Foreign investments dwindle in 2000

Foreign investment to the CNMI continued its downward spiral as the Department of Commerce reported only three approved applications by foreign companies wishing to do business in the Commonwealth last year.

On paper, the three companies represent only a total of $750,000 in foreign capital infusion to the Commonwealth. The foreign investment figure is far worse than the six registered in 1999 and the four approved foreign investments in 1998.

Under Public Law 10-44, capital invested by foreign companies should not be less than $150,000 in a public organization and not less than $250,000 in a private investment.

In addition to the foreign investment minimum, the Foreign Investment Office also levies a $100,000 security deposit for alien companies setting up businesses in the Commonwealth under PL 10-44.

According to the Department of Commerce’s Division of Economic Development Director Lee Cabrera, the combination of the $150,000 to $250,000 minimum foreign investment and the $100,000 security deposit has in some ways wreaked havoc on the reputation of the CNMI as an ideal investment site for offshore companies.

“If the CNMI wants to entice more foreign investment in the future, it should eliminate or somehow amend existing laws on foreign investment. Regardless of what the financial conditions are in origin investment countries,” Mr. Cabrera noted.

Before PL 10-44 came into law in February 1997, foreign companies needed only to invest a minimum of $50,000 to set up businesses in the CNMI. In essence, according to Mr. Cabrera, PL 10-44 forced alien companies to pay $250,000 to gain entry to the Commonwealth market. “The 400 percent increase can no way be described as a modest increase,” he added.

However, as well as the restrictive conditions and levies imposed by the law, Mr. Cabrera also argued that the 1997 Asian economic contagion and the unstable status of guest workers brought about by uncertainty the three-year limit law repeal, have also dampened foreign investor interest on the islands.

The recession that hit the Asian region three years ago has long been blamed for lack of capital investment in the CNMI and the entire Asia-Pacific region in general. Most of the countries that traditionally poured much-needed capital to the Commonwealth have been victims of the 1997 economic crash.

Japan, South Korea, Taiwan, People’s Republic of China and even Australia have in the past been generous investors in the region. But investment figures from those countries have plummeted since 1997.

The three-year limit on nonresident workers has also done its fare share to scare away foreign capital.

The three-year limit law, or Public Law 11-69, mandates nonresident workers to exit the Commonwealth after three consecutive years of employment in the CNMI. After which they can only return after a six-month wait.

Local businessmen have all made known their opposition to the law, which they say will drain them, in a few months time ,of skilled workers. Mr. Cabrera noted that how can the CNMI attract foreign investment if it does not have a stable and reliable workforce to begin with.