Security deposit bill hits rough waters

Despite mounting calls from the business sector, a bill easing a requirement for foreign investors to post a $100,000 security deposit appears to run into troubles in the Senate as it is still awaiting committee review more than nine months after it passed the lower house.

But Sen. Juan P. Tenorio, whose committee on Resources, Economic Development and Programs has been tasked to deliberate on the measure, said they would soon come up with amendment for final voting on the floor. He did not provide specific date.

He said other restrictions should be kept in place, including exempting from the proposal some businesses where abuses on their workers may still be a major problem, such as clubs, security agencies and job placement companies, as well as those hiring foreign workers.

“The amendment would reflect categories that would not be exempted at all,” Tenorio said in an interview. “So any foreign investors (who wants waiver of the security deposit), they should not hire nonresident workers.”

The senator has been insistent to tie the scrapping of the security deposit to employment, pitching only those investments that will provide jobs for resident workers.

While House Bill 11-131 does not specify the type of business, it will allow investors to meet the stringent requirement by complying with one of four alternatives in lieu of the $100,000 cash deposit.

Through the new regulations, lawmakers hope the money can be used as additional capital to boost their business stock. An investor seeking to set up business here can provide any of collateral other than cash, such as bond, mortgage of property or a bank credit.

According to Tenorio, these alternatives will not work out as there are loopholes in the Foreign Investment Act, including proliferation of “fly-by-night” businesses that can circumvent the law and leave huge financial obligations both to their workers and creditors.

“How many quality investments have shied away because of the requirement?” he asked, noting that calls from some business groups to eliminate it are “all hot air.”

He also maintained their claims that it is deterrent to investment potential of the island are not backed up by figures. “Have we made efforts to investigate the bad ones, the fly-by-nights?”

For those who he calls “bonafide investors,” the $100,000 deposit is “just peanuts,” Tenorio added. “Some of them just invest here because they just want to bring in family members (as employees).”

Reacting to allegations that the Legislature is too slow in addressing the needs of the business community, the senator stressed he is just trying to prevent cases in which the only solution to deal with growing number of displaced alien workers would be to use taxpayers’ money for their repatriation.

“I am going to amend the bill I feel would be good and protective of the people’s interest,” Tenorio explained. “It’s not anti-development if you look at it from the other side.”

Earlier, Rep. Oscar M. Babauta, sponsor of the bill passed in August last year by the House, 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.