House panel wavers on deposit

The chair of the House Commerce and Tourism Committee on Friday cautioned the Senate on its proposed amendment to a legislation that will ease requirement on the $100,000 security deposit on foreign investments, saying imposing unnecessary conditions may scare potential investors.

Rep. Oscar Babauta said determining a “fly-by-night” company will also be difficult as any foreign businessman can just come in with millions of dollars in capital money and leave a few months after in deep financial trouble.

Other government agencies have existing regulations to detect unscrupulous businesses on the island, according to the House member whose measure is awaiting Senate action.

Sen. Juan P. Tenorio, chair of the Senate committee on Economic Development, Resources and Program which is deliberating the pending bill, earlier has said he would amend the proposal to include a safety net on the scrapping of the cash deposit requirement on foreign investments.

He will also put in place a $10,000 fee for those investments considered “fly-by-night” by the CNMI government, while an additional $90,000 will be assessed if they hire foreign manpower instead of resident workers.

“I agree with the intent of reducing the amount of the security deposit but the explanation on doing away with the other flexibility of having to secure a higher value than the $10,000 is something we need to reassess,” Babauta said in an interview.

Under his proposed measure, a potential investor can meet the required $100,000 security deposit under the Foreign Investment Act other than cash 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 institution.

CNMI leaders believe that by doing away with the stiff requirement, the investor can probably use the money instead to boost the capital, rather than leave the money sitting idle in the bank.

Tenorio maintained his amendment will seek elimination of the bonding requirement provided in the House version because he said the provision has proved to be “not working” despite the regulation being in place since two years ago.

Babauta, however, pointed out that it is a policy decision to consider slashing the deposit to $10,000 provided that the new investment will employ indigenous workers.

“I agree with the senator’s intention in giving priority to the resident workers, but if an investor cannot find workers in the area of technical skills, then we need to allow that investor to hire from abroad,” he said, adding that they may also be allowed to employ those workers seeking the current immunity offer by the government.

“There are existing regulations in place that the term “fly-by-night” business is very vague,” Babauta explained.

Local business leaders have been prodding the CNMI to remove what they consider as a stumbling block to the growth of the island economy which has been reeling from the crisis in Asia, its main source of investments.

The requirement, imposed since 1997, is meant to deter companies from running away from their financial obligations once they decide to close with a trail of huge debts, including non-payment of wages and benefits to their employees.