The Senate on January 31 passed on third and final reading the proposed measure limiting new foreign-owned investments in Palau to five-star accommodations.
House Bill 10-15-1, HD2, which was one of the priority measures under the Remengesau administration, will soon get to the President for review and action.
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Remengesau first initiated the measure in early 2017 but the Senate Committee on Resources, Commerce, Trade and Development, in its committee report adopted on January 25, has proposed several changes including reducing the tax incentives to foreign-owned businesses investing in high–end accommodations.
The Senate version of the measure instead proposed a tax credit of up to 20 percent.
Remengesau originally proposed a tax credit of up to 80 percent but the House panel said such a tax break would be “ruinous” to the country’s coffers.
The panel also raised concern about using the term high-end accommodation and recommended a simplified rating system based on one to five-star rating system. The report said there are limited activities and attractions in Palau that will entice a luxury tourist.
“Currently, the two main drivers of Palau’s tourism are diving and the Rock Islands. A luxury tourist is going to demand more and varied activities such as high-end shopping, learning of traditional Palauan crafts, golf, eco-tours, deep sea fishing and perhaps water parks or other diversions for young and old,” the Senate committee stated.
Remengesau’s version of the bill requires Foreign Investment Board (FIB) to only accept proposed lodging facility that is five-star rated accommodations.
The Senate version added that the Environmental Quality Protection Board (EQPB) should also include additional permits requirement unique to hotels and other lodging facilities.
The measure also proposed that the investors would also come in with their own designed water treatment system, power backups and renewable energy sources to lessen the strain to the environment and existing infrastructure of the country.
The Senate version also recommended that the Bureau of Tourism (BOT) must come up with a proportional system of accommodation based on one to five-star rating.
The proposed law is part of Palau president Tommy Remengesau’s new “quality over quantity” approach to tourism.
Remengesau, in earlier interviews, reiterated that Palau is less concerned with raising the numbers and more focused on inviting “quality” visitors.
While Palau is estimated to continue its growth, they remain vulnerable to environmental impacts.
Remenegsau said Palau would be more selective in accepting new accommodation projects.
Remengesau’s proposed bill also stated that the proposed investment on hotels should be $5 million. The Senate version requires a minimum investment of $500,000 to $5 million.
The tourism sector contributes 85 per cent of the economy in Palau. (Bernadette H. Carreon) [/restrict]