Guidelines for free trade zones okayed • But House holds off action on tax breaks, incentives

The proposed free trade zones in the Northern Marianas moved a step forward after the House of Representatives yesterday passed unanimously a measure providing the guidelines, including the creation of a government agency that will oversee the ambitious project.

But the administration-backed legislation left open a plan to offer tax breaks and other incentives to potential foreign investors, citing the need to pass a separate measure that will deal with the financial component of the special economic sites.

Introduced by House Speaker Diego T. Benavente last March, the bill went through a three-month review by the joint committees of Commerce and Tourism as well as Ways and Means to incorporate recommendations from the private sector and other public agencies.

In a report submitted to the body, the panel stressed the significance of the proposal in stimulating the local economy which has suffered heavily in the wake of the economic recession in Asia, CNMI’s main source of tourists and investments.

The plan will attract new businesses, create jobs for local people, stir industrial and commercial activities on the island as well as help diversify the economic base beyond tourism and garment manufacturing.

Lawmakers also noted other potential benefits, such as training opportunities for locals by highly-skilled workers who will be hired by businesses within the zone.

They, however, will ensure that the tourism environment remains free from pollution and hazards associated with industrialization, saying these areas must not “cloud the air, foul the beaches or contaminate the aquifer.”

Commerce and Tourism Committee chair Rep. Oscar M. Babauta said the new version drafted by the joint House panel took note of the suggestions made by the Saipan Chamber of Commerce and other business groups, the Commonwealth Ports Authority and other government agencies.

Under the revised draft of House Bill 11-389, rules and regulations governing lease of public lands and government properties must also comply with the set-up existing in agencies like CPA, whose lots are being targeted as sites for the free trade zones.

“This is our first attempt to establish these special areas and we have approved this legislation so that the free trade zone plan can take off,” Babauta said in an interview after the House session. “If we see problems in the future, we will be ready to amend the law.”

A milestone: Envisioned as a milestone for Gov. Pedro P. Tenorio’s administration, the grand project was broached last year amid the worsening economic difficulties confronting the island.

The governor’s Free Trade Zone Task Force, composed of business leaders, public officials and lawmakers, fine-tuned the bill to come up with the proposal that would be workable on the island.

Although the initial bill included the tax component, the House agreed to separate the issue to concentrate on the creation of the Commonwealth Free Trade Zone Authority which will administer these sites.

“We realize that we’re heading into uncharted waters here, and that this measure cannot be all things to everyone. We have tried, however, to be sensitive to all concerns raised, and to put together the best bill possible,” the report said.

The proposed package of tax incentives for investments in the free trade zones is expected to be covered by another legislation that will set up a program similar to Guam, called the Qualifying Tax Certificate program.

This measure, aimed at enticing both local and foreign investors, is now under review by the Ways and Means Committee.