Government of the Federated States of Micronesia

FSM endorses State and National Action Plans to revitalize its Economy

Palikir, Pohnpei (FSM Information Services): February 18, 2011 - On February 11, the FSM National Economic Symposium (NES) proposed four key resolutions, via the endorsement of the following: State and National Action Plans, a National Long Term Fiscal and Economic Framework, the Reform of the FSM Tax Code, and the Amendment of State Infrastructure Prioritization Lists.

The State and National Action Plans each cover five distinct development areas: trade and industry, infrastructure; business, regulatory and logistics; transportation; and human resource and development. Each State Action Plan has been taken back to its respective State for further specification and finalization. All plans will be used to guide budgetary planning processes for FY2012.

In conjunction with these plans, the National Long Term Fiscal and Economic Framework (LTFF) specifically addresses the fiscal challenges raised by the Joint Economic Management Committee (JEMCO) at a meeting held in Hawaii, in September 2010.

JEMCO saw unsustainable growth trends in health and education expenditures, as well as in government wage bills; with, amongst other things, limited progress on broad-based tax reforms and limited increases in other revenue categories.

The LTFF Report recommends cost constraining measures, including the reduction of personnel, travel, consumable and other costs, as well as revenue reform measures, and as such will be submitted as a response to the JEMCO requirements.

The NES endorsed the passage of the Tax Reform Legislation currently before National Congress and State Legislatures. The major reform components of the legislation include: the establishment of a Unified Revenue Authority to replace the existing state and national tax offices, the replacement of the gross revenue tax with a nets profit tax, and the replacement of the states sales tax with a value added tax.

The fourth and final resolution spotlighted that currently the US Office of Insular Affairs is largely limiting infrastructure funding to primary and secondary education capital projects and projects that directly affect health and safety, including water and wastewater projects, solid waste disposal projects, and health care facilities.

While the NES participants advised that they strongly supported strengthening infrastructure in the above-referenced areas, they also affirmed that broadening the scope of infrastructure projects to include the development of the private sector; the upgrading of the energy, transportation and communication sectors; and the emergency infrastructure needs, would certainly assist in revitalizing the FSM economy.

All resolutions have been executed by President Mori, Governor Simina of Chuuk State, Lieutenant Governor Sigrah of Kosrae State, and Governor Anefal of Yap State. Final execution by Governor Ehsa of Pohnpei State is pending.

For further information on this release, please contact:

FSM Office of the President
Public Information: Press, Radio, Video
P.O Box 34
Palikir Station, Pohnpei, FM 96941
Tel.: (691) 320-2548/2092
Fax.: (691) 320-4356