Federated States of Micronesia

Total land area	Spread over 607 islands (4 states) 700km² ^[1]
Exclusive economic zone (EEZ) area	2.9km² ^[1]

Resident population (2008 estimate)	110,445 ^[2]
Total population (2015 forecast)	113,864 ^[2]
Annual population growth rate (2008-15)	0.4% ^[2]
Population density (2008)	158/km²
Women in parliament	0 out of 14 members
Human Development Index score	0.724^[5]

The Federated States of Micronesia gained full independence and commenced its free-association relationship with the United States on 3 November 1986, after being administered as a part of the Trust Territory of the Pacific Islands (TTPI), a United Nations Trust Territory under the U.S. administration since the end of the Second World War. FSM is a constitutional government organised as a loose federation of four states, each with its own government. Other neighboring Micronesian island former members of the TTPI, also formulated their own constitutional governments and became the Republic of the Marshall Islands (RMI) and the Republic of Palau (ROP) at independence. The FSM has a seat in the United Nations. The unicameral national Congress has 14 Senators, one form each state elected for a four-year term and ten who serve two-year terms, whose seats are apportioned by population. The Judicial Branch consists of the Supreme Court, comprised of Justices who sit in trial and appellate divisions. The Constitution creates three levels of government: national, state and local (municipalities). State governments have their own Constitutions and three co-equal branches of government, including their own courts. FSM is an independent, sovereign island nation, made up of four states: Yap, Chuuk, Pohnpei and Kosrae. FSM is a constitutional government in free association with the US. The unicameral congress has fourteen members elected by popular vote. Four senators - one from each state - serve four-year terms; the remaining ten senators represent single-member districts based on population, and serve two-year terms.

Head of State and Government	President Emanuel Mori since 11 May 2007. Vice President Alik L. Alik since 11 May 2007. The President and Vice President are elected by Congress from among the four state-based senators to serve four-year terms in the executive branch. Their congressional seats are then filled by special elections. There are no formal political parties.
Executive	The president and vice president are supported by an appointed cabinet: - Secretary of Education - Secretary of Finance and Administration - Secretary of Foreign Affairs - Secretary of Health and Social Affairs - Secretary of Justice - Secretary of Resource and Development - Secretary of Transportation, Communication and Infrastructure - Office of Public Defender
Civil Service	At the national level there are eight executive departments and a dozen national agencies and enterprises. The eight departments include: Education; Finance and Administration; Foreign Affairs; Health and Social Affairs; Justice; Resources and Development; Transportation, Communication and Infrastructure; and the Office of the Public Defender. Most major governmental functions are carried out at the state level while the national government is responsible for foreign affairs and overall coordination. Chuuk has the largest civil service among the five governments, with just under 2,000 employees as of FY2008 (after its reduction-in-force). Pohnpei's civil service is the second largest with around 1,400 employees, followed by Yap with around 1,000 and Kosrae with just over 500 (after its reduction-in-force). The national government had 846 employees (as of FY2008). The four states have a great deal of control over their internal governance, including the power to make external contracts. State governments are also dividied into executive, legislative and judicial branches. State executive brances are headed by a Governor and a Lieutenant Governor elected by popular vote for four-year terms. At the national level, civil service management responsibilities fall under the Department of Finance and Administration, and equivalent organisations handle civil service responsibilities in each state government.
Local Government	The four states hold significant authority and carry out the majority of government functions, with the national government's role effectively limited mostly to coordination. Local or municipal governments exist at the village level. Municipal leaders are often village chiefs, though some are elected officials. Municipal governments have taxing authority and are able to regulate the operation of local businesses. Municipal government leaders are chosen according to their respective municipal constitutions and in conjunction with the state government elections process. Disputes between the national and state governments are not uncommon, including disagreements over the authority and use of US Compact and other funds.
Judiciary	Under Article XI of the Constitution, the Supreme Court is the highest court in the nation. It has original and exclusive jurisdiction in cases involving disputes between states, foreign officials, admiralty and maritime cases, FSM Constitution, national laws or treaties and other domestic laws. Each state has its own Court, in Pohnpei, Article 10 of the State Constitution vests Pohnpei's judicial power in the Pohnpei Supreme Court. In Yap, the State Court may have a Chief Justice and at least two Associate Justices.
International Organisations	ACP, ADB, AOSIS, FAO, G-77, IBRD, ICAO, ICRM, IDA, IFC, IFRCS, IMF, IOC, ITSO, ITU, MIGA, OPCW, PIF, Sparteca, SPC, UN, UNCTAD, UNESCO, WHO, WMO

The FSM Strategic Development Plan 2004-2023 articulates the country's overarching development goals. Drawing heavily on the results of the FSM's third economic summit held early in 2004, the plan commits to a 'sustained growth strategy' with six priorities: macroeconomic stability, good governance, developing an outward-oriented and private sector led economy, investing in human resource development, investing in infrastructure, and long-term sustainability (environmental, socio-cultural, and financil). Economic and public financial management remain major challenges for FSM. Despite relatively high aid inflows, the economy and total formal employment have contracted in recent years. The states of Chuuk and Kosrae have experienced dramatic fiscal crises that required drastic adjustment, including reduction in force measures. Fiscal and economic management in Pohnpei and Yap have been less problematic, but fiscal deficits remain common. Management of the funding under the Compact of Free Association with the United States of America has proven to be particularly difficult, in particular infrastructure funding. FSM's federal structure presents unique challenges to public sector management, particularly in the areas of planning and budget coordination. FSM’s public finances and broader economy are very heavily influenced by the Compact of Free Association with the United States. Financial performance varies across the four state governments and the central government. On aggregate, FSM’s performance ratings on fiscal policy, debt policy, efficiency of revenue mobilisation, and overall quality of budgetary and financial management are slightly below regional averages. The states of Chuuk and Kosrae have experienced serious financial crises in recent years that have required fairly drastic adjustment, mostly on the expenditure side. Grants, primarily from the United States, make up over 60 percent of consolidated revenues. Ongoing tax reform aiming to raise tax collection efficiency and revenues will ultimately replace certain existing national and state taxes with the VAT and Net Profit Tax while centralising, modernising and strengthening the tax administration with the establishment of a Unified Revenue Authority, among other things. Grants under the US Compact are decreasing by US$800,000 annually and will terminate in 2023. While a Compact Trust Fund is also being capitalised over this period, earnings from which are intended to support the annual budget after 2023, there remains concern over the long-term financial stability of the country. Fiscal management in Chuuk and Kosrae have been of particular concern in recent years and the two states saw negative overall fiscal balances in four out of five years through to 2008. Pohnpei and Yap have also run deficits, but their fiscal positions have been relatively more manageable. In all four states revenues consistently fall below expenditure, suggesting room for improvement and possible challenges ahead. Subsidies and public enterprises remain a concern and are a reform priority. The discontinuation of Compact energy grants in 2003 led to some utility corporations raising prices. There is recognition that subsidies will need to be curtailed further given the fiscal outlook. FSM has followed a prudent external debt management strategy and with a debt to GDP ratio of 27 percent as of 2008, its debt level is low compared to other Pacific island countries.

VISION

The Next 20 Years: ACHIEVING ECONOMIC GROWTH & SELF-RELIANCE In 2003, the Federated States of Micronesia (FSM) convened the 3rd FSM Economic Summit. The Summit was attended by four hundred participants representing the four FSM states, the traditional leadership, private sector, National and State governments, non-government organisations, churches, women’s and youth groups, government officials, as well as representatives of foreign governments and donor institutions. The theme of the Summit was, The Next 20 Years: Achieving Economic Growth & Self-Reliance.

STRATEGIC DEVELOPMENT PLAN (2004-2023) - THE NEXT 20 YEARS

The objectives of the Summit were several:	- To achieve consensus on an overall strategy consistent with the theme of achieving economic growth and self-reliance. - To build awareness of the economic structure of the amended Compact provisions and the likely impact on the FSM economy, and - To improve implementation and monitoring of the outcome of the planning process. The Summit can be said to have successfully achieved the first two, while commitment and determination will be required in the detailed planning process to ensure successful implementation and monitoring. The Summit participants were presented with two sets of materials: draft sector chapters, and sector planning matrices. Both were debated in committee and the matrices were adopted by the Summit. This material has now been consolidated, included in the Strategic Development Plan (SDP), and adopted by Congress. The Summit provided the opportunity for the leadership to consider the progress attained during the first 17 years of the Compact. While implementation of the Compact was successful and saw the emergence of a stable democracy, economic growth was disappointing. The leadership concurred that the FSM could attain a better result during the 20-year period of the amended Compact, and adopted a 'Sustained Growth Strategy'. While it was recognised that the strategy would entail sacrifice and commitment, it was felt that only through adopting a more aggressive reform agenda could the FSM provide the type of environment that our citizens could hope to find gainful economic opportunities at home, and avoid the need to migrate to neighbouring territories. The SDP comes in three volumes. Volume I is the major component of the Plan and presents on overview of the FSM economy, discussion on the macroeconomic frame- work in light of the Sustained Growth Strategy, and the need for fiscal adjustment in the medium and long term. Volume I also presents discussion on the policies and development strategies for each sector of the economy. Volume II contains the sector planning matrices adopted at the Summit together with a statistical appendix. These first two volumes are complementary and should be used in cross-reference with each other. Volume III is the Infrastructure Development Plan (IDP) and is an integral component of the overall planning framework for the FSM.

The objectives of the Summit were several:

- To achieve consensus on an overall strategy consistent with the theme of achieving economic growth and self-reliance. - To build awareness of the economic structure of the amended Compact provisions and the likely impact on the FSM economy, and - To improve implementation and monitoring of the outcome of the planning process. The Summit can be said to have successfully achieved the first two, while commitment and determination will be required in the detailed planning process to ensure successful implementation and monitoring. The Summit participants were presented with two sets of materials: draft sector chapters, and sector planning matrices. Both were debated in committee and the matrices were adopted by the Summit. This material has now been consolidated, included in the Strategic Development Plan (SDP), and adopted by Congress. The Summit provided the opportunity for the leadership to consider the progress attained during the first 17 years of the Compact. While implementation of the Compact was successful and saw the emergence of a stable democracy, economic growth was disappointing. The leadership concurred that the FSM could attain a better result during the 20-year period of the amended Compact, and adopted a 'Sustained Growth Strategy'. While it was recognised that the strategy would entail sacrifice and commitment, it was felt that only through adopting a more aggressive reform agenda could the FSM provide the type of environment that our citizens could hope to find gainful economic opportunities at home, and avoid the need to migrate to neighbouring territories. The SDP comes in three volumes. Volume I is the major component of the Plan and presents on overview of the FSM economy, discussion on the macroeconomic frame- work in light of the Sustained Growth Strategy, and the need for fiscal adjustment in the medium and long term. Volume I also presents discussion on the policies and development strategies for each sector of the economy. Volume II contains the sector planning matrices adopted at the Summit together with a statistical appendix. These first two volumes are complementary and should be used in cross-reference with each other. Volume III is the Infrastructure Development Plan (IDP) and is an integral component of the overall planning framework for the FSM.

GNI per person 2007 (Atlas method)	US$2,280 ^[2]
GDP current (2007 estimate)	US$235.9m ^[3]
GDP per capita (2007 estimate)	US$2,183 ^[3]

Labour market – Formal sector (2000 census)

Number of employees	29,175 ^[4]
% of workforce	-- ^[4]
% Female	42% ^[4]
% Public sector	-- ^[4]
% Private sector	-- ^[4]

FSM has seen a decline in overall economic activity since the implementation of the amended Compact in 2004. Factors behind this include a reduction in resources, capacity constraints in fulfilling new fiscal procedures, and the need to transition out the use of capacity-building sector grants from general government operations. The government seeks to pursue a 'sustained growth strategy' by maintaining macroeconomic stability through the adoption of fiscally responsible policies, tax reform, adoption of a medium term expenditure framework, and through prudential external debt management. The economy depends heavily on public sector expenditures, which are heavily reliant on official transfers. The public sector (inclusive of national and state governments, and public agencies and enterprises) contributes over 50 percent of GDP and formal employment. Annual real GDP growth averaged negative 0.8 percent in the five year period through to 2008. Three of the four states (all except for Pohnpei) saw contraction over this period. Slow throughput in Compact infrastructure spending has been cited as one cause of the recent economic stagnation. FSM has historically had fairly low inflation levels, but from early 2004 prices began to grow steadily, peaking in 2008 at just over 10 percent. Higher imported food and fuel prices, utility rates, and import taxes are the primary factors for recent inflation, which has moderated since 2008. The current account has recorded high and sustained trade deficits, exceeding US$150 million for the first time in 2008. Balance of payments inflows are dominated by grants but also include fishing license revenues, dividends, tourism receipts and remittances.

Each of the state constitutions contain provisions recognising and preserving local custom and tradition. Traditional leadership is relatively more influential in Yap and Pohnpei. Yap is known for being the most traditional of all the island groups in Micronesia, and its state Constitution creates two councils of chiefs (which constitute what some call the fourth branch of government), one for the main island of Yap and one for the outer island chiefs. These councils review and can disapprove any act of the Yap state legislature if it is deemed to be in violation of custom. The councils have used this authority on occasion to reject certain laws. The Yap legislature cannot override the veto of the councils but can revise the acts to incorporate the councils’ concerns. In Pohnpei, while the Constitution does not make specific mention of the formal role of traditional leaders, the paramount chiefs wield significant influence, especially within their communities. The chiefs have formed their own council, which attempts to influence public policy with varying degress of success. Chuuk has a somewhat chequered reputation when it comes to governance and administration, which has been attributed to the fragmented nature of traditional authority. Individual islands were seldom unified under a single leader, with the primary social and political unit being the lineage group, which usually resided together on one or more parcels of land. The history of patronage politics is often at odds with the modern systems of government and has led to Chuuk officials being criticised for poor allocation and management of public resources. Kosrae is a single island state with a cultural tradition very similar to Pohnpei. However, most of the traditional social and political structures collapsed after the devastating depopulation due to the influx of Western diseases during the nineteenth century. As a result, modern leadership, through church and government structures, have effectively replaced traditional rank and prestige.

Print media in the FSM is run by the government with some privately owned and operated.

Telephone	Federated States of Micronesia Telecommunications Corporation operates telecommunications services.
Internet	7800 Facebook users as at June 2010 (7.26% of population)^[7].
Newspapers	The National Union (fortnightly bulletin published by federal government); The Island Tribune (private weekly); Pohnpei Business News; Micronesia Weekly and Kaselehlia Press.
Television	KPON TV - Pohnpei (commercial); TTTK TV - Chuuk (commercial); WAAB TV - Yap (government). Additionally satellite TV broadcasts international channels.
Radio	V6A (Baptist church); V6AH (Pohnpei); V6AI (Yap); V6AJ and V6BC (Kosrae); BWXX FM 89.5 and V6AK (Chuuk).

Defence of the Federated States of Micronesia is the responsibility of the United States under the terms of the Compact, but local police matters are handled by the national and state police forces. The national police, which is a division of the Department of Justice, has a specific mandated duty to enforce fishery laws, the Controlled Substance Act, the Weapons Control Act, Search and Rescue, protection of government officials and visiting foreign diplomats, and laws that are national in nature or crimes against the government. Other functions include medical evacuation, assistance in disaster relief operations, emergency communications and technical support and training state law enforcement agencies. The national police is managed and administered from its headquarters at the capital, Palikir. The maritime wing, an integral unit of the national police, is situated at the dock in Dekehtik, Pohnpei. There are also state police departments in Kosrae, Pohnpei, Chuuk, and Yap, as well as municipal departments for Kitti, Kolonia, Madolenimhw, Nett, Sapwuahfik and Sokehs on Pohnpei; Polle, Fono, Losap, Nema, Udot, Uman and Tol in the Chuuk chain; and Tafunsak on Kosrae. State police play a greater role than the national police in handling local policing and security issues.

Official transfers account for over half the national budget revenues, most of which comes from the United States under the Compact and federal grants. Other major donors and development partners include Japan, China, Australia, New Zealand, and the European Union. FSM is a member of many regional and international organizations, including the Asian Development Bank, World Bank, and International Monetary Fund. FSM has established diplomatic relations with 60 countries. Australia's bilateral development assistance program is focused on strengthening human resource development, improving financial management and governance, and supporting community organisations and government agencies. The largest component of Australian aid to the FSM supports education and training, providing scholarships for study at regional institutions. In 2010–11 Australia will provide funding to support approximately 45 students from FSM who have been granted a regional scholarship award. Australia also funds a Small Grants Scheme, which supports community organisations or supplements the work of government agencies to provide direct assistance to small-scale community development. Australia provides funding for targeted technical advice under the Pacific Technical Assistance Mechanism (PACTAM), supporting short-term projects targeting the government's development priorities to improve taxation and revenue reforms.