Senate urged on tight business rules

A legislator yesterday prodded the Senate to act on a crucial bill seeking to ease the requirement on the $100,000 security deposit imposed on foreign investments in the Northern Marianas which has been sitting in the upper house for the past four months.

Rep. Oscar Babauta, author of House Bill 11-131, underscored the need to pass the measure in line with the plan to establish the first free trade zone on the island requiring various business incentives to attract potential investors.

He said the legislation must complement a Senate proposal offering foreign retirees residency here if they invest at least $150,000 in what lawmakers hope would stir the slowing economy.

“We should remove those strangling rules and regulations that impede the growth of our investment climate,” Babauta told in an interview.

Members of the House of Representatives voted overwhelmingly on Babauta’s bill last August, but senators have yet to act on it despite strong support from the private sector.

Under the proposal, the security deposit provided under the Foreign Investment Act can be paid through several options other than the cash requirement.

These include an equivalent first mortgage on real or leasehold property, a bond issued by an insurance or surety company and a letter of credit or guarantee drawn from the Federal Deposit Insurance Corporation.

Lawmakers have said the cash deposit may be invested back into the business to boost its capital stock and help perk up the island economy which has suffered deeply from the Asian financial crisis over the past year.

The private sector has hailed the move as an effort to enhance the investment potential of the commonwealth amid declining number of foreign investors who mostly come from Japan and Korea, the island’s main tourism market.

“If we can offer incentives to foreign retirees, why can’t we do the same and remove an obstacle for other investors to come in,” Babauta asked.

“I would rather have the money be spent to raise the investment capital rather than sitting idle in the bank,” he said.

The representative also stressed the measure will be part of package of incentives to entice businessmen from abroad to establish companies in a proposed free trade zone on the island.

A legislation is currently being drafted by the government to set into motion the FTZ plan in what local officials hope will help revitalize and diversify the economy.

“(Removing the cash requirement) is an urgent issue because of the dire situation of the economy,” Babauta explained. “It is also one of our biggest selling points in conjunction with the free trade zone plan.”

Newly appointed Commerce Sec. Frankie Villanueva has also expressed support for HB 11-131 as a measure to encourage more investments into the NMI.