Government of the Federated States of Micronesia

Bush signs amended Compact

PALIKIR, Pohnpei (FSM Information Service): December 23, 2003 - United States President George W. Bush, has signed into law, House Joint Resolution 63, approving the implementation of the Amendments to the Compact of Free Association between the U.S. and the Federated States of Micronesia.

The signing on December 17, completed the US ratification process and concluded four years of intensive bilateral negotiations and educational efforts to establish a framework to guide the US-FSM relations over the next 20 years.

President Joseph J. Urusemal applauded the signing as a "testament to the special relationship between FSM and the US, it reaffirms the spirit of close friendship and cooperation fostered by the 1986 Compact," the essence of which he stated, "remains intact."

The President said, "FSM's economy will undergo some initial strains, but proper and efficient management of the funding will enable the FSM to move forward."

He continued that, "in view of the lessons learned during the first Compact, we owe it to ourselves, to strengthen our capabilities to meet the new grants structures, procedures and accountability requirements."

According to the President, the seemingly stringent requirements will, "not only work to our nations benefit by improving our efficiency standards in managing Compact funds, but such disciplined fiscal management reinforces FSM continuing efforts towards ultimate economic self-sufficiency."

The Compact of Free Association is a milestone document that provides a political status unique in international relations. It is a non-expiring agreement that defines the foundation for relations between the U.S. and the Freely Associated States (FSM, Republic of the Marshall Islands and Republic of Palau).

The newly signed Compact amended several provisions of financial assistance in Title II-Economic Relations along with assistances provided in Title III-Defense Issues.

The Compact amendments package now needs to go through FSM ratification process. For the agreement to enter into force, the Compact Legislation will require approval by the FSM Congress and three-fourths of the State Legislatures. The FSM executive and legislative process which had officially been on hold pending President Bush's signature, is now underway.

It is hoped that consideration will be completed by the end of the next legislative sessions anticipated to begin in January 2004.

The amended Compact package maintains and extends US defense activities in the Freely Associated States (FAS): the FSM and the Republic of the Marshall Islands. With new accountability measures incorporated, the amended Compact aims to better focus U.S. development assistance to advance the FAS toward economic self-sufficiency.

The amended provisions of the signed Compact contain the following for the FSM; for the first three years, the funding would be apportioned as follows: $16 million - will be towards the trust fund contributions and $76 million - toward economic assistance grants. The grants are to be allocated annually among six sectors: education, health, capacity-building, private sector development, environment and infrastructure.

Beginning the fourth year, an annual decrement of $800,000 from the sectoral grants would be re-allocated to the trust fund contributions until 2023.

The amended Compact also continued FSM's eligibility for various U.S. federal programs and a new "cash-out" scheme on the education related grants.

Prior to the signing, the FSM and US had held technical meetings in Honolulu concerning the implementation of the amended Compact provisions on disaster relief, education programs and judicial trainings. While significant progress was made during these meetings, discussions at a technical level are still ongoing.

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