A Report on the
STATE OF THE ISLANDS

Chapter 2: AMERICAN SAMOA

2.1 American Samoa

American Samoa is made up of seven islands with a total land area of 76 square miles. Located in the tropics, it is 14 degrees south of the equator and 160-173 degrees west longitude. This island chain is some 2,300 miles southwest of Hawaii and over 4,100 miles southwest of San Francisco. Sydney, Australia is about 2,700 miles further to the southwest, while Auckland, New Zealand is only 1,600 miles southwest. American Samoa is the only United States territory south of the equator.

The seven American Samoan islands are dispersed over 150 miles of water. Tutuila, the main island, is the center of government and business. Its famous Pago Pago harbor is one of the Pacific's deepest and most sheltered harbors. Tutuila has a land area of 56 square miles, with an estimated 95 percent of the 56,000 total population living there. The remaining 20 square miles include the three islands of Ofu, Olosega, and Ta'u of the Manu'a group located 60 miles east of Tutuila; Aunu'u, a small island 1/4 mile off the eastern shore of Tutuila; Rose Atoll, a wildlife refuge 60 miles east of Manu'a; and Swain's Island, 200 miles north of Tutuila.

American Samoa's population is growing rapidly. The mid-year population estimate for 1995 is 56,350. This represents growth of approximately 21% since the 1990 census showed a population of 46,773, a much higher figure than was anticipated. This growth is the result of in-migration and high birth rates, including births to non-residents. As might be expected this rapid population growth places a strain on the public infrastructure and on the ASG's ability to provide necessary services.

2.2 Political Status Developments and Federal Relations

American Samoa is an unincorporated and unorganized territory of the United States. It is "unincorporated" becuase not all provisions of the U.S. Constitution apply. It is "unorganized" becuase Congress has not provided the territory with an organic act, which would provide for the organization of the government and its relationship to the Federal Government. Congress has delegated the authority over American Samoa to the Secretary of the Interior, who in turn authorized the territory to draft the constitution under which it operates. American Samoans are nationals of the United States and may become naturalized U.S. citizens.

American Samoans are among the last remaining true Polynesians, along with the Hawaiians, Maorians, Tongans and Tahitians. Although there appears to be tremendous blending of Western with traditional ways and strong influences of metropolitan industrial cultures, American Samoa still holds firmly to its ancient traditions. The traditional social structure, built on the "aiga" or extended family system remains the basis of American Samoa's social structure. The "matai" (chiefs) are responsible for the family lands and property and for its general well-being.

In April 1990, the deeds of cession was signed by the United States and the leading chiefs and orators of Tutuila and Aunu'u. On June 1904, Manu'a agreed to cede its authority to the United States. Under the terms of the deeds of cession, the United States agreed that the chiefs of the villages would be permitted to retain their individual control over their separate villages, provided such control was in accordance with the laws of the United States pertaining to Samoa and provided that such control was not obstructive to the peace of the people and the advancement of civilization. The United States agreed to respect and protect the individual rights of the people, especially in respect to their lands and property. The islands remained under naval administration from 1900 to 1951, when the President of the United States, with executive order 10264, transferred the administration of American Samoa from the Secretary of the Navy to the Secretary of the Interior.

In 1977, the American Samoa people elected for the first time their own Governor and Lieutenant Governor. In 1981 American Samoa sent its first non-voting delegate to the United States Congress. The local legislature is called the Fono. Its upper house is comprised of eighteen senators, who are elected by county councils in accordance with traditional Samoan customs. The lower house is made up of 20 representatives who are popularly elected, plus a delegate from Swains Island. The current governor, A.P. Lutali, previously held the office from 1984 to 1988. The Lieutenant Governor is Tauese Sunia. The delegate to congress, reelected to his fourth term in 1992, is Eni Faleomavaega.

The Chief Justice, and an Associate Justice, are appointed by the Secretary of the Interior. A panel of ten Samoan judges sit with and assist the Chief and Associate Justice, in deciding the wide range of cases before the High Court. Court proceedings are conducted, insofar as applicable, in accordance with U.S. Federal Rules of Civil and Criminal Procedure and the Revised Code of American Samoa. Proceedings are conducted in Samoan and English, unless the presiding judge stipulates that the hearing be conducted in one language only.

The major focus of attention in the ASG's relationship with the federal government is working out a partnership which will enable the local government to improve its financial management and budget capabilities. Over the past several years, the ASG has incurred a cumulative operating deficit in excess of $30 million. A General Accounting Office audit pointed to the lack of adequate fiscal management and budget discipline as the main causes of the government's poor financial condition. In the wake of that report, Congress directed the ASG and the Department of the Interior's Office of Insula Affairs to form a joint working group to develop a plan of action to address ASG's fiscal management problems. Progress reports on ASG's plan of action are submitted semi-annually to Congress. OTIA entered into several agreements with other federal agencies to provide recommendations and assistance for rebuilding ASG's financial management capabilities and strengthening other government functions.

The American Samoa Government continues to have significant financial, budgetary, and internal control problems. The territory's deficit and financial condition are compounded by the high demand for government services from the rapidly growing population, a limited economic and tax base, and recent natural disasters. These factors have limited ASG's ability to reduce the deficit and will continue to plague ASG in the near future. The ASG has initiated measures aimed at controlling and reducing expenditures, while continuing its program of expanding and diversifying the local economy.

American Samoa's economy is still heavily dependent on federal expenditures and the two tuna canneries. In fact, 93 percent of American Samoa's economy is based directly and indirectly on U.S. federal expenditures and the canning industry. The remaining seven percent stems from a small tourism industry and a few small businesses.

Total employment in American Samoa declined from 13,810 in 1991 to 13,627 in 1992 and to 13,543 in 1993. Employment is distributed about equally among the three sectors: government, the canneries, and secondary industries--primarily wholesale and retail trade, transportation and services. Cannery employment continued to decrease, by 2% in 1993. Employment in the rest of the economy increased slightly with the opening of BCTC (a garment manufacturing company) in late 1995. BCTC-Samoa is the Territory's first garment factory, which started operations last year at Tafuna and now employs over 700 people. However, close to 50 percent of the BCTC workforce is made up of foreign workers. The overall potential unemployment rate is still at a two digit level (13 percent) in the face of a growing population.

American Samoa has experienced flat or declining real federal revenue for the last decade, except for post-hurricane periods in which federal recovery funds have added substantially to the total. Hurricanes Ofa in 1990 and Val in 1991 caused widespread damage and severe disruption to American Samoa's infrastructure and economic development efforts.

American Samoa's balance of trade reflects the dominance of the tuna canneries and annual changes are heavily influenced by changes in prices and the timing of export shipments. Export data in the last two years reflected a devastated decline in trade with an anticipated deficit of close to $200 million. Since 1994, the level of export ($252 million) is about half as much as it was in 1993 ($488 million) and previous years.

Typically, local businesses are small, owned by independent local operators, and sell exclusively to the local market. They face high costs due to limited access to capital, the need to import most goods and raw materials, and high labor costs compared to the rest of the region. High costs and the distance to markets restrict their ability to export. Thus, local businesses are vulnerable to competition from neighboring islands with lower wage levels, and from larger, more efficient business in the United States.

American Samoa's current narrow economic base is not adequate to meet the demand for employment. The ASG has sought to diversify its economy by seeking outside investment in light industries (particularly garment manufacturing), farming and fishing, tourism, and regional trade and services. However, the disadvantages of a remote location, lack of skilled manpower,

limited infrastructure and the lack of significant comparative advantages (such as labor cost) over other Pacific sites have yet to be overcome.

ASG has implemented a program involving "micro-industries" which would focus on exports and import substitution. Several locally owned businesses are in the process of completing lease agreements with ASG for land to construct their facilities. Discussions of a second garment factory between ASG and off-island interested investors took place earlier this year. The administration is currently collecting data and background information about the company before a firm commitment can be reached. Proposed plans for an expansion to the present operation of the BCTC company at the Industrial park is also considered. ASG is presently undertaking negotiations with a German-based company to start a shoe factory in American Samoa. Another company has also agreed in principle' to set up a watch factory here later this year.

The Economic Development Revolving Loan Fund program was recently developed as a primary alternative to meet inadequate capital financing that must be provided for new ventures in export-based industies. The purpose of this program is to provide finances for existing and start-up businesses which have limited access to investment capital. It will also provide the leverage for capital deficient or marginal risk businesses to obtain loans from banking institutions. A total of $305,000 worth of loans (creating over 50 new jobs) were disbursed for local business development.

The Special Industry Committee No. 21 conducted minimum wage hearings for American Samoa on June 21, 1995. Testimony was presented by the American Samoa Government, the two canneries - Starkist Samoa, Inc. and Samoa Packing, and various members of the private sector. Both the ASG and the canneries lobbied for wage rates to remain the same. However, the Special Industry Committee Hearing 21 resulted in a recommendation that an increase in the minimum wage be applied to all categories. The ASG's minimum wage was raised by 8 cents, from $2.37 to $2.45 an hour. The previous minimum wage for the two canneries of $3.05 an hour was raised by 5 cents, thus making it $3.10 an hour. Nevertheless, implementation of the new rate was deferred for a period of one year.

Although tourism is not currently a major factor in American Samoa's economy, the development of this sector is a priority. The islands have not shared in the tourism boom experienced in the Western Pacific in the 1980s and have seen a precipitous drop in the 1990s. This drop was due to several factors, including the loss of international airline service, and several typhoons. Tourist arrivals totalled 5,800 in 1995, a decline of about 1,500 from the 1992 figure and about half of the visitor level in 1991. American Samoa has little tourist infrastructure, with only one large hotel (80% government-owned) and a total of 260 hotel/motel rooms in Tutuila and Manu'a. Proposals for additional hotel rooms have been put forward, but have not received the necessary approvals or financing for construction. In addition to its need for upgraded tourist facilities, the tourism industry needs increased promotion, improved skill training, and increased international air travel services.

Development of ecotourism is one of the most promising growth areas. Because of its perceived "gentle" effect on the local population and environment, the concept is supported within the community. Self-initiated development such as the building of hiking trails and the protection of cultural sites is especially appealing. A visitor industry of modest size which focuses on the appreciation of Polynesian culture, the island's natural beauty, and the preservation of the environment can be an engine of economic growth at the grass roots level of villages and families.

A major step in ecotourism development was the establishment of the National Park of American Samoa in 1993. This is the only national park in which the Federal Government does not own the land, but leases it for 50 years from the American Samoa Government on behalf of the eight villages in the park. The National Park of American Samoa protects the only mixed-species paleotropical rainforest and the only Indo-Pacific coral reef in the national park system. The park's 8,000 acres are spread over three islands and include 1,000 acres of the finest coral reef in the territory. A unique feature of the park is its two species of Flying Fox Fruit Bat, including one which flies during the day, making it easily seen by Park visitors.

As the Park's master plan is being completed, a brochure is under preparation to be sent to tourism providers around the globe as a major marketing tool for the Park. The Park staff is also encouraging village-based tourism to permit visitors to experience Samoan culture at its best while helping to protect the park by providing an economic incentive to the people of the villages in the Park.

Improvements in air service, privatization and expansion of the Rainmaker Hotel, recent growth in motel rooms and cruise ship calls and expansion of government tourism assistance could make tourism a prime potential growth sector.

The privatization of the Rainmaker Hotel is in progress as the Rainmaker Hotel Sale Task Force works on preparations to sell the hotel. Three interested buyers were selected from a list of 16 respondents to the Request For Qualification (RFQ). The three include the Honolulu-based Outrigger Hotels and Resorts, the Honolulu-based Samoan-owned Spinning Web Corporation, and the Marufuku Group. Request For Proposals (RFP) have been mailed to the three prospective buyers, and are given sixty days to submit their proposals for the review of the Task Force before a recommendation can be submitted to the Governor.

The Fono has just endorsed and approved the 55 year lease of the almost six acres of prime government land in which the Rainmaker Hotel stands. The ASG will receive a total of $1.6 million during the 55-year life lease from the American Samoa Development Corporation.

The ASG's financial statements since 1988 have received opinions qualified only in regard to fixed asset accounting. Management information sufficient to monitor the financial situation continues to be in place. However, the accounting function in the ASG is currently operating at a reduced level due to the loss of key personnel and the adoption of a new computer system.

The General Accounting Office's 1992 audit found that the laws prohibiting the expenditure of funds in excess of appropriated amounts have been disregarded, and procurement and contracting regulations have not been implemented. Accountability for such actions by responsible officials has not been enforced. High cost areas such as medical referrals, procurement, and personnel have not been well managed.

The plan of action developed by the ASG and submitted to Congress on April 12, 1993, provided an outline of activities the ASG would take to implement the recommendations of the GAO. These measures include the improvement of revenue collections, the enforcement of American Samoa law prohibiting the expenditures in excess of appropriated funds, and the implementation of sound practices in procurement and contracting. Besides stating this commitment to accepted management practices, the plan of action calls for reductions in personnel and improved management of medical referrals to reduce government expenditures. The plan also calls for filling vacancies in the Territorial Audit Office.

The Congress then directed the Interior Department to work closely with the ASG to more clearly define specific objectives arising from this general outline and to implement the plan of action. An ASG-Interior Joint Working Group (JWG) was formed and Memoranda of Agreements were signed in early 1994 to address the goals of the plan of action. These included agreements to have a team of Treasury Department officials make recommendations of financial management improvements and a team of Justice Department officials to recommend improvements in prosecutorial functions.

In 1995, OIA worked with local leaders to identify and hire a financial planning group to help ASG prepare a financial recovery plan. CORE, Inc. began working with the JWG in American Samoa May 8, 1995. In October 27, 1995, CORE provided the JWG with a final report on immediate-term financial recovery plan. The JWG submitted the report to Gov. Lutali in December of 1995. In a January 27, 1996, letter, Gov. Lutali submitted some changes to the final report to the Department of the Interior supporting the recommendations and endorsing the plan. CORE officials concluded that ASG can institute immediate revenue-enhancing measures, including modest increases in local government fees for hospital, court, airport, seaport, telephone, hotel, and golf services. This enhancement could provide $3 million in annual additional revenues to the government. CORE also recommended mid and long-term cost containment measures for ASG.

OIA and Interior's Information Resources Office worked with ASG to fully automate ASG's financial accounting systems. On April 8, 1995, OIA officials signed a grant with Governor Lutali, providing the local government with $1.6 million for the purchase and installation of a computerized financial management system and for procuring auditing and accounting support services. An additional $800,000 was provided to ASG on April 1996 for this project.

At the same time, a team from the Internal Revenue Service set up a training program for local officials in tax collection and enforcement. OIA also assisted ASG to improve local government fiscal management practices through the Insular Management Control Initiative, which funds training of local government financial management personnel.

At Governor Lutali's request, a team from the Department of Justice/FBI, in cooperation with ASG, conducted an assessment of white collar crime involving public funds and the need for investigative and prosecutorial assistance to supplement local capabilities. The Justice report concluded that major local government fraud, including the theft and misuse of federal funds, is contributing significantly to American Samoa's worsening financial condition, and neither local nor Federal law enforcement capabilities are adequate to deal with the problem.

OIA, working with the Justice Department on the issue of federal law enforcement in American Samoa, developed draft legislation that would establish the District Court of American Samoa and confer on it limited jurisdiction for the enforcement of federal statutes in the islands. This jurisdiction would also provide for the collection of debts owed to the United States by residents of American Samoa. At present, but for a few minor exceptions, no federal court has jurisdiction over American Samoa and this void has made it extremely difficult, if not impossible, for the United States to enforce its laws in that territory and to collect debts owed to it by inhabitants of that territory.

The jurisdiction would be limited to civil, criminal, and regulatory statutes of the United States and only at the suit of the United States. This is intended to protect American Samoa's culture and customs, especially the extended family, traditional chiefs (Matai), and communal land tenure systems. The legislation would specifically provide that the court not have jurisdiction over litigation that directly affects a Matai title or communal property. This limitation stems from the U.S. legal obligations under the Treaties of Cession.

OIA also has provided technical assistance in a number of other areas since the formation of the joint working groups. These include establishing a cooperative management and maintenance program to improve medical services in the ASG hospital, initiating a Public Health Service evaluation of the off-island medical referral system, and extending Pacific Island Training Initiative programs to provide a long-term training program for ASG officials.

The commitment of the ASG to reform its practices is paramount to the success of the joint working group. The ASG developed financial recovery plans in 1988 and 1990 to deal with its then less daunting deficits. Audit reports indicate that key elements of the plans were not implemented and thus were not effective. Despite the best intentions of plans and technical assistance, the success of the most recent efforts will depend upon ASG's political will.

2.5 Infrastructure

Water System

The American Samoa Power Authority (ASPA) continues to progress toward the goal of providing safe drinking water to all villages in American Samoa. About 10 of the 15 villages which relied on antiquated and poorly maintained surface water catchment systems are now connected to quality water systems built and maintained by ASPA. The remaining 5 villages are included in comprehensive plans to construct satellite water systems. A cornerstone of this effort was the refurbishment and reconditioning of the water well drill rig. The Tafuna Water System Improvements Project which consisted of replacing undersized, old, and corroded distribution pipes and construction of a million gallon storage tank is completed.

Waste Water System

The modification and expansion of the two wastewater plants at Utulei and Tafuna have been completed and the plants are fully operational. The Tafuna Plains sewer collection system (Phase III) is making significant progress. Nearly 750 residents are connected to the system and about 200,000 linear feet of pipe, including main lines and distribution lines, has been laid. The Department of the Interior has assisted in funding a Hazard Mitigation Project to improve the sewage ocean outfalls. The project is currently under construction. Other Department of the Interior funded Capital Improvement Projects include new sewer collection system for the island of Aunu'u and a sewer connection program within the Pago Pago Bay area. The latter program has been extremely successful; approximately 720 homes have been connected through this program and another 50 homes will be served when the project is completed.

ASPA has implemented a combined water/wastewater rate charge to compliment the annual subsidy from the American Samoa Government. Unfortunately, the American Samoa Government has not been able to meet their financial obligations to ASPA, which is hampering the ability of the Wastewater Division Operations to perform its responsibilities. ASPA Wastewater is unable to meet the needs of the growing population without capital improvement funds. Re-authorization of the EPA Clean Water Act-Construction Grant funds are necessary if ASPA is to provide the people of American Samoa with a healthy standard of living.

Solid Waste Disposal

On March 1, 1995 the Governor of American Samoa, under Executive Order No. 5-1995, transferred the solid waste program to the American Samoa Power Authority. This fulfills a recommendation of the Operations and Maintenance Improvement Program (OMIP) team. The team has also recommended that solid waste disposal should be funded by user fees and not subsidized by other ASPA operations. There are currently still no charges to the consumer for waste disposal.

Other programs and studies underway include a recycling and reutilization study by EPA, a hazardous waste disposal options study (also by EPA), an EPA study to reduce hazardous waste, and a used battery recycling program. In addition, the American Samoa EPA has been working with a firm that is interested in removing and salvaging all scrap metal from the American Samoa Government, including several commercial vessels sunk on the reef in Pago Pago Harbor.

The ASPA generates, transmits and distributes electric power throughout American Samoa. The over-all operation of the utility is considered a great success. Recently ASPA installed the fourth new high efficiency, low RPM generator. These were financed by savings realized from lower fuel and maintenance costs made possible by new state of the art diesels.

To protect this investment, modern programmed maintenance is being implemented at ASPA. The power infrastructure is also being hardened against natural disasters. Both the Satala and Tafuna power plants have projects under review to make tropical storm resistant modifications to the plants. These will include reduced noise emissions and automation of controls for maximum fuel efficiency and reliability.

The distribution of electric power has also benefitted from completion of upgraded warehouse and shop facilities and from hardening of projects, including underground placement of feeders to the canneries and the Pago Pago business and government district.

The American Samoa highway system consists of 120 miles of federal highway designated roads and another 100 or so miles of paved and unpaved public roads. The designated federal highway roads are eligible for improvement using federal highway aid funds, but other roadways are the responsibility of the ASG Department of Public Works.

The highway system in American Samoa is in generally poor shape, due to the effect of hurricanes, the age of the roads, inadequate maintenance, and past road construction standards that do not meet the present heavy traffic loads. Federal funds are now being used for an extensive program to construct improved roadways that may be expected to last for some 50 years.

Funding for road maintenance comes from a portion of the territory's gasoline tax of 10 cents per gallon. Legislation is being prepared to increase the gasoline tax to reflect national averages to secure adequate funding to meet maintenance needs. However, the OMIP team has found that funds are accumulating in the road maintenance fund without any budget for their utilization. The OMIP team has made specific recommendations of improved road maintenance, including reduction in redundant staff, better planning, rental of equipment, and better training.