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Micronesia: Small and Large, Rich and Poor, Abundant and Scarce

Posted by Keith on June 17, 2007 at 4:14 am  

By Keith DeGreen, J.D., CFP

Large and Small. Rich and poor. Abundant and scarce.

These adjectives all describe the 1800-mile archipelago of the Caroline Islands that run east-west along about the seventh parallel, known as Micronesia, or more formally as the Federated States of Micronesia (FSM).

Large and Small

The total land mass of FSM’s four primary islands, and its countless smaller ones, is only 271 square miles; but because its territorial waters extend outward for at least 12 miles from each island along the 1,800-mile archipelago, their waters extend for more than 21,600 square miles.

The population of FSM is small – about 110,000. But it operates under a treaty of “free association” with the omnipresent United States. This means that FSM citizens may travel freely to the U.S. to find work, and many do. It also means that although FSM patrols its own waters, it looks to it’s much larger allies — the U.S. Pacific Fleet, and The Royal Australian Navy — to help it enforce, for example, fishing quotas.

Rich and Poor

We visited Pohnpei only, but this largest of Micronesia’s islands is it’s wealthiest. Yet – and despite the fact that fully two thirds of all Micronesians are employed by the government – poverty abounds here.

The private economy here –even including fishing (at which the efforts of Micronesians are eclipsed by the foreign fleets that ply these waters), and tourism (highly limited due a lack of quality resort destinations) — is simply insufficient to sustain the population.

Heavy subsidies pour in from the U.S. government. Father Hezel, a Jesuit priest, is a self-trained economist. He maintains a seminary on Pohnpei. He has written scholarly articles suggesting that Micronesia needs to build a larger remittance economy. He believes – and the evidence is everywhere – that able-bodied Micronesians need to find jobs in the U.S. or in other countries, and to send money home.

Bill James, an American ex-pat, is the Managing Editor of The Kaselehlie Press – a local paper on Pohnpei. He told me that until recently FSM’s territorial waters abounded with fish – particularly the highly prized yellow-fin tuna.

However, according to James, foreign fleets have so over-fished these waters, and have so blatantly violated quota requirements, that their catch far surpasses sustainable levels.

A Royal Australian Navy Lieutenant, Mark Sorby, is a Maritime Surveillance Advisor to the FSM. He stopped by our ship and asked us to report any suspicious activity we might observe at sea. The U.S. Navy is also on the lookout for violators, but according to Mr. James, at least one U.S. admiral told him the enforcement situation across so vast an area is virtually hopeless.

Apparently, instead of bringing their catch into port for transfer to fleet processing ships, and for inspection and taxation by local officials, many foreign fleets send their processing ships out to sea to rendezvous with their smaller fishing vessels. They then transfer the unreported catch, and continue fishing.

FSM’s enforcement dilemma presents a fairly representative snapshot of what smaller, poorer governments the world over are up against in their efforts to enforce fishing quotas at sustainable levels. Unless something is done soon, many species of eating fish, in many parts of the world, are in danger of extinction. Ultimately, satellite technology, and greatly enhanced enforcement capabilities – most likely at the expense of first world countries (translation – primarily at the U.S.’s expense) – will need to be employed.

Abundant and Scarce

Beauty abounds here. And the potential for a substantial eco-tourism industry abounds throughout Micronesia as well. The reefs are a diver’s paradise. There are countless Japanese wrecks and relics to be seen. Birdlife is prolific. Jungle Trails, spectacular vistas, and unique flora and fauna are everywhere. And the airport at Pohnpei is decent. Not great, but decent.

However, the opportunities to fund the sorts of projects capable of bringing significant tourism dollars to the islands are scarce.

There are simply no resort-standard facilities on the islands. Yes, there is a place called The Village on Pohnpei – an eco-resort owned and run by a very nice family that is well worth mentioning. It is a wonderful place with a colorful history, and it boasts beautiful views, a great bar, and thatched-roof cabins. But it is primitive: A place for backpacking 20- or 30-somethings to stay. The rooms are open-air. The beds have nets around them. And you need the nets.

Again, there’s nothing wrong with The Village. It is what it is. But it does not offer what most people with actual money want: Central air conditioning, TV, internet accessibility, a pool, room service and other resort-style amenities. And unfortunately, there are no facilities like that to be found anywhere in Micronesia.

Meanwhile, only citizens of Micronesia may own land there. It is understandable that Micronesians do not want their islands overwhelmed by foreign ownership. However, joint real estate ventures with foreigners are not encouraged; and recently the FSM has tightened – not relaxed – the business license requirements for foreigners. For example, now, according to Bill James, a deposit of at least $50,000 cash is required before a permit for even the smallest business will be issued to a foreigner.

Contrast this attitude with the approach in, say, China, where citizens there routinely form real estate joint ventures with heavily capitalized foreign interests. The Chinese retain ownership of long-term renewable leases on the land (only the government actually owns the underlying land there), but the investors collateralize their investments with liens on the revenues produced on the land. Everybody is happy, progress abounds, and many Chinese get rich.

In fact, it was only recently that the FSM allowed The Bank of Micronesia to own real estate – and then only for the purpose of selling land – to Micronesian citizens only — that it might acquire through foreclosure. Until this recent change in the law, Micronesian land owners had absolutely no way to use their land as collateral. Yet, capitalism absolutely positively depends on the ability of an average property owner to monetize the value of their real estate.


I’m very glad we visited Pohnpei. It is truly gorgeous. As I said in an earlier dispatch, it is the type of place that makes sailing across the Pacific well worth the effort. But while there we had had our luxurious boat on which to live. I hope for the sake of this entire region that the elected leaders here get past politics and soon open their country, in a prudent but productive manner, to the future.



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