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FSM Report on Compact Negotiations

POHNPEI, Palikir (FSM Information Service): November 2, 2001 - The Joint Compact Negotiating Committee has submitted a progress report pertaining to the negotiations over the expiring provisions of the Compact of Free Association, a treaty between the FSM and the U.S.

In his report to President Leo Falcam and Speaker Jack Fritz, Gerson A. Jackson, JCN Chairman, stated that JCN is mindful of the need to keep the FSM leaders and public informed about the progress of the negotiations on the expiring provisions of the compact.

In the first round of negotiations, the parties produced four general principals to guide future negotiations on specific provisions of the Compact.

The four general principals include: the continued security and defense relationships between the FSM and the U.S., assisting the FSM in its efforts to advance the economic self-sufficiency of its people, to advance the development of the private sector in the FSM and to more effective account for achievements under the Compact of the Free Association.

In the first round, JCN tabled a concept paper that set out four elements that would constitute the forthcoming FSM economic proposal. The elements include: continued Block Grants from the U.S., a Trust Fund to provide perpetual funding for the FSM, continued access to U.S. Federal Programs and a commitment by FSM to increase local revenues.

In the second round of negotiations that took place in San Francisco in April 2000, JCN officially tabled the FSM economic proposal.

The proposal contained the following elements:

• An annual appropriation for Block Grant from the U.S. for basic assistance of $84 million a year for 20 years with inflation adjustment;

• An annual appropriation for the Trust Fund from the U.S. of $20 million a year for 20 years with inflation adjustment; and

• Continued access to U.S. Federal Programs

The U.S. agreed in principle to continue federal grants and a Trust Fund but at no specific amounts.

At the third round of Compact Negotiations in January 2001, the U.S. finally tabled its counterproposal: a $61 million annual grant and a $13 million annual Trust Fund for 15 years without inflation adjustment.

The grant amount was broken down into the following sectors:

• Education: $23 million

• Health 15 million

• Infrastructure 10 million

• Private Sector 2 million

• Capacity Building 4 million

• Environment 2 million

• Performance Incentive 5 million

In a technical meeting that was held in June 2001, which was devoted to technical discussions on various components of the FSM Revised Proposal, it is believed that much understanding has gained.

In August, the JCN Working Group met to receive and review the report of the Technical Meeting in Washington, D.C., and it was decided that the report would be referred to the full JCN for consideration, which later endorsed the recommendations in the report.

The U.S. chief negotiator, Allen Stayman, informed JCN in August, that his employment contract will be terminated at the end of October 2001.