Federated States of Micronesia

Reviews of Kiribati, Marshall Islands, Nauru, and Palau are not included in this issue.

Federated States of Micronesia

The period under review focused on issues currently affecting the future of the Federated States of Micronesia (FSM), including those related to the Compact of Free Association (compact) renegotiation, the constitution, health, education, and leadership. The FSM is responding to these issues in light of the overarching question of how much self-reliance it seeks in order to strengthen its future capacity. The pertinent question is thus, how should the FSM renegotiate the compact to attract more financial assistance to survive post-2023?

The FSM is once again going through an intense political and economic transition in preparation for the third compact renegotiation. Since the implementation of the compact in 1986, the United States has provided over us$2 billion dollars to the FSM government in return for the power to deny third parties access to the islands, ostensibly to preserve regional security but, in reality, to deny any potential enemies access to the FSM for military purposes. Since World War II, US interest in the FSM has always been a strategic military interest, and the compact was negotiated in relation to this (FSM Government 2003, 93–101).

China’s increased presence in the Pacific has forced the United States to reevaluate its future relationship with the FSM. The United States is aware of the fact that if it scales down its financial assistance to the FSM, it will open up opportunities for other regional powers to extend their influence in the region. US Secretary of State Mike Pompeo made a special trip to the FSM on 5 August 2019 to meet with the leaders of the three compact nations and highlight the United States’ seriousness in maintaining a security presence in the Micronesian subregion.

Although the compact established a trust fund for the FSM to replace the compact funds after 2023, it is not certain whether the proceeds from it will sustain the federation, particularly with respect to the downturn in the world economy caused by the ongoing Coronavirus Disease 2019 (covid-19) pandemic. It is predicted that there will be a shortfall of the trust fund by 2023. This has put stress on the nation’s leaders and led Chuuk to seek independence in order to handle its own financial affairs (Mori 2012, 8). China, according to many observers, is likely to pay more attention to the FSM post-2023 due to its own interests in the region. It has been argued that China will use a soft-diplomacy approach to win the FSM’s political affection, such as by giving financial assistance to improve public infrastructure, offering scholarships, and supplying more grants to upgrade the nation’s technological capacity for the future (Zhang 2011). The key concern for the FSM’s future is therefore to preserve and extend its autonomy while withstanding external pressures.

The compact has been the major source of the FSM’s funds since 1986, and this has been referred to as being a double-edged sword. On the one hand, it is seen as a savior in that it prevents the FSM from bleeding to death from economic collapse, while on the other hand, it is seen as stifling the FSM’s progress both internationally and domestically by creating dependency on US monies. Despite this, Micronesians are acutely aware that reliance on US funding is not economically viable in the long term. Needless to say, the FSM has to perform a balancing act to ensure its own future economic survival (Ilon 2011; Robert 2011).

Compact supporters welcomed US oversight on its spending to stop the misuse of funds (Micronesia Forum 2007). The Joint Economic Management Compact Office, controlled by the United States, has on occasion withheld funds until checks and balances have been put in place by the FSM government. Given this ongoing auditing measure, both the United States and the FSM are studying their next move ahead of 2023. The compact has yet to begin its renegotiation for the third time.

Optimists perceive the compact as a means of maintaining the...