguished group of witnesses today and 
let me introduce the whole group before we call on them. First 
is The Honorable David Cohen who's the Deputy Assistant 
Secretary for Insular Affairs in the Department of Interior. 
Next is The Honorable Tim Villagomez who is the Lieutenant 
Governor of the Commonwealth of the Northern Mariana Islands. 
Next Honorable Pedro Tenorio who's the Office of the Resident 
Representative here in Washington and Ms. Jeanette Franzel who 
is the Director of Financial Management and Assurance with the 
U.S. Government Accountability Office. So we appreciate all of 
them being here and then we have others on the second panel 
that we will also hear from but let me first indicate that all 
of your statements, your full statements, will be included in 
the record so you do not need to give us the entire statement 
orally. If you could summarize the main points you want to make 
and maybe take 5 minutes or so each and tell us what the main 
points are that we need to understand, that would be greatly 
appreciated.
    Let me start with David Cohen, first, and then we'll just 
go, let's see here what the best route is, I guess, Mr. 
Benedetto, I didn't get to introduce you. Let me do that. I 
missed you when I went through the listing here. We welcome you 
as well. Thank you very much, Mr. Cohen, why don't you start 
first? Then I'll go over here to the left-hand side and Ms. 
Franzel and then across.

  STATEMENT OF DAVID B. COHEN, DEPUTY ASSISTANT SECRETARY FOR 
          INSULAR AFFAIRS, DEPARTMENT OF THE INTERIOR

    Mr. Cohen. Thank you Mr. Chairman. Mr. Chairman and members 
of the committee, thank you for the opportunity to testify. I 
am here with Jim Benedetto, who's the Federal Ombudsman. The 
Federal Ombudsman's Office, as was mentioned, is an office 
under the Office of Insular Affairs, which I supervise that is 
dedicated to making sure that the guest workers in the CNMI 
have the ability to assert their rights and protections.
    I testified before you last March about the CNMI's very 
difficult economic and fiscal challenges. The situation has 
changed since then. It's gotten worse. The simultaneous decline 
of the CNMI's only two major industries has caused revenues to 
drop approximately 25 percent since 2004. Continued declines of 
this magnitude would cast doubt on the government's ability to 
remain solvent and to provide even the most basic critical 
services.
    On labor issues, good progress has been made in recent 
years but we continue to have concerns that are summarized in 
my written statement. The deteriorating economy deprives the 
government of the resources that it needs to effectively 
prevent, investigate and prosecute labor abuse. Senator Akaka 
made this point. The closure of large factories places 
significant demands upon the local government and 
simultaneously causes it to lose revenues that it needs to meet 
those demands and all of its other obligations. While the 
departure of the garment industry may be in the long-term best 
interests of the CNMI, an immediate, abrupt departure is not. 
We also remained troubled by the serious structural imbalances 
in the CNMI economy and in CNMI society. The CNMI remains a 
two-tier economy where the private sector is overly reliant on 
foreign workers and where the local population is overly 
reliant on public employment.
    As noted in my written statement, the CNMI has made 
commendable progress over the last several years in curbing 
labor abuse. However, excessive reliance on a foreign low wage 
work force creates a risk of exploitation and abuse. That risk 
could be overcome with a high level of effort, vigilance and 
resources, but this would probably be difficult to sustain 
under current conditions. Mr. Chairman, I call your attention 
to the unique situation of the long term foreign workers that 
have become an integral part of CNMI society. A number of 
foreign workers have been working there for 5, 10, 15 or more 
years. Many are raising children there and their children are 
U.S. citizens. These workers were invited to come because they 
were needed. They came and have stayed legally and they have 
contributed much to the community. They were essential in 
building this economy from the ground up. I hope that the 
committee and the CNMI government will keep these long-term 
members of the community in mind as they consider immigration 
reforms.
    The question is not whether the current economic structure 
is a good one. It is not. The question is how to help the 
people of the CNMI build a strong, prosperous and just society 
without causing, in the transition, needless pain to innocent 
people including the foreign workers. This was a point made by 
Senator Murkowski. The administration is committed to working 
with Congress and the CNMI to establish a framework that will 
allow the people of the CNMI to build such a society. We're 
ready to explore with you and the CNMI various options for 
establishing such a framework, including Federalizing the 
immigration system in a manner that it would not cause needless 
economic or fiscal harm.
    We offer the following principles to guide any discussion 
of Federalization. First, we must properly address national 
security and homeland security issues. Second, we should 
minimize damage to the economy and maximize the potential for 
economic growth. For the CNMI to build a viable new economy, it 
will likely need to remain readily accessible not only to a 
reasonable number of workers, but to customers such as tourists 
and students. Third, we must ensure that the new economy is not 
as conducive to worker exploitation and abuse as was the old 
economy. Since the CNMI has a very limited local labor pool, it 
is reasonable to rely to some degree on foreign workers, but 
the mistakes of the past must not be repeated with a large 
class of politically powerless foreign workers populating the 
lower tier of a two-tier economy. Fourth, we should carefully 
analyze the likely impact of major proposals before we 
implement them, and this point was made by all of the Senators. 
Labeling our efforts as reform does not relieve us of the duty 
to carefully consider the potential consequences of our 
actions. This is especially true when we are dealing with an 
economy and society as fragile and potentially volatile as that 
of the CNMI. If we leap before we look, we could inadvertently 
and needlessly hurt people that we are trying to help. We 
should, however, be expeditious in our analysis and not use the 
need to study as an excuse to delay. The people of the CNMI are 
eager to get on with their future.
    Finally, we must ensure that the people of the CNMI fully 
participate in decisions that will affect their future. A 
better future for the CNMI cannot be imposed unilaterally from 
Washington, DC, ignoring the insights, wisdom and aspirations 
of those to whom this future belongs. Three years ago this 
month I testified for the administration in favor of granting 
the CNMI a non-voting delegate to the U.S. House of 
Representatives. I pointed out how soldiers from the CNMI were 
fighting and dying so that the peoples of Iraq and Afghanistan 
could have the right to elect representatives to their 
respective national legislatures. I pointed out that these 
soldiers did not themselves have the right to elect a 
representative to their national legislature, a right held by 
residents of every other U.S. commonwealth and territory and 
the District of Columbia. Since I delivered that testimony, Mr. 
Chairman, I have attended the funerals of Sergeant Eddie Chen, 
Sergeant Wilgene Lieto and Corporal Derence Jack. Just last 
week we lost Marine Lance Corporal Adam Quitugua Emul, killed 
in action in Iraq. These sons of Saipan died so that the people 
of Iraq could enjoy rights that are still not enjoyed by the 
loved ones that these brave young men have left behind. Before 
considering legislation that would drastically change the lives 
of the people of the CNMI, we hope that Congress will consider 
granting them a seat at the table at which their fate will be 
decided. Thank you.
    [The prepared statement of Mr. Cohen follows:]
 Prepared Statement of David B. Cohen, Deputy Assistant Secretary for 
              Insular Affairs, Department of the Interior
    Mr. Chairman and members of the Committee, thank you for the 
opportunity to testify on the important issues facing the Commonwealth 
of the Northern Mariana Islands (CNMI). I come before you today wearing 
at least two hats: As Deputy Assistant Secretary of the Interior for 
Insular Affairs, I am the Federal official that is responsible for 
generally administering, on behalf of the Secretary of the Interior, 
the Federal Government's relationship with the CNMI. I also serve as 
the President's Special Representative for consultations with the CNMI 
on any matter of mutual concern, pursuant to Section 902 of the U.S.-
CNMI Covenant.
    Mr. Chairman, we would like to thank you and Senator Domenici for 
the comprehensive set of questions that you recently asked Secretary of 
the Interior Dirk Kempthorne on labor, immigration, law enforcement and 
economic issues in the CNMI. We have done our best to provide the 
information that you requested, and we have also identified areas where 
important information is currently unavailable. I will not use my 
statement to summarize the information that we have gathered for you, 
although I will be happy to answer questions about it and look forward 
to reviewing and discussing that information with your Committee's 
staff in the weeks ahead. Rather, I will provide a general summary of 
the current state of affairs in the CNMI as we see it, followed by some 
thoughts about where we might go from here.
    I testified before this Committee last March about the very 
difficult economic and fiscal challenges that the CNMI was facing as 
its only two major private sector industries, garment manufacturing and 
tourism, were facing significant declines at the same time. The 
situation has changed since then. It has gotten worse.
    The most compelling challenge that the CNMI faces today is how to 
deal with a deepening economic crisis that has triggered a growing 
fiscal crisis. Both of the CNMI's major industries continue to decline 
rapidly and simultaneously. Between 2000 and 2006, garment sales 
declined 49.5 percent, from $1 billion to $527 million. According to 
the CNMI Department of Finance, garment makers contributed, directly 
and indirectly, 37.9 percent of general fund revenues in fiscal year 
2000. In fiscal year 2006, that share was down to 25.1 percent--and it 
is headed down still further since garment factory closing continues. 
In 2000, there were 34 holders of garment making and shipping licenses 
in CNMI. In December 2006, after the closure of Concorde Garment 
Manufacturing Inc.'s factory caused the loss of approximately 1,400 
jobs, only 19 garment factories remained.
    The CNMI's other major industry, tourism, is also experiencing 
troubling declines. Just as the industry, dependent more heavily on 
Japan than it is on any other market, was recovering during the middle 
of the decade, Japan Airlines (JAL) discontinued flights to the CNMI in 
October 2005. This was a major setback to the CNMI's tourism industry 
because JAL carried 40 percent of all Japanese tourists to the CNMI and 
29 percent of all tourists to the CNMI. With no carrier filling the 
void immediately and others only incrementally during 2006, tourist 
traffic was down 16 percent during the year. The tax contribution of 
tourism to the CNMI treasury cannot be measured as directly as that of 
garment manufacturers. However, it is reasonable to say that tourism is 
the only other major source of income and taxes in the CNMI.
    The simultaneous decline of the CNMI's only two major industries 
has caused government revenues to decline sharply, dropping 
approximately 25 percent from $221.2 million in 2004 to a projected 
$165.8 million for the current fiscal year. Continued declines of this 
magnitude would cast doubt on the CNMI government's ability to remain 
solvent and to provide even the most basic critical services to CNMI 
residents.
    I would like to also address the labor situation in the CNMI. Much 
has transpired since this Committee last held an oversight hearing on 
this subject in September 2000. The following are examples of the 
significant progress that the CNMI government has achieved since then:

   The independent Garment Oversight Board has been in place 
        since 2003 as a result of a class-action lawsuit. The Board 
        monitors compliance by CNMI garment factories with 59 standards 
        relating to working and living conditions. The Board, which is 
        made up of three former judges (including former California 
        Supreme Court Justice Cruz Reynoso and former Washington 
        Supreme Court Chief Justice Richard Guy), has engaged the 
        nonprofit organizations Verite and Global Social Compliance to 
        conduct comprehensive inspections of each factory twice a year 
        (with additional inspections as necessary). A factory placed on 
        probation as a result of a failed inspection loses its 
        eligibility to sell to 26 major retailers.
   The Federal Ombudsman's Office reports that the number of 
        complaints filed annually had been reduced by over 60% since 
        the inception of the office in 1999: from 1221 complaints per 
        year to 473. In recent years, the complaints generally have 
        concerned matters less grievous in nature than those identified 
        in the early years.
   In 2003, the CNMI government signed a Memorandum of 
        Agreement with the Department of the Interior's Office of 
        Insular Affairs to establish a refugee protection system. Under 
        the guidance of U.S. Citizenship and Immigration Services, the 
        CNMI amended its immigration statute, promulgated implementing 
        regulations, and established a refugee protection program with 
        financial assistance from the Office of Insular Affairs.
   Under the Memorandum of Agreement with the Office of Insular 
        Affairs, the CNMI also agreed to cooperate with the United 
        States to combat human trafficking. In furtherance of that 
        goal, the CNMI enacted the Anti-Trafficking Act of 2005.
   In 1999, 23 garment factories entered into a strategic 
        partnership with the U.S. Department of Labor's Occupational 
        Safety and Health Administration (OSHA) that requires each 
        participant to maintain a formal, written safety and health 
        management system for each worksite and associated staff 
        housing, and to establish a joint employer/employee safety and 
        health team. OSHA credits this program with reducing the lost 
        workday injury rate in these factories to well below the 
        average for the industry nationwide. OSHA reports that over 44 
        full time health and safety managers have been hired by the 
        garment factories pursuant to this partnership.
   The CNMI government has negotiated agreements with the 
        Chinese Economic Development Association to pre-screen Chinese 
        nationals coming to work in the CNMI, limit the fees the 
        workers can be charged by approved recruiters, and intercede on 
        the workers' behalf when a dispute arises; implemented 
        secondary preference for jobless alien workers already present 
        in the CNMI; and completed a comprehensive revision of the 
        alien labor rules and regulations to guarantee due process 
        rights to alien worker complainants. While this type of pre-
        screening is not intended to, and does not, substitute for a 
        visa screening process administered as a foreign affairs and 
        national security function of the United States, it does assist 
        in regulating the numbers of nonresident workers who come to 
        work in the CNMI, ensuring that some minimum standards are met 
        with respect to the qualifications of those workers, and in 
        protecting their legal rights.
   We congratulate the CNMI Attorney General's Office for 
        aggressively investigating and winning convictions against club 
        owners who pressured foreign employees into prostitution.

    We give the CNMI government a great deal of credit for the progress 
that has been made in the last several years. A number of others 
deserve a great deal of credit as well, including Members of Congress 
who have pushed for reforms, the garment workers and their attorneys 
who brought the class action suit against the garment industry, 
international non-profit organizations such as Verite which conduct 
rigorous inspections of the garment factories, and longtime workers 
rights advocates such as former California Supreme Court Justice Cruz 
Reynosa who have worked to oversee the inspection regime. We recognize, 
however, that the situation remains far from perfect, and we continue 
to have a number of concerns. For example:

   The CNMI Department of Labor still has too few experienced 
        investigators and hearing officers to deal with the labor 
        complaints that have been generated. Although about 1,200 of 
        the backlogged cases dating back to 1997 were recently closed, 
        those cases were the ones most readily resolved (such as 
        default cases and those where no further investigation was 
        needed). Meanwhile, the CNMI Department of Labor continues to 
        fall behind in completing its investigations and adjudications, 
        resulting in 1,349 cases still pending from 2004, 2005 and 
        2006.
   We believe that enforcement in labor cases is hampered by an 
        insufficient commitment by the CNMI law enforcement authorities 
        to prosecuting or sanctioning repeat offenders.
   We are concerned about foreign attempts to influence the 
        adjudication of particular cases in the CNMI's fledgling 
        refugee protection program.
   We continue to be concerned about reports that increasing 
        numbers of laid-off garment workers are turning to 
        prostitution.
   The CNMI's current fiscal crisis casts doubt on its ability 
        to ensure the timely repatriation of thousands of garment 
        workers employed by factories who may not have the resources to 
        pay their wages in full and provide them a plane ticket to 
        their point of hire. In addition, of the bonding companies who 
        have a secondary obligation to pay back wages and provide 
        tickets, a majority do not have sufficient assets to meet their 
        obligations.
   On November 30, 2006, the CNMI held a Workforce Development 
        Summit cosponsored by the Northern Marianas College Small 
        Business Development Center and the CNMI Workforce Investment 
        Agency. The goals of the Summit were twofold: (1) offer an in-
        depth discussion of employment issues facing local residents 
        and the public and private sectors, and (2) gather business and 
        government leaders to discuss the CNMI employment needs with a 
        goal of developing the local workforce to fill positions that 
        are currently occupied by foreign employees. The Summit brought 
        together business and government leaders to discuss the CNMI's 
        critical employment needs so that government counseling, 
        training, education, financial assistance, internship and 
        placement programs could unify their efforts and maximize 
        resources to develop the necessary resident labor talent. As a 
        result, the CNMI is creating a demand-driven talent development 
        action plan that will result in a higher percentage of resident 
        workers employed in the private sector. The U.S. Department of 
        Labor's Employment and Training Administration is assisting the 
        CNMI with mapping their public and private resources and assets 
        to begin development of their talent development action plan.

    The labor situation in the CNMI is inextricably linked to the 
fiscal and economic situation. The most significant threat to the human 
rights of foreign employees in the CNMI today is the deteriorating 
economy. This manifests itself in a number of ways, including by 
depriving the government of the resources that it needs to effectively 
prevent, investigate and prosecute labor abuse. The closure of large 
garment factories places significant demands upon the local government, 
and simultaneously causes the government to lose revenues that it 
desperately needs to meet those demands and all of its other 
obligations. This mutually reinforcing negative cycle illustrates that 
while the departure of the garment industry may be in the long-term 
best interests of the CNMI, an immediate, abrupt departure is not. 
Change is necessary, but we should be wary of exacerbating a situation 
that is already fraught with peril.
    In addition to these concerns, we remain troubled by the serious 
structural imbalances in the CNMI economy and in CNMI society. The CNMI 
remains a two-tier economy where the private sector is overly reliant 
on foreign employees, and where the indigenous population is overly 
reliant on the public sector for employment. Because of the unique 
economic structure of the CNMI and the fact that approximately 50% of 
the residents are foreign employees, the ability to import labor is a 
factor that tends to depress wages in the private sector, which in turn 
tends to reinforce the reluctance of U.S. citizens to work outside of 
the public sector. There have been attempts to address this unique 
structural problem through local legislation, but the problem persists.
    Additionally, having a large alien work force with little economic 
power and relatively limited legal rights has created a great risk of 
exploitation and abuse in the CNMI. As noted above, the CNMI has made 
commendable progress over the last several years in curbing labor 
abuse. Our experience tells us, however, that excessive reliance within 
the CNMI on a foreign, low-wage work force creates a risk of abuse. 
That risk could be overcome with a high level of effort, vigilance and 
resources, but it would probably be difficult to sustain such efforts 
under the CNMI's current fiscal and economic conditions. Perhaps we 
would not all have to work so hard to prevent abuse if the structure of 
the CNMI's economy did not give rise to such risks. And eliminating the 
most overt forms of abuse will not necessarily eliminate subtler forms 
of exploitation that arise when foreign employees have little power and 
a great deal to lose if they assert even the limited rights they have.
    Mr. Chairman, I call to your attention the unique situation of the 
long-term foreign employees that have become an integral part of CNMI 
society. A number of foreign employees have been working in the CNMI 
for five, ten, fifteen or more years. Many are raising children in the 
CNMI, and their children are U.S. citizens. These employees were 
invited to come to the CNMI because they were needed, they came and 
have stayed legally, and they have contributed much to the community. 
They were essential in building the CNMI economy from the ground up 
from what it was at the inception of the Commonwealth: a rural economy 
with little industry, tourism or other commercial activity. Long-term 
foreign employees are integrated into all levels of the CNMI's 
workforce and society, serving as doctors, nurses, journalists, 
business managers, engineers, architects, service industry employees, 
housekeepers, farmers, construction workers, and in countless other 
occupations. I hope that the Committee and the CNMI Government will 
keep the situation of these long-term members of the CNMI community in 
mind as they consider reforms to the CNMI's immigration system.
    We stress, Mr. Chairman, that the CNMI's situation is unique, and 
that our discussion of the CNMI should not be extrapolated to draw 
observations about other economies, including that of the U.S. as a 
whole. The CNMI's proportional reliance on foreign labor is 
overwhelming when compared to that of many other economies, including 
the U.S.'s economy as a whole; foreign employees constitute 
approximately half of the CNMI's population. The CNMI also has the 
ability to admit foreign employees from low-wage economies in the 
region without being subject to Federal laws designed to protect 
opportunities for the U.S. workforce. The sheer scope and scale of the 
foreign labor situation in the CNMI make the CNMI a special case.
    The question, Mr. Chairman, is not whether the CNMI's current 
economic structure is a good one. It is not. The question is how to 
help the people of the CNMI build a strong, prosperous and just society 
without causing needless pain and suffering to innocent people--
including the foreign employees--in the transition. The Administration 
is committed to working with Congress and with the CNMI's 
representatives to establish a framework that will allow the people of 
the CNMI to build such a society. We are ready to explore with you and 
with the CNMI's representatives various options for establishing such a 
framework, including federalizing the CNMI's immigration system in a 
manner that would not cause needless economic or fiscal harm. Since 
federalization would constitute a paradigm shift from the current 
system, we believe that various options for federalization should be 
considered carefully in order to avoid unintended consequences. We 
would respectfully offer the following as suggested principles to guide 
any discussion of federalization:
    First, we must ensure that national security and homeland security 
issues are properly addressed. In a post-9/11 world, this principle 
must take priority over all others. Any proposal should be fully vetted 
by the experts at the Departments of Homeland Security, State, and 
Justice to ensure that it provides adequate protections for the CNMI 
and for the rest of the U.S.
    The second principle is that, subject to the need to address 
compelling national security and homeland security concerns, we should 
minimize damage to the CNMI economy and maximize the potential for 
future economic growth. We must recognize that the CNMI is in a very 
fragile economic and fiscal condition. The Federal Government must make 
every effort to avoid imposing measures that could plunge the CNMI even 
deeper into crisis. The cash-strapped local government, which is 
struggling to absorb sharp decreases in revenues, is already unable to 
provide critical services such as water and power in a reliable 
fashion. If the current crisis is exacerbated, it could endanger the 
health, safety and welfare of innocent people, threaten the public 
order, and leave large numbers of foreign workers jobless and stranded.
    Once the CNMI gets through the current crisis, it will have to 
build a sustainable economic future. This is probably an opportune 
moment in the CNMI's history for the people of the CNMI to engage in a 
facilitated process to develop a homegrown strategic plan for its 
economic future. The process should involve all segments of society, 
and the ultimate product should be one that the large majority of the 
community is willing to buy in to. If the CNMI were to embark on such a 
process, there would not necessarily be a need for Congress to delay 
its effort to establish a framework for a new immigration system. We 
would suggest that Congress build sufficient flexibility into that 
framework, however, so that the CNMI's vision for its future could be 
duly considered and, to the extent possible, accommodated when it is 
ready.
    Regardless of whether such a strategic planning process occurs or 
what it produces, we should recognize that the CNMI's unique 
circumstances should be taken into account. By controlling its own 
immigration system, the CNMI enjoys a competitive access advantage--in 
other words, it has the ability to make it easier for certain classes 
of visitors to enter the CNMI than to enter the rest of the U.S. This 
competitive access advantage enabled the CNMI to reach out to other 
tourist markets after it lost a significant share of its Japanese 
market. It has also allowed the CNMI to consider legitimate economic 
opportunities that might arise from admitting students, retirees, 
investors and others who might not have easy access to the rest of the 
U.S. If the CNMI were to lose its competitive access advantage with 
respect to legitimate foreign visitors, it would significantly restrict 
the already limited range of options that the CNMI has to build a 
viable economy.
    As part of the bargain through which the CNMI currently retains the 
flexibility to control its own immigration system, the U.S. seeks to 
insulate itself from the impact of CNMI immigration decisions by 
maintaining a ``second firewall'' between the CNMI and the rest of the 
U.S. Aliens seeking admission to the CNMI must be processed and 
inspected through CNMI immigration procedures, which could be thought 
of as the ``first firewall.'' Admission to the CNMI confers no right of 
admission to the rest of the U.S. Aliens seeking to travel from the 
CNMI to the rest of the U.S. must apply separately for admission to the 
U.S., and all persons traveling from the CNMI to the rest of the U.S. 
are inspected as if they were arriving from a foreign country (the 
``second firewall''). While DHS has statutory authority to inspect and 
determine the admissibility of aliens proceeding from all insular 
territories to the remainder of the United States, including those 
territories governed by U.S. immigration law, the ``second firewall'' 
authority is broader and more significant in the case of a territory 
like the CNMI which operates its own immigration system.
    Even under an immigration system administered by the Federal 
Government, the law could provide greater flexibility to admit foreign 
visitors to the CNMI than is currently allowed under the Immigration 
and Nationality Act. This greater flexibility could be justified by the 
fact that the CNMI's economic viability is arguably dependent upon 
having it. As with the current system, the U.S. could seek to insulate 
itself from any impact to the rest of the U.S. from granting greater 
flexibility to the CNMI by maintaining the ``second firewall'' between 
the CNMI and the rest of the U.S. Under such a scenario, aliens 
entering the CNMI after qualifying for special visas or visa waivers 
would have to qualify separately for admission to the rest of the U.S., 
and all persons traveling from the CNMI to the rest of the U.S. would 
continue to be inspected as if they were arriving from a foreign 
country.
    We raise these ideas not as concrete proposals, but as discussion 
items that Congress, the Administration and the CNMI government could 
explore together. The underlying point here is that for the CNMI to 
build a viable new economy, it will likely need to remain readily 
accessible not only to a reasonable number of workers, but, more 
importantly, to customers such as tourists and students. Achieving this 
objective may require some degree of flexibility and creativity.
    The third principle is that we must ensure that the new CNMI 
economy is not as conducive to worker exploitation and abuse as was the 
old CNMI economy. Since the CNMI has a very limited indigenous labor 
pool, it is reasonable for its economy to rely to some degree on 
foreign workers. But the mistakes of the past must not be repeated, 
with a large class of politically powerless foreign employees 
populating the lower tier of a two-tier CNMI economy, regulated by a 
government without adequate resources to prevent exploitative 
practices.
    The fourth principle is that we should carefully analyze the likely 
impact of major proposals before we implement them. Just as we would 
not perform major surgery on a patient without first performing a 
detailed diagnosis and medical analysis, and just as we do not build 
even schools or hospitals without conducting an environmental analysis 
or impact study, neither should be attempt to perform major surgery on 
the CNMI's economy and society without first analyzing the likely 
impact. Labeling our efforts as ``reform'' does not relieve us of the 
responsibility to carefully consider the potential consequences of our 
actions before we take them. This is especially true when we are 
dealing with an economy and society that is as fragile and potentially 
volatile as that of the CNMI. If we leap before we look, we could 
inadvertently and needlessly hurt people that we are trying to help. We 
should, however, be expeditious in our analysis, and not use the need 
to study as an excuse to delay. The people of the CNMI are eager to get 
on with their future.
    The fifth and final principle is that we must ensure that the 
people of the CNMI participate fully in decisions that will affect 
their future. A better future for the people of the CNMI cannot be 
imposed unilaterally from Washington, D.C., ignoring the insights, 
wisdom and aspirations of those to whom this future belongs.
    Mr. Chairman, three years ago this month, I testified on behalf of 
the Bush Administration before the House Committee on Resources in 
favor of granting the CNMI a non-voting delegate to the U.S. House of 
Representatives. In my testimony, I spoke of the courageous military 
service to two Chamorros: Captain James Pangelinan, who served with the 
25th Infantry Division in the Sunni Triangle and has since been 
promoted to Major, and Specialist Monique Sablan, who was seriously 
wounded in Iraq while serving with the 101st Army Airborne Division. If 
I may, Mr. Chairman, I would like to read a short passage from my 
testimony from three years ago:

          Capt. Pangelinan and Specialist Sablan have put their lives 
        on the line so that the people of Iraq can achieve the dream of 
        a democracy, in which every community is represented in an 
        elected national government. Other servicemen and servicewomen 
        from the CNMI are fighting so that the people of Afghanistan 
        can achieve the same dream.
          . . .[T]hese brave young men and women from Saipan, from 
        Tinian, from Rota, have the same dream for themselves as they 
        do for the peoples of Iraq and Afghanistan. They dream of being 
        represented in the national legislature of their country, the 
        country whose uniform they proudly wear, the country that they 
        proudly defend. They dream that they will one day have the 
        representation that has been afforded to every other state, 
        territory and commonwealth in the American family.

    Mr. Chairman, since I delivered that testimony, I have attended the 
funeral of Army Sergeant Wilgene Lieto in Tanapag, of Army Specialist 
Derence Jack in Chalan Kanoa, and of Army Sergeant Eddie Chen in 
Arlington National Cemetery. Just last week, Mr. Chairman, we lost 
Marine Lance Corporal Adam Quitugua Emul of Tanapag, killed in action 
in Iraq. These sons of Saipan died so that the people of Iraq could 
enjoy rights that are still not enjoyed by the loved ones that these 
brave young men have left behind.
    Before considering legislation that would drastically change the 
lives of the people of the CNMI, we hope that Congress will consider 
granting them a seat at the table at which their fate will be decided.
    Thank you.

    The Chairman. Thank you very much. Why don't hear from Ms. 
Franzel?

     STATEMENT OF JEANETTE M. FRANZEL, DIRECTOR, FINANCIAL 
   MANAGEMENT AND ASSURANCE, GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Franzel. Thank you Mr. Chairman. I'm pleased to be here 
today to discuss our December 2006 report on the U.S. Insular 
areas. My comments today will highlight information from our 
report but specifically focus on CNMI's current economic 
challenges, its weakened fiscal condition and its financial 
accountability issues. We have updated the information from our 
December report to include information for fiscal years 2005 
and 2006. Overall we have concluded that the government of CNMI 
does face serious economic, fiscal and accountability 
challenges.
    First I will discuss CNMI's economic challenges. As we've 
heard CNMI's economy is highly dependent on two industries: 
garment manufacturing and tourism. The garment manufacturing 
industry has suffered a significant decline in the past few 
years. As of last summer 10 of CNMI's 27 garment factories had 
closed. U.S. Commerce status showed that the value of CNMI's 
shipments of garments to the U.S. markets dropped by almost 40 
percent from 2004 to 2006. CNMI's tourism sector sharply 
declined in the late 1990's and has not recovered since then. 
This decline is attributed to a series of external events 
including economic trends in nearby countries and changes in 
airline routes.
    The economic factors I just described have a significant 
impact on the CNMI government's fiscal condition which has 
steadily weakened from 2001 to 2005. One of the financial 
indicators that we've looked at is CNMI's fund balance, which 
generally reflects amounts of resources available for 
government spending and operations. CNMI's fund balance went 
into deficit balance in 2002 and has steadily declined since 
then to a deficit of $84 million dollars in 2005. In order to 
finance its activities in an environment where expenditures 
have been exceeding revenues, CNMI has increased its debt and 
has stopped making required payments to its pension plan. 
Although CNMI's 2006 audited financial data is not yet 
available there are several indicators pointing to a severe 
fiscal crisis during fiscal year 2006 and this is indicating a 
need for long-term solutions. The CNMI government has 
implemented several drastic cost cutting and restructuring 
measures in fiscal 2006. For instance it has enacted austerity 
holidays which basically consist of bi-weekly unpaid furloughs 
for government workers during which many government operations 
are shut down. This is to save money on personnel and operating 
costs. Legislation was also enacted to authorize the government 
to suspend its contributions to the retirement fund for the 
remainder of fiscal 2006 and 2007 due to severe cash-flow 
problems. Again this is a short-term measure that's going to 
need a long-term solution. Several other restructuring and 
reforms were also enacted during 2006.
    Finally, I'd like to briefly discuss CNMI's ongoing 
accountability challenges. The government of CNMI has had long-
standing financial accountability problems including the 
inability to achieve clean audit opinions on its financial 
statements and numerous other internal control and compliance 
weaknesses. CNMI has made some progress but really needs to get 
to the point where reliable financial information is readily 
available and it can pass a financial audit. This is especially 
important during difficult fiscal conditions when difficult 
decisions need to be made, spending needs to be closely 
monitored and this type of information is needed on a daily 
basis for ongoing decisions and reforms.
    Before concluding I'd like to briefly summarize some of the 
recommendations from our 2006 report. Our recommendations were 
addressed to Department of Interior's Office of Insular Affairs 
which plays a key role in helping CNMI and other insular areas 
to attract potential investors and businesses and in monitoring 
and addressing accountability issues and other emerging issues. 
Our recommendations were geared toward increasing the 
effectiveness of assistance being provided to CNMI and included 
formal evaluation of efforts to attract businesses to the 
insular areas, formalizing the framework used by OIA for site 
visits and for monitoring issues in CNMI and closer monitoring 
of progress in resolving some of the accountability issues that 
currently exist. OIA has agreed with our recommendations and 
pointed out areas where it was already taking steps in these 
areas.
    In summary, strong leadership is needed to address CNMI's 
serious economic, fiscal, and accountability challenges and to 
achieve long-term stability and prosperity. The CNMI government 
needs to continue to work toward sustainable solutions and OIA 
in response to our recent report expressed its commitment to 
monitoring and assisting CNMI and the other insular areas in 
promoting economic development and in improving financial 
management and accountability. Mr. Chairman this concludes my 
statement. I will be pleased to respond to any questions you or 
the other members of the committee have.
    [The prepared statement of Ms. Franzel follows:]
    Prepared Statement of Jeanette M. Franzel, Director, Financial 
       Management and Assurance, Government Accountability Office
commonwealth of the northern mariana islands: serious economic, fiscal, 
                     and accountability challenges
                             gao highlights
Why GAO Did This Study
    The U.S. insular area of the Commonwealth of the Northern Mariana 
Islands (CNMI) is a self-governing commonwealth of the United States 
that comprises 14 islands in the North Pacific.
    In a December 2006 report--U.S. Insular Areas: Economic, Fiscal, 
and Financial Accountability Challenges (GAO-07-119)--regarding four 
insular areas including CNMI, GAO identified and reported the 
following: (1) economic challenges, including the effect of changing 
tax and trade laws on heir economies; (2) fiscal condition; and (3) 
financial accountability, including compliance with the Single Audit 
Act.
    The Chairman of the Senate Committee on Energy and Natural 
Resources, which requested the December 2006 report, asked GAO to 
present and discuss the results as they pertain to CNMI. Our summary 
and conclusions are based on our work performed for our December 2006 
report on U.S. insular areas. For this testimony we also had available 
CNMI's fiscal year 2005 audited financial statements, which we have 
included in our review, along with some recent developments in fiscal 
year 2006.
What GAO Found
    The Commonwealth of the Northern Mariana Islands (CNMI) faces 
serious economic, fiscal, and financial accountability challenges. 
CNMI's economy depends heavily on two industries, garment manufacturing 
and tourism. However, recent changes in U.S. trade law have increased 
foreign competition for CNMI?s garment industry, while other external 
events have negatively affected its tourism sector.
    CNMI's garment industry has declined in recent years with factory 
closings and reduced production. The value of garment shipments to the 
United States dropped by more than 16 percent between 2004 and 2005 and 
by an estimated 25 percent in 2006.
    Tourism in CNMI declined sharply in the late 1990's as a result of 
a series of external events, including the Asian financial crisis; 
cancellation of Korean Air service; and fears of international crises 
such as the SARS epidemic, terrorism, and the Iraq war. In 2005, Japan 
Airlines withdrew direct flights to the capital.
    The fiscal condition of CNMI's government has steadily weakened 
from fiscal year 2001 through fiscal year 2005, as government spending 
has exceeded revenues each year since 2002. CNMI ended fiscal year 2005 
with a deficit of $84.1 million in its governmental fund balance. 
CNMI's liabilities also exceed its assets for its primary government. 
Indicators point to a severe financial crisis in fiscal year 2006. In 
response, the CNMI government has implemented cost-cutting and 
restructuring measures, including ``austerity holidays,'' consisting of 
biweekly furloughs during which government workers are not paid and 
many government operations are closed to reduce personnel and operating 
costs.
    CNMI's long-standing financial accountability problems include the 
late submission of financial audit reports, inability to achieve 
``clean'' opinions in its financial statements by the independent 
financial auditors, and reports showing serious internal control 
weaknesses over financial reporting. Many of the auditors' findings are 
longstanding, going back in some cases to 1987.
    Federal agencies and CNMI have sponsored and participated in 
conferences, training sessions, technical assistance, and other 
programs to improve CNMI's economy, fiscal condition, and 
accountability. During 2006, the CNMI government took steps to reverse 
its prior patterns of deficit spending. It will need to continue to 
work toward long-term sustainable solutions, with concentrated 
attention on the challenges facing the islands and feedback mechanisms 
for continuing improvement. Leadership on the part of the CNMI 
government and the Department of the Interior's Office of Insular 
Affairs is critical to providing long-term stability and prosperity for 
this U.S. insular area.
    Mr. Chairman and Members of the Committee: I am pleased to be here 
today to discuss the Commonwealth of the Northern Mariana Islands' 
(CNMI) serious challenges in strengthening its economy, fiscal 
condition, and financial accountability. CNMI is a self-governing 
commonwealth of the United States that administers its own local 
government functions under its own constitution. CNMI consists of 14 
islands in the North Pacific with a total land area about 2.5 times the 
size of Washington, D.C. In recent years, CNMI has experienced serious 
economic and fiscal challenges, and several indicators point to a 
fiscal crisis in fiscal year 2006.
    Today, I will highlight our December 2006 report\1\ on the recent 
economic trends in the CNMI economy, its weakening fiscal condition, 
and its financial accountability challenges, which we have updated to 
include information for fiscal years 2005 and 2006.
---------------------------------------------------------------------------
    \1\ GAO, U.S. Insular Areas: Economic, Fiscal, and Financial 
Accountability Challenges, GAO-07-119 (Washington, D.C.: Dec. 12, 
2006). CNMI is one of the subjects of this report.
---------------------------------------------------------------------------
    Our summary and conclusions are based on our work performed for our 
December 2006 report on U.S. insular areas, which included audited 
financial statements through fiscal year 2004. For this testimony we 
also had available CNMI's fiscal year 2005 audited financial 
statements, which we have included in our review, along with some 
recent developments in fiscal year 2006. We provided a draft of this 
statement to Department of the Interior (DOI) officials who agreed with 
our conclusions and provided technical comments, which we have 
incorporated throughout the statement as appropriate. We conducted our 
work in accordance with generally accepted government auditing 
standards.
                                summary
    The government of CNMI faces serious economic, fiscal, and 
financial accountability challenges. The government's ability to 
strengthen CNMI's economy has been constrained by CNMI's lack of 
diversification in industries. CNMI's economy is highly dependent on 
two industries: garment manufacturing and tourism. The garment 
manufacturing industry is facing the challenges of remaining 
internationally competitive against low-wage nations given recent 
changes in trade agreements. CNMI's tourism sector experienced a sharp 
decline in the late 1990s, and a series of external events, such as the 
economic trends of nearby countries and changes in airline practices, 
have further hampered the sector. Both the garment and tourism 
industries employ non-citizen workers who are paid wages lower than the 
U.S. minimum wage.
    The fiscal condition of CNMI's government has steadily weakened 
from fiscal year 2001 through fiscal year 2005, the most recent year 
for which audited financial statements for CNMI were available. CNMI's 
fund balance, which generally reflects the amount of resources 
available for current government operations, went into a deficit 
balance during fiscal year 2002 and continued to decline to a deficit 
balance of $84.1 million by the end of fiscal year 2005. CNMI has also 
shown significant declines and negative balances in its reported net 
assets, which is another measure of fiscal health, and which represents 
the balance of total assets less liabilities. In order to finance its 
government activities in an environment where expenditures have 
exceeded revenues, CNMI has increased its debt, causing its debt to 
asset ratio to increase significantly since fiscal year 2002. In 
addition, several indicators point to a severe fiscal crisis during 
fiscal year 2006. The CNMI government has implemented several drastic 
cost-cutting and restructuring measures, including ``austerity 
holidays'' consisting of biweekly furloughs, during which government 
workers are not paid and many government operations are closed to 
reduce personnel and operating costs during fiscal years 2006 and 2007. 
In addition, other measures were passed, including restructuring of 
payments to the retirement plan and reforming the rate of compensation 
for boards and commissions.
    The government of CNMI has long-standing financial accountability 
problems, including the inability to achieve unqualified (``clean'') 
audit opinions on its financial statements, and numerous, long-standing 
material weaknesses in internal control over financial reporting and 
compliance with laws and regulations governing federal grant awards. 
CNMI received $65.6 million in federal grants in fiscal year 2005, and 
its audited financial statements are used by federal agencies for 
overseeing and monitoring the use of federal grants. Progress has been 
made by CNMI concerning the timely submission of its audit reports. 
Specifically, for fiscal year 2004, CNMI's audited financial statements 
were 22 months late compared with 1 month late for its fiscal year 2005 
submission. However, given CNMI's continued inability to achieve clean 
opinions on its financial statements and the continuing material 
internal control weaknesses over financial reporting, there is limited 
accountability over federal grants to this insular area. Furthermore, 
the lack of timely and reliable financial information hampers CNMI's 
ability to monitor programs and the reliability of financial 
information, such as revenues and expenditures, in order to make 
informed decisions.
    The DOI's Office of Insular Affairs\2\ (OIA) has ongoing efforts to 
support economic development in CNMI and assist CNMI in addressing its 
accountability issues. To help diversify and strengthen the insular 
area economies (including CNMI), OIA has programs aimed at attracting 
American businesses to the insular areas. However, the effectiveness of 
these conferences and business opportunity missions is uncertain due to 
the lack of formal evaluation of these efforts. In addition, DOI's OIA 
and Inspector General (IG), along with other federal IGs, oversee 
CNMI's efforts to improve its financial accountability. OIA monitors 
the progress of completion and issuance of audit reports and provides 
general technical assistance funds to train insular area employees and 
enhance financial management systems and processes. Yet, progress has 
been slow and inconsistent. A focused effort is called for where direct 
and targeted attention is concentrated on the challenges facing CNMI to 
help CNMI achieve economic and fiscal stability. OIA plays a key role 
in this effort by helping CNMI and the other insular areas improve 
their business climates, identify areas of potential for private sector 
investment, and market insular areas to potential investors.
---------------------------------------------------------------------------
    \2\ OIA's mission is to promote sound financial management 
processes, boost economic development, and increase the federal 
government's responsiveness to the unique needs of the insular areas.
---------------------------------------------------------------------------
    Strong leadership is needed to address CNMI's current challenges. 
During 2006, the CNMI government took dramatic steps to reverse prior 
patterns of deficit spending. The CNMI government will need to continue 
to work toward long-term sustainable solutions. In response to our 
recent report, OIA expressed its commitments to continuing its 
comprehensive approach and to implementing other innovative ideas to 
assist CNMI and the other insular areas to continue to improve 
financial management and accountability and to support economic 
development. We are encouraged by OIA's commitment to taking a 
leadership position in assisting CNMI and monitoring CNMI's progress in 
facing its current economic, fiscal, and accountability challenges.
narrow economic base and intrinsic and external factors limit economic 
                            progress in cnmi
    Several factors constrain CNMI's economic potential, including the 
lack of diversification, scarce natural resources, small domestic 
markets, limited infrastructure, and shortages of skilled labor. The 
United States exercises sovereignty over CNMI, and, in general, federal 
laws apply to CNMI.\3\ However, federal minimum wage provisions and 
federal immigration laws do not apply.\4\ CNMI immigration policies and 
the demands for labor by the garment manufacturing industry and tourism 
sector have resulted in rapid population growth since 1980 such that 
the majority of the population are non-U.S. citizens. (See fig. 1.)* 
According to U.S. Census Bureau data for 2000, the most recent census 
data available, about 56 percent of the CNMI population of 69,221 were 
not U.S. citizens.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
    \3\ CNMI is an unincorporated territory to which Congress has 
determined that only selected parts of the U.S. Constitution apply. 
Residents born in CNMI are U.S. citizens and although they have many of 
the rights of citizens of the 50 states, CNMI residents cannot vote in 
national elections and do not have voting representation in Congress.
    \4\ The U.S. House of Representatives and the Senate recently 
passed H.R. 2, ``Fair Minimum Wage Act of 2007,'' which, if enacted, 
would make the federal minimum wage provisions applicable to CNMI with 
a phased-in implementation.
---------------------------------------------------------------------------
    According to U.S. Census Bureau data for 2000, the median household 
income in CNMI was $22,898, a little more than half of the U.S. median 
household income of almost $42,000 for 2000. The percentage of 
individuals in poverty in 2000 was 46 percent, nearly four times the 
continental U.S. rate of 12 percent in that same year.
    CNMI's economy depends on two industries, garment manufacturing and 
tourism, for its employment, production, and exports. These two 
industries rely heavily on a noncitizen workforce. This workforce\5\ 
represents more than three quarters of the labor pool that are subject 
to the CNMI minimum wage, which is lower than the U.S. minimum wage. 
The garment industry, for example, uses textiles and labor imported 
mostly from China. A 1999 study found that garment manufacturing and 
tourism accounted for about 85 percent of CNMI's total economic 
activity and 96 percent of its exports.\6\ A 2005 estimate of CNMI's 
gross domestic product (GDP) suggest that, in 2002, the garment 
industry contributed to roughly 40 percent of CNMI's GDP and 47 percent 
of payroll.\7\ However, recent changes in trade laws have increased 
foreign competition for CNMI's garment industry, while other external 
events have negatively impacted its tourism sector.
---------------------------------------------------------------------------
    \5\ The 2000 U.S. Census shows that noncitizens, predominantly 
Chinese and Filipinos, make up over half of CNMI's population. Almost 
all of these temporary foreign workers came to CNMI after 1990.
    \6\ Business Development Center, Northern Marianas College, An 
Economic Study for the Commonwealth of the Northern Mariana Islands, 
U.S. Department of the Interior, October 1999.
    \7\ See M. Rubin and S. Sawaya, Final Trip Report on Benchmark 
Estimates of 2002 Gross Domestic Product in the Commonwealth of the 
Northern Mariana Islands (Washington, D.C.: U.S. Census Bureau, 2005). 
Many businesses, including the garment factories, are owned and 
operated by foreigners.
---------------------------------------------------------------------------
Decline in Garment Industry Tied to Trade Law Changes
    Recent developments in international trade laws have reduced CNMI's 
trade advantages, and the garment industry has declined in recent 
years. Historically, while garment exporters from other countries faced 
quotas and duties in shipping to the U.S. market, CNMI's garment 
industry benefited from quota-free and duty-free access to U.S. markets 
for shipments of goods in which 50 percent of the value was added in 
CNMI.\8\ In recent years, however, U.S. agreements with other textile-
producing countries have liberalized the textile and apparel trade. For 
example, in January 2005, in accordance with one of the 1994 World 
Trade Organization (WTO) Uruguay Round agreements, the United States 
eliminated quotas on textile and apparel imports from other textile-
producing countries, leaving CNMI's apparel industry to operate under 
stiffer competition, especially from low-wage countries such as 
China.\9\ According to a DOI official, more than 3,800 garment jobs 
were lost between April 2004 and the end of July 2006, with 10 out of 
27 garment factories closing.\10\ U.S. Department of Commerce data show 
that the value of CNMI shipments of garments to the United States 
dropped by more than 16 percent between 2004 and 2005, from about $807 
million to $677 million, and down from a peak of $1 billion in 1998-
2000. In 2006, reported garment exports to the United States fell 
further, by an estimated 25 percent compared to 2005, with exports 
declining to an estimated $497 million. The reported level of shipments 
to the United States in 2006 was comparable to levels of sales in 1995-
1996, prior to the significant build-up of the industry. (See fig. 2.)* 
In December 2006, the largest and oldest garment factory closed. Given 
that the garment industry is significant to CNMI's economy, these 
developments will likely have a negative financial effect on government 
revenue. For example, reported fees collected by the government on 
garment exports fell 37 percent from $38.6 million in 2000 to $24.4 
million in 2005.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
    \8\ According to the U.S. Harmonized Tariff Schedule, certain items 
of which at least 50 percent of the value was added in a U.S. 
possession are eligible for duty-free shipment to the United States.
    \9\ GAO, U.S.-China Trade: Textile Safeguard Procedures Should Be 
Improved, GAO-05-296 (Washington, D.C.: Apr. 4, 2005.)
    \10\ The burden of this job loss on the government may be mitigated 
to some extent by the fact that garment industry workers are almost 
exclusively foreigners on temporary guest visas. Also, data we obtained 
from the U.S. Census Bureau indicate that foreign workers send much of 
their earnings back to their countries of origin in the form of 
remittances; the remainder, which is spent on local goods and services, 
is relatively small, and as a result, has limited effect on local 
economic activity. Remittances were estimated at about $80 million for 
2002, roughly 10 percent of GDP, and at over $100 million in 2005.
---------------------------------------------------------------------------
External Events Affect Tourism
    CNMI's tourism sector experienced a sharp decline in the late 
1990s, and a series of external events have further hampered the 
sector. Tourism became a significant sector of economic activity in 
CNMI by the mid-1980s and continued to grow into the 1990s. Due to its 
proximity to Asia, Asian economic trends and other events have a direct 
effect on CNMI's economy. For example, tourism in CNMI experienced a 
sharp decline in the late 1990s with the Asian financial crisis and due 
to the cancellation of Korean Air service to CNMI following an airplane 
crash on Guam in August 1997. (See fig. 3.)* Visitors from Korea, the 
second largest source of tourists, decreased by 85 percent from 1996 to 
1998. After a modest recovery in 2000, tourism faltered again with the 
September 11, 2001, terrorist attacks on the United States. In 2003, 
according to CNMI officials, tourism slowed--with a double-digit 
decline in arrivals for several months--in reaction to the SARS 
epidemic and to the war in Iraq.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
---------------------------------------------------------------------------
    Tourism in CNMI is also subject to changes in airline practices. 
For example, Japan Airlines (JAL) withdrew its direct flights between 
Tokyo and Saipan in October 2005, raising concerns because roughly 30 
percent of all tourists and 40 percent of Japanese tourists arrive in 
CNMI on JAL flights, according to CNMI and DOI officials. The Marianas 
Visitors Authority's June 2006 data show that the downward trend in 
Japanese arrivals is not being offset by the growth in arrivals from 
other markets such as China and South Korea, with the total number of 
foreign visitors dropping from 43,115 in June 2005 to 38,510 a year 
later.\11\ At the same time, CNMI has experienced increased Chinese 
tourists in recent years, which offer the potential to reenergize the 
industry.
---------------------------------------------------------------------------
    \11\ China Southern Airlines' August 2006 decision to suspend its 
flights from Guangzhou City in China to Saipan in September because of 
low load factor, high fuel costs, and low yield in fares is likely to 
slow the growth of Chinese visitors and hinder CNMI's efforts to 
attract more tourists from China.
---------------------------------------------------------------------------
          cnmi's reported fiscal condition continues to weaken
    The fiscal condition of CNMI's government has steadily weakened 
from fiscal year 2001 through fiscal year 2005, the most recent year 
for which audited financial statements for CNMI were available. In 
addition, several indicators point to a severe financial crisis in 
fiscal year 2006. As shown in figure 4,* CNMI's reported governmental 
fund balance declined from a positive $3.5 million at the beginning of 
fiscal year 2001 to a deficit of $84.1 million by the end of fiscal 
year 2005, as CNMI's expenditures for its governmental activities 
consistently exceeded revenues in each year since fiscal year 2002. 
Most of CNMI's governmental activities, which include basic services 
such as public safety, health care, general administration, streets and 
parks, and security and safety, are reported in its governmental 
activities, or government funds. The fund balance (or deficit) for 
these activities reflects the amount of funds available at the end of 
the year for spending. A significant contributing factor to the gap 
between expenditures and revenues is that actual expenditures have 
exceeded budgeted expenditures each fiscal year during the period 2001 
through 2005.\12\
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
    \12\ The over-expenditure of budget amounts has been recorded as a 
finding in CNMI's single audits since fiscal year 2000.
---------------------------------------------------------------------------
    Another measure of fiscal health is the measure of net assets for 
governmental activities, which represents total assets minus total 
liabilities. As shown in table 1, CNMI has experienced a negative trend 
in its balance of net assets for governmental activities, going from a 
reported positive $40.6 million balance at the end of fiscal year 2001 
to a negative $38 million balance at the end of fiscal year 2005.\13\ 
The primary difference between the fund balance measure and net assets 
is that the net assets include capital assets and long-term 
liabilities, whereas the fund balance figure focuses on assets 
available for current period expenditures and liabilities that are due 
and payable in the current period.
---------------------------------------------------------------------------
    \13\ The net asset amount at September 30, 2005, when compared to 
the fund balance amount as of the same date, includes an additional 
positive balance of $46 million resulting from capital and deferred 
assets of approximately $180.8 million less long-term liabilities of 
$134.8 million.

                                                            Table 1.--CNMI'S FISCAL CONDITION
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Fiscal Years Ending September 30,
                                                 -------------------------------------------------------------------------------------------------------
                                                         2001                 2002                 2003                 2004                 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data:
    Population..................................              71,868              74,003               76,129               78,252               80,362
        Own source revenues.....................         227,709,651         215,650,986          225,412,808          235,754,891          244,183,778
        Federal contributions...................          49,348,134          71,964,627           57,560,034           63,006,595           64,346,950
    Total Revenues..............................        $277,057,785        $287,615,613         $282,972,842         $298,761,486         $308,530,728
    Total Expenditures..........................        $258,177,431        $314,985,333         $303,986,379         $352,488,419         $343,370,293
    Revenues less Expenditures [Surplus/                 $18,880,354        $(27,369,720)        $(21,013,537)        $(53,726,933)        $(34,839,565)
     (Deficit)].................................
    Total net other financing \1\...............          $6,511,003          $3,510,667                   $0          $39,493,350               $7,625
    Governmental funds beginning year balance             $3,540,878     \2\ $19,609,305          $(4,249,748)    \2\ $(35,011,807)        $(49,245,390)
     \3\........................................
    Governmental funds end of year balance......         $17,219,852         $(4,249,748)        $(25,263,285)        $(49,245,390)        $(84,077,330)
    Net Assets, end of year \4\.................         $40,575,181     \5\ $30,760,955          $15,596,170         $(18,656,437)        $(38,131,589)
        Change in net assets....................  ..................         $(9,814,226)        $(15,164,785)        $(34,252,607)        $(19,475,152)
Calculations:
    Federal contributions as a percent of                       17.8                25.0                 20.3                 21.1                 20.9
     revenues...................................
    Government revenue per capita...............              $3,855              $3,887               $3,717               $3,818               $3,839
    Government expenditures per capita..........              $3,592              $4,256               $3,993               $4,505               $4,273
    Government revenue as percent of GDP \6\....  ..................                 .30
    Government expenditures as percent of GDP     ..................                 .33
     \6\........................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source.--GAO analysis of single audit reports covering fiscal years 2001, 2002, 2003, 2004, and 2005. The estimate of GDP, in the amount of
  $946,854,877, came from Final Trip Report on Benchmark Estimates of 2002 Gross Domestic Product in the Commonwealth of the Northern Mariana Islands,
  U.S. Census Bureau, Feb. 11, 2005.
 
Notes.--Financial data in table 1 reflects CNMI's financial statements for its governmental activities, which include most of CNMI's basic services.
  This financial data does not include CNMI's component units, which are legally separate but related to CNMI. This financial data also does not include
  CNMI's fiduciary funds, because those funds cannot be used to finance CNMI operations.
CNMI's audited financial statements received qualified opinions from its external auditors and therefore, these amounts are subject to the limitations
  cited by the auditors in their opinions and to the material internal control weaknesses identified.
 
\1\ Other financing includes transfers in and out of other funds.
\2\ The end-of-year fund balance for the prior fiscal year may not agree with the beginning of year fund balance for the succeeding fiscal year due to
  amounts being restated in subsequent financial statements. We could not readily identify explanations for these restatements because comparative
  information was not always available or disclosures were not made in subsequent financial statements.
\3\ Governmental funds finance most of the basic services provided by the government.
\4\ Net assets are capital assets and other assets, such as cash and receivables, less liabilities.
\5\ The amount reported is the restated amount from the 2003 Single Audit Report, corrected because of excluded and misstated amounts.
\6\ GDP estimates are not available for 2001, 2003, 2004, and 2005.

    In order to finance its government activities in an environment 
where expenditures have exceeded revenues, CNMI has increased its debt 
and has not made the required contributions to its retirement fund. 
CNMI's reported balance of notes and bonds payable has increased from 
$83 million in fiscal year 2002 to $113 million in fiscal year 2005, 
representing an increase of 36 percent. CNMI's balance owed to its 
pension fund has increased from $72 million in 2002 to $120 million in 
2005, representing an increase of 67 percent. CNMI has also been 
incurring penalties on the unpaid liabilities to the pension fund. The 
total amount of assessed penalties was $24 million as of September 30, 
2005.
    As shown in figure 5,* CNMI's reported debt to assets ratio \14\ 
has increased significantly, from 89.8 percent in fiscal year 2002 to 
113.5 percent in 2005. In other words, at the end of fiscal year 2005, 
CNMI owed $1.14 for every $1.00 in assets that it held.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
    \14\ The debt to asset ratio measures the extent to which CNMI had 
funded its assets with debt. The lower the debt percentage, the more 
equity CNMI has in its assets.
---------------------------------------------------------------------------
    Although CNMI's audited fiscal year 2006 financial statements are 
not yet available, indicators point to a severe fiscal crisis during 
fiscal year 2006. In a May 5, 2006 letter to the CNMI Legislative 
leaders, Governor Benigno R. Fitial stated that ``the Commonwealth is 
facing an unsustainable economic emergency . .  . I regret to say that 
the nature and extent of these financial problems are such that there 
is no simple or painless solution.'' CNMI has implemented several 
significant cost-cutting and restructuring measures during fiscal year 
2006. For instance, in August 2006, CNMI enacted its Public Law No. 15-
24 to implement ``austerity holidays'' consisting of bi-weekly 
furloughs, during which government employees are not paid and many 
government operations are closed. This measure was taken to help 
alleviate the financial crisis by saving millions of dollars in both 
personnel and operational costs. The measure declared unpaid holidays 
once per pay period for the remainder of fiscal years 2006 and 2007, 
reducing the government's normal pay period to 72 hours every 2 weeks. 
In June of 2006, CNMI enacted Public Law No. 15-15 to authorize the 
CNMI government to suspend the government's employer contributions to 
the retirement fund for the remainder of fiscal years 2006 and 2007. In 
addition, CNMI has passed laws to restructure loans among its component 
units, reform the rate of compensation for members of boards and 
commissions, increase the governor's authority to reprogram funds, 
extend the date for full funding of the retirement fund's defined 
benefit plan,\15\ and create a defined contribution retirement plan for 
government employees hired on or after January 1, 2007. These measures 
are immediate and dramatic, and are indicative of severe financial 
problems that will likely call for long-term solutions.
---------------------------------------------------------------------------
    \15\ Based on the actuarial report, dated October 1, 2004, the 
unfunded pension liability was estimated at $552,042,142.
---------------------------------------------------------------------------
              cnmi's financial accountability remains weak
    CNMI has had long-standing financial accountability problems, 
including the late issuance of its single audit reports, the inability 
to achieve unqualified (``clean'') audit opinions on its financial 
statements, and numerous material weaknesses in internal controls over 
financial operations and compliance with laws and regulations governing 
federal grant awards.
CNMI's Compliance with Single Audit Requirements
    CNMI received a reported $65.6 million in federal grants in fiscal 
year 2005 from a number of federal agencies. The five largest federal 
grantors in 2005 for CNMI included the Departments of Agriculture, 
Health and Human Services, Interior, Homeland Security, and Labor. As a 
nonfederal entity expending more than $500,000 a year in federal 
awards, CNMI is required to submit a single audit report each year to 
comply with the Single Audit Act, as amended. \16\ Single audits are 
audits of the recipient organization--the government in the case of 
CNMI--that focus on the recipient's financial statements, internal 
controls,\17\ and compliance with laws and regulations governing 
federal grants. \18\ One of the objectives of the act is to promote 
sound financial management, including effective internal controls, with 
respect to federal expenditures of the recipient organization. Single 
audits also provide key information about the federal grantee's 
financial management and reporting and are an important control used by 
federal agencies for overseeing and monitoring the use of federal 
grants.
---------------------------------------------------------------------------
    \16\ 31 U.S.C. Chp. 75.
    \17\ Internal control is an integral component of an organization's 
management that provides reasonable assurance that the following 
objectives are being achieved--effectiveness and efficiency of 
operations, reliability of financial reporting, and compliance with 
applicable laws and regulations. Internal control also serves as the 
first line of defense in safeguarding assets and preventing and 
detecting errors and fraud.
    \18\ Office of Management and Budget (OMB) Circular No. A-133, 
Audits of States, Local Governments, and Non-Profit Organizations, 
establishes policies for federal agencies to use in implementing the 
Single Audit Act and provides an administrative foundation for 
consistent and uniform audit requirements for nonfederal entities 
administering federal awards.
---------------------------------------------------------------------------
    For fiscal years 1997 through 2005, CNMI did not submit its single 
audit reports by the due date, which is generally no later than 9 
months after the fiscal year end. \19\ CNMI's late submission of single 
audit reports means that the federal agencies overseeing federal grants 
to CNMI did not have current audited information about CNMI's use of 
federal grant funds. As shown in table 2, CNMI's single audit 
submissions were significantly late for fiscal years 1997 through 2004. 
However, CNMI has made significant progress in 2005 by submitting its 
fiscal year 2005 single audit report less than 1 month late.
---------------------------------------------------------------------------
    \19\ Under the Single Audit Act, the single audit reporting package 
is generally required to be submitted to the Federal Audit 
Clearinghouse either 30 days after the receipt of the auditor's report 
or 9 months after the end of the period under audit.

            Table 2.--REPORTED SINGLE AUDIT ACT REPORT SUBMISSIONS FOR FISCAL YEARS 1997 THROUGH 2005
----------------------------------------------------------------------------------------------------------------
                                           Date single audit report    Date single audit report      Number of
             Fiscal Year End                          due                      received           months late\1\
----------------------------------------------------------------------------------------------------------------
09/30/1997..............................  10/31/1998................  12/28/1999................              14
09/30/1998..............................  10/31/1999................  12/28/1999................               2
09/30/1999..............................  06/30/2000................  10/19/2000................               4
09/30/2000..............................  06/30/2001................  10/17/2002................              16
09/30/2001..............................  06/30/2002................  06/06/2003................              11
09/30/2002..............................  06/30/2003................  08/09/2004................              13
09/30/2003..............................  06/30/2004................  07/06/2005................              12
09/30/2004..............................  \2\ 06/30/2005............  04/17/2006................              22
09/30/2005..............................  06/30/2006................  07/19/2006................               1
----------------------------------------------------------------------------------------------------------------
Source.--Auditors' reports, Federal Audit Clearinghouse, and GAO analysis.
 
\1\ Calculated based on the submission form date without regard to extensions granted to CNMI. The form date is
  the date the Federal Audit Clearinghouse receives the required single audit form certifying that the audit has
  been performed and summarizing its findings.
\2\ CNMI received an extension until February 28, 2006 for submission of the fiscal year 2004 single audit
  report.

CNMI Unable to Achieve ``Clean'' Audit Opinions Due to Persistent, 
        Significant Weaknesses
    Auditors are required by OMB Circular No. A-133 to provide opinions 
(or disclaimers of opinion, as appropriate) as to whether the (1) 
financial statements are presented fairly in all material respects in 
conformity with generally accepted accounting principles (GAAP) and (2) 
auditee complied with laws, regulations, and the provisions of 
contracts or grant agreements that could have a direct and material 
effect on each major federal program.
    The CNMI government has been unable to achieve unqualified 
(``clean'') \20\ audit opinions on its financial statements, receiving 
qualified opinions on the financial statements issued for fiscal years 
1997 through 2005. Auditors render a qualified opinion when they 
identify one or more specific matters that affect the fair presentation 
of the financial statements. The effect of the auditors' qualified 
opinion can be significant enough to reduce the usefulness and 
reliability of CNMI's financial statements.
---------------------------------------------------------------------------
    \20\ Auditors express an unqualified (``clean'') opinion on 
financial statements when they have determined, based on sufficient 
review work, that the financial statements are presented fairly in all 
material respects, in accordance with generally accepted accounting 
principles.
---------------------------------------------------------------------------
    CNMI has made some progress in addressing the matters that resulted 
in the qualified opinions on its financial statements for fiscal years 
2001 through 2003. However, some of the issues continued to exist in 
2004 and 2005. The auditors identified the following issues in fiscal 
year 2005 that resulted in the most recent qualified audit opinion: (1) 
inadequacies in the accounting records regarding taxes receivable, 
advances, accounts payable, tax rebates payable, other liabilities and 
accruals, and the reserve for continuing appropriations, (2) 
inadequacies in accounting records and internal controls regarding the 
capital assets of the Northern Marianas College, and (3) the lack of 
audited financial statements for the Commonwealth Utilities 
Corporation, which represents a significant component unit of CNMI.
    Auditors for CNMI also rendered qualified opinions on CNMI's 
compliance with the requirements for major federal award programs from 
1997 through 2005. In fiscal year 2005, the auditors cited 
noncompliance in the areas of allowable costs, cash management, 
eligibility, property management, procurement, and other requirements.
Weaknesses over Financial Reporting and Compliance with Requirements 
        for Major Federal Programs
    CNMI has long-standing and significant internal control weaknesses 
over financial reporting and compliance with requirements for federal 
grants. Table 3 shows the number of material weaknesses and reportable 
conditions for CNMI for fiscal years 2001 through 2005. The large 
number and the significance of reported internal control weaknesses 
raise serious questions about the integrity and reliability of CNMI's 
financial statements and its compliance with requirements of major 
federal programs. Furthermore, the lack of reliable financial 
information hampers CNMI's ability to monitor programs and financial 
information such as revenues and expenses and to make timely, informed 
decisions.

      Table 3.--REPORTED WEAKNESSES IDENTIFIED IN THE AUDITORS' REPORTS FOR FISCAL YEARS 2001 THROUGH 2005
----------------------------------------------------------------------------------------------------------------
                                             Internal control over financial      Compliance with requirements
                                               reporting in accordance with     applicable to each major program
                                              government auditing standards        and internal control over
                                             (report on financial statements)   compliance with OMB Circular No.
                Fiscal Year                -----------------------------------  A-133 (report on federal awards)
                                                                              ----------------------------------
                                             Material   Reportable    Total     Material   Reportable
                                            weaknesses  conditions             weaknesses  conditions    Total
----------------------------------------------------------------------------------------------------------------
2001......................................          10           0         10           4          13         17
2002......................................           9           1         10           2          14         16
2003......................................          10           2         12           1          15         16
2004......................................           8           5         13           2          31         33
2005......................................           9           4         13           2          36         38
----------------------------------------------------------------------------------------------------------------
Source.--CNMI single audit reports for fiscal years 2001 through 2005.

    CNMI's 13 internal control reportable conditions \21\ for fiscal 
year 2005, 9 of which were material weaknesses, \22\ indicate a lack of 
sound internal control over financial reporting needed to provide 
adequate assurance that transactions are properly recorded, assets are 
properly safeguarded, and controls are adequate to prevent or detect 
fraud, waste, abuse, and mismanagement. For example, one of the 
material internal control weaknesses that the auditors reported for 
CNMI's government for fiscal year 2005 was the lack of audited fiscal 
year 2005 financial statements of the Commonwealth Utilities 
Corporation (Corporation), a significant component unit of CNMI.\23\ 
Because the Corporation's financial statements were unaudited, the 
auditors could not determine the propriety of account balances 
presented in the financial statements that would affect CNMI's basic 
financial statements. CNMI's auditors also reported other significant 
material internal control weaknesses that have continued from previous 
years, such as improper tracking and lack of support for advances to 
vendors, travel advances to employees, liabilities recorded in the 
General Fund, and tax rebates payable. Due to the lack of detailed 
subsidiary ledgers and other supporting evidence, the auditors could 
not determine the propriety of these account balances. According to the 
auditors, the effect of these weaknesses is a possible misstatement of 
expenditures and related advances and liabilities, which also resulted 
in a qualification of the opinion on the fiscal year 2005 CNMI 
financial statements. Consequently, CNMI's financial statements may not 
be reliable.
---------------------------------------------------------------------------
    \21\ Reportable conditions over financial reporting are matters 
that come to an auditor's attention related to significant deficiencies 
in the design or operation of internal controls that could adversely 
affect the entity's ability to produce financial statements that fairly 
represent the entity's financial condition.
    \22\ Material weaknesses in financial reporting are reportable 
conditions in which the design or operation of internal controls does 
not reduce to a relatively low level the risk that misstatements caused 
by error or fraud--material in relation to the financial statements 
being audited--may occur and not be detected in a timely period by 
employees in the normal course of performing their duties.
    \23\ A component unit is an organization that is not part of the 
primary government activities but for which the nature and significance 
of their relationship with a primary government are such that excluding 
the organization would cause the reporting entity's statements to be 
misleading or incomplete.
---------------------------------------------------------------------------
    As shown in table 3, auditors also reported 38 reportable 
conditions\24\ in CNMI's compliance with requirements for major federal 
programs and the internal controls intended to ensure compliance with 
these requirements. Two of these reportable conditions were considered 
material weaknesses.\25\
---------------------------------------------------------------------------
    \24\ In the context of compliance, reportable conditions are 
matters that come to an auditor's attention related to significant 
deficiencies in the design or operation of internal controls over 
compliance that could adversely affect the entity's ability to operate 
a major federal program within the applicable requirements of laws, 
regulations, contracts, and grants.
    \25\ Material weaknesses in this context are reportable conditions 
in which internal controls do not reduce to a relatively low level the 
risk of noncompliance with applicable requirements of laws, 
regulations, contracts, and grants that would be material to the major 
federal program being audited and undetected in a timely way by 
employees in the normal course of performing their duties.
---------------------------------------------------------------------------
    One of the two material internal control weaknesses affecting 
compliance with federal programs reported for CNMI's government for 
fiscal year 2005 included the failure to record expenditures for the 
Medical Assistance Program when they were incurred. Specifically, the 
auditors identified expenditures in fiscal year 2005 for billings from 
service providers for services rendered in previous years. The effect 
of this weakness is that expenditures reported to the grantor agency, 
the U.S. Department of Health and Human Services, are based on the paid 
date and not, as required, the service date. In addition, actual 
expenditures incurred during the year are not properly recorded and, 
therefore, current year expenditures and unrecorded liabilities are 
understated. The other material weakness affecting compliance related 
to the lack of adherence to established policies and procedures for 
managing and tracking property and equipment purchased with federal 
grant funds. As a result, CNMI's government was not in compliance with 
federal property standards and its own property management policies and 
procedures. The other 36 reportable conditions concerned compliance 
with requirements regarding allowable costs; cash management; 
eligibility; equipment and property management; matching, level of 
effort, and earmarking; procurement and suspensions and debarment; 
reporting; subrecipient monitoring; and special tests and provisions 
that are applicable to CNMI's major federal programs.
    In CNMI's corrective action plan for fiscal year 2005, CNMI 
officials agreed with almost all of the auditors' findings. According 
to its fiscal year 2005 corrective action plan, CNMI is working to get 
a current audit of its component unit, the Commonwealth Utilities 
Corporation. Other planned actions include properly reconciling 
advances to vendors; reviewing travel advance balances and making 
adjustments as needed, including making payroll deductions if expense 
vouchers are not filed timely; implementing procurement receiving 
procedures for prepaid items; making necessary corrections to its 
automated tax system to enable auditors to better review tax returns; 
determining the correct balances for construction projects; 
implementing controls over verifying eligibility for Medicaid and 
restricting access to the related data; and ensuring proper completion 
of inventories. The plan provides that most of the findings will be 
addressed by the end of fiscal year 2007. It is important to note 
however, that many of the auditors' findings, particularly those 
categorized as material weaknesses, are longstanding findings going 
back in some cases to 1987.
  efforts to assist cnmi in its economic and accountability challenges
    OIA has ongoing efforts to support economic development in CNMI and 
assist CNMI in addressing its accountability issues. OIA has in the 
last 3 years sponsored conferences in the United States and business-
opportunity missions in the insular areas to attract American 
businesses to the insular areas. The main goal of these efforts is to 
facilitate interaction and the exchange of information between U.S. 
firms and government and business officials from the insular areas to 
spur new investment in a variety of industries. Innovative projects 
such as setting up a production and mass mailing facility in CNMI aimed 
at the Japanese market are reported to be underway.
    OIA's efforts in helping to create links between the business 
communities in the United States and CNMI are key to helping meet some 
of the economic challenges. In our recent report,\26\ we concluded that 
the insular areas would benefit from formal periodic OIA evaluation of 
its conferences and business-opportunity missions, including 
assessments of the cost and benefit of its activities and the extent to 
which these efforts are creating partnerships with businesses in other 
nations. In our December 2006 report, we recommended that OIA conduct 
such formal periodic evaluations to assess the effect of these 
activities on creating private sector jobs and increasing insular area 
income. OIA agreed with our recommendation.
---------------------------------------------------------------------------
    \26\ GAO-07-119.
---------------------------------------------------------------------------
    DOI's OIA and IG, other federal inspectors general, and local 
auditing authorities assist or oversee CNMI's efforts to improve its 
financial accountability.\27\ OIA monitors the progress of completion 
and issuance of the single audit reports as well as providing general 
technical assistance funds to provide training for insular area 
employees and funds to enhance financial management systems and 
processes. DOI's IG has audit oversight responsibilities for federal 
funds in the insular area.
---------------------------------------------------------------------------
    \27\ Although the insular areas receive grants from many federal 
agencies, one of the grant-making agencies is designated as the 
cognizant agency for purposes of the Single Audit Act. The cognizant 
agencies have specific responsibilities under OMB Circular No. A-133. 
The cognizant agency is usually the agency that provides the 
predominant amount of funding. The cognizant agency for CNMI is DOI.
---------------------------------------------------------------------------
    To promote sound financial management processes in the insular area 
government, OIA has increased its focus on bringing the CNMI government 
into compliance with the Single Audit Act. For example, OIA created an 
incentive for CNMI to comply with the act by stating that an insular 
area cannot receive capital funding unless its government is in 
compliance with the act or has presented a plan, approved by OIA, that 
is designed to bring the government into compliance by a certain date.
    In addition, OIA provides general technical assistance funds for 
training and other direct assistance, such as grants, to help the 
insular area governments comply with the act and to improve their 
financial management systems and environments. The Graduate School of 
the U.S. Department of Agriculture (USDA) has been working with OIA for 
over a decade through its Pacific Islands and Virgin Islands Training 
Initiatives (PITI and VITI) to provide training and technical 
assistance.
    OIA staff members make site visits to CNMI as part of its oversight 
activities. In our December 2006 report, we recommended that OIA 
develop a standardized framework for its site visits to improve the 
effectiveness of its monitoring. We also recommended that OIA develop 
and implement procedures for formal evaluation of progress made by the 
insular areas to resolve accountability findings and set a time frame 
for achieving clean audit opinions. OIA agreed with our recommendations 
and noted that it had already made some progress during fiscal year 
2006. Establishing a routine procedure of documenting the results of 
site visits in a standard framework would help ensure that (1) all 
staff members making site visits are consistent in their focus on 
overall accountability objectives and (2) OIA staff has a mechanism for 
recording and following up on the unique situations facing CNMI.
                              conclusions
    CNMI faces daunting economic, fiscal, and financial accountability 
challenges. CNMI's economic and fiscal conditions are affected by its 
economy's general dependence on two key industries. In addition, 
although progress has been made in improving financial accountability, 
CNMI continues to have serious internal control and accountability 
problems that increase its risk of fraud, waste, abuse, and 
mismanagement.
    Efforts to meet formidable fiscal challenges in CNMI are 
exacerbated by delayed and incomplete financial reporting that does not 
provide officials with the timely and complete information they need 
for effective decision making. Timely and reliable financial 
information is especially important as CNMI continues to take actions 
to deal with its fiscal crisis.
    OIA has ongoing efforts to assist CNMI in addressing its 
accountability issues and to support economic development in CNMI. OIA 
officials monitor CNMI's progress in submitting single audit reports, 
and OIA provides funding to improve financial management. Yet, progress 
has been slow and inconsistent. The benefit to CNMI of past and current 
assistance is unclear. Federal agencies and CNMI have sponsored and 
participated in conferences, training sessions, and other programs to 
improve accountability, but knowing what has and has not been effective 
and drawing the right lessons from this experience is hampered by a 
lack of formal evaluation and data collection.
    Strong leadership is needed for CNMI to weather its current crisis 
and establish a sustainable and prosperous path for the future. During 
2006, the CNMI government took dramatic steps to reverse prior patterns 
of deficit spending. The CNMI government will need to continue to work 
toward long-term sustainable solutions. A focused effort is called for 
in which direct and targeted attention is concentrated on the 
challenges facing CNMI, with feedback mechanisms for continuing 
improvement to help CNMI achieve economic, fiscal, and financial 
stability. OIA plays a key role in this effort. In its comments on our 
December 2006 report, OIA pointed out that it provides ``a crucial 
leadership role and can provide important technical assistance'' to 
help CNMI and the other insular areas improve their business climates, 
identify areas of potential for private sector investment, and market 
insular areas to potential investors. It also noted that improving 
accountability for federal financial assistance for CNMI and other 
insular areas is a major priority. OIA has stated its commitment to 
continuing its comprehensive approach and to implementing other 
innovative ideas to assist CNMI and the other insular areas in 
continuing to improve financial management and accountability. 
Leadership on the part of the CNMI government and OIA is critical to 
addressing the challenges CNMI faces and to providing long-term 
stability and prosperity for this insular area.
    Mr. Chairman and Members of the Committee, this concludes my 
statement. I would be pleased to answer any questions that you and 
other Members of the Committee may have at this time.

    The Chairman. Thank you very much. Before you finish, we've 
taken two of the charts from your report and made large copies 
of them. Could someone bring those a little closer so the 
members of the committee could see them and could you describe 
what those charts say? Are you familiar with these charts?
    Ms. Franzel. Yes, these are in fact included in our written 
statement.
    The Chairman. Right, I know they are, and I just thought it 
would be useful for committee members to understand what the 
charts indicate.
    Ms. Franzel. Certainly. Some of these charts also relate to 
other charts provided in our written statement.
    The first chart shows the growth in CNMI population by 
citizenship with a breakout between non-U.S. citizens, U.S. 
citizens and Chamorro and you'll see the tremendous growth in 
population up until 2000. That trend dovetails with another 
chart that's in our written statement which shows the apparel 
industry growth which I guess we do not have here. You'll see 
the similar rise in the apparel industry growth along with the 
population because the population growth was needed to support 
the garment industry. Our figure in our written statement also 
shows the subsequent decline in the garment industry. 
Unfortunately it is my understanding from the CNMI officials 
and from our own work that we currently don't have an updated 
reliable population figures, but if any of the other witnesses 
have those figures, I'd welcome them to add to this chart.
    The other chart shows government revenues and expenditures. 
You'll see that in 2002 the dotted line, which represents 
expenditures, becomes higher than revenues, which is the dark, 
almost flat line. This chart only goes through 2005. 2006 
numbers were not available to us but the CNMI government is 
reporting that that revenue figure, the strong dark line, has 
in fact taken a large dip in 2006 and again I would welcome any 
further information on that from the other witnesses. The small 
dotted line at the bottom shows the resulting impact of the 
deficit on the fund balance of CNMI which is currently 
negative. That means there are not funds readily available for 
financing government operations and the way that it can be 
negative while financing operations is through the increased 
debt that the CNMI has incurred.
    The Chairman. Thank you very much. Let me now go right 
ahead with testimony from Honorable Pedro Tenorio with the 
Office of the Resident Representative here in Washington. Thank 
you very much for being here.

     STATEMENT OF PEDRO A. TENORIO, OFFICE OF THE RESIDENT 
                         REPRESENTATIVE

    Mr. Tenorio. Thank you Mr. Chairman, Hafa Adai to also the 
members of the committee. Thank you for inviting me to testify. 
Unlike the other territories we do not have a delegate in the 
House and we appreciate your willingness in affording the 
resident representative an opportunity to speak on behalf of 
the people of CNMI.
    Last March, Mr. Chairman, I came before you to testify on 
the state of our financial situation and our economy. 
Unfortunately there has been no improvement in either area and 
the outlook is as gloomy as it was then. With the help of this 
committee we have made progress on amending General Note 3(a) 
and I've also received some of the tax cover over funds owed to 
us by the U.S. Treasury. Thank you for your help. We appreciate 
and look forward to your ongoing support in the Commonwealth.
    I would like to address several policy issues on the 
subject of immigration. Any immigration legislation that is 
implemented without due consideration of existing conditions in 
the CNMI will have a negative effect on our economy. If the 
goal of this committee is to transform CNMI immigration into a 
Federal framework we urge Congress to please proceed carefully. 
Congress must ensure that the outcome is positive and 
beneficial to both sides. I'd first like to provide a 
historical perspective to this discussion. As a member of the 
Marianas Political Status Commission which negotiated the 
Covenant we participated in the discussions that authorize 
local control of immigration. We debated two issues on the 
subject. The first, providing protection to our small 
indigenous population from being overwhelmed by immigrants and 
second, having sufficient work force to develop our economy. At 
the time of our negotiations, tens of thousands of Southeast 
Asian refugees were arriving in Guam under the U.S. immigration 
policy and we were fearful that full implementation of INA 
would allow those and other immigrants to migrate to the CNMI. 
We felt that the early years of our new status should be 
focused on building a stable economy. This concern was shared 
by the United States.
    On the other hand, we recognized that we needed a larger 
level force that we had to fast-track construction of our 
utilities, other public facilities, resort hotels, golf courses 
and others. It was our intent that the need for these workers 
would be temporary. Although some are critical of how we build 
our economy, utilizing local control of immigration, that 
precision does not negate the need for skilled workers that are 
not readily available from elsewhere in the United States or 
its freely-associated partners.
    During the Covenant negotiations we assumed it would be a 
significant U.S. presence in our Islands from a buildup by the 
Department of Defense. We gave up more than 18,000 acres of 
valuable public land for that purpose. We anticipated that the 
military buildup would jump-start our economy and provide a 
long-term stable base for private sector growth and local 
employment. The model we used, we all considered, was Guam. 
That did not happen. Tourism gradually developed but also took 
a toll on our resources and demanded workers and skills not 
available in the local population. Garment manufacturing began 
in Guam but found a home in Saipan.
    In retrospect, we probably should have paid closer 
attention to the demands that that industry placed on our 
resources. Nonetheless, the textile and tourism sectors formed 
the backbone of a private sector and the source of government 
revenues required to provide services to our residents. 
Hindsight is a wonderful gift, but we need to deal with where 
we are now rather than the economy that we anticipated 30 years 
ago when this committee approved the Covenant.
    Mr. Chairman, we're here to participate in the serious 
process with the committee to ensure not simply that additional 
mistakes are not made and that will strengthen our local 
economy. Sometimes in looking at the current problems we forgot 
how much progress has been made. This committee has been 
sensitive over the years to how the territories differ from the 
mainland and each other and how mainland standards don't always 
work in non-contiguous areas. We have been fortunate that this 
committee has had members from both Alaska and Hawaii, areas 
that are non- contiguous and that also have an interest in the 
U.S. Pacific territories and an appreciation of the Pacific 
basin and its promises and problems. For that reason if 
Congress chooses to extend U.S. immigration to the CNMI we will 
need to look to you to craft the provisions that ensure a 
smooth transition and that ensure that the local economy is 
strengthened by your decision.
    I will be proposing a series of CNMI-specific amendments to 
U.S. immigration policy that will allow the CNMI to continue to 
develop its economy. This list is not exhaustive or complete, 
but rather a starting point for further discussions. No. 1, 
Visa Waiver Program; No. 2, special H1 and H2 program outside 
of the U.S. caps; No. 3, special visa provision for existing 
and future foreign investors; No. 4, special guest workers 
programs to meet work force requirements; No. 5, special waiver 
program for its educational centers; and, No. 6, retaining the 
existing CNMI refugee and asylum program. I also want to 
mention, Mr. Chairman, that we want to ensure that indigenous 
population protections from social and political alienations 
are there. Mr. Chairman we acknowledge without question that 
section 503 of the Covenant specifically allows Congress to 
extend the immigration and naturalization laws in the CNMI. 
Furthermore, I respectfully emphasize that section 701 requires 
the United States ``to assist the government of the Northern 
Mariana Islands in its effort to achieve a progressively higher 
standard of living for its people as part of the American 
community and to develop its economic resources needed to meet 
the financial responsibilities of local self government.''
    We look forward to working with you and your committee, Mr. 
Chairman, to successfully merge these two important fundamental 
principles of our political agreement into a new reality for 
the Commonwealth. Through this I respectfully recommend an 
extensive study, deliberations and consultation be included in 
developing this new framework. I recommend that a joint 
congressional, administrative and CNMI study group be formed to 
thoroughly study all aspects of the CNMI's economy, current 
immigration laws, and long-term economic prospects as a crucial 
step in developing a new immigration policy for the CNMI. It 
has taken the CNMI three decades to reach this point in our 
development. Only through careful consideration can we move the 
CNMI toward economic recovery and into an era of prosperity 
while returning to us to a state of self-sufficiency and 
stability that we once enjoyed. Thank you Mr. Chairman, and I 
look forward to your questions.
    [The prepared statement of Mr. Tenorio follows:]
    Prepared Statement of Pedro A. Tenorio, Office of the Resident 
                             Representative
    Hafa Adai, Mr. Chairman, Senator Domenici, and Members of the 
Committee. Thank you for this opportunity to share with you my thoughts 
on issues relating to labor, immigration, law enforcement, and economic 
conditions in the Commonwealth of the Northern Mariana Islands. As you 
know, unlike the other territories, we do not have a Delegate in the 
House, so all of us in the Commonwealth appreciate your courtesy and 
willingness over the years in affording the Resident Representative an 
opportunity to speak on behalf of the United States citizens residing 
almost half way around the world. It was almost a year ago that I came 
before you to testify on the state of the CNMI economy. Unfortunately, 
there has been no improvement in our economic condition, and the 
outlook today is as gloomy as it was then.
    With this Committee's help we have made progress on amending 
General Note 3(a) of the Harmonized Tariff Schedule and have received 
some of the tax cover over funds owed to us by the U.S. Treasury. I 
appreciate your ongoing support and interest in the Commonwealth.
    Today our Lt. Governor and others will be providing you with 
updated information on our economy as well as the status of labor, 
immigration and law enforcement initiatives in the CNMI. I would like 
to address several policy issues that I feel must be considered prior 
to normalizing federal immigration policy in the CNMI.
    Legislation that is developed without due consideration of existing 
socio-economic conditions in the CNMI will have a profound and negative 
effect on our economy. A 1997 U.S. Commission on Immigration Reform 
report stated that ``immediate imposition of all parts of the 
Immigration and Nationality Act would harm the CNMI's economic 
development. Moving a society that has become so dependent on foreign 
contract labor towards a more sustainable economy cannot occur 
overnight.''
    Mr. Chairman those words were true in 1997 and they are even more 
true today. If the goal of this committee is to normalize CNMI 
immigration into a federal framework, we urge Congress to proceed 
carefully as this is a very complicated endeavor. It must be guaranteed 
that comprehensive economic and social statistics reflecting current 
conditions and realities are carefully collected and evaluated so as to 
ensure that the outcome of normalization is positive and beneficial to 
both the CNMI and the federal government.
    I would first like to provide an historical perspective to this 
discussion. As a member of the Marianas Political Status Commission, 
which negotiated the Covenant, I remember first hand the discussions 
that led to the provisions that maintained local control of 
immigration. We debated two issues on the subject: providing protection 
to our small indigenous population from being overwhelmed by immigrants 
and having a sufficient workforce to develop our economy.
    At the time of our negotiations, tens of thousands of Southeast 
Asian refugees were arriving in Guam under U.S. immigration policy, and 
we were fearful that full implementation of the INA would allow those 
and other U.S. immigrants to migrate to the CNMI. We felt that the 
early years of our status as a U.S. Commonwealth should be focused on 
building a stable economy.
    On the other hand we recognized that we needed a larger labor force 
than we had to build our infrastructure, hotels, and other business 
establishments. It was our intent that the need for these workers would 
be temporary. Though some are critical of how we built our economy 
through our local control of immigration, that criticism does not 
negate the need for skilled workers that are not readily available from 
elsewhere in the U.S. or its freely associated partners.
    When the Covenant was being negotiated, all sides assumed there 
would be a significant United States presence in our islands from a 
buildup by the Department of Defense. One of the more difficult issues 
to resolve, but one we were willing to accommodate the United States 
on, was the land requirements that the United States wanted for defense 
purposes, including use of our main harbor area and the most productive 
agriculture lands on Tinian. We all anticipated that the buildup would 
not only jump start our economy as the infrastructure was constructed, 
but would provide a long term stable base for private sector growth in 
small businesses as well as local employment The model we all 
considered was Guam.
    That did not happen and as we continued to develop from the mixed 
subsistence/cash economy under the Trusteeship, the principal source of 
employment became the public sector as we struggled to provide services 
to our residents at mainland standards. Tourism gradually developed, 
but also took a toll on our resources and demanded workers and skills 
not available within the local population. Garment manufacturing began 
in Guam, but found a home in Saipan. In retrospect we probably should 
have paid closer attention to the demands that industry placed on our 
services and also on our resources, but nonetheless, the textile and 
tourism sectors form the backbone of our private sector and the source 
of the revenues our government requires to provide services to our 
residents. Hindsight is a wonderful gift, but we need to deal with 
where we are now rather than with the economy that we anticipated 
thirty years ago when this Committee considered and approved the 
Covenant.
    We are here to participate in a serious process with the Committee 
and the Congress to ensure not simply that additional mistakes are not 
made, but more importantly, what can we do to strengthen our local 
economy. When the Covenant was originally negotiated, as this Committee 
will recall, a provision was included that provided an annual grant for 
operations for our local government. With the assistance of this 
Committee and your support over the years, our economy improved and the 
grant was slowly transformed to eliminate any payments for operations 
and to dedicate the funds exclusively to infrastructure development and 
for replacement of the aging works installed during Japanese Mandate 
and Trust Territory of the Pacific Island government times. As we 
progressed, unlike any other territory, our annual payment began to 
require a local match. I want to emphasize that, we were required to 
provide a local match for appropriations that have no such requirement 
in other areas. Finally, over the past decade, increasingly a portion 
of the annual funding guaranteed under the Covenant has been diverted 
to other areas--for example, approximately $10 million/year goes to 
American Samoa for infrastructure grants with no matching requirement. 
Other portions are diverted to support federal activities, and a 
portion--now about 1/3 has been made available to the CNMI.
    I mention this because sometimes in looking at the current problems 
we forget how much progress has been made since the Covenant first went 
fully into effect only about twenty years ago. This Committee has been 
particularly sensitive over the years to how the territories differ 
from the mainland and in some cases from each other and how mainland 
standards don't always work in non-contiguous areas. We have been 
fortunate over the years that this Committee has had Members from both 
Alaska and Hawaii--areas that are non-contiguous and that also have an 
interest in the Pacific and an appreciation for the Pacific Basin and 
its promises and problems. For that reason, if Congress chooses to 
extend U.S. immigration laws to the CNMI, we will need to look to you 
to craft the provisions that ensure a smooth transition and strengthen 
the local economy.
    I will be proposing a series of CNMI specific amendments to U.S. 
immigration policy which will accomplish this. By no means is this list 
exhaustive or complete, but rather a starting point for further 
discussion.
    First, I request that Congress provide us with our own Visa Waiver 
Program similar yet distinct from Guam's Visa Waiver Program. Much of 
our tourism planning focuses on new markets in China and Russia. 
Several years ago with the assistance of the U.S. State Department, we 
were granted Approved Destination Status by the People's Republic of 
China. That designation and market as well as the Russian market would 
be cut off to us without a visa waiver program.
    Second, as you know we have a very small indigenous labor pool, and 
have turned to guest workers to build our economy. Whether it be for 
doctors, nurses, engineers, cooks, or hotel maids, applying existing H1 
and H2 caps to the CNMI would disrupt our health care system, our 
government and our economy. Therefore I request that special provisions 
be made outside of standard H1 and H2 caps and rules for the CNMI. I 
would mention that when this Committee last considered such 
legislation, provisions were included to expand the pool of available 
workers without exceeding overall U.S. quota limits by allocating 
unclaimed spaces from certain categories and reallocating those to the 
CNMI. It is that type of creative provision I am suggesting to ensure 
an adequate supply of workers for our economy.
    Third, since many of our businesses are owned and operated by 
foreign corporations and were begun under our own immigration rules, I 
am concerned that normalizing immigration might disrupt these 
businesses if they are not grandfathered in to the new system. 
Likewise, as we are trying to attract new investors into the CNMI, I 
fear that the existing cumbersome, slow and overly bureaucratic 
processing system for standard H1 visas would be a deterrent to our 
economic recovery. Therefore, I request that special provisions for 
current and future foreign investors be included in any legislation.
    Fourth, we have been criticized for building our economy on two 
labor intensive industries, i.e. apparel and tourism. To change this we 
will need federal financial assistance and guidance to diversify our 
economic base beyond these two. However, the CNMI's indigenous 
population is still not large enough to provide for an adequately sized 
labor force to support a sustainable economy and will thus greatly 
limit our options to widen our economic base. Therefore, immigration 
policies must be sensitive to the workforce and training needs that 
will arise from a shift in available jobs required by new industries. A 
specifically and carefully designed guest worker program to meet the 
CNMI's workforce requirements must be an integral part of a new 
immigration framework. Again I would note that this Committee was 
particularly sensitive to this issue when you last considered similar 
legislation and Senator Akaka and the Chairman, Senator Murkowski, 
proposed directives to both the Departments of Commerce and Labor to 
help diversify our economy and to train our local population. Those 
provisions, I submit, are worthy of consideration even outside the 
context of immigration policy and converge nicely with efforts that the 
Department of the Interior has undertaken to try to attract businesses 
to the territories.
    Fifth, our proximity to Asia makes the CNMI an excellent location 
to provide specialized training such as English for Asian businessmen 
and students and nursing NCLEX prep classes. We currently provide NCLEX 
prep classes to Asian nurses, who upon passage come to the U.S. to fill 
a void created by a severe nursing shortage. I understand that U.S. 
student visas are now very difficult to acquire. Within a visa waiver 
program, I request that special consideration be granted to the CNMI 
for foreign student visas.
    Sixth, several years ago the CNMI negotiated an MOU with various 
federal agencies to provide for the enforcement of U.S. treaty 
obligations relating to refugees and asylum. Full implementation of the 
INA in regards to refugees and asylum seekers may have adverse 
consequences for both the CNMI and the U.S. Careful study of the 
situation is required and possibly delayed implementation would be 
best.
    Seventh, it was the intent of the Covenant to preserve the Northern 
Marianas for its indigenous people. Too many times in the history of 
the U.S. we have seen indigenous peoples displaced and outnumbered 
leaving them a political and economic minority in their own homeland. I 
caution the committee to be careful in the construction of a new 
immigration framework so as to avoid the political and social 
alienation of the Chamorro and Carolinian peoples.
    In essence, Mr. Chairman, this Committee is embarking on a long and 
difficult voyage. We acknowledge without question that Section 503 of 
the Covenant specifically allows Congress to extend the immigration and 
naturalization laws to the CNMI. Furthermore, I respectfully emphasize 
that Section 701, requires the U.S. to ``assist the Government of the 
Northern Mariana Islands in its efforts to achieve a progressively 
higher standard of living for its people as part of the American 
community and to develop its economic resources . . . ''. We look 
forward to working with your Committee to successfully merge these two 
important fundamental principles of our political agreement into a new 
reality for the Commonwealth.
    To do this I respectfully recommend that extensive study, 
deliberation and consultation be included in developing this new 
framework. I recommend that a joint congressional, administrative, and 
CNMI study group be formed to thoroughly study all aspects of the 
CNMI's economy, current immigration laws, and long term economic 
prospects as a crucial step in developing a new immigration policy for 
the CNMI. It has taken the CNMI three decades to reach this point in 
our development. Only through careful consideration can we move the 
CNMI toward economic recovery and into a new era of prosperity while 
returning us to a state of self sufficiency and stability that we once 
enjoyed. Thank you.

    The Chairman. Thank you very much. Next is the Honorable 
Lieutenant Governor of the Commonwealth, Tim Villagomez. We 
appreciate you being here. Go right ahead.

 STATEMENT OF HON. TIMOTHY P. VILLAGOMEZ, LIEUTENANT GOVERNOR, 
          COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS

    Mr. Villagomez. Thank you, Mr. Chairman, and members of the 
committee, for the opportunity to appear before you today and 
testify on behalf of the people of the Commonwealth of the 
Northern Mariana Islands. Governor Fitial expresses his deep 
regrets as he hoped to attend these hearings personally today, 
but he's still in recovery from two back surgeries in December.
    Mr. Chairman, present with me today are Howard Willens, 
Governor Special Legal Council; Eloy Inos, Secretary of 
Finance; Matthew Gregory, the Attorney General; and, Mel Grey, 
Director of Immigration. While it is my intent to answer all 
your questions myself, should questions arise that are more 
technical I would like to defer to them.
    We have submitted a written statement for the record on 
behalf of the Commonwealth responsive to your inquiries on 
matters of immigration, labor, law enforcement and economic 
conditions in the Commonwealth. I would like this opportunity 
to touch on some of its key points.
    Under the terms of the Covenant immigration is the 
responsibility of the Commonwealth government. It is clear from 
the negotiating history that one of the purposes of this 
provision was to enable the CNMI to have access to aid and 
labor that was essential to the development of its economy. The 
question of bringing control of immigration under the Federal 
Government has been discussed on several occasions by this 
committee and different administrations. We believe that the 
Commonwealth has an effective immigration program and that the 
transferring of this responsibility to Federal officials may 
have a negative impact not fully understood. Consideration of 
any such legislations have to take into account the gravity of 
the Commonwealth's current economic situation.
    As you know our two main industries, tourism and the 
apparel industry, have suffered from developments beyond our 
control. Tourism has suffered a drop in visitor arrivals of 40 
percent since 1996. The apparel industry is generating less 
than half the revenues of a few years ago and of the 34 
factories that once did business in the Commonwealth, only 15 
remain. Government revenues are declining at a rate that is 
difficult to absorb. Revenues fell by 28 percent from the peak 
in 1997 to 2006. Revenues are anticipated to drop by another 15 
percent this year from the amount estimated in our 2007 budget. 
We have been required to reduce government expenditures. The 
CNMI payroll per person has dropped by 29 percent since 2003. 
We reduced the number of government employees by 10 percent in 
2006 from 2005. As mentioned we have instituted unpaid 
austerity Fridays. Further reductions in the number of 
employees and payroll are inevitable.
    Control over immigration was one of the unique economic 
tools provided under the Covenant. The other tools were control 
over minimum wage, exemption from the Jones Act, control over 
customs, and the authority to rebate taxes and local source 
income. These tools have been critical to the development of 
the CNMI economy in the past. This has been recognized by 
several independent reports including those coming from the 
Government Accountability Office. These tools continue to be 
critical to our efforts to attract new investment to the 
Commonwealth. We have seen some problems in developments in 
recent months. The developments of new resources continuing, 
the new financial services company of Saipan, interest from 
private educational institutions, and new tourist markets in 
China and Russia. All of this, Mr. Chairman, depends in large 
measure on these economic tools under the Covenant.
    Mr. Chairman, we believe that the Commonwealth operates an 
effective immigration system to protect its borders and to 
control the entry and exit of all those who come to the CNMI. 
Neither local nor Federal officials have produced any evidence 
of organized criminal activity in the Commonwealth. We operate 
a computerized arrival and departure tracking system. We have 
better enforcement results in this administration than in past 
years, fewer unqualified entrants, more voluntary 
repatriations, more deportations, and more successful 
investigations and prosecutions. We continue to work closely 
with Federal officials on cases involving alien smuggling, 
human trafficking, and firearms trafficking. We believe that 
the CNMI immigration enforcement and tracking system is at 
least as effective as the Federal system.
    In order to address labor criticism our Department of Labor 
has worked with the Federal Government's under the Federal CNMI 
Initiative on labor, immigration and law enforcement. There has 
been a significant decline in the number of complaints alleging 
unpaid wages. The number of hearings doubled between 2005 and 
2006 and mediation was used to resolve half the cases in 2006. 
The backlog of cases has been substantially reduced already, 
and with more reductions expected by the end of May 2007. The 
Department of Labor has initiated a new, no-hire accountability 
program to publicly identify non-residents who are no longer 
authorized to be in the CNMI. We ask the committee to defer 
Federalization of immigration in light of the changed 
circumstances in the Commonwealth and our strong enforcement 
records. As we have said before, an isolated island community 
of 70,000 residents faces entirely different challenges with 
respect to its access to the labor market comparable to 
communities on the mainland.
    Mr. Chairman, we recommend that the committee request a new 
study by the Government Accountability Office regarding the 
CNMI. Such a study would focus on several issues of importance 
of the Commonwealth and to this committee. It would examine the 
most recent statistics regarding the CNMI's population, its 
work force and its economy. It might examine the recent trends 
in the apparel industry, tourism and new investments in the 
Commonwealth. It could look at the expected impacts on the 
economy of increases in the minimum wage or restrictions on the 
use of alien labors over the next several years. A GAO report 
on this and related issues would provide a much-needed basis 
for further deliberation and consultation between the 
Commonwealth and the committee on the immigration issue. I am 
confident that the members of this committee who consider this 
matter carefully before taken any action. Thank you.
    [The prepared statement of Mr. Villagomez follows:]
 Prepared Statement of Hon. Timothy P. Villagomez, Lieutenant Governor 
          of the Commonwealth of the Northern Mariana Islands
    Hafa Adai, Mr. Chairman and Members of the Committee. I am Timothy 
P. Villagomez. I have served as Lieutenant Governor of the Commonwealth 
since January 9, 2006. I am pleased to have this opportunity to discuss 
the control of immigration within the Commonwealth.
                          summary of position
    Under the terms of the Covenant between the Northern Mariana 
Islands and the United States, immigration is currently the 
responsibility of the Commonwealth Government. The question of 
``federalizing'' the control of immigration within the Commonwealth has 
been discussed on occasion by this Committee and different 
Administrations over the past dozen years. We believe that the 
Commonwealth has an effective immigration program and that legislation 
transferring this responsibility to federal officials may have a 
negative impact not fully understood. We recommend instead that the 
Committee request the Government Accountability Office to conduct a 
thorough study of the Commonwealth's economic circumstances and the 
important issues raised by any such legislation. The Commonwealth's 
position can be summarized as follows.
Serious Economic Downturn
    The Commonwealth is currently facing its most serious economic 
challenge since its beginning in January 1978. External factors beyond 
our control have severely curtailed our two most important revenue-
producing industries. During our first year in office this 
Administration has concentrated on two objectives: the reduction in 
government costs necessary in light of declining revenues and the 
attraction of new investors to help reinvigorate the private sector. We 
respectfully suggest that any proposed change in the immigration laws 
be evaluated in light of its impact--positive or negative--on the 
Commonwealth's ability to survive economically in the near term and 
provide meaningful services and an appropriate standard of living to 
its citizens in the long run.
Essential Economic Tools
    The special economic tools provided by the Covenant, including 
Commonwealth control over minimum wage and immigration, have been 
indispensable to the Commonwealth's economic development over the past 
25 years. Independent studies, including those by the Government 
Accountability Office, have emphasized the difficulties facing fragile, 
small island economies with limited human and natural resources. They 
have stressed the importance of these tools in giving the Commonwealth 
a much-needed economic advantage in attracting new investors to its 
islands. The Congress is now considering a substantial change in the 
federal laws affecting minimum wage levels in the Commonwealth. If 
enacted into law, some increases in the Commonwealth's minimum wage are 
likely in the near term--with potentially significant impacts on the 
local economy and workforce. Depriving the Commonwealth of its control 
of immigration now, before these impacts can be fairly assessed, would 
be premature and entail unnecessary risk to CNMI citizens.
Effective Immigration Enforcement
    The Commonwealth has demonstrated that it has the institutional 
capability to administer an effective system of immigration control and 
has demonstrated a genuine commitment to enforce such a system. The 
computerized arrival and departure tracking system has been fully in 
effect since 2003 and electronic passport readers are now in use with 
respect to all non-military travelers, regardless of citizenship, 
entering and departing the Commonwealth. A rigorous enforcement effort 
directed at ``overstays'' identified by our computer systems has been 
implemented by this Administration. Vacancies in the Division of 
Immigration are being addressed: there are now 64 personnel on duty 
with 31 new hires under consideration. Since 2001 there has been more 
effective immigration control--as represented by the decline in the 
number of unqualified applicants for admission into the CNMI. In 
collaboration with federal agencies, numerous investigations and 
criminal prosecutions have been pursued successfully by the 
Commonwealth over the past several years, dealing with such matters as 
alien smuggling, international firearms trafficking, and human 
trafficking. The Commonwealth's immigration laws, including its visa 
waiver system, are enforced in a manner fully consistent with the 
federal immigration laws. In some important respects, the local 
immigration requirements are stricter than their federal counterparts. 
The CNMI supports its immigration enforcement efforts with prompt 
hearings and appeals, including those cases involving refugee and 
asylum claims.
Effective Disposition of Labor Abuses
    The Commonwealth's control over immigration under the Covenant, in 
particular its reliance on guest workers in its tourism and 
manufacturing industries, has been criticized for contributing to 
widespread labor law violations. In collaboration with the federal 
government under the Federal-CNMI Initiative on Labor, Immigration, and 
Law Enforcement, the CNMI Department of Labor has successfully 
addressed these criticisms. The Department's enforcement efforts have 
resulted in a significant decline in the number of complaints alleging 
unpaid wages. A high priority has been assigned to the identification 
and prosecution of human and sex trafficking cases. Department hearing 
officers have doubled the number of annual hearings from 2005 to 2006. 
Mediation is employed in all cases promptly and has resulted in the 
prompt resolution of over 50 percent of all complaints during 2006. 
Where necessary, hearings are now scheduled within 60 days after filing 
of the complaint. The backlog of pending cases has been substantially 
reduced. Some 979 old cases were closed in 2006. We will complete all 
cases filed in 2002 by the end of February and are on schedule to 
complete all cases filed in 2003 and 2004 by the end of May 2007. The 
Department is currently evaluating the enforcement of laws preserving 
certain jobs in the Commonwealth for local workers and other means of 
facilitating the employment in the private sector of local workers--
including those previously employed by the CNMI Government.
Recommendation
    The Commonwealth urges that implementation of federalization of 
immigration in the Commonwealth be deferred in light of the changed 
circumstances in the CNMI and our strong enforcement record. We have 
appointed Melvin Grey, a man with more than 29 years of experience in 
the federal immigration service, as Director of Immigration. He is 
enforcing the Commonwealth's laws fairly and vigorously and cooperating 
fully with the responsible federal officials.
    An isolated island community of 70,000 residents faces entirely 
different challenges, with respect to its access to the labor market, 
than comparable communities on the Mainland. Federal control of 
critical immigration decisions affecting the Commonwealth's economy and 
citizens--no matter how sensitive or well-intentioned--can never be 
fully responsive to local aspirations and concerns. We have looked 
carefully at Senate Bill No. 1052, passed by the U.S. Senate in 2000, 
and believe that it raises several important questions that deserve 
further consideration.
    Under these circumstances the Commonwealth recommends that this 
Committee request a new study by the Government Accountability Office 
regarding the CNMI. Such a study would focus on several issues of 
importance to the Commonwealth and this Committee. It would examine the 
most recent statistics regarding the CNMI's population, its workforce, 
and its economy. It might examine the current trends in the garment 
industry, the visitor industry, and new investment in the Commonwealth. 
It could look at the expected impacts on the economy of increases in 
the minimum wage level or restrictions on the use of alien workers over 
the next several years. A GAO report on these and related issues would 
provide a much needed basis for further deliberation and consultation 
between the Commonwealth and the Congress on this immigration issue.
    I am confident that the Members of this Committee will consider 
this matter carefully before taking action.
                               discussion
The Challenge Facing the Commonwealth
    The challenge facing the Commonwealth today is best understood by 
acknowledging its phenomenal growth after becoming part of the United 
States. The new Commonwealth prospered far beyond the expectations of 
the Covenant negotiators. From a population of 15,000 and annual 
government revenues of $5,000,000 in 1978, the Commonwealth's 
population expanded to about 17,000 in 1980, 43,000 in 1990, 59,000 in 
1995, and 70,000 in 2000.\1\ Government revenues grew similarly--from 
$10,000,000 in 1980, to $102,000,000 in 1990, $190,000,000 in 1995, and 
peaked at $248,000,000 in 1997. According to the Bank of Hawaii, the 
8.7 percent growth rate during 1980-1995 was ``by far the highest 
population growth rate on record for any economy in the Pacific.'' The 
economic development producing these results was concentrated in two 
industries: tourism and apparel manufacturing.
---------------------------------------------------------------------------
    \1\ Population statistics regarding the CNMI are set forth in 
Exhibits 1 and 2 to this Statement.
---------------------------------------------------------------------------
    The premier industry in the CNMI, tourism, has had visitor arrivals 
drop 40% since 1996, affected by such factors as the Asian financial 
crisis in 1997, the terrorist attack on the United States in September 
2001, SARS, and the recent increases in fuel costs. Arrivals are down 
16% from 2005 to 2006. The island's largest air carrier, Japan 
Airlines, discontinued service to the CNMI due to problems with its 
profitability in serving all leisure markets. Similarly, Continental 
Airlines discontinued all direct flights from Japan--historically the 
largest and most important source of tourists for the Commonwealth. 
Northwest Airlines picked up some of the lost service, but this airline 
also has been in bankruptcy and has struggled. The occupancy rates, and 
room rates, in our local hotels have declined substantially, with some 
hotels closing down or converting to other uses.
    At its peak in 1999, the apparel industry comprised 34 factories, 
which generated sales of $1.06 billion and created 25,000 jobs--half of 
all island jobs--in direct and indirect employment. With just 15 
garment factories remaining now, sales fell to $489 million in 2006, 
and industry employment has dwindled to about 8,700. One factory 
recently closed which employed about 1,400 workers, most of whom are 
nonresident workers who will be repatriated unless they find a transfer 
employer approved by the Department of Labor within the 45-day transfer 
period recently granted by a Department of Labor Hearing Officer. The 
apparel industry still accounts for nearly 30 percent of government 
revenues. The Commonwealth is hopeful that the Congress will reconsider 
the bill rejected last year that would have provided some relief to our 
garment and other manufacturers. In the absence of such relief and with 
the changes in world trade rules expected by the end of 2008, it seems 
likely that very few apparel factories will continue to operate in the 
CNMI by 2009. A significant increase in the minimum wage rate would 
prompt a more rapid departure of these factories from the CNMI.
    The combined impact of declines in these two industries has had a 
pervasive influence on the Commonwealth's economy and citizens. With 
fewer tourists, those businesses specializing in the visitor trade--
such as hotels, restaurants, gift shops, and optional tours--have fewer 
customers, lower gross revenues, and declining profits. With less money 
in the hands of consumers generally, the entire range of retail 
businesses in the Commonwealth--grocery stores, shoe stores, clothing 
stores, and hair salons--have a similar downturn. Then, of course, the 
wholesalers or suppliers to these establishments experience decline and 
even closure. Empty stores and abandoned buildings in the Commonwealth 
provide silent, but dramatic, testimony to this effect.
    The impact on Commonwealth tax revenues has been substantial--down 
about 22% (from $248 million to $198 million) from the peak in 1997 to 
2006. The CNMI payroll has dropped from $193 million (2003) to a 
projected $137 million in 2007--a drop of 29 percent. The failure of 
the federal government to reimburse fully the CNMI for the compact 
impact costs resulting from the free flow of Micronesians into the 
Commonwealth has added to our burdens.\2\ The number of government 
employees has declined from 5,463 in 2005 to 4,890 at the present 
time--a reduction of about 10.5 percent.\3\ All non-essential CNMI 
government employees are now required to take every other Friday off 
without pay until fiscal year 2008. It is now projected that government 
revenues will drop by at least another 15 percent since the 2007 fiscal 
year budget went into effect on October 1, 2006 and this will 
undoubtedly result in other personnel reductions and decline of public 
services. As an example, the Commonwealth Utilities Corporation 
enforced regularly scheduled power outages from July 2006 through mid-
October 2006 as it was unable to fund scheduled diesel fuel payments 
for island generators. All CUC customers had their power rates raised 
about 100 percent in July 2006.
---------------------------------------------------------------------------
    \2\ Exhibit 3 sets forth compact impact costs during 1986 to 2006 
of $222,687,480 and total reimbursement of only $22,145,102.
    \3\ Exhibit 4.
---------------------------------------------------------------------------
    These developments over the past few years are impacting the 
Commonwealth residents in several important respects. The unemployment 
rate was estimated at 5.5 percent in 2003 and is probably much higher 
at the present time.\4\ Only about six percent of the 1,265 residents 
registered recently with the CNMI Labor Office found employment. About 
800 residents recently signed up for the Medicaid program for which 
they were previously not qualified. Given the decline in the employees 
within the apparel industry in particular, it seems very likely that 
the overall population and the number of nonresident workers in the 
CNMI have declined significantly in the last few years.\5\ This is 
supported as well by considerable anecdotal evidence, such as the 
recent departure figures collected by the Division of Immigration and 
the declining enrollment at the Northern Marianas College. If the 
trends in the apparel industry continue and the local economy can not 
produce jobs for those U.S. citizens and nonresident workers currently 
unemployed, it is very possible that by the year 2010 the number of 
nonresident workers will fall toward 15,000 and the total population 
will be in the 60,000 to 65,000 range.
---------------------------------------------------------------------------
    \4\ Exhibit 5 contains labor force statistics generated by the 2000 
census and a CNMI household survey in 2003. The census figures showed 
an unemployment rate of 3.8 percent and the household survey limited to 
Saipan showed a rate of 5.5 percent.
    \5\ Exhibits 6 and 7 set forth statistics regarding the CNMI labor 
force participation by citizenship and the number of work permits 
issued by industry.
---------------------------------------------------------------------------
    Faced with these recent developments, the Commonwealth has mounted 
a diversified campaign to stimulate the economy. Some of these efforts 
have produced promising results:

   Communications.--NTT DoCoMo Inc., a leading communications 
        company with over 52 million customers in Japan, has made a 
        substantial investment in the Commonwealth and will soon be 
        closing a major merger in the CNMI and Guam. Another Japanese 
        company, Sumitomo, has in 2006 invested over $25 million in 
        partnership with PTI Communications in our local telephone 
        system.
   Resorts.--Two new casino resorts are being developed on 
        Tinian. Saipan hotels have expended $60 million in renovations 
        and improvements.
   Financial Services.--A major financial services company has 
        moved its headquarters from the Virgin Islands to Saipan.
   Private Educational Institutions.--The education industry is 
        showing encouraging signs of development. Facilitated by a new 
        student visa program and observing the success of one recently 
        established school, four new private educational institutions 
        have expressed interest in the CNMI as an English-language 
        location for the training of foreign students. Other 
        educational institutions, including one with a nurse training 
        program, are also under consideration.
   Outsourcing Centers.--One call center operation is ready to 
        begin training local residents for possible operation and a 
        second, larger back office processing concern from the 
        Philippines is investigating the establishment of facilities in 
        the CNMI.
   Tourism.--Tourist arrivals in 2006, although significantly 
        lower than in 2005, nonetheless exceeded expectations. Most 
        significant were the increases in two of the Commonwealth's 
        newest tourist markets: China and Russia. In December 2004, 
        former Governor Juan N. Babauta signed an agreement with the 
        People's Republic of China awarding the CNMI its coveted 
        ``Approved Destination Status'' and, by the end of 2006, the 
        Commonwealth was receiving two weekly flights each from 
        Beijing, Shanghai, and Guangzhou. These flights brought a total 
        of 36,978 Chinese tourists to the CNMI in 2006. Under the 
        current Administration's five-year plan, it is anticipated that 
        by 2010 visitors from China will number 250,000, or 25 percent 
        of the total visitor arrivals. Although many fewer in number, 
        the tourists from Russia are a promising market and on January 
        3, 2007, the CNMI welcomed the first-ever charter flight from 
        Russia. It is hoped that the number of Russian tourists will 
        more than triple by 2010. Continued efforts to secure more 
        direct flights between Japan and the Commonwealth have shown 
        some success in 2007, with Japan Airlines committed to several 
        weekly charter flights directly to Saipan during the months of 
        March and April. In June of 2006, JTB, the largest tour agent 
        of Japan, opened its new facility on Saipan. The company cited 
        confidence in the future of the CNMI as a long-term destination 
        for Japanese tourists. JTB has also participated in efforts to 
        increase tourism to the CNMI from China.
   Retirement Market.--Recently enacted legislation in the CNMI 
        authorizes the creation of condominium facilities consistent 
        with the land alienation provisions of the CNMI Constitution. 
        We are hopeful that this legislation and flexible visa 
        arrangements will attract more interest in the Commonwealth as 
        a retirement community for Japanese and other Asian citizens.

    As is apparent, some of these encouraging developments are not 
likely to increase the Commonwealth's revenues significantly in the 
next few years, but they reflect continued dependence on the visitor 
industry and a change in emphasis from large manufacturing operations 
to smaller, more service-oriented businesses.
The Covenant's Unique Economic Tools Have Been Indispensable to the 
        Commonwealth's Economic Development
    The Covenant provisions relating to the economic development of the 
future Commonwealth were as important to the Northern Marianas 
negotiators as those provisions relating to political status. These 
included the following: (a) CNMI control over immigration; (b) CNMI 
control over minimum wage levels; (c) exemption from the U.S. coastwise 
laws to reduce shipping costs; (d) control over customs to provide 
flexibility; and (e) the authority to rebate taxes on local source 
income. Negotiators from both the United States and the Northern 
Marianas recognized the limitations presented by the Commonwealth's 
small population and sparse natural resources. In addition, they 
recognized that this future addition to the American political family, 
8,500 miles from Washington D.C., would naturally be influenced 
economically by factors different from those affecting the States on 
the Mainland. They agreed that the future Commonwealth should have 
maximum self-government over its internal affairs, and recognized that 
decisions regarding economic development would best serve Commonwealth 
citizens if made by their own elected officials. More broadly, the 
United States in Section 701 of the Covenant promised to ``assist the 
Government of the Northern Mariana Islands in its efforts to achieve a 
progressively higher standard of living for its people as part of the 
American economic community and to develop the economic resources 
needed to meet the financial responsibilities of local self-
government.''
    The negotiating history of the Covenant provisions relating to 
immigration is somewhat more complicated than often portrayed. It is 
true that the Covenant negotiators were concerned about application of 
the federal immigration laws to the future Commonwealth because of the 
possible mass migration to the Northern Mariana Islands by those 
seeking an entry point from which to pursue U.S. citizenship. But the 
Marianas Political Status Commission members also recognized that their 
opportunity to develop an economy producing the standard of living 
promised by the Covenant would need to rely heavily on the use of alien 
labor. The Commission's economist in 1973 provided the Commission 
members and the U.S. Delegation with detailed analyses of the Northern 
Marianas population at that time and with projections for 1975 and 
1981. Anticipating an increase in the number of hotel rooms from 500 in 
1975 to 1500 in 1981, he projected that the population (including 
aliens) would grow from 14,980 in 1973 to 24,193 in 1981, and that the 
number of aliens would increase from 1,500 in 1973 to 7,500 in 1981. 
These figures were an important component of the debate between the 
negotiating parties as to the pace and extent of economic growth in the 
future Commonwealth that would produce the per capita income and 
standard of living appropriate for members of the American political 
family. The Commission ultimately persuaded the U.S. Delegation that 
the question of post-termination application of the federal immigration 
laws should be determined ``by consultation between the local 
government and the U.S. Government'' in order to ``ensure that the 
decision whether the U.S. immigration laws ought to apply in full force 
or with certain modifications will be made when all the facts are 
available and when the post-termination economic and social structure 
of the Marianas can more dearly be seen.''\6\
---------------------------------------------------------------------------
    \6\ Paper of the Marianas Political Status Commission (May 28, 
1974), p.5. The issue of economic development, including the use of 
alien labor, is discussed (with citations to the original documents) in 
Willens & Siemer, An Honorable Accord: The Covenant between the 
Northern Mariana Islands and the United States (University of Hawaii 
Press, 2001), pp. 107-08, 123-25, 180-81.
---------------------------------------------------------------------------
    When assessed after twenty years, a 1999 Economic Study, prepared 
under the auspices of the Northern Marianas College and funded by the 
Department of the Interior, confirmed the importance and success of 
these Covenant provisions. The study observed that the ``spectacular 
economic growth'' of the Commonwealth was due to the rapidly growing 
tourist industry and the emergence and growth of the garment industry. 
(Executive Summary, 2). It concluded that total garment and visitor 
industry related employment accounted for about 80 percent of all 
employment in the CNMI in 1995. It pointed out that the jobs in these 
two industries held by CNMI permanent residents accounted for 71 
percent of all permanent resident jobs in the CNMI, including 
government jobs, in that year. The report emphasized the importance of 
the garment industry, especially at a time when the tourist industry 
was suffering a serious decline. But the authors cautioned that the 
anticipated decline in the garment industry in 2005 ``could have 
disastrous effects on the CNMI economy.'' (p.3)
    The 1999 Study advanced many recommendations for consideration by 
CNMI and Department of the Interior officials. It urged that these 
officials and other readers of the Study,

          recognize the CNMI's relative economic position. It is very 
        unlike that of typical US communities in several respects 
        (distance to markets and sources of supply, the absence of 
        economies of scale, the lack of a large and highly trained 
        labor force, etc.). Its Gross Domestic Product per capita is 
        only a fraction of the US average. Wages and productivity are 
        significantly lower than in the US, eliminating the US as a 
        realistic source of labor. The CNMI may have to rely to a large 
        extent on foreign workers for the foreseeable future to develop 
        the visitor industry and for any economic diversification of 
        significance. In addition, because of its size, insularity and 
        location, the CNMI may have to rely indefinitely on a higher 
        proportion of foreign workers than the US. Severe restrictions 
        on the CNMI's access to foreign labor could seriously curtail 
        its economic recovery and development for the foreseeable 
        future. (pp. 4-5).

    Specifically, the 1999 Study recommended that ``No change should be 
made in immigration policy or law without a clear determination of how 
such change would affect the supply of labor in the CNMI.'' (p. 3) It 
went on to state:

          The CNMI's economic recovery and future development could be 
        seriously retarded by an excessively restrictive immigration 
        system. Such a system could deprive the garment industry, the 
        visitor industry, and all future industries of an adequate 
        supply of skilled labor. It is not known exactly what the 
        effects would be of a federal immigration takeover; however, 
        its explicit purpose is to reduce the number of alien workers 
        in the CNMI. What is known for certain is that the CNMI 
        resident labor force is neither large enough nor skilled enough 
        by itself to support the garment industry, the visitor 
        industry, or future development in new industries. (p.3)

    These comments--and the need for a careful study of effects of such 
a change--are as true today as they were in 1999.
    The General Accounting Office (now the Government Accountability 
Office) relied on many of the earlier study's factual findings in its 
report to Congressional committees in 2000. It included some more 
recent data on the contributions to the Commonwealth's total revenues 
of the two leading industries: in 1997 the tourist industry contributed 
about 14 percent of the government's total budget and in 1998 the 
garment industry contributed about 22 percent. It too emphasized the 
vulnerability of the CNMI's economy ``to outside events because of its 
heavy reliance on only two industries, which may be affected by changes 
in Asian economic conditions, legislation in the United States, or 
international trade agreements.'' (p. 9) The GAO report concluded that 
the CNMI ``is more self-sufficient fiscally than other outlying areas, 
such as Guam, Puerto Rico, the U.S. Virgin Islands, and the Freely 
Associated States. Between 1994 and 1997, about 87 percent of the CNMI 
government's general revenue came from local sources rather than from 
payments from the U.S. Treasury.'' (p. 9) The GAO report went on to 
observe that ``The ratio of locally derived government revenue to gross 
domestic product (GDP) in the CNMI is also higher than that of most 
other outlying areas and is larger than the comparable ratio for all 
levels of government in the United States.'' (pp. 9-10) Because of the 
severe declines in the CNMI revenues over the past few years, it is 
uncertain that these conclusions remain valid, but they demonstrate the 
past utility and continued importance to the Commonwealth of the 
economic tools provided by the Covenant.
    The GAO rejected most of the Interior Department's criticisms of 
its report. Contrary to the Department's view regarding the impact of 
the tourist and garment industries, the GAO concluded ``that the local 
resident population--most of whom are U.S. citizens--have benefited 
from the economic growth and development in the past 20 years because 
incomes and employment opportunities have increased with economic 
growth.'' (p. 14) The GAO defended its inclusion of the Freely 
Associated States for purposes of comparing the CNMI's revenue-raising 
efforts on the grounds that these areas receive federal funds, they 
have a shared history with the CNMI, and their citizens have the right 
of residency in the CNMI. The GAO did confirm that it shared the 
Interior Department's concern ``that the CNMI's reliance on the garment 
and tourist industries and on foreign workers makes it vulnerable to 
outside events that impact either industry or the economy's access to 
foreign workers.'' (p. 15) Commonwealth officials, of course, have been 
even more concerned about this dependence, increasingly in the last 
several years, but their efforts supported by the Interior Department 
over the past 20 years to diversify the CNMI economy have produced very 
modest results.
    A more recent GAO report in December 2006 focused on the long-
standing economic, fiscal, and financial accountability challenges 
facing the CNMI, Guam, American Samoa, and the U.S. Virgin Islands. The 
GAO found that the abilities of all four insular areas ``to strengthen 
their economies have been constrained by their lack of diversification 
in industries, scarce natural resources, small domestic markets, 
limited infrastructure, and shortages of skilled labor.'' (p. 2) 
Echoing the earlier reports, it commented that the few key industries 
in these areas were vulnerable to changes in favorable U.S. federal 
government trade and tax policies as well as various external factors, 
such as fluctuations in the economies of nearby countries and the 
effect of the terrorist attack on the United States in September 2001. 
(p. 2) GAO acknowledged the conferences sponsored by the Department of 
the Interior over the past three years to attract American businesses 
to these areas, but concluded that ``the effectiveness of these 
conferences and business opportunities missions is uncertain due to the 
lack of formal evaluation of these efforts.'' (p. 2)
    The recent GAO report provided ample detail regarding the decline 
in CNMI government revenues over the past several years, the changes in 
international trade arrangements leading to the closure of ten garment 
factories as of July 2006, and the reasons underlying the decline in 
visitor arrivals from its peak in 1997. (pp. 16-18) It reported that 
``CNMI's total government funds balance declined from a positive $3.5 
million at the beginning of 2001 to a deficit of $49.2 million by the 
end of 2004 as total government spending rose more rapidly than 
revenues.'' (p. 25) (The GAO report does not include data from 2006 
reflecting the current CNMI Administration's effort to reduce 
government expenditures and address the substantially greater deficit 
at the end of 2005 that it inherited.) The GAO report also compared the 
levels of federal government expenditure in each of the four insular 
areas as a percent of revenues and per capita. It concluded that the 
CNMI, like the U.S. Virgin Islands, ``receives a significantly lower 
proportion of its revenues from the federal government than do American 
Samoa or Guam.'' (p. 25)
    We do not dispute that over the past decade Commonwealth officials 
have made mistakes in dealing with the pace and direction of economic 
development and creating (and maintaining) the necessary 
infrastructure. With the benefit of hindsight, it is always clear that 
public officials could have acted quicker and more decisively. But the 
economic forces battering the Commonwealth over the past decade would 
have almost certainly caused economic hardship of a magnitude even the 
most effective local officials could not have anticipated.
    These independent reports strongly support three conclusions of 
great importance to any Congressional consideration of ``federalizing'' 
control over immigration. First, small island economies are unique and 
fragile; principles and policies commonly applied to large, diversified 
economies may have little, or no, relevance to the CNMI. Second, the 
special tools provided in the Covenant did enable the CNMI in recent 
years to develop an economy that met the needs of its citizens and 
lessened the need for federal government support. Third, maintenance of 
these tools provides the best hope for enabling the CNMI to overcome 
its current economic crisis in the near term, although significant new 
financial assistance from the United States may be necessary. 
Especially with the anticipated change in the minimum wage levels in 
the CNMI, any substantial change in prevailing immigration rules would 
add an unwelcome measure of uncertainty and instability facing any 
prospective new investor in the Commonwealth.
The Commonwealth's Control of Immigration Has Been Effective
    Commonwealth immigration laws and regulations control the entry of 
aliens into the CNMI in a manner consistent with the intent and 
policies of the federal immigration system. We are protecting our 
mutual interest in national and border security while protecting the 
health and safety of U.S. citizens and all others residing in the 
Commonwealth. These laws and regulations are enforced by the CNMI 
Division of Immigration managed by a Director of Immigration. This 
Administration in 2006 appointed Melvin Grey, a man with 29 years of 
experience with the U.S. immigration service, to serve as Director of 
Immigration. The Division mirrors the federal structure and programs, 
including sections dealing with Inspections, Investigations, 
Processing, and Legal. Detention of aliens, when required is 
accomplished through the use of CNMI Department of Corrections as a 
practical and effective cost saving measure. Deportation hearings are 
conducted in the Commonwealth Superior Court.
    The Commonwealth's commitment and institutional ability to maintain 
an effective system of immigration control is evidenced by its 
implementation of a computerized arrival and departure tracking system. 
Financed by the federal government, the Border Management System 
(``BMS'') has been fully operational since 2003, with the entry and 
departure of each traveler recorded. Reports are prepared regarding 
those non U.S. citizens who appear to have ``overstayed'' their visit 
to the CNMI under their particular visa status. A recent test of the 
system confirmed its utility. The system was tasked to identify Tourist 
``overstays'' from March 2006 through October 2006, recognizing that 
any cutoff date produces some loose ends--for example, a person who 
entered on October 5 for a 30-day stay with the option of requesting 
another 60 days. The system initially produced 99 ``overstays'' of a 
total of 334,195 entries during the period. However, after cross-
checking other data bases within our system, including the Labor and 
Immigration Identification System (``LIIDS''), we concluded that there 
were only six ``overstays''--people for whom we show no departure, no 
extensions, no adjustment of status, no pending claims, and no 
detention status. These six are now under investigation.
    The Commonwealth administers a visa waiver system that is fully 
consistent with the federal system and, in some respects, more 
stringent. Visitors from seven countries are eligible for CNMI visa/
entry permit waivers: Australia, Canada, Hong Kong, Japan, Ireland, 
South Korea, and Great Britain. Visitors from 28 countries, plus the 
Fujian Province of China, are excluded from entry. The Commonwealth 
excludes some countries, such as Indonesia and Malaysia, because of 
security risks, document availability risks, and document fraud risks, 
even though their citizens are permitted entry into Guam. In contrast 
with federal immigration officials, CNMI officials have relatively few 
travel and identity documents to process for compliance--principally 
foreign passports, CNMI Electronic Visas, and other CNMI-issued entry 
permits. The CNMI also recognizes U.S.-issued BI/B2 visitor visas, the 
U.S. Lawful Permanent Resident card, and U.S. military travel orders 
with military ID for U.S. military personnel. With these exceptions, 
all other travelers, regardless of citizenship, are required to present 
a passport for entering and departing the CNMI. Electronic passport 
readers capture the significant data from the passports in a secure 
electronic database.
    The CNMI Visitor Program requires a sponsor for most aliens seeking 
admission to the Commonwealth. The sponsor must supply documentation 
identifying the visitor, the intent of the visit, contact information 
for the alien and the sponsor while the visitor is in the CNMI, and an 
affidavit of support. In this affidavit, the sponsor must promise to 
support the visitor if necessary, that the visitor will not become a 
charge to the community, and that the sponsor will reimburse the CNMI 
for all expenses incurred as a result of the visitor becoming a 
deportable alien, including detection, detainment, prosecution, and 
repatriation. Some exceptions or waivers of these sponsorship 
requirements are available on a very restricted basis, such as for 
nurses and student nurses coming to the CNMI to take the National 
Collegiate Licensure Examination (NCLEX). Virtually all of these nurses 
are primarily interested in going to the United States to apply their 
special education and severely-needed occupational skills under the 
federal immigration and labor laws.
    The CNMI Division of Immigration alone has the authority to grant 
entry permits to the Commonwealth. To facilitate the processing of 
these permits, three travel agencies have been granted authority to 
gather information regarding prospective visitors, fill out 
applications, and submit the completed applications to the Division for 
review and decision whether to approve or deny. Each of the approved 
travel agencies, one of which is affiliated with the Tinian Dynasty 
Hotel and Casino, has posted a $500,000 bond which is subject to 
forfeiture in the event of a breach of the operating agreement between 
the CNMI and the travel agency or tour operator. A similar procedure 
was followed recently with a single charter flight from Russia 
sponsored by local tour agencies, each of which has substantial bonds 
with the CNMI to ensure appropriate pre-screening of applicants for 
entry into the Commonwealth. Visitor Entry Permits were issued by CNMI 
Immigration after review of the applications and the visitors were 
inspected at the Saipan airport before being allowed to enter.
    More effective screening procedures have produced a significant 
decline in the number of exclusions in recent years. From a total of 74 
exclusions in calendar year 2001, the figure has fallen to only seven 
in 2006. Where violations are found, the Division of Immigration 
promptly conducts hearings and appeals as required. It takes 
approximately 30 days to conduct the hearing after arrest and about 60 
days to process appeals. Federal policies with respect to the granting 
of refugee and asylum have attracted some illegal immigration into Guam 
and the remainder of the United States resulting in multi-year 
adjudications of removal proceedings involving refugee and asylum 
applications before an Immigration Judge. In contrast, the CNMI under 
its federally-approved process, which is fully consistent with the 
international law obligations of the United States, can complete its 
refugee and asylum processing and hearing in less than eight months.
    The Commonwealth's law enforcement efforts over the past several 
years show many significant successful prosecutions and a strong record 
of cooperation with federal law enforcement agencies. These 
prosecutions have involved alien smuggling, international firearms 
trafficking, employment of illegal aliens, prostitution, and various 
forms of document fraud. The CNMI assisted federal immigration 
officials in processing shiploads of smuggled aliens into Guam that the 
federal officials there were unable to address. At no point during the 
period since 2000 have either federal or local officials developed, or 
received, credible evidence suggesting any organized criminal activity 
in the Commonwealth.\7\
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    \7\ Whatever merit they had at the time, the vague allegations to 
the contrary in a 1997 report of the Immigration and Naturalization 
Service are refuted by the consistent experience and performance of 
federal and local law enforcement officials in the Commonwealth over 
the past decade.
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    To further fortify our legal attack on human smugglers, in late 
2005 we enacted legislation specifically directed at human smugglers 
that imposes severe penalties for a wide range of criminal conduct. A 
significant case has already been charged under the new statute. 
Cooperation between CNMI law enforcement officials and the U.S. 
Immigration and Customs Enforcement and the U.S. Coast Guard 
Investigative Services offices located on Guam resulted in an important 
conviction in 2006 of two terrorists associated with the Tamil Tigers 
in Sri Lanka. Unaware of the fact that the CNMI was part of the United 
States, the terrorist/traffickers were willing to enter the CNMI with 
the belief that they would be smuggled into Guam to consummate the arms 
deal. The federal officials involved were very appreciative of the 
assistance provided by the CNMI, indicating that the case would have 
been extremely difficult, if not impossible, to conclude successfully 
under Mainland federal jurisdiction. We expect that enforcement 
directed at alien smuggling will continue to be a high priority during 
2007.
The CNMI Department of Labor Effectively Controls the Commonwealth's 
        Use of Guest Workers
    The use of guest workers in the Northern Marianas is extensively 
regulated by CNMI law and regulations. The law prohibits the private 
sector from hiring nonresident workers to fill certain positions. Where 
private sector companies are able to hire such workers, they must 
provide benefits not required to be provided to resident employees. 
These include (a) all medical costs incurred by nonresident workers for 
the period of their employment contract and 96 days after the contract 
expires if the worker is still in the CNMI; and (b) the costs of 
repatriating the company's nonresident workers. Employers of these 
guest workers are also required to cover all costs associated with 
processing the nonresident worker permits applications, typically 
costing about $300 per employee annually. Finally, employers of guest 
workers must post a bond or other financial assurance to cover 
repatriation costs, three months wages, and medical expenses for each 
nonresident worker employed.\8\
---------------------------------------------------------------------------
    \8\ Exhibits 8 and 9 set forth statistics regarding immigration 
entry permits by immigration class.
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    Once employed by a private sector employer, the nonresident workers 
are protected by a broad regulatory umbrella. Unlike resident workers, 
most of whom are subject to employment at will, nonresident workers 
must be employed pursuant to a contract that has been approved by the 
Department of Labor. Any change in the contract terms must be approved 
by the Department. Early termination of a nonresident worker's 
employment must also be approved. These workers are entitled to have 
any work-related grievance heard by a neutral Department hearing 
officer, and may seek administrative or judicial review of such final 
administrative orders. Adverse decisions against employers may result 
in fines, imposition of liquidated damages, and debarment from further 
employment of guest workers, among other remedies. Finally, employers 
of nonresidents are subject to workplace inspections and other 
oversight not imposed upon employers of resident workers. The 
Department's Health and Safety Unit since 2001 has conducted annually 
more than 1,000 safety inspections of CNMI businesses and barracks. It 
is in this context that the Department's handling of labor complaints 
should be assessed.
    Abuses--both actual and alleged--in the apparel industry in the 
1990s led to extensive monitoring of practices in the industry to 
supplement the enforcement efforts of CNMI agencies. The Wage and Hour 
Division and the OSHA Division of the U.S. Department of Labor became 
more active after the Congressional hearings in 1998 and 1999. The 
Environmental Protection Agency became involved. A class action in the 
U.S. District Court in the Northern Marianas was resolved by a consent 
decree under which a Garment Oversight Board, composed of three judges, 
was created to scrutinize industry practices with the assistance of two 
internationally recognized monitoring firms. The buyers of garments 
from the CNMI factories conduct their own monitoring of industry 
worksites and dormitories, conducting employee interviews with the use 
of Chinese translators. In addition, the garment industry and the 
brands and labels group have their own standards, against which the 
practices of CNMI factories have been regularly assessed. Finally, and 
inevitably, the international and local media have been consistently 
alert to any suggestion of labor abuses in the CNMI. There can be no 
serious question but that these efforts have contributed to a 
substantial reduction in labor abuses in the Commonwealth.
    The recent efforts of the Department of Labor's Enforcement Unit 
confirm a significant decline in the number of labor complaints 
alleging unpaid wages. This reflects the current Administration's 
insistence on addressing the most serious labor violations, unpaid 
wages, sponsorship schemes, and human and sex trafficking. As Exhibit 
10 reflects, the total number of labor complaints filed during the 
years 2000-2006 have remained fairly constant, but the number of 
complaints alleging unpaid wages or overtime have declined by almost 50 
percent.
    In early 2006, an investigation by the Enforcement Unit of a labor 
claim by a night club dancer uncovered numerous violations of CNMI 
labor and criminal laws, and led the Attorney General's Office to 
indict four employees at the nightclub on sex and human trafficking 
charges. The criminal case is scheduled for trial in 2007. In April 
2006 the Department filed a Determination and Notice of Violation, 
finding that the employers owed the employees more than $350,000 in 
wages for the hours the employees were confined in the company barracks 
and for the illegal deductions. The Labor case is stayed pending 
decision on various motions. Whenever similar allegations are presented 
to the CNMI's Office of the Attorney General, they are investigated 
promptly and prosecuted to the fullest extent of the law. Information 
regarding pending investigations cannot be made public in order to 
preserve the integrity of the law enforcement effort and the privacy 
and civil rights of any suspect under investigation.
    In April 2006 the Secretary of Labor entered into a Memorandum of 
Understanding with several other CNMI agencies, Karidat (a local social 
services agency), and the U.S. Attorney's Office establishing the CNMI 
Human Trafficking Intervention Coalition. Late in 2006 the U.S. 
Department of Justice supported this Coalition with a grant of several 
hundred thousand dollars.
    Beginning on October 1, 2006, the Department of Labor has mounted a 
serious effort to reduce significantly the backlog of about 3,000 
pending labor cases involving about 5,500 employees from 1997 through 
2004. In the first stage of the project the Department closed nearly 
1,000 cases by the end of December 2006--in each instance granting the 
relief sought by the employee. These involved cases with (a) 
settlements evidenced by a written agreement that was approved by a 
hearing officer, or (b) a request by the employee for repatriation 
followed by an exit from the Commonwealth, or (c) an administrative 
order issued by a hearing officer after an evidentiary hearing. The 
Department expects to close all cases filed through 2002 before the end 
of February 2007, concentrating on cases in which the employee asked 
only for transfer relief (the right to move to a new employer) and the 
present employer did not oppose the request. The last category of cases 
involves those in which the employee asked for transfer relief or 
repatriation and money damages. These cases may require a hearing on 
the record. Department officials are on schedule to complete the 
processing of all cases filed in 2003 and 2004, including hearings 
where necessary and the filing of opinions by the hearing officers, by 
the end of May 2007.
    Procedures are now in place to make sure that current cases are 
resolved in a timely manner to prevent any further growth in the 
backlog. These accomplishments are largely due to changes implemented 
at the Department by its investigators and the hearing officers. The 
Department's Hearing Office has dramatically increased the number of 
hearings conducted and the dollar amounts awarded and collected.\9\ 
Significant increases in the number of hearings began in 2003, but this 
trend accelerated in 2006 when the hearing officers conducted twice the 
number of hearings held in 2005. The number of hearings naturally 
varies from year to year depending on several variables, including the 
number of complaints filed, the complexity of the cases, the length of 
particular hearings, and the number of hearing officers working in a 
given period.
---------------------------------------------------------------------------
    \9\ Exhibit 11.
---------------------------------------------------------------------------
    New procedures at the Department have contributed significantly to 
the expedited processing of complaints. Within a week or ten days after 
a complaint is filed, there is now an effort to engage the parties in 
mediation supervised by a hearing officer. In 2006 more than 50% of the 
complaints filed were resolved through mediation, thereby eliminating 
any need for a hearing. The Department's regulations were amended in 
2004, dealing with procedural matters such as motions, appearances, 
service of process, discovery, protective orders, and disqualification 
of hearing officers. The amendments codified existing practices, or 
implemented new procedures, and provided needed clarity for the 
complainants and the lawyers who participated in the hearing process. 
The Secretary of Labor in 2006 initiated a change in the scheduling of 
hearings that permits the Hearing Office to set cases for hearing at 
the time the case is referred for investigation. The hearing officers 
now set cases for hearing between 30 and 90 days from the date of 
referral to investigation. Under the prior system, cases would be 
referred to investigation for an indefinite amount of time until the 
investigators advised the Hearing Office that the case was ready to be 
placed back on the calendar for hearing. The prompt scheduling of a 
hearing provides an additional incentive for the participants to settle 
the matter before the hearing date.
    In 2003 and 2004 the Department experienced the filing of hundreds 
of duplicative or so-called ``copycat complaints'' filed by garment 
workers. The Department suspected that these nearly identical 
complaints might be frivolous--i.e., claims filed for the sole purpose 
of obtaining a temporary work authorization (``TWA'') to enable the 
worker to work for another factory that might be offering more overtime 
to its employees. The Department's Enforcement Unit estimates that 169 
duplicative cases were filed in 2003 and 399 were filed in 2004. A case 
was generally placed in this category if: (a) the complaint is against 
a garment factory; (b) the complaint is a form letter that is identical 
to others that have been filed; (c) the complainant is represented by 
one of a few translators who are associated with the copycat cases; and 
(d) the complaint principally alleges poor work conditions (such as bad 
food or dirty restrooms) rather than significant wage claims. Many of 
the complainants in these cases refused to engage in good faith 
mediation and sought instead to receive TWAs.
    The Department recognized that its effort to reduce the backlog 
required a serious response to these ``copycat'' cases. First, relying 
on its amended regulations, the Department mediators began to deny 
worker requests for TWAs unless the worker engaged in good faith effort 
to settle the complaint. Faced with a denial of their request for a 
TWA, many workers opted to stay with their current employers. Second, 
in 2005 the Hearing Office held, after an evidentiary hearing, that 
many of these claims were frivolous and ordered the complaining workers 
to depart from the CNMI as a sanction for filing a frivolous complaint. 
This sent a strong message that discouraged other employees from filing 
claims without merit. Third, the Department cautioned local translators 
that it would carefully scrutinize the activities of those who filed 
multiple boilerplate complaints against the same employer. In this 
regard, the Department of Labor and the Office of the Attorney General 
established by regulation a Code of Professional Responsibility for 
Translators, which is modeled after the standards adopted by the 
National Center for State Courts. Sanctions include rejecting the 
services of a translator for violation of these rules. Lastly, the 
Department has enlisted the volunteer assistance of an experienced 
attorney to serve as hearing officer of the still unresolved 
duplicative cases that have not yet been resolved and it is expected 
that these will be resolved within the next several months.
    To address another longstanding problem, the Department of Labor, 
with assistance from the Office of the Attorney General, created a 
``Collection Unit'' to concentrate on enforcing the orders requiring 
employers to pay wages or meet other financial obligations. Several 
tools are being utilized to achieve this objective. When the Unit finds 
that an employer has missed a payment deadline, it can (and does) 
suspend processing of all pending or forthcoming nonresident worker 
applications by that employer. Or it may seek an order to show cause at 
the Hearing Office, in which proceeding Department officials may 
request that the delinquent employer be permanently barred from 
employing nonresident workers. If these efforts fail, the Department 
may tap the employer's bonds or bring a collection action in court. 
Aggressive action by the Collection Unit in recent months along these 
lines has produced some excellent, and expeditious, results.
    The issues of high recruitment fees, and the possibility that some 
CNMI employers may receive kickbacks from recruiters of nonresident 
workers in another country, have long been of concern to the Department 
of Labor and the CNMI Government generally. The limitations on the 
Commonwealth's jurisdiction (and the federal government's as well) to 
investigate transactions and relationships in foreign countries make it 
extremely difficult to pursue such allegations effectively. One very 
significant, and different, approach was taken recently when the CNMI 
Attorney General and the Chinese Economic Development Association 
(``CEDA'') entered into a Memorandum of Understanding in November 2004. 
Under this agreement, CEDA agreed to review most permit applications 
submitted by Chinese nationals to work in the CNMI. CEDA agreed to 
certify only those applications submitted by employees who utilized a 
recruiter licensed by the Chinese Government, and who had agreed to 
charge a fee of no more than 12.5 percent of base wages set forth in 
the employment contract. By regulation adopted in January 2005, 
compliance with this agreement (and all others with foreign governments 
pertaining to employment of their nationals), was made a precondition 
to issuing a nonresident work permit to a Chinese national. New CNMI 
regulations issued early in 2007 further address the problem of 
recruiting abuses in the Commonwealth by defining lawful (and unlawful) 
recruiting practices, expressly prohibiting ``kickbacks'' and other 
unlawful arrangements, requiring recruiters to be licensed and 
registered in the CNMI, and authorizing Department of Labor officials 
to seek injunctive and other relief against recruiters doing business 
in the CNMI.
    The many closures of garment factories in the last two years, and 
the prospect of more departures in the next few years, present 
administrative and enforcement problems for both the Department of 
Labor and the Division of Immigration. Most recently, the Concorde 
factory, employing some 1,400 employees, announced its closure within 
60 days and then, in light of the response of its employees, decided to 
implement its decision even more promptly. Utilizing the experience 
garnered with respect to earlier closings, the Department of Labor 
immediately initiated an expedited investigation of the closure and 
convened public hearings for the employees to advise them of their 
rights. The Department also helped negotiate an agreement with Concorde 
under which the company agreed to reimburse the recruitment fees paid 
by its recent hires. An administrative hearing was then held on January 
3, 2007, at which all affected workers were granted 45 days to search 
for a transfer employer. A second hearing will be held to address 
various labor claims asserted by some of the workers, including claims 
by some of the more recent hires that they were fraudulently induced to 
enter into their employment contracts at a time when the employer knew 
it could not fulfill the terms of the contracts. Several hundreds of 
the employees immediately sought and secured from Concorde arrangements 
for their repatriation. If, as is expected in light of the 
Commonwealth's current economic circumstances, most of the discharged 
Concorde workers remaining in the CNMI are unable to find another job, 
they will be required to leave the Commonwealth at the end of the 45-
day transfer period, or after the labor claims have been resolved, 
whichever is later. If they do not do so voluntarily, the Division of 
Immigration will initiate deportation proceedings.
    As the backlog cleanup effort got underway in October 2006, the 
Department of Labor began to look more comprehensively at the problem 
of nonresident workers who may have overstayed their lawful period for 
working in the Commonwealth. The objective was to identify and 
publicize those aliens who seemed to be in the Commonwealth without 
proper authorization. The computer staff began work on the project in 
December 2006, trying to integrate carefully the input from a number of 
different computer systems that record employment status with the LIIDS 
computer system and the Border Management System (``BMS''). This was 
the first time that the system was asked to produce such a list and it 
was not an easy task.
    The Department of Labor on January 31, 2007, issued its first ``NO 
HIRE'' list of aliens who appear not to have an immigration status 
allowing employment in the Commonwealth. The Department is advising 
both CNMI employers generally and the listed aliens that the 
Department's records indicate that the aliens cannot be lawfully 
employed without an appropriate adjustment of the alien's status. 
Employers and the listed aliens are given ten days to advise the 
Department with respect to the accuracy of the list and what steps will 
be taken, if necessary, to permit the alien to be employed lawfully in 
the CNMI. If the system has erroneously identified a person who is in 
fact fully entitled to work in the Commonwealth, that person's name 
will be on a published corrections list. After the ten-day period and 
corrections in the list have been made, CNMI employers will be subject 
to legal sanctions if they hire aliens whose status has not been 
certified as legal and the aliens will be subject to repatriation--
voluntarily or through deportation proceedings. Based on the initial 
results, this program will yield substantial improvements in the CNMI's 
computerized programs and the reliable identification of aliens no 
longer entitled to remain in the Commonwealth.
                               conclusion
    As a result of the hearings conducted by this Committee in 1998-99, 
legislation was enacted by the Senate to bring the CNMI under the 
federal immigration laws. There was general agreement at the time that 
both federal and local officials had failed to enforce effectively the 
laws in place to control labor abuses. Reforms instituted over the next 
several years showed progress towards dealing with these problems and 
federal officials, from time to time, commented favorably on these 
developments. The general media, of course, continued to focus on the 
earlier, and more sensational, events and the Commonwealth's improved 
performance was rarely acknowledged. Our testimony today has been 
designed to provide the Members of this Committee and the public with a 
current report of the Commonwealth's economic circumstances and its 
enforcement of the CNMI immigration and labor laws. We are prepared to 
supply any additional information that will assist the Members in 
considering the issues before the Committee.
                               exhibits*
---------------------------------------------------------------------------
    * Exhibits will be retained in committee files.
---------------------------------------------------------------------------
    Exhibit 1.--Population by Citizenship, CNMI: 1980, 1990, 1995, 2000 
and 2003.
    Exhibit 2.--Total Population by Place of Birth: 1973-2000.
    Exhibit 3.--Compact Impact Costs Incurred vs. Reimbursements: 1986-
2006.
    Exhibit 4.--Number of Public Service Employees: FYs 2003-2006.
    Exhibit 5.--Labor Force Statistics: 2000 and 2003.
    Exhibit 6.--CNMI Labor Force Participation by Citizenship: 1973-
2000.
    Exhibit 7.--Work Permits Issued by Industry: 1999-2006.
    Exhibit 8.--Immigration Entry Permits by Immigration Class: 
Calendar Years 2006-2000 (without 706K contract workers).
    Exhibit 9.--Immigration Entry Permits by Immigration Class Calendar 
Years 2006-2000 (including 706K contract workers).
    Exhibit 10.--Total Labor Complaints Filed & Total Complaints 
Alleging Unpaid Wages Calendar Years 2000-2006.
    Exhibit 11.--Department of Labor Hearings and Mediation.

    The Chairman. Thank you very much. Let me ask questions. 
We'll just do 5-minute rounds, and then Senator Akaka, and then 
Senator Tester.
    Let me ask David Cohen first. I think you've indicated in 
your statement that you acknowledge that the economy structure 
that is currently in place there at CNMI ``is not a good one,'' 
I think was the phrase you used at the current time, and I 
think most experts seem to agree with that. Obviously we have a 
difficult problem of transitioning from what is currently in 
place to a more sustainable model. In the meantime, this loss 
of the garment industry, or many of the plants in the garment 
industry, is causing a need for repatriation of tens of 
thousands of unemployed workers and overstayed tourists, as I 
understand it. Do you believe CNMI is able to do that, manage 
that effort without Federal assistance?
    Mr. Cohen. Mr. Chairman, I think that will be quite a 
challenge and part of it might depend on the pace of the exit 
of the garment industry. If, for example, the garment industry, 
in reaction to world events or Federal legislation, were to 
exit abruptly, within the next few months, for example, if they 
can't deal with the changes that are coming and the remaining 
15 to 19 factories decide to close shop at once, which is a 
possible scenario, I think it would be a real challenge. The 
structures that are in place to make sure that there is an 
orderly repatriation in that circumstance might be severely 
taxed. The funds that the government is supposed to keep to 
make sure that there's a way to settle back wage claims and pay 
for transportation back home, I think that fund will not be 
sufficient to do the job. The bonds that are supposed to be in 
place, and are technically in place, to provide funds for these 
purposes, I think will not do the job. I think we'll find that 
many of the bonding companies are insolvent and will not be 
able to make good on their claims, so if there is a sudden 
exodus it will present a really serious challenge to everyone 
involved.
    I have to say that there was a recent closure of, at the 
time, the largest factory, the Concorde Factory, and so far 
that's been handled quite well. The company has stepped up and 
agreed to pay workers, for example, refunds on their 
recruitment fees that go beyond what the law requires. A number 
of the workers have already been repatriated. There have been 
mass hearings to make sure their claims are properly addressed 
and that's been handled well, but once we get down to the lower 
tiers--the less financially stable factories, for example--if 
they all close at once, that's going to be a real problem.
    The Chairman. Let me press you on that. Is it your view 
that because of this potential economic risk, we should not be 
legislating in this Congress or are you saying we can legislate 
if we do so carefully?
    Mr. Cohen. I would say the latter. I would say good 
legislation can be helpful and legislation conversely that's 
not well thought out--not to suggest that would ever occur--but 
if we aren't careful and think through all the consequences, we 
could do serious damage. So I'm not saying that this is not an 
opportunity for legislation.
    The Chairman. So, is it the administration's position then 
that it wants to work with Congress to develop legislation that 
will be sensitive to these problems that can be passed in this 
Congress? Is that the administration position?
    Mr. Cohen. Yes, we're absolutely ready to work with 
Congress on good legislation. We don't necessarily say that 
that's the only option but we're here and ready to work with 
you to fashion good legislation.
    The Chairman. Is there a better option?
    Mr. Cohen. Perhaps not. Good legislation perhaps is the 
best option and we're still studying that. We're also studying 
the legislation that had been passed before in light of current 
circumstances and current needs. I think we mostly want to make 
sure that we don't inadvertently do anything that would be 
harmful.
    The Chairman. Right. In 2001, the administration strongly 
supported the bill that this committee reported out and passed 
through the full Senate. I guess you're saying that you're a 
little lukewarm on the whole idea of us passing legislation in 
this area now, or am I misreading that? I'm just trying to 
figure to what extent the administration is willing to fully 
engage with the Congress and with this committee in developing 
legislation that we can then move ahead with.
    Mr. Cohen. Mr. Chairman, I would not say we're lukewarm 
about working with you to pass legislation. We're just 
cautioning against the potential side effects of bad 
legislation, but I think good legislation, which is something 
that would result from the type of process that we're all 
talking about, can really help the situation and put the CNMI 
on a path to a much stronger and more secure future.
    The Chairman. Okay, alright, well let me defer to Senator 
Akaka for his questions.
    Senator Akaka. Thank you very much, Mr. Chairman. Thirty 
years ago a Covenant was approved between CNMI and the U.S. 
Government. It appears that some of the agreements that were 
made at that time need to be changed to improve the conditions 
there. So my feeling at this point in time is that some of the 
agreements that were made at that time need to be improved.
    I want to ask Jim Benedetto a question. When I visited CNMI 
in the 1990's, I met with many security guards at that time who 
had gone months without pay, but had no alternative but to go 
to work to share food and housing with others because they had 
no money. You wrote a letter on April 1, 2005 to the CNMI 
Department of Labor regarding Island Security Service--ISS, 
Inc.--in which you stated, ``there are serious questions about 
ISS's insolvency given the history of nonpayment of wages.'' 
You asked why this employer had not been barred from hiring 
alien workers and been criminally prosecuted. My question to 
you is: how many workers have been involved and what is the 
status of this situation?
    Mr. Benedetto. Actually there were a series of about six 
letters and that was probably the fifth letter that I wrote on 
Island Security Service starting in 2002. The situation 
involves scores of its workers and a lot of open cases that 
date back; there have been prior enforcement actions against 
ISS by the CNMI Department of Labor and by the United States 
Department of Labor's wage/hour division. Some of the previous 
cases resulted in settlement consent decrees, wherein ISS 
agreed to remain timely on their wage payments that were coming 
up bi-weekly, and also to pay a little extra to catch up with 
the back wages that were owed. In every case that I am aware of 
ISS has defaulted on those obligations.
    On January 25 of this year a dozen or so workers spoke with 
the Marianas Variety and told the reporter there that they were 
all owed back wages between $2,000 and $9,000. My office 
assisted those 12 workers in filing individual labor complaints 
with the Department of Labor. I've heard that there is a 
possibility that ISS actually is going to go into bankruptcy. I 
don't have independent verification of that, but if so that 
would be a serious situation, even more serious than it is now. 
As I stated in the letters, there were a couple of failures of 
security guard companies in the 1990's, three of which that I'm 
aware of that all left or closed up their businesses, owing 
security guards $750,000, $800,000, $900,000, and that resulted 
in the Department of Labor promulgating emergency regulations. 
Those emergency regulations state that before a security guard 
company can hire or renew, they're required to post a cash bond 
for a certain amount of the wages. There has to be an 
evaluation of their fitness to do business and a submission of 
tax records and payroll records to ensure that they're current 
on all their wage payments. If any of these things had been 
done, then we wouldn't be in this situation, because ISS would 
not have been able to renew its workers each year.
    Senator Akaka. Can you comment on the Missumis Construction 
Inc and RIFU Garment Inc and their situation?
    Mr. Benedetto. The Missumis case is, or the series of cases 
is--unfortunately, there are two sides to that. On the one 
hand, we have a straight failure to pay wages and a lot of 
violations and at least 34 different cases that have been filed 
with the assistance of the Ombudsman's Office going back all 
the way to 1999. I wrote a letter in 2005 that asks the 
Department of Labor what the status of those cases is, and I 
believe that some of those cases have been resolved. The ones 
from 1999; but the last time I checked the 2004 ones were still 
outstanding.
    There's another side to that. It's not exactly the way it 
appears on the surface, but it leads to another problem, and 
that is that when somebody has a labor case pending in the CNMI 
and they have evidence of a pending labor case, they cannot be 
deported. Under CNMI's Non-resident Workers' Act, at the end of 
your contract you have an expiration transfer period of 45 
days, so currently you have 45 days to find another employer if 
you wish to, and if you can that allows you to remain in the 
Commonwealth.
    My understanding from discussions with the Department of 
Labor is that there are a number of employers who will be 
approached by people who are close to the end of their 45-day 
expiration transfer period and they will say, essentially: ``I 
really can't find a job, can you help me out? I'll pay my 
application fee and then you can put me on the books as one of 
your workers,'' and that gives them immigration status, even 
though the expectation is both from the employer and the worker 
that no work is going to be provided. They nevertheless will 
put an employment contract together, submit it to Labor and 
then if the person is able to find an employer later on in that 
year, they can go and get a consensual transfer which allows 
the person, essentially, to extend their expiration transfer 
period out beyond, maybe a whole year beyond the 45 days. So, 
that's what we call an ``illegal sponsorship'' because the 
intent is not to have people on the books on paper and allow 
them to remain in the Commonwealth. If there's no jobs there 
then the intent of the Non-resident Worker's Act is that they 
depart.
    Senator Akaka. Thank you for your response. Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Tester.
    Senator Tester. I've got a lot of questions here, Mr. 
Chairman. We'll try to make them short and I would hope we 
could get right to the answers if it's possible.
    I'll stay with you, Mr. Benedetto. So the illegal stuff 
goes on, going on Senator Akaka's question; there's no ability 
to deal with these folks from an employer's standpoint or an 
employee's standpoint, just let it go? Where does the 
jurisdiction fall to say ``stop''?
    Mr. Benedetto. Well, that is perhaps a better question to 
be addressed to the CNMI government officials that are here. 
When Congress created the Ombudsman's Office it didn't give us 
any teeth, and so my role is basically to nag. So I write 
letters and I point out what the options are and I try in 
individual cases to press to adjudicate to get a fair result, 
if we can, for the workers that we take. In most cases, I would 
say that the Department of Labor, once the investigation has 
been concluded, is able to reach a fair result and they handle 
it quite well.
    Senator Tester. Okay.
    Mr. Benedetto. I believe that what your question is going 
to, is why aren't these cases getting resolved? That is because 
the investigations are not getting completed. The backlog of 
cases that the Department of Labor has labored under itself is 
2,000 cases, and I believe that they've closed about 1,200 of 
those cases. However, in the meantime there are another 1,300-
plus unresolved cases from 2004, 2005 and 2006. They simply 
need to devote more resources to the investigation section in 
Labor.
    Senator Tester. Alright, what's the ISS's jurisdiction?
    Mr. Benedetto. Well, since there were allegations in the 
letters that the overtime pay was not paid, there's a 
jurisdiction with the U.S. Department of Labor's wage hour 
division.
    Senator Tester. Okay, outside of that, though, what is 
their jurisdiction? What do they do? What do they oversee? 
Outside of what I just talked about, do they oversee 
immigration? What do they oversee?
    Mr. Benedetto. Island Security Services is a private 
security guard company.
    Senator Tester. Yes.
    Mr. Benedetto. They get contracts with government agencies 
and large businesses around the Commonwealth and they provide 
the security guards for their sites, their work sites.
    Senator Tester. Their work sites, okay. As far as meth 
goes, as far as the potential smuggling of active ingredients, 
as far as making immigration more difficult, or at least 
following the law, is what I mean: is there any ability to do 
that? What's being done to crack down on illegal immigration 
and potential smuggling of ingredients of drugs?
    Mr. Benedetto. Well, drugs, and ingredients of that type, 
are outside my scope.
    Senator Tester. Okay, who could answer that? Anybody on the 
panel? Go ahead. Thank you.
    Mr. Villagomez. Senator, since you are asking a specific 
question regarding that issue, may I refer you to the Attorney 
General?
    Senator Tester. It's up to the chair, but I don't have a 
problem with that; it's whatever you want. I'll tell you what: 
if you could just get that question answered for me, that would 
be fine. It doesn't have to be done now, but I do have a 
question for Ms. Franzel, real quick. I read in your 
documentation there's $65 million or something like that that's 
granted to the Marianas. What is that granted for? It's 
probably in your documentation. If you could just give me a 
quick summation of what that's granted for, that'd be great. Is 
it granted for any of the security stuff we're talking about?
    Ms. Franzel. The grants come from several different Federal 
agencies to support several different Federal programs. The 
Department of the Interior is one of the bigger grantors to 
deal with infrastructure and other types of assistance. There 
are grants from Agriculture, Homeland Security as well as 
Health and Human Services. Those would be the biggest grantors, 
so Homeland Security is one of the bigger grantors to CNMI.
    Senator Tester. Okay, good. I understand that the reason 
that they can't get a clean financial audit is because, with 
the exception of maybe this last year, they didn't do an audit 
or didn't get it done. What's the scoop there?
    Ms. Franzel. It's really a combination of factors. There 
are some isolated factors with some of the separate entities, 
such as the utility corporation which has been having multiple 
difficulties. So the utility corporation has not been audited 
at all, but that is separate from the main government 
activities. In the main government activities, many of the 
difficulties are with basic bookkeeping, payments to vendors, 
accounts receivable and tax rebates payable.
    Senator Tester. Whose job is it to see that the audits get 
done in our shop? Is there anybody that oversees that?
    Ms. Franzel. Well, under the Single Audit Act, CNMI is 
required to have its audit done and that is a Federal law. So 
the primary responsibility for complying is with the CNMI. 
Department of Interior is the cognizant oversight agency, to 
make sure that it is getting done.
    Senator Tester. Okay. This is kind of a comment, because I 
really do respect the work that the bureaucracy does; they do a 
lot of tough work and this is not pointed to anybody in this 
room that I know of. It is absolutely amazing to me, and we're 
talking about small figures here in the overall budget, but it 
is absolutely amazing to me, that I think in 1997, the audit 
wasn't done, 'til 2004; for 7 or 8 years, there's no 
accountability. It's incredible that it can go on for that 
length of time and there are probably things much bigger than 
that out there. How can this happen? Who needs to be fired? 
What's going on?
    Ms. Franzel. We have had discussions with OIA about this 
and OIA has increased its focus. There has actually been 
significant improvement on the accountability side, but still 
not to the point where some of the basic bookkeeping is 
happening properly, and where the financial statements as a 
whole are in fact fairly stated. It is also a complex reporting 
environment. CNMI does have reporting elements of State, local 
and Federal governments. I think in the future it may help to 
separate some of this and really focus on getting the basic 
accounting and bookkeeping right--that's certainly something 
that is very achievable--and perhaps hiring some expertise to 
deal with some of the more complex issues.
    Senator Tester. With the Chair's permission, Mr. Cohen, did 
you have something you wanted to say to that?
    Mr. Cohen. Yes, Senator. I want to address the point about 
helping the Island governments, including the CNMI, comply with 
their obligations under the Single Audit Act. When I came into 
office the top two priorities that we established for our 
office were No. 1, private sector economic development 
throughout the Islands, which is the top priority; and, No. 1A, 
improving accountability, including improving compliance with 
the Single Audit Act, even though it's not our obligation to 
actually fulfill this requirement for the Islands.
    We recognize that there were and continue to be serious 
capacity problems in complying with new reporting requirements, 
including some that came into play just a few years ago and are 
proving to be a very daunting challenge for all of our Island 
communities. So we increased the amount of resources that we 
dedicated to training, capacity building, and we have 
instituted a crash program really to get all of the Island 
governments caught up on their delinquent single audits. We've 
had excellent success on that and we think, if I'm correct, and 
maybe Ms. Franzel might remember this off the top of her head, 
but we've gotten all of our Island governments current, I 
believe with the exception of one. We're also improving the 
cleanliness of the audits as well. We assign a very high 
priority to this. We've devoted resources to it. It is, as Ms. 
Franzel has suggested, quite a challenging task just because of 
the distance that we needed to travel because the Islands have 
gotten so far behind and were wrestling with new requirements. 
But we're very much working on this.
    Senator Tester. I appreciate that. I can just tell you from 
my perspective when you're talking about programs that need 
help and there's no audit to verify that the money is going 
where it needs to go, all sorts of red flags fly up in the air. 
Then when we talk about developing policy to help situations 
that have arisen or potentially will arise, if there's no sound 
financial structure behind the dollars there's no way I, in 
good faith, say we're going to give you more money, if that's 
one of the resources that are needed. Thank you, Mr. Chairman.
    The Chairman. Thank you very much. Ms. Franzel, let me just 
ask you one other question. You pointed out various problems in 
the management of the finances there in the CNMI. You have any 
conclusion or views as to whether those capacity problems, I 
guess that's the right phrase that Mr. Cohen used, whether 
those would be expected to extend over into the immigration 
area. It seems to me what we're doing is we're saying they've 
got real problems with the finance management issue, but we at 
least so far are willing to leave the immigration issues in 
their control as well. Do you have any views as to whether or 
not there is some analogy or some lesson that we ought to be 
taking from that?
    Ms. Franzel. I can make a couple of comments on that. First 
of all, the financial management area has been hampered by the 
limited pool of resources and expertise available just by the 
very nature of the Island economy and the geographic isolation 
and, frankly, the difficulty that others who do not have a 
connection to the Island really have in integrating and staying 
on the Islands. So there is an inherent limited pool available. 
There is also a complexity to this type of government which has 
elements of Federal, State and local responsibilities all wound 
together. The financial management piece is a pretty basic area 
of good management and some of the issues and the long-standing 
problems, although there have been improvements, are indicative 
of a very difficult environment and perhaps a risky type of 
control environment. These factors could potentially be 
impacting the other operations as well.
    The Chairman. Senator Akaka had some additional questions.
    Senator Akaka. Yes, thank you Mr. Chairman. Let me follow 
up on capacities that you just mentioned and direct this 
question to the Lieutenant Governor. In previous hearings 
before this committee the INS and bipartisan U.S. Commission on 
Immigration reform stated that CNMI can--and let me stress this 
word, can--never establish proper immigration control because 
it lacks the authority to prescreen people through a visa 
issuing process, and because it lacks access to classified data 
bases used to screen people at the border. My question to you: 
does the CNMI currently have either of these two capacities?
    Mr. Villagomez. Thank you, Senator. Since taking office in 
January last year we have concentrated on issues regarding 
immigration and so forth and it is for this reason that our 
administration has appointed Mr. Mel Grey, who has a 29 years 
INS experience as a Federal official, and is now the Director 
of Immigration. In response to your question: yes, Senator 
Akaka, we have an effective computerized system in place right 
now on tracking arriving and departing passengers out of the 
Commonwealth, and this in that sense, is the LIDS system that 
is currently in place and was funded by Federal assistance. The 
immigration process works closely with other Federal officials 
and in cooperation with Federal agencies.
    Senator Akaka. Thank you for that response. Representative 
Pete Tenorio, I want to thank you for your testimony and for 
your specific suggestions as to how we can strengthen 
legislation. In 1997, the DUI report on the initiative stated, 
``CNMI alien labor policies are having a profound negative 
effect on public services and infrastructures such as 
education, health care, public safety, water, sewer and solid 
waste disposal.'' Generally how is the public services 
situation changed over the past 9 years?
    Mr. Tenorio. Thank you Senator. It's a very, very important 
question. In fact it's one of those things that I've been 
trying to address for so long. We have a very, very weak 
infrastructure in terms of utilities, water, water systems, 
power systems and even wastewater disposal systems. The 
presence of a large number of non-resident workers has 
generally aggravated the situation and the system has really 
become overloaded and insufficient to provide for a real kind 
of utility services that we are so used to here in the 
Mainland. For example, let me just tell you that about 50 
percent of the Island of Saipan right now does not have 24 
hours of water service for its people, and for those that have 
a water service in their homes, none of them could drink the 
water from the tap because it's just not potable. It's too 
salty. It's not properly treated, so people don't use their 
water in the faucets for drinking purposes. They have to go out 
and buy water--well water from the stores, or processed water 
on the Island--and we have had continuing problems with our 
power generation.
    The government is trying to find ways to make the power 
generation activity a self-sufficient activity, but it cannot 
do so because it does not collect enough revenue from its 
operations. Fuel costs are escalating to a huge, unreasonable 
amount, so people cannot really afford to use electricity on a 
24-hour basis that we are so used to. The cost of electricity 
has doubled in just the last several months because of the 
government's initiative to increase the rate of the utility 
charges on a popular-watt basis to find resources to be able to 
purchase imported fossil fuel gas and diesel. So again, despite 
the presence of the large number of resident workers that we 
had hoped would contribute to improving the overall capacity of 
the utilities to generate income, it doesn't. It exacerbates 
the problem of operating utilities throughout the Islands.
    Senator Akaka. Well, thank you very much. My time has 
expired. I have other questions that I will submit for the 
record.
    The Chairman. We will certainly submit several questions 
for the record. We do have one more panel and we have a vote at 
11:30, so I would submit additional questions. Senator Tester, 
did you have any other questions of this panel before we go to 
the second panel?
    Senator Tester. Just real quick and a ``yes'' or ``no'' 
answer will work. Is trade the major reason why you've lost 10 
of the 27 garment manufacturers? Is it trade loss?
    Mr. Villagomez. Mr. Chairman. Senator, yes.
    Senator Tester. Thank you.
    The Chairman. Alright, well thank you all very much for 
your testimony. We appreciate it and why don't we call the 
second panel forward and hear from them?
    Okay, we have three witnesses on this panel, and a couple 
of others who are here accompanying one of the witnesses. Let 
me just introduce them while they're taking their seats. First, 
we have Ambassador Haydn Williams, who is a former Covenant 
negotiator. We appreciate him being here. Second, we have Ms. 
Lauri Ogumoro, who is accompanied by Sister Stella of the 
Sisters of the Good Shepherd, and also Kayleen Entena. We 
appreciate both of them being here accompanying Ms. Ogumoro. 
Also, our other witness is Mr. Juan T. Guerrero, who is the 
President of the Saipan Chamber of Commerce. Thank you very 
much for being here.
    Why don't we just take our witnesses in that order? If 
Ambassador Williams would want to start, we appreciate your 
being here and look forward to your testimony.

  STATEMENT OF F. HAYDN WILLIAMS, AMBASSADOR, FORMER COVENANT 
                           NEGOTIATOR

    Ambassador Williams. Mr. Chairman and other distinguished 
members of the committee, I thank you for the invitation to 
appear before you today. I have had a long association with the 
Marianas going back to World War II. As Deputy Assistant 
Secretary of Defense for International Security Affairs under 
President Eisenhower and Kennedy, my office had responsibility 
for the Department of Defense's interest in the Trust Territory 
of the Pacific Islands, including the Marianas. In the 1970's, 
I was the President's personal representative for the 
negotiation of the NMI Covenant and seeing the Covenant through 
the House and the Senate. Frequent visits in the 1980's and 
1990's kept my interest alive, along with my efforts to win 
congressional support for the American Memorial Park in Saipan 
and the building of the American memorial to our war dead in 
the Battles of Saipan, Tinian and the Philippine Sea.
    My message is a simple one. It is time for the Congress to 
take a critical look at the current situation in the Northern 
Marianas in the best interest of the citizens of the CNMI and 
the broader interests of the United States. This committee is 
aware that the CNMI today is in dire straights and has turned 
to Washington for help. In your oversight hearings, I believe, 
Mr. Chairman, that it is important to focus your attention on 
the CNMI's immigration policies and control of its borders. In 
addressing this matter a brief look back at the Covenant 
negotiations may be useful to remember the times and the spirit 
in which the talks were conducted, namely the long-held desire 
of the NMI to become a permanent part of America.
    The two preeminent issues were U.S. sovereignty and the 
rights to internal self-government. Once these two matters were 
agreed in principle, the negotiations turned to other 
questions, including what Federal laws would apply to the new 
Commonwealth. The Marianas and negotiators were especially 
concerned about U.S. immigration laws. They were worried about 
their Island culture, their Chamorro and Carolinian heritage 
being overwhelmed by an influx from Asia. They wanted 
protection from this happening and also from the threat of war 
refugees entering the Northern Mariana Islands from Southeast 
Asia. They therefore proposed that immigration control be in 
their hands to enable them to carefully restrict the numbers 
entering the NMI. While the United States could not accept this 
proposal, it agreed that in a transition period before the end 
of the trusteeship and the coming into force of U.S. 
sovereignty, the new Commonwealth would be given transitional 
responsibility for immigration. Under section 503 of the 
Covenant Congress retained the ultimate authority to make U.S. 
immigration laws applicable to the CNMI following termination 
of the trusteeship. It was anticipated at that time that such 
action would be taken quickly by the Congress given the known 
attitude of some leading key members on the immigration 
question regarding territories.
    When the Covenant was approved in 1976, it was expected 
that the trusteeship would come to an end in a couple of years, 
once the compacts of free association with the other districts 
were concluded. But these negotiations lingered on and on, and 
instead of 2, it was some 10 years before the U.N. Security 
Council terminated the trusteeship. This far, far longer-than-
expected interim period enabled largely non- indigenous 
entrepreneurs to take advantage of the Covenant's liberal trade 
privileges and wage and immigration exemptions to establish 
their presence in the CNMI and to begin the importation of 
increasingly large numbers of low-paid alien workers for their 
enterprises. It was during this transition period that local, 
political and business opposition to any Federal implementation 
of section 503 became institutionalized. The opposition was 
committed to blocking--with the help of hired Washington 
lobbyists--any Federal action on minimum wages and immigration. 
The subsequent story of the social, economic and environmental 
impact of the CNMI's labor and immigration policies on life in 
the CNMI--the consequences of encouraging an alien population 
growth of some 500 percent, of turning the indigenous citizens 
of the Commonwealth into a small minority--is well documented.
    Three administrations, beginning with President Reagan, 
have voiced deep concern over these developments. This 
committee, too, recognized the need for remedial action. In 
2000, the CNMI Covenant Implementation Act authored by Senators 
Murkowski and Akaka call for the extension of U.S. immigration 
laws to the CNMI with protective transitional measures and 
exemptions. This Act was passed unanimously by the Senate. 
Regretfully, this Senate initiative died in the House without 
even a hearing for reasons that are now publicly well-known. As 
a former defense official, I am most concerned about the need 
to protect and control our borders. Today we are no longer 
living in a soft security environment, and it had been reported 
by the Justice Department that critical security 
vulnerabilities had existed in the CNMI for several years. In 
view of heightened terrorist threats and the Marianas strategic 
location, the Federal Government's responsibility for 
protecting the people of the CNMI and all American citizens has 
taken on new and urgent importance.
    The CNMI simply does not have the institutional capability 
to adequately prescreen or screen persons entering the 
Commonwealth. Border control is an inherently sovereign 
function. I repeat, border control is an inherently sovereign 
function, and in the present threatening world security 
environment and the growing reach of global crime syndicates, 
the responsibility for protecting the Nation's borders in the 
CNMI should be in the hands of the Federal Government.
    Before closing, I would like to say--going back to the 
Covenant negotiations, that the United States then was fully 
sensitive and sympathetic to the Northern Marianas' legitimate 
need for imported labor to help it reach its goals of economic 
self-sufficiency. Carrying forward this same spirit, the 
Murkowski-Akaka Bill stated that the extension of immigration 
laws to the CNMI would be done ``in an orderly manner with the 
commitment to mitigate any adverse effects on the local 
economy.'' The bill spoke to how the law could help the CNMI 
diversify, stabilize, and strengthen its economy with special 
provisions to meet legitimate imported labor needs.
    The CNMI is going through a difficult period. I am 
confident that with good will, with open ongoing consultations 
and cooperation between Saipan and Washington, that the CNMI 
can begin to establish a new, more stable and sustainable 
economic foundation for its future. In meeting this challenge, 
I believe this effort will be greatly aided by the discipline, 
the orderliness, the management experience and the long-term 
benefits that will flow from the extension of U.S. immigration 
laws to the Commonwealth of the Northern Mariana Islands. In 
the interest of the people of the Northern Marianas, Mr. 
Chairman, I urge this committee to take this long overdue 
action. Thank you.
    [The prepared statement of Ambassador Williams follows:]
 Prepared Statement of F. Haydn Williams, Ambassador, Former Covenant 
                               Negotiator
    Mr. Chairman, Senator Domenici, Senator Akaka, and other members of 
the Committee, I thank you for the invitation to appear before you 
today. I have had a long association with the Marianas going back to 
World War II. As Deputy Assistant Secretary of Defense for 
International and Security Affairs under Presidents Eisenhower and 
Kennedy my office had responsibility for DOD interests in the Trust 
Territory of the Pacific Islands including the Marianas. In the 1970s, 
I was the President's Personal Representative for the negotiation of 
the CNMI Covenant, and seeing the Covenant through the House and the 
Senate. Frequent visits in the '80s and '90s kept my interest alive 
along with my efforts to win congressional support for the American 
Memorial Park in Saipan, and the building of the American Memorial to 
our war dead in the battles of Saipan, Tinian, and the Philippine Sea.
    My message is a simple one. It is time for the Congress to take a 
critical across-the-board look at the current situation in the CNMI in 
the best interests of the citizens of the CNMI and the broader 
interests of the U.S. This Committee is aware that the CNMI today is in 
dire straits and has turned to Washington for help. In your CNMI 
oversight hearings, I believe, Mr. Chairman, that it is in everyone's 
interest to focus in particular on the CNMI's immigration policies and 
the control of its borders.
    In addressing this matter a brief look back at the Covenant 
negotiations may be useful--to remember the times, the context and the 
spirit in which the talks were conducted--namely the long held desire 
of the NMI to become a permanent part of America. The two preeminent 
issues were, U.S. sovereignty, and the rights to internal self-
government. Once these two matters were agreed to in principle, the 
negotiations turned to other questions including what Federal laws 
would apply to the new Commonwealth.
    The Marianas delegation was especially concerned about U.S. 
immigration laws. They were worried about their island culture, their 
Chamorro and Carolinian heritage being overwhelmed by an influx from 
Asia. They wanted protection from this happening, and also from the 
threat of war refugees entering the NMI from South East Asia. They 
proposed that immigration control be in their hands to enable them to 
restrict the numbers entering the NMI.
    The U.S. could not accept this proposal, but agreed that in a 
transition period before the end of the Trusteeship and the coming into 
force of U.S. sovereignty, the new Commonwealth would be given 
transitional responsibility for immigration. Under Section 503 of the 
Covenant, Congress retained the ultimate authority to make U.S. 
immigration laws applicable to the CNMI following termination of the 
Trusteeship. It was anticipated at the time, that such action would be 
taken quickly, given the, known attitude of some leading key members of 
Congress on the immigration question regarding territories.
    When the Covenant was approved, it was expected that the 
Trusteeship would come to an end in a couple of years, once the 
Compacts of Free Association with the other Districts were concluded. 
But those negotiations lingered on and on. Instead of two, it was 10 
years before final U.N. Security Council action terminated the 
Trusteeship for the Marianas. This far longer than expected interim 
period enabled largely non-indigenous entrepreneurs to take advantage 
of the Covenant's trade privileges, and its wage and immigration 
exemptions to establish their presence in the CNMI, and to begin the 
importation of large numbers of low-paid alien workers for their 
enterprises.
    It was during this transition period that local political and 
interested business opposition to any Federal implementation of section 
503 became institutionalized. It was committed to blocking, with the 
help of hired Washington lobbyists, any Federal action on minimum wages 
and immigration.
    The subsequent story of the serious social, economic, and 
environmental impact of the CNMI's labor and immigration policies over 
the past 30 years on the life in the CNMI, the consequences of 
encouraging a population growth of some 500 percent, and turning the 
indigenous citizens of the Commonwealth into a small minority, has been 
well documented.
    Three Administrations, beginning with President Reagan, have all 
voiced deep concern over these developments. This Committee too has 
recognized the need for remedial action. In 2000, the CNMI Covenant 
Implementation Act, authored by Senators Murkowski and Akaka, called 
for the extension of U.S. immigration laws to the CNMI with proper 
transitional measures and exemptions. The Act was passed unanimously by 
the Senate. Regretfully, this Senate initiative died in the House 
without even a hearing, for reasons that are now well known.
    As a former defense official, I am most concerned about the need to 
protect and properly control our borders. Today, we are no longer 
living in a soft security environment and it has been reported by the 
Justice Department that critical security vulnerabilities have existed 
in the CNMI for several years. In view of heightened terrorist threats 
and the Mariana's strategic location, the Federal government's 
responsibility for protecting the people of the CNMI and all American 
citizens has taken on new and urgent importance.
    The CNMI does not have the institutional capacity to adequately 
pre-screen or screen persons entering the Commonwealth. Border control 
is an inherently sovereign function and in the present threatening 
world security environment and the reach of global crime syndicates, 
the responsibility for protecting the nation's borders in the CNMI 
should be in the hands of the Federal government.
    Before closing, I would like to say, going back to the Covenant 
negotiations that the U.S. was fully sensitive and sympathetic to the 
CNMI's legitimate need for imported labor to help it reach its stated 
goals of economic self-sufficiency. Carrying forward this same spirit, 
the Murkowski/Akaka bill stated that the extension of immigration laws 
to the CNMI would be done ``in an orderly manner with a commitment . . 
. to mitigate any adverse effects . . . on the local economy.'' The 
Bill speaks to how the law can help the CNMI diversify, stabilize, and 
strengthen its economy with special provisions to respond to imported 
labor needs.
    The CNMI is going through a difficult period. I am confident that 
with goodwill, with open ongoing consultations and cooperation between 
Saipan and Washington, that the CNMI can begin to establish a new, more 
stable and sustainable economic foundation for its future. In meeting 
this challenge, I believe the CNMI will be greatly aided by the 
discipline, the orderliness, and the long-term benefits that will flow 
from the extension of U.S. immigration laws to the Commonwealth of the 
Northern Mariana Islands. Thank you.

    The Chairman. Thank you very much for your statement. Ms. 
Ogumoro, we're glad to have you here. Please go right ahead.

STATEMENT OF LAURI OGUMORO, MSW, ACSW, KARIDAT SOCIAL SERVICES, 
                             SAIPAN

    Ms. Ogumoro. Thank you, Mr. Chairman, for inviting me to 
speak today. My name is Lauri Bennett Ogumoro. I'm a social 
worker with Karidat, a Catholic Social Services Agency in the 
Commonwealth. I'm speaking before this committee with the 
blessing and support of His Excellency Bishop Tomas A. Camacho 
from the diocese of Chalan Kanoa in the Northern Mariana 
Islands. I've lived and worked in the CNMI for the past 25 
years. I'm married to a Carolinian from the Island of Saipan.
    I'm accompanied today by Sister Mary Stella Mangona, 
Sisters of the Good Shepherd and Miss Kayleen Entena. There's a 
rumor going around the Island that Miss Entena is testifying 
today for this committee in exchange for a T Visa. This is not 
true. The unfortunate reality is that Miss Entena has been 
granted a T Visa from the United States because she is victim 
of human trafficking in the CNMI. She is a victim of human 
trafficking in its most heinous form, sex trafficking. In fact 
it is Miss Entena's strength that gives me the courage to tell 
her story and that of many women in the CNMI. Thank you 
Kayleen.
    As a social worker for the past 25 years on the Island of 
Saipan I have been blessed to have come to know many of the 
indigenous families of the Commonwealth. As a social worker I 
have also had the opportunity to meet and work with many of the 
non-residents in the community. Although some would say it is 
an oxymoron to call these individuals non-residents when they 
have actually lived and worked in the Islands for 10, 15 or 20 
years or more. It is as if there are really two separate groups 
of people living in the Commonwealth, resident and non-
resident. Although not quite disenfranchised, non-resident 
workers live and work almost seemingly apart from the local 
U.S. citizen resident population. Because the Islands are 
predominately Roman Catholic within both resident and non-
resident populations the great equalizer then is the Catholic 
Church. Unfortunately after mass the groups once more divide.
    Most on the Island will acknowledge there are problems, 
problems with labor abuses, undocumented workers and the like, 
what will not be acknowledged is that the measures taken to 
correct the labor abuses have not gone far enough. Each 
administration comes in and tries new approaches to fix the 
problem but it is almost as if the labor and immigration 
systems in the Commonwealth have taken on a life of their own. 
Lax controls and enforcement of regulations from the beginning 
have resulted in the complex set of problems being dealt with 
today. Many will say you have to give the Commonwealth a 
chance. It's a young Commonwealth. Unfortunately human lives 
are being destroyed in the process. The unintended consequences 
then are where we are now as a Commonwealth? With a non-
resident guest worker population that outnumbers the indigenous 
U.S. citizens, one only needs to look at the history of some of 
our neighbors in the Pacific to understand we are headed, if 
something is not done to save the Commonwealth for its own 
people, the Chamorros and Carolinians. The unintended 
consequences have grown a labor and immigration system that can 
never quite keep track of itself. The reality is that 
unscrupulous persons, both resident and non-resident, know 
where the connections are, where the weak spots are in the 
system and therefore know how to use the system, for their own 
personal gain. This leads us to the abandonment of workers on 
Island: workers laboring 20 to 21 hours a day with no day off, 
and the exploitation of young women brought to the Islands to 
work in night clubs, then forced into prostitution. The 
vulnerable worker who works months without getting paid but 
trusts that his boss' words will ring true, ``I'll pay you next 
month.'' The threat of being sent home is a most real threat 
that forces compliance.
    I do not know what the answers are. I, too, like most 
living the Island, wonder how life will change for me and my 
family. How high will prices go? How many businesses will be 
shut down? How many will lose jobs and who else will move off 
Island? What I do know is that the Commonwealth is a beautiful 
place. It is my home. The best analogy I can think of is 
something I tell women who are victims of domestic violence. I 
know you love your husband, but you can't live with him when 
he's hurting you. The Commonwealth of the Northern Mariana 
Islands cannot continue down the path it's been on because all 
of us are being hurt. If ever there was an opportunity for 
change, that opportunity is now. In social work theory, one 
sees a crisis as also an opportunity for change. If ever there 
was a crisis and a time for change, that time is now. Olomwaay.
    [The prepared statement of Ms. Ogumoro follows:]
    Prepared Statement of Lauri Ogumoro, MSW, ACSW, Karidat Social 
                            Services, Saipan
    My name is Lauri Bennett Ogumoro; I am a U.S. citizen originally 
from the state of Oregon. I have lived and worked in the Commonwealth 
of the Northern Mariana Islands for the past 25 years. I am married to 
a Carolinian from the island of Saipan. My husbands' ancestors 
navigated the open ocean in canoes to come to Saipan. They came in the 
early 1800's after their islands, between Yap and Chuuk (now known as 
the Federated States of Micronesia), were devastated by two consecutive 
typhoons. In Carolinian the word for Saipan is ``Saipol'' meaning 
``empty place''. At the time the Carolinians settled on Saipan it was 
indeed an empty place. The Spaniards had removed the Chamorro 
population from the islands north of Guam in order to colonize all the 
residents of the Mariana Islands on Guam.
    I am a professional social worker. I have a Masters Degree in 
Social Work from the University of Hawaii, 1989. I am a member of the 
National Association of Social Workers, and the Academy of Certified 
Social Workers. I worked as a social worker for the Commonwealth 
government for twenty years, most of those years as a medical social 
worker at the Commonwealth Health Center. I am now employed as a social 
worker with Karidat, which was formerly known as Catholic Social 
Services. I am the manager of Guma' Esperansa--House of Hope, the 
shelter for battered women and their children on Saipan.
    I would like to preface my testimony with the understanding that 
the Commonwealth of the Northern Mariana Islands is my home. The 
Commonwealth is a beautiful place with proud peoples of the Chamorro 
and Carolinian cultures. I have been blessed to live on the island of 
Saipan and to raise my children amongst a proud and traditional 
Carolinian family. I arrived on Saipan in June of 1982. This was 
shortly before the advent of the garment industry. The population of 
Saipan at that time was a little over 16,000.
    My testimony is not to offer solutions, but to offer a glimpse of 
the conditions of many living in the Commonwealth. I will not offer my 
personal opinions as to the issue of federal take-over of CNMI 
immigration. I am aware that some in the Commonwealth have claimed that 
I have already faxed in my statement to this Committee saying the 
federal government should take over local immigration. This is not 
true. I would also like to make it clear to this Committee that there 
are many dedicated individuals working in the CNMI Immigration and 
Labor Departments, the Department of Public Safety and the Office of 
the Attorney General. These individuals work closely with Karidat to 
assist the victims I will describe in my testimony. I offer this 
testimony as a social worker and as an advocate for women. I humbly 
offer this testimony with the support of His Excellency Bishop Tomas A. 
Camacho in order to share with you some of the stories of the women and 
children served by Karidat. Bishop Camacho has asked that I share with 
you the facts, without editorializing.
    Karidat, which means charity in Chamorro, is the only non-profit 
non-governmental social services agency in the Commonwealth of the 
Northern Mariana Islands. Karidat operates under the auspices of the 
Catholic Church in the Diocese of Chalan Kanoa. Karidat celebrated its 
first 25 years of service to the community in May 2005. Karidat runs 
several community-based programs such as individual and family 
counseling services, the House of Manhoben Teen Center, the Victim 
Hotline, the Emergency Food and Shelter Program, the Victim Advocacy 
Program, the Guest Worker Assistance Program which ran from October 
1995 to November 2005, and Guma' Esperansa. The Guest Worker Assistance 
Program operated as a safety net for non-resident workers with valid 
labor complaints to get assistance with food and shelter while they 
waited for resolution to their labor complaints and/or sought new 
employment. Funding for the Guest Worker Assistance Program came from 
the U.S. Department of the Interior, Office of Insular Affairs. Non-
resident workers referred to the Guest Worker Assistance Program (GWAP) 
reported such complaints as unpaid wages and/or overtime, illegal 
deductions for medical care and housing, unlawful termination, and 
discrimination. Some reported losing their jobs due to pregnancy or the 
inability to keep up with the quota system i.e.: having to sew 500 
sleeves a day. Most of the labor complainants seeking help from Karidat 
had labor complaints dealing with unpaid wages and overtime pay. Below 
is an overview of the numbers of clients served by the GWAP.

        GUEST WORKER ASSISTANCE PROGRAM--NUMBER OF PERSONS SERVED
------------------------------------------------------------------------
                  Year                         Food            Rent
------------------------------------------------------------------------
1996....................................             556         ( \1\ )
1997....................................             413         ( \1\ )
1998....................................             955         ( \1\ )
1999....................................           1,162             278
2000....................................           1,321             192
2001....................................           1,089             195
2002....................................             716             155
2003....................................           1,482             290
2004....................................             940              82
2005....................................             700               0
------------------------------------------------------------------------
\1\ Not available.

    Founded in 2001, Guma' Esperansa, is the newest program operated by 
Karidat. With the opening of Guma' Esperansa the Commonwealth had its 
first permanent shelter for victims of domestic violence and sexual 
assault and their children. Funding for shelter personnel and 
operations comes mainly from two competitive federal grants: Victim of 
Crime Act (VOCA) and Violence Against Women Act (VAWA) STOP funding. 
The shelter also receives funding from several other smaller grants, 
such as the Emergency Shelter Grant from the U.S. Department of Housing 
and Urban Development; and the United Way Emergency Food and Shelter 
National Board Program.
    In late 2005 Guma' Esperansa received funding from the United 
States Conference of Catholic Bishops--Refugee and Migration Program to 
provide funds to support the activities of daily living for the victims 
of human trafficking in our care. In July 2006 the funding for our 
services to victims of human trafficking was transferred to the Hawaii 
American Samoa Anti-Trafficking Services grant from the U.S. Department 
of Justice, Office of Victims of Crime. Hawaii, American Samoa, Guam, 
and the Commonwealth of the Northern Mariana Islands were included in 
this grant. Guma' Esperansa learned in August 2006 that our grant 
application for one of the ten discretionary grants for from the U.S. 
Department of Justice, Office of Victims of Crime, Human Trafficking 
Victim Services was awarded. We received the finding in November 2006. 
Thus our funding was once again transferred, this time to a grant 
specifically designed for Guma' Esperansa and the Northern Mariana 
Islands.
    Guma' Esperansa also enjoys a wide base of support from the 
community in the Commonwealth through such things as canned food and 
clothing drives, sponsorship of our Real Men Calendar, and monetary 
donations. As the only shelter for victims of domestic violence, sexual 
assault, and human trafficking in the Commonwealth, Guma' Esperansa 
provides free and confidential shelter services to victims and their 
children regardless of citizenship, ethnicity, or immigration status.
    The ethnic breakdown of clients and their children seeking refuge 
at Guma' Esperansa mirrors the ethnic diversity of the Commonwealth. 
Filipinos, followed by Chamorro, then Chinese women are the three 
largest ethnic groups served through the shelter. Because of the ethnic 
diversity of the CNMI population Guma' Esperansa has maintained a staff 
that can readily provide services in the predominant languages spoken 
such as Chamorro, Carolinian, Tagalog, Palauan, and Chuukese. Guma' 
Esperansa has contracts and/or relationships with Chinese, Korean, 
Vietnamese, and Thai translators that are available to provide 
translation services to shelter clients.
    Below is a breakdown of population by ethnicity, as reported in the 
CNMI's 2000 Census of Population and Housing by the U.S. Department of 
Commerce, Census Bureau:

         Table 1.--CNMI 2000 CENSUS OF POPULATIONS BY ETHNICITY
------------------------------------------------------------------------
              Ethnic Group                  Population      Percentage
------------------------------------------------------------------------
Indigenous..............................          17,401            25.1
    Chamorro............................          14,749            21.3
    Carolinian..........................           2,652             3.8
Other Micronesian.......................           4,600             6.6
    Chuukese (FSM)......................           1,394             2.0
    Kosraean (FSM)......................              56             0.1
    Marshallese.........................             112             0.2
    Palauan.............................           1,685             2.4
    Pohnpeian (FSM).....................             640             0.9
    Yapese (FSM)........................             204             0.3
    Other Pacific Islander..............             509             0.7
Asian...................................          38,610            55.8
    Bangladeshi.........................             873             1.3
    Chinese.............................          15,311            22.1
    Filipino............................          18,141            26.2
    Japanese............................             952             1.4
    Korean..............................           2,021             2.9
    Nepalese............................             300             0.4
    Other Asian.........................           1,012             1.5
Other...................................           8,610            12.5
Caucasian...............................           1,240             1.8
African American........................              41             0.1
Other (Other race or ethnic group;                 7,329            10.6
 combination of 2 or more ethnic groups)
                                         -------------------------------
      TOTAL.............................          69,221             100
------------------------------------------------------------------------

    The ethnic diversity of the CNMI presents many challenges to social 
service providers in terms of language barriers, cultural differences, 
and labor and immigration concerns. There are also differing attitudes 
regarding domestic violence, sexual assault, and human trafficking 
within both the indigenous and non-resident communities.
                           domestic violence
    Based on the last two years, 54 % of women served through Guma' 
Esperansa are immigrant women. Most of these women met their husbands 
on Saipan. Many are married, some are living in common-law 
relationships, and most have children. About 15 percent of these women 
are non-resident women living in common-law relationships with or are 
married to their non-resident husbands.
    Sometimes the battered woman tells us she is illegal and therefore 
usually chooses to only stay briefly in the shelter. We have 
successfully worked with the Attorney General's Office and the 
Department of Immigration to assist several women to regain their legal 
status in the Commonwealth. Some battered immigrant women report that 
they do not have a job but are ``sponsored'' by friends or relatives. 
Sponsorship arrangements are strictly prohibited by CNMI Labor 
regulations, but they are not uncommon nonetheless. The ``sponsor'' 
signs documents indicating that he or she will be the employer, even 
though there is no genuine job or wages. Finding a sponsor gives these 
women the appearance of legal status as non-resident workers so they 
are able to remain in the CNMI. This allows non-resident women to stay 
home and care for their children, as many cannot afford to pay for 
childcare. Meanwhile the father of their children (also a non-resident 
worker) works to support the entire family. One woman reported paying 
$2,000.00 to a ``sponsor'' only to have the sponsor run away with her 
money. She had no recourse for the recovery of her money since the 
arrangement was prohibited in the first place. This particular woman 
remains ``illegal''. When a nonresident worker has a family, they often 
do not live in company-sponsored barracks, since children may not be 
permitted. Instead he may rent a room for his wife and children. Many 
times these low-cost rentals have communally shared bathrooms and 
kitchens. Stress on these families can be tremendous and often leads to 
domestic violence.
    There is no provision in current CNMI Immigration law to protect 
battered non-resident women married to U.S. citizen spouses. Therefore 
the threats by a U.S. citizen spouse to send an immigrant (non-
resident) woman back home is more than just words. These are the kinds 
of threats that force women to stay in abusive relationships. The 
threat of taking their U.S. citizen children (since children born in 
the CNMI are U.S. citizens) to Guam or the U.S. mainland so she will 
not be able to see them is also very real. I have known of many such 
threats and of several cases in which this has actually been done. In 
some cases these mothers, although they have committed no crime, may 
never be able to see their children again. There was talk several years 
ago that the CNMI Immigration law would be amended to allow battered 
women to self-petition as an Immediate Relative in the Commonwealth if 
they could show that their U.S. citizen spouse was convicted of 
domestic violence. This would have been a step in the right direction, 
but I am sure that most advocates for victims of domestic violence will 
tell you that this threshold, a criminal conviction, would be too high. 
The vast majority of domestic violence cases in the CNMI, as elsewhere, 
do not involve criminal charges. It was felt, however, that the 
threshold of a criminal conviction was necessary to avoid fraudulent 
claims of abuse in order for women to stay in the Commonwealth.
    It has only been in the last few years that battered non-resident 
women married to U.S. citizens in the Commonwealth have been encouraged 
to self-petition for lawful permanent residence status in the United 
States under the provisions of the Violence Against Women Act. (This is 
commonly known as a VAWA petition.) A few years ago, I personally 
escorted an immigrant woman to get legal assistance to file a VAWA 
petition as a battered spouse. Unfortunately at that time we were told 
that U.S. Immigration law did not apply in the Commonwealth and 
therefore the attorney advised her that she needed to get her abusive 
husband to petition for her to get a green card. This particular 
woman's husband had broken her left femur bone. She had endured ongoing 
threats and abuse, as well as child abuse to her five-year-old son who 
had been adopted by her husband. Typical of abusive spouses, the 
husband had no intention of helping her improve her immigration status, 
and the woman remained in a dangerous situation for many more months. 
Fortunately, another victim in a similar situation who did not have 
access to discouraging legal advice took the initiative to complete the 
VAWA self-petition process and was successful. Lawful permanent 
residency to the U.S. has been granted to her and subsequently to 
several others. This gives us renewed hope that U.S. Immigration law in 
at least this respect protects immigrant women in the Commonwealth. I 
can also report that advocacy to the CNMI Immigration Director and the 
past Attorney General on individual cases of battered immigrant women 
to renew their CNMI Immediate Relative status without their spouses' 
consent has been successful. This has given these women time to 
consider their options, including the possibility of preparing a VAWA 
self-petition.
    In November 2006 a 39-year-old Chinese woman was brought to the 
shelter by police officers assigned to the domestic violence unit. They 
told us this woman was a victim of domestic violence. Through 
translators we learned she had been on Saipan for almost one month. She 
spoke no English and had visible bruises on her arms and head. Through 
the translator it was learned that she came into Saipan on a tourist 
permit with the purpose of marrying a U.S. citizen. It seems a cousin 
already on Saipan who worked in a garment factory arranged the 
marriage. The cousin told this woman that this was the fastest way for 
her to get a job on Saipan because she would become IR (Immediate 
Relative status) when she got married then she could get a job. When 
asked why she came to Saipan this woman told us through the translator 
``to work and make babies''. This woman left the shelter before we 
could assist her with a protective order. She told us she was afraid of 
getting her cousin in trouble. This same woman returned to the shelter 
just two days later, telling us she was afraid of her husband because 
he continued to hurt her. She told us she needed to get away from her 
husband and that her cousin was going to find her a new place to live. 
She again left the shelter before we could help her. Is this story 
indicative of more out there? I do not know. What I do know is that 
these women are vulnerable and afraid to utilize the system that is 
designed to protect them.
                           human trafficking
    In May 2005 Guma' Esperansa took in its first victim of human 
trafficking. At the time we knew little about human trafficking or the 
services needed by the victims. We had to learn fast. Unfortunately the 
Commonwealth of the Northern Mariana Islands is not immune to the 
modern day form of slavery known as human trafficking. Our idyllic 
tropical islands have seen several trials in recent months in both the 
local and federal district courts of women who were brought to our 
islands and forced into prostitution by their traffickers. In the year 
2006 Guma' Esperansa served thirty victims of human trafficking from 
four cases identified through local law enforcement. This number does 
not include those victims of human trafficking discovered by federal 
law enforcement. These victims were subsequently sent to Guam for safe 
shelter. A prayer that was found in the back of a journal kept by one 
of the sex trafficking victims rescued on Saipan can best describe the 
needs of the victims and why human trafficking is a priority of the 
federal government.

          Dearest Lord: Please help my job everyday. I need money for 
        my family. I know you knew it already. So, I hope I will be 
        able to meet a generous person. Please provide me that kind 
        person. Lord I hope you understand me. As you know, I want to 
        go back to the Philippines. I do not like it here anymore, so 
        please speed up every single day that passes by. Please help 
        me. Please do not forsake me. Please guide me down here.

    The first victim of human trafficking assisted by Guma' Esperansa, 
is a 43 year old Chinese woman who ran away from her employer after 
having been assaulted. This woman flagged down a passer-by who brought 
her to the police station. The police escorted her to the hospital due 
to her injuries and subsequently brought her to Guma' Esperansa for 
safe shelter that same day. Through the assistance of translators we 
learned the details of X's life in the Commonwealth. X was recruited to 
work as a babysitter. After working for her employer for one month in 
China, her employer asked X to come to Saipan to work for her. X's 
contract states that she was a waitress on the island of Tinian. X's 
CNMI Labor contract was never translated to her; she signed her 
contract trusting her employer's explanation to her. She arrived on 
Saipan in late December 2004. During her employment on Saipan, X states 
she worked 20 to 21 hours a day, cooking, cleaning, and babysitting. 
She never had a day off. She not only cleaned her employer's apartment 
and watched her baby but she also cleaned another apartment where other 
employees were staying. X was promised that she would receive $250.00 a 
month and that her employer would pay all of her processing fees. She 
was paid twice, but deductions were taken from her salary each time; 
her total net pay for four months of work was about $255.00. X was also 
forced to sign a promissory note saying she owed her employer for her 
plane ticket and processing fees. She was assaulted by her employer and 
others working for her employer on at least four different occasions. X 
begged her employer to send her home to China. X was told that if she 
tried to runaway, her employer would find her, ``dump'' her body into 
the ocean, and tell her family in China that she was smuggled to Guam. 
The criminal trial against X's trafficker has not been completed. X's 
trafficker is charged with one count of assault and battery. A civil 
case has been filed in the U.S. District Court of the Northern Mariana 
Islands but is stayed pending the completion of the criminal case.
    In September 2005 Guma' Esperansa took in two young women recruited 
in the Philippines to come to Saipan to work as waitresses for three 
months. Both women were promised to be paid $400.00 a month. They were 
brought in legally on tourist permits. These young women were never 
told that tourist permits would not allow them to lawfully work. The 
applications for tourist permits were submitted to CNMI Immigration 
claiming the young women were respectively the niece and the girlfriend 
of their male employer/trafficker. Both arrived on Saipan early in the 
morning and were shown to their rooms in the massage/karaoke parlor and 
told to rest. In the afternoon of the day of their arrival each was 
given a box of condoms and a box of small yellow pills. They were 
instructed to take one pill every day. Later that afternoon a Korean 
male and ``Mamasan'' knocked on the door of one of the young women. 
``Mamasan'' told her that the Korean was a good man and would take care 
of her. This victim recounts how she was terrified and shocked when she 
realized what was happening. She states she started crying. The Korean 
male then raped her. All in all four men raped her on the first day she 
was arrived on Saipan. Much the same happened to the second young 
woman. Both women stated they pleaded with Mamasan to give them the 
waitress job that was promised. One of the victim's states she even 
begged to be a ``washer woman''. Mamasan threatened them if they did 
not comply. She told them she would turn them into the police. Mamasan 
told them that they needed to work as prostitutes because they owed her 
money, and if they didn't pay her back they would never see their 
families again. Mamasan took their passports and travel documents. The 
two young women stated they would sometimes find themselves locked 
inside the massage parlor. These young women stated that they were 
forced to work as prostitutes for almost ten days. That is until they 
escaped with the help of several young Filipino males they actually met 
in the massage parlor.
    The two young women in this case were able to testify at the 
criminal trial against their traffickers. The traffickers were found 
guilty on all counts but two. They have been sentenced to three years 
in jail, ordered to pay an $8,000.00 fine and to serve 7.5 years 
probation. They are also barred from ever hiring non-resident workers 
again and their business license was revoked. The female trafficker in 
this case, Mamasan, a Chinese national, has been ordered deported after 
serving her three-year sentence. In December 2006 this particular 
Chinese woman was found amongst a group of 16 Chinese nationals on a 
boat in CNMI waters that was intercepted by local and federal 
authorities as the group was allegedly trying to be smuggled to Guam.
    In March 2006, Guma' Esperansa began serving seven young Filipino 
women, two of which were still minors at the time they were rescued. It 
is alleged that at one time this particular club employed as many as 
seven minors. These young women's employer/trafficker operated two 
nightclubs on Saipan. In April 2006 a task force of Law Enforcement 
Officers rescued eleven more young Filipino women from this same 
nightclub. These young women were all recruited from the provinces of 
the Philippines with the promise of earning 500,000 Philippine pesos 
(about $10,000 U.S.) to be exotic dancers at the bars operated by their 
traffickers. Because several of these young women were minors and/or 
too young to work in a bar in Saipan, the traffickers told them to get 
birth certificates saying they were 21 years old. With the promise of 
500,000 Philippine pesos for one year's work these young women were 
able to secure the needed birth certificates. They then gave these 
birth certificates to their traffickers who used their connections in 
the Philippines to get passports made using the fraudulent birth 
certificates. Before leaving the Philippines all of these young women 
were forced to sign a waiver of their personal rights on Saipan. Their 
traffickers told them that this was for their protection. The women 
were subsequently locked in their barracks during nonworking hours. 
They were all forced to cash their paychecks in the ``bar'' where 
deductions were taken from each paycheck for such things as costume 
rentals, and bed sheets. One young woman told us she paid almost 
$600.00 to rent her bed sheets. These young women were also forced to 
do more than just perform exotic dances. They were forced to perform 
lewd acts with customers against their will. When they complained that 
they did not want to perform such acts the traffickers told them that 
the man was a ``good customer'' and threatened them with more 
deductions from their pay or to be sent home if they did not comply. 
Promised commissions for ``ladies drinks'' were never paid.
    These young women told us they thought they could be ``exotic 
dancers'' for one year. After all they were promised 500,000 Philippine 
pesos, a lot of money to help their families back home. These young 
women's employers/traffickers are being charged with 227 counts of 
``unlawful exploitation of a minor; involuntary servitude; sexual 
servitude of a minor; human trafficking; immigration fraud; unlawful 
exploitation of a minor; solicitation, conspiracy; transporting persons 
for the purposes of prostitution; employment of illegal aliens; 
harboring illegal aliens; aiding, abetting and encouraging illegal 
entry; assisting illegal aliens; and conspiracy''. This is the first 
case charged under the Commonwealth's Anti-Human Trafficking Law. The 
trial is set for February 2007.
    All of the women from this case are pre-certified victims of human 
trafficking. They are now living in apartments around the island, which 
are subsidized by Karidat through a U.S. Department of Justice, Office 
of Victims of Crime grant for service to victims of human trafficking. 
Despite living away from the shelter, shelter staffs are in touch with 
most of the women on a daily basis. Karidat assisted these women to 
find jobs, now most are working. Several of the women have been 
attending Adult Basic Education classes in order to earn a high school 
diploma.
    On December 4, 2006 a group of seven women from China arrived on 
Saipan after having been recruited for work in Saipan. Each paid 
$6,000.00 (US) to recruiters in China for their job in Saipan. The 
women understood that two were to work as commercial cleaners, two were 
to work in a restaurant, and three would work in a garment factory. 
Upon arrival in Saipan they were told that the jobs they were promised 
did not exist. Instead, they were offered work as prostitutes and club 
workers on Tinian. Six of the women sought the help of authorities the 
next day. The six were brought to Guma' Esperansa for safe shelter. The 
seventh remains with the alleged employer/traffickers. This case 
remains under investigation at this time. The women remain anxious and 
frustrated. The reality that they may return to China without being 
able to pay back those they borrowed money from to get the job in 
Saipan is always in their minds. The following is a translated 
statement they wrote to the CNMI Labor Department:

          Dear Labor Department Staff,
          One of the girls had already gone back to China. Our case had 
        still not being processed. We are wondering what's the 
        explanation from your side. You might say that there is not 
        enough evidence or you are still investigating about it. At 
        least we had the right to know what's going on. The rest of us 
        can only get a return ticket home. If that's the end, we'll be 
        very disappointed.
          Even though you always said that our money was cheated in 
        China, but if there were no connection from Saipan, how could 
        we get here? Now the Chinese New Year is coming we are all 
        hurry up and want to be back home. But if by that time all we 
        get are just return tickets without further follow-up, then why 
        not just cancel our case. That will save your time!
          If there is anything that we wrote above has offended you, 
        please excuse us.
          [Letter signed by the five remaining victims from this case.]

    Is this the tip of the iceberg? Are these isolated cases? There is 
some belief on island that the women who report such schemes as 
discussed above say they are victims of human trafficking in order to 
get the benefits. Not all victims of human trafficking, contrary to 
popular belief, want to go to the United States. They are not looking 
for T-Visas, most have never heard of such a thing. Unfortunately the 
reality is that due to their being a victim of human trafficking it may 
no longer be safe to go back home. This reality is not always easy for 
victims to comprehend as they long to see families they left behind.
    It was reported in the local media in April 2006 that from 1999 to 
2005, the number of non-resident workers in the CNMI with permits to 
work in nightclubs and bars ranged between 456 and 679 a year, 
according to data compiled by the Department of Commerce. It was 
further reported that the government issued the most permits for these 
workers in 2005, at 679, an almost 10 percent increase from the 
previous year's 618 permits. I have had the opportunity to talk with 
many women over the last few years. Many recounted how they were 
brought to Saipan to work in nightclubs, bars and karaoke's. Many 
stated they discovered that when they got to Saipan their job included 
much more then just being a waitress. Sometimes they were locked in 
their barracks, some report being escorted to the store and even 
church. One woman tearfully shared how one day the boss told them that 
they would now be required to serve customers topless. She told me she 
refused to serve customers topless because it was not in the contract. 
She stated that her employer bought her a plane ticket and sent her 
home to the Philippines the next day. Thus sending a message to the 
rest of her co-workers that they must do as they are told or they would 
be sent home. Another woman told me how she came to Saipan to work as a 
waitress but she was forced into prostitution. She told me she was able 
to escape by befriending one of the customers who got her out of the 
club and eventually married her.
    When I talk with community members and tell them about human 
trafficking and what is happening to these young women working in the 
night clubs the response is much the same, ``Oh he's been doing that 
for years, or that's just the way it is.'' This complacency amongst 
community members would no doubt be different if these young women were 
women from the Commonwealth being trafficked into China or the 
Philippines. Human trafficking is not just about something that happens 
in far away places. It happens in our own beloved Commonwealth.
    long-term effects of cnmi labor/immigration policies on the cnmi
    Perhaps an unintended consequence of the Commonwealths' desire for 
growth and development is where we are now with a guest worker 
population that exceeds that of the indigenous/U.S. citizen population. 
Rapid population growth and development has put stress on island 
infrastructure and ecosystems. City water is ``on'' for only a few 
hours a day in many parts of the island. The public school system does 
not have enough teachers to meet the needs of an ever-growing student 
population. Public health and medical services struggle to keep enough 
doctors and nurses on island to meet the medical needs of the general 
public. The Medicaid program has over 10,000 cases, and is challenged 
to pay the medical bills of its clients. Many non-resident workers are 
afraid to seek medical treatment for fear of losing their job or having 
their employer deduct their medical expenses from their pay. The 
criminal justice system is burdened with an increasing robbery and 
burglary rate. Perhaps this is due to the ever widening economic 
hardships on island and the competition for a limited number of jobs.
    The number of undocumented workers and workers who are 
``sponsored'' living in the Commonwealth ranges from 500 to 5,000 
depending on who you talk to. Some in the Commonwealth will make the 
charge that the United States has a lot of undocumented workers too. 
While this is true, the situations are not really similar. 
Unfortunately, the islands of the Commonwealth do not allow an 
undocumented worker to move from freely from island to island to find 
work. The undocumented worker cannot make it back across the border to 
his or her homeland. Unfortunately, he or she remains on island, most 
living in plain sight of Commonwealth authorities. Nearly all 
undocumented nonresident workers in the Commonwealth have children born 
in the Commonwealth. These children attend Headstart and the public 
schools. If one of the parents is legal they may try to apply for 
Medicaid health insurance and food stamps for the children. One must 
also realize that the majority of the non-resident workers brought to 
the CNMI are of childbearing age. According to the 1995 Census 95% of 
the CNMI workforce is a ``Guest Worker'' or non-resident workforce. 
Just over half of the CNMI population is of Asian descent; this group 
is predominately individuals from the Philippines, China, Thailand, and 
Korea. There is a ``melting pot'' of guest workers that eagerly come to 
the Commonwealth seeking a better wage in order to care for their 
families back home.
    Employers within the Commonwealth can readily seek non-resident 
workers from nearby Asian countries. While it is seemingly easy to 
bring in guest workers to the Commonwealth, on the other hand it seems 
very difficult to repatriate these workers to their home country when 
entry and work permits are expired and the workers are in hiding. Many 
non-resident workers claim that they have not been paid or have been 
abused by their employers thus there is an overwhelming backlog of 
labor cases. Some of these claims may be frivolous but others describe 
very real violations of human rights and/or of the Fair Labor Standards 
Act. The sheer number of labor cases to be reviewed and adjudicated is 
overwhelming. Contract workers continue to be stranded as they wait for 
employers to pay their back wages and provide them with plane tickets 
to go home. This may very well lead to exploitation of stranded workers 
already in the CNMI by unscrupulous employers, illegal sponsors, and 
human traffickers.
    Bishop Tomas A. Camacho wrote so eloquently to all the people in 
the Commonwealth in his pastoral letter on human rights on the feast of 
St. Joseph the Worker, May 1, 2006. Bishop Camacho reminded this 
predominately Roman Catholic community, both resident and non-resident, 
of Catholic teaching on human rights and justice. If I may paraphrase 
Bishop Camacho's pastoral letter: ``. . . Catholic social teaching 
emphasizes that no society can be considered truly prosperous if it 
neglects the needs of the poor and vulnerable''. Karidat faces 
challenges on an almost daily basis to meet the needs of the poor and 
vulnerable in the CNMI society. Resident and non-resident alike deserve 
to be treated with respect, dignity and justice.
    Many in the Commonwealth are afraid to speak out, for fear of 
reprisals to themselves or family members. I believe it is a matter of 
conscience. The abuses described above are not representative of 
indigenous values nor of Catholic social justice. If we do not speak 
out to correct the wrongs in our islands we will lose who we are as 
Chamorros, Carolinians, and Americans.

    The Chairman. Thank you very much. I appreciate you being 
here and I appreciate Sister Stella and Kayleen Entena being 
here as well. Did either of you wish to make a statement or are 
you here to answer questions?

 STATEMENT OF SISTER MARY STELLA MANGONA, SISTERS OF THE GOOD 
                            SHEPHERD

    Sister Mangona. I gave a written testimony. I am in support 
of what Miss Lauri Ogumoro has just said regarding the CNMI.
    My role as a Good Shepherd Sister is to work with a number 
of non-resident workers, citizens in the community, and my work 
has called me to appreciate the Island. My mission is still to 
respect, to appreciate the beautiful culture of respect, but I 
am here in order to appeal to everybody to do something for the 
best interest of the Island, of the people of the CNMI. It has 
suffered such negative reputation based on the conditions 
existing in sweat shop garment factories which were exposed in 
1990's. There has been some improvement, but one of the things 
that is close to my heart is the recent immigration policy has 
created a permanent type of third-class citizens of non-
resident workers who remain non-resident workers, 
disenfranchised and without any rights, because they remain so.
    As a human rights advocate I applaud some of the local 
labor departments' serious and timely investigation of the 
abuses that have been mentioned by many of the speakers. As a 
human being though, I do think logically that I'm mystified by 
why these particular workers were permitted to enter CNMI at 
all. I'm talking about the non-resident workers. One garment 
factory after another has been closing throughout 2006, as has 
been mentioned. But some companies continue to employ new 
workers; the question is why is this continuing? The companies 
didn't need new workers. It made more work for labor to 
investigate and repatriate them. They create a burden on CNMI 
society at large while they are unemployed and are waiting for 
the labor cases to be heard and settled, since in many cases 
they need to rely on charity for their basic support. The 
greatest suffering, however, is of course imposed on the 
individual non-resident workers who came with the dream to help 
their families back home. It would appear then that the only 
ones benefiting are the unscrupulous recruiters in the home 
companies.
    So I would like to quote from Bishop Tomas Camacho's 
Pastoral Letter on Human Rights, issued in Saipan on May 1, 
2006, because I am here to appeal that we may do the best we 
can for the CNMI citizens, non-resident workers and everybody 
that lives there, and we all advocate. I'm an advocate for 
human rights. ``Some may feel that desperate times justify 
desperate measures to bolster the economy or simply to provide 
for our families. We must avoid this temptation in the light of 
Catholic teaching and human rights and justice. We must never 
exploit our fellow human beings nor sacrifice the rights on the 
altar of prosperity. Indeed Catholic social teaching emphasizes 
that no society can be considered truly prosperous if it 
neglects the needs of the poor and vulnerable. If our community 
allows human rights abuses they will continue to happen. If our 
community as a whole does not tolerate abusive activities they 
will stop.''
    I have shared my experiences, similar to experiences of 
Miss Lauri Ogumoro, only to provide information and insight 
into the conditions of contract workers and families in the 
CNMI. I believe the time has come for us in the light of the 
gospel to proclaim freedom for prisoners, recovery of sight for 
the blind and relief for the oppressed. Let us then have the 
courage to earnestly seek what is best for all people without 
respect to wealth or power. May justice reign in the CNMI that 
we may repair our tarnished international reputation. Thank 
you.
    [The prepared statement of Sister Mary Stella Mangona 
follows:]
 Prepared Statement of Sister Mary Stella Mangona, Sisters of the Good 
                                Shepherd
    My name is Sr. Mary Stella Mangona. I was born in the Philippines 
and became a naturalized citizen of the United States in 1992. I am a 
licensed Marriage and Family Therapist with an M.A. in Psychology from 
the Ateneo de Manila University in the Philippines. I also received 
training in Pastoral Counseling at Loyola University, Chicago. I have 
been employed since 1999 by the government of the Commonwealth of the 
Northern Mariana Islands (CNMI) as a mental health counselor with the 
Department of Public Health, Community Guidance Center. I am, however, 
attending these hearings of the United States Senate Committee on 
Energy and Natural Resources not in my capacity as an employee of the 
CNMI government but in my role as a Catholic Religious Woman, as a 
delegate of His Excellency Bishop Tomas A. Camacho of the Diocese of 
Chalan Kanoa. I am here primarily to offer support to other members of 
the Bishop's delegation and to assist with translation from Tagalog, if 
necessary, for a victim of human trafficking who will be testifying 
before the Committee on February 8, 2007. I am also grateful for this 
opportunity to offer written observations particularly in regard to 
issues of labor and immigration in the CNMI. I will try to describe the 
life situations of many of my clients without advocating particular 
solutions.
    I have been a Sister of the Good Shepherd for more than 40 years, 
that is, a member of a Roman Catholic international order of religious 
women with ministries spanning 71 countries including the CNMI. Good 
Shepherd work throughout the world is directed by the Church's 
teachings on Social Justice, with a special emphasis on advocacy for 
human rights and upholding the dignity of each individual. Our mission 
is especially to girls and women who are marginalized in society. I 
have been living and working on Saipan since 1999, when my Provincial 
Superior encouraged me to move from Guam to follow up on rumors about 
female victims of human trafficking and to find out whether we could 
provide assistance or intervention. My position with the CNMI Community 
Guidance Center has enabled me to work closely with other service 
agencies like Karidat (the local equivalent of Catholic Charities), 
Division of Youth Services, Public School System, Probation Department 
and the Department of Corrections. At times I have been approached by 
the Bishop, by parishioners referred contract workers, and by non-
resident workers themselves as they feel I can be trusted with 
sensitive information in my capacity as a Religious and a counselor. My 
individual and family counseling sessions have been with both local 
population as well as other ethnic groups living in the CNMI. Outreach 
programs and educational presentations have touched on a large number 
of issues particularly domestic violence, human rights advocacy with 
non-resident workers, the rights and responsibilities of overseas 
workers (particularly to Filipino groups, given my background and 
ability to speak Tagalog), sexual abuse of children, depression and 
anxiety, and trauma recovery and empowerment for victims of human 
trafficking and sexual assault.
    My mission on island makes me appreciate the beautiful culture of 
``respetu'' of elders and family members. This tradition, which is also 
a Filipino value, has inspired me to extend the respect and honor to 
other members of CNMI society who may not be citizens. I have supported 
the laws and customs that reflect Catholic social teaching that 
emphasizes treating one another with dignity and justice based not on 
social position, achievements, wealth, or any other determinants. In my 
eight years here in the CNMI, I have met many persons in the public and 
private sectors who work tirelessly for the protection of the poor and 
vulnerable. These individuals' valiant efforts on behalf of specific 
victims of exploitation and discrimination, however, have not stemmed 
the tide of new problems. I see two prongs to this difficult situation. 
On the one hand, there are overt violations of human rights, mainly in 
the areas of non-payment of wages, hostile workplace practices and the 
illegal termination of workers who try to bring such conditions to the 
attention of authorities. Such incidents continue to be reported at an 
alarming rate, but at least these workers do have some recourse through 
local laws and Federal mechanisms such as the Fair Labor Standards Act 
and the Equal Opportunity Employment Commission (EEOC). On the other 
hand, there are many others--especially women and children--who are 
consigned to degrading living conditions and vulnerable to various 
sorts of scams purported to improve their status but in fact only 
benefiting the enterprising operators who prey upon them. It is my 
observation that these women and children are victims of unintended 
consequences of the ``guest worker'' immigration program of the CNMI.
    The CNMI has suffered from a negative reputation based on the 
conditions existing in ``sweat shop'' garment factories which were 
exposed in the 1990's. Indeed there were heinous abuses at the time. 
Complaints were filed. Due process, along with the pressure generated 
by high-profile news media (the 20/20 story, for example), resulted in 
dramatic improvements. Changes were mandated. Some of the worst 
violators closed their CNMI factories. By 2003, I had seen a 
significant change in amelioration of the problems presented. The 
information about improvements in working conditions, however, never 
received the same level of publicity as the reports of the original 
violations. Among those relatively few people who even know of the 
existence of the CNMI, even to this day the reaction to mention of 
Saipan tends to be something along the lines of ``Isn't that that 
terrible place with all those sweat shops?'' Not surprisingly, this has 
engendered a defensive stance in industry and government. While it is 
true that some negative publicity from outside our Islands is based on 
out-dated information, the result of the defensive posture is that 
current legitimate concerns are downplayed by the insistence that 
progress has been made since the 90's or that any given report is an 
isolated case. The climate is not conducive for productive dialogue and 
search for systemic solutions to serious and ongoing problems. Policies 
which are harmful not only to non-resident workers but to indigenous 
people remain in force.
    I want to emphasize that my concerns pertain to ``the system'' as a 
whole, not to any particular department. The Labor and Immigration 
Departments are technically separate, but they are housed in the same 
building and their functions blur together. Because the guest worker 
population is currently larger than the resident population, the vast 
majority of incidents involve both labor and immigration because the 
issues are inextricably linked.
     a current example of a labor case involving a garment factory
From the Marianas Variety, February 2, 2007
          Concorde Garment Manufacturing Corp. and L&T Group of 
        Companies fraudulently induced 48 of its 1,406 former employees 
        to sign contracts by hiring them even though the companies knew 
        they were going to close the factory, according to the 
        Department of Labor. Labor also found other violation of labor-
        laws and rules by Concorde and L&T, including their conditional 
        renewal of contracts upon workers' payment of recruitment fees 
        of up to 3,800 Chinese RMB or some $489. These were among the 
        findings in the compliance agency case filed by Labor on behalf 
        of 1,406 former Concorde and L&T employees, according to an 
        `amended determination' issued on Monday by Labor Director 
        Robert N. Magofna and reviewed by Assistant Attorney general 
        Dorothy Hill. . . .
          `It is the department's position that because respondents 
        took affirmative steps to bring these employees to the CNMI 
        after they knew, or should have know, that they were not going 
        to be able to fulfill the terms of their contract with these 
        workers, they fraudulently induced these employees to contract. 
        As such, the department cannot approve these terminations as 
        undertaken in good faith for economic necessity,' said Labor.
          A labor investigation found that as early as Sept. 26, 2006, 
        the respondents' corporate management in Hong Kong decided to 
        implement a significant reduction in force of its Saipan 
        operations, effective January 2007, and this was conveyed to 
        senior management in Saipan in early Oct. 2006. However, 
        Concorde's 48 new hires from China entered the CNMI on or after 
        Oct. 28, 2006 and the last four arrived on Nov. 4, 2006.

    As a human rights advocate, I applaud the local Labor Department's 
serious and timely investigation of these abuses. A step towards 
justice for the defrauded laborers--good! As a human being who tries to 
think logically, however, I am mystified why these particular workers 
were permitted to enter CNMI at all. One garment factory after another 
has been closing throughout 2006. As of October 2006, there were 
already hundreds, if not thousands, of displaced garment workers on 
Saipan, seeking transfers to those factories still operating. Even 
assuming that Concorde had been financially thriving and legitimately 
in need of augmenting its workforce, why was it authorized to import 
workers from off-Island rather than recruiting from the existing pool 
of experienced, unemployed garment workers already here? That is a 
question that everyone I know has been asking. It doesn't seem to make 
any sense. The companies didn't need the new workers. It made more work 
for Labor to investigate and repatriate them. They create a burden on 
CNMI society at large while they are unemployed and/or waiting for the 
labor cases to be heard and settled, since in many cases they need to 
rely on charity for their basic support. The greatest suffering, 
however, is of course imposed on the individual non-resident workers, 
who came to the CNMI with their dreams of helping their families back 
home, only to find they had wasted their resources and worsened their 
situations. It would appear that the only ones benefiting are the 
unscrupulous recruiters in the home companies. Why then did Labor and 
Immigration allow them to come in?
                     what does ``temporary'' mean?
    The establishment of the garment industry in the CNMI opened the 
door for non-resident workers to come and help because of the lack of 
local labor force. Non-resident workers are commonly called ``contract 
workers''--both by themselves and by the local residents who hire them. 
This designation reflects the understanding that these alien workers 
are supposed to be in the Commonwealth on a temporary basis, according 
to the terms of their contracts (usually for one or two years). Since 
the contracts can be renewed, however, there are a substantial number 
of non-resident workers who have remained in the CNMI on a more or less 
continuous basis for 15-20 years. This has effectively created a 
permanent underclass of disenfranchised persons. If you have lived 
somewhere for 20 years, it really is your home, but these workers have 
no official status of belonging. They are valued employees with stable 
employment histories, U.S. citizen children going to public schools, 
deep roots in the community, but no possibility of adjusting their 
year-to-year vulnerable, temporary status except by marrying a local 
person. In my counseling caseload, I encounter approximately 5 cases 
each year involving ``contract marriages,'' where non-resident workers 
marry a U.S. citizen after the payment of a fee. I believe that the 
ones I actually see are only the tip of the iceberg. I do not wish to 
imply that the problem of contract marriages is unique to the 
Commonwealth, although I think that due to our small population, there 
may be a greater proportion per capita as compared with the U.S. 
mainland.
    The long-term ``temporary'' alien workers described above are here 
legally; their contracts are regularly renewed, or they transfer to new 
employers and the proper papers are filed to establish new contracts. 
But what about those workers whose contracts are not renewed? The 
expectation of the non-resident employee system would be for all 
workers to return to their home countries upon the conclusion of their 
contracts. The employer of record is required to provide the return 
ticket. There is, however, a 45-day grace period during which the 
individual can seek to transfer to another employer. Perhaps during the 
boom years of economic expansion, this provision worked effectively. 
When there were plenty of jobs to be found, displaced workers could 
find new legal employers. The system is definitely not working well 
now. It is difficult for anyone to find a new job. Many people ``go 
underground'' by the end of the 45 days. They do not report to their 
original employer for the ticket back. They become over-staying aliens 
subject to deportation, essentially hiding in plain sight. They eke out 
an existence, and they stay, sometimes for years. A peculiar problem 
arises when an over-staying alien happens to die in the Commonwealth. 
Who is responsible for the funeral or repatriation of the body? I have 
personally known of three such cases where the body stayed in the 
morgue for months because nobody claimed responsibility and there was 
no mechanism to assign it.
    There does not appear to be any reliable answer to the question of 
how many undocumented persons currently reside in the Commonwealth. The 
Department of Labor recently published a list of 1,001 names, but it 
included some who have already departed and others who can prove that 
they have legal status. My Filipino clients and friends have also 
informed me that they know of many ``illegals'' whose names do not 
appear on the list. What does this imply about the accuracy of the 
tracking system?
                     displacement of local workers
    The establishment of garment factories on Saipan necessitated the 
availability of thousands of workers, which led to the inauguration of 
the guest worker program. Labor laws and policies are very clear that 
CNMI residents (often calls ``locals'') and their immediate relatives 
(IR's) have preference in hiring. Employers are only permitted to hire 
a non-resident worker after they have demonstrated that they tried to 
recruit from the local labor force but no suitable applicant was 
available. I have personally assisted many women to look for employment 
and I have learned that this policy is widely circumvented. On any 
given day, there are a number of ``help wanted'' ads in the newspapers. 
Telephone inquiries about the vacancies, however, elicit the response, 
``It's only a renewal,'' meaning that a non-resident worker's contract 
is expiring and is about to be renewed. The employer duly advertises 
the position, giving the appearance of following the law, but without 
the intention of allowing for possible recruitment. The ``vacancy'' is 
actually a ``no vacancy.'' This is very disheartening for local and IR 
women who need to be able to support themselves and their children so 
they can separate from abusive spouses and common-law partners. The 
lack of good-faith recruiting can be reported to the Department of 
Labor, but gaining a reputation as a ``troublemaker'' will not endear 
the applicant to the prospective employer. It is often said that local 
people are unwilling to work in minimum wage jobs for $3.05 an hour. My 
observation is that few locals are ever given the opportunity to test 
their willingness. It is more expedient for employers to hire non-
residents who are both less likely to know their legal rights and less 
able to resist exploitation.
                    catholic social justice teaching
    In conclusion, I quote from Bishop Tomas A. Camacho's Pastoral 
Letter on Human Rights, issued on Saipan on May 1, 2006.

          Some may feel that desperate times justify desperate measures 
        to bolster the economy or simply to provide for our families. 
        We must avoid this temptation in the light of Catholic teaching 
        on human rights and justice . . . We must never exploit our 
        fellow human beings nor sacrifice their rights on the altar of 
        `prosperity.' Indeed, Catholic social teaching emphasizes that 
        no society can be considered truly prosperous if it neglects 
        the needs of the poor and vulnerable. . . .
          If our community allows human rights abuses, they will 
        continue to happen.
          If our community as a whole does not tolerate abusive 
        activities, they will stop.

    I have shared my experiences to provide information and insight 
into the conditions of workers and families in the CNMI. The CNMI is a 
beautiful place with proud and ancient traditions for its residents and 
offering hope to those non-resident workers who continue to seek 
opportunities on these Islands, but our tarnished international 
reputation is like a deep wound with a small band-aid on it. Let us 
have the courage to earnestly seek healing. I believe the time has come 
for us, in the light of the gospel, ``to proclaim freedom for 
prisoners, recovery of sight for the blind, and release for the 
oppressed.''
    May justice reign in the CNMI!

    The Chairman. Thank you very much. I appreciate your 
statement. Kayleen, did you wish to make a statement also? If 
so, you're welcome to do that.

   STATEMENT OF KAYLEEN D. ENTENA, RESIDENT, THE PHILIPPINES

    Ms. Entena. Good morning. I am Kayleen Entena. I want the 
CNMI government and immigration official to revise or make 
their requirements stricter, especially for entering Saipan, 
Tinian, and Rota. I am hoping that this kind of illegal system 
will stop, the way it happened to me, the way I was treated. I 
do not want this to happen to anyone. I know that there are 
other women out in the community like me. They are just afraid 
to speak out because they don't know where to go or just 
because they have to support their family back home. Please 
help change the way the government functions here on the CNMI. 
The way it is so easy to bring people from the Philippines and 
force them into prostitution like me. If there's no change in 
the system and the people who are doing this are not held 
responsible for their actions, no matter where they are from--
China, the Philippines or even Saipan--then it will continue to 
happen to innocent victims like me. I hope you will hear my 
wish. I am thankfully grateful.
    [The prepared statement of Ms. Entena follows:]
   Prepared Statement of Kayleen D. Entena, Resident, The Philippines
    My name is Kayleen D. Entena. I am 23 years old; I am from Laguna 
Province in the Philippines. Laguna Province is about two hours by bus 
from Metro Manila. I am the eldest child in my family. I have four 
brothers, my father passed away when I was in elementary school. My 
mother works sometimes as a housekeeper. When I was recruited in the 
Philippines for work in Saipan in September, 2005, I was excited about 
the opportunity to work abroad. I was promised to be paid $400.00 a 
month to work as a waitress, they told me I would be working in a 
restaurant. I was looking forward to earning money to help my family 
and to go back to college. My Mom did not want me to go to Saipan. She 
was worried because everything happened so fast. I told her I wanted to 
go because I trusted what Sir Ed and Arnel were telling me.
    I arrived on Saipan early in the morning. Sir Ed was on the plane 
with us from the Philippines. His wife met us at the airport. She told 
us to call her Mamasong. They took us to the restaurant; they showed me 
to my room and told me to take a rest. Later in the afternoon when I 
woke up Mamasong came to my room and gave me a box of small yellow 
pills and a box of condoms. She told me to take one pill everyday, she 
told me it would make me feel good and that the pills were for my 
health. I did not question the box of condoms because I did not look 
inside the box when she gave it to me.
    I remember after about one hour Mamasong knocked on my door she was 
with a guy, I think he was a Korean: Mamasong told me to massage him. I 
was shocked. I did not know what kind of massage. Mamasong left. I 
started massaging they guy's back, he told me ``not that kind, I 
already paid Mamasong'', then he said you ``give me satisfaction''. I 
did not know what I was going to do, I was scared, I started crying, I 
told him, ``I don't like, I don't like'', he then started to rape me. I 
started crying, the man complained to Mamasong, he told her ``your girl 
is no good'', he wanted a ``yellow massage'', which is having sex with 
a guy. Four men raped me in this same way on my first day in Saipan.
    This kind of thing went on for almost ten days to me and the other 
girl from the Philippines. We tried to run away twice, but they were 
always at the front, we did not have a chance to get out. Mamasong told 
us if we tried to leave she would call the police. We were very scared. 
We begged Mamasong to give us the jobs that they promised us in the 
Philippines. Mamasong was really mad; she told us if we are only 
waitresses we would not make enough money to pay for our plane tickets 
and passport. I wanted to kill myself, but the girl with me told me 
``don't do that, we came here together, God is here with us and He will 
help us, He will not forsake us''. She told me we have to be strong. 
She said, `` I have a son and I need to be strong because of my son. 
You, you are the eldest in your family so you need to be strong too. 
When we have the opportunity we will run away''.
    We asked everyone that came into that place to help us. Most said 
they were scared they did not want to get involved. Finally a young 
guy, 21 years old, who was half Chamorro/half Filipino and his friends, 
helped us. His friends were young too; one of them was only 16 years 
old. Mamasong served them drinks. I did not know that if you are only 
16 years old you are not allowed to drink in a bar. When a group of 
Japanese customers came into the bar we decided it was the right time 
to run away, but Mamasong saw us, and we went back inside. Later that 
same night when Mamasong was busy with the customers we ran away and 
kept on running to where the young guys told us to meet them. The guys 
were waiting for us; they took us to one of their houses. One of the 
guy's mom helped us, we told her our story and she called Immigration. 
Finally they took us to Karidat. I am not sure what would have happened 
to me if all these people didn't help me.
    I want the CNMI Government and Immigration officials to revise or 
make their requirements stricter especially for entering Saipan, 
Tinian, and Rota. I am hoping that this kind of illegal system will 
stop, the way it happened to me, the way I was treated. I do not want 
this to happen to anyone. I know that there are other women out in the 
community like me. They are just afraid to speak out because they don't 
know where to go or just because they have to support their family back 
home. Please help change the way the government functions here on the 
CNMI. If there's no change or people are not held responsible for their 
actions then it will continue to happen to innocent victims. I hope you 
will hear my wish. I am forever grateful.

    The Chairman. Thank you very much. Thanks for being here 
and thanks for your statement. Our final witness today is Mr. 
Juan Guerrero, who is the spokesperson and President of the 
Saipan Chamber of Commerce. Go right ahead, please.

  STATEMENT OF JUAN T. GUERRERO, PRESIDENT, SAIPAN CHAMBER OF 
                            COMMERCE

    Mr. Guerrero. Hafa Adai. Mr. Chairman and members of the 
committee, I am Juan Tino Guerrero, current president of the 
Saipan Chamber of Commerce. I represent the Chamber's 151 
members and I thank you for the opportunity to address this 
committee on the issue of potential extension of Federal 
immigration labor law to the Commonwealth of the Northern 
Mariana Islands.
    The Chamber of Commerce's written testimony more fully 
outlines our belief and concerns. What I'd like to specifically 
address today is what effect the contemplated legislation will 
have on the Commonwealth's ability to survive the challenges 
ahead of us. In the Chamber's written testimony we attempt to 
provide this committee on the overall sense of life on the 
remote island, the depressed state of our economy and the 
likely consequences of losing local control immigration and the 
minimum wage. Over the past 3 years we have lost a quarter 
million seats of inbound passenger capacity as a result of our 
two largest carriers canceling all service to and from our 
largest source of inbound tourists, Japan. Visitors' arrivals 
from Japan has declined 28 percent. Overall tourist arrivals 
have decreased by more than 16 percent. If it were not for the 
China, Russia and South Korea markets, overall tourist numbers 
would have been as bleak as the Japanese numbers. We no longer 
have jet service to Guam, Hong Kong or Taiwan. Our only hope 
for a rebound in tourism at this point is for the CNMI to 
remain accessible to countries whose citizens are not currently 
able to enter the U.S. mainland under the Federal Visa Waiver 
Program.
    The second important aspect of the Commonwealth's ability 
to control immigration of the local labor relates to our 
ability to fulfill necessary jobs on our Islands both in terms 
of numbers and in terms of skills. Even at the preventing of 
United States' minimum wage, very few people who work in the 
mainland would choose to live and work in the CNMI, because of 
their very real inconvenience and cost considerations discussed 
in our written testimony. Therefore in order to compete with 
our mainland, our actual wages would have to be far above the 
Federal minimum wage, or more to the point, the prevailing wage 
for similar jobs. This, in addition to the already higher cost 
of both capital goods and consumer goods, would price us right 
out of the market. We must have access to foreign workers to 
whom CNMI wages and standard of living represent an attractive 
alternative to that in their home countries. With the 
imposition of the Federal immigration this would no longer be 
possible. Related to this matter of minimum wage, most members 
of the Chamber of Commerce do not agree generally with an 
increase in the minimum wage, but do believe that 140 percent 
over a 48-month period is too much and too fast, especially 
compared to proposed increases to historical United States 
minimum wages and considering this is an economy that has been 
shrinking for 10 years and is now in a depression. We generally 
favor a creation of a Federal wage review board and a gradual 
increase to the local minimum wage in a manner that would not 
lead to the collapse of our fragile economy. The imposition of 
Federal minimum wage law and immigration law would remove two 
of the only tools that the CNMI possesses to shape its economy 
and its future.
    We do believe the Federal, technical and financial system 
would enhance enforcement of our local laws. We hope that the 
U.S. Congress will acknowledge the uniqueness of our community 
and our economy and we invite you to visit our Islands in order 
to better understand the true essence of our people. The unique 
challenges, both natural and man-made, that we face.
    We do not believe that much of what you have read or heard 
through the media clearly or accurately represents who we are 
or the true state of affairs in the Commonwealth. We look 
forward to the opportunity to work together to reach an 
agreement on this important issue in ways that answers the 
concern of all interested parties without destroying our local 
economy. Also, Mr. Chairman, with me today is Alex Sablan, the 
vice president of the Saipan Chamber of Commerce; Marion Piece, 
president of the DFS Saipan; Robert Jones, who is also a local 
businessman and chairman of the Strategic Economic Development 
Committee; and Josephine Nestor, from Hyatt, also representing 
the hotel association. With that Mr. Chairman I want to say 
thank you and Si Yu'us Ma'ase.
    [The prepared statement of Mr. Guerrero follows:]
 Prepared Statement of Juan T. Guerrero, President, Saipan Chamber Of 
                                Commerce
    Hafa Adai, Mr. Chairman and Members of the Committee. I am Juan T. 
Guerrero, current president of the Saipan Chamber of Commerce. I 
represent the Chamber's 151 members and am honored by the opportunity 
to address this Committee on the issue of potential extension of 
federal immigration law to the Commonwealth of the Northern Mariana 
Islands.
                              introduction
    The Chamber, along with your Committee, is keenly aware of the 
lengthy history of the subject matter before the United States 
Congress. The Chamber believes that: (1) the Commonwealth's resident 
labor pool is inadequate, both in terms of population and skill, to 
adequately answer the needs of businesses in the CNMI; (2) 
``federalization''--of either CNMI immigration laws or minimum wage 
laws will not solve, but, rather, will exacerbate that problem; (3) the 
laws of the Commonwealth are adequately designed to protect the 
interests of the islands, the United States government, and non-
resident workers; (4) enforcement, which as a general rule never 
fulfills all of the hopes of the drafters of any legislation, has 
continued to improve since the last time this Committee visited the 
issue at hand; and (5) specific allegations designed to cast a cloud 
over the CNMI's ability to manage its internal affairs, rest on 
outdated, untrue, sensationalized, or aberrant facts.
                               discussion
    While the Commonwealth is similar to many islands inasmuch as it 
does not have the land mass, population, or ready access to markets 
required to host a diverse economy, it is unique in many ways, 
including: it does not enjoy the economic backstop provided by 
America's military machine, as does Guam; the islands' tourism base is 
not made of 2.6 million mostly western vacationers and we are not home 
to one of the world's largest petroleum refineries, as is the United 
States Virgin Islands; we do not enjoy anything near the per capita 
federal subsidization of American Samoa.
    The Commonwealth is unique to the United States, even in the 
context of the ``insular areas.'' The CNMI economy has, for the past 29 
years, been comprised almost exclusively of Asian-sourced tourism and 
garment manufacturing. ``Almost exclusively'' is meant in the very real 
sense of approximately 85 percent of the islands' total economic 
activity and 96 percent of the islands' exports, according to a 2006 
General Accountability Office report. It is easy to criticize, as many 
in the United States have done over the years, a community for allowing 
its economy to become dependent on only two revenue streams. What is 
less easy to offer are alternatives to a people whose capitol island is 
46 square miles of land, over 6,000 thousand miles of open ocean from 
the west coast, accessible only by a grueling journey involving a 
minimum of 13 hours of air travel in addition to between 6 and 12 hours 
of layovers. Small population base, even smaller worker base, difficult 
and expensive access, phenomenally higher prices for basic staples of 
life shipped or flown from thousands of miles away, few sources of 
naturally-occurring potable water, often visited by destructive 
typhoons--this does not describe a locale to which many mainland-based 
industries, or employees, aspire to relocate.
    Under the best of circumstances, travel and shipping to and from 
the Commonwealth and the cost of goods affected thereby present a 
challenge to daily life. Our current economic situation, however, is 
far from being ``the best of circumstances.'' Passenger jet air service 
now consists of two flights daily to Japan on Northwest Airlines, 
following the termination within the last two years of scheduled air 
service by Japan Airlines and Continental Airlines. These terminations 
reduced the annual number of passenger seats into the CNMI by over 
200,000. We have one flight daily to Seoul on Asiana Airlines, and one 
flight twice weekly to Manila on Continental Airlines. The remaining 
flights to and from our islands are passenger propeller aircraft with 
limited cargo capacity, and serve mainly as commuter flights to Tinian, 
Rota, and Guam. Lack of competition brought about by the relatively 
small (and shrinking) market has had the expected effect on prices and 
availability, both for passenger transportation and shipping. Pricing 
of and the ability to send cargo by waterborne transport have also 
taken dramatic turns for the worse in recent years. One of the three 
shipping companies that provide direct service to the islands from 
Asian ports has ceased all CNMI operations. The remaining carriers are 
currently considering a reduction in port calls. The CNMI has also seen 
inter-island container carriage to and from Guam reduced from twice-
weekly to once-a-week service. This contraction in the shipping market 
has been accompanied by an average across-the-board 25 percent cost 
increase due to fuel price escalation and diminished outbound garment 
volume. By way of example, a refrigerated freight container sent from 
the United States mainland was priced at $5,580, just two years ago. 
Today, the same container costs $7,600 on average.
    The now ten-year-old recession, originally visited upon the CNMI in 
the wake of the 1997 Asian financial markets collapse, has taken its 
toll on the economic landscape of the islands. The 40 percent decrease 
over the past ten years in tourist arrivals coupled with the more 
recent reduction of more than 50 percent in the garment industry has 
had a massive impact on the local market. The implementation of a 
(admittedly necessary) ten percent decrease in government payroll by 
the current administration, a 100 percent increase in the cost of power 
for consumers, a mass exodus of workers (both local and foreign), and 
the ever-increasing cost of goods and services, have resulting in 
economic turmoil that would be further, and likely irrevocably, 
exacerbated by the implementation of federal minimum wage and 
immigration laws at this time. The local business community has 
estimated that federalization of the Commonwealth's immigration as 
proposed in the form of S-1052 would have the effect of slashing the 
local economy by approximately 50 percent. Any hindrance of the 
Commonwealth's attempt to rebuild and sustain a viable and diverse 
visitor base from Japan, South Korea, China, Russia, the Philippines, 
and other Asian countries would ruin the islands' hopes for any 
economic rebound. Competing with such island destinations as Guam and 
Hawaii, the CNMI, because of its size and limited diversity of 
attractions, increasingly must rely on its ability to attract tourists 
from countries such as China or Russia, where the availability of 
passports to the average citizen on a wide-scale basis is a recent 
development. This diversification is especially important as the 
average Japanese and Korean traveler is becoming increasingly worldly, 
sophisticated, and in search of destinations with greater perceived 
``status.''
    Over the past ten years, the Commonwealth has experienced a decline 
in U.S. citizen/local labor force participation. This should not be 
surprising. The size of the average Chamorro and Carolinian family has 
decreased steadily as the CNMI becomes more culturally ``westernized.'' 
In the past ten years, children of the very residents who were just 
young adults at the time of the Covenant signing have begun to move to 
the mainland for further education and employment opportunities in 
numbers never before seen, as their parents and grandparents for the 
most part had neither the financial ability, the need, or the impetus 
to do so. The limited employment and advancement opportunities (even if 
the minimum wage were commensurate with the mainland) for those with 
advanced degrees in what is becoming, at heart, primarily a service 
economy, is a determining factor in the current decision for many of 
the younger generation to relocate.
    Any substantial across-the-board decrease in the availability of 
affordable foreign labor would negatively impact the local economy, 
even if such a decrease was phased in over a number of years. As noted 
above, the local labor pool is inadequate, under any scenario, to fill 
the number of jobs currently held by non-resident workers. Although 
individuals may prefer to remain close to their families, especially 
when visits require lengthy and expensive travel, they also place great 
weight on economic considerations in choosing where to live. It is 
difficult to rationalize living in a relatively inaccessible, small 
island community, where the cost of living is 25 to 30 percent higher 
than the mainland U.S. and comparable income is far lower, even when 
close familial ties are factored in. Individuals who might choose such 
living and working arrangements are, for the most part, individuals 
whose alternatives are less attractive. Those individuals are not 
United States citizens. Those individuals are foreign nationals.
    One popular misconception is that repatriated foreign workers can 
simply be replaced by workers from the mainland. Those unfamiliar with 
realities of island life might pose the question: why not employ United 
States citizens from the mainland to staff the economy? The fact is 
that some do come to the islands--but many individuals from the 
mainland who move to the islands for employment reasons find adjustment 
difficult and do not remain long after their initial enthusiasm wears 
off. Usually, disenchantment of one spouse or the other is likely to 
result from one or more of the following: high cost of living compared 
with the United States, particularly for utilities and food; limited 
and expensive supply of fresh fruit, vegetables, and other refrigerated 
foods; perceived limited medical facilities or educational 
opportunities; inability to adapt to a different environment; limited 
employment opportunities for a spouse; the expense of moving household 
effects vast distances and the cost of re-establishing one's household; 
limited opportunities for professional growth; hot and humid climate; 
separation from family members on the mainland and the expense of 
returning for frequent visits. The Commonwealth is a service-oriented 
economy with limited opportunities for many professions; opportunities 
for cultural enrichment are limited; there is no public transportation; 
there are water shortages and power outages and, in some cases, special 
medical needs cannot be met in the islands. Once again, those 
individuals with the options available to them that abound in the 
mainland are less likely to endure perceived or actual inconveniences 
than those whose living conditions in their home countries may be 
similar or, likely, worse.
    One notion that the Chamber finds particular disturbing is the oft-
repeated characterization of the CNMI minimum wage as being a ``slave 
labor'' wage. In 2005, non-resident workers remitted to their home 
countries over $114,000,000 of wage income. This represents 12 percent 
of the gross territorial product of the CNMI and a phenomenal 
percentage of the overall net wages of non-resident workers. While the 
Chamber agrees with a measured increase in the CNMI minimum wage after 
thoughtful analysis, this must be done with a realization and 
acknowledgement that the current minimum is not akin to slave labor, as 
evidenced by the massive amount of wage dollars annually exported from 
the islands.
    In addition to the need for affordable labor, the CNMI also relies 
on local control of immigration to fuel the less-criticized second half 
of the driving force behind the local economy: tourists. Tourists from 
counties requiring visas under United States immigration policies 
represent over one-third of all tourist arrivals in the CNMI. The CNMI 
government is aware of national security and other concerns raised by 
issues relating to visitors from such countries. The Chamber believes 
that the LEEDS system currently in use by the CNMI Division of 
Immigration has resulted in far fewer illegal visitor ``overstays'' on 
a percentage basis than is the case in United States mainland. The 
Chamber is also aware that it has been the choice of federal agencies 
not to share relevant information with the CNMI concerning undesirable 
visitors.
    The Chamber believes that local immigration laws have been enforced 
with increasing efficiency over the past several years. The Division of 
Immigration's enforcement of policies and practices that are very 
similar to the federal immigration policies and practices of the United 
States has led to increasingly effective processing and tracking of 
those who enter the CNMI as tourists. The Commonwealth's border 
management system, visa waiver program, and visitor entry permit 
program are, the Chamber believes, extremely effective tools for 
ensuring the entry of qualified, legitimate foreign visitors. 
Similarly, the Chamber believes that the CNMI's refugee and asylum 
program, which was implemented with federal approval and oversight, is 
a fair and efficient process for handling such matters in means 
consistent with United States international obligations. The Chamber 
believes that the effectiveness of the immigration processes in place 
could be further improved if relevant federal agencies agreed to share 
information with the local Division, but understands that those 
agencies have declined to do so to date.
    Similarly, local labor law is fully consistent with federal labor 
law, in its entirety, with the sole exception of the minimum wage 
provision. In addition to compliance with all federal standards, CNMI 
labor law contains special protections for foreign workers that are not 
available in the mainland. All foreign workers are employed pursuant to 
contracts, each of which is approved by the Department of Labor--that 
is, no foreign workers are employed ``at will.'' Furthermore, local law 
mandates that employers provide for repatriation of foreign workers at 
the conclusion of their employment, it requires employers to cover all 
necessary medical costs incurred by their employees, it provides for 
foreign workers dispute resolution mechanisms that are not even 
available to the local workforce, and includes protections to ensure 
that foreign workers' due process rights are protected. Perhaps the 
only downside to a program that so comprehensively protects the rights 
of foreign workers is that it has led to instances of ``copycat'' 
complaints by workers who believe that the Department's rigorous 
enforcement of the rights of aggrieved employees might be an effective 
alternate means to obtaining financial security. The Chamber believes 
that in many ways, the CNMI's labor laws, regulations, and policies for 
foreign workers offer greater protection than those same workers would 
qualify for in the United States mainland. By way of example, it has 
been noted that there is no guarantee that a domestic worker 
complainant of abuse in the United States mainland would be allowed to 
remain and seek legal redress. This is not the case in the 
Commonwealth, where regulatory mechanisms afford such workers rights to 
remain and seek alternative employment, while adjudicating a legal 
action, if they so desire.
    If there is one area that the Chamber believes could be improved 
upon with respect to the issues at hand, it is enforcement. This is not 
meant to suggest that local enforcement efforts have been ineffective--
they have, if anything, improved significantly in recent years--but, 
rather, Chamber members perceive enforcement agencies to be underfunded 
and understaffed. While the Chamber is fully satisfied that local laws 
concerning labor, immigration, and minimum wage are appropriate and 
adequate to address the needs and concerns of the Commonwealth, the 
federal government, and nonresident workers (as does the Federal 
Ombudsman's Office, which noted that the relevant local laws and 
regulations ``give the CNMI Department of Labor all the tools it needs 
to fulfill its mandate''), the Chamber would not be opposed to federal 
technical and financial assistance as regards enforcement of those 
laws.
    One specific area of concern is federal enforcement of federal 
laws. The Commonwealth has neither the manpower nor the budget to 
provide adequate compliance and enforcement personnel with respect to 
federal labor law. The Chamber believes that the federal government 
should strengthen its presence through appropriate offices and agencies 
in the Commonwealth to provide all workers, not just foreign workers, 
easy access to those offices intended to address such matters. This 
position is bolstered by the findings of the Federal Ombudsman's Office 
in 2006 that ``[e]nforcement efforts by some federal agencies have been 
somewhat sporadic in the past, as a result of limited resources, the 
remoteness of the CNMI, the expense of providing an enforcement 
presence, and the perception that larger or more populous jurisdictions 
should be a higher priority than the CNMI is for the agencies' 
dwindling enforcement dollars.''
    There have been a number of reports, some dating back 20 years, of 
foreign worker abuse, non- or under-payment of wages, rape, forced 
prostitution, inhumane working and living conditions, and the like. The 
Chamber deplores any occurrences of such actions or events, but in no 
way believes that sensationalized reports represent the actual, current 
state of working and living conditions of non-resident workers in the 
CNMI. Law enforcement, public prosecutors, and relevant sections of the 
Division of Immigration and Department of Labor have proven engaged, 
effective, and equitable.
    It is an unfortunate reality that there are bad people who commit 
criminal acts in every part of the world. For example, the National 
Organization of Women reports that there are approximately 132,000 
incidents of reported rape or attempted rape in the United States each 
year and that somewhere between two to six times that number that go 
unreported. The Chamber finds such statistics as disheartening as the 
reported incidents of rape or forced prostitution that occur within the 
Commonwealth. An important distinction, however, is that few people 
suggest that the United States is fostering such behavior through its 
labor and immigration laws or minimum wage laws. The Chamber firmly 
believes that these social issues need to be, and are, addressed by the 
appropriate authorities in the CNMI. The Chamber also believes it 
unfortunate that some have attempted to capitalize on the plight of a 
relatively few victims of such crimes in the Commonwealth. We take very 
seriously such allegations, and find this promotion of a sense of 
state- or culture-sanctioned criminal behavior both utterly without 
merit and highly misleading. While the Chamber acknowledges certain 
allegations made decades ago, many of which were, the Chamber believes, 
sensationalized aggrandizements of individual occurrences, we believe 
that such incidents--which happen everywhere in the world, including 
the United States--are on the decline in the Commonwealth. Statistics 
and anecdotal evidence bear out this fact, and we hope that the United 
States Congress will not succumb to such sensationalist reports.
    The Chamber hopes that members of this Committee and their staff 
will take this opportunity to independently investigate what those 
critics of the Commonwealth would prefer you not know or consider: 
there are many positive facets to the CNMI that reflect our unique 
character and the warm, giving, and cohesive nature of our community. 
The NMI Chapter of the American Red Cross, for example, has been 
recognized by the national American Red Cross as one of the most 
successful chapters in the country, on a per-capita basis, and has 
supported, through the provision of volunteer workers and supplies, 
disaster relief efforts outside our islands in places such as Yap and 
American Samoa, as well as in Texas and Louisiana (in response to 
Hurricanes Wilma and Katrina) and New York City (in response to the 
September 11, 2001 attacks). A relatively new group on island, Beautify 
CNMI!, attracts on a weekly basis, dozens (and sometimes hundreds) of 
community volunteers to clean and maintain the natural beauty of our 
islands, and in one large event last October, organized over 3,000 
volunteers for a one-day, island-wide clean up. The Chamber itself 
sponsors, though fundraising and private donations, a number of 
scholarships for CNMI students. The CNMI Mayor's Office sponsors 
international exchange programs, primarily with Japan. There has been a 
resurgence in local sports, such as outrigger canoe racing. Despite 
almost no government funding (because of the current economic crisis), 
but because of widespread community support, both in terms of donated 
manpower and dollars, the Commonwealth last year hosted the Micronesian 
Games, a quadrennial regional sporting event that brought together over 
1,000 athletes and supporters from Palau, the Federal States of 
Micronesia, the Republic of the Marshall Islands, Guam, and the CNMI. 
These are just a few aspects of the CNMI about which you will never 
receive a GAO or congressional report, or about which you will never 
receive an email or read a story in a national magazine, but which more 
accurately represent the true essence of our community.
                               conclusion
    The imposition of federal minimum wage law and immigration law will 
remove two of the very few means that the CNMI possesses to shape its 
economy and its future. The Chamber recognizes that the minimum wage 
should rise, and agrees that immigration enforcement could be improved. 
However, the Chamber does not believe that an across-the-board 
imposition of federal law with respect to either will solve any 
problems, real or perceived, that may exist in the CNMI. We hope the 
United States Congress will acknowledge the uniqueness of our community 
and our economy and will understand that answers to problems that are 
conceived and implemented by and for a country of hundreds of millions 
of citizens with the largest national economy on earth do not 
necessarily translate well in a tiny group of islands thousands of 
miles away. The Chamber invites interested federal officials to visit 
our islands in order to better understand the unique challenges, both 
natural and man-made, that we face. We look forward to an opportunity 
to work with federal officials to reach agreement on these important 
issues in ways that answer the concerns of all interested parties 
without destroying our local economy.
    The Chamber would be pleased to answer any questions or provide 
further information that might be of assistance to this Committee.
    Si Yu'us Ma'ase, Olomwaay, and Thank You.

    The Chairman. Thank all of you for being here and 
testifying. Let me just ask Mr. Guerrero--let me understand the 
Chamber's position on this. Is it your position that we should 
not legislate any changes with regard to Federal authority over 
immigration laws, that we should leave it the way it is? Is 
that your view?
    Mr. Guerrero. It is the position of the Chamber of 
Commerce, yes sir.
    The Chairman. And you believe that long-term the economic 
circumstance of the Island will be better if there is no change 
in the current handling of immigration matters?
    Mr. Guerrero. We believe in good government, good 
management as indicated by some of the witnesses. I believe 
that the current administration is on the right track; however, 
it's been impacted with financial decline due to the sudden 
closing of the garments and the recent decline. I believe that 
if it's managed properly, we would sustain and revitalize our 
economy, yes, sir.
    The Chairman. Okay. Let me just ask Ambassador Williams. 
You made a very strong statement in favor of us going ahead and 
extending Federal immigration laws to the Islands. It's your 
view, I gather, that that could be accomplished without having 
the kind of adverse economic effect that obviously some of the 
business community are concerned about. You believe that the 
economy could do as well under Federal immigration laws in 
place over the long-term, as without. Is that a correct reading 
of your position?
    Ambassador Williams. That is correct. I think long-term 
that the economy and the people of the Northern Marianas would 
be well-served by the extension of U.S. immigration laws and 
control of their borders by the Federal Government.
    The Chairman. Okay, and Ms. Ogumoro, as I understand your 
testimony and Ms. Entena's testimony and Sister Stella's, your 
thought is that a change with regard to immigration laws and an 
extension of Federal immigration laws to the Islands is one 
part of the solution to the abuse of people that you are 
particularly focused on. Is that an accurate understanding of 
your testimony?
    Ms. Ogumoro. Yes, sir. To illustrate my point, if an 
individual has the ability to go in the morning and put in 
seven applications for work and enter permits and get them out 
at 4 the same day, and bring in seven women from China in 1 
day, there's something wrong with the system.
    The Chairman. So you're saying that for those folks who are 
there on the Mariana Islands they would be benefited from 
having Federal immigration laws extended.
    Ms. Ogumoro. Well, we certainly cannot continue the way we 
are now, and there has to be some kind of change, whether it 
requires Federal intervention or not, I don't know. But I know 
that now people's lives are being destroyed. Since I've been 
here in Washington, DC, we've welcomed another woman from China 
into the shelter. She was brought to us by the Attorney 
General's investigative unit. She's a supposed or alleged 
victim of human trafficking, and that's since I have left the 
Island, so there are some problems that need to be faced.
    The Chairman. Right. Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman. Let me 
follow up with Lauri Ogumoro. As you have heard some say that 
these cases of coerced prostitution and trafficking are rare 
and sensationalized. My question to you: is how prevalent are 
these cases in the CNMI, and do you think that the rate has 
increased or decreased since the year 2000?
    Ms. Ogumoro. Well, the Trafficking Victims Protection Act 
was authorized in 2000, and since 2005 is when we started our 
program to provide services to victims of human trafficking. 
I've been told by people at the Department of Justice that they 
consider the CNMI a hot spot for victim trafficking, human 
trafficking, because of our close proximity to Asia and because 
we have our own labor and immigration system.
    Thankfully on the Island we have been able to identify 
people, but there are more out there that need the assistance. 
It's very easy to get a tourist permit and to bring somebody 
into the Island and then they are forced into prostitution or 
they are forced into indentured servitude, so there seems to be 
some loopholes in the system that need to be tightened up. We 
worked very closely with the Attorney General's office and with 
people at immigration and labor. There are good people in the 
system, but the system itself needs to be fixed because it's 
just so easy. And like I said, I received an email from people 
at the shelter. We welcomed another woman from China into the 
shelter who is an alleged victim. It's my understanding in 2006 
the CNMI had 30 victims of human trafficking. Our friends in 
American Samoa have three. There's two identified victims in 
Hawaii and there's no victims in Guam.
    Senator Akaka. Sister Stella, Mr. Guerrero in his testimony 
suggests that local control of immigration provides greater 
protection for its guest workers than Federal control, and my 
simple question is do you agree with Mr. Guerrero's statement 
based on your experience?
    Sister Mangona. I agree with her statement, because the 
emphasis of my statement is concerned with the system as a 
whole. We would like some changes in the system, not just in 
any particular department, but if the particular department 
that needs to change their policies or implementation of 
policies. They have good policies but implementation is really 
lacking. It's, then, we would need something to counteract 
that.
    Senator Akaka. Mr. Guerrero, in 1997 the report of the U.S. 
Commission on Immigration and Reform found that the CNMI 
economy was unsustainable because there would be no advantage 
for the garment industry when the multi-fiber agreement comes 
into force at the end of 2005. My question to you is: what 
steps did CNMI and the community take over the past 10 years to 
prepare for the departure of the garment industry?
    Mr. Guerrero. Senator, on the garment industry, that 
question is a very loaded question. You're asking what is our 
government doing to replace the garment. The government has 
been emphasizing on the building of the tourism economy just 
like Hawaii. We're targeting 1 million arrival in the next 5 
years. Fortunately with the departure of Japan Airlines and our 
regional carrier, Continental Airlines, which no longer serves 
us--other than the twice-weekly from Saipan to Manilla--have 
departed the gates of the Japanese market. The tourism, the 
CNMI is an island economy. It offers basically the attraction 
that tourists look for, which are beaches, clean water, nice 
sunshine, night golf course and a place to enjoy without 
worrying about this cold weather outside. We like to value 
ourselves and put our economy in focus so that we can, with the 
help of the Federal Government, probably we can get essential 
air services back to further build our tourism. We'd like to 
see more of the tourism because it's more friendly than 
garment.
    We'd like to see more U.S. investors to come to the CNMI. 
As you know, OIA, through the office of Mr. Cohen, did a number 
of investment conferences here in the United States and in 
Hawaii a few months ago. We're still positive that we will see 
some U.S. investors coming to the Island; unfortunately not at 
the rate that we expect. I'd like to see Mr. Cohen's office 
again to ask if perhaps we should look at the Asian market to 
attract the small- and medium-type businesses to come and do 
business in the Commonwealth.
    I know our Islands is not perfect. We're going through a 
transition. We're faced with many difficulties, but I do 
believe, I strongly believe as a business leader in the 
community, that with good management, good governance that we 
can proceed and change back our Islands so we don't exploit. 
The Chamber of Commerce does not endorse exploitation of 
workers. We'd like to see a gradual minimum wage increase so 
that we can replace and make the value of people more 
meaningful. We'd like to see more enforcement of Federal 
features to visit our Islands; OSHA. We'd like to see the Coast 
Guard. We'd like to see more immigration control. We'd like to 
see more enforcement to safeguard the problems that we face 
with implementation or of the Fair Labor Standard Act as it 
applies in every State so we can stop, rather than let it 
happen and then try to stop it, or correct it, and that's 
basically how we see it. We'd like to urge this committee to 
work with us so that we can come up with more solutions, better 
solutions that would be more sustainable to help the people in 
the Commonwealth and be a responsible citizen of the United 
States, sir.
    Senator Akaka. Well I want to thank you very much for your 
vision, the business vision of the future for CNMI, and I thank 
you for that.
    I also want to thank Ms. Entena for being with us today, 
and for your statement. I know it must be difficult to share 
your experience, but your courage to endure must be commended, 
and I thank you for being here with us today and for adding to 
the record.
    I want to also thank the Ambassador. Your statement was 
tremendous of the history of how the agreements have come 
about, and your part in it as well, and for you to recognize 
what should be happening is very important to us and is very 
valuable. I want to thank you, Mr. Ambassador, for your 
statement, and with that I want to thank the Chairman for 
having this hearing, and we look forward to trying, really to 
try to do our best to not only help this country but to help 
CNMI as well. Thank you very much.
    The Chairman. Thank you, Senator Akaka. You've been a real 
leader on this issue and thank you for continuing to do that. I 
want to thank all the witnesses as well. I think it's been a 
very useful hearing and we have a lot of good suggestions and 
ideas and information here that we can take. I hope we can move 
ahead with some legislation that will help deal with some of 
these problems. Thank you all very much. The hearing is 
adjourned.
    [Whereupon, at 11:40 a.m. the hearing was adjourned.]
                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

    [Note.--The following questions were sent to the Department 
of the Interior in advance of the February 8, 2007 hearing from 
the Energy and Natural Resources Committee:]
                            socio-economics
    Question 1. With the enactment of P.L. 103-332 in 1994, Congress 
established the Federal-CNMI Initiative on Labor, Immigration, and Law 
Enforcement to respond to concerns about conditions in the CNMI. Please 
update the following socio-economic estimates/indicators as used in 
prior reports of the Initiative, and present them in graphs showing 
trends from 1980 through 2005:

   Total CNMI population, with a breakout of U.S. citizens and 
        non-U.S. citizens;
   Birthwplace of CNMI residents: foreign born, mother CNMI 
        born, and mother born elsewhere;
   Total number of guest workers;
   GDP;
   Per capita income among U.S. citizens;
   Unemployment rate among U.S. citizens;
   Other socio-economic indicators that are available that you 
        believe would be useful to the Committee.

    Answer.
Total CNMI Population, With a Breakout of U.S. Citizens and Non-U.S. 
        Citizens

                           POPULATION BY CITIZENSHIP, CNMI: 1980, 1990, 1995 AND 2000
----------------------------------------------------------------------------------------------------------------
                                                                               Number of Persons
                         Citizenship                         ---------------------------------------------------
                                                                  1980         1990         1995         2000
----------------------------------------------------------------------------------------------------------------
All persons.................................................       16,780       43,345       58,846       69,220
U.S. citizen................................................       13,071       20,082       27,489       30,135
    Born in CNMI............................................       11,993       16,752       22,220       24,820
    Born U.S. or other territory............................        1,078        2,405        4,061        3,870
    Born abroad of U.S. parents.............................  ...........          237          189          410
    Naturalized citizen.....................................  ...........          688        1,019        1,035
Not a U.S. citizen..........................................        3,709       23,263       31,357       39,090
    Permanent resident......................................  ...........        2,188        3,405        4,350
    Temporary resident......................................  ...........       21,075       27,952      34,740
----------------------------------------------------------------------------------------------------------------
Source.--Central Statistics Division; CNMI Census Reports.

    The Office of Insular Affairs of the Department of the Interior 
funded a technical assistance request from the CNMI for an estimate of 
the population of Saipan only through a 10 percent sample survey of 
population for the year 2003. The purpose of the survey was to obtain 
current information on total population by classifications of 
citizenship, as had been the case in the 2000 and other previous 
censuses. The estimates derived through the sample survey are as 
follows:

                  POPULATION BY CITIZENSHIP, CNMI: 2003
------------------------------------------------------------------------
                       Citizenship                             2003
------------------------------------------------------------------------
All persons.............................................          63,419
U.S. citizen............................................          29,326
    Born in CNMI........................................          25,703
    Born U.S. or other territory........................           1,923
    Born abroad of U.S. parents.........................             718
    Naturalized citizen.................................             982
Not a U.S. citizen......................................          34,093
    Permanent resident..................................           3,756
    Temporary resident..................................          30,337
------------------------------------------------------------------------
Source.--Central Statistics Division.

Birthplace of CNMI Residents: Foreign Born, Mother CNMI Born, and 
        Mother Born Elsewhere
    Foreign-born residents, consisting of U.S. citizens born abroad and 
non-U.S. citizens, are presented below:

                         FOREIGN-BORN RESIDENTS
------------------------------------------------------------------------
                          Year                                Number
------------------------------------------------------------------------
1980....................................................           3,709
1990....................................................          24,188
1995....................................................          32,565
2000....................................................          40,535
------------------------------------------------------------------------

    The number of foreign-born residents was estimated to be 35,075 in 
2003 on Saipan, based on the 10 percent sample survey on the island. 
Saipan represented 90.1 percent of the CNMI total population in the 
2000 U.S. Census. Extrapolating from the Saipan sample of 2003, a rough 
estimate of total CNMI foreign born residents in 2003 would be 38,972 
(which would assume a ratable distribution of foreign-born residents, 
which may not be an accurate assumption). CNMI residents by mother's 
place of birth are presented in the table below:

        MOTHER'S PLACE OF BIRTH, CNMI: 1980, 1990, 1995 AND 2000
------------------------------------------------------------------------
   Mother's Place of Birth       2000       1995       1990       1980
------------------------------------------------------------------------
Born in CNMI................     18,093     13,674     14,236      8,876
Born in the United States...      1,716      1,383      1,062        451
Born in Puerto Rico or other      1,245        977        753        738
 U.S. Island Area...........
Born Elsewhere..............     48,167     25,365     27,294     4,251
------------------------------------------------------------------------
Source: CNMI Census Reports: 1980, 1990, 1995, 2000.

    As indicated earlier with regard to total population, the 
birthplace of Saipan residents only for 2003 was estimated from the 10 
percent sample. Those figures are presented in the table below.

                   MOTHER'S PLACE OF BIRTH, CNMI: 2003
------------------------------------------------------------------------
                 Mother's Place of Birth                       2003
------------------------------------------------------------------------
Born in CNMI............................................          16,777
Born in the United States...............................           1,116
Born in Puerto Rico or other U.S. Island Area...........             588
Born Elsewhere..........................................         27,312
------------------------------------------------------------------------
Source.--2003 Community Survey, based on a 10 percent sample.

Total Number of Guest Workers
    Guest (temporary alien) workers legally working in the CNMI must be 
authorized to do so by a work permit, which is issued and/or renewed on 
an annual basis. The exception to this rule is that aliens with a 
pending labor claim may be authorized to work pursuant to a Temporary 
Work Authorization (TWA). The table below sets forth the number of work 
permits issued and/or renewed each year since 1999. We have been 
informed by the CNMI Department of Labor that approximately 1,500 TWAs 
are currently outstanding, so adding this amount to the number of work 
permits issued in 2006 should yield an amount roughly equivalent to the 
number of legally authorized guest workers in the CNMI in 2006. The 
total number of work permits in the table below for the year 2006 was 
estimated from data collected for the first three quarters.

                                         WORK PERMITS ISSUED BY INDUSTRY
----------------------------------------------------------------------------------------------------------------
                INDUSTRY                    1999     2000     2001     2002     2003     2004     2005     2006
----------------------------------------------------------------------------------------------------------------
Banking.................................       10       15        9       10       15       11       13       15
Construction............................    2,844    2,604    1,794    1,739    1,496    2,076    1,938    1,900
Fishing.................................       11       18       20       18       19       28       16       17
Garment.................................   14,833   16,639   15,104   12,372   11,982   14,512   13,922   10,089
Hotel...................................    2,035    2,887    2,370    2,194    2,203    2,687    2,447    2,375
CNMI Gov't..............................       67       78       53       67       89      193      281      236
Night Club/Bar..........................      500      598      456      471      480      679      618      540
Farmer..................................      543      558      432      417      445      699      658      653
Private Household.......................    1,610    1,823    1,410    1,529    1,597    2,012    1,802    1,699
Restaurant..............................    1,171    1,419      987    1,096    1,021    1,670    1,420    1,279
Services................................    6,961    8,756    6,954    7,172    7,181   10,998    9,534    8,480
Tourism.................................      339      468      380      389      369      588      491      424
Manpower................................       49      178       87       81       59       58       15       15
Security Services.......................       84      220      214      178      192      194      139      181
                                         -----------------------------------------------------------------------
      TOTAL Permits Issued..............   31,057   36,261   30,270   27,733   27,148   36,405   33,294  27,903
----------------------------------------------------------------------------------------------------------------
Source.--CNMI Department of Labor.

GDP
    The CNMI has yet to develop local expertise to generate national 
income and product account or macroeconomic data in a manner the Bureau 
of Economic Analysis (BEA) of the U.S. Department of Commerce produces 
for the United States and the 50 states. One reason for this and other 
data deficiencies is that the CNMI (like the other U.S. territories of 
American Samoa, Guam and the U.S. Virgin Islands) is not included in 
the American Community Survey (ACS). The U.S. Census Bureau's ACS 
provides the most complete and current economic and demographic data 
available on the United States and the 50 states. Nor is the CNMI 
included in some other surveys that generate current and complete data 
on industries, production and household income and expenditures. The 
CNMI and the other territories noted above are included only in the 
U.S. Census and the Economic Census, which the Census Bureau conducts 
every five years ending in ``2'' and ``7''.
    The Office of Insular Affairs (01A) of the Department of the 
Interior is addressing some of the data deficiencies in the CNMI and 
other U.S. territories (and the U.S.-affiliated freely associated 
states in the North Pacific) through a technical assistance grant for 
the Census Bureau to perform certain computational tasks, do survey 
work and train local personnel. OIA's small technical assistance budget 
makes it essential to be selective and focus only on areas believed 
critical to monitoring economic and financial progress by the island 
governments, OIA and Congress.
    The Bureau estimated that the CNMI's GDP ranged from $1 billion to 
$1.3 billion in 2002. It employed, for the first time, the methods and 
techniques of the BEA, the final arbiter of GDP methodology and data in 
the United States. Given an estimated population of 70,465\1\ in 2003 
(and no estimate for 2002), per capita GDP would range from $14,191 to 
$18,448 in 2002-2003. Since both the off-Census population and OIA-
sponsored GDP estimates are preliminary, they are tentative and subject 
to revision. Moving from a point (single year) estimate of GDP to a 
series that would resemble U.S. GDP is the next step in the OIA's 
efforts to help the CNMI develop economic statistics capacity and 
standards that are in line with national norms.
---------------------------------------------------------------------------
    \1\ This estimate is derived by taking the 2003 estimate of the 
Saipan population and assuming that the Saipan population in 2003 was 
the same percentage of total population--90.1--as it was in 2000. This 
may not be an accurate assumption, as a higher concentration of guest 
workers on Saipan may have led to a disproportionate population loss 
there.
---------------------------------------------------------------------------
Per Capita Income Among U.S. Citizens

           PER CAPITA INCOME, CNMI: 1980, 1990, 1995 AND 2000
------------------------------------------------------------------------
                                                    U.S.       Non-U.S.
           Census Years               Total       Citizens     Citizens
------------------------------------------------------------------------
2000.............................        9,151        9,666        8,754
1995.............................        7,580      ( \1\ )      ( \1\ )
1990.............................        7,199      ( \1\ )      ( \1\ )
1980.............................        3,298      ( \1\ )      ( \1\ )
------------------------------------------------------------------------
Source.--CNMI Census Reports, ``Recent Trends in Population, Labor
  Force, Employment, Unemployment and Wages, CNMI: 1980 to 2000''.
 
\1\ Means data not available.

Unemployment Rate Among U.S. Citizens

                                               UNEMPLOYMENT RATES
----------------------------------------------------------------------------------------------------------------
                            Citizenship                                1973     1980     1990     1995     2000
----------------------------------------------------------------------------------------------------------------
All persons........................................................     12.6      2.4      2.3      7.3      3.8
U.S. Citizen.......................................................     14.3      3.0      5.7     12.7     11.1
    CNMI born......................................................     15.1      3.2      6.7     14.3     12.9
    Other U.S. citizen.............................................      8.2      1.3      2.7      8.9      7.2
Not a Citizen......................................................      7.8      1.5      1.2      5.3      1.8
    Permanent resident.............................................     14.5      3.1      7.4     14.2      8.1
    Temporary resident.............................................      3.2      0.9      0.7      4.7      1.3
All females........................................................     21.7      2.6      2.7      8.6      3.4
U.S. Citizen.......................................................     21.5      2.8      6.8     15.3     12.5
    CNMI born......................................................     22.3      2.9      7.7     16.8     14.3
    Other U.S. citizen.............................................     13.6      1.5      3.6     11.6      8.8
Not a Citizen......................................................     22.6      2.3      1.4      6.6      1.6
    Permanent resident.............................................     30.3      4.2      7.9     16.8      8.7
    Temporary resident.............................................     11.7      1.0      0.9      6.0     1.0
----------------------------------------------------------------------------------------------------------------
Source.--CNMI Census Reports, ``Recent Trends in Population, Labor Force, Employment, Unemployment and Wages,
  CNMI: 1980 to 2000''.

Other Socio-Economic Indicators That Are Available That You Believe 
        Would Be Useful to the Committee
    In the absence of current GDP data, one important indicator of an 
economy's health, especially its business sector, is business receipts 
subject to local taxes. In the CNMI, business sales are subject to a 
business gross receipt tax. Unlike localities and states that impose 
explicit sales and excise taxes, normally shown on retail sales 
receipts, CNMI business gross receipt (BGR) taxes are imbedded in 
retail prices. The BGR's base, the amount on which merchants and 
vendors pay taxes, is among the most useful indicators of business 
activity, especially in economies where other sources of information 
such as GDP are not available. Sales and taxes have been stagnant or 
declining in the CNMI for quite some time now, as shown in the 
accompanying graph.*
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
---------------------------------------------------------------------------
    Another important piece of evidence of a deteriorating tax base is 
total local tax receipts from business that correspond with the 
timeline in the Business Gross Revenues graph.* In fiscal year 1997, 
the last peak in the local business cycle, total local tax receipts 
were $201.9 million. In fiscal year 2006, local tax receipts were 
$160.3 million, 20.6 percent below the peak. (In fiscal year 2007, they 
are projected to be even lower.)
    It is not unusual for business taxes to decline during recessions 
(business contractions) that occur normally in market economies. Once 
the business cycle turns the other way, tax collections follow. 
However, tax collections and the tax base of the CNMI are not in a 
cyclical decline. Instead, these declines are secular and will likely 
continue at least until all garment makers leave the CNMI. What 
economic order will emerge from the demise of garments and a declining 
tourism market is difficult to predict. What is predictable is a long 
and bumpy road ahead for the CNMI and other small, isolated economies 
that are left with no choice but to watch and follow global trends and, 
in the case of the U.S. territories, policy changes from Washington, 
D.C.
    Question 2. What is the number of non-U.S. citizens resident in the 
CNMI who are not guest workers and what is the basis for their being in 
the CNMI--for example: are they Compact migrants, investors, dependents 
of workers, illegal residents, or others?
    Answer. Based on the 2000 Census data, there was a total of 39,090 
non-U.S. citizen residents in the CNMI, including 36,261 temporary 
alien workers (guest workers). This would suggest a total of 2,829 non-
citizens who were not working pursuant to a work permit. We do not have 
definitive data on the allocation of this population among aliens 
working pursuant to temporary work authorizations (TWAs), migrants from 
the freely associated states under the Compacts of Free Association, 
dependents, investors and others. It is also quite possible that there 
may have been a significant number of illegal residents that were not 
captured by the Census figures. In 2003, extrapolating from a sample 
survey on Saipan, there were an estimated 37,881\2\ non-U.S. citizens, 
and of these non-U.S. citizens, 27,148 were guest workers working under 
permits. The difference of the two counts was 10,733, which would 
include aliens working under TWAs, Compact migrants (discussed below), 
investors (discussed below), dependents and others. It is possible that 
this figure does not significantly capture illegal residents.
---------------------------------------------------------------------------
    \2\ Again, this is based upon an extrapolation of the estimate for 
Saipan derived by grossing up the estimated number of non-citizens on 
Saipan on the basis of the percentage of the CNMI population that 
Saipan's population represented in 2000. These assumptions could 
certainly be challenged, but our intention is merely to provide a rough 
estimate.
---------------------------------------------------------------------------
    Among the significant segments of non-U.S. citizens who are not 
work permit holders are Compact migrants. The most recent data on 
Compact migrants are those for 2003, when the Department of the 
Interior conducted a census of Micronesians in the summer of that year. 
The census reported that:

   there were 4,244 freely associated state (FAS) migrants in 
        the CNMI;
   Of these FAS migrants, 3,570 (84 percent) were determined to 
        be in the CNMI as a result of migration provisions contained in 
        the Compact of Free Association between the migrants' home 
        country and the United States (post-Compact migrants);
   The remaining 674 (16 percent of the total) were determined 
        to be in the CNMI prior to Compact approval (pre-Compact 
        migrants); and
   FAS migrants represented 5.6 percent of the CNMI's total 
        population in 2003.

    The provision of the amended Compact legislation that compensates 
the CNMI, Guam, Hawaii and American Samoa for expenses connected to 
Compact migrants requires a census of Micronesians every five years 
until it terminates after fiscal year 2023. The Department of the 
Interior will conduct the next enumeration of Micronesians in the CNMI, 
Guam, Hawaii and American Samoa in fiscal year 2008.
    Information on investor permits is provided in the answer to 
Question 3 below. We do not have definitive data on the number of non-
citizens who are dependents or in other categories.
    Question 3. The CNMI has a foreign investor program that permits 
investors to enter the CNMI with $50,000 to start a business.

   Has this program ever been independently evaluated, and if 
        so what were the findings and recommendations of that 
        evaluation?
   How many such investors are there in the CNMI?

    Answer. According to the CNMI Department of Commerce, there has 
never been an independent evaluation of the program. The numbers of 
investors of record are as follows:

           FOREIGN INVESTOR PERMITS ISSUED, CNMI: 1995 TO 2006
------------------------------------------------------------------------
                          Year                                Numbers
------------------------------------------------------------------------
2006....................................................             304
2005....................................................             275
2004....................................................             340
2003....................................................             294
2002....................................................             361
2001....................................................             336
2000....................................................             432
1999....................................................             400
1998....................................................             410
1997....................................................             536
1996....................................................             548
1995....................................................            528
------------------------------------------------------------------------
Source.--Foreign Investment Office, Department of Commerce.
 
Note.--Total figures include all different categories of permits.

    Question 4. Please provide historical and current estimates for the 
number of private sector and public sector jobs in the CNMI economy, 
and the number that are held by U.S. citizens.
    Answer.

         CNMI TOTAL EMPLOYMENT BY CLASS OF WORKER, 1980 TO 2000
------------------------------------------------------------------------
                                                 U.S. Citizen
           Class of Worker           -----------------------------------
                                        1980     1990     1995     2000
------------------------------------------------------------------------
Employed persons 16 years and over..    3,673    6,302    8,745    8,620
Private for wage and salary workers.    1,564    3,102    4,044    4,190
Government workers..................    2,013    2,942    4,300    4,175
Self-employed workers...............       88      240      378      235
Unpaid family workers...............        8       18       23       25
Non-U.S. Citizen Employed persons 16    2,268   19,663   26,067   34,130
 years and over.....................
Private for wage and salary workers.    1,744   18,925   24,797   33,080
Government workers..................      487      568      718      825
Self-errployed workers..............       36      142      488      210
Unpaid family workers...............        1       28       64       20
Percent Non-US Citizen Employed          38.2     75.7     74.9     79.8
 persons 16 years and over..........
Private for wage and salary workers.     52.7     85.9     86.0     88.8
Government workers..................     19.5     16.2     14.3     16.5
Self-enployed workers...............     29.0     37.2     56.4     47.2
Unpaid family workers...............     11.1     60.9     73.6    44.4
------------------------------------------------------------------------
Source.--CNMI Census Reports, ``Recent Trends in Population, Labor
  Force, Envloyment, Unemployment and Wages, CNMI: 1980 to 2000''.

    We are aware of no estimates of employment more current than the 
2000 Census data.
    Question 5. What is the amount of money estimated to leave the CNMI 
economy annually through remittances by guest workers and alien 
investors?
    Answer.

                                   OUTWARD REMITTANCES CNMI: CY1991 TO CY2006
----------------------------------------------------------------------------------------------------------------
                                          No. of                              Country of Destination
             Calendar Year               Licens-   Total Amount  -----------------------------------------------
                                            es       Remitted       Philippines        China           Other
----------------------------------------------------------------------------------------------------------------
1991...................................       18     $28,795,262     $28,795,262
1992...................................       20      34,047,991      34,047,991
1993...................................       15      37,768,126      37,768,126
1994...................................       13      38,975,439      38,975,439
1995...................................       11      44,401,533      44,401,533
1996...................................       10      49,455,740      48,553,066        $902,674
1997...................................        9      52,409,994      48,297,339       4,112,655
1998...................................       10      58,880,902      49,011,756       9,869,146
1999...................................       10      65,098,884      47,147,249      17,951,635
2000...................................       13      73,286,726      47,887,242      24,443,977        $955,507
2001...................................       14      76,687,693      50,773,522      24,719,049       1,195,122
2002...................................       16      80,105,771      50,144,046      28,880,312       1,081,413
2003...................................       17      81,549,563      51,404,326      29,479,139         666,098
2004...................................       20      94,019,358      56,108,229      37,359,971         551,158
2005...................................       20     114,538,092      68,414,794      45,688,843         434,455
2006 3rd Q.............................       18      74,254,040      40,460,240      33,527,305        266,495
----------------------------------------------------------------------------------------------------------------
Source.--Department of Commerce, Banking Section.
 
 Note.--This does not include outward remittances from banks.

    Question 6. What is the rate of emigration of U.S. citizens from 
the CNMI and what factors will affect the historic trend?
    Answer. Emigration of U.S. citizens from the CNMI cannot be tracked 
at this time. The tracking of emigration of U.S. citizens from the CNMI 
is currently beyond the capability of the CNMI's Labor and Immigration 
Identification and Documentation Systems (LIIDS). Departures can be 
accounted for, but they are not grouped in categories such as 
emigrants, residents, tourists, short-term residents, businessmen. 
Persons leaving the CNMI could only be tracked over time to determine 
whether or not they return. LIIDS would have to be re-configured to 
monitor emigration.
    There has been, over recent months, a noticeable awareness among 
the local citizenry that people have already been opting to move to the 
mainland for better employment opportunities.
    Question 7. How much financial and technical assistance has the 
Interior Department provided to the CNMI and to the U.S. Bureau of 
Census to support and improve the CNMI's statistical capabilities, and 
what is the status of those efforts?
    Answer. During fiscal years 1997-2006, the OIA provided $604,220 in 
technical assistance grants to the CNMI government and the Bureau of 
the Census specifically for statistics work. The purpose has been to 
help the CNMI government do statistics and survey work to generate 
estimates of population, household income and expenditures, consumer 
prices and, in the last couple of years, national income and product 
account data. As pointed out earlier, since the CNMI is not included in 
the American Community Survey (ACS) and does not have an ACS-like 
ongoing data gathering and fact finding program of its own to generate 
current data, there is generally no current information during the 
periods between the censuses. If government, business and individuals 
need information on population, household income and expenditures for 
years other than the national or local census, they may explore other 
alternatives such as sample surveys. As one would expect, this is not a 
practical option for individuals and small businesses.
    In an effort to fill at least some of the information gap, OIA 
provides technical assistance to help the CNMI government build the 
institutional capacity to provide current and complete economic, 
financial and other data. As helpful as we believe OIA's technical 
assistance has been, it is too little in the context of resources 
necessary to develop the institutional capacity that would generate 
current and complete data systematically.
    The CNMI's efforts to generate and maintain comprehensive and 
current statistics are hampered by its troubled financial condition. In 
the current situation, progress will be slow, but the Department of the 
Interior is committed to doing its part to help move the CNMI on the 
path to providing current and complete information.
    Question 8. Please provide historical and current information on 
the adequacy and reliability of essential public services including: 
water, power, wastewater, healthcare, and education.
    Answer.
Medical Care
    Historically, the people of the CNMI received medical care from 
various medical hospitals, including the Japanese Hospital, Dr. Tones 
Hospital, and village dispensaries.
    Currently, medical care is provided through the Commonwealth Health 
Center, the Dr. Jose T. Villagomez Public Health and Dialysis Center, 
which houses programs for health education and promotion; disease 
prevention and control services; and mental health and substance abuse. 
These facilities also provide in-patient beds, off-island referral 
services, out-patient care, emergency room care, pharmaceutical 
services and counseling. On the islands of Tinian and Rota, the health 
centers provide a range of services, but patients with more serious 
medical problems must be sent to Saipan for treatment. For very 
specialized services, patients are referred to off-island facilities 
mainly in Guam or the Philippines. Such specialized services may 
include cancer treatment, complicated cardiac care and surgeries, very 
specialized surgeries, extensive trauma care and advanced diagnostics.
Water Operations
    The water operations for Saipan are neither adequate nor reliable.
    The largest island of Saipan is the only U.S. community of its size 
without potable water available 24 hours a day. The source of water is 
rain, which falls primarily from August through December. The public 
utility has 143 deep wells; 72 do not meet federal standards for 
drinking water. The utility requires an expenditure of $4 million for 
new well drilling and the decommissioning of poor quality wells. 
Simultaneously, the distribution pipelines must be pressured at a cost 
of $170 million, as estimated by the U.S. Army Corps of Engineers. 
Without 24-hour pressurization, the pipelines become contaminated 
beyond the control of disinfectants. Contamination also leaks in 
through older pipelines. If these projects are not achieved in tandem, 
good water is released through leaking or contaminated pipelines.
    In December 2003, the CNMI created a separate entity, the Water 
Task Force, to implement a schedule of projects outlines in the April 
2003 U.S. Army corps of Engineers' ``Water Infrastructure Development 
Plan for the Island of Saipan.'' Its two-year goal was to establish 24-
hour pressurization of the water system on Saipan. To date funding 
totaling $20 million, administered through the Office of Insular 
Affairs, has been earmarked for various projects, including metering, 
leak detection and repair, and well drilling an optimization. Varying 
degrees of success have been achieved, with the most improvement coming 
during the first two years of the program.
    The U.S. Environmental Protection Agency (EPA) found, in May 2006, 
39 major deficiencies in the Saipan operations that affect the quality 
of public water supply. Due to budget limitations, the utility is 
struggling in its efforts to take corrective action. There are severe 
shortages in staffing and materials for maintenance, in addition to the 
lack of capital funding.
    In January 2007, with OIA funding, advisors will help the public 
utility identify requirements and funding levels for critical 
compliance with the EPA water and wastewater regulations. Although some 
grants may be identified for minor projects or personnel training, 
obtaining potable drinking water will require a major capital outlay.
    A water rate study was completed in 2006, which has not yet been 
submitted to the utility. It is expected there will be a significant 
increase in water rates in 2007. CNMI residents have already voiced 
discontentment over having to pay for non-drinkable water. Furthermore, 
the rate structure does not include capital expansion. Current water 
rates are based on a graduated scale, ranging as little as 50 cents per 
1,000 gallons for the first 3,000 gallons of use; $3.50 per 1,000 
gallons, using between 3,001-60,000 gallons; and the highest charge is 
$4.00 per 1,000 gallons for usage above 60,000 gallons per month.
    Both the islands of Rota and Tinian encountered violations relating 
to water treatment and bacteriological testing in 2006.
                         wastewater operations
    Although Saipan has two secondary sewage treatment plants (STP), 
both are at capacity. Both suffer from a lack of funding for 
maintenance. Only 60 percent of Saipan has sewers. The Utility suffers 
from a lack of qualified personnel. Only the Wastewater Manager holds 
EPA certification, although staff is undergoing certification testing.
    The Wastewater Division has sharply decreased the number of sewage 
spills throughout the collection systems due to improvements in 
pipelines and new pumps that keep pace with the increasing amounts of 
sewage relating to the tourism market.
    Any new industrial growth for Saipan must include a plan for 
wastewater treatment expansion. To date, only one new STP is planned 
for this island in the largest homestead of Kagman. The U.S. Army Corps 
is currently handling the design phase. Construction and collection 
systems will cost a minimum of $25 million. Complete capital costs will 
again be a problem.
    The islands of Rota and Tinian have no wastewater treatment 
systems. The Department of the Interior provided capital improvement 
project funding for portions of the designs and construction. Funding 
to complete the project is lacking.
    Wastewater rates mirror the water rates. Wastewater is not metered; 
customers are billed according to the water meter usage.
                              electricity
    Even with a depressed economy resulting in factory closures, the 
island of Saipan requires 90 megawatts of new or improved capacity. It 
is difficult to attract industry if electric capacity is insufficient. 
Electricity is the backbone of an emerging or recovering economy. 
Electricity is neither adequate nor reliable in the CNMI.
    The base load generators at the capital island power plant are 
inefficient and frequently break down. The island of Saipan experienced 
1,349 hours of power outages in 2006; 1,190 were due to generation 
failures or inability to procure fuel.
    As mandated by the Department of the Interior and local law, the 
public utility must establish rates based on the actual or full costs 
of its services. For the first time since its inception in 1986, CUC 
has recently and successfully achieved such full cost recovery this for 
its electric operations. Charging adequate and accurate electric fees 
is not without challenges. Just after implementing permanent rates in 
November 2006, the government created a public utilities commission 
that will soon review, and possibly adjust, these rates. Other bills 
under consideration suggest legislating electric rates. These actions 
are not surprising since the price for a kilowatt of power rose from 
14.5 to an average of 28 cents--literally overnight.
    Arguably, the CNMI is not alone in establishing high electric 
rates. Cities in both Hawaii and Alaska have similar fossil fuel-based 
energy systems. In those states, fuel companies have a larger customer 
base resulting in lower prices for diesel and unleaded gasoline, fuel 
deliveries, and storage facilities. There are also a number of private 
and public utilities that buy fuel. In the CNMI, the public utility is 
the largest fuel customer. The CNMI is more remote and dependent on the 
importation of fuel. The contractual ``ad ons'' for profit and fuel 
deliveries in Saipan is 16 percent, in Tinian 39 percent, and for Rota 
40 percent. Moreover, the fluctuating market makes the general price of 
electricity difficult to gauge.
    Although the public utility rate structure is now sufficient to 
purchase fuel and basic generation requirements, it does not generate 
sufficient revenue to fund the required overhauls of the existing 
generation fleet. Three units are overdue for repairs that are 
estimated to cost $13 million. Payment is expected in advance. Each 
overhaul will take a minimum of six months. As that time elapses, the 
remaining generation equipment will also require major overhaul. Power 
outages are expected to continue.
    Electric interruptions cause major problems for all industries. 
Some suffer production losses, while others, such as the major hotels, 
worry that tourists who are inconvenienced will take home a poor image 
of the island. Power failures prevent the treatment of water--both from 
public and desalination units. Frequent outages cause businesses to 
install backup generation and staff these mini power plants all over 
the island. Even on the island of Rota, with its ecotourism, generation 
equipment is antiquated and funding for repairs is lacking. Therefore, 
two of the three islands cannot tout reliability.
    The public utility does not currently have the resources to install 
more efficient generating facilities. The recent rate increase does not 
provide for sufficient funding to build new generation facilities. 
Capital costs to purchase efficient generators are estimated, at 
minimum, $1.5 million per megawatt. Alternate energy expansion 
estimates are even higher. The lack of land is also an issue.
    The lack of reliable generation makes it difficult for the CNMI to 
attract private or industrialized business. For these reasons, the CNMI 
government completed a new study in 2006 for the privatization of 
generation and transmission operations on both Saipan and Rota. A 
public bid for the sale of CNMI assets not only requires contract 
approval by the public utility commission, but also will likely involve 
a Federal review to protect Federal investments in these electric 
systems. As of January 2007, the CNMI government had yet to release the 
project for bid.
    Question 9. How do the incentives and disincentives compare, for 
both CNMI businesses and for the CNMI government, for the hiring of 
aliens versus the hiring of U.S. citizens?
    Answer.
Incentives for Private Employers To Hire U.S. Citizens
    The Nonresident Workers Act, 3 CMC  4411, et. seq., mandates that 
U.S. citizens be given preference in employment in the Commonwealth. 3 
CMC  4413. Section 4421 requires the CNMI Secretary of Labor to 
``[o]versee, monitor, and review the use of nonresident workers and all 
matters related to such use, including the health, safety, meals, 
lodging, salaries, and working hours and conditions of such workers, 
and the specific contractual provisions for the services or labor of 
such workers,'' therefore, private employers may avoid the direct and 
transactional costs inherent in complying with the regulations 
pertaining to the hiring and retention of nonresident workers by hiring 
U.S. citizens instead. These costs are substantial, and include the 
cost of recruiting alien workers and negotiating and executing 
contracts of employment; the application and annual renewal fee of $275 
per nonresident worker; the cost of preparing and advertising a Job 
Vacancy Announcement (JVA), unless that requirement is waived by the 
Director of Labor; and the loss of productivity resulting from the 
delay inherent in hiring a nonresident worker, when a U.S. citizen may 
be available for work immediately.
    In addition to the transactional or indirect costs, there are fees 
and other direct costs associated with hiring a nonresident worker, 
including the annual application and renewal fee of $275; the cost of 
securing a labor bond or other surety for each nonresident worker (3 
CMC  4435(a)); the cost of repatriating the nonresident worker at the 
end of the contract or any subsequent renewal, unless the worker 
secures a transfer to another employer; and the cost of providing 
either health insurance or reasonably necessary medical care (3 CMC  
4437), among others.
Disincentives for Private Employers To Hire U.S. Citizens
    Private employers have had great difficulty in filling job 
vacancies with U.S. citizens in the Commonwealth, due to the reluctance 
of U.S. citizens to work at the CNMI's minimum wage, which has been 
$3.05 since 1997. Nonresident workers, by contrast, may find the CNMI's 
minimum wage attractive, compared to hourly wage rates in their 
countries of origin.
Incentives for Government Employers To Hire U.S. Citizens
    The Commonwealth government's incentive to hire U.S. citizens is 
political, not economic. Government officials are under increasing 
pressure to reduce the number of jobs that go to nonresident workers, 
and correspondingly, to increase employment opportunities for U.S. 
citizens.
    In addition, the Commonwealth government is prohibited from hiring 
nonresident workers for most positions, except for the following 
agencies, and under the following restrictions:

   the Public School System may continue to employ nonresident 
        workers who were employed as of March 6, 1996; however, 
        nonresident workers employed as classroom teachers or 
        supervisory personnel must be graduates of a college accredited 
        by United States accrediting associations, or alternatively, 
        must be graduate of a college or university and must pass an 
        English proficiency test;
   the Department of Public Health may employ nonresident 
        workers as nurses, doctors, midwives and dentists, providing 
        they have appropriate professional degrees from recognized 
        colleges and universities and satisfy all licensing 
        requirements;
   the office of the Public Auditor may employ nonresident 
        workers, provided they meet minimum professional qualifications 
        as established by the Public Auditor;
   the Department of Public Works may employ nonresident 
        workers who meet professional qualifications imposed by the 
        Secretary of the Department of Public Works;
   the Northern Marianas College may employ nonresident workers 
        as instructors or researchers, if they are college graduates 
        and meet certain professional requirements; and
   the Commonwealth Utilities Corporation may employ qualified 
        nonresident workers in technical and professional positions.

    The limited nature of the Commonwealth government's opportunities 
to employ nonresident workers removes any incentive to hire any 
nonresident workers but those needed to fill vacancies that cannot be 
filled by the U.S. citizen workforce.
Incentives for Government Employers To Hire Nonresident Workers
    The disincentive to hiring nonresident workers that applies to 
private employers--i.e., the payment of an annual fee of $275 per 
worker--does not operate as a disincentive to the Commonwealth 
government, since it is exempt from paying the application fee for 
nonresident workers it employs, pursuant to 3 CMC  4424(b).
    Question 10. In its June 5, 2001 report to the U.S. Senate, the 
Committee on Energy and Natural Resources found: ``What job creation 
exists in the private sector goes to foreign workers. The ability to 
obtain skilled foreign workers at low wages effectively forecloses 
opportunities for United States residents in both entry and skilled 
positions.'' Do you generally agree with this finding?
    Answer. Because of the unique economic structure of the CNMI and 
the fact that approximately 50% of CNMI residents are guest workers, we 
generally agree with this finding. The most recent CNMI census data 
that we have available, from 2000, shows the unemployment rate for U.S. 
citizens in the CNMI to be almost six times as high as that for guest 
workers. Although the Nonresident Workers Act mandates that U.S. 
citizens be given preference in employment for most jobs in the CNMI, 
there are few U.S. residents who are willing to work for the CNMI's 
minimum wage, which has been $3.05 since 1997. This practice is 
especially evident in the skilled positions, particularly trade 
occupations. There are few U.S. resident carpenters, electricians, 
plumbers, masons and heavy equipment operators, and the Northern 
Marianas College has dropped its vocational training courses due to a 
lack of interest in lower-paying jobs. The result is a workforce in 
which local workers are heavily concentrated in the public sector and 
non-U.S. citizens hold the large majority of private sector jobs. We 
note that these economic impacts appear to be related to the scope and 
scale of the guest worker program that exists in the CNMI, where guest 
workers make up approximately 50% of the population and the minimum 
wage is set at a much lower rate than the wages demanded by U.S. 
citizens. The CNMI's guest workers are integrated into all levels of 
the workforce, comprising a majority of its doctors, nurses and 
journalists, in addition to its housekeepers, farmers, garment and 
construction workers. The economic impacts of a guest worker program of 
this proportion on a small island economy are unique and should not be 
extrapolated to draw observations about other economies, including that 
of the U.S. as a whole.
    Question 11. The report added, ``A by-product of this situation has 
been increased pressure on the public sector to expand solely to 
provide jobs.'' Do you generally agree with this finding?
    Answer. We agree with the finding. The CNMI government employs some 
4,000 workers for a population of permanent residents of only 35,000. 
Anemic job creation in the private sector, the low minimum wage, and 
the lack of a general welfare program in the CNMI have all contributed 
to a system where U.S. resident workers look to the government to 
provide jobs, and where U.S. resident secondary school students aspire 
to be government workers. In addition, U.S. residents have begun to 
emigrate to the U.S. mainland to look for work, due to the poor 
performance of the local economy and the paucity of jobs in the private 
sector that pay substantially more than the statutory minimum wage.
                        federal-cnmi initiative
    Question 12a. Under the Federal-CNMI Initiative on Labor, 
Immigration, and Law Enforcement the Administration established an 
Interagency Task Force to coordinate Initiative activities in 
Washington D.C., one in Saipan to coordinate activities there, and 
agreed to send an annual report to the Congress.
    Please provide the funding levels for the Initiative from FY95 
through FY2006.
    Answer. In 1995, the Congress set aside $7 million to allow the 
CNMI and Federal agencies to establish an initiative to correct labor, 
immigration and related law enforcement problems. Congress again 
addressed the matter in 1996 with P.L. 104-134, which authorized as 
much as $3 million annually for the joint Federal/CNMI Initiative. The 
Initiative was intended to provide a diminishing level of funding as 
agencies, both federal and local, were able to assume the fiscal 
responsibility for their respective mandates. For 1997, the full $3 
million was appropriated. For each of the ensuing fiscal years through 
FY 2001, $2 million was appropriated. For FY 2002, OIA reduced the 
amount going to the Federal agencies, for a total that year of $1.5 
million. For FY 2003, the amount was further reduced to $1,160,000. For 
FY 2004, the amount was $1,000,000, not including $1 million of old, 
unused funding that was regranted to the Initiative. For FY 2005, the 
amount remained at $600,000, but regrants of old funds totaling 
$144,000 were also regranted. For FY 2006, no funds were allocated to 
the Labor, Immigration & Law Enforcement Initiative, due to the large 
amount of unexpended funds from previous years' grants. For FY 2007, it 
is expected that OIA will fund the Initiative with approximately 
$500,000.
    Question 12b. Please provide updated performance information for 
Federal and CNMI:
   Labor (resources/inspections/violations),
   Immigration (resources/exclusions/deportations), and
   Law Enforcement (resources/cases/convictions).
    Answer.
Federal
            Department of Labor
    The following chart summarizes the available information from the 
U.S. Department of Labor's Wage and Hour Division (WHD) on the number 
of investigators, investigations concluded, back wages collected and 
employees receiving back wages. Investigation data for fiscal years 
1995 through 1997 was taken from annual reports submitted by the 
Department of the Interior to Congress on the Federal-CNMI Initiative 
on Labor, Immigration, and Law Enforcement. The remaining data are from 
the Wage and Hour Investigator Support and Reporting Database 
(WHISARD). WHD converted its investigation database in late 1999 and 
2000. As a result of the conversion, case investigation information 
from FY 1999 may not have been concluded in the database until FY 2000.

                                          DEPARTMENT OF LABOR--FEDERAL
----------------------------------------------------------------------------------------------------------------
                                                        WHD                                          Employees
                   Fiscal Year                     Investigators     Concluded      Back Wages    Receiving Back
                                                      Assigned    Investigations     Collected         Wages
----------------------------------------------------------------------------------------------------------------
1995.............................................            2         ( \1\ )
1996.............................................            2              32          $420,000             693
1997.............................................            2              20          $660,000       \2\ 1,000
1998.............................................            3              28        $6,828,296           3,927
1999.............................................            3               8          $241,883              32
2000.............................................            3              75        $5,287,385           3,355
2001.............................................            1              34        $2,841,384           1,066
2002.............................................            4              53        $4,149,799           1,718
2003.............................................            4              49        $2,264,810           1,858
2004.............................................            2              43        $1,984,763           2,473
2005.............................................        \3\ 2              55        $2,246,200           2,718
2006.............................................            2              40        $1,137,881            717
----------------------------------------------------------------------------------------------------------------
\1\ WHD established a CNMI office with two investigators in April 1995. The record of investigations and back
  wage amounts are not available for FY 1995. However, from the period beginning in April 1995 and ending June
  1996, WHD conducted 20 investigations and collected $1,288,000 for 1,600 workers.
\2\ Available records indicate that the number of employees receiving back wages was ``nearly 1,000.''
\3\ One of the assigned investigators was on military duty for approximately four months during FY 2005 and
  eight months during FY 2006.

    WHD continues to maintain a presence on the CNMI. Two investigators 
currently located in Saipan continue to conduct directed investigations 
in the low-wage industries, respond to complaints and provide 
compliance assistance.
    The Federal Bureau of Investigation was asked to provide 
information in response to this question, but unfortunately, has not 
forwarded any information to us at this time.
    The United States Attorney's Office was asked to provide 
information in response to this question, and contacted us to say they 
did not have approval to forward any information to us.
CNMI
    The CNMI Department of Labor provided a report summarizing its 
activities; this response is culled from the pertinent sections of that 
report.
            Resources
    The CNMI Department of Labor provided no response to the portion of 
the question asking for the current status of departmental resources.
            Inspections
    According to the CNMI Department of Labor, its Health and Safety 
Unit has conducted approximately 1,000 inspections of business 
establishments and a few hundred inspections of employee housing units 
every year since 2001. In recent years, the number of inspections has 
been steadily increasing. For instance, in 2004, Department of Labor 
personnel inspected 1,025 business establishments and 202 employee 
housing units. In 2005, 1,257 business establishments and 285 employee 
housing units were inspected. As of early December 2006, Labor 
personnel had inspected 1,213 business establishments and 266 employee 
housing units.
            Violations
    The CNMI Department of Labor has provided the following tables 
detailing its statistics concerning violations:

                 TOTAL LABOR COMPLAINTS FILED 2000-2006
------------------------------------------------------------------------
                  Year                   New Cases    Closed    Pending
------------------------------------------------------------------------
2000...................................        327        159        168
2001...................................        188        134         54
2002...................................        296        196        100
2003...................................        524        220        304
2004...................................        812        146        666
2005...................................        420         54        366
2006...................................        343         26        317
------------------------------------------------------------------------


                    COMPLAINTS ALLEGING UNPAID WAGES
------------------------------------------------------------------------
                                                        Unpaid Wages and
                         Year                                  OT
------------------------------------------------------------------------
2000.................................................                136
2001.................................................                107
2002.................................................                125
2003.................................................                 97
2004.................................................                127
2005.................................................                 71
2006.................................................                 74
------------------------------------------------------------------------

    OIA's Federal Ombudsman's Office had difficulty reconciling some of 
the data contained in this table with data in the Federal Ombudsman's 
Database. For example, Ombudsman data shows some 49 workers complained 
of unpaid overtime in calendar year 2006, and 118 complained of 
nonpayment of regular wages in the same year. In calendar year 2006, 
the Federal Ombudsman's Office assisted 142 workers in filing 
complaints with the Department of Labor. Moreover, the Department of 
Labor makes no mention of compliance agency cases, where the Director 
of Labor initiates an action on behalf of multiple workers having the 
same claim against a single employer. Examples of cases where more than 
one worker alleged unpaid wages or overtime, but which would not show 
up as individual complaints include, Director of Labor v. Pacific 
Utility & Communication, Inc. (seven employees were not paid for seven 
months), and Director of Labor v. K&K Corp., d/b/a Zion Tailoring 
(three workers were owed several paychecks), among others referred to 
the Department of Labor by the Federal Ombudsman in 2006.
CNMI Immigration
            Resources
    According to Melvin Grey, Director of the CNMI's Division of 
Immigration, the Division has 95 authorized positions, with 58 
currently on duty, and another 37 hires in process. The Division's 
personnel are broken out into the following sections: processing 
section: 10 authorized, seven on duty; visitor entry permits (VEP's): 
four authorized, three on duty; airport section: 45 authorized, 25 on 
duty; investigation: 12 authorized, seven on duty; Rota: 11 authorized, 
seven on duty; and Tinian: 13 authorized, seven on duty.
            Exclusions
    In 2006, there were seven persons denied entry into the CNMI; six 
from China, and one from the Republic of the Philippines. The number of 
exclusions has been dropping over the past several years, and the 
Division of Immigration says this is to be expected, as its screening 
capability gets 24 better. For example, in 2005, the Division excluded 
25 persons; in 2004, 29; in 2003, 16; in 2002, 26; and 2001, 74.
            Deportations
    In 2006, the Division of Immigration filed 166 deportation cases, 
resulting in 45 persons being ordered deported. An additional 19 
persons stipulated to deportation (an order of deportation is a 
prerequisite to applying for refugee protection, which causes many 
seeking refugee protection to stipulate). Twenty persons had their 
cases dismissed, and were allowed to voluntarily depart (persons who 
are deported are barred from returning to the CNMI, so many agree to 
voluntarily depart, in hopes that they may be allowed to return in the 
future). Twenty-seven others had their cases dismissed outright, which 
may occur if, for example, the person had a labor case pending (persons 
with pending labor complaints are not deportable), which did not come 
to the attention of the authorities until the case had been filed. 
Twenty-eight are ``off-calendar'' (no explanation offered for this 
designation), and 27 cases are still pending adjudication.
    Question 12c. Please summarize the current activities of the two 
Task Forces, such an agenda/objectives, and assessment of progress.
    Answer. Currently, there is an Interagency Task Force in 
Washington, D.C., organized by the Department of the Interior, that is 
performing a comprehensive review of CNMI labor and immigration issues. 
Membership includes the Departments of the Interior, Homeland Security, 
Labor, Justice, and State.
    The Interagency Task Force in Saipan is now called the Labor 
Enforcement Group, and is comprised of Department of the Interior 
personnel representing the Federal Ombudsman's Office and the CNMI 
Field Representative, representatives from the Equal Employment 
Opportunity Commission in Honolulu and its solicitor in Los Angeles, 
representatives from the U.S. Department of Labor's Wage/Hour Division 
in Honolulu and its solicitor in San Francisco, the Federal Bureau of 
Investigation, the United States Attorneys Office, and the CNMI 
Attorney General.
    Telephonic conferences are held approximately every three months. 
Issues discussed include current and pending cases involving garment 
factory closures, human trafficking, and other issues that may be of 
concern to law enforcement personnel. Proposed legislative changes are 
also discussed. If other agencies are interested in reports of 
violations, we have established mechanisms and procedures for the 
sharing of information to avoid duplication of effort, conservation of 
resources and enhanced enforcement opportunities.
                   criminal activity/law enforcement
    Question 13. In 1997, reports by the Immigration and Naturalization 
Service, and by the U.S. Commission on Immigration Reform expressed a 
concern regarding organized criminal activity.

   Please describe the gambling industry in the CNMI, how it is 
        regulated, whether any Federal agency has ever evaluated the 
        performance of the local gambling regulatory authorities, and 
        if so, their findings.

    Answer. Currently, the Tinian Dynasty Hotel and Casino operates the 
only casino in the CNMI. Casinos are currently authorized for Tinian 
only. Regulation of casinos is overseen by the five-member Tinian 
Casino Gaming Control Commission pursuant to a comprehensive gaming 
statute and regulations promulgated thereunder. The Commission has the 
authority to issue up to five permits, and three have been issued 
(including that for the Tinian Dynasty). The application fee for a 
license is $200,000 (non-refundable), which covers, among other things, 
the cost of procuring background investigations.
    According to the CNMI Attorney General, the U.S. Internal Revenue 
Service has had two agents stationed in the CNMI in past years and at 
one time one of the resident agents did some preliminary review of the 
industry. We are still attempting to determine whether there is a 
report summarizing the outcome of that review. We are unaware of any 
other Federal evaluation of the CNMI gaming industry.
    The Federal Bureau of Investigation and the United States 
Attorney's office were both contacted and asked to provide answers to 
this question. They were unable to provide any pertinent information at 
this time.
    Question 14. How does the presence of organized crime elements from 
Japan, China, and Russia in the CNMI compare with that of Guam?
    Answer. According to a 2002 risk assessment prepared by the U.S. 
Justice Department at the request of Frederick A. Black, then U.S. 
Attorney for the Districts of Guam and the Northern Mariana Islands:

          Individuals belonging to Chinese Triad gangs, Japanese 
        Yakuza, Russian Mafia, and Korean Mafia organizations each 
        participate to some degree in the criminal activity of the 
        [Northern Mariana Islands]. Gambling, prostitution, drugs, 
        money laundering and the exploitation of the large segments of 
        the alien population are fully orchestrated by these 
        organizations.
          The risk assessment also makes mention of ``the presence of 
        several transnational criminal organizations on Guam.''

    Another report, the Federal-CNMI Initiative on Labor, Immigration, 
and Law Enforcement in the Commonwealth of the Northern Mariana 
Islands, Fourth Annual Report (1998), states, ``Japanese and Chinese 
organized crime groups have become more active in the CNMI over the 
past few years,'' and cites an organized crime task force formed 
between the FBI and CNMI law enforcement:

          Since FY 1995, the FBI has led investigations which resulted 
        in the convictions of 12 former or current Japanese organized 
        crime figures, three former or current Chinese gang members, 
        and 15 others on drug and fraud charges . . . Since FY 1995, 
        DEA agents have assisted local police in 64 drug-related 
        arrests, (18 in FY 1998 to date), 42 convictions, the seizure 
        of 1260 grams of methamphetamine, 14 kilograms of heroin, 7 
        vehicles and 1 pleasure boat.

    More recently, however, the CNMI Attorney General's Office provided 
the following statement:

          Neither local CNMI nor federal law enforcement agencies have 
        produced any reports, arrest records, or convictions that 
        indicate any country-of-origin-based organized crime elements 
        from Japan, China or Russia are operating organized criminal 
        activity in the CNMI.
          Aliens from Japan, China or Russia engaging in criminal 
        activity are seemingly operating as opportunistic individuals 
        either individually or as loosely connected opportunistic 
        groups. No information to the contrary has been presented by 
        any local or federal law enforcement agencies.
          Yakuza members have been identified as entering the CNMI, but 
        it has not been made known by or to local CNMI law enforcement, 
        nor has any federal agency made it known to CNMI law 
        enforcement that the Yakuza have any organizational operations 
        in the CNMI. Disenfranchised members of the Yakuza have been 
        known to be involved in drug activity in the CNMI but the 
        organization itself has not been identified to local CNMI law 
        enforcement by any other law enforcement entity that the 
        organization is fronting or otherwise participating in criminal 
        activity. The last federal prosecution of a former Yakuza 
        member was the case of United States v. Yoshio Takahashi, Crim. 
        No. 97-00032 (D.N.M.I.), which went to trial in January 1998.
          While unidentified members of China or Russia-based 
        organizations may have entered the CNMI, no information or 
        evidence has been presented to show that they are operating, or 
        in control of, any criminal operations in the CNMI. There was a 
        murder in 2000 by possible Chinese organized crime elements, 
        but the suspect escaped to Southeast Asia before he was 
        identified. The U.S. Attorney's Office charged potential 
        confederates with gambling offenses so they could be convicted 
        and promptly deported. See United States v. Liu Jun Wei, Crim. 
        No. 00-00028 (Chen Yung Yao remains a fugitive); United States 
        v. Chen Guo Xiong, Crim. No. 01-00021.

    Guam, operating under federal immigration laws, does have a ``no 
fly'' list for identified Yakuza members. Criminal operations on Guam 
connected to China or Russia based organized crime are unknown.
                      national security/terrorism
    Question 15. During the Committee's September, 1999 hearing on the 
Marianas, Senator Akaka asked the Administration witness, ``. . .do you 
foresee any (emphasis added) circumstances under which the government 
of the commonwealth could operate an immigration system that is 
satisfactory to the Federal Government?'' The witness replied, ``No, 
Mr. Akaka, I do not.''
    Please provide the Committee the current Administration position 
regarding whether the Commonwealth could operate an immigration system 
that is satisfactory to the Federal Government.
    Answer. We do not take the position that an immigration system 
operated by a U.S. territory such as the CNMI could not, under any 
circumstances, be satisfactory.
    However, we also recognize that a territory faces particular 
challenges, including the exclusive reservation of the conduct of 
foreign affairs to the Federal Government, resource limitations, access 
to information, training, technology and capacity-building, that make 
operating a ``satisfactory'' immigration system more difficult than it 
is for the Federal Government. In addition, ``satisfactory'' is a 
questionable term as a benchmark of acceptability for any immigration 
system, whether operated by the U.S. Government or by any other U.S. 
jurisdiction. Although points of view may differ about what particular 
features of any immigration system are most important or desirable in 
determining its level of satisfactory performance, this Administration 
shares with the United States Congress and the Government and people of 
the CNMI and the United States the desire that the immigration system 
employed in the CNMI be one that serves as effectively as possible the 
fundamental values, security and economic needs of the people of the 
CNMI as well as the rest of the United States.
    Question 16. Please briefly describe the current and anticipated 
military presence in the CNMI and Guam.
    Answer.
U.S. Navy
    According to MC1(SW) Jeffery T. Williams, COMNAVMAR Public Affairs, 
U.S. Naval Forces Marianas oversees the U.S. Navy's largest and most 
strategic island base located in the Western Pacific. U.S. Naval Forces 
Marianas is 3,300 miles west of Hawaii. It is home to more than 12,000 
military members and their families.
    On Tinian, the docks and harbor at San Jose are also available to 
the military. They are part of the military access agreement. Because 
they are only occasionally used by the military, they are sub-let back 
to the residents of Tinian for their use.
    U.S. Naval Forces Marianas serves as the Defense Representative to 
Commander, U.S. Pacific Fleet. It coordinates all shore-based naval 
personnel and shore activities in Guam as well as being the Navy's 
representative to the Guam community.
    Approximately 4,000 sailors, including 2,000 Navy personnel serving 
on ships, submarines and aircraft-are stationed in Guam.
    Naval Base Guam remains a pivotal point of strength and sea power 
for the Western Pacific by hosting several key tenant commands, as well 
as serving as the home of submarine tender USS Frank Cable and 18 other 
Tenant Commands.
    The current naval presence in the CNMI also includes several pre-
position supply ships (Compsron 3) which alternate between Saipan and 
Guam under a Navy Captain (manned by merchant mariners).
U.S. Air Force
    Andersen Air Force Base occupies most of the northern portion of 
Guam. Andersen is an important forward-based logistics-support center 
for exercise and contingency forces deploying throughout the Southwest 
Pacific and Indian Ocean area. It is home to the 36th Wing, a 
rotational Expeditionary Bomb Squadron and several tenant units. The 
total number of active duty Air Force personnel and dependents on Guam 
is approximately 8,500.
U.S. Coast Guard
    According to LTJG Marcus Hirschberg, Command Center Chief, U.S. 
Coast Guard Sector Guam, there are currently 227 active duty and 
reserve Coast Guard personnel stationed on Guam and Saipan.
    Coast Guard Sector Guam is located on the COMNAVMAR Navy Base and 
is comprised of 132 active duty and reserve personnel. The sector is 
responsible for coordinating search and rescue missions within Guam, 
most of the CNMI, Palau, and the Federated States of Micronesia. It is 
also responsible for port security, commercial vessel safety, maritime 
pollution response, and homeland security missions within Guam and the 
CNMI. Sector Boat Forces have three 25 Defender class boats that 
operate in Guam.
    The Coast Guard 110 Island Class Patrol Boats, USCGC ASSATEAGUE 
and USCGC WASHINGTON report to Sector Guam. ASSATEAGUE has a crew of 17 
and WASHINGTON a crew of 21. They respond to Search and Rescue and Law 
Enforcement cases within Sector Guam's area of responsibility.
    The Coast Guard Cutter SEQUOIA is a 225 buoy tender that responds 
when needed for search and rescue, law enforcement, or pollution 
response.
    In addition, there is a three-person Marine Safety Detachment 
stationed in Saipan that performs commercial vessel inspections and 
other duties related to commercial vessel safety.
Army Reserves
    The island of Saipan is home to the 3rd platoon of Echo Company, 
100th battalion, 442nd infantry (90 soldiers) and an element of 302nd 
quartermaster company (22 soldiers). The reserve center is located on 
5.5 acres of leased-back Federal property in the village of Garapan. 
There are 112 soldiers on Saipan.
Other CNMI Military Presence
    The U.S. military have long-term rights to utilize the island of 
Farallon de Medinilla as a bombing range, which it does with some 
regularity. Such activity is always advertised, so as to discourage 
fishing boats from being in the surrounding waters during the time of 
bombing and strafing exercises over the island.
    Two-thirds of Tinian is military retention land, which is used for 
occasional major military exercise involving one or more of the Guam-
based services. More regularly, aircraft use Tinian's North Field for 
aviation practice. The Mayor's office is usually informed of such an 
activity in advance to avoid inadvertent domestic interference or 
tourist inconvenience.
Anticipated Military Buildup
    Plans are underway to relocate the Third Marine Expeditionary Unit 
from Okinawa to Guam. This would result in the relocation of up to 
approximately 8,000 Marines to Guam, and up to approximately 9,000 
dependents. It is estimated that the relocation of the Marines will 
require an investment of approximately $10.3 billion for infrastructure 
and other requirements. It is anticipated that the Navy and Air Force 
presence on Guam will also increase significantly, requiring an 
additional investment of approximately $5 billion. The aforementioned 
improvements would be built over a period of 10 to 20 years.
    Rear Admiral Charles J. Leidig, Commander, Naval Forces Marianas, 
has said that the Department of Defense is exploring how the CNMI might 
be included in the anticipated military buildup. For example, there has 
been some discussion of having some prefabricated construction occur in 
the CNMI because of labor shortages that are likely to occur on Guam. 
There has also been discussion of increased use of facilities in the 
CNMI for training, including live-fire training.
    Question 17. Please compare border control polices in the CNMI with 
those of the rest of the U.S.
    Answer. Since the CNMI is an isolated island community, it does not 
face the challenges that the mainland U.S. faces to combat a large 
volume of illegal border crossings by land. We will therefore focus the 
comparison on control of aliens traveling inbound by air (although 
noting that the CNMI, like other parts of the United States, does face 
the challenge of illegal migration by sea). Under the Immigration and 
Nationality Act, before traveling to the continental United States, 
Alaska, Hawaii, Puerto Rico, Guam, or the Virgin Islands, aliens must 
obtain a visa from a U.S. consular officer abroad unless they are 
eligible under the Visa Waiver Program or other legal authority for 
admission without a visa. Carriers are subject to substantial fines if 
they board passengers bound for these parts of the United States who 
lack visas or other proper documentation. All visa applicants are 
checked against the Department of State's name-checking system, the 
Consular Lookout and Support System (CLASS). With limited exceptions, 
all applicants are interviewed and subjected to fingerprint checks. 
After obtaining a visa, an alien seeking entry to these parts of the 
United States must then apply for admission to an immigration officer 
at a U.S. port of entry. The immigration officer is responsible for 
determining whether the alien is admissible, and in order to do so, the 
officer is supposed to consult appropriate databases to identify 
individuals who, among other things, have criminal records or may be a 
danger to the security of the United States.
    The CNMI does not issue visas, conduct interviews or check 
fingerprints for those wishing to travel to the CNMI, nor does the CNMI 
have an equivalent to the Consular Lookout and Support System, nor does 
the CNMI have an equivalent to the Federal immigration officer 
responsible for determining whether the alien is admissible. The CNMI 
does have its own sophisticated computerized system for keeping track 
of aliens who enter and leave the Commonwealth. A record of all persons 
entering the CNMI is made with the Commonwealth's sophisticated Labor & 
Immigration Identification and Documentation System (LIIDS), which is 
state-of-the-art. As each person enters or exits the Commonwealth, his 
or her passport is scanned, and an electronic record is made of the 
person's immigration information and the date and time of his or her 
entry or exit.
    While many of the CNMI's nonresident workers from the Philippines 
are given some level of prescreening by the Philippine Overseas 
Employment Authority (POEA), and most Chinese workers are prescreened 
by the Chinese Economic Development Association (CEDA), these foreign 
organizations are not concerned with the border security of the CNMI; 
rather, their mandate is to regulate the numbers of nonresident workers 
who come to work in the Commonwealth, and to ensure that some minimum 
standards are met with respect to the qualifications of those workers, 
and protection of their legal rights. It is difficult for local 
authorities to verify the authenticity of documents submitted by those 
workers.
    Furthermore, not all workers are subject to the prescreening 
requirements of the POEA and CEDA; for example, workers taking 
positions in night clubs or other ``entertainment'' industries are not 
prescreened by either organization. While the POEA is mandated to 
perform its function pursuant to the laws of the Republic of the 
Philippines, CEDA's obligations spring from a voluntary agreement 
negotiated between the CNMI and the Chinese Ministry of Commerce. For 
tourists entering the CNMI from China, there is a procedure described 
below in the answer to Question 20 for admission through the issuance 
of authorization for entry letters.
    Question 18. We understand that not all commuter flights from the 
CNMI to Guam are subject to TSA inspection. Is that correct?
    Answer. Federal Security Director Michael Conley of the U.S. 
Department of Homeland Security's Transportation Security 
Administration (TSA) on Saipan, provided the following answer to this 
question:

          No, that is not correct. Freedom Air, which is a . . . 
        commuter provider in the islands, flies to Guam via Rota. The 
        passengers are deplaned in Rota and those continuing on to Guam 
        are screened prior to reboarding. All passengers landing on 
        Guam from Saipan have been TSA screened.

    Question 19. In March, the CNMI's Resident Representative, Pete A. 
Tenorio, requested $140 million in add-ons from Congress to the 
Department's FY08 appropriations for operations and construction 
projects in the CNMI.

   Given the serious revenue shortfalls currently facing the 
        CNMI and the apparent decline in essential public services, is 
        the Department willing to consider granting requests from the 
        CNMI for increases in either operations, capital or other 
        funding?

    Answer. The Office of Insular Affairs does not have sources within 
its existing budget to fund a bailout in the event that a fiscal or 
economic crisis occurs in the CNMI.
    Question 20a. Over the past year, the Government of the CNMI has 
reportedly proposed or considered several changes to their labor and 
immigration policies including:

   deportation of guest workers who are in the CNMI under 
        Temporary Work Authorizations (TWAs);
   granting the authority to issue entry permits to casino 
        operators;
   regulations to permit the entry of foreign elementary and 
        secondary school students to attend private schools; and
   selling CNMI residency to foreign investors for $200,000 or 
        $250,000.

    Please summarize the validity of these proposals, and their current 
status. (Please provide copies of the proposals and of any Federal 
review and recommendations.)
    Please describe if there are additional significant labor and 
immigration policy changes that the CNMI has considered in the past 
year. If any have been considered please summarize them.
    Answer.
Deportation of TWA Holders
    The proposal to deport workers who are working under Temporary Work 
Authorizations (``TWA's'') was never seriously considered by the CNMI 
Department of Labor, even though it was widely reported in the media. A 
little background on the process will help to illuminate how the 
miscommunication occurred.
    When a nonresident worker files a labor complaint, the 
Administrative Hearing Office schedules mediation between the employer 
and the worker. If the parties negotiate in good faith, but fail to 
reach agreement, the Hearing Office will usually grant the worker a 
memo to seek temporary employment, so the worker will not become a 
burden to the Commonwealth in the months or years it takes Labor to 
investigate the case and schedule adjudication. If the worker finds an 
employer who wishes to hire him on a temporary basis, the worker and 
employer will seek a TWA for the worker, which is renewable every 90 
days. Approximately 500 TWAs are granted or renewed each month, which 
means that during any three-month period approximately 1,500 TWAs are 
outstanding and valid. For the three-month period beginning October 22, 
2006, 227 TWAs were approved and 318 are pending. Approximately 90% of 
the TWA applications are approved.
    Some workers have taken advantage of the long delay by repeatedly 
securing additional memos, without ever finding a job. The memo is a de 
facto immigration permit, since a worker cannot be deported while his 
or her case is pending. Some workers will also seek unregistered, 
illegal employment, which deprives the Commonwealth of the taxes it 
would derive if the worker were engaged in legitimate employment.
    The issue of deporting TWA holders was clarified later in a press 
conference. The official stated that workers holding memos might be 
deportable, if they were working. TWA holders, by contrast, are legal 
workers under CNMI law.
Role of Private Entities
    The CNMI Attorney General's office provided the following 
statement:

          At all times the authority to grant entry permits remains 
        with the Division of Immigration. Most entry permits are 
        reviewed, and are issued or denied, by direct application to 
        the Division. There is a process in place where three travel 
        agencies have been granted authority to gather information 
        regarding prospective visitors to the Commonwealth, fill out 
        applications, and submit the completed applications to the 
        Division for review and further action. At all times the 
        Division retains the ultimate authority to approve or deny any 
        application submitted. Each of the approved travel agencies, 
        one of whom is affiliated with the Tinian Dynasty Hotel and 
        Casino, has posted a $500,000 bond which is subject to 
        forfeiture in the event of a breach of the operating agreement 
        between the CNMI and the travel agency or tour operator.
          There are currently two such active travel agencies: Saipan 
        Travel and Century Travel. Both charter flights from China. 
        There was one formerly authorized agency which did not start 
        operation two years ago, and another agency has been authorized 
        in its place to begin operation when a second expected casino 
        opens on Tinian.

Foreign Student Permits
    The CNMI issues alien student attendance permits for alien children 
to attend private schools in the CNMI. In order to obtain a student 
permit, a student has to be under 14 years of age, and have a parent 
legally residing in the Commonwealth. In addition, the family has to 
prove it had sufficient financial resources to permit the child to 
attend a private school. Parents of the student also have to post a 
$25,000 cash bond with the Commonwealth, or provide a letter of credit 
in the same amount.
CNMI Residency for Investors
    According to a story in the Saipan Tribune that appeared on October 
1, 2006, the CNMI government was considering the possibility of 
establishing a new program through which alien entrepreneurs meeting 
certain requirements would be eligible for residency in the CNMI.
    According to the story, the program would be similar to one under 
U.S. law, the U.S. alien entrepreneur program, which requires a minimum 
of $500,000 for targeted employment areas, or $1 million elsewhere, and 
a required level of U.S. job creation, in exchange for permanent 
resident alien status.
    Attorney General Matthew T. Gregory said the program would be 
established through legislation. No legislation has yet been proposed 
for this program, which would presumably revamp the existing investor 
classification for residency under CNMI immigration law. The current 
classification requires an investment of at least $150,000.\3\
---------------------------------------------------------------------------
    \3\ The $50,000 minimum fee referred to in question 3 above was the 
original requirement for obtaining a business license in the CNMI. 
Subsequent revisions to the investment rules raised the business 
license fee to $150,000.
---------------------------------------------------------------------------
    Question 20b. Please summarize the validity of these proposals, and 
their current status. (Please provide copies of the proposals and of 
any Federal review and recommendations).
    Answer. The only proposal mentioned above is that for a revamped 
alien entrepreneur classification for admission for CNMI residence. We 
have only seen a press report that this concept was being considered 
and are not aware of a specific proposal on which we could comment. 
Since these are matters of CNMI law, the Administration typically would 
not take a position on CNMI proposals unless an important Federal 
interest were implicated.
    Question 20c. Please describe if there are additional significant 
labor and immigration policy changes that the CNMI has considered in 
the past year. If any have been considered please summarize them.
    Answer. The most significant policy changes that have occurred in 
the past year have come about as a result of the initiative of Rep. 
Jacinta Kaipat of the CNMI House of Representatives, who chairs the 
House Judiciary & Government Operations Committee. Kaipat, a lawyer and 
former Administrative Hearing Officer with the CNMI Department of 
Labor, is well-versed in the CNMI's Nonresident Worker Act, Minimum 
Wage & Hour Act and Alien Labor Rules & Regulations.
    Chairwoman Kaipat formed a task force representing knowledgeable 
individuals from the private and public sectors, and announced her 
intent to produce legislation that would strengthen due process 
protections for nonresident workers without creating entitlements, and 
provide sound policy guidance to the Commonwealth for the next 20 
years.
    Among the provisions that sprang from the Task Force's efforts are: 
the Winding-Up Act of 2006, which (1) mandates notice and substantive 
protections for workers when a factory is closing or downsizing; (2) a 
new requirement that (within one week of arrival in the CNMI) each new 
worker and his employer attend an orientation explaining his or her 
rights and the complaint process; (3) restoration of the Division of 
Immigration and CNMI Department of Labor's right to enter workplaces 
and conduct regulatory inspections (six years after the U.S. District 
Court found several provisions of the Alien Entry & Deportation Act 
unconstitutional); (4) provision for group hearings and streamlined 
procedures for the CNMI Department of Labor's Administrative Hearing 
Office; and (5) elimination of consensual and expiration transfers for 
workers, but retention of administrative hearing transfers for workers 
who prove a violation of the Nonresident Workers Act, Minimum Wage & 
Hour Act, Alien Labor Rules & Regulations, the Fair Labor Standards 
Act, Title VII of the federal the Civil Rights Act, or a breach of the 
worker's contract.
    Question 21. In May, the Department of the Interior's Ombudsman 
wrote, ``We have long suspected that a portion of the fees charged by 
recruiters in China were being kicked-back to the factories here in 
Saipan.''

   Has any Federal or CNMI agency investigated such kick-backs, 
        and if so, what are their findings and recommendations?
   Please provide information on the number of CNMI labor 
        investigators and hearings officers over the past ten years.

    Answer. On July 26, 2006, the Federal Labor Ombudsman wrote to the 
CNMI's Secretary of Labor, Gil M. San Nicholas, formally requesting 
that the CNMI Department of Labor commence an investigation to 
determine whether the garment factories were requiring the payment of 
fees to those China-based recruiters in exchange for renewal of their 
jobs in Saipan. The letter raises the question why Saipan garment 
factories would continue to recruit and hire scores of additional 
workers to come to Saipan after a decision had been made to cease their 
business activities. Given the cost and potential liabilities inherent 
in bringing a nonresident worker to Saipan, the Ombudsman speculated 
that employers who continued to do so after the garment industry began 
its inevitable decline might be deriving some financial benefit from 
recruiting workers from China, as opposed to hiring from among the 
hundreds or perhaps thousands of experienced workers who were already 
present in Saipan and actively seeking employment.
    The letter went on to note that a number of garment workers had 
complained they had been told their employment contracts would not be 
renewed unless they paid to renew their relationship with their 
Chinese-based recruiting agency. Those who refused to do so were 
reportedly not renewed. When the complaining employees' cases were 
heard by the CNMI Department of Labor's Administrative Hearing Office, 
the employer's representative denied the company had any relationship 
with the recruiter, disclaimed any knowledge of the practice of 
requiring workers to pay recruiters before their contracts were 
renewed, and claimed the worker had not been renewed for reasons 
unrelated to the relationship between the worker and recruiter. 
However, the Ombudsman in his letter noted that Chinese law requires a 
written contract be executed between the recruiter and the garment 
factory, and produced a copy of such an agreement between a garment 
manufacturing company and one of its recruiters, undercutting the 
company representative's denials. The Ombudsman questioned the legality 
of such side agreements, given the possibility they could affect the 
terms and conditions of the employment agreement (between the worker 
and the factory) approved by the CNMI Department of Labor, result in 
workers being paid less than the minimum wage after the recruiting fees 
were deducted from their compensation, or violate the Nonresident 
Workers Act's prohibition against charging the worker any fee for 
obtaining a job.
    A meeting was held later, attended by the CNMI's Deputy Secretary 
of Labor, the company representative and legal counsel, legal counsel 
for the CNMI's Department of Labor and the Federal Ombudsman. The 
Deputy Secretary ultimately concluded that the previously undisclosed 
recruiter-worker and recruiter-employer agreements should be submitted 
to the CNMI's Department of Labor for its review and approval, and the 
company agreed to post written notices in its facilities in Saipan, in 
the workers' language, informing them that they were not required to 
pay any fee to their recruiter or any other person in order to have 
their contract renewed, and requesting that they immediately inform the 
company's human resources department if anyone informed them otherwise. 
The CNMI Department of Labor provided the following table:

 AVERAGE NUMBER OF CNMI DOL HEARING OFFICERS AND LABOR INVESTIGATORS FOR
                       EACH OF THE LAST TEN YEARS
------------------------------------------------------------------------
                                          Average Number  Average Number
                  Year                      of Hearing          of
                                             Officers      Investigators
------------------------------------------------------------------------
1996....................................               2              11
1997....................................               2              11
1998....................................               2              10
1999....................................               2              10
2000....................................               3              12
2001....................................               3              15
2002....................................               3              17
2003....................................               3              16
2004....................................               3              11
2005....................................               3              11
2006....................................               3              11
------------------------------------------------------------------------

    Question 22. It was recently reported that despite a steady decline 
in business activity in the CNMI, in the most recent quarter, July-
September 2006, there has been a substantial 29% increase in the number 
of work permits over the previous quarter.

   Please provide an overview of the validity of this report, 
        and the reason for the increase.

    Answer. According to the CNMI Department of Labor, a quarterly 
report issued by Labor and Immigration Identification and Documentation 
Systems (LIIDS) did show a 29% increase in permits issued from the 
second to third quarter of 2006 (from 6,059 to 7,832). However, the 
term ``permit'' includes amendments to existing contracts, extensions 
for Authorizations for Entry, issuance of duplicate permits, and the 
grant of short extensions to permits. For the quarter in question, 
LIIDS figures show that more than 900 of the ``permits'' issued in the 
third quarter of 2006 were amended contracts. The majority of these 
amendments simply reflect reorganizations and name changes for one or 
more garment factories, which would require each employee contract and 
permit to be amended to reflect the new employer of record.
    Excluding the amendments and extensions in both quarters (so that 
the number reflects only the issuance of new, renewal or expiration 
transfer or administrative order permits), the increase in permits 
issued was 13% (from 5,877 to 6,806), an increase the CMNI Department 
of Labor does not find significant, as quarterly figures often 
fluctuate by that amount, due to the normal ebb and flow of business 
and hiring. What did not increase to any significant degree were new 
permits from off-island. 1,195 were issued in the second quarter and 
1,287 were issued in the third.
    Labor points to a comparison of the number of permits issued in 
2005 and 2006 as evidence that the government actually issued 21% fewer 
permits in 2006 than in 2005 (27,437 in 2006 as opposed to 33,294 in 
2005), reflecting the downward trend in garment industry employment.
    Question 23. Are there any non-governmental persons or 
organizations which the CNMI government has authorized to issue visitor 
entry permits, and if so, please provide a list of those organizations.
    Answer. The CNMI Attorney General's office provided the following 
statement:

          At all times the authority to grant entry permits remains 
        with the Division of Immigration. Most entry permits are 
        reviewed, and are issued or denied, by direct application to 
        the Division. There is a process in place where three travel 
        agencies have been granted authority to gather information 
        regarding prospective visitors to the Commonwealth, fill out 
        applications, and submit the completed applications to the 
        Division for review and further action. At all times the 
        Division retains the ultimate authority to approve or deny any 
        application submitted. Each of the approved travel agencies, 
        one of whom is affiliated with the Tinian Dynasty Hotel and 
        Casino, has posted a $500,000 bond which is subject to 
        forfeiture in the event of a breach of the operating agreement 
        between the CNMI and the travel agency or tour operator.
          There are currently two such active travel agencies: Saipan 
        Travel and Century Travel. Both charter flights from China. 
        There was one formerly authorized agency which did not start 
        operation two years ago, and another agency has been authorized 
        in its place to begin operation when a second expected casino 
        opens on Tinian.

    Question 24. Please summarize the rates of participation in major 
federal and local welfare programs along with historical data that 
would show any trends. Is there any correlation between the high rate 
of welfare participation and the CNMI's labor and immigration policies?
    Answer. The following are the various Federal welfare (Title IV-D 
of the Social Security Act) programs that exist in the CNMI. They are 
block grants, with limited funding availability that does not increase 
in response to economic changes resulting in higher costs of living or 
increases in unemployment.

   Nutritional Assistance Program (NAP) a.k.a. Food Stamps. 
        This is a program wherein eligible persons (under guidelines 
        set by the CNMI) are provided with coupons that may be used 
        only to purchase food. While the CNMI is not provided funding 
        out of the large ``pie'' as the other states and territories, 
        limited funding is allocated under a separate section of the 
        Social Security Act.
   Low Income Housing Energy Assistance Program (LIHEAP). This 
        is a program funded both locally and federally wherein eligible 
        persons are provided with a voucher that may only be applied 
        toward payment of an electric bill. Eligibility for this 
        program is determined under guidelines set by the CNMI. Limited 
        funding for the CNMI is provided under a separate section of 
        the Act.
   MIHA & Section 8 housing. This is a program which provides 
        funding for eligible persons to rent a home or apartment. 
        Limited funding for the CNMI is provided under a separate 
        section of the Act.
   Medicaid. This is a program which provides medical coverage 
        for eligible persons. Limited funding for the CNMI is provided 
        under a separate section of the Act.
   Medicare. This is a program which provides older eligible 
        persons with medical care. Limited funding for the CNMI is 
        provided under a separate section of the Act.

    The benefits provided in the CNMI by the various federally funded 
IV-D programs are so limited that they do not form an incentive not to 
work for the CNMI minimum wage. Food Stamp benefits are approximately 
$82 per month per person. The LIHEAP benefits average $33.88 per family 
per month. Section 8 (42 USC  14370 and MIHA public housing are not 
factors because there is a long waiting list to receive this benefit, 
and most local people already have housing on their own family land. In 
other words, there is no ``homeless'' problem in the CNMI. The NAP does 
not provide money to pay normal everyday living expenses other than 
food. Thus, clothing, toiletries, cleaning supplies, and transportation 
costs are not covered. The LIHEAP almost never covers an entire monthly 
electric bill, and cannot be applied towards a monthly water bill. The 
$528.66 per month that one would get working a minimum wage job in the 
CNMI can buy much more than what is provided by the various federal aid 
programs offered in the CNMI.
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

Statement of Joseph M. Mendiola, Senate President, Commonwealth of the 
                        Northern Mariana Islands
     conditions in the commonwealth of the northern mariana islands
    Mr. Chairman . . . Members of the Committee . . . On behalf of my 
colleagues in the CNMI Senate and the people of the Commonwealth, I 
thank you for allowing me the opportunity to present testimony 
regarding the proposal to extend federal immigration policies and law 
to our Commonwealth.
    The subject matter before us today is not new. CNMI government 
officials have stood before this Committee in the past over the same 
issue. I will not claim that our immigration system has always been 
problem free. No immigration system is without problems. However, I 
strenuously maintain that we have made great strides, tremendous 
strides in improving Commonwealth immigration procedures since the last 
CNMI delegation came before this Committee.
    It has been mentioned that part of the Commonwealth's problem was 
that it had attempted to ``change perception rather than change 
reality.'' The realities of our immigration laws and enforcement in the 
Commonwealth are vastly improved over those of a decade ago. This 
testimony highlights the changes and improvements so your Committee has 
the benefit of up-to-date information while considering the legislation 
before it.
    Our local government has demonstrated that it has the ability and 
resolve to effectively manage and further improve, when necessary, our 
immigration system. Herein I briefly highlight some of the many changes 
that have been made to ensure our borders are adequately protected. I 
present to you the current realities our people face, and draw 
attention to the negative impacts federalization of our immigration 
system would have on our community.
    The two major industries, tourism and apparel, that have sustained 
our economy and utilized the majority of our guest workers, have been 
in serious decline during the past decade. The apparel industry is on 
its way out, most likely never to return. As the industry leaves, so 
too will the thousands of workers the industry employs, thereby greatly 
reducing the imbalance of nonresident to resident workers that has been 
such a concern to many past and present members of this Committee. We 
have witnessed and will continue to witness the orderly repatriation of 
these guest workers.
    The other industry is tourism. It has been in a severe decline for 
multiple reasons, not the least of which were the tragic events of 
September 11, 2001 and the SARS epidemic. We are working hard to 
rebuild this sector of our economy. However this will be practically 
impossible in both the short and long terms without control of our 
immigration policy. This is the current reality. The in-roads we have 
made in enhancing our tourism industry will be lost.
    Our recent bilateral negotiations with the Chinese government 
resulted in the granting of ``Approved Destination Status'' in 2004 
which we project may result in a quarter million Chinese tourists per 
year by 2010. It should be noted that the U.S. government was well 
aware of our plans; the Department of Interior was kept apprised at 
every step. This effort would be wasted and we would lose access to 
this rapidly growing market with federalized immigration. Our emerging 
Russian market would likewise be lost along with any realistic hope of 
revitalizing our only mature and sustainable industry.
    The CNMI frankly will find it difficult, if not impossible, to 
compete for tourists with Hawaii, the mainland U.S., and even Guam. All 
have budgets far greater than does the CNMI. We do not have Disneyland. 
We do not have the beautiful Volcanoes National Park. We do not have 
income from a large military presence as does Guam. We have only a 
small fraction of the infrastructure of these other American 
destinations. We have our people, our tropical weather and our 
beautiful environment. We presently have control over our immigration 
policy and our Visitor Entry Permit is our competitive advantage. 
Without it we will not be able to compete.
    The Commonwealth faces its most severe economic crisis since its 
inception. Our local businesses are already bracing for an increase in 
the minimum wage, which must be passed on to consumers. This, coupled 
with increased costs of transportation to our islands can only lead to 
inflation at a time when our people can least afford it. The cumulative 
effect of an imposition of federal minimum wage standards and 
immigration law concurrently cannot fully be known but the outlook is 
certainly not hopeful. These are all unpleasant realities. Allowing the 
CNMI to maintain control of its own immigration will go a long way to 
help our economic recovery.
    There are some unfortunate perceptions, with which I must 
respectfully disagree. The first is that the CNMI lacks the 
institutional capacity to control its borders or to properly manage 
immigration and guest worker programs. This is outdated information. 
Many of the geographical traits of the Commonwealth that work to its 
economic disadvantage, for example our small size and our remote 
location in the Pacific Ocean, work to our advantage when protecting 
our borders. We simply do not have thousands of miles of unguarded 
border with other countries; the only way into and out of the CNMI is 
by air or sea, thereby making the job of securing our borders easier.
    While our Immigration and other law enforcement officials do not 
have an easy job, our people have the professional skills and 
experience to enforce our immigration laws. They do an extraordinary 
job, promptly implementing new immigration legislation enacted as we 
continually fine tune policies to reflect present and future realities. 
The improvements we have made are many.
    With the assistance of the U.S. government, we now maintain 
sophisticated computer systems and electronic passport readers. The 
implementation of the Labor and Immigration Identification System and 
the Border Management System ensure that everyone who enters the CNMI 
is accounted for. And, as has been evidenced on numerous occasions, 
local authorities have successfully worked with federal authorities in 
jointly enforcing CNMI and Federal law. Federal takeover is not the 
answer, but the continued sharing of information such as watch lists 
is.
    Our ports are effectively and professionally guarded. Anecdotally, 
what follows is a quote from the magazine Latitude 38, a sailing 
magazine published in Northern California.\1\ ``In contrast to the 
hovering officials of Saipan, who couldn't even wait for us to finish 
tying the docklines before beginning the paperwork, the Hong Kong 
officials gave us 24 hours to check in at their offices.'' I believe 
our present system compares favorably to the system on the mainland, 
which admittedly has a far greater number of ports to monitor. In the 
context of securing the Commonwealth's borders, our ``hovering'' 
officials are doing their job. I am proud of them.
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    Furthermore, it should be noted that there are safeguards and 
redundancies in place to ensure that the CNMI is not used as a transit 
point for entry to the U.S. mainland. For example, all travelers 
leaving the Commonwealth for the States are required to clear U.S. 
Immigration and Customs upon arrival into Hawaii or the mainland.
    I am extremely proud of our enforcement agents and officials. As 
always, I welcome the continuing assistance of, and interaction with, 
the U.S. government in regards to border security. For example, an 
increased Coast Guard presence would be welcome.
    It has also been said that the CNMI has been lax on matters of 
national security and law enforcement. I would respectfully disagree. 
The CNMI government has worked diligently with the United States 
Federal Government in the aftermath of the tragic events of September 
11th, 2001, to ensure that relevant CNMI agencies have taken action 
towards protecting citizens of the United States of America.
    The CNMI recognizes that terrorism is a serious and deadly problem 
that threatens our safety both at home and around the globe. Our people 
serve our country in Iraq. On January 29th of this year we lost our 
fourth native son to the War on Terror. We share the burden. And 
although our efforts in no way compare to the efforts of our armed 
forces, we certainly attempt to do what we can at home.
    In 2005, we passed Public Law 14-59, the Commonwealth Anti-
Terrorism Act, which established rigorous criminal penalties for those 
who commit or encourage acts of terrorism. This measure complements 
federal laws in the fight against terrorism and better protects our 
citizens against those who would commit such acts.
    We have created an Office of Homeland Security within the Office of 
the Governor. The Office of Homeland Security is tasked with enhancing 
our government's ability to protect the property and lives of our 
residents, and visitors, in the event of a threat or act of terrorism. 
Responsibilities and duties of the Office include developing and 
implementing appropriate training for local, regional and state 
responders who may be involved in the event of a terrorist incident 
that involves conventional, biological, chemical or nuclear weapons.
    We are Americans. We are well aware of the need for security, and 
we have taken appropriate and necessary steps to protect our 
Commonwealth from attack. I am concerned that, by taking over our 
immigration enforcement responsibilities, the Federal government will 
necessarily dilute resources and energy that could better be utilized 
elsewhere in our United States.
    In the past, concerns were raised that CNMI law had no mechanism 
for addressing political refugees. We have addressed these concerns. 
Public Law 13-61 implemented the United Nations Convention Relating to 
the Status of Refugees and the United Nations Convention Against 
Torture and Other Cruel, Inhumane or Degrading Treatment or Punishment. 
To this end our Attorney General's Office has promulgated regulations 
that take into account refugee rights and protections in the 
Commonwealth.
    The enactment of this law not only ensures compliance with the 
aforementioned treaty as required by Section 102 of the Covenant, it 
also takes into account the economic and sociological realities that 
are unique to the Commonwealth, and the fact that the Commonwealth 
retains exclusive jurisdiction over matters related to immigration 
pursuant to Section 503(a) of the Covenant. The necessary procedures 
are in place and our system works. The CNMI has changed its reality and 
it is now time for others to change their perceptions.
    Another perception is that the CNMI's labor and immigration 
policies contribute to an unsustainable economy. It is true our 
population has grown over the past several decades but so has our 
economy. Government revenues grew from $10,000,000 in 1980 to 
$248,000,000 in 1997. That said we certainly have our problems. Our 
local utility is in a dire state but the problems do not stem from our 
guest worker program. The high cost of fuel for our generators and 
replacement parts which are difficult to source seem to account for 
most of the difficulty. Also, our residents contend with unreliable 
water on a daily basis. Some areas of Saipan must contend with non-
potable water distribution. We may be the only jurisdiction in the 
American Political Family that does not have potable water. This is not 
the fault of a failed immigration policy but instead reflects the 
geographical reality of life in small tropical islands that depend on 
rain which falls primarily from August through December.
    We are taking steps to improve our position, but this may only be 
accomplished with the strengthening of our economy. Retaining control 
over immigration is a critical mechanism needed to revitalize our 
economy. Rebuilding our tax base will fund the renovation of our aging 
infrastructure. We ask that you consider this before crafting any 
proposal.
    The final misconception is that Federal legislative action is 
needed to protect guest workers from abuse. The CNMI has made great 
strides in protecting the rights and safety of our guest workers. I 
will not brush aside the past acts of unscrupulous employers, but I 
will say that our government has taken great pains to ensure that the 
abuses of the past are not repeated. I will not deny the fact that 
isolated instances still occur, but I will point to our aggressive 
enforcement of the law and the successful prosecution against those who 
would violate it. Our close cooperation with federal law enforcement 
authorities shall continue.
    Our government has worked with the Attorney General and the 
Department of Justice in enacting Public Law 14-88, the Anti-
Trafficking Act of 2005. This CNMI law provides a comprehensive 
mechanism to combat the crime of human trafficking by prohibiting the 
act of recruiting, transporting or receiving persons for forced labor; 
and the act of recruiting, transporting or receiving persons knowing 
that they will be used in the commercial sex trade. This measure also 
mandates severe penalties for those convicted of these crimes to deter 
traffickers from engaging in these reprehensible acts.
    Attorney General Alberto R. Gonzales, on behalf of President Bush, 
sent a letter to the Senate and asked that we enact an Anti-Trafficking 
Act to better aid the Federal Government in its enforcement efforts 
against this problem that, sadly, is a global problem. The letter was 
dated April 25th, 2005 and received shortly thereafter. We took prompt 
action and after full consideration, the Act was signed into law and 
became effective less than five months later. I am very proud of our 
fast response time. This is concrete proof of the Commonwealth's 
willingness and ability to ensure the rights and safety of all in the 
CNMI. Your Committee clearly has knowledge of negative allegations 
regarding the Northern Marianas. This testimony and the accompanying 
exhibits document positive factual information about the present day 
situation in the Commonwealth.
    We have enacted, and continue to research and reform laws 
protecting our guest workers and everyone who considers the 
Commonwealth home. I know Lt. Governor Villagomez and Speaker Babauta 
have referenced many of these efforts. Our commitment to protect every 
person in the Commonwealth is real. Our ability to do so is also real.
    My preceding remarks have dealt with past and present realities. 
Now I will briefly discuss the future. If the CNMI can retain control 
of its immigration, we certainly can maximize our tourism industry, but 
I also see an opportunity to turn the Commonwealth into an educational 
hub. Again, it is our Visitor Entry Permit that gives us our 
competitive advantage and our only tool by which we may advance our 
goal.
    I envision a place where students from all over the Asia-Pacific 
region may come to study in American institutions of higher learning. I 
envision this as an industry with few, if any, externalities. Knowledge 
may be contagious but it will not spoil our wonderful environment. Our 
marine ecosystem that includes coral reefs and proximity to the Mariana 
Trench leads me to believe that we could be a premiere location for 
oceanographic study. Likewise, volcanic activity, plants and animals 
found nowhere else and archaeological attractions all are found in the 
CNMI and are worth of study.
    The students' tuition and associated spending will bolster our 
economy. This is a stable and sustainable industry if properly 
nurtured. Our residents would benefit from the additional educational 
opportunities. The positive impact of exposing these students to the 
best of America: free speech, free assembly, freedom of conscience and 
religion, academic freedom and the workings of a democratic government 
and society is a value difficult to quantify, but worthy of your 
consideration.
    Many foreign students seeking American educations do not qualify or 
have the means or inclination to travel to the mainland, yet they could 
study in the CNMI and take home the American ideals and values they 
experience first-hand in the Commonwealth. The Commonwealth's ability 
to control our own immigration could thus be one of the most important, 
and beneficial, aspects of United States foreign policy in this 
important region for years to come. This is an opportunity we all 
should embrace. I would ask you to consider the value of making this a 
reality.
    In closing, I admit that in the past, when the media disseminated 
serious allegations about the CNMI, our government focused on changing 
the perceptions rather than the reality. But those times have long 
since passed. We have implemented true change in our immigration 
system. Unfortunately, it is often sensationalized accounts that 
prevail as the public perception of the CNMI and not the reality of the 
great strides we have made.
    We simply ask to be judged as we are now. Consider and analyze the 
reforms we have enacted. If this Committee determines the CNMI is 
omitting a necessary step or policy, we will be happy to implement your 
suggestions. Should this Committee find that more federal involvement 
is necessary, we would welcome any additional assistance implementing 
our immigration laws.
    We welcome your visit to our islands, but ask that any preconceived 
notions of the CNMI be put aside. We invite you to see firsthand the 
reforms we have implemented over the years and the challenges we 
currently face. We ask to be judged on our current reality, and not the 
past. I ask the members of this Committee to carefully analyze the 
information we are presenting and make their decisions based on the 
current reality. Federalization of our immigration system is not 
necessary. The CNMI is actively engaged in effective management of our 
own immigration. Thank you very much.
                                 ______
                                 
  Statement of Simon Habegger, Instructor, Northern Marianas College, 
              Commonwealth of the Northern Mariana Islands
              labor issues in the northern mariana islands
    To whom it may concern, I am an instructor at the Northern Marianas 
College, in the Commonwealth of the Northern Mariana Islands. I 
understand that the Committee on Energy and Natural Resources is 
holding a hearing to examine issues related to immigration, labor, and 
related problems here in the Commonwealth, and that members of the 
community are invited to submit written testimony. I would like to do 
so.
    I speak fluent Thai and have many friends in the Northern Mariana 
Islands who are guest workers from Thailand. I believe that their 
experiences are important when assessing the current state of contract 
workers on Saipan, and would like to submit the following testimony.
    Several Thai workers that I know are currently employed by a 
construction firm, Sablan Construction, that does not pay them 
regularly. They receive occasional checks from petty cash (an illegal 
practice) and are owed several thousand dollars each. Their homes are 
rented from Sablan Constructin and are crowded, unsafe and unsanitary, 
far below the level of a slum. Many have been working in these 
conditions for years, and cannot go home since they have no savings.
    I have asked them why they put up with this treatment, and they say 
that they are close to qualifying for limited Social Security benefits 
(10 years of work). I drove two of them down to the Social Security 
Office to check on their status. One man, who has worked full-time on 
Saipan from 1988--2006, had been credited with 29 quarters (7.25 years 
out of 18 years). The other man, who has worked full-time on Saipan 
from 1996--present, had been credited with 31 quarters (7.75 years out 
of 10 years). Both of them were shocked to find that in addition to 
working for no pay, they were not being credited with taxes paid 
towards retirement.
    I took the first of these men who has worked since 1988 down to the 
Office of Revenue and Taxation (a branch of the Commonwealth 
government) to find his tax records, in order to support a claim for 
augmenting his Social Security credits. The Office of Revenue and 
Taxation does not keep records available that are older than 10 years, 
and was not receptive to searching for them. For the years 1996 and 
1997 they had records of this man's W-2 forms, but refused to release 
them to him. The reason given was that Sablan Construction had filed 
his taxes for him in that year, and the records could only be released 
to Sablan Construction.
    Thai workers at Onwel Manufacturing Saipan Ltd. (a garment factory) 
report that new workers are even now being brought in from Thailand; 
these new workers have to sign a form that says they will not sue Onwel 
Manufacturing Saipan Ltd. if their jobs are abruptly terminated.
    Thai workers at Michigan, Inc. (a garment factory) have been told 
that the company is closing down and does not have money to pay them 
any more. They are unaware of any legal recourse that they might have 
to receive recompense, and any legal process is likely to drag on long 
after they have been repatriated. After repatriation there will be no 
urgency for the local government or the legal system to make up their 
lost wages.
    The Thai workers in the Northern Mariana Islands are extremely 
vulnerable. They speak no English, they are unfamiliar with any rights 
that they might have, and the corruption and inefficiency of the local 
government stymie any sort of appeals that they resort to. They assume 
that any complaint or legal effort they make will be retaliated 
against, and they will be sent home with nothing. The men working for 
Sablan Construction are the barest step above indentured servitude; 
they can go home whenever they want, with nothing--they are continuing 
to work for nothing in the hope of receiving part of their back pay, 
and retirement benefits, in the future. At least one of them is quite 
desperate. It is disgusting that they have endured this for years.
    Many of the factory workers pay large fees to come here, borrowed 
against houses and land at high interest, and which require years of 
work to pay back. It is absolutely unconscionable that they are still 
being recruited at a time when the industry is acknowledged to be on 
its last legs and they will be lucky to work for six months. In 
December of 2006 the factory workers of the largest garment factory, 
Concorde Garment Manufacturing Coporation, protested for several days 
when the factory announced its closing--many had been recruited, and 
spent thousands of dollars, just a month or two before.
    Compelling people to pay for their jobs opens the door to many 
abuses. Why is the government here still granting work permits to new 
garment workers? The industry is closing down and there is a large pool 
of unemployed workers on Saipan. Why are the garment factories 
recruiting new laborers abroad? What provisions are being made to 
protect garment workers whose factories close suddenly, without paying 
them for several weeks or months beforehand, and do not provide for 
their ticket home?
    Every foreign worker has a bond, purchased with their own money, 
that is supposed to provide for these eventualities. The bonding 
companies have been unregulated, they are vastly undercapitalized, and 
they will not provide the services for which they have been paid.
    The government of the Commonwealth of the Northern Mariana Islands 
is, in my estimation, uninterested in protecting the human rights and 
fiduciary rights of the foreign workers that it admits.
    What has been done to control Sablan Construction's exploitation of 
its workers? What provisions have been made to protect the workers at 
Michigan Inc.? Why are new workers still being recruited by Onwel 
Manufacturing Saipan Ltd. and receiving work permits? Why is the 
bonding industry in disarray?
    Everything I have written here was told to me directly by Thai 
garment workers, without intermediaries or interpreters. These are 
their experiences, and how the workers themselves report they are 
treated by their employers. Thank you very much for your time and 
attention. If you would like to get in touch with me further, I would 
be happy to expand upon what I have written here.
                                 ______
                                 
                       Statement of Brian J. Ross
    Mr. Chairman and Honorable Senators. Thank you for this opportunity 
to offer testimony to this esteemed committee on matters pertaining to 
my home, the beautiful ``Commonwealth of the Northern Mariana 
Islands''.
    Let me start by telling you a little about myself so you have 
framework to consider my testimony. I am a Proud U.S. Citizen, and a 
disabled, retired, Veteran. I have resided in the NMI for over a 
decade. I am married to a wonderful lady who is an elementary school 
teacher in our public school system. One could consider us on the lower 
end of ``middle class'' on an economic scale.
    A lot will be said to this committee, both from the local 
politicians who will testify today, and from the Office of Insular 
Affairs about our need for representation, or a Delegate to the 
Congress before any decisions or action taken.
    Most CNMI Veterans STRONGLY disagree!
    Let me remind this honorable Committee that previously we had an 
opportunity for a Delegate, but the bill was stopped by the efforts of 
Representative Tom Delay, and lobbyist Jack Abramoff, at the request of 
then Speaker and now Governor Ben Fitial, who still calls them both 
``Good Friends''.
    The Committee should also remember that in 1969, an election was 
held to consider the reunification of Guam and the CNMI. CNMI Voters in 
that instance ``OVERWHELMINGLY'' approved the measure, indicating then 
our preference for U.S. ``Federalization'' as our annexation would have 
provided. Unfortunately the voters of Guam disapproved the measure, so 
it did not go forward.
    Our Politicians who testify to you do NOT represent the views of 
the ``Silent Majority'' of CNMI residents. They represent the Chamber 
of Commerce, the SEDC, (Saipan Economic Development Counsel), a project 
of the Governor, and other business fat cats, who benefit by having 
NOTHING done. In fact 54% of our local population are guest-workers and 
therefore can not vote or even obtain a visitor visa to travel to 
Washington and offer testimony.
    Don't be swayed by arguments about the Covenant. Remember that when 
the Covenant was negotiated and VERY liberal rights for Immigration 
Control, and land ownership rights, and self determination on minimum 
wage allowed we lived in a very different world.
    I contend that when the awful events of 9/11 touched our shores, 
all deals were off, and everything open to change. Which the Covenant 
permits.
    From the perspective of a Disabled Veteran from the mainland, my 
U.S. Constitutional rights are violated every single day by this 
agreement.
    I am NOT permitted to own land outright, or use my VA Home Loan 
Guarantee Benefit, but my Chamorro and Carolinian Veteran brothers can.
    I am NOT allowed to vote in certain elections, within my community, 
because of my ethnicity. In short I am treated as a second class 
citizen in my own country, under the U.S. Flag.
    I could go on and on with many other examples of blatant 
discrimination.
    When the thousands of Men and Women who served to liberate our 
islands in 1944-45, fought, became disabled or died, did so to support 
the U.S. Constitution and traditional American Values. When I took the 
oath, I did too, as I know you did.
    I did not ever think that I would live in a jurisdiction under the 
U.S. Flag were traditional American Values are violated every single 
day. That was NOT the deal then, and it should NOT be today!
    Recently one of the negotiators of the Covenant for the CNMI, Mr. 
Guerrero, offered public comment in local media, stating that he NOW 
would support a U.S. Federal assumption of Immigration Control 
responsibilities. He further stated that the CNMI has failed to manage 
these responsibilities effectively.
    At your hearing on these very issues in 1999, you asked the 
question of the Federal Government officials, if in their view ``the 
CNMI could operate a Immigration System that would be acceptable'', 
there answer was NO!
    I maintain the answer is still NO! Particularly in the light of 
security challenges we have faced in the United States since 9/11/01.
    Myself and other Veterans within our community would respectfully 
request that the Congress take the following steps:

   Enact a bill similar to the Murkowski Bill S-1052 that was 
        introduced in May 1999 in the 106th Congress and approved 
        unanimously by this Committee and the Senate. Or the amended 
        version S-507 introduced in the 107th Congress in March of 
        2001. Both Acts mandate Federal Control over, Immigration and 
        Homeland Security, within the CNMI.
    With provisions for a guest-worker program to be administered by 
        the Department of Homeland Security, and a Visa Waiver Program 
        similar to Guam's, so our visitor industry will NOT be 
        impacted.
   Institute a Federal Minimum Wage in the CNMI, with no 
        opportunity for excuses by the local government. We have the 
        highest utility rates under the U.S. Flag, the price of 
        gasoline is $3.06 a gallon, and a minimum wage that has been at 
        $3.05 for nearly ten years. This impacts both local and guest-
        workers.
   When both the above measures are enacted, consideration of a 
        Delegate for the U.S. House of Representatives.

    Our local government has failed us repeatedly over the years. We 
urge the Congress to pass federal legislation that will enforce Federal 
Immigration laws, insure Homeland Security in the wake of 9/11.
    Provide a Federal Minimum wage that is livable to citizens and 
guest-workers alike. Let us be treated like our fellow citizens in 
other territories and the mainland.
    Please provide us the same measure of Homeland Security and Border 
Control our fellow islanders do on Guam, Puerto Rico, and the U.S. 
Virgin islands.
    Please help us!
    Thank you for your consideration of my testimony. May God Bless 
America, and the CNMI.
                                 ______
                                 
                                      Saipan, MP, January 31, 2007.
Hon. Senator Jeff Bingaman,
The United States Senate, Committee on Energy and Natural Resources, 
        Washington, DC.
    Dear Senator Bingaman: The United States Congress is taking up 
legislation that will have profound effect on the Commonwealth of the 
Northern Mariana Islands.
    Labor conditions have evolved and improved significantly over the 
last decade. Local officials and the community at large are keenly 
aware of their obligations to employees, and the law is vigorously 
applied, as both local and federal officials have jurisdiction in these 
matters.
    The Covenant, as appended in P.L. 94-241, recognized that our 
geographic location, and relative inexperience with more sophisticated 
businesses practices abroad, would require assistance to develop an 
economy that could sustain a growing population. This is difficult 
under ordinary circumstance, even for a country like the United States, 
but our relative isolation and inexperience put us at an added 
disadvantage, that the Covenant attempted to mitigate.
    Some would argue that the CNMI has been given adequate time to make 
the necessary accommodations that a more sophisticated system requires. 
I argue that these kinds of changes occur over several generations, and 
that ignoring this reality would heap economic hardship on the CNMI for 
simply punitive reasons.
    A new focus has emerged in the CNMI, however, one that recognizes 
the importance of building up our own local capacity, and substituting 
nonresidents with U.S. Citizens, but these changes add costs that 
neither the business community or government can absorb if they are 
made too quickly and without due consideration to our present economic 
condition. The CNMI has historically received the lowest level of 
federal subsidies of all the states and territories, a situation that 
we worked hard to achieve, believing that self-sufficiency is a 
laudable goal. As our economy has declined, government officials have 
applied for increasing federal subsidies, a trend that we find 
worrisome, and judging by history, will be difficult to reverse.
    What some congressional staff now propose for the CNMI does not 
adequately recognize the global changes in worker migration patterns, 
or radical changes occurring in global economic conditions that 
necessitate the movement of residents from one country to another to 
provide services not served by local populations. This is an extremely 
complex matter that we have not satisfactorily resolved for our 
community, but the debate and review is ongoing, and with continued 
assistance from the United States government, we feel that we can 
address in a manner that promotes U.S. Employment opportunities here 
while permitting continued nonresident employment options open.
    The Congress, in its wisdom has seen fit to exempt American Samoa 
from federal wage increases for the very same reasons the CNMI puts 
forth. Except in the case of the CNMI it is not asking for an outright 
exemption, but asking for a public hearing, an independent report, 
perhaps generated by the GAO, to ascertain at what rate the minimum 
wage should be increased.
    Other territories receive substantively higher sums of federal 
assistance, direct and indirect grants, subsidies, and infusions of 
capital arising from military activities. This is not the case with the 
Northern Marianas. We are not seeking additional federal funding; we 
are seeking support for the means to generate our own revenue, to 
maintain an economy that promotes self-sufficiency and less reliance on 
federal coffers, not more.
    This is what was envisioned in the Covenant.
    There is no doubt that the minimum wage increase will result in 
significant job losses on the private sector side, business closures 
will also result, and government collections will decline further, 
fueling a further downturn of the economy.
    The basis for these actions it seems is largely punitive, driven by 
examples of labor abuses dating back some 10 years. There are labor 
violations to be sure, as there are in the normal course of businesses 
in any community anywhere in the world, but a system is in place to 
register and process ordinary labor complaints. The more egregious 
labor abuses, with rare exception, are a thing of the past, and when 
they occur, they are handled with the full force of law, both local and 
federal. These are not tolerated or taken lightly by the local 
community.
    As a long-time member of the business community, I am writing to 
inform the committee that the measure as it is currently drafted will 
have significant, negative affect on our community that will not be 
aided even with significant federal aid. I ask that the Congress study 
the matter of wage increases as it applies to the CNMI before acting on 
the measure now before it.
    There is no doubt that the CNMI could have and should have handled 
many of these matters more responsibly. As a community, I believe that 
positive changes will occur in labor and wage considerations, and we 
ask that the Congress take the time to conduct an independent review 
before enacting radical wage increases that do not adequately consider 
economic conditions on the ground.
    I ask that my letter be made a part of the hearing record, and 
thank you for the opportunity to submit comments on these important 
bills.
            Sincerely,
                                                   Juan S. Tenorio.
                                 ______
                                 
                                      Saipan, MP, February 6, 2007.
Senator Bingaman,
Chairman, U.S. Senate Committee on Energy and Natural Resources, U.S. 
        Senate, Washington, DC.
    Dear Chairman and Honorable Members of the Committee: I am a U.S. 
Citizen who moved from the mainland to the CNMI 16 years ago. I, along 
with 14 other stateside Americans, invested over $6 million in the 
booming economies of the Pacific Region and the miracle growth-taking 
place in the CNMI.
    As a way of comparing how small the small population is in the 
CNMI, or American Samoa, the number of spectators sitting in the stands 
watching Super Bowl XLI was 15% greater than the TOTAL population of 
the Northern Mariana Islands. The total land area of Saipan is 29% 
smaller than the District of Columbia. Hawaii's land area is 35 times 
BIGGER than all the Northern Mariana Island combined. America's 
smallest state Rhode Island is 22 times bigger than Saipan. If this 
population were in any other areas of the U.S., issues would merely be 
solved in the neighborhood through councilmen or the Mayor's office. 
However, in the case of these small Western Pacific Islands, they stand 
before the U.S. Senate and Congress.
    On my second visit to the CNMI in 1991, the then Governor Guerrero 
asked me, ``Why is it taking Americans so long to come out here?'' With 
all the advantages of doing business here, why are they not coming?
    The Interior Department has only recently created Investment Forums 
aimed at educating and informing American companies on the 
opportunities to invest in insular territories. Juxtapose to the 
Forum's objectives is Congressional actions making it virtually 
impossible to continue investing capital in the CNMI economy and other 
insular territories.
    If American businesses or nearly Asian investors can reinvest in 
the CNMI or American Samoa, who is expected to shoulder capital 
requirements for economic expansion? In the cast of Guam, it is the 
U.S. Government and its expected military expansion, but what happens 
to other regional insular areas if capital funding sources evaporate? 
The region becomes economically unstable which is not in the best long-
term interest of America.
    The economies of the Western Pacific territories are primarily 
affected and rely on Asian countries. As a way of comparison, Tokyo is 
3 hours from the Northern Mariana Islands. Seoul is 4 hours away. Hong 
Kong is 4 and half hours but Hawaii is a distant 7 hours and Los 
Angeles is a staggering 11 hours. The beaches on the east side of 
Saipan face the Pacific Ocean, but on the west side, they face the 
Philippine Sea. Policies best suited for mainland U.S. may not be 
appropriate for these small fragile economies possessing limited 
natural resources and lying in the front yard of Asia.
    Without money coming into their respective economies from tourism, 
fishing, garments and construction, the only remaining funding source 
is the American taxpayer. Money must flow into an economy in order for 
it to purchase the goods and services it needs. Last year, CNMI 
purchased over $900 million in goods and services from U.S. suppliers. 
Less than 7,000 American tourists (primarily from Guam) came to the 
islands last year but slightly less than 480,000 came from Asia.
    The U.S. sells more to CNMI than it buys. With its economy poised 
to collapse with pending legislation, how can the people of the CNMI 
continue to purchase from mainland suppliers? Where will the money come 
from to buy essential goods and services? Is this Committee prepared to 
recommend policy knowing that it will make the peoples of the Western 
Pacific insular territories wards of the Federal Government?
    Every time you take away economic sovereignty, you create a system 
of dependency. It appears political policy is headed in the direction 
of creating a dependent culture. It is far easier to pacify island 
people by simply paying them to sit home than actually work. Being 
self-sufficient permits mistakes to occur and reduces control by 
Washington administrators.
    The Interior Department has already stated that the insular areas 
should not expect money from Washington. If this is so, is the 
potential cure worst than the disease. Are the indigenous people 
expected to drink water and eat air? Or simply, trust me, the check is 
in the mail.
    The only Natural Resource of the Western Pacific Insular 
Territories is location. These islands, like other pristine 
environments and Indigenous cultures, should remain economic 
sanctuaries based on their local economic limitation and conditions. 
Their economies are fragile and exist without the vast natural 
resources of the U.S. mainland. Words from old song, ``Different 
strokes for different folks.''
    The peoples of the Western Pacific have developed their culture, 
traditions and lifestyles over thousands of years. Recent archeological 
discoveries in the Northern Marianas date the earliest inhabitants at 
9,000 years. Americans only arrived on these islands in 1945 to end the 
War in the Pacific from the island of Tinian. Over 100,000 American 
soldiers fought from these islands, yet today, the island of Tinian has 
a population of less than 2,500.
    As reported in our local newspapers, witnesses brought before the 
Committee will voice problems with their employment experience in the 
CNMI. What about the over 50,000 formerly employed workers who had no 
problems with the system? Workers, who came, worked and returned to 
their home countries with large savings and success stories? Workers, 
who went back home and started businesses, bought homes and became 
financially independent. As environmentalist would say, ``Who speaks 
for the trees?''
    It is unfair and unjust to look at one side of the equation. The 
Committee's objective should be to learn the balanced truth. Who speaks 
for thousands of success stories? Who speaks for the local inhabitants? 
The Committee can not be convinced that all is bad, otherwise, why do 
workers want to stay and continue working or that applications to work 
exceeds the number of jobs.
    In conclusion, I have made the CNMI my residence for the past 16 
years. Even though I lost my ability to vote in Federal elections, even 
though I have no representation in Congress, even though I do not bave 
24 hours water, even though my electrical power is the most expensive 
in the WORLD--I chose to live here. The air is clean, you can hear 
birds fly, there are only 14 traffic lights on the island and the 
average temperature is average 81 degrees throughout the year.
            With respect and hope for fairness in discussing solutions,
                                                  Paul Zak,
                                                          Resident.
                                 ______
                                 
Statement of Oscar M. Babauta, Speaker of the House, Fifteenth Northern 
Marianas Commonwealth Legislature, Commonwealth of The Northern Mariana 
                                Islands
    Hafa Adai and Good Morning Chairman Bingaman, Ranking Member 
Domenici, and Members of the Committee. My name is Oscar M. Babauta and 
I am the Speaker of the House of Representatives of the Fifteenth 
Northern Marianas Commonwealth Legislature. I am grateful for the 
opportunity to submit written testimony to the Senate Committee on 
Energy and Natural Resources regarding a matter of critical interest to 
the People of the Northern Mariana Islands.
    Under the Covenant to Establish a Commonwealth of the Northern 
Mariana Islands (CNMI) in Political Union with the United States of 
America (48 U.S.C. 1801), the CNMI is vested with plenary immigration 
authority, subject to United States citizenship and nationality 
requirements. See generally COVENANT 503-506. I would like to take 
this opportunity to discuss the CNMI's immigration authority, a more 
detailed explanation of which is provided below, that has enabled our 
islands to develop a manufacturing and tourist economy that benefits 
both locals and non-residents and allows us to contribute to the 
American political fraiily. I also would like to provide some 
background for the Committee on our continuing legislative efforts in 
the area of immigration and labor reform.
            a background of the cnmi's immigration authority
    As many members of this Committee are aware from past hearings on 
the matter, the CNMI has historically been reliant on non-resident 
labor to meet the demands of our local economy. At the time we joined 
the United States as a Commonwealth, there was a great need for a non-
resident labor force. Over time, this need has remained, although we 
are making every effort to train and employ local residents and 
decrease our dependence on foreign labor. To this end, we continue to 
develop programs for the training and placement of the local population 
through courses of study at the Northern Marianas College (our local 
land-grant secondary education institution), and cooperative agreements 
such as that with the University of Hawaii extension program, 
Framingham State College in Massachusetts, and other training programs.
    Pursuant to our immigration authority granted in the Covenant, the 
CNMI has enacted both the Commonwealth Entry and Deportation Act (CEDA, 
3 CMC 4301 et seq.) and the Non-Resident Workers Act (NRWA, 3 CMC 
4411 et seq.). Together, these two provisions of law form the bulk of 
our immigration statutory law, a large part of which addresses non-
resident labor. In 2006, the CNMI issued 27,903 nonresident worker 
permits during the fiscal year and had 443,812 tourist arrivals for the 
year.\1\ These numbers are both lower than in many previous years and 
are indicative of two divergent trends. As the apparel industry winds 
down and local workforce training continues, I expect the number of 
non-resident worker entry permits to decline. Conversely, as investment 
in our tourism industry increases, we hope to see an increase in 
visitor arrivals (see below, Part II).
---------------------------------------------------------------------------
    \1\ Sources: Non-resident entry permit information obtained from 
the CNMI Department of Labor. This number is based on three quarters of 
actual data and an extrapolation for the fourth quarter of Fiscal Year 
2006. Tourist arrival information obtained from the Marianas Visitors 
Authority.
---------------------------------------------------------------------------
    Since the passage of the CEDA and NRWA, local government 
departments and agencies have developed a regulatory infrastructure as 
well as immigration and border tracking databases to ensure the 
effective identification of persons entering and exiting the 
Commonwealth. The Division of Immigration, in cooperation with the 
Department of Labor, has promulgated regulations for the processing and 
entry of non-resident workers and their families. The Division of 
Immigration has also promulgated regulations governing the issuance of 
short and long term business and investor visas, short and extended 
term tourist visas, entry permits for U.S. citizen's non-citizen family 
members, and entry permits under numerous other entry categories. The 
Attorney General's Office is tasked with maintaining a list of visa-
exempt, visa-waiver, and visa-required countries patterned after the 
U.S. model. The Attorney General also maintains a list of countries 
from which identification or other travel and entry documents are 
unreliable. The Division and the Legislature continue to review and 
adjust visa categories for aliens seeking entry to the CNMI.
    The Labor and Immigration Identification and Documentation System 
(LIIDS) tracks all non-resident labor contracts, job category 
authorizations, and permit status of non-resident workers in the 
Commonwealth. This allows immigration and labor investigators to 
quickly determine the permit status of all non-resident workers 
involved in labor complaints and administrative hearings, as well as 
compiling data on overstaying aliens. The Border Management System 
(BMS) generates a record of all entries to and exits from the 
Commonwealth, regardless of citizenship. Investigators can similarly 
have instant access to arrival information and can confirm the 
departure of non-residents with expired contracts and those ordered 
deported from the Commonwealth for violating local law.
    As our immigration and labor laws have become more fully fleshed 
out over time, so too has the expertise of our local judiciary. We are 
fortunate to have informed, active judges who encourage a robust 
immigration practice that protects both due process principles and the 
best interests of the Commonwealth and the United States. These judges 
have helped to define a body of case law that will guide future 
government officials, attorneys, and judges in interpreting and 
applying the provisions of our immigration laws. Examples of important 
strides the judiciary has made in the area of immigration are the 
clarification of various provisions of the CEDA, the safeguarding of 
constitutional due process rights for non-resident workers, and support 
for an effective enforcement regime.
    In total, our statutes, regulations, border management systems, and 
jurisprudence provide a comprehensive legal infrastructure for 
immigration. The ability to efficiently track entries and exits of all 
persons and the labor status of non-resident workers promotes fair and 
thorough enforcement and enhances local and national security. The 
ability to process tourist visas under local, as opposed to federal, 
immigration authority offers us a beneficial competitive advantage vis-
a-vis other major Asian tourist destinations such as Bali, the 
Philippines, and peninsular Thailand and Malaysia.
    why control of immigration is important to our economic recovery
    I certainly do not appear before you today to suggest that the 
reports of corruption and abuse in our labor and immigration system are 
categorically false. Past incidents involving non-resident workers, as 
well as efforts to rectify certain problems in our immigration system 
that I discuss later in my testimony, are well documented. I do ask, 
however, for your dispassionate consideration of my request that the 
CNMI retain its plenary immigration authority. For twenty-five years 
the Covenant has enabled our Commonwealth to develop solid private 
sector industries. Although our tourism industry has declined from its 
pre-SARS and pre-9/11 peak, it remains an extremely important source of 
income, employment, and government revenue for our islands. As an 
elected leader of the CNMI, I feel strongly that retaining local 
immigration authority over both our non-resident labor force and our 
tourism industry is essential to our Commonwealth's economic recovery.
    Many Committee members may be aware that our Commonwealth is 
experiencing a severe economic downturn. We are in the process of 
losing most if not all of our largest single industry, apparel 
manufacturing, which is in turn having a ripple effect throughout the 
public and private sectors. For example, Concorde Manufacturing, the 
largest single apparel manufacturer in the CNMI, recently closed down 
due to economic and market pressures. This resulted in the layoff of 
approximately 1,400 employees and will mean a significant loss of 
revenue for the CNMI government. To illustrate this overall revenue 
decline, the approximate revenue level for Fiscal Year 1997 was 
$248,000,000. By Fiscal Year 2003 revenue shrank to $217,000,000. The 
projection for Fiscal Year 2007, initially set at $193,000,000, has now 
been amended down to $178,000,000.\2\ It is not clear whether this 
situation will improve in the near term. The pending legislation in 
Congress to raise the minimum wage in our Commonwealth will add an 
additional challenge to our economic recovery. While we will rise to 
that challenge if and when the wage bill is enacted, I feel that 
control over immigration remains a sensitive local matter, influenced 
by local conditions, relationships with our nearest Asian and Pacific 
neighbors, and our long term plans for economic growth. In many ways 
our ability to remain a relevant player in the global economy depends 
on our ability to respond to political and labor market changes through 
our immigration laws.
---------------------------------------------------------------------------
    \2\ Source: Public Law 13-24, Public Law 15-21, and the CNMI Office 
of Management and Budget.
---------------------------------------------------------------------------
    In many areas of our economy it is difficult to find resident 
employees to fill specific jobs. This is in part because of our remote 
location and physical isolation from the American mainland. It is also 
due to a shortage of skilled professionals (and even unskilled 
laborers) among the local population, and a lack of adequate training 
programs in the past.\3\ As an example, we are placed at a disadvantage 
with regard to other American states and territories (with the possible 
exception of Guam, which benefits from a large military presence) when 
it comes to recruiting physicians, attorneys, engineers, and other 
skilled professionals. While an American state can depend on an 
exponentially larger population or proximity to major urban centers to 
recruit these professionals, we must compete as a tiny, remote 
location, nearly 6,000 miles from coastal California and largely 
unknown to the American public. To ask an American professional to 
uproot a career, family, and lifestyle to make such a move can prove to 
be a daunting task. As of yet we are too small a jurisdiction to 
support a law school, medical school, or major university where local 
residents can seek training in the technical and scientific 
professions. It is this reality we are faced with when trying to 
recruit resident professionals. As a result, non-resident 
professionals, and our ability to process them locally, have become an 
important component of our continued development. The same is true of 
unskilled non-resident laborers. For twenty-five years non-resident 
laborers have contributed in a vital way to our islands, operating 
businesses, building schools, and improving public works. They have 
helped to transform the CNMI into a dynamic, multicultural society 
teeming with potential.
---------------------------------------------------------------------------
    \3\ As explained on Pages 1-2, we continue to develop training 
programs for resident workers both here in the CNMI and through 
cooperative arrangements.
---------------------------------------------------------------------------
    As we look beyond our current economic downturn to a future with a 
much diminished apparel industry, we continue to search for alternative 
economic activities to generate income for our Commonwealth. Past and 
present administrations have taken steps to diversify our tourism 
economy, and have in recent years opened new tourist markets beyond the 
CNMI's traditional tourist market of Japan. These new markets include 
China, South Korea, and Russia. In 2004 the CNMI signed an Approved 
Destination Status Agreement with China, providing the CNMI with access 
to Chinese tourist markets and direct flights from major Chinese 
cities. Because of the anticipated boom in Chinese outbound tourism and 
the proximity of the CNMI to the Chinese mainland, we hope to 
experience significant growth in the Chinese tourist market in the 
coming years. Maintaining local control over immigration is critical to 
the development of this market, as our local immigration authorities 
are able to work directly with Chinese government officials and respond 
to the changing conditions of the market as needed.
    An additional tourist market that has experienced recent and rapid 
growth is the Russian tourist market. Visitors from eastern Russian 
cities began arriving in the CNMI in sizeable numbers in Fiscal Year 
2005. Initially the flights came through Seoul, Korea, but more 
recently direct charter flights have been scheduled. Russian arrivals 
in August 2006 increased 136% from August 2005. September 2006 arrivals 
increased 112% from the same month in the previous year. In Fiscal Year 
2007, Russian arrivals increased another 89% and 57% respectively for 
October and November 2006.\4\ Although the actual numbers are still 
relatively small, the Russian market is a bright spot in otherwise 
difficult Asian terrain. The market is characterized by longer than 
average visits resulting in increased revenues, a high percentage of 
return visitors, and little to no legal complications. To date, I am 
not aware of any Russian tourist that has been issued an order of 
deportation for overstaying an entry permit or violating any other 
provision of law. As with the development of the Chinese market, I do 
not believe the CNMI could have experienced such a rate of success 
without local immigration control.
---------------------------------------------------------------------------
    \4\ Data Provided by the Marianas Visitors Authority. The CNMI 
Fiscal Year begins October 1 of the previous calendar year.
---------------------------------------------------------------------------
    We view these early successes with the Chinese and Russian tourist 
markets as a sign of a brighter future for the CNMI's tourist economy. 
We continue to promote the Japanese and South Korean markets, as well 
as other Asian and Pacific markets. The Covenant's immigration 
provisions are invaluable to this effort. Our ability to compete with 
other parts of the region and world for tourist business is greatly 
augmented by a responsive local immigration authority.
                  immigration and labor reform efforts
    I would like to assure this Committee that the CNMI has taken 
substantial steps to reform and strengthen our immigration laws and 
regulations in order to improve our enforcement system. In 2004, the 
Commonwealth Legislature passed Public Law 13-61, an Act that 
established our Refugee Protection Program.\5\ Following passage of 
this important legislation, comprehensive regulations were adopted in 
cooperation with the Department of the Interior and the United States 
Citizenship and Immigration Services (U.S.C.I.S.) to effectively honor 
and implement the United Nations Convention on the Status of Refugees 
and the United Nations Convention and Protocol Against Torture. Special 
Administrative Protection Judges were trained at the Department of 
Homeland Security's FLETC program in Glynco, Georgia, to hear cases 
brought by deported aliens who expressed a fear of persecution or 
torture upon returning to their home country. The program brings the 
CNMI in line with the treaty commitments of the United States in the 
area of refugee protection.
---------------------------------------------------------------------------
    \5\ I have appended copies a all CNMI legislation discussed in this 
section for the Committee's reference.
---------------------------------------------------------------------------
    In 2005, the Commonwealth Legislature passed the Human Trafficking 
and Related Offenses Act through Public Law 14-88. The Act, supported 
by the U.S. Department of Justice, has become an important and 
effective tool in the CNMI's continuing efforts to combat labor fraud 
and trafficking. Also in 2005, the Legislature passed Public Law 14-92, 
an act to amend our voluntary departure law to provide immigration 
prosecutors with improved procedural options in deportation cases. This 
law should lead to a more consistent and expedient system for resolving 
pending cases. Additionally in the 2005 session the Legislature passed 
Public Law 14-59, the ``Anti-Terrorism Act of 2004,'' Public Law 14-63 
``An Act to Establish the Office of Homeland Security,'' and Public Law 
14-84, legislation which corrected constitutional deficiencies in 
certain immigration statutes that were struck down by the U.S. District 
Court for the Northern Mariana Islands in Gorromeo v. Zachares, Civil 
Action No. 99-0018 (D.N.M.I. 2000).
    As I write to you today the Legislature is debating a comprehensive 
overhaul of the CNMI's Non-Resident Worker Act to improve efficiency 
and accountability in our alien labor system. In conducting this reform 
effort, we are seeking input from CNMI government agencies, business 
leaders, educational leaders, the U.S. Federal Ombudsman, and members 
of the public. The goal of this labor reform is to provide both 
employers and non-resident employees with a dependable legal structure 
that promotes the consistent application of laws, protects the rights 
of interested parties, and provides labor stability for the economy of 
the CNMI. In addition to this reform, the House of Representatives has 
this session passed House Bill 15-131, an act to ensure the fair and 
efficient winding-up of large-scale businesses in the CNMI. In light of 
our recent economic downturn, the House has acted to provide resident 
and non-resident employees with fair notice of business closures and 
prevent the abandonment of contract employees and fraudulent removal of 
company assets. The notice requirements are intended to supplement 
worker protections provided under the federal Worker Adjustment and 
Retraining Notification (WARN) Act of 1988. (See 29 U.S.C. 2101 et 
seq.)
    The Legislature also continues to support efforts of local and 
federal law enforcement to combat illegal employment practices. Labor 
and immigration investigators work regularly with both the CNMI 
Attorney General and federal authorities to prosecute employers who 
hire illegal aliens or participate in recruitment ``scams'' to defraud 
non-resident contract workers. In January of this year these efforts 
resulted in the criminal convictions of two employers accused of 
immigration fraud and unlawful employment in the hiring of two non-
resident workers from the Philippines. See CNAll v. Cabrera & Luo, 
Crim. Case No. 05-0311(B).
    The Commonwealth Legislature is committed to reviewing and 
improving our immigration and labor laws whenever necessary. We take 
very seriously our duty to develop the most effective immigration 
system possible. As always, we welcome cooperation with U.S. agencies, 
and any technical or financial assistance they may provide, in the 
training of our local immigration investigators, inspectors, and 
processing personnel.
    I remain optimistic about our future as a productive and innovative 
Commonwealth in the American political family. I believe that 
preserving local immigration control will enable us to climb out of our 
current economic downturn and develop a strong and diversified economy 
that will become increasingly less dependent on foreign labor. Mr. 
Chairman, Ranking Member Domenici, I want to thank you and the 
Committee for your consideration of my testimony as a legislative 
leader representing our beautiful island Commonwealth.
    Thank you and Si Yu'us Ma'asi.
                                 ______
                                 
                       Statement of Singh Mangal
    Dear Sir/Madam, thank you very much once again to give a moment of 
your valuable time to read the following comments about Northern 
Mariana Island's labor and immigration. I have special request with you 
that this is my last e-mail. Highly appreciated if you could help us by 
changing the way NMI are handling the labor and immigration is horrible 
and so lax that they may call anyone to NMI to work simply by issuing a 
entry permit. I am not gonna give any example. You will sense by 
yourself when you talk to non resident workers. 100% alien workers will 
go for Federalization. As per Mr. David Cohen said that non resident 
workers who have been working for the past five, ten, fifteen and more 
are the one who built Saipan by working hard but their life never ever 
improved.
    We read all the testimonies, submitted by panel 1 and panel 2. 
Everyone's main concerned is ``Federalization''.
    We have really no idea why some of our local government officials 
requesting for great flexibility if Congress to extend the immigration 
and naturalization laws to CNMI is a fishy knowing that over 5,000 
labor cases were compiled already in Federal Labor Ombudsman since 
2000. They know that they can not handle anymore except creating a lot 
of problems. ``Three decades'' CNMI's labor and immigration is under 
their disposal still they want so that their tarnished names will be 
published in worldwide. CNMI became known about sex slavery and forced 
abortion internationally since 2000. Federal-Yes with no great 
flexibility otherwise they might abuse again by using their power as 
usual.
    Major problems--There is no price control on this island not like 
Guam. Different store has a different prices of daily essential 
commodities. Govenment offices don't pay their utilities on time i.e., 
three to four months resulted in non-payment to Mobil on time. They 
increased gradually by making ordinary people to pay as published 
several times in local newspaper since last year.
    I have been working for the past 10 years legally as a Supervisor 
in five stars hotel. One good example-I have mentioned clearly to my 
colleagues that if you guys work honestly and efficiently. Non 
residents are not required any more to work on this island. The problem 
is (1) they are not punctual on duty, (2) frequent absent and tardiness 
with excuses. These are the factors that 90% businessmen hire non 
resident workers in order to run their business. This really shows that 
total dependancy on non resident workers.
    Local peoples are being brain washed by their local leaders that 
``NO FEDERAL'' because they are very strict. About 30% of CNMI 
population are working in Guam and other U.S. parts knowing that the 
govenment is corrupted totally. Now, some of local peoples are coming 
to work knowing that the minimum wage is gonna go high pretty soon.
    Alien workers leave their family back in their country and whatever 
their hard earned money, they remit to their family. Now the question 
arises, million dollars are remitted from NMI as per the President, 
Chamber of Commerce. Millions times, alien workers requested local 
governor to consider them as a resident workers especially for those 
who have been working more than five years so that they may bring their 
family to NMI. Whatever they earn, all the earning will be spent on 
this island but our appeals for help fell on a deaf ears.
    They talk and boast about their progress and improvement. If you 
take a vote, I think 70% will go in favour of ``Federalization''. 
Please help us to get rid of their control so that everyone may work 
equally under the flag of U.S. and treat alien workers as a human 
being.
                                 ______
                                 
                                          Our Commonwealth,
                                      Saipan, MP, January 26, 2007.
United States Senate, United States House of Representatives, 
        Washington, DC.
    Dear Senators and Representatives: We are the people of the 
Commonwealth of the Northern Mariana Islands. We come from diverse 
ethnic, socio-economic, and religious backgrounds. Some of us are 
government employees, some of us are private-sector employees, some of 
us are business owners, and some of us are unemployed. Some of us are 
old; some young. We represent many different points of view on 
political, economic, and social issues. We may disagree among ourselves 
about the causes of our current malaise; and we may disagree about the 
solutions. Despite all our differences, however, we share a common 
belief: we deserve consideration by and consultation with those who 
enact laws that impact our unique culture and economy.
    We are not similar to California or New York or Washington, D.C. or 
even Hawaii or Guam, and it would be unfair to attempt a comparison. 
Our geographic isolation, our size, our limited natural resources, the 
limited availability and prohibitive cost of travel, the underpinnings 
of our economy, and the inherent influences of Asian cultures and 
economies, make us singular among the states and insular areas of 
America. Our way of life is necessarily and vastly different than that 
in the 50 states. Think about this before making changes at a pace that 
will destroy what viable economy remains.
    While we would prefer to solve our own problems internally, if the 
United States Congress feels this inadvisable, then we do believe that 
in order for you to change our lives so dramatically, we first deserve 
serious study, real consideration, and a meaningful opportunity to be 
heard in respect thereof. It would be wrong to do otherwise.
    Understand the successes and failures of our past as well as the 
challenges of our future. If you believe we have failed ourselves in 
the past, we ask that you do not fail us in the present. Please do not 
attempt to fix what you may perceive as our failures without a real 
understanding, a careful study, and a meaningful dialogue with us, the 
people of the Commonwealth.
            Very truly yours,
                  (Signatures retained in committee files).
                                 ______
                                 
   Statement of the Hotel Association of the Northern Mariana Islands
    Dear Chairman Bingaman and Honorable Committee Members, the Hotel 
Association of the Northern Mariana Islands (HANMI) offers this 
testimony for the United States Senate, Committee on Energy and 
Resources in support of continued local control over immigration as 
provided for under the Covenant to Establish a Commonwealth of the 
Northern Mariana Islands in Political Union with the United States of 
America. This position has been developed by the members of our non-
profit association following a survey of the 14 leading hotels on 
Saipan and approximately 18 allied members that do business with the 
hotel industry of the Northern Mariana Islands.
    Commencing in 1992 with testimony before the former House 
Subcommittee on Insular Affairs, and continuing thereafter through 
numerous hearings, including September 1999, when we testified before 
this House Committee on Energy and Resources, HANMI has detailed our 
position in favor of retaining local control of immigration under the 
government of the CNMI.
    There are three primary reasons for our position: First, our island 
economy is currently experiencing tremendous challenges, which will 
take years to overcome under the best of circumstances. Today, our 
tourism industry--once a raging success story--is challenged not only 
to recover losses of the past decade, but also to become perhaps the 
sole major provider for our islands needs going into the future. We 
need stable and supportive business conditions in order to make this 
happen.
    It is difficult to imagine that these small islands could receive 
sufficient understanding, resources, and flexibility to meet our unique 
needs if immigration is handled by federal authorities headquartered 
half a world away.
    Secondly, the Northern Mariana Islands have always been challenged 
to grow our economy and become self-sustaining with a small, indigenous 
population. This situation has not changed over the years. Our citizen 
population is still too small to run essential government services 
across three main islands and then still have enough people available 
to provide an adequate work force for the private sector.
    We also do not have enough human resources to provide all of the 
specialized skills and language capabilities necessary to operate 
existing businesses without the addition of skilled foreign labor.
    Our local government is able to continue to evaluate our 
immigration system and set the parameters for accepting foreign labor 
according to the unique and changing needs of our islands.
    Of equal importance to our future is the recognition that we need 
to diversify our tourist markets to include two nearby countries, 
namely China and Russia. We are currently welcoming a significant 
number of visitors from these emerging and promising tourist markets, 
something that we fear would not be permissible under the current 
restrictions of U.S. Immigration.
  background on our tourism industry and changing economic conditions
    Approximately 21 years ago, the 16% economic growth rate of the 
Northern Mariana Islands was one of the highest of any American state 
or possession. Resorts and smaller hotels were built, and visitor 
arrivals brought prosperity to the islands. The Northern Marianas 
welcomed 728,621 tourists at its peak in 1997. These visitors were 
almost exclusively from Japan and Korea. Last year in FY 2006, our 
tourism industry struggled with just 443,812 visitors.
    Because we have been so dependent upon Japanese tourists, quite 
naturally the early golden days ended with the bursting of the Japanese 
``bubble'' economy in the mid-1990's. The Asian economic crisis in both 
Japan and Korea followed, and a series of other natural and manmade 
calamities also took their toll.
    When Japan's and Korea's economies declined, hotel owners who were 
saddled with debt began to sell their properties. From approximately 
2002 to the present, many hotels changed hands. The turnovers in the 
CNMI's hotel industry were not unique, but were repeated in Guam and 
Hawaii. Like the Marianas, Hawaii's original resorts were heavily owned 
by the Japanese, and like our islands, Hawaii's tourism industry 
deteriorated prior to the entry of new investors.
    Hotel buyouts in Hawaii took place from the late nineties up to 
2002, just a few years before Japanese hotels in Guam and the CNMI also 
began selling. Hawaii today is enjoying a boom in tourism due to 
massive turnover at over $5 Billion in hotel sales, renovations, and a 
destination enhancement program by the government. The transformation 
in Hawaii happened at a faster pace than the Marianas, due to the 
islands' proximity to the U.S. mainland and the influx of American and 
Canadian tourists and investors. The Northern Mariana Islands, by 
contrast, see few American tourists except inter-island travelers from 
Guam and an occasional military ship's visit.
    In the Northern Marianas, the only other major industry, garment 
manufacturing has declined by more than 50% over the past two years. 
The industry sounded the alarm regarding losses they expected with the 
opening of world trade agreements in 2005. Unfortunately, sincere 
efforts by local officials, the private sector, and the U.S. Department 
of Interior's Office of Insular Affairs to quickly diversify this 
remote island economy have not proven to be tremendously successful.
    In 2005, after nearly eight years of decline, the CNMI's tourism 
industry finally seemed to be recovering. New hotel investments had 
already begun, when suddenly due to unhealthy financial conditions in 
the airline industry, vital service from Japan Airlines was cancelled 
with just a few months' warning.
    The pullout of JAL has been one of the most difficult challenges 
our industry has ever had to overcome. Anticipating massive losses, 
HANMI joined forces with other businesses under the Governor's 
Strategic Economic Development Council (SEDC) to fund a study on the 
multiplier effects of this pull out. (Please see Appendix I: ``Tourism, 
Japan Air Lines and the Commonwealth of the Northern Mariana Islands, 
An Economic Impact Analysis, June 2005.'')
    In the same year, the Northern Marianas also lost Continental 
Airlines service from Hong Kong and Taiwan, two competitive markets 
where the islands had only limited marketing dollars. Northwest 
Airlines picked up some of the lost routes from Japan, but this did not 
completely make up the gap in lost air seats. Northwest Airlines has 
since provided service into the CNMI from Japan, while service from 
Korea has also been served by only one carrier, Asiana Airlines. Local 
inter-island air service, starved by the loss of Japanese tourists, 
also declined substantially.
    The air service crisis and concern over dependency on just a few 
carriers led tourism officials to join together to learn much more 
about the business of the airlines. An international air service 
consultant was hired by the CNMI government, and after frank and open 
discussions with existing carriers and dozens of other airlines 
operating in the Asian-Pacific, we learned that we are a ``low yield'' 
destination. Absent a government subsidy of essential air service, this 
business model is something we must work hard to change before a real 
recovery can be seen. (Please see Appendix II: Marianas Visitors 
Authority presentation ``4 Cornerstones to Tourism's Recovery.'')
                        about the industry today
    HANMI members are all located on Saipan and represent 3,018 of the 
3,394 total hotel rooms that are open for business on Saipan. As 
evidence of our economic challenges, an additional 84 rooms are 
currently closed for business, while 182 more rooms have recently been 
converted to apartments. The island of Tinian has 452 hotel rooms, of 
which 42 are closed. Rota has 250 rooms, with 60 closed at this time.
    Saipan had 429,267 visitors in calendar year 2006. With this level 
of visitors, hotel occupancy averaged 63.57%, down 9% from 2005. For 
reference, the average break even point for most hotels is estimated to 
be in the 70-percentile range.
    Tinian's tourism industry has survived thus far due to privately 
chartered flights from China, which provides the majority of visitors 
to one resort hotel and several locally-owned small hotels. Tinian 
received 64,083 tourists in 2006.
    Our smallest inhabited island of Rota has been the hardest hit by 
the loss of air service, resulting in hotel occupancies from a 
frightening zero to 10% on any given day. The Marianas Visitors 
Authority reported that as of December 2006, total visitors have 
dropped by 52%.
    In 2006, average hotel room rates for HANMI members actually 
increased slightly to $91.29, reflecting the nearly $60 M in 
renovations and improvements that have been made in recent years on 
Saipan. For comparison purposes, Guam's average room rate in 2006 was 
over $100, while Hawaii surpassed the $160 mark. Local hotel 
performance is down considerably from the peak of the industry, when 
the hotels averaged over 85.57% in 1996 and reached an average rate of 
$136.06 in 1997. (Please see Appendix III for HANMI Average Rates and 
Occupancies from 1992 to 2006.)
    To put the costs of doing business and profitability in 
perspective, it must be understood that the Northern Marianas as a 
tourist destination competes directly with Asian tropical destinations 
including the Philippines, Thailand, Malaysia, Maldives, Palau, and 
Bali, Indonesia, where the cost of labor is low and service standards 
are high. With sufficient indigenous populations to provide skilled 
labor, it is difficult for us to compete unless we provide the same 
high level of service.
    Our islands also compete with Guam and Hawaii, which are hubs of 
air service and shipping for the Pacific region. These destinations 
have elaborate transportation systems and lower costs due to larger 
economies of scale. They also offer abundant shopping, dining and more 
developed tourism attractions than the Northern Marianas. It is worth 
noting that both Guam and Hawaii have benefited from billions of 
dollars of investment by the U.S. military into their local 
infrastructure.
    Due to inadequate infrastructure in the Northern Marianas, hotels 
have had to invest millions of dollars in their own power and water-
making systems. These investments which are invisible to our guests are 
a necessary cost of doing business, requiring capital outlays that 
could otherwise be spent on marketing, business enhancements, and 
paying higher wages.
            employment challenges in saipan's hotel industry
    Especially given weakened business conditions, if the CNMI's 
immigration authority is taken away, we are deeply concerned about the 
hardships that could be caused by reduced access--or even a phase out--
of our valued employees from overseas. Members of the Hotel Association 
feel it is unrealistic at best to expect the tourism industry to 
completely phase out its foreign workers, even over a long period of 
time.
    In total, members of the Hotel Association employed 2,022 as of 
December 31, 2006, of which 520 or 31% were local residents. Of those 
categorized as local, 113 came from the freely associated states of 
Micronesia.
    It must be stated that our hotels care about hiring local residents 
and we are working to raise the number of resident hires in our 
industry gradually over time. HANMI members have voluntarily and 
gradually increased wages and benefits over the years. Increased 
employment of local residents has largely been made possible through 
the migration of skilled personnel out of the local government, while 
for entry level jobs, HANMI members have provided on-the-job training.
    While the minimum wage is set by local law at $3.05 per hour, 
members of the Hotel Association have reported an average minimum wage 
of $3.50 per hour. The hotels provide such benefits as medical 
insurance, housing, duty meals, and a wide range of activities 
including employee sporting events, service awards, employee assistance 
programs, and training and development to create a sense of community 
and build morale among our multi-cultural staffs.
    Despite these efforts, we have seen that there are certain jobs for 
which the indigenous community consistently has shown little or no 
interest. This is evidenced by the high number of foreign workers in 
such positions as housekeeping, maintenance, and most food and beverage 
positions. For culinary arts, no formal training is available and many 
of our chefs are recruited from Asian countries to provide 
international cuisines that meet the tastes of our guests. In this 
area, the ability to recruit highly skilled chefs from foreign 
countries is seen as one of the few competitive advantages for our 
destination.
    To follow international trends and expectations, numerous resort 
hotels have invested in the development of luxury spas, with more on 
the way for the island of Saipan. However, we have seen that indigenous 
residents will generally not apply for jobs as spa therapists--even if 
training is provided--due to a general shyness in serving guests. Most 
of the personnel working in luxury spas today are recruited from Bali, 
which is renowned throughout the world as a leading spa destination.
    Some feel that low entry level wages in the CNMI's business 
community are preventing more local employment, and this may at least 
be partially true. There is always room for improvement, but with 
current economic conditions, and much higher costs of doing business in 
our remote location, we cannot afford the same level of wages that are 
currently offered in such booming U.S. destinations as Hawaii, which is 
actually experiencing a labor shortage. Our nearby island of Guam also 
has a much larger population base with many military family members 
that are available to work in the tourism industry.
    Thus said, we are proud of the progress that our industry has made. 
Successful career paths have been established and proven in the ever-
increasing number of local residents that have joined hotel management 
teams. Some of our best success stories have occurred in the field of 
human resources. Currently all of the resort hotels throughout Saipan, 
Tinian and Rota now have local citizens in human resources management. 
With networks in the community, these professionals are much better 
equipped today than at any time in our industry's history to hire and 
mentor other residents.
    In all of the resorts on Saipan, and in most of the smaller hotels 
throughout our islands, there are residents in entry level, 
supervisory, management, and even top executive positions. As a tourist 
destination serving sophisticated international customers, we also 
consider ourselves fortunate to be allowed by the local government to 
employ people from such countries as the Philippines, Japan, Korea, 
Taiwan, China, Australia, Thailand, India, and Europe.
    Without the flexibility to hire a certain number of our employees 
from overseas, members of HANMI believe that our industry could not 
survive. We would clearly not be able to provide the service level that 
our guests expect. Therefore, it stands to reason that if we lose our 
competitiveness as a tourist destination, eventually some businesses 
would close and even some of the best and brightest local workers might 
lose their jobs.
    We would also like to address concerns of the past about a 
reputation of labor complaints in Saipan. First, we feel that this has 
been over-sensationalized in the international media, at times for 
political reasons. Unfair media coverage has damaged the image of our 
islands and hurt tourism. It has also hurt the spirit of our community.
    There are few labor disputes currently occurring in our hotel 
industry, a result of ongoing training in federal and local laws, as 
well as established employee care programs and benefits that are 
provided by employers.
    In the mid-1990's, HANMI initiated an inter-hotel committee for 
human resources of the hotel industry to regularly join together to 
share ideas and training. The expansion of this committee 10 years ago 
resulted in the founding of the CNMI chapter of the U.S. national 
organization, the Society for Human Resources Management (SHRM). 
Several of our members' human resources managers have held the position 
of president of this organization over the years, helping to promote 
employee care practices in not only tourism, but in other island 
businesses that have joined SHRM.
    To help ensure we provide safe work places, in 2005, HANMI members 
entered into a voluntary partnership agreement with the U.S. Department 
of Labor's OSHA Division out of Region IX, San Francisco. This program 
provides for voluntary inspections, annual conferences and joint 
cooperation in ensuring safe and healthy working conditions.
    Our Association members and other tourism industry personnel have 
also generously volunteered countless hours of their time and donated 
many thousands of dollars to the Northern Marianas College and other 
local schools over the years. We support many community organizations, 
including the Marianas Tourism Education Council for the youth which is 
designed to stimulate interest in the industry.
    These efforts, while good for the community, have not ensured a 
necessary level of tourism education. Our islands simply do not have 
the size of population, nor the means, nor experienced tourism 
instructors to develop specialized education necessary to grow local 
employment in tourism to a level that could allow us to completely 
phase out our foreign work force.
    As an example, although the Korean market is the second largest 
tourism market for the CNMI today, there are no Korean language classes 
available. Therefore, hotels and other tourism-related businesses have 
no other choice but to hire Korean citizens to communicate with 
tourists.
          the need for diversification of our tourist markets
    Another critical reason why HANMI supports continued local control 
over immigration is the need for flexibility to diversify our tourist 
markets. It is recognized that Japan and Korea will always be major 
source markets for our islands, but we must keep the doors open for 
other nationalities in order to lessen our dependence on any one 
market. We share great concern about change to our immigration system 
because the U.S. does not currently recognize countries we have 
invested in for nearly a decade, namely China and Russia.
    Diversification will protect our island economy from an unhealthy 
dependence upon only one or two markets--or one or two air carriers--
that could make or break us at any given time. Islands in the Caribbean 
are fortunate to be able to attract tourists from the U.S. mainland and 
Europe; Southeast Asian destinations can rely on Europe and many other 
Asian countries, while the Northern Marianas is investing and tapping 
into a number of Asian countries within a short flying distance.
    Even before the loss of JAL, tourism industry stakeholders and the 
Marianas Visitors Authority identified the need to invest in the most 
promising new markets in our region. Diversification is critically 
important in light of past history, where we have seen that world 
events beyond our control can create immediate and negative impacts on 
our small economy.
                       our russian tourism market
    Since 1998, Russian tourists have become a lucrative market for the 
islands, as these guests stay for long periods of time. The Japanese 
and Korean markets stay for only 3 nights, while it is not uncommon for 
wealthy Russian tourists traveling with their children to stay for up 
to 3 weeks. These visitors come to our islands to avoid bitterly cold 
weather in Russia and to enjoy a taste of American life on the closest 
tropical island to their country. Many of these guests travel on 
business class fares via connecting flights from Korea and Japan, which 
helps our air carriers.
    Russian families spend a great deal on dining, patronizing all 
resort hotel services including kids' clubs and spas. They spread money 
throughout our economy when they buy retail goods, and enjoy a wide 
variety of the optional tours available in the islands.
    Marketing efforts to Russian tourists have largely been developed 
through the initiative and investment of Saipan's resort hotels. The 
Pacific Islands Club, an American-owned hotel chain, was the first to 
hire a Russian market manager and begin direct marketing in Russia in 
1998. As of February 2007, at least eight resort hotels have invested 
in marketing to and serving the Russian market.
    In the year 2006, there were just over 1,500 Russian tourists who 
came to the Northern Marianas, resulting in estimated sales of 31,500 
room nights. In the CNMI's 5-Year Strategic Plan for Tourism, we have 
identified a modest target of 10,000 Russian arrivals by year 2010.
    The shortest travel time from Russia is only 7 hours or roughly 
less time than it takes to travel from the CNMI to Hawaii. This makes 
our islands a viable destination for Russian tourists. In fact, the 
first-ever Russian charter flight came direct to the island on January 
4, 2007, bringing 130 tourists. These were families with children who 
came for 14 nights to spend the Russian Christmas and New Year holiday 
on the island of Saipan. This trip was so successful that there is talk 
of a second charter.
                          china tourism market
    In addition to Russia, one of the brightest spots on the horizon 
for the recovery of the CNMI's tourism industry is the China market. 
Retaining the CNMI's privilege of local control of immigration is an 
essential element to keeping and growing this new market.
    As recently stated by the general manager of a resort hotel on 
Saipan, ``Being where we are geographically, we cannot survive without 
a China strategy. It is a different world. In the future, we have to 
find a way to open these markets.''
    For the CNMI, it only makes sense for our local tourist industry to 
have a China strategy to capitalize on the rapid economic growth of 
this nearby country, which is only a 4 to 5 hour nonstop flight away.
    Since 2002 when a locally-based hotel on Tinian first began 
chartering flights from Guangzhou, the Northern Marianas have begun to 
grow this market slowly and carefully with selective visitor entry 
permit processing designed to control numbers and qualify visitors 
prior to allowing entry into the islands. This visitor entry permit 
process is controlled by the local government.
    In December 2004, following several years of effort, former 
Governor Juan Babauta signed an agreement with Chinese officials in 
Beijing to grant the CNMI Approved Destination Status. ADS allows the 
CNMI to legally promote itself as a recognized tourist destination in 
China, an honor we share with more than 100 other countries. As of this 
writing, more than half of the world--including Australia, Europe and 
many other Western countries--currently have this coveted status.
    China has already surpassed the number of outbound tourists from 
Japan and is now the largest tourist market in the world, with more 
than 36 Million people traveling overseas in 2006. As a result, there 
is probably no major tourist destination in the world today that does 
not have a China marketing plan. The Northern Marianas have a major 
advantage in attracting this market due to our local control over 
immigration and short distance from China, which is only a 4 to 5 hour 
flight away.
    Guam officials have visited China numerous times, in the hopes of 
welcoming tourists. As early as 2003, Hawaii conducted a comprehensive 
study of the China market and its potential for the state. Hawaii has 
since set up an office in China and has been marketing heavily in 
preparation for a ``green light'' for Chinese tourists to visit. San 
Francisco and Nevada have also set up offices in China. In 2005, 
California Governor Arnold Schwarzenegger led his first trade mission 
to China, while the states of Florida and Texas were the first U.S. 
destinations to exhibit at Beijing's International Travel and Tourism 
Market in 2006. The state of Georgia also sent tourism officials to 
China in the year 2005, in anticipation of opening a tourism and trade 
office.
    Just like other tourists, Chinese families come to the CNMI to 
enjoy the beautiful clean environment, golf, marine sports and other 
optional tours. While the Chinese may be second to Japanese travelers 
in terms of the total amount they spend on trips, they have begun to 
out-rank the Japanese in how much they spend on shopping.
    Over the years to date, the CNMI has welcomed more than 334,000 
Chinese tourists to Tinian and Saipan, bringing millions of dollars 
into our economy. In FY 2006, the arrival figures grew modestly to 
38,385.
    The CNMI now targets to build arrivals from China to 250,000 
tourists per year according to the islands' 5-Year Strategic Plan for 
Tourism. The CNMI currently benefits from six direct, nonstop chartered 
flights from Beijing, Shanghai and Guangzhou. It is our hope that we 
can continue this growth through a gradual build up of flights from 
only the most modern and affluent cities in China.
    To summarize our position, the Northern Mariana Islands today are 
in a pivotal moment in our economic history. Public and private sector 
leaders are moving together, determined to do more of what it takes to 
revive the islands' economy. We have a roadmap to guide our industry, 
which is the CNMI's 5-Year Plan for Tourism.
    We recognize that we are a small destination with limited air 
service and few competitive advantages other than our beautiful climate 
and scenery. We have a small indigenous population that by sheer 
numbers alone cannot fulfill all of our employment needs for the 
foreseeable future, if ever.
    History has shown us that dependence on just one or two tourist 
markets has put the community's livelihood and our industry in 
jeopardy. Therefore, the best way to grow and stabilize our industry 
for the betterment of our islands is to diversify to new markets that 
currently require local control over immigration.
    We would like to state for the record that our position is not 
solely based on economics, but also a genuine concern for our 
community. We recognize that tourism may be the only major provider for 
our islands in the near future.
    Today with many less garment and tourist dollars circulating in the 
economy, our industry is faced with challenges that require 
extraordinary and collaborative efforts to diversity our tourism 
markets, improve our businesses, and hire more local residents. At the 
same time, continued investments can only be made within a stable and 
supportive business climate.
    The members of the Hotel Association will be pleased to join in 
further discussion with local and federal officials regarding this 
position. We thank you for your kind consideration of our views.
                               appendix *
---------------------------------------------------------------------------
    * Documents have been retained in committee files.
---------------------------------------------------------------------------
    I. ``Tourism, Japan Airlines and the Commonwealth of the Northern 
Mariana Islands, An Economic Impact Analysis,'' prepared by 
Economists.com for the CNMI Strategic Economic Development Council, 
June 2005.
    II.``4 Cornerstones to Tourism's Recovery,'' a presentation by the 
Marianas Visitors Authority, presented to MVA members, the Saipan 
Chamber of Commerce, and a joint session of the CNMI Legislature on 
October 4, 2006.
    III. Hotel room Occupancy and Rate Statistics, as prepared by the 
Hotel Association of the Northern Mariana Islands for Saipan's hotels, 
1992 to 2006.
                         additional references
    ``Strategic Initiatives for 2006-2010,'' a strategic plan for 
tourism, prepared for the Office of CNMI Governor by the Ad Hoc Tourism 
committee, Strategic Economic Development Council, May 2006. 
Statistical reports of the Marianas Visitors Authority.

                                    

      
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