A Report on the
STATE OF THE ISLANDS

Chapter 7: THE FEDERATED STATES OF MICRONESIA

7.1 The Federated States of Micronesia

The Federated States of Micronesia (FSM) is a grouping of 607 small islands in the Western Pacific about 2,500 miles southwest of Hawaii, lying just above the Equator. Generally speaking, Fsm comprises what is known as the Eastern and Western Caroline Islands. While the country's total land area amounts to only 270.8 square miles, it occupies more than one million square miles of the Pacific ocean, and ranges 1,700 miles from East (Kosrae) to West (Yap)- Each of the four States centers around one or more "high islands." and all but Kosrae include numerous atolls.

Chuuk State has a total land area of 492 square miles and includes seven major island groups. Pohnpei State has 133.4 square miles of land area, of which 130 is accounted for by Pohnpei island, the largest in FSM. Yap State is made up of 4 large islands, 7 small islands and 134 atolls, with a total land area of 45.6 square miles- Kosrae is essentially one high island of 42.3 square miles.

FSM enjoys a tropical climate, with relatively even, warm temperatures throughout the year. Rainfall is generally plentiful, and Pohnpei reputedly is one of the wettest places on Earth, with up to 330 inches of rain per year. Nevertheless, drought conditions do occur periodically throughout FSM, especially when the El Nino condition moves into the Western Pacific. At these times groundwater supplies have dwindled to emergency proportions. Tropical typhoons constitute an annual threat, particularly to the low-lying atolls.

As far as is currently known the small land areas of FSM possess no significant exploitable natural resources. Historically, copra was an export, but the more recent decline in copra prices has all but wiped out that industry. The resources of the sea, however, are another story- FSM claims well over a million square miles of exclusive economic zone, and that zone straddles the World's richest tuna fishing grounds. In years to come, the development of deep seabed mining techniques also may offer a significant source of income for the Nation.

7.2 Population

By most recent estimates the total population of FSM stands at about l05,500, an increase of some 20,000 since the last census in 1980. The State of chuuk accounts for roughly half the total, at about 50,500; Pohnpei is next at about 35,000. The State of Yap has about 12,,000 people, and Kosrae has a population of about 7,500. Since the Compact of Free Association permits FSM citizens to enter the US freely, to maintain "habitual residence" and to pursue education and employment, upwards of 15,000 Micronesians are currently living in the U.S.: 7,000 in Guam, 3,000 in CNMI, and the rest in Hawaii or on the Mainland. The number who actually emigrate to the US, however, remains relatively low as most FSM citizens eventually return to FSM. At least eight major indigenous languages are spoken, as well as many dialects, none throughout 111SM- The common language of commerce and government is English.

The general ethnic character of the people is Micronesian, with a small number of Polynesian. The influence of European and Japanese contacts is also seen. It can be said

that each of the four States exhibits its own distinct culture and tradition, but there are also common cultural and economic bonds that are centuries old.

7.3 History

In 1525, Portuguese navigators in search of the Spice Islands (Indonesia) came upon Yap and Ulithi. Spanish expeditions later made the first European contact with the rest of the Caroline Islands. Spain claimed sovereignty over the Caroline Islands until 1899- At that time, Spain withdrew from its Pacific insular areas and sold its interests to Germany, except for Guam which became a US insular area.

German administration encouraged the development of trade and production of copra. In 1914, German administration ended when the Japanese navy took military possession of the Marshall, Caroline and Northern Mariana Islands.

Japan began its formal administration under a League of Nations mandate in 1920. During this period, extensive settlement resulted in a Japanese population of over 100,000 throughout Micronesia. The indigenous population was then about 40,000. Sugar cane, mining, fishing and tropical agriculture became the major industries.

The United Nations created the Trust Territory of the Pacific Islands (TTPI) in 1947. Ponape (then including Kusaie), Truk, Yap, Palau, the Marshall Islands and the Northern Mariana Islands, together constituted the TTPI - The United States accepted the role of Trustee of this, the only United Nations Trusteeship to be designated as a "Security Trusteeship," whose ultimate disposition was to be determined by the UN Security Council.

The President of the United States appointed a High Commissioner of the TTPI, and he, in turn, appointed an administrator for each of the "Districts" mentioned above. The TTPI remained under the civil administration of the US Navy Department until 1962, when authority passed to the Department of the Interior. In 1979, upon implementation of the FSM Constitution, the US recognized the establishment of the FSM national and state governments.

7.4 Political status

On July 12, 1978, following a Constitutional Convention, the people of four of the former Districts of the Trust Territory: Truk (now Chuuk), Yap, Ponape (now Pohnpei) and Kusaie (now Kosrae) voted in a referendum to form a Federation under the Constitution of the Federated States of Micronesia (FSM) . United Nations observers certified this referendum as a legitimate act of self determination. Thereby, the people reasserted their inherent sovereignty which had remained dormant, but intact, throughout the years of stewardship by the League of Nations and the United Nations.

Upon implementation of the FSM Constitution on May l0, 1979, the former Districts became States of the Federation, and in due course adopted their own State constitutions. Nationwide democratic elections were held to elect officials of the National and four State governments. The Honorable Tosiwo Nakayama, the former President of the Congress of Micronesia, became the first President of the FSM and formed his Cabinet. The new Congress of the FSM convened, elected the Honorable Bethwel Henry as Speaker, and began to enact laws for the new Nation. A judicial system was established pursuant to the National and State constitutions. Thereupon, the United States entered upon a period (1979-86) of orderly transfer of governmental functions consistent with the terms and intent of the UN Trusteeship Agreement.

Meanwhile, negotiations conducted with the United States since 1968 on a post-trusteeship relationship continued. A treaty between the two sovereign nations, known as the Compact of Free Association (the Compact) , was signed on October 1. 1982. Thereafter, following a complex period of negotiating related agreements and the completion of constitutional processes of ratification, the Compact entered into force on November 3, 1986. See US Public Law 99-239, January 14, 1986, for the text of the Compact and related provisions of US law enacted at that time.

The Compact is an innovative adaptation of the status known in international law as, "free association." In previous instances, a sovereign metropolitan power had devolved limited sovereignty upon a non-sovereign entity (typically a colony) existing within its body, reserving to itself whatever governmental functions or attributes, such as citizenship, might be appropriate in the circumstances. The instrument of devolution, necessarily, had been a unilateral act of the metropolitan power, and its terms operated to transfer to the receiving party only such governmental powers as the sovereign power chose to convey. Such instrument thus became organic to the birth of limited self-government in the freely associated entity.

In the case of the FSM, however, the inherent sovereignty of the people and their constitutional government had never been owned by a metropolitan power. The US, in accepting the Trusteeship, expressly foreswore any assumption of sovereignty over the islands. The FSM Constitution is the only document organic to the Nation's sovereign existence.

The FSM Constitution provides, in Article IX, Section 4, for a process by which the delegation of major governmental powers can be accomplished. This process was carefully followed and completed after the nationwide referendum on the Compact in June 983. Thus, the responsibility for defense and security accepted by the United States under the terms of the Compact is delegated to the United States under the FSM Constitution, and is not reserved by the United States in his own right, but by means of the bilateral Compact, signed by the United States and the Federated States of Micronesia. This crucial distinction undermines the FSM's existence today as a sovereign State within the international community. It is on this basis that the FSM

perfected full diplomatic relations with the United States in 1989, and secured membership in the United Nations in September 1991.

The consistent encouragement by the US Government to the people of the FSM throughout the lengthy and complex process outlined above is consistent with the ongoing worldwide commitment of the US to fostering democratic ideals, and provides the foundation for what promises to be a lasting bond between the two countries.

7.5 Government

The FSM Constitution, like that of the US, provides for three separate branches of government at the national level - Executive, Legislative and Judicial. It contains a Declaration of Rights similar to the US Bill of Rights, specifying basic standards of human rights consistent with international norms. It also contains a provision protecting traditional rights. Unlike the Us system, however, most major governmental functions other than the conduct of foreign affairs and defense are carried out by the State governments. The ownership of land in FSM by non-citizens is constitutionally prohibited.

The Congress of the FSM is unicameral with fourteen senators, one from each state elected for a four-year term, and ten who serve two-year terms, whose seats are apportioned by population. currently, Chuuk has six seats, Pohnpei four and two each are held by Yap and Kosrae. The President and Vice President are elected to four-year terms by the Congress, from among the four-year Senators, and the vacant seats are then filled in special elections. Currently, the Honorable Bailey Olter (of Pohnpei) is President of the FSM; the Honorable Jacob Nena (of Kosrae) is Vice President; the Honorable Jack Fritz (of chuuk) is Speaker of the FSM Congress,

The Judicial Branch of the National Government is headed by the FSM Supreme Court, currently comprised of three Justices who sit in trial and appellate Divisions. At this time there are no other National courts. Justices are nominated by the President for a lifetime appointment and confirmed by the Congress. The Honorable Andon Amaraich (of Chuuk) is Chief Justice of the FSM Supreme Court.

The State governments under their Constitutions are structurally similar, all utilizing three branches, Executive, Legislative and Judicial. Their makeups vary according to their different circumstances. Currently the Honorable Sasao Gouland is Governor of the State of Chuuk; the Honorable Del Pangalinen is Governor of the State of Pohnpei; the Honorable Vincent Figir is Governor of the State of Yap; and, the Honorable Moses Mackwelung is Governor of the state of Kosrae.

7.6 The Economy

For centuries, the people of the Micronesian islands provided very well for themselves through a subsistence economy. Even today, the traditional skills provide an important backstop as the

Nation struggles to cope with the emergence of a money economy, and the demands of an increasing population no longer existing in isolation from the rest of the World.

From about 1962, the US, as UN Trustee, began to institute a program of developing a political and physical infrastructure to move the islands in the direction of eventual self-sufficiency in the context of the World at large. By 1986 a great deal had been accomplished in development of public utilities, construction of roads, schools, hospitals, communications, transportation, etc., but locally-generated revenue was still insignificant. The emerging economy was firmly dependent upon Us aid.

By that time, two irreversible trends had been established: 1) islanders, particularly young islanders, had been introduced to Western standards of lifestyle and the Western imperative of "development", and 2) the need for money to support the maintenance of this process had been instilled, at the cost of traditional values and approaches. This is not a lamentable outcome, but simply a modern reality. If for no other reason, the advent of modern communications and transportation has rendered impossible any thought of returning to "the good old days," and irrelevant any musing over the islands readiness to pursue development along with their neighbors in the Region.

The Compact of Free Association was seen by both FSM and the US as a vehicle to secure a responsible level of assistance, financial and otherwise, that would enable the continuation of FSM's progress economically, ensure the solidification of stable democratic government and provide for the maintenance of essential US security interests in the Region,

At this writing, ten years into the Compact relationship, it can be said that the Compact is serving its purpose very well. Much has been accomplished since 1986. A visitor to FSM today who last saw it in 1986 cannot help but be impressed with the improved transportation services and facilities, one of the best local and international communications systems in the Pacific, reliable power and water in most locations, paved roads, better housing, better schools and hospitals, new hotels and restaurants, well-stocked stores, the showcase new National Capitol facilities and the new College campus, to name only a few.

The complex system of transmitting and monitoring Compact funds has been carefully managed by the US Department of the Interior. The Department of State has coordinated the Compact-related activities of a number of Executive agencies through the Inter-Agency Group, and has encouraged and supported FSM's efforts to establish its role within the international community. The Interior-related Committees and subcommittees in the US Congress have made possible many advances through support of programs and projects related to, but not specifically within the terms of the Compact.

While private sector development remains the obvious priority, some important accomplishments should not be overlooked. Within the last ten years, 22 private, FSM-owned construction companies have come into being, employing mostly local labor. This accounts for the fact that 50% of all housing in FSM has been constructed in the last ten years, of typhoon-proof materials. All road maintenance in FSM is now performed by private FSM companies- The privatized telecommunications corporation is one of the showcase operations in the Pacific. The Pohnpei Public Utilities Corporation, with the assistance of DOI Maintenance Assistance funding, has brought reliable power and water to Pohnpei, and has eliminated all public subsidies. There are 17 auto repair companies, 3 air conditioning and refrigeration companies, 6 concrete products companies and numerous other private ventures creating local employment.

Of course, this is not to say that all is well. Export earnings, among other things, must be increased, and it is not an easy task. Remote, resource-poor small-island countries present unique challenges in development which make it a slow process.

On November 3, 1996, the FSM enters the last five-year cycle of the Compact's package of financial assistance. Levels of grant funding, which started out in 1986 at $60 million and dropped in 1991 to $51 million, will decrease to $40 million annually through 2001. The overall US assistance, however, includes a number of federal programs and technical assistance which, currently, adds a value of approximately $50 million annually to the package. Locally-generated revenues in FSM have shown an increase each year since FY 1993, when they stood at $56.5 million. Other foreign country donors, such as Japan, China and Australia, have initiated assistance programs which are specifically targeted and not insignificant, but their scale is, and is likely to remain minor by comparison to the United States.

Seeing that a variety of obstacles were hindering the pace of development, and that dependence on US aid was not diminishing at the rate desired, the United States in 1993 initiated a process through the Asian Development Bank to analyze the FSM's situation and assist in designing and implementing effective economic strategies. As things then stood, a sudden cutoff of Compact assistance in 2002 would produce an overnight drop in per-capita gross domestic product from about $1445 to around $300. Obviously, something had to be done.

The Compact mandates that at least 40% of grant funds must be expended in the capital account. The ADB finds that this requirement has been met thus far by FSM, resulting in the completion of many essential infrastructure projects. The problem lies in the slow pace of economically productive growth in the private sector, and the large government payrolls. This has resulted in a relatively comfortable living environment where most economic activity is in infrastructure development, services and sales of consumer goods, all largely dependent on continued outside financial assistance. In this light, it can be seen that private sector development in and of itself is not the complete answer.

In November 1995, with ADB's assistance, FSM convened a large meeting in Pohnpei of State and National government representatives, as well as businessmen from throughout the country. This "Economic Summit" identified a set of goals and objectives for a range of sectors within FSM, such as Commerce and Trade, Agriculture and Tourism, It was also agreed that National and State governments should be downsized on a priority basis.

Subsequently, Pohnpei, Yap and Kosrae have completed follow-up State "Summits" to translate the national Summit mandates into implementing actions at the State level. A similar Chuuk Summit is to be held soon. These implementing actions will occupy the close attention of governments at all levels in the FSM for some years to come. it is worth noting that Yap Sate already has instituted a program to reduce government employment by 371, and Pohnpei State is moving toward a similar action.

The sectors which seem to offer the most potential for near-term income generation are Fisheries and Tourism. Agriculture has some potential, particularly for intra-FSM trade, but the small land area limits large-scale farming for export.

FSM has for some years earned $18-24 million annually in licensing fees paid by foreign vessels for tuna fishing in FSM's Exclusive Economic Zone. More recently, additional earnings have begun to grow as FSM's Fishing Corporation and the Yap Fishing Corporation have initiated their own fishing operations together with onshore processing. Direct exports of sashimi-grade fresh tuna by air to Japan account for increasing traffic at the airports. Farming of giant clams and other marine products has been instituted. Various plans to establish canneries have been discussed, and will be pressed. The outlook for this industry overall is strong.

Tourism has seen significant increases in recent years. A number of new, small hotels have opened in Pohnpei, Yap and Kosrae with support facilities for diving and other tourist activities. At this time, the challenge in terms of larger-scale investment is to overcome limitations of air transportation, land use issues and competition with other island destinations closer to tourist markets.

Recently, a good deal of attention has focused on the State of Chuuk, which is lagging behind in some areas of finance and development. The ADB has found, however, that reports of Chuuk's financial situation reflect a degree of misunderstanding. Sufficient funds remain on deposit there to substantially address Chuuk's problems, and efforts are being brought to bear at the National and State levels to move the situation forward.

The ADB effort also includes coordinating an overall donor program through the mechanism of a Consultative Group of donor countries, including the US, through the Office of Insular Affairs of the Interior Department, which is currently conducting a series of meetings. In this group, FSM has called attention initially to the need for donor support in the downsizing-of-government effort..

As Trustee, the US placed early emphasis on basic education for FSM children. The Peace Corps provided an early cadre of teachers, which has been augmented increasingly in recent years by qualified Micronesians. Today, as one indicator the literacy rate in FSM is quite high. By law, all FSM children are required to attend school through the eighth grade. Private educational facilities, such as the Pohnpei Agricultural and Trade School (PATS) and Xavier High School in Chuuk, are important elements of the overall picture.

In the post-secondary area, FSM students have been supported at the College of Micronesia, the University of Guam and other US colleges through Pell grants and other US education programs. Almost all current government leaders in the FSM are graduates of US colleges. The College of Micronesia in Pohnpei is now opening a new campus constructed with US assistance, and is the beneficiary of Land Grant status through the US Department of Agriculture.

Currently, special attention is being directed to the most effective design of curricula at all levels to address particular needs of FSM in the coming years. An Interior Department funded study by the University of Ohio has been valuable in identifying areas of inappropriate emphasis, and suggesting alternative strategies,

FSM citizens enjoy a level of health care which is high in comparison to the rest of the Pacific Region. The US Public Health Service provides doctors at the four State hospitals, and Micronesians are taking their place in the system through such programs as the Medical officer Training Program in Pohnpei. Certain emergency cases are referred to hospitals in Guam and Hawaii.

Volunteer groups of physicians in the United States visit on a regular basis to perform specialized services in such areas as reconstructive surgery. Mrs, John McCain, wife of the Senior Senator from Arizona, has been tireless in organizing teams of specialists whose visits have been extremely important and beneficial.

7.8 Outlook

There is every reason to believe that the long-term close relationship with the US envisioned in the Compact will be maintained. In the first ten years, the commonality of interests between the two countries that gave birth to this relationship has been confirmed in practice, and should grow stronger still as FSM overcomes obstacles through measures such as those discussed above. There are no quick and easy answers to the problems of development in this remote region of the World, but the US has earned a deserved place in the Region as a primary sponsor of democracy and stability. Through this sponsorship the people of the FSM maintain faith in the eventual attainment of their ability to provide for themselves and future generations.

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