The Senate is looking at placing a safety net on the proposed scrapping of the $100,000 cash deposit requirement imposed on foreign investments in a bid to deter “fly-by-night” businessmen from setting up shop on the island.
According to Sen. Juan P. Tenorio, chair of the Economic, Resources and Program Committee, they will amend a pending House measure to address concerns on unscrupulous businesses with a trail of financial obligations.
A fee of $10,000 will be charged for those investments under this category, while additional $90,000 will be assessed if they hire foreign manpower instead of resident workers, he said.
“That amount will cover possible liabilities of investors who have not paid wages to their employees or they have outstanding obligations here and they just suddenly disappear,” Tenorio explained in an interview.
The committee has set a meeting on Wednesday to tackle the proposed bill passed by the House of Representatives several months ago, but still awaiting action in the Senate.
House Bill 11-131 is seeking to ease the security deposit requirement under the Foreign Investment Act, providing leeway in meeting the condition through other forms of payment, such as mortgage of property, an insurance bond or a letter of credit or guarantee from a bank and other financial institutions.
Local business leaders have been pressing the CNMI government to remove what they consider as a stumbling block to the growth of the island economy as the existing law has only discouraged potential investors in the last two years.
Some members of the Senate have earlier expressed support over the move due to the current tight financial situation of the government, but it is only now the committee is deliberating on the proposal.
Tenorio maintained the safety net against “fly-by-night” businesses will ensure that the island gets quality investments, while providing incentive for those employing indigenous people.
“You come in and you hire locals. If you want nonresident workers, you will have to put up $90,000 more,” he said.
The senator, however, said he would seek the elimination of the bonding requirement included in the House proposal because “it is not going to work at all when we always see the problems of nonresident workers not getting paid” despite the measure already in place.
Some local officials have defended the deposit requirement as a step to guarantee compliance of businessmen with the labor laws and prevent them from accumulating financial liabilities without any means to repay them.
But the number of new businesses has declined in recent years due to the stiff requirement and the situation has been aggravated by the economic turmoil dogging Asia, CNMI’s main source of investments and tourism market.