Chamber stands by SEDC report on QC

Although disputed by the Commonwealth Development Authority, Saipan Chamber of Commerce president Alex Sablan said he stands by with the finding of the Strategic Economic Development Council, pointing to the dismal performance of the government’s qualifying certificate program.

“We have laid out our concerns in the committee report. We’ve identified seven reasons [why it’s not working]. That’s where we stand,” said Sablan yesterday.

CDA board chairman Tom Glenn Quitugua earlier defended the QC program, saying that contrary to the business group’s perception, the program is actually “most lenient and most liberal” compared to those in other places.

He said places like the U.S. Virgin Islands or Vietnam offer only a 5-percent tax break while the CNMI grants up to 100 percent tax abatement over 25 years.

In a report released last week, the SEDC said that in the first five years since its inception, the QC program only brought $2.6 million in fresh investments to the CNMI out of $305.1 million potential investment.

It said that of the nine applicants that were granted qualifying certificates, five refused to pursue the government’s terms and conditions.

Of the four recipients, only one was considered a new company.

The committee cited the following reasons why the QC program does not attract more investments:

* Wrong mindset or understanding of the program by CDA, the administering agency;

* CDA’s “erroneous” understanding that it would erode the current tax base;

* “Add-ons” or additional requirements imposed on an applicant outside the QC law;

* Lack of flexibility to negotiate between parties;

* Varying application fee from $2,500 to $10,000 as a potential barrier to applicants;

* QC approval ultimately resides in one individual, the governor, and

* Conflict in existing language on confidentiality.

Meantime, Quitugua said that there is a rationale behind the fee structure.

“If we would have a chance to explain it to them [business people], they would see how we came up with the fees. Of course, Rota and Tinian are different environments from Saipan. Definitely, the fee there is much lower than Saipan,” said Quitugua, while adding that the fee also varies depending on the nature of business activities.

The SEDC recommends having a uniform fee for all applicants.

The committee also recommends the review of policy giving the governor veto power over CDA board without the ability for an override by the board in some form.

This setup brings an appearance of politics entering into decision, it said.

It further said that instead of disapproval in case of inaction from the governor in 45 days, the committee recommends amending this to result in approval if there is no action within 45 days.

On confidentiality, the committee said the absence of civil or criminal penalties on the release of applicants’ confidential information can contribute to companies being wary of applying for QCs, SEDC said.

The committee said the SEDC and CDA should jointly study and compare QC program that have been successful in other areas, to amend it or create an entirely new incentive program.

For his part, Quitugua remains unclear as to what part of the law to amend, but he concedes that “there’s always for improvement.”

“Amend what part? As I’ve said, I sympathize with them, and there’s always room for improvement. I am for amendments but I’m not for amendments for runaway investors. Any amendment for the good of the CNMI is fine,” he said.