Senator: Investor bond won’t work

Due to failure to provide a safety net despite the bonding requirement, the Senate appears bent on revamping a pending legislation seeking to ease the $100,000 security deposit for foreign investments in a bid to tighten some provisions on the proposal.

Sen. Juan P. Tenorio, chair of the Senate committee on Economic Resources, Development and Program Committee which is deliberating on the House measure, said he will eliminate the bonding requirement as provided under the proposed bill.

“Bonding just doesn’t work here. We have had problems with the bonding requirement in the past,” he told in an interview. “They are not able to pay their obligations” when companies are bankrupt.

The panel is set to meet again to finalize a draft of the Senate amendment which has been pending since the House of Representatives passed the bill middle of last year amid calls from the private sector to repeal the stringent requirement.

According to Tenorio, the proposal mapped out by the lower house has yet to address loopholes in the Foreign Investment Act implemented in 1997 as some of its provisions are still open to those so-called “fly-by-night” businessmen.

House Bill 11-131 aims to ease the security deposit requirement under the existing law, providing leeway in meeting the condition through other forms of payment in lieu of cash, such as mortgage of property, an insurance bond or a letter of credit or guaranty from a bank and other financial institutions.

Rep. Oscar M. Babauta, sponsor of the bill and chair of the House Commerce and Tourism Committee, earlier has cautioned senators against imposing other unnecessary requirements which may scare potential investors at a time when the CNMI is hoping to attract foreign capital into the private sector.

“If they want to ease the requirement, then we might as well repeal the law. That would definitely take care of the problem because the bonding requirement doesn’t work here,” Tenorio pointed out.

“We are not easing it because there are still loopholes that would create new problems in the future. It’s not easing it the way (the House wants to) do it,” he added, “it will just open the door for fly-by-night businessmen.”

The senator, however. maintained he would still push for an amendment that will provide incentive to foreign investors who will tap the local labor pool, instead of hiring manpower from abroad.

While he has proposed a $10,000 initial fee for each new investment that employs “strictly” resident workers, Tenorio said the Senate could reduce the amount further to lure businessmen into the island.

“The first thing you should be looking at is what will be its maximum return to the people in terms of employment. Do we want foreign investors here who will hire nonresident workers?”

The legislature must weigh the benefits and impact of the company to the CNMI before giving them the necessary support, Tenorio added, noting the government should encourage “quality investments.”

He also brushed aside perception that the existing regulations have turned off foreign investments in the last two years, saying unscrupulous businessmen may have been the ones who are against the law.

“You want to have a room here where you can provide protection for the CNMI,” the senator explained. “Is $100,000 worth anything to any bonafide investor who can make millions of dollars here?”