Since the end of World War II, economic development has been one of the primary flags planted in the middle of conference tables in the Federated States of Micronesia. The Compact of Free Association took up the mantra when FSM became an independent nation, but no progress has been made in the intervening years.
After all, talk is cheap and easy. Where’s the motivation to attract companies to invest in these islands when the FSM leaders can simply sit back and collect their share of COFA funds every year?
They profess to want tourists, but even that goal is elusive, hampered by issues like the lack of reliable, daily flights from Guam and other feeder cities and islands.
For real progress, the FSM, in partnership with the U.S. and its allies such as Australia and Japan, should focus on addressing the fundamental obstacles that deter potential investors—in other words, the root causes of failure.
According to the U.S. Department of State’s 2024 Investment Climate Statement, challenges include:
· Restrictions on foreign ownership of land and businesses in specified industries.
· Complicated company registration processes requiring approvals from both state and national governments.
· Weak private sector contract enforcement and investor protection.
· Ineffective courts and bankruptcy processes.
· Inadequate infrastructure, poor health and education systems, the scarcity of commercial flights, and high costs of energy, imported goods and business services.
The report also notes that recent changes in Pohnpei’s laws aim to ease foreign investment, but capital formation remains low, foreign commercial banks face severe limitations, and the ability to secure loans is restricted.
Another significant issue stated in the State Department’s assessment is the antiquated power grids, which hinder the integration of renewable energy. For example, Pohnpei Utility Corp. can only use one-third of its solar power capacity due to grid instability.
These challenges make FSM an unappealing option for companies looking to establish an office in a new location.
The lack of development opportunities is also at the core of the steady, outward stream of FSM citizens that has amounted to a 31 percent decline since 2010.
A skilled workforce is crucial for attracting businesses. However, many Micronesians seek higher education and career opportunities elsewhere, leaving behind a limited pool of workers.
In 2022, the World Bank announced a $17.7 million Skills and Employability Enhancement Project that aims to address these issues by improving access to technical and vocational training and establishing the FSM Skills Academy. Yet progress on the initiative has stalled, according to the 2024 status report. And, once trained, there are few openings other than in those low-level, unskilled government jobs.
While the U.S. is currently providing various training programs in the FSM, such as lineman training for public power utilities and advanced national police training, the impact on local employment opportunities remains limited. For many, especially those working in government offices with little chance for advancement, the situation feels stagnant. This has led many high school graduates to head to the U.S., never to return.
When I was living in Yap, public and private sector employees attending skill-training sessions often seemed to be more interested in receiving a free lunch and a day out of the office than participating in genuine opportunities for career growth—perhaps because there are no career-growth opportunities and little to no follow-up to determine the effect of the training.
Higher-level managers in the public sector tend to hold onto their jobs until retirement, limiting advancement prospects for those in the lower ranks who toil day-after-day for minimal wages. The idea of career advancement is absent in the FSM. That will never change if the status quo remains.
There is little to no pride in one’s job. It is only a job with no future. I once suggested that Yap’s human resource department create a video about the national and local government and what they do to be shown to all new employees during job orientation. I was informed that there was no job orientation other than showing the new hires to their desk on their first day. With no competition in the job market, there is no motivation for the government to motivate employees.
To improve the economic development outlook, a more focused and strategic approach is required. The FSM needs substantial reforms in investment climate, infrastructure and workforce development to attract businesses and retain talented individuals. Only then can the FSM hope to overcome its economic challenges and achieve sustainable development.
The question is: Is there enough incentive among the leadership to make change happen?
Joyce McClure is a former senior marketing executive and former Peace Corps volunteer in Yap. Transitioning to freelance writing, she moved to Guam in 2021 and recently relocated back to the mainland. Send feedback to joycemcc62@yahoo.com
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