Micronesia’s future between China and the US

East Asia Forum/June 16th, 2012

Author: Scott Leis, Maryland(Original Link)

With a total land area of 702 square kilometres spread across a series of tiny isolated islands and atolls, the Federated States of Micronesia (FSM) may not be rich in land, but it does have one enormous resource, and that is its ocean.

The country’s Exclusive Economic Zone, which encompasses more than 2.5 million square kilometres, is some of the most strategically significant waters on the planet. It is an area near critical sea lines of communication and is located directly in the so-called ‘Second Island Chain’ from mainland Asia, close to all the major East and Southeast Asian Powers. And these waters are very rich too, containing abundant fish stocks that could help feed China’s enormous population. For these two reasons the FSM is commanding the attention and money of both China and the US.

The FSM has an economic relationship with the US as a ‘Freely Associated State’ under the terms of a Compact of Free Association that was signed into law in 1986, was amended and renewed in 2003, and is set to expire in 2023. As a Freely Associated State, the FSM has received millions of US tax dollars to support and develop various sectors of their economy, including health, education, infrastructure, business and the environment. In return, the US has full international defence authority for the islands and their territorial waters.

As the Compact approaches its end the FSM is trying to secure its post-Compact future  by shifting away from its US-centric foreign policy. Since March 2000, China has invested hundreds of millions of dollars in developing its diplomatic relationship with the FSM. Most of the money has been distributed to the same economic sectors that the US–FSM Compact intended to develop. Some of the money China invested has been deposited into a Trust Fund that will help support the FSM government after 2023, when it is likely to face severe budgetary deficits as the Compact with the US comes to an end. Beijing’s money has also paid for FSM officials at every level to travel to China for meetings and training.

China has continually pushed to expand its fishing interests in the FSM’s territorial waters to the point where Chinese fishing businesses now have a vertical monopoly in the country. Initially, the Chinese offered pure grant money, but after Beijing decided, that ‘there is little return on [Chinese] investment owing to poor Micronesian performance’, they began to focus on preferential loans that would need to be repaid either with non-existent Micronesian money or through collateral.

In October 2011 a Chinese company, Exhibit and Travel Group (ETG), unveiled a huge development plan for the FSM state of Yap. Yap is roughly 800 kilometres away from Guam, where one of the US’s largest military facilities in the Western Pacific is based. The proposed development plan was consistent with the FSM’s own Strategic Development Plans for 2004–23, which involved making tourism ‘the leading economic activity in the FSM’.

As a result of these two complementary plans and with the support of Yap’s governor, in January 2012, the state council of traditional chiefs and ETG signed a memorandum of understanding with the intention of developing the island’s tourism industry and supporting infrastructure. If carried out, the provisions of the investment plan mean ETG will acquire the rights to the majority of Yap’s land, and promise to succeed where the US failed by developing key infrastructure including seaports, airstrips, roads and medical facilities while maintaining the environmental integrity of the island.

The recent Chinese involvement in Yap, and the FSM as a whole, may be nothing more than a coincidence between three interests: a private Chinese company seeking to make profit; the Chinese government trying to quell its Malthusian fears by securing a dependable food source for its enormous population; and the FSM government trying to develop infrastructure and a sustainable economic sector that a nearly 30-year-old agreement with the US has failed to develop. Yet given the FSM’s geo-political situation between China and the US, China’s ever increasing defence budget, and the proximity of these islands and their territorial waters to US military installations in Guam and the Kwajalein Atoll, there is reason to fear that something that started as mutually beneficial will devolve into something that is mutually detrimental.

If the Chinese development proposals in the FSM come to fruition, the FSM may no longer need a comprehensive assistance package from any foreign government after 2023. And if the Compact of Free Association is not renewed, the US will lose its full international defence authority for the islands and their territorial waters. But these strategically located islands will still require a foreign military for their national defence, and only time can tell whether that will be the US or China. Given the ever closer relationship between China and the FSM, it is increasingly possible to be China — but can, and will, the US allow that?

Scott Leis holds a Master of Arts from the Kansas State University. He lives in Edgewater, Maryland.


David Arthurs

20th June, 2012, 3:53 pm

I was very disturbed by the article mentioned above by Scott Leis, June 16, 2012, on the FSM due to its many inaccuracies and misrepresentations.Scott Leis’ article states that the U.S. has failed in developing the infrastructure of this nation. I would guess that Scott has never visited the islands or these comments would never have been made.

I have made many trips to the FSM. In 1979, when I made my first visit to Pohnpei, there were not any paved streets, the electricity was very unreliable, and water was only supplied a few hours a day. I am now living here on Pohnpei and all of the main streets and roads are paved, there is potable water 24 hours a day, and the electricity is very reliable.

The communications system, too, is very much up to date. Pohnpei is connected to the world by a submarine fiber optic cable financed by the United States. Most of the rest of the country is connected to the Internet by satellite. Cell phone service and traditional land line coverage, too, are the rule rather than the exception.
Another gross error is the claim that the Compact of Free Association between the U.S. and the FSM will expire in 2023 if not renewed. In fact, only the current financial terms expire in 2023; the Compact itself has no termination date. It can only be terminated by the FSM if 75% of citizens of three of the four states approve in a plebiscite. This is not likely to ever happen since the thousands of FSM citizens now living and working in the U.S. would have to leave. They are now sending over seven million dollars a year back home to their families, and those families are not going to cause them to leave the U.S.

Scott states that “China has invested hundreds of millions of dollars in developing its diplomatic relationship with the FSM.” While China does not release information concerning the level of its overseas development activities, unlike Scott we can make some educated observations about what it has contributed to the FSM. Over the years that China has been contributing they have built a gymnasium for the college, four houses for government officials, an administration building for Pohnpei state, a school in Kosrae that is not even usable, an office for the Tuna Commission that required $230,000 work before it was suitable to move in, two ships, a handful of scholarships and invitation travel for officials, and modest contributions to a trust fund.

Contrast the Chinese level-of-effort with that of the U.S. The U.S. provides some $200,000,000 a year to the FSM in both Compact funding and in other U.S. federal programs, grants, and services – such as PELL scholarship grants to post-secondary students amounting to nearly $15 million a year. U.S. funding, too, benefits every citizen of the FSM.
The article continues with regard to the Chinese “…and promise to succeed where the U.S. failed by developing infrastructure including seaports, airstrips, roads and medical facilities.” The fact is that the U.S. put in an airstrip years ago on each island and is just now finishing up some $130,000,000 in airport improvement projects funded by the U.S. Federal Aviation Administration. These airports are built to U.S. standard and are certified for use by the U.S. flag carrier than provides regular commercial service to the islands. There are also seaport facilities on each of the main islands that service large container ships. How did Scott manage to overlook all this? If he ever visited, did he not arrive by sea or air?

Also, the U.S. has built a hospital in three of the four states with construction of the last one due to start next year. Major renovation projects are underway or planned for each of the three existing hospitals. These hospitals are complemented by numerous dispensaries throughout the country. And, of course, Compact funds underwrite virtually all the costs associated with providing health care in the FSM.

Obviously Scott failed to do professional research on the subject and the article is very misleading to the public. I think Scott owes his readers a factual story. Otherwise, those in the know will not credit any of his articles.

Berna Gorong

20th June, 2012, 7:43 pm

Thank you Dave for a great response and comment to mentioned article.
Scott Leis

20th June, 2012, 10:07 pm

David, not only have I lived in the FSM, as a US Peace Corps Volunteer from 2005-2007, but I have been back twice on my own dime to visit. As a Peace Corps Volunteer I lived in both Yap and Ulithi Atoll and took multiple trips –by sea– to nearly all of Yap’s Neighboring Islands. On one of my return visits in 2010 I flew to Pohnpei and took the Caroline Voyager (a dual purpose cargo and passenger ship)from Pohnpei to Ulithi which included stops at most of Chuuk’s Neighboring Islands including the Hall Islands, the Namonuitos, Pulap Atoll, Puluwat Atoll and Pulusuk.As it relates to the above essay, the major economic assistance portion of the Compact that does expire is the only part that provides political leverage to be of significance at an international level. The Pell Grants, and the USDA Grants may still exist and are undoubtedly important at the local and individual level but they are not the portions of the Compact that can cause the FSM, US or Chinese Governments to align themselves with one another. That will only happen when talking about the huge sums of money that are being provided to support the majority of the National economy, infrastructure and defense, and that part of the Compact will expire, and it will happen in 2023.

China has invested hundreds of millions of dollars in developing diplomatic relations with the FSM. Although China may not release this information, there are still people that know this and one happens to be Former US Ambassador to the FSM, H.E. Miriam Hughes. I live near Washington, D.C. and have discussed this with her personally.

I never said that China’s level-of-effort has equaled that of the US but the essay is about shifting paradigms. The US has had a much longer history in these islands than China and is now bound to provide assistance to them. China on the other hand is doing this, not because they are bound to it, but because they are trying to develop a relationship, and over the shorter time frame that they have been involved there, they have been very effective, arguably more effective than the US because they do not have to deal with the cumbersome bureaucracy that involves the US’s Department of the Interior, Office of Insular Affairs (OIA).

I have seen the “infrastructure” of these islands…schools and churches that were built to accommodate WWII servicemen. Buildings that have been repainted by generations of Peace Corps Volunteers prior to me, yet they are falling apart. Airstrips that you say meet FAA standards. Have you been to Fais, Woleai or Ulul? Do unmaintained airstrips with weeds eroding their surfaces, and coconut thatched control towers meet FAA standards? Throughout my entire time in the islands, Peace Corps was trying to re-station volunteers in Woleai Atoll but could not because the airstrip is not perfectly level and would flood during heavy rain rendering it unusable. Woleai is not unique in this regard.

You claim that, “most of the rest of the country is connected to the Internet by satellite”. Have you been to “most of the rest of the country”? There is more to the country than, Pohnpei, Kosrae, Weno, and Yap’s main island. Ulithi had Internet, however, it was useable only 50% of the time that I lived there. Many of the other Neighboring Islands did not even have this and were dependent on the use of Single-sideband modulation radios. Not exactly the “very up-to-date” communications system that you refer to.

Regarding your comments about the islands seaports, roads and medical facilities; the seaports on the main islands are fine, however, they do not have the dry-dock capabilities necessary to service any of their state-owned vessels on which the citizenry heavily relies. For this they have to sail the vessels to China, Japan or Australia leaving the Neighboring Island populations without critical services for months at a time.

The roads are eroding fast due to inadequate maintenance delayed, in part, by the slow processes of the OIA.

I have spent more time in the hospital of Yap than is fair. One of my closest relationships ended due to a Dengue Fever outbreak in 2007. At that time, we were stuck in Ulithi and could not be medevac’d due to the weather and the limited capabilities of the aircraft. When the weather finally broke we were taken to Yap’s hospital were the afflicted underwent a failed blood transfusion before being sent to Palau because Yap did not have a dialysis machine. By then it was too late. The likelihood of this happening in Guam, a place with properly provisioned facilities, would have been much less.

The dispensaries around the main islands and especially in the Neighboring Islands are also often under-provisioned, unable to provide even basic antibiotics.

I stand by this essay and would appreciate it if you familiarize yourself with the rest of the FSM before critiquing your next article.

  • RPCV

    20th June, 2012, 10:48 pm

    As another former Peace Corps Volunteer who lived in the FSM for three years, and who has visited a further three times to connect with old friends over the subsequent decade, I agree completely with Mr. Leis.
    Sadly, a small group of Yapese are making decisions that benefit them personally in the short term, but will be doing all of Yap and the FSM a great deal of harm over the long term.
  • Adam Thompson

    21st June, 2012, 11:28 am

    As a current employee within the FSM national government I would like to first thank Mr. Leis for bringing this subject to wider attention. I am also working on an article for the East-West Center newsletter on the shifty nature of US/China relations within Micronesia focusing particularly on the FSM and Yap. However, I was relieved to see the comments of Mr. Arthurs as I was prepared to say something very similar. The decades of US support HAS transformed the islands for the better in all the ways Mr. Arthur mentioned. It has also allowed for the ability of the local people to dictate their future democratically. The failings are largely the result of misuse of funds, poor management, and plain apathy that are the pains of a developing country learning to grow up. We are here to continue to help them develop gradually as they see fit.China’s involvement is not so much for altruistic purposes as it is for exploitation of the largest fishing stock left in the world and its own economic development. Yes their communist system allows them to develop rapidly which could bring larger development to the islands in a shorter period of time. But that, to me, is the scary part, because my greatest concern is with the preservation of the traditional culture, which is most threatened by rapid development. The only legal measures aimed at preserving the traditional culture and conserving the environment are those that have been adopted based on US laws. And while Mr. Leis stated that China will develop “while maintaining the environmental integrity of the islands” I haven’t seen anything to reassure me of that promise, especially since the Tuna Commission China funded, took out the museum and the government building on Pohnpei is the biggest eyesore on the landscape when viewed from Sokeh’s Rock.

    Yes the US’s struggling economy may threaten the amount of funding they will provide when the financial agreement is re-negotiated, but we’ll have to wait to see about that. For now we still have another decade to try to get FSM on the best path, which to me, means growing into an independent nation that isn’t subservient to others demands. A nation with a sustainable tourism plan. Not a mass tourism plan where millions of Chinese invade a tiny island every year. Rather tourism where a select group of people from all over the world come to see a unique place – a World Park.

    These are the decisions that have to be made. I am a part of that US assistance, as was Mr. Leis, as was RPCV. I don’t think we’re failing in any way where China could succeed. I think we are struggling where China would otherwise just take control.

    (Original Link)


    Related Article: The United States and China in the South Pacific and Beyond


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