Federated States of Micronesia Country Brief – April 2008

Introduction

The Federated States of Micronesia is an independent country in a Compact of Free Association with the United States. It consists of 607 volcanic islands spread over 3 million sq km of ocean, just north of the equator. The President of the Federated States of Micronesia, Emanuel Mori, is both Head of State and Head of Government. Alik Alik is Vice President.

Political Overview

The FSM is an independent country in a Compact of Free Association with the United States, first signed in 1986. The FSM has an American-style constitution adopted in 1978 which provides for a government composed of an executive branch, a legislative branch and a judicial branch. Each of the four states of the Federation (Pohnpei, Chuuk, Kosrae and Yap) has its own constitution, an elected governor, a lieutenant governor and a unicameral legislature. The National Congress is also unicameral and consists of 14 members. Four senators – one from each state – serve four year terms. The remaining ten members represent single member districts based on population and serve two year terms. Both the President and the Vice-President are elected by the Congress from among its four-year members and both serve a four-year term. An appointed cabinet supports the President and Vice President. There are no formal political parties.

President Mori from Chuuk was elected to the Presidency by Congress on 11 May 2007, in the first regular sitting of Congress following national elections on 6 March 2007. Senator Alik Alik, from Kosrae, was elected as Vice President. Senator Resio Moses, who has been appointed Vice Speaker, was elected for Pohnpei. In Yap, former President Joseph Urusumal was re-elected unopposed as the state’s representative. Senator Isaac Figir, from Yap, was elected as the Speaker of the House and Senator Joe Suta of Chuuk was appointed Floor Leader.

Under the Compact of Free Association, the FSM controls all domestic and foreign policy with the exception of defence and security, for which the United States is responsible. The Compact also provides direct financial assistance from the US for the development of the FSM (US$1.3 billion provided from 1986 to 2001). Following renegotiations, a second Compact came into force in 2004. The new Compact provides less generous levels of funding, but still equivalent to US$1.8 billion over twenty years. That amount includes contributions to a trust fund which, from 2024, will replace direct financial assistance. FSM itself contributed US$30 million to the trust fund in 2004. From 2007, annual grants from the US to the FSM government will decrease each year, while contributions to the trust fund will increase accordingly. As well as financial assistance, the Compact also grants FSM citizens access to US federal programs, and favourable provisions for travelling to and working in the United States.

Economic Overview

In 2006, GDP was $US 244.7 million. The post-World War II economy of FSM has been dominated by the US Trusteeship and subsequently by the financial provisions of the 1986 Compact of Free Association. This has created a government-led economy largely reliant on external grants with only a modest private sector. In 1996, the FSM Government moved to embrace an economic reform program assisted by the international community and institutions such as the Asian Development Bank and aimed at stabilising public finances and removing regulatory obstacles to foreign investment and private sector development. The current Government is implementing a program of public sector downsizing.

The fisheries sector is regarded as having the greatest development potential. With an EEZ of 2.5 million square kilometres, the FSM bestrides major equatorial tuna migratory paths and the fishing industry has been boosted by the construction of cold storage facilities and processing plants. In 2006, foreign commercial fishing fleets paid over $13 million for the right to operate in FSM territorial waters. These licensing fees account for nearly ten per cent of domestic budgetary revenue. Additionally, exports of marine products, mainly re-exports of fish to Japan, account for nearly eighty-five per cent of export revenue.

The tourist industry is another area of potential for the FSM, particularly diving and eco-tourism. Some 15 000 tourists visit the islands each year. Tourism development is, however, constrained by limited airline links, limited availability of infrastructure, including roads, power and water, and by geographical isolation.

Bilateral Relationship

Australia established diplomatic relations with the FSM in July 1987 and the Australian Embassy in Pohnpei was opened in November 1989. We continue to enjoy a close and friendly relationship.

An Australian parliamentary delegation visited FSM in November 2005 and a reciprocal visit was made by a parliamentary delegation from FSM to Australia in August 2006.

Australia first provided small-scale development assistance to the FSM in 1979 following the establishment of constitutional self-government. The development assistance program has increased since then and in 2007-08 it is expected to total approximately $1.07 million. Assistance focuses on governance, scholarships, technical assistance, small grants and building up the border-management system.

In recognition of the FSM's vast EEZ and the importance of the fisheries sector to its long-term economic viability, Australia has provided three Pacific Patrol Boats worth A$18 million to FSM and continues to support its maritime surveillance through annual Defence Cooperation Program assistance totalling A$1.038 million in 2007-08.

FSM has provided two police officers to the Regional Assistance Mission to Solomon Islands Participating Police Force since March 2006.

Bilateral Economic and Trade Relationship

Australia is one of the FSM's main sources of imports after the US. Australian exports to the FSM totalled A$8.3 million in 2006-07, principal exports were live animals and meat. Australia's imports from the FSM totalled A$5,000 in 2006-07; and included tyres and jewellery.

Visitor Information

Australians travelling to Micronesia are advised to consult the Smartraveller travel advice.