NMI sees growth in number of idle business permits

In the absence of a law that requires off-island investors to put up their businesses on the island in a given period after the issuance of their respective investment visa certificates, the Northern Marianas may soon witness an increase in the number of unused permits.

While no government data pertaining to the official number of unused business licenses were immediately available, the Department of Commerce disclosed one banking company based in Guam had applied for and was issued a license to operate in the CNMI but is yet to put up a branch here.

Citizens Security Bank has been issued a license to operate in the Northern Marianas since May 1996 but is yet to open a branch after having its permit sit idle for a little over four years now.

Also, a number of foreign investors who have applied for and obtained government licenses to construct and operate hotel facilities in the Northern Marianas have failed to make true to their business proposals.

Commerce officials could not offer explanation as to what has been keeping the banking company from establishing a branch on the island despite the issuance of its permit since May 1996.

They only said the current investment law does not have any provision that mandates the commerce department or the government to forfeit business licenses issued to off-island or on-island investors who failed to make concrete moves on their proposed investments at a given period.

Nine banks are currently licensed to operate in the Northern Marianas. Of which, seven have physical facilities while one – an offshore bank – operates through its authorized agent here.

Its pending establishment of a branch in the Northern Marianas brings to only eight the total number of banks that are actually operating in the CNMI. Of these, the Hong Kong and Shanghai Banking Corporation is the only foreign bank that operates on the island.

The commerce department also disclosed it has not received application from any foreign bank wishing to provide full banking service in the Commonwealth since Hong Kong Bank.

Officials attribute this to the Commonwealth’s apparent restrictive foreign investment policies which allow the entry of only federally-insured banking companies into the island, or those whose assets exceed $100 billion.

Hong Kong Bank’s assets have exceeded the $100-billion asset requirement. Under existing laws, a banking company has the option not to secure membership with the Federal Deposit Insurance Corporation.

The commerce department explained that it requires foreign banks to secure federal insurance or at least have lesser risk of failure in order to provide the necessary security for Northern Marianas depositors and other bank clients.

FDIC offers up to $100,000 insurance for each account in the event of bank failure or bankruptcy. Finance experts have seen the need to pacify worries by private depositors, thus, the move to aggressively encourage banking institutions operating here to get some form of security like FDIC membership.

Aside from the Hong Kong Bank, two local companies – the City Trust Bank and the Bank of Saipan – are without FDIC insurance since these were not covered by the requirement because they were already in operation before the law was implemented.

Despite these, CNMI government officials are confident the local banking industry will continue to weather external and internal financial upheavals as manifested by the growth in bank assets, which is nearing the $600-million mark as of end March 2000.