Panel searches for trade-zone models

A government body tasked to draw up a free trade zone in the Northern Marianas is leaning towards two areas established in the Philippines and Antigua and Barbados which they hope to use as a guideline in setting up the proposed special economic site here.

In a preliminary draft of a proposed legislation, the Subcommittee on Free Trade Zone is studying both models to assist them in the planning, which will include incentives and tax breaks in a bid to attract potential investors into the island.

The proposal also outlines the creation of an administrative body that will oversee the operations of the CNMI free trade zone as well as set out rules and regulations.

The bill is the centerpiece of the plan by the Economic Recovery and Revitalization Task Force to establish the FTZ on the island which is aimed at spurring the local economy on the heels of the impact of the prolonged recession in Asia, CNMI’s main tourism market and source of investments.

Under its provisions, the following business incentives have been offered to draw potential investors into the CNMI:

•exemption from the payment of taxes or levies imposed by the local government, including import of goods, equipment and machinery as well as raw materials;

•exemption from the payment of income and other taxes of any kind, except Social Security contributions and medical benefits, for FTZ employees;

•exemption from payment of export taxes of products manufactured within the special zone to other countries.

In addition, the proposal allows hiring of foreign manpower through special work permit issued by the FTZ board provided that the local labor pool has not enough qualified workers to meet the work force requirement of businesses within the area.

To generate revenues, the board will charge royalties for each investment based on the rate it will determine, according to the draft of the bill.

Based on the Antigua model, the payment of the royalty is the only condition imposed on investors who agree to set up their businesses within the special site. The Philippine free trade zone, meanwhile, charges five percent of the gross income of companies as its share.

The subcommittee is expected to deliberate on the bill drawn up by the governor’s legal counsel before coming out with a final draft that will be introduced in the House of Representatives.