Government of the Federated States of Micronesia

Fifth-Year Compact Review Update

Palikir, Pohnpei (FSM Information Services): June 11, 2009 - In September of 2007, the FSM's preparation for the 5th Year Review of the Amended Compact Act was initiated with the creation of the FSM Compact Review Committee (CRC). Under the Mori Administration, the CRC's work is ongoing, having held seven meetings so far and focusing on the four status indicators the Compact Act directs FSM to report on, including recommendations. The four status indicators are:

  1. General social, political and economic conditions, including estimates of economic growth, per capita income, and migration rates;

  2. The use and effectiveness of United States financial, program, and technical assistance;

  3. The status of economic policy reforms including but not limited to progress toward establishing self-sufficient tax rates; and

  4. The status of the efforts to increase investment including the rate of infrastructure investment of U.S. financial assistance under the US/FSM Compact [...], non-U.S. contributions to the Trust Funds, and the level of private investment.

They will also be looking at recommendations on ways to increase the effectiveness of United States assistance and ways to meet overall economic performance objectives, including, if appropriate, recommendations to Congress to adjust the inflation rate or to adjust the contributions to the Trust Funds based on non-U.S. contributions.

The purpose of the Review is to assess what has work and what has not worked, and what is needed now and in the fifteen year to come to meet the Compact's goals in 2023. The CRC is working to identify what mid-course adjustments can be made that will bring FSM onto the best course to meet these goals.

So far, the CRC has recently developed a draft "Guiding Document" with two broad categories; economic and practical procedural adjustments and process adjustments. An Economic Consultant has been hired to do a preliminary assessment and analysis of the Trust Fund, Annual Sectoral Grants Decrement, and the Partial Inflationary Adjustment.

In April 2009, President Mori met with Hawaii Congressional Delegation members to update them on the FSM's effort and sought their support. (See PIO Press Release #0409-26) Consequently, the FSM Ambassador to the US has met and will continue to follow-up with the members and their staff in Washington, DC on the details of the 5th Year Review.

In terms of the work done so far with the US Executive Branch, the Chairman of the CRC, Mr. Fabian Nimea - Director of SBOC, together with staff from the home office and our Embassy in Washington, DC, has already been consulting with the US Executive Branch, particularly the Office of Insular Affairs, which will most likely lead the US Executive Branch's work on the review. The CRC technical team has also met and updated key officials from the US Department of State, the US Department of Interior, as well as key US Congressional staff on the FSM's own Compact Review preparatory work and progress. Recent staff meetings in both Washington, DC and in Honolulu helped clarify the two government's common understanding of the Review and how they might approach the various aspects of the Review process.

The report on the Review by the US Executive Branch is due with the US Congress no later than December 31, 2009. The CRC plans to submit its report on the Five-Year Compact Review to the United States in October 2009. The US will include, in its own report, the recommendations that FSM submits and the US responses to such recommendations.

Between now and the submission date, the CRC still has a lot of work to do. This work has been divided into the main areas of focus for the review and CRC members are working with the appropriate line departments at the National Government and with all the States to come up with the information and data that is needed for the report.

Just last week, the CRC met with the 16th FSM Congress to update them on their progress so far and seek additional funding for the remaining work that needs to be done. In a letter to Speaker Figir, CRC Chairman Nimea thanked him and Congress for their continued support for the efforts of the CRC and said that the Review "has (the) potential for influencing beneficial outcomes of the Compact review for the people of FSM."