Palau Airways Receives OK From Foreign Investment Board

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Airline commences operation before submitting application

By Aurea Gerundio-Dizon

KOROR, Palau (Island Times, Oct. 5, 2012) – The Foreign Investment Board has unanimously approved the application of Palau Airways for Foreign Investment Approval Certificate.

The approval was reached during a meeting yesterday by the board, which includes John Skebong as chairman, Sinesio Sandei as vice chairman, Besure Kanai and Susan Ngirausui as members.

Earlier reports showed the Palau Chamber of Commerce questioned the airline’s application as it has been operating here for nearly five months already before submitting application for FIAC to FIB.

The Chamber also commented that the airline company incorporated in Palau with less than the required capitalization of $500,000.

The Chamber asked the FIB to not entertain the application of the airline company or to impose penalties for the alleged violations.

In an interview with FIB Chairman Skebong yesterday, he said that it is not FIB’s task to impose the penalty but the Attorney General’s Office.

Asked about what the FIB will do if there will be complaints for violations against a certain private business, the chairman said that "they (referring to complainants) should deal with the AG." It is the AG that handles legal matters in the FIB, according to Skebong.

Skebong said that what the FIB does is accept applications, review it and then approve or disapprove an application. In the case of Palau Airways, the board unanimously approved its application.

Documents available at the FIB Office with regards to Palau Airways showed Koror State Gov. Yositaka Adachi wrote FIB expressing his support for this enterprise. He anticipates that Palau Airways will be beneficial for Koror State and the Republic by increasing the visitors into the Republic.

However, Adachi said that it is unclear to him whether the amounts stated to be invested in the Republic or the maintenance of a workforce of 20 percent meet the requirement under the law.

"As Koror State is a business-friendly zone, I take the position that this application should be approved, yet only if the investment amount is justified to the satisfaction of the Foreign Investment Board (preferably in the form of bank statements) and/or some time limit is set for the investment. Recent airline enterprises have not successfully maintained a business presence in the Republic – ostensibly due to lack of capital," Adachi stated.

A letter from Lawyer William Ridpath to FIB argued against the concerns raised by the Chamber.

On the fact that Palau Airways commenced operations sans FIB permit, Ridpath said that the airline company "reasonably construed" a section of the FIB regulations as exempting airlines from the FIAC requirement.

"The national government apparently accepted this view, at least initially, as it is issued as business license to Palau Airways. At some point, however, the national government more closely examined this issue, and requested that my client obtain a FIAC. Palau Airways acceded to this request by submitting the pending application which, if approved, would make it the only airline currently flying to Palau that will have FIAC. There never was any intent by anyone to circumvent the Palau laws, and the entire process has been very amicable and cooperative," Ridpath stated.

On the capitalization issue, Ridpath said that the application reflects that Palau Airways has an authorized capitalization and paid-in capital of $2 million. Also, the operational proposal section of the application reportedly estimated total of $4.9 million would be needed to commence operations.

"In any event, Palau Airways has obviously succeeded in raising the funds necessary to commence and maintain its operations, as is apparent from its reliable conduct of regular flights over the past three months, so this issue would appear to be moot," Ridpath said.

Ridpath added that he hopes that the Chamber will recognize the role that Palau Airways is fulfilling in the local air transport and tourism industries. He said that the airline has proven itself to be a key contributor to Palau economy.

The FIAC approved by the board for Palau Airways is for a period of 50 years.

Information gathered by Island Times revealed that a condition was attached to the FIAC that requires the airline company to have at least 20 percent Palauan workforce as required by Section 106 of Foreign Investment Act.

Section 106 states that "No foreign investment approval certificate shall be issued for carrying on a business enterprise which involves a foreign investment in the Republic of less than $500,000 or which will maintain a workforce of which less than 20 percent of such persons shall be citizens of the Republic."

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