For the most current version of this Note, see Background Notes A-Z.
Federated States of Micronesia
Area: 702 sq. km (about 270 sq. mi.) in four major island groups/states (Pohnpei, Chuuk, Yap and Kosrae).
Cities: Capital--Palikir. Other cities--Kolonia, Moen, Lelu.
Terrain: 607 mountainous islands and low-lying coral atolls.
Nationality: Noun and adjective--Micronesian.
Growth rate: 3.0%.
Ethnic groups: Nine ethnic Micronesian and Polynesian groups.
Religion: Roman Catholic 50%, Protestant 47%.
Language: English (official and common), and all four states have their own ethnic language.
Health: Life expectancy--male 66.7 yrs.; female 70.6 yrs. Infant mortality rate--33.5/1,000.
Work force: More than one-half of workers are government employees.
Type: Constitutional confederation in free association with the U.S. The first Compact of Free Association entered into force in 1986, and an Amended Compact entered into force June 30, 2004.
Independence (from U.S.-administered UN trusteeship): November 3, 1986.
Constitution: May 10, 1979.
Branches: Executive--president (chief of state and head of government), cabinet. Legislative--unicameral Congress with 14 seats. Judicial--Supreme Court.
Major political parties: No formal parties.
GDP: $240 million.
GDP per capita (nominal): $2,200.
National income (GDP + foreign assistance): $360 million.
National income per capita: $3,100.
GDP composition by sector: Services 77%, agriculture 19%, industry 4%.
Industry: Types--government, fishing.
Trade: Exports ($19 million)--fish, garments and buttons, betel nut. Export market--Japan (80%), U.S. Imports ($133 million)--food, manufactured goods, fuel. Import sources--U.S. (73%), Japan, Australia.
External debt: $111 million.
Currency: U.S. dollar.
GEOGRAPHY AND PEOPLE
The Federated States of Micronesia (FSM) consists of 607 islands extending 1,800 miles across the archipelago of the Caroline Islands east of the Philippines. The four states are the island groups of Yap, Chuuk (called Truk until January 1990), Pohnpei (called Ponape until November 1984), and Kosrae. The federal capital is Palikir, on Pohnpei.
The indigenous population, which is predominantly Micronesian, consists of various ethnolinguistic groups. English has become the common language. Population growth remains high at more than 3%, but the population of the four states remains almost constant due to emigration.
The ancestors of the Micronesians settled the Caroline Islands over 4,000 years ago. A decentralized chieftain-based system eventually evolved into a more centralized economic and religious empire centered on Yap. European explorers--first the Portuguese in search of the Spice Islands (Indonesia) and then the Spanish--reached the Carolines in the 16th century, with the Spanish establishing sovereignty. The current FSM passed to German control in 1899, then to the Japanese in 1914, and, following World War II, to the United Nations Trust Territory of the Pacific Islands, which was administered by the United States after 1947.
On May 10, 1979, four of the Trust Territory districts ratified a new constitution to become the Federated States of Micronesia. The neighboring trust districts of Palau, the Marshall Islands, and the Northern Mariana Islands chose not to participate. The FSM became independent and signed a Compact of Free Association with the U.S. in 1986. An Amended and Perpetual Compact entered into force in June 2004.
GOVERNMENT AND POLITICAL CONDITIONS
The internal workings of FSM are governed by the 1979 constitution, which guarantees fundamental human rights and establishes a separation of governmental powers. The unicameral Congress has 14 members elected by popular vote. Four senators--one from each state--serve 4-year terms; the remaining 10 senators represent single-member districts based on population, and serve 2-year terms. The president and vice president are elected by Congress from among the four state-based senators to serve 4-year terms in the executive branch. Their congressional seats are then filled by special elections. An appointed cabinet supports the president and vice president. There are no formal political parties.
The FSM is a confederation with a weak central government. Each of FSM's four states has its own constitution, elected legislature, and governor. The state governments maintain considerable power, particularly regarding the implementation of budgetary policies.
The judiciary is headed by the Supreme Court, which is divided into trial and appellate divisions. The president appoints judges with the advice and consent of the Congress.
Principal Government Officials
Head of State and Government--President Joseph J. Urusemal
Secretary of Foreign Affairs--Sebastian L. Anefal
Speaker of the Congress--Peter Christian
Ambassador to the U.S.--Jesse Marehalau
Permanent Representative to the UN--Masao Nakayama
FSM maintains an embassy at 1725 N Street NW, Washington, DC 20036 (tel: 202-223-4383). It also maintains consulates in Honolulu and Guam.
Under the terms of the Compact of Free Association, the U.S. provided FSM with around $2 billion in grants and services from 1986 to 2001. The Compact's financial terms were renegotiated for a 20-year period through 2023. The U.S. will provide almost $100 million in direct assistance every year until 2023, including contributions to a jointly managed Trust Fund. U.S. grants to the FSM in addition to these funds totaled $57 million in 2004. Assistance under the Amended Compact will be distributed via grants to the following six sectors: education, health, infrastructure, public sector capacity building, private sector development, and the environment.
The FSM public sector plays a central role in the economy as the administrator of the Compact funds. The national and state-level governments employ over one-half of the country's workers and provide services accounting for more than 40% of GDP. Real wages nationwide have been flat for the past decade, as has the number of jobs in the economy (about 15,500.) Private sector jobs pay about half as much as public sector jobs; however, both national and state government salaries continue to fall in real terms.
The fishing industry is highly important. Foreign commercial fishing fleets pay over $20 million annually for the right to operate in FSM territorial waters. These licensing fees account for nearly 30% of domestic budgetary revenue. Additionally, exports of marine products, mainly re-exports of fish to Japan, account for nearly 85% of export revenue.
Visitor attractions include SCUBA diving in each state, World War II battle sites, and the ancient ruined city of Nan Madol on Pohnpei. Some 15,000 tourists visit the islands each year. However, the tourist industry has been hampered by a lack of infrastructure and limited commercial air connections. The Asian Development Bank has identified tourism as one of FSM's highest potential growth industries.
Farming is mainly subsistence, and its importance is declining. The principal crops are coconuts, bananas, betel nuts, cassava, and sweet potatoes. Less than 10% of the formal labor force and less than 7% of export revenue come from the agriculture sector. Manufacturing activity is modest, consisting mainly of two garment factories in Yap.
The large inflow of official assistance to FSM allows it to run a substantial trade deficit--imports outstrip exports by a seven-to-one ratio--and to have a much lighter tax burden than other states in the region (11% of GDP in FSM compared to 18%-25% elsewhere). The government borrowed against future Compact disbursements in the early 1990s, yielding a significant external debt that now tops $60 million. In 2005, the FSM Government and Congress took positive steps to revamp and rationalize the nationwide tax system to improve collections and more fairly distribute the tax burden.
The Government of the Federated States of Micronesia conducts its own foreign relations. Since independence, the FSM has established diplomatic relations with a number of nations, including most of its Pacific neighbors and the People's Republic of China. Regional cooperation through various multilateral organizations is a key element in its foreign policy. The FSM became a member of the United Nations in 1991.
The Governments of the FSM and the U.S. entered into the first Compact of Free Association on November 3, 1986. An Amended Compact entered into force on June 30, 2004. Under the Compact, the U.S. has full authority and responsibility for the defense of the FSM. This security relationship can be changed or terminated by mutual agreement. The U.S. will provide $92 million in assistance to the FSM over the next 20 years. A Joint Economic Management Committee (JEMCO) consisting of representatives of both nations will ensure that assistance funds are spent effectively. The basic relationship of free association continues indefinitely.
Principal U.S. Officials
Ambassador--Suzanne K. Hale
Deputy Chief of Mission--Stephen Druzak
Management Officer--Michael Pace