LOWER BASE Saipan — Port and shipping industry officials want a revitalization of the free-trade zone to counter falling income. The decline in revenue is due to the downturn in the garment industry.
Commonwealth Ports Authority data provided to the Journal showed that CPA’s revenues during the first four months of the current fiscal year dropped by $76 147 compared to the same period in fiscal 2004.
According to the authority total revenue generated from inbound and outbound cargoes from October to January of fiscal 2004 was $1.64 million compared to $1.56 million for the same months in fiscal 2005.
Frank B. Camacho president of CTSI Logistics and president of the Port Operators and Users Committee said the government should definitely look into opening the free-trade zone. “The decline will continue unless the government takes a proactive approach ” he told the Journal. “Any revenue-generating criteria is good enough to compensate for the loss ” Camacho said.
Lee C. Cabrera seaport manager for the Commonwealth Ports Authority said actively pursuing the free trade zone project “will be a logical approach.” However he said "this is going to cost money and take time.”
Businesses that could operate at the industrial area might include assembly lines for computer parts and accessories he said.
Meanwhile members of the shipping industry are attempting to reduce expenses.
Glenn D. Palacios operations manager for Seabridge Inc. and vice chairman of the committee said shipping companies in the CNMI are “looking at experiencing a 50% cut in cargo volumes inbound and outbound. We just have to cut back on our operational costs. We have to tighten belts. It’s now a matter of streamlining to survive ” he said.
Camacho said cutbacks were necessary. “We cannot continue to do business without making money as well.”
The government has long been working on opening an industrial zone.
Charles V. Cepeda general manager of Pacific Trading Co. and chairman of the board of the Free Trade Zone Authority told the Journal the zone was “up and rolling.”
He declined to comment on whether there have been commitments from investors.
On Sept. 22 2000 Gov. Pedro P. Tenorio signed Public Law 12-20 which would “stimulate the economy … through the creation of free trade zones tax incentives … and a public corporation to administer free trade zones.” This law further refined the 1999 Northern Mariana Islands Free Trade Zone Act and addressed a number of concerns.
Public Law 12-20 which was introduced by House Rep. Diego T. Benavente now lieutenant governor noted that “apparel manufacturing activity may lessen … in the next several years as international trade agreements affecting tariffs make other international manufacturing locations more economically attractive than the CNMI.”
Thus the measure stated “it is in the best interest [of the CNMI] to take aggressive actions to broaden the CNMI’s economic base through diversification.”
The law created the Commonwealth Free Trade Zone Authority to be governed by a nine-member board of directors with staggered terms of four years.
It also designated a 20-hectare CPA area in the vicinity of the Saipan International Airport as the site for the free-trade zone and allowed the mayors of Tinian and Rota to open their own FTZs as well. Public Law 12-20 guaranteed a 20-year business gross revenue tax exemption to companies that operated at the FTZs.
Other tax exemptions include:
• Excise tax on the importation of capital equipment and raw materials;
• Developers tax on the construction of needed buildings to operate the business; and
• Export taxes or user fees for a period not more than 20 years.
The law also entitles FTZ investors to tax rebates and requires them to pay workers the federal minimum wage rate. However there still is no activity at the designated FTZ area almost five years after the law was enacted.
Carlos Salas executive director of the authority told the Journal that the land has already been made available to add another 20 hectares depending on activity and an additional 20 hectares if needed. But he said “there is no development going on.”
Karl T. Reyes former House lawmaker and FTZ board chairman who now is NMI Retirement Fund administrator said the Free Trade Zone Authority got off to a bad start — the legislature did not appropriate operational funds.
“When we finally had a budget most of the members’ terms had expired ” he said.
Reyes said the board still needs four more members as there only are five.
Reyes said aggressively pursuing the FTZ project “would be very good.”
Finished products that would be exported to the United States from the industrial zones would be tax-free he said and given the islands’ close proximity to Asia Reyes said the CNMI has an advantage. MBJ