PACIFIC ISLANDS REPORT

Pacific Islands Development Program/East-West Center
With Support From Center for Pacific Islands Studies/University of Hawai‘i

By Jaime Espina

PALIKIR, Pohnpei (Marianas Variety, Dec. 26) —Challenges presented by the amended Compact of Free Association between the Federated States of Micronesia and the United States, particularly the stringent rules on managing funds, will prove to be a boon and not a bane to this Pacific nation, the country’s president says.

While acknowledging that the amended Compact would cause "some initial strains" to the economy, FSM President Joseph J. Urusemal nevertheless stressed that "proper and efficient management of the funding will enable the FSM to move forward."

For the first three years of the amended Compact, the FSM will be receiving $76 million in economic assistance grants, to be allocated among education, health, capacity-building, private sector development, environment and infrastructure. Another $16 million will go to a trust fund for the FSM.

Beginning in the fourth year, there will be an annual decrement of $800,000 in the sector grants, which will go to trust fund contributions until 2023.

In a statement released by the national government, the president said the stringent requirements imposed by the new Compact would "not only work to our nation’s benefit by improving our efficiency standards in managing Compact funds, but such disciplined fiscal management reinforces FSM continuing efforts toward ultimate economic self-sufficiency."

Urusemal also lauded the signing last Dec. 17 by U.S. President George W. Bush of House Joint Resolution 63 approving the implementation of the amended Compact, completing the American ratification of the pact that provides a framework to guide U.S.-FSM relations over the next 20 years.

Urusemal said Bush’s signing of the Compact was a "testament to the special relationship between FSM and the U.S.; it reaffirms the spirit of close friendship and cooperation fostered by the 1986 Compact."

The amended Compact has to be ratified by the FSM Congress and at least three of the four state legislatures before it finally takes effect.

According to the FSM government statement, the process is expected to be completed by the end of the local Congress’ next session, scheduled to begin in January.

There are major differences between the amended Compact and the original pact, most notably in the reduced funding level and the strict requirements in the use and monitoring of how U.S. grant money is to be used.

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