Development
Saipan Struggles to Attract Foreign Investment
Federal Takeover Bid, Restrictive Laws Slow Business Development
Foreign investors have pumped in a little over $4 million in fresh capital to the Northern Marianas in the last five years — a figure that Commerce Department officials say pales in comparison the early 1990s, when the Commonwealth received up to $10 million annually in new foreign investment.
Between February 1997 and March 2001, the Northern Marianas witnessed the entry of only 10 new foreign companies engaged in real estate, construction, computer consulting, wholesale, retail, furniture production and garment embroidery. This, despite the recent implementation of the Qualifying Tax Certificate, an investment incentive program aimed at attracting new business ventures.
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Business analysts blame the economic downturn in Asia and CNMI's restrictive local investment policy requiring investors to put up a $100,000 security deposit for the dramatic decline in the number of foreign investors coming into the islands.
Governor Pedro P. Tenorio believes that the implementation of the Foreign Investment Act in 1997 paralyzed the entry of new investments into the Commonwealth, exacerbating economic impediments brought about by the slowdown in the tourism industry. But Tenorio also echoes concerns raised by his economic advisors on the effects that the U.S. federal takeover initiative is having in discouraging foreign investors from pouring fresh capital into the islands’ economy.
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Former Saipan Chamber of Commerce president Jose Ayuyu said the stability of political relations between the CNMI and the United States governments is a major factor in determining the success of government and private sector-initiated programs for economic growth and development. Ayuyu said foreign investors are concerned about the uncertain political relations of the Common-wealth with the federal government.
Tenorio also underscored the need to forge better relations with Washington to thwart any takeover initiative. He said federalization of local labor and immigration systems would worsen the anticipated adverse economic impacts of the impending relocation of the Saipan garment manufacturing industry to Asia and Latin America.
The CNMI chief executive also mentioned the adverse effects a federal takeover of immigration and minimum wage would have on the local economy, especially at a time of plunging visitor arrivals and low business activities.
In the late 1990s, Democratic U.S. congressmen began pushing a federal takeover plan in response to abuses of Asian workers in the garment industry on Saipan. Although the garment industry has done much to clean up its act, the takeover move remains alive. At the same time, a group of Chinese businessmen, who recently visited the Northern Marianas for possible investment opportunities, expressed concerns over the lack of infrastructure facilities including power and water supply, and road facilities.
The Department of Commerce called for expedited legislative action on proposed changes in the existing foreign investment law to develop for a Northern Marianas business climate that is conducive to growth and progress. Commerce Secretary Frankie Villanueva expressed the department's support for intensified moves by both chambers of the CNMI Legislature to update the existing foreign investment law and other wide-ranging business policies.
The Northern Marianas, due to its restrictive foreign investment laws, has been losing potential foreign businessmen to the neighboring Guam where investors can get a green card and American citizenship in five years for a minimum of $250,000 in total investments.
Photo: Floyd K. Takeuchi
