CNMI HOUSE APPROVES INVESTMENT IN PALAU AIRLINE

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By Jayvee L. Vallejera

SAIPAN, CNMI (Saipan Tribune, Jan. 7) - The House of Representatives has given its support to the Babauta administration's plan to borrow $500,000 from a regional bank and invest it in the newly established Palau Micronesia Air.

The lower chamber adopted in yesterday's afternoon session a resolution offering its support to the venture, which entails letting the Commonwealth Development Authority borrow half-a-million dollars from the Pacific islands Development Bank. The CNMI government is also a founding member of the PIDB and has infused $1 million into the bank.

The lower chamber also adopted a joint resolution expressing the same sentiment as the House resolution but this one needs to obtain Senate approval. The upper chamber has scheduled a session this afternoon where it is expected to tackle the joint resolution.

Both resolutions express the Legislature's support for the half-million-dollar loan from PIDB, which would be infused into the Palau Micronesia Air. The money would be the CNMI government's equity investment in the new airline, entitling it to 10 percent of the company's shares of common stocks and two seats on the firm's Board of Directors. The responsibility, however, of paying for the loan would rest on the CNMI government's shoulders.

Airline president Alan R. Seid said the money is needed to start the company, build the profit margin, and provide a strong reserve for the future.

"It [$500,000] is a direct equity and not a loan to the airline, though it [stocks] would be hopefully valued at a greater amount and will be generating dividends.It's a risk that you must recognize," Seid said during a presentation to the lower chamber Monday.

He is optimistic, though, that the value of the airline stocks would increase, the business would be successful, and it would be able to generate good economic stimulus in the CNMI and the neighboring islands.

House Speaker Heinz S. Hofschneider said that, with the passage of the resolution and the expected concurrence of the Senate to the joint resolution, what comes next is the passage of a bill that would authorize the CDA to apply for the loan.

It would still depend, however, on PIDB if it will grant the CDA's loan application.

Lt. Gov. Diego T. Benavente, who personally shepherded the passage of the resolutions in yesterday's session, described the loan as "the most proper for the purpose that we made our contribution to the PIDB," which is to support regional development projects.

"If we do this via the loan versus coming up with the half-million dollars out of our general fund, it would be less of an impact and the annual repayment of that [loan] will be something that we believe would be minimal compared to the obvious benefits of having another airline flying directly to the CNMI," Benavente said.

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