Jose S. Dela Cruz said foreign investors are reluctant to do business in the CNMI due to its land ownership law.
Under the CNMI Constitution, only people of Northern Marianas descent can own land. Public lands can be leased up to 40 years while privately owned lands can be leased up to 55 years.
Dela Cruz said the restriction imposed by Article 12 of the CNMI Constitution “is, without a doubt, rigid and inflexible.”
One of his recommendations is to extend leasehold interest for up to 75 or 99 years just like what Palau did recently to enable foreign investors to fully recover their capital.
“Liberalizing our existing land ownership law would give potential investors the needed boost and confidence to seriously consider investing in the CNMI. So far, potential investors have shied away from the CNMI because we have not given them a strong reason to invest here,” he said in an 11-page essay about Article 12 and its impact on the CNMI economy.
“At no time in the history of the CNMI has the local economy been as depressed as what we have been experiencing over the past four years. The real danger is, unless we begin to turn around the local economy, the CNMI government might become bankrupt soon,” he added.
Boom
The growth of the local tourism industry in the 1980s through the 1990s was mainly fueled by foreign investment which financed hotels and other business establishments.
Many landed local families flourished economically by leasing their property to foreigners.
“Much of our economic boom could be attributed to the influx of investment monies from foreign investors, primarily from Japan and Korea. They invested huge sums of money in land acquisition, in hotel construction, golf course development and other ventures in the CNMI,” said Dela Cruz.
Many of these investors are now reluctant to remain in the CNMI as they near the end of their lease term.
“With a leasehold interest of sometimes 10 to 15 years remaining, many of these long time investors are now wondering whether they should continue making any further improvement on their existing investment or whether they should begin winding down their operation, especially with the extremely poor economic condition of the CNMI,” said Dela Cruz.
He said the land alienation rule is crucial to these foreign investors’ decision.
“There is no question that we need to review our land alienation laws and liberalize it because our economy is not moving at all and the only thing of value that we could offer our investors is land,” he said.
Some CNMI leaders argue that the land alienation rule was created to protect the indigenous people’s right to their ancestral land.
Dela Cruz said there is merit to their fear of becoming landless in their own islands.
“But the possibility of an indigenous landowner becoming landless could still occur under Article 12 as it now exists; landowners could always sell all their land to buyers of NMI-descent, without any restriction,” he said.
Under the Covenant, the CNMI may decide to review Article 12 in 2011.
