Del. Secilil Eldebechel, vice chair of the House Committee on Resources and Development said the controversial measure will actually help the economy raise its local revenues because foreigners making use of front businesses do not have to skirt the law.
“If the FIA becomes a law in eliminates front businesses,” Elbedechel said.
Earlier several local businessmen are circulating a petition to appeal to the lawmakers to kill the measure saying that it will open up the entire business sectors to foreign investments.
The signature gathering petition stated that the current bill pending before Congress will open up the entire private sector industry in Palau for foreign investment which local businessmen fear will force them to close shop.
The measure in question is House Bill 8-72-5 , the house version of the proposed changes in the Foreign Investment law was passed on final and third reading earlier. It is now pending before the Senate.
The delegate said as it is the most of the businesses supposed to be reserved exclusively to Palauan businessmen are already being taken over by foreign businessmen.
Many foreign investors form “front” businesses as a means of circumventing restrictions on industries otherwise closed to foreign investors.
According to the measure, a non-citizen who has business interest is required to submit an application for the issuance of Palau Foreign Investment (PFI) charter within 90 days.
Administrative responsibilities then will be placed with the Registrar of Corporation and a minimum investment of US$250,000 is required.
Elbedechel clarified that the bill doesn’t drive local businesses away, rather it still gives them majority shares of the businesses
The measure stated that the investment may either be paid in cash or actual value of tangible assets.
The measure opens up business activities which are currently reserved exclusively for Palauans.
Under the measure, Palauans can still owe 5i percent of the business while foreign investors can only own 49 percent.
The current law reserves businesses such as retail sale of goods; all land transportation including bus services, taxi services and car rentals; handicraft and gift shops located at the premises of hotels or at the Palau International Airport; bakeries; tour guides, fishing guides and other form of water transportation activities and travel and tour guides for Palauans only.
