$100K deposit shouldn’t be kept idle: Reyes

House Ways and Means Committee chair Rep. Karl T. Reyes yesterday stressed the need to ease the requirement on the $100,000 security deposit imposed on foreign investments in the wake of the plan to establish the first free trade zone in the Northern Marianas.

He said the cash bond should be converted into more tangible investments, such as an additional capital money for business expansion, in what may serve as another incentive to attract potential investors into the commonwealth.

While the House has approved a measure removing the cash requirement, the Senate has yet to tackle the proposal despite urgent calls from the business sector to hasten its passage.

Under House Bill 11-131, the security deposit provided in the Foreign Investment Act can be paid other than cash through several options, such as mortgage on property, an insurance bond or a letter of credit or guarantee.

Local business leaders have said the cash requirement has contributed to the steep decline in the number of investments coming into the CNMI in the last two years.

“We may need a separate amendment on the $100,000 security deposit which can be used for other tangible investments, instead of keeping the money in the bank,” Reyes told in an interview.

The representative is a member of the Free Trade Zone Subcommittee of the Economic Recovery and Revitalization Task Force, which is mapping out the mechanism of the special business area on the island.

The panel is currently drafting a proposed legislation that will include package of incentives aimed at luring investments from Asia, Europe and the United States into the CNMI.

This will cover provisions on possible tax structure, public lands use, products for export and facilities for use by various companies as well as the creation of administrative body to oversee the whole area.

Reyes acknowledged the subcommittee has yet to get into specific details, saying that they are thinking “broadly” to have a correct mechanism in place once the free trade zone has been established.

“Putting too many amendment might damage the credibility of the area,” he explained. “We are carefully looking at all the aspects and as many areas as possible.”

Gov. Pedro P. Tenorio’s administration is rushing the drafting of the proposal because of the worsening economic crisis on the island triggered by the prolonged financial turmoil in Asia, its main source of investments and tourists.