Support for scrap of $100K deposit builds

Senate Floor leader Pete P. Reyes yesterday expressed support on the easing of a cash deposit requirement imposed on foreign investments, adding to growing clamor for a legislation to amend the stringent law in light of the current economic slump.

He also shrugged off fear that the removal of the $100,000 security bond may encourage businessmen to set up what he called “shadow investments” and violate CNMI laws.

“We need to see this proposed bill move forward, it’s beginning to hound us,” Reyes said in an interview, referring to House Bill 11-131 which is pending at the Senate.

Senators are expected to tackle the legislative proposal which has been sitting in a committee for review for the last few months since the House of Representatives approved the measure middle of last year.

Local business leaders have been pressing the NMI government to remove what they consider as a stumbling block to the growth of the island economy as the requirement has only discouraged potential investors since it became law two years ago.

The cash deposit is provided in the Foreign Investment Act, but HB 11-131 will seek alternatives to meet the requirement other than cash, such as mortgage on property, an insurance bond or a letter of credit or guarantee from a financial institution.

According to Reyes, the money intended to post the bond will assist businessmen to shore up their capital, instead of letting it stay idle in the bank as stipulated in the existing law.

“I prefer that we translate the $100,000 into more tangible investment, rather than keeping it in the bank where it is not being used at all,” he said.

The Senate committee on Resources and Development, chaired by Sen. Juan P. Tenorio, is deliberating on the bill and the panel’s position “is much more relaxed (than what is proposed),” Reyes pointed out.

But some local officials maintain the requirement is needed to ensure that businessmen do not violate laws and accumulate financial liabilities without any means to repay them.

“The requirement was passed to make sure that there is safeguard,” Reyes explained. “But it is not working. It’s not bringing the investments we need because businessmen have to come up with capital and yet they still need to raise this additional amount.”

The commerce department, which oversees the implementation of the foreign investment law, should also be equipped with a mechanism that will “provide better enforcement capability to control shadow investors,” the senator added.

The island has been riled by the economic turmoil in Asia, its main source of tourism income and investments, helping to pull down the number of new businesses set up in the last one and a half year.