PACIFIC ISLANDS REPORT

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

COMPACTS OF FREE ASSOCIATION
Development Prospects Remain Limited for Micronesia and Marshall Islands

Government Accountability Office
GAO-06-590

June 2006 

Why GAO Did This Study

In 1987, the United States began providing economic aid to the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI) through a Compact of Free Association. In 2004, through amended compacts with the FSM and the RMI, the United States committed to provide more than $3.5 billion until 2023. Joint U.S-FSM and U.S.-RMI compact management committees are required, among other things, to monitor progress toward specified development goals and address implementation of policy reforms to stimulate investment. The legislation implementing the amended compacts (P.L. 108-188) requires that GAO periodically report on political, social, and economic conditions in the FSM and the RMI. In compliance with this requirement, GAO examined each country’s (1) political and social environment, (2) economic environment, and (3) status of economic policy reforms.

What GAO Recommends

GAO recommends that the Secretary of the Interior direct the Deputy Assistant Secretary for Insular Affairs, as Chairman of the compact management committees, to ensure they meet requirements to address the lack of FSM and RMI progress in implementing reforms to increase investment and tax income. Interior, Health and Human Services, the FSM and the RMI generally agreed with the recommendation and the need to find development opportunities.

www.gao.gov/cgi-bin/getrpt?GAO-06-590.

To view the full product, including the scope and methodology, click on the link above.

For more information, contact David B. Gootnick at (202) 512-3149 or gootnickd@gao.gov.