Micronesia, Federated States of

MICRONESIA,
FEDERATED STATES OF

LOCATION, SIZE, AND EXTENT
TOPOGRAPHY
CLIMATE
FLORA AND FAUNA
ENVIRONMENT
POPULATION
MIGRATION
ETHNIC GROUPS
LANGUAGES
RELIGIONS
TRANSPORTATION
HISTORY
GOVERNMENT
POLITICAL PARTIES
LOCAL GOVERNMENT
JUDICIAL SYSTEM
ARMED FORCES
INTERNATIONAL COOPERATION
ECONOMY
INCOME
LABOR
AGRICULTURE
ANIMAL HUSBANDRY
FISHING
FORESTRY
MINING
ENERGY AND POWER
INDUSTRY
SCIENCE AND TECHNOLOGY
DOMESTIC TRADE
FOREIGN TRADE
BALANCE OF PAYMENTS
BANKING AND SECURITIES
INSURANCE
PUBLIC FINANCE
TAXATION
CUSTOMS AND DUTIES
FOREIGN INVESTMENT
ECONOMIC DEVELOPMENT
SOCIAL DEVELOPMENT
HEALTH
HOUSING
EDUCATION
LIBRARIES AND MUSEUMS
MEDIA
ORGANIZATIONS
TOURISM, TRAVEL, AND RECREATION
FAMOUS MICRONESIANS
DEPENDENCIES
BIBLIOGRAPHY

CAPITAL: Palikir, Pohnpei Island

FLAG: Adopted in 1978, the flag is light blue, bearing four five-pointed stars arranged in a diamond in the center.

ANTHEM: Patriots of Micronesia (adopted in 1991).

MONETARY UNIT: The US dollar is the official medium of exchange.

WEIGHTS AND MEASURES: British units are used, as modified by US usage.

HOLIDAYS: New Year's Day, 1 January; Federated States of Micronesia Day, 10 May; Independence Day, 3 November; Christmas Day, 25 December.

TIME: In Pohnpei and Kosrae, 10 pm = noon GMT; in Yap and Truk, 9 pm = noon GMT.

LOCATION, SIZE, AND EXTENT

The Federated States of Micronesia (FSM) is located in the western Pacific Ocean within the Carolinian archipelago. The four states consist of 607 islands with a total area of 7,866 sq km (3,037 sq mi), comprising 702 sq km (271 sq mi) of land, and 7,164 sq km (2,766 sq mi) of lagoons. Comparatively, the area occupied by the FSM is slightly less than four times the size of Washington, DC. Kosrae, the smallest and easternmost state, consists of five closely situated islands. Pohnpei consists of the single large island of Pohnpei and 25 smaller islands within a barrier reef, in addition to 137 outer islands, of which the major atolls are Mokil, Pingelap, Kapingamarangi, Nukjuoro, and Ngatik. Truk includes the large Truk lagoon, enclosing 98 islands, and major outer island groups, including the Mortlocks, Halls, Western, and Namwunweito islands. Yap, the westernmost state, consists of 4 large islands and 7 smaller islands surrounded by barrier reefs, in addition to 134 outer islands, of which the largest groups are Ulithi and Woleai. The cumulative coastline distance is 6,112 km (3,798 mi).

The capital city of the Federated States of Micronesia, Palikir, is located on the island of Pohnpei.

TOPOGRAPHY

The 607 islands constituting the four states include large, mountainous islands of volcanic origin and coral atolls. Kosrae is largely mountainous, with two peaks, Fenkol (634 m/2,080 ft) and Matanti (583 m/1,913 ft). Pohnpei contains a large volcanic island, with the highest elevation that of Mt. Totolom (791 m/2,595 ft). Truk contains 14 islands that are mountainous and of volcanic origin. Yap contains four large high islands, with the peak elevation that of Mt. Tabiwol (178 m/584 ft). The outer islands of all states are mostly coral atolls. Though the country is not generally known to have major earthquakes, a 6.6 magnitude quake occurred on Yap on 16 January 2005.

CLIMATE

The climate is maritime tropical, with little seasonal or diurnal variation in temperature, which averages 27°c (80°f). The islands are subject to typhoons. The short and torrential nature of the rainfall, which decreases from east to west, results in an annual average of 508 cm (200 in) in Pohnpei and 305 cm (120 in) in Yap.

FLORA AND FAUNA

There is moderately heavy tropical vegetation, with tree species including tropical hardwoods on the slopes of the higher volcanic islands and coconut palms on the coral atolls. The only native land mammal is the tropical bat. A rich marine fauna inhabits the open sea, reefs, lagoons, and shore areas.

ENVIRONMENT

Solid waste disposal in urban areas is a continuing problem and the land is threatened by toxic pollutants from mining operations. Micronesia's water supply is also threatened by industrial and agricultural pollutants. Population increases in urban areas. Untreated sewage and contaminants from industrialized countries in the region add to the problem of water pollution.

United Nations (UN) research shows that global warming and the rise of sea levels are a threat to Micronesia's forests, agricultural areas, and water supply. Pollution from industrial and agricultural sources also threatens the nation's mangrove areas. The fish population is endangered by waterborne toxins and explosives used in commercial fishing. The country also has a problem with the degeneration of its reefs due to tourism. In 1984, the government established an FSM Environmental Protection Board.

According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included six types of mammals, eight species of birds, two types of reptiles, six species of fish, four types of mollusks, and four species of plants. Threatened species include the chuuk flying-fox, the chuuk monarch, and the Mortlock Islands flying-fox. The Kosrae crake and the Kosrae mountain starling have become extinct.

POPULATION

The population of Federated States of Micronesia in 2005 was estimated by the United Nations (UN) at 108,000, which placed it at number 177 in population among the 193 nations of the world. In 2005, approximately 4% of the population was over 65 years of age, with another 40% of the population under 15 years of age. There were 102 males for every 100 females in the country. According to the UN, the annual population rate of change for 2005–10 was expected to be 2.1%, a rate the government viewed as too high. The projected population for the year 2025 was 115,000. The overall population density was 154 per sq km (400 per sq mi). The majority of the population lives in the coastal areas of the high islands, leaving the mountainous interiors largely uninhabited.

The UN estimated that 22% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 2.17%. The capital city, Palikir, Pohnpei Island, had a population of 7,000 in that year. Population estimates for other large urban areas included 53,700 in Truk; 34,486 in Pohnpei; 13,900 in Yap; and 7,317 in Kosrae.

MIGRATION

No significant permanent emigration has occurred; most emigration has been undertaken temporarily for higher education. The total number of migrants in 2000 was 3,000. In 2005, the net migration rate was -21.01, a significant change from 11.65 migrants per 1,000 population in 1999. The government views the emigration levels as too high.

ETHNIC GROUPS

The islanders are classified as Micronesians of Malayo-Mongoloid origins. The people of the Nukuoro and Kapingamarangi atolls in southwestern Pohnpei are of Polynesian descent. In total, there are nine ethnic Micronesian and Polynesian groups. Noncitizens are prohibited from owning land and holding certain occupations. Non-Micronesians are generally not granted citizenship.

LANGUAGES

English is the official language and is taught in the schools. The indigenous languages are of the Malayo-Polynesian family. Yapese, Ulithian, Woleaian, Trukese, Pohnpeian, and Kosraean are classed as Malaysian. Kapingamarangi and Nukuoro, spoken on two isolated atolls of the same names in Pohnpei, are Polynesian languages.

RELIGIONS

Roman Catholicism and Protestantism have been widely accepted throughout the country following their introduction by missionaries in the 1880s. Protestantism is predominant in Kosrae. The largest Protestant denomination is the United Church of Christ. Others include Baptist, Seventh-Day Adventist, Mormon, the Salvation Army, Jehovah's Witness, and Assemblies of God. Roman Catholics are dominant on Chuuk and Yap. There is a small Buddhist community of Pohnpei. There are also a small number of Baha'is in the country. The constitution provides for religious freedom and a bill of rights specifically prohibits the establishment of a state religion.

TRANSPORTATION

As of 2002, there were 240 km (149 mi) of roadways on the major islands, of which 42 km (26 mi) are paved. Over 90% of all vehicles are located on the main islands of Pohnpei, Moen (in Truk), Kosrae, and Yap. The state of Yap provides public bus transportation, primarily used by students. International shipping services are provided by eight companies, some of them Japanese. There are commercial harbor facilities at Kolonia, Moen, Okat, and Colonia. The Federated States of Micronesia's merchant fleet, as of 2005, consisted of two vessels (one cargo and one passenger/cargo of 1,000 GRT or more) totaling 2,423 GRT. Interisland shipping service is provided by six government-owned vessels. In 2005, there were an estimated six airports, all of which had paved runways. International and interstate scheduled airline services are provided by Continental/Air Micronesia, Air Nauru, and Pacific Missionary Aviation.

HISTORY

The Carolinian archipelago was sighted by European navigators in the 16th century. In 1686 the Spanish captain Francisco Lezcano named Yap Island "La Carolina" after King Charles II of Spain; the name was later generalized to the islands as a whole. Until the end of the 19th century, the islands were under Spanish colonial administration. In 1899 following the Spanish-American War, Spain sold the islands to Germany. Japanese administration commenced at the end of World War I, and in 1947, following World War II, the four states of the FSM came under US administration as part of the UN Trust Territory of the Pacific Islands. Beginning in the 1960s, the people of Micronesia began making clear their desire for political independence. The United States, ever interested in maintaining good relations with the strategically significant Pacific islands, gave in to such demands and helped Micronesia to form a consultative body, called the Congress of Micronesia, in 1967. The congress declared the area sovereign in 1970. The history of the FSM as a political entity began on 12 July 1978, when a constitution drafted by a popularly elected constitutional convention was adopted; it went into effect on 10 May 1979. The government of the FSM and the government of the United States executed a Compact of Free Association in October 1982; in November 1986, that compact went into effect. Under the Compact of Free Association, the United States is responsible for defense and security issues. The UN Security Council voted in December 1990 to terminate the FSM's status as a UN Trust Territory. A new capital was built about 10 km (6 mi) southwest of Kolonia in the Palikir Valley; it has served the FSM since 1990.

The FSM became an independent state and joined the UN in September 1991. John R. Haglelgam of Yap was elected FSM's president in 1987. In May 1991 Bailey Olter of Pohnpei defeated Haglelgam in the presidential election. Olter was reelected to a second term in 1995, as was vice president Jacob Nena. On 18 July 1996 Olter suffered a stroke and underwent treatment in Texas. Nena served as acting president while Olter was incapacitated. When Olter was unable to resume his duties, Nena became the FSM's fourth president on 8 May 1997. In a new election Leo A. Falcam, of Pohnpei, was elected vice president. In the May 1999 elections Falcam was elected president and Redley Killion, of Chuuk, was elected vice president. Joseph J. Urusemal was elected president in 2003, and Redley Killion vice president.

The first Compact of Free Association between the FSM and the United States expired in 2001. Prior to beginning negotiations and before any other assistance was considered, the United States requested a full accounting of the approximately $3 billion in US funding provided to FSM since 1986. During further discussions of the compact in 2000, the United States suggested that restrictions on Micronesian immigration might be tied to future funding. In May 2003, after four years of discussion, negotiators agreed upon an amended document providing 20 years of ongoing assistance in the amount of approximately $76 million per year; US president George W. Bush signed the compact in December 2003. The payments were to be made according to a schedule of reduced annual grants, with the goal that FSM would establish trust funds and attain greater financial independence. In 2005, the US Government Accounting Office (GAO) expressed concern that FSM was handling the funds without sufficient accountability and oversight, and went so far as to suspend some funds earmarked for education in Chuuk because they were misused.

Faichuk has been seeking independence from Chuuk since the 1960s. In March 2005 a congressional bill was introduced formally seeking that Faichuk become the fifth state of the FSM.

Beginning in the late-1990s and continuing into the new millennium, global warming and the possibility of rising sea levels have raised concern over the long-term prospects for the islands in the middle of the Pacific Ocean. The Intergovernmental Panel on Climate Change has suggested that the sea could rise by about. 5 m (18 in) by 2100, but that figure could be much lower or higher. The existence of low-lying nations such as FSM would be threatened by any rise in sea level.

GOVERNMENT

The national executive branch includes the president and vice president, elected by the congress from its membership, who serve a four-year term and may not be from the same state. The principal officers of the executive branch are appointed by the president, with the advice and consent of congress. The judiciary consists of a Supreme Court that applies criminal and civil laws and procedures closely paralleling those of the United States. The legislature consists of a unicameral congress of 14 senators. Of the senators, four are elected at large on the basis of state equality and ten on the basis of population apportionment, with five from Truk, three from Pohnpei, and one each from Yap and Kosrae. The four at-large senators serve four-year terms and the remaining senators serve two-year terms. Congressional elections were held in all four states (Chuuk, Kosrae, Pohnpei, and Yap) to fill the ten two-year seats in March 2005. The next elections for the legislature were scheduled to be held in March 2007; elections for president were scheduled for May 2007.

POLITICAL PARTIES

There are no formal political parties.

LOCAL GOVERNMENT

The state executive branch consists of state governors and lieutenant-governors, popularly elected for four-year terms. The state legislative branch consists of members popularly elected on the basis of proportional representation, numbering 20 in Pohnpei, 30 in Truk, 13 in Kosrae, and 9 in Yap. Municipalities are districts composed of a number of small communities (sections), some of which may be located in different islands.

Municipal government is considered by many to be the most important level of government in Micronesia. The leaders of local bodies are generally tribal chiefs, who are considered by a sizable body of Micronesians to be more important figures than nationally elected politicians. The Council of Chiefs can veto any legislation it considers detrimental to traditional ways.

JUDICIAL SYSTEM

The national judiciary consists of a Supreme Court, headed by a chief justice, and such subordinate courts as are established by statute. Justices are appointed by the president, with the advice and consent of Congress, and serve for life. The Supreme Court has both trial and appellate divisions. It may review cases heard in state or local courts if they require interpretation of the constitution, national law, or treaties, and it may hear appeals from the highest state court where permitted by a state's constitution.

State and municipal court systems have been established in each of the states. State courts have jurisdiction over all matters not within the exclusive jurisdiction of the national courts. Municipal courts have jurisdiction over civil and criminal matters arising within their municipalities.

The Micronesian constitution and judicial system are modeled after those of the United States. The civil and criminal laws also parallel those of the United States.

The constitution provides for an independent judiciary and the government respects this provision in practice.

ARMED FORCES

The Federated States of Micronesia maintains no armed forces. External security is the responsibility of the United States.

INTERNATIONAL COOPERATION

The FSM became a member of the United Nations on 17 September 1991; it is a part of ESCAP and serves on nonregional specialized agencies such as the FAO, the World Bank, the IFC, IMF, UNESCO, and the WHO. The FSM participates in the ACP Group, the Asian Development Bank, G-77, the Pacific Island Forum, Sparteca, and the Alliance of Small Island States (AOSIS).

The FSM and the United States signed the Compact of Free Association on 3 November 1986. Amendments to the compact went into effect on 1 May 2004. Under these amendments, the United States has full authority and responsibility for the defense of the FSM and promises to provide $92 million in assistance over 20 years.

In environmental cooperation, the FSM is part of the Basel Convention, the Convention on Biological Diversity, the Kyoto Protocol, the Montréal Protocol, and the UN Conventions on the Law of the Sea, Climate Change and Desertification.

ECONOMY

Other than US payments, the Micronesian economy is markedly underdeveloped. A clothing plant in Yap employs 500 workers in the country's largest private-sector industrial enterprise. The subsistence economy is thought to generate about 25% of GDP, but statistics from the government are incomplete and unreliable.

In 1993, the United States, whose aid constitutes a large share of GDP, enlisted the Asian Development Bank (ADB) in a plan to devise and implement an economic development scheme for the country. In 1995, an economic summit was convened to discuss some solutions. Privatization was high on the list of recommendations and Yap has already initiated a plan to reduce government employment by 37%. The ADB-led summit also recommended resources be spent in the development of fisheries and tourism, two sectors with substantial potential. In the late 1990s and early 2000s, licensing fees paid by foreign fisherman for tuna fishing in Micronesia's exclusive economic zone have provided $18–24 million annually.

The Second National Development Plan, for the years 1992–96, featured as its primary objective decreasing dependence on aid and, at the same time, making better use of its aid. As of 2005, little progress had been made, however. It was estimated that after US-led grants end, per-capita GDP could drop to below $500.

The economy underwent a recess in 2004, contracting by 3.3%, down from positive growth figures in 2003 (3.2%), and 2002 (0.8%). The inflation rate was relatively stable, and at 1.5% in 2004; inflation did not pose a problem to the overall economy. There are no recent official numbers for the unemployment rate, but it is estimated to hover somewhere around 22%. US assistance remains the major source of income for this tiny country and the local private sector is fragile and with few future perspectives. The country's isolated position and its poor infrastructure will continue to hinder its long-term growth prospects.

INCOME

The US Central Intelligence Agency (CIA) reported that in 2005 Micronesia's gross domestic product (GDP) was estimated at $277.0 million. GDP was supplemented by grant aid, averaging perhaps $100 million annually. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $2,000. The annual growth rate of GDP was estimated at 1%. The average inflation rate in 2001 was 2%. It was estimated that agriculture accounted for 50% of GDP, industry 4%, and services 46%.

It was estimated that in 2002 about 26.7% of the population had incomes below the poverty line.

LABOR

In 2003 the government reported that Micronesia's national labor force was estimated at about 23,190 in 1994 (the latest year for which data was available). Two-thirds of the workforce in 2002 were government employees. The unemployment rate in FSM was 22% in 2000, up from 16% in 1994. The unemployment rate varied by state, with the highest rate on Chuuk, at 34%, followed by Kosrae (17%), Pohnpei (12%), and Yap (4%). While unemployment remains high, the economy faced shortages of skilled workers, since over 44% of the population was under 16 years of age.

The law provides the right to form or join unions, and government employees are granted the right to form associations to proffer their views. However, no such associations have been formed as of 2002. The country is not affiliated with the International Labour Organization (ILO).

While labor laws are applied mostly without variance in all four states, the minimum wage varies from state to state. Minimums for government-employed workers in 2002 ranged from $0.80 per hour for Yap to $2.00 per hour in Pohnpei. Only Pohnpei had a minimum wage for private sector workers. In 1999, it stood at $1.35 an hour. There is no minimum working age for children and many children assist their families in subsistence farming activities.

AGRICULTURE

Agricultural production has traditionally been for subsistence and was based on a system of shifting cultivation in the high islands. Staple crops include taros, sweet potatoes, bananas, cassavas, and breadfruit. Yams are grown on Pohnpei, Kosrae, Yap, and Fais islands. Other vegetables, such as cucumbers, eggplant, head cabbage, Chinese cabbage, bell peppers, green onions, and tomatoes, are also produced. Other fruits include mangoes, papayas, pandanus, pineapples, lemons, and limes, with oranges and tangerines also produced on Kosrae. The ubiquitous coconut palm is used for a wide range of subsistence purposes, and copra is the main cash crop and the nation's leading export. Crop production in 2004 included (in thousands of tons): coconuts, 140; cassava, 11.8; and bananas, 2. Black and white peppers were introduced to Micronesia in 1938, but pepper growing only began in Pohnpei (the FSM's most important pepper-producing island) in 1960. Rich volcanic soil and heavy rainfall make gourmet Pohnpei peppers highly regarded.

ANIMAL HUSBANDRY

Livestock in 2005 included some 13,900 head of cattle, 32,000 pigs, and 4,000 goats. Pigs, traditionally kept by many households for ceremonial purposes, are being upgraded through the introduction of improved strains. Two pig farms operate on Pohnpei. The largest cattle herd is on Pohnpei Island. Eggs are produced commercially and limited success has been achieved by commercial poultry chicken projects in the states of Pohnpei and Chuuk. Chickens are kept by many households. Goat projects are also operating in Kosrae and Chuuk. A few head of water buffalo are privately raised on Pohnpei and on Pata in Chuuk. In the mid-1990s, the government started encouraging domestic feed production in order to decrease the reliance on imported feed meal.

FISHING

Inshore marine resources of the reefs and lagoons are harvested mainly for subsistence. The FSM's exclusive economic zone covers some 2.6 million sq km (1 million sq mi) of ocean which contain the world's most productive tuna fishing grounds. Although the FSM now has sole ownership of tuna stocks capable of a sustained yield of well over 100,000 tons per year, there is virtually no national participation in its exploitation. The total catch in 2003 was 32,191 tons, including 23,788 tons of skipjack tuna, 5,708 tons of yellowfin tuna, and 994 tons of bigeye tuna. The tuna catch is valued at about $200 million annually. The Micronesian Maritime Authority and the National Fisheries Corporation assist in the development and promotion of commercial fisheries. Pohnpei and Kosroe have embarked on the construction of cold storage and tuna processing plants, and the Yap Fishing Corporation began upgrading its fleet. Total fisheries exports were valued at $19 million in 2003.

FORESTRY

The nation has abundant forestry resources, particularly on the high islands, consisting of approximately 15,000 hectares (37,000 acres) of forests. Two privately owned commercial sawmills are operated on Pohnpei—one in Kitti logging mangrove cedar and one in Kolonia utilizing upland timber. Exploitation of the nation's forestry resources is limited and virtually all lumber used in construction is imported ($2.1 million in 2004). Mangrove timber is used for handicrafts and furniture making.

MINING

There were deposits of phosphates on Fais Island in Yap and bauxite in Pohnpei, Truk, and Yap, but there was no commercial exploitation. Clays, coral, sand, rock aggregate, and quarry stone works supplied construction materials.

ENERGY AND POWER

The nation is dependent on imported petroleum, which supplied about 80% of the total energy requirements. Fuel wood for household use provided most of the remainder. Diesel fuel, which accounted for over two-thirds of petroleum imports, was used primarily for electrical generation and ship services. In 2002, Micronesia produced 192 million kWh, with demand that year at 178.6 million kWh. Electricity was generated by government power stations located in each state center. About half the electricity produced was used by the government. Small quantities of electricity are produced in outer island communities.

INDUSTRY

Manufacturing activity is nearly nonexistent and accounts for only a fraction of a percent of GDP. Cottage industries involving handicrafts and small-scale processing are carried out in all states and constitute an important source of income for those not integrated into the monetary economy. In Truk, a small industries center, a garment factory, a coconut-processing plant, a boatbuilding plant, and a breadfruit flour plant were in operation; in Pohnpei, a coconut processing and soap and oil plant, a feedmill, an ice production plant, a brick-manufacturing plant; in Yap, a cottage industries program; and in Kosrae, a small industries center and a wood-processing plant. In late 1999, a tuna processing plant opened in Majuro.

In 2000, the industry had a 4% share in the economy, with services accounting for 46%, and agriculture for 50%. More than two-thirds of the country's labor force are employed by the government.

SCIENCE AND TECHNOLOGY

There are no institutions for advanced instruction or research and development in science and technology. (The College of Micronesia (COM), which has five campus locations, does not provide advanced degrees). A medical school was established in Pohnpei in 1987.

DOMESTIC TRADE

Domestic commercial activity is dominated by wholesale and retail trade, which is highly localized in the four state centers of Kolonia, Tofol, Moen, and Colonia. Nearly half of the population is employed in subsistence farming and fishing. The country relies heavily on imports of food and manufactured goods.

FOREIGN TRADE

The FSM sustains a severe trade deficit. Exports include agricultural products (coconuts, bananas, betel nuts, cassava, and sweet potatoes), pigs, chickens, and re-exports of fish. Copra, formerly the country's largest export crop, suffered a severe decline in the late 1990s.

In 2000, exports totaled $22 million (FOB—Free on Board), while imports grew to $149 million. In 2004, most of the exports went to Japan, the United States, and Guam. Imports primarily came from the United States, Australia, and Japan.

BALANCE OF PAYMENTS

Foreign receipts are predominantly grants and rental payments from the United States and aid from other sources. Economic aid totaled $77.4 million in 1995.

The US Central Intelligence Agency (CIA) reported that the purchasing power parity of Micronesia's exports was $22 million while imports totaled $149 million resulting in a trade deficit of $127 million.

Exports of goods and services totaled $40 million in 2004, same as in 2003. Imports grew from $172 million in 2003, to $184 million in 2004. The resource balance was consequently negative, and on a downward path—from -$131 million in 2003 to -$145 million in 2004. A similar trend was registered for the current account balance, which deteriorated from $2 million in 2003 to - $25 million in 2004. Foreign exchange reserves (including gold) decreased to $55 million in 2004, covering less than four months of imports.

BANKING AND SECURITIES

Commercial banking operations are regulated by the FSM Banking Board. There are two foreign commercial banks: the Bank of Hawaii, with branches in Pohnpei, Yap and Kosrae; and the Bank of Guam, with branches in Pohnpei and Truk. There is also a domestic Bank of the FSM that operates branches throughout the islands. The FSM Development Bank commenced operations in 1982. It provides loans for projects that meet criteria based on the government's development priorities and is authorized to provide loan guarantees to other financial institutions in the FSM. However, it can only make loans of up to $200,000 because of capital limitations. The FSM Employees Credit Union was chartered in 1986. Tradable securities are not issued by the FSM government, state governments, or enterprises residing in the FSM. The currency is the US dollar.

In 1996, national and state governments considered measures designed to cope with the winding down of US funding under the Compact of Free Association (under which payments were scheduled to end in 2001). The restructuring of national government was underway as of 2005, with the aim of reducing the number of employees and departments. In 2003 the compact with the United States was amended to provide an additional 20 years of assistance by the United States. The FSM government was charged to seek ways to improve basic infrastructure through private-sector investment; infrastructure improvements should in turn encourage growth of the private sector. In 1999, the FSM Trust Fund was established to foster financial independence. The International Monetary Fund reported that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $21.2 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $115.3 million.

INSURANCE

The Public Service System administers life insurance and workers' compensation programs. In 1984, a government employee group health insurance program was instituted, and in 1987, a retirement pension program—for both state and national government employees—was initiated.

PUBLIC FINANCE

The state and national governments had a series of surpluses in the late 1980s, followed by years of deficits in the early 1990s. Government revenues remained nearly constant during the 1990s, while spending was unrestrained. By the late 1990s, the deficits had come under control.

The US Central Intelligence Agency (CIA) estimated that in 1998 Micronesia's central government took in revenues of approximately $161 million and had expenditures of $160 million. Revenues minus expenditures totaled approximately $1 million. Total external debt was $53.1 million.

TAXATION

National taxes on wages and salaries are levied, as well as a business gross receipts tax. The states are constitutionally limited in the types of taxes they may impose; they may levy sales taxes on alcoholic beverages, soft drinks, and cigarettes. The municipal governments usually levy head taxes and boat license and business license fees.

An important tax revenue service is from the sale of tuna fishing rights, which rose from $12.7 million in 1990 to $18.2 million in 1994. In 1999, FSM, Palau, and the Republic of Marshall Islands agreed to cooperate in policing illegal fishing in the region.

CUSTOMS AND DUTIES

As of 1988, specific duties were levied on cigarettes, beer and malt beverages, wine, distilled alcohol, and gasoline and diesel fuel. Ad valorem duties were levied as follows: tobacco, 50%; perfumes, cosmetics, and toiletries, 25%; soft drinks, 2% per 12 fl oz; foodstuffs for human consumption, 1%; and all other products, 3%. Micronesia's import taxes are among the lowest in the Pacific.

FOREIGN INVESTMENT

There is little foreign private investment. The Foreign Investment Act of 1997 was enacted to prohibit foreign investment in specific business activities, namely arms manufacture, minting of coins or printing of currency notes, and nuclear power or radioactivity-related businesses. The Act also restricts investment by foreigners in banking, telecommunications, fishing, air transport, and shipping.

ECONOMIC DEVELOPMENT

The first national development plan (1985–89) was the initial stage of the government's 15-year program designed to achieve national self-sufficiency. Funds accruing under the Compact of Free Association were required for implementing the plan, and rephasing of the plan was necessary. A multi-million dollar US-implemented capital improvement plan was completed in the early 2000s. It included new airports, docks, water and sewage systems, paved roads, and hospitals. Under the terms of the Compact of Free Association, the United States provided $1.3 billion from 1986–2001 in grant aid.

A Second National Development Plan covering the years 1992–96 sought to diversify Micronesia's economy; mainly to wean it from dependence on US aid. Little was accomplished. In late 1999, representatives of the United States and Micronesia began negotiations aimed at renewing some provisions of the Compact of Free Association. The Amended Compact of Free Association with the United States, which provided that aid to Micronesia would continue until 2023 and would be consolidated through a trust fund to provide annual payouts in perpetuity after that year. The country's medium-term perspectives were bleak though, due to its isolation and poorly developed infrastructure, and due to the reduction in 2003 of US assistance.

SOCIAL DEVELOPMENT

The extended family and clan system, headed by traditional leaders or chiefs, is retained in varying degrees, especially in the outer islands. A social insurance system includes old age, disability, and survivor benefits. Employees contribute 6% of their earnings; employers make a 6% payroll contribution. The basic retirement pension benefit is 16.5% of the first $10,000 and marginal rates beyond that level. Survivor payments totaled 60% of the descendant's pension.

In spite of constitutional safeguards, sex discrimination and violence against women are serious problems. Women's roles within the family remain essentially the traditional ones. Sexual abuse and domestic violence are increasing. Women, however, face no discrimination in education. In 2004, women were well represented in middle and lower levels of government and generally received equal pay for equal work.

Minorities generally do not face discrimination or prejudice. Noncitizens, however, are prohibited from owning land. Human rights are generally respected.

HEALTH

There are hospitals in each state center. In 1986, a community health center was established in Pohnpei and in 1987, a medical school was started. In the outer islands, primary medical services are provided through dispensaries staffed by health assistants. In 1982, a superdispensary was initiated in the Lower Mortlock Islands to serve 3,769 people scattered on seven atolls. Tertiary medical treatment is provided through patient referral to hospitals in Guam and Hawaii. All of Micronesia had access to safe water and sanitation. In 2004, there were an estimated 60 physicians per 100,000 population.

The infant mortality rate in 2005 was 30.21 per 1,000 live births, and the life expectancy was 69.75 years. In the same year, the general mortality rate was 6 deaths per 1,000 people and the fertility rate was 3.9 children per woman. The maternal mortality rate was 121 per 100,000 live births. Immunization rates for Micronesian children under one year of age were as follows: measles, 80%; tuberculosis, 50%; polio, 77%; and diphtheria, tetanus, and pertussis, 78%. Although polio has been eradicated, there have been cases of tuberculosis, and measles. Anemia was seen in 33% of children under the age of five.

HOUSING

At the 2000 census, there were 15,273 occupied households, with about 44.4% on Chuuk, 35.8% on Pohnpei, 12.9% on Yap, and 6.9% on Kosrae. The average number of members per household was 6.8. About 26.8% of households had nine or more members. An estimated 30% of the housing stock was built in 1993 or later, with another 8.8% of all housing built in 1969 or earlier. Materials for housing construction are generally imported. Metal sheeting and concrete are the most common materials for walls and roofs. About 53.6% of all households had electricity and 50% had access to piped water. Only 25% of all households have access to improved sanitation systems.

EDUCATION

The state governments are responsible for the provision of education. Elementary education is compulsory up to the eighth grade or until age 15. In 1986 there were 142 primary schools, nine of them private, with 968 teachers and 23,636 pupils. Secondary education was provided through five public high schools (one in each state center and one in Falalop on the Ulithi atoll, serving Yap's outer islands) and five private secondary schools (two in Truk and three in Pohnpei).

The only postsecondary institution is the College of Micronesia (COM), which has five campus locations. FSM students are eligible for postsecondary education grants from the US government and attend institutions mainly in Guam, Hawaii, and the US mainland. Vocational education is provided by the Pohnpei Agriculture and Trade School and the Micronesian Occupational College in Palau.

A 2000 census report indicated that of all citizens aged 25 years or older, 12.3% had no formal schooling, 36% had completed only an elementary school education, 32.3% had completed their high school education, and about 18.4% had completed some college education.

LIBRARIES AND MUSEUMS

Library materials are contained in the primary and secondary schools, and at the College of Micronesia, which holds about 33,000 volumes and serves as the depository for documents from the trust territory government's archives in Saipan. The Pohnpei Public Library has about 30,000 books. A Chuuk Public Library was being organized in 2002. The library of the Congress of the Federated States of Micronesia holds 15,000 book volumes. There is a small museum in Kolonia, Pohnpei. The Nan Madol archaeological site was designated a historical landmark in 1986.

MEDIA

The FSM Telecommunications Corp. provides interstate telecommunications via its satellite ground station in each state center and international connections through the Pohnpei and Truk stations. An interstate and international telex service has been available through the Pohnpei station since 1984. Telecommunications services to all inhabited outer islands are provided by radio links with the Pohnpei, Truk, and Yap stations. In 2001, there were 10,100 mainline phones in use nationwide. In 2002, there were an additional 1,800 mobile phones in use nationwide.

Most of the papers and newsletters are sponsored by the state governments. The National Union is published twice monthl). State publications include Mogethin (Yap), Yap Networker, Uss Me Auus, (Truk), Pohnpei Reports, Kaselehile Press Pohnpei State, Sinlaku Sun Times (Kosrae), and Kosrae State Newsletters.

As of 2001, there is one state-owned radio station in each state capital, broadcasting in English and local languages. There is one private radio station owned by a religious group. In 1997, there were 127 radios and 10 television sets per 1,000 population. In 2002, there were 6,000 Internet subscribers.

The constitution provides for free speech and a free press, and the government is said to respect these rights in practice.

ORGANIZATIONS

There are Community Action Agencies in Yap, Truk, and Pohnpei, which organize youth clubs and community self-help projects. Private institutions, most of them church-affiliated, play an active role in youth and community development. There are sports associations representing such pastimes as weightlifting, lawn tennis, tae kwon do, and track and field. Many municipalities sponsor local women's organizations and community centers. There is a national chapter of the Red Cross Society.

TOURISM, TRAVEL, AND RECREATION

Limited tourist facilities have been developed in each state. Tourist attractions include the spectacular beauty of the high islands; the rich marine environment; World War II artifacts, including sunken Japanese ships in the Truk lagoon; and remains of an ancient culture on Yap Island, including stone platforms and large circular stones used as money. All visitors must have an onward/return ticket and a present proof of citizenship or passport that must be valid for 120 days after leaving Micronesia. A valid entry permit is also necessary if staying for more than 30 days. There are no vaccination requirements unless traveling from an infected area.

In 2003, there were 18,168 tourist arrivals, almost 41% of whom came from the United States. According to the 2005 US Department of State estimates, the daily cost of staying in Yap was us$283; in Chuuk, us$187; and in Pohnpei, us$167.

FAMOUS MICRONESIANS

John Haglelgam, a former senator in the congress, was president of the FSM from 1987 to 1991. Jacob Nena (b.1941) served as the fourth president from 1996 to 1999. Leo Falcam (b.1935) served as the fifth president from 1999 to 2003. He was succeeded by Joseph John Urusemal (b.1952). In 2000, FSM's first five-story building (and first building with an elevator) opened; it was named for Raymond Setik (d.1997), a successful businessman and one of the first members of the legislature in 1979.

DEPENDENCIES

The FSM has no territories or colonies.

BIBLIOGRAPHY

Hezel, Francis X. The New Shape of Old Island Cultures: A Half Century of Social Change in Micronesia. Honolulu: University of Hawaii Press, 2001.

Karolle, Bruce G. Atlas of Micronesia. 2nd ed. Honolulu, Hawaii: Bess Press, 1993.

Leibo, Steven A. East and Southeast Asia, 2005. 38th ed. Harpers Ferry, W.Va.: Stryker-Post Publications, 2005.

Micronesia: A Guide through the Centuries. Alexandria, Va.: Close Up Foundation, 2000.

Poyer, Lin. The Ngatik Massacre: History and Identity on a Micronesian Atoll. Washington, D.C.: Smithsonian Institution Press, 1993.

——. The Typhoon of War: Micronesian Experiences of the Pacific War. Honolulu: University of Hawaii Press, 2001.

Rainbird, Paul. The Archaeology of Micronesia. New York: Cambridge University Press, 2004.

United States General Accounting Office. Foreign Relations: Migration from Micronesian Nations Has Had Significant Impact on Guam, Hawaii, and the Commonwealth of the Northern Mariana Islands. Washington, D.C.: The Office, 2001.

Wuerch, Wiliam L. Historical Dictionary of Guam and Micronesia. Metuchen, N.J.: Scarecrow Press, 1994.