Government of the Federated States of Micronesia

Statement by

the Honorable Peter Christian
Chief Negotiator
for the
Joint Committee on Compact Economic Negotiations (JCN)

Before the
Senate Committee on Energy and Natural Resources

Washington, D.C., December 6, 2001

Check Against Delivery

Mr. Chairman and Members of the Committee,

Good morning. I am Senator Peter Christian, Member of Congress of the Federated States of Micronesia (FSM) and Chief Compact Negotiator for the FSM. Thank you for the opportunity to appear before this Committee to discuss the progress on the renegotiations of expiring provisions of the Compact of Free Association. I am accompanied today by the Chairman of our negotiating committee, the Honorable Gerson Jackson, Lt. Governor of the State of Kosrae, and by the Executive Director of the JCN, former Secretary of Foreign Affairs, the Honorable Asterio Takesy. We are all very grateful to have been invited to participate in this hearing. We welcome this opportunity to provide our own perspective on the implementation of the Compact during the initial 15 years of Free Association between our two nations and to outline our vision for the future of this relationship and of our nation.

Before I go further, Mr. Chairman, let me express the appreciation of the Federated States of Micronesia to the former Director of the Office of Compact Negotiations, Mr. Alan Stayman. Much of the progress made in these negotiations is the result of the efforts of Al and his staff. At the same time it has been our pleasure to meet and talk with the new U.S. Chief Negotiator, Albert V. Short (Col. USA Ret.). Col. Short is well known to us from his experience in the original Compact negotiations. From his comments to date, we are very encouraged by his desire to move these talks along quickly. We look forward to meeting with Al Short and his staff at our meetings next week in Honolulu.

Mr. Chairman, I know that you and many on this Committee are well versed in the history of Micronesia. But for the benefit of others, please allow me to trace a brief sketch of what has brought us to where we are today.

The FSM has a small but culturally diverse population, widely dispersed across thousands of miles of ocean. It has limited natural resources and is isolated from potential markets. For most of our history, we were a subsistence economy. The twentieth century brought the first sustained contact with the West to our islands, and with it a fundamental change in our societal and economic structures.

The long and strong bonds of friendship and cooperation that we enjoy today were forged between our two nations after liberation of the Micronesian islands by the U.S. at the end of World War II, and were strengthened during U.S. administration for the next forty years. During the mid-1970s, work began on establishing a Constitutional Micronesian government, a goal of the U.S., Micronesia and the United Nations. After nearly 15 years of arduous negotiations, an agreement to achieve this goal was reached in the form of the Compact of Free Association, which was implemented in late 1986.

As has been said many times before, the Compact was a landmark document, not only in U.S.-Micronesian relations, but in terms of international agreements as a whole. It recognized and facilitated the return of self-government to the Micronesian entities (the Federated States of Micronesia [FSM], Republic of the Marshall Islands [RMI], and later the Republic of Palau. It was a unique initiative, with little if any precedent in international relations to guide its implementation.

Clearly, there have been mistakes on both sides during the fifteen-year history of the Compact, and we recognize our shortcomings in this regard. However, by all accounts the agreement has been a success. Micronesia today is much better off than it was fifteen years ago. Despite the recent slowdown associated with the second step-down in assistance, and contrary to the GAO's findings, the FSM has experienced real growth during the Compact period. In recent years, this growth has been spearheaded by the private sector, which has been increasing its share in the overall economy. Our nation has also gone through six scheduled, peaceful changes in leadership. Our political institutions are secure and increasingly accountable. There is widespread and growing optimism concerning the future of the country and our relationship with the U.S.

This is a record in which both of our nations can take pride. The FSM is a stable and democratic nation, and one that respects the basic human rights of its citizens. It has achieved a respectable level of economic growth during the period in which the Compact has been in place. These are not insignificant accomplishments, taking into account the significant obstacles that the country has faced. In fifteen years we have seen the adoption of Western governance practices, accounting standards, and the emergence of a thriving international affairs capacity. The introduction of a monetary economy has not been without its bumps in the road, but as of now the prospects for economic self- sufficiency within the global economy can be discussed, and the ground for this new phase in our history is being broken.

With this in mind, we welcomed the series of recent GAO reports. These contain a great deal of useful material that will assist the FSM and the U.S. in correcting past mistakes and better adapting for the future. While we would not agree with all of the conclusions of these reports as they reflect upon the FSM, we acknowledge that there have been significant shortcomings in the past, and that problems persist in some areas. Some of these are already being addressed, as part of a generalized focus on improvements in management. In other cases, we will be looking closely at what can be done to resolve those weaknesses that persist.

However, and this is a key point Mr. Chairman, we continue to have significant difficulties with the underlying negative assumptions applied by the GAO in the course of its investigations. It is disheartening to note that these have continued in recent reports, despite having made our concerns known and having provided additional and often contradictory data.

We understand that it is the nature of GAO review to examine problems rather than to develop a balanced picture. Still, we can't help but fear that these reports have created an unjustly negative portrait of the FSM that threatens to cloud our ongoing Compact negotiations with the U.S.

One of our major problems with the reports is that they were compiled on the basis of negative anecdotal evidence from visits to selected locations within the FSM, and not from the experiences of all four FSM states. The GAO conclusions regarding education in the FSM, for example, took no notice whatsoever of the truly remarkable accomplishments in education in the State of Yap.

Our objections to elements of the reports are a matter of record. Given time constraints during this hearing I will not go into specific areas, and would refer Members to our responses provided earlier to the GAO. Unfortunately, many of our comments seem to have been lost on the GAO in subsequent reports. To cite but one example, the FSM Government objected strongly to treatment of the FSM and RMI as one entity in the first report. Clearly, the situation and circumstances of both countries warrant separate examinations. Still, we are concerned to see that inadequate separation has been maintained in all reports since. This is not fair to either the FSM or RMI, and results in a series of inaccurate conclusions.

Some of the conclusions reached by the GAO are made all the more troubling given the steps the FSM has already taken to address economic and administrative challenges. As the Members of the Committee are undoubtedly aware, since 1995, the FSM has been engaged in a sweeping (and often painful) program of economic and administrative restructuring. The main factor behind the decision to undertake these measures was the need to accommodate the step-down in Compact funding that occurred in 1998. At the same time, the FSM took advantage of the opportunity to enhance accountability and improve transparency in government operations.

In the late 1990s, a series of economic summits were held at the state and national levels, in order to identify key priorities, goals and strategies. Two rounds of these meetings have now been held. The results of these meetings, which involved a broad cross-section of stakeholders, form the basis of the FSM's Strategic Development Framework. This is our ongoing, continuing development plan, which, with U.S. agreement, has replaced the outmoded five-year cycle of development planning referred to in the Compact.

Finally, the state and national governments have begun implementing performance-based budgeting procedures. These procedures strengthen the linkage between the identified objectives and strategies and government expenditure.

These measures are intended to enhance the effectiveness of the FSM to use the resources available to it. In our negotiations with the U.S., both sides have been working to develop mechanisms that will reinforce the work that has already been done.

The reforms are ongoing, and the FSM remains deeply committed to seeing these through to their completion. Obviously, these measures have required a good deal of political courage and the foregoing of short-term economic benefits in favor of the broader, longer-term economic health of the nation. There is no doubt that the resulting changes have hit many Micronesian citizens hard, as they have the national, state, and local governments. Thus, there is a natural temptation to seek short-term sources of revenue to cover pressing expenses. Nevertheless, my people are steadfastly committed to charting a sustainable economic course. Our commitment to the Trust Fund mechanism as a workable component of the FSM's future economic planning stands as testament to this long-term view.

Mr. Chairman, of late there has been much attention given to the fact that many Micronesian citizens have come to the U.S. for various periods of time and for various purposes. However, I believe that the term "migration" is inappropriate to describe these movements.

The majority of FSM citizens travel to the U.S. for limited periods of time and for specific purposes. These are law-abiding taxpayers employed in a wide range of jobs. While it is true that new Micronesian migrants, like many migrant groups, tend to be concentrated in low paying, service-sector positions, they fill an important niche in many local economies where they reside and work. Employment in these sectors is crucial to the local economy. I refer especially to our workers in the tourism and construction sectors, most notably in Guam, Hawai'i and Saipan. The GAO would suggest that these are somehow "parasitic" on the local economy. I suggest otherwise.

Another important factor prompting the short-term movement of Micronesians to the U.S. is enrollment in post-secondary educational institutions. This was deemed to be an important benefit of the new relationship by both sides in the first Compact negotiations, and has proven to be a tremendous success in improving the capacity of Micronesians to self-govern and achieve a viable economic future. Those who graduate from U.S. colleges and universities often return to the FSM and put their newly acquired skills to work for the betterment of the county. Still, not as many return as we would like due to the comparatively low wages for scarce professional positions in the FSM. Increasing the number and profitability of private-sector employment in the country represents a primary goal of the ongoing reform process, and is a key objective for both sides in the negotiations now under way.

A third factor prompting Micronesians to travel to the U.S. is access to health care. There currently exist inadequate primary health care facilities in the FSM, let alone secondary and tertiary-level treatment facilities. As such, our people have little choice but to travel to health facilities overseas. Many offset the cost of treatment through productive employment in the local economy while they are there.

Finally, a large group of "migrants" come to the U.S. for opportunities that simply are unavailable at home. One segment of this group is Micronesians who volunteer to serve in the U.S. armed forces. Today Micronesians serve alongside U.S. servicemen and women throughout the world. FSM citizens in the U.S. military have tended to concentrate in some of the more dangerous specialty areas, such as Special Forces and airborne units.

I would ask you, Mr. Chairman, and the distinguished Members of this Committee, to approach the movement of FSM citizens into and out of the United States with a proper perspective. There are just over 100,000 persons in the FSM today. Our entire population could fit in the Rose Bowl, with a few seats to spare. Of course, the actual number who come to the U.S. is only a small fraction of this figure. The latest figures from the US Bureau of the Census, point to 1,503 citizens of the FSM living in the Commonwealth of the Northern Mariana Islands (CMNI); 6,325 in Guam; and 3,312 in Hawai'i. The total number of FSM citizens throughout the United States, its Territories and Possessions, is estimated at 16,346. While larger than we would like, these numbers barely register in the overall U.S. immigration totals. Please, Mr. Chairman, let us keep this discussion in perspective.

We know that the numbers indicated above impact far more significantly on the U.S. insular areas, but we also know that these same areas are host to other visiting nationalities in even larger numbers. We do not wish to be singled out unfairly.

Obviously, it is in the best interest of the FSM to reduce these numbers. The primary motivations for migration -- wage levels in the FSM, educational opportunities and health care -- are all centerpieces of the Compact agreement now being negotiated. If successful in improving these aspects of life in the FSM, we can reasonably expect these figures to decline. However, unrestricted movement of persons throughout the region will remain as important as ever, and these flows, in both directions, must be maintained.

The FSM Government has pledged its full cooperation in working with the U.S. authorities, and particularly the authorities of Hawai'i, Guam and the CNMI, to ensure that immigration concerns are addressed. We maintain the position that the immigration provisions of the current Compact grant sufficient authority to the U.S. to allow these concerns to be met through administrative means, rather than necessitating a renegotiation of the Compact's immigration provisions.

We support reimbursement of the governments of the U.S. States, Territories and Possessions in the region for any Compact-related expenses. However, we encourage an impartial, detailed, balanced and accurate accounting of these costs. There are clear economic benefits for these areas through Micronesian employment, and this important factor must be taken into account in the course of any assessment.

Throughout the life of the first Compact agreement, there have been persistent attempts by some Congressional offices to cut back on educational assistance provided through the Compact to Micronesians studying abroad and at home. This is directly counter to the goals expressed by the U.S. at the time of Compact signing. Through the tireless efforts of some in the U.S. Senate, including some in this Committee, we have succeeded in maintaining these benefits. However, doubt over the continuation of educational assistance creates great difficulties for our students and economic planners, who cannot rely on continuation of these funds from one year to the next.

There is much more that time does not permit here to be discussed on this topic, and I would refer the Committee to review the documents provided by the FSM Government in response to the GAO report entitled "Level and Characteristics of Migrants from the FSM."

From the first round of negotiations, the FSM has been in complete agreement with the U.S. that a primary goal is greater accountability in expenditures of Compact funds. This has not changed. The principle is at the core of any future agreement between our two countries, and is reflected in the Joint Statement issued at the Honolulu talks in January 2001. I would request that this statement be placed in the record of this hearing.

We welcomed the underlying principles in the recent U.S. proposal as a constructive first step. However we believed that there should be a greater partnership in overseeing mechanisms to ensure accountability for it to be truly effective. We therefore have proposed the Joint Economic Management Mechanism, or "JEMM." Our proposal has met with an encouraging response from the U.S. negotiators, and we hope to agree on the principle and the framework of the mechanism during upcoming negotiations.

If implemented, the JEMM would provide constant, rather than occasional, oversight by both the U.S. and FSM of all Compact funding, and thereby avoid most of the difficulties of the past concerning timely reporting, incompatible standards, and other administrative aspects. The result will be a hands-on partnering approach to funds management and full accountability for all assistance provided under the Compact.

I wish to stress that the mood in Micronesia today is hopeful and optimistic. We look forward to maintaining our steadfast relationship with the U.S. and will work constructively to address its concerns. Most importantly, we recognize the tremendous success of the Compact of Free Association, and encourage Members of this Committee to keep these aspects in mind when considering the materials presented today, and in the future.

With regard to the negotiations, the key objective of the FSM is to consolidate the gains made over the past fifteen years and to secure a basis for continued sustainable growth. We feel that the U.S. shares these objectives, as reflected in the various joint statements that have emerged from the earlier rounds. However, Mr. Chairman, I must state frankly that continued progress and economic stability cannot be maintained at the level of Compact assistance currently proposed by the United States.

When we commenced these negotiations two years ago, we hoped to be able to move quickly towards an agreement. However, we do recognize that several factors have combined to slow the pace over the past few months. Nevertheless, we are optimistic about the potential for rapid progress from this point on.

The FSM has been prepared at every stage of the negotiations thus far. We have presented data as requested by the U.S. and have maintained the initiative in presenting proposals and counter-proposals. In short, we have pushed for a swift conclusion to the talks. I am providing a brief chronology of the renegotiations for your background, and would ask that this be placed in the record.

We have forged a unique relationship through the hard work, determination and commitment of many in both countries. We look forward to strengthening these bonds during the next twenty years and to working together to ensure an economically self- sufficient Micronesia for the future.

In closing Mr. Chairman, let me again thank you and your Committee for scheduling this oversight hearing into the status of Compact negotiations. We are pleased to be negotiating with our long-time friend and ally, and fully expect that the US will continue to honor and respect the unique relationship between our two countries.