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Foreign Investment
For international businesspersons and investors exploring the
opportunities to invest wisely and trade equitably in an island
paradise, the Federated States of Micronesia is such a place.
The FSM became fully self-governing in the fall of 1986 and was
admitted to the United Nations in September of 1991. As a matter
of choice, the FSM opted to maintain a close relationship with
the United States by entering into a long-term treaty agreement
called the Compact of Free Association. With the implementation
of the treaty, the Federated States fulfilled its collective will
to take charge of its own destiny.
Under the Compact Treaty and separate Bilateral Agreements, the
United States agreed to defend the FSM as it would defend itself
and its citizens and to provide unique packages of financial assistance
and investment incentives.
The potential for development in the FSM is immense. The FSM's
200 mile EEZ encompasses more than 1 million square miles of ocean,
teeming with the world's largest tuna stock, and a total land
area of 281.3 square miles.
 Sitting gem-like in the vast setting of the Pacific Ocean - some
2,400 miles north of Australia, 2,000 miles southeast of Japan,
and 2,500 miles southwest of Hawaii, the FSM is relatively unheard
of. The islands of the Federated States of Micronesia remain to
this day an almost virgin territory - one of the last real frontiers
on the planet.
Both local and international investors are offered a unique blend
of advantages: clean environment, favorable economic and social
circumstances and a sincere commitment to free market enterprise
philosophy. Investment incentives and other packages of financial
assistance under the treaty with the United States reinforce the
commitment to free enterprise and help pave the way to self-sufficiency.
In short, the Federated States of Micronesia is definitely the
place to invest, live and work.
18 Reasons to Invest in the FSM
Visitor visas are issued upon arrival. Foreign investments and
working permits are required before arrival and can be obtained
by writing to contacting the FSM Department of Resources and Development.
The Federated States of Micronesia has a stable democratic form
of government modeled after that of the United States.
Through the Compact of Free Association (Treaty) with the United
States, the FSM is guaranteed security protection by the US.
The FSM uses the US dollar as its currency, assuring investors
that investment will not be subject to unexpected currency fluctuations
to the extent that the US is the market or sources of supply.
Easy access by air and sea to major markets such as the US Pacific
Rim, New Zealand, Australia, and Guam.
Modern telecommunications system and state of the art technology
such as telephones, telex, facsimile services and switching equipment.
Apart from the FSM Development Bank, the Bank of Hawaii, Bank
of Guam, and the Bank of the FSM are on hand to provide modern
international banking services linking the nation to the rest
of the world.
Inexpensive rates for long-term land leases for business sites.
Under treaty arrangement, the FSM has no quota restrictions to
US markets for domestic or value-added products.
The FSM also enjoys preferential market access to other Pacific
island countries including New Zealand and Australia. Under the
South Pacific Regional Trade Economic Cooperation Agreement (SPARTECA),
a non-reciprocal trade agreement, Australia and New Zealand offer
unrestricted duty-free access to virtually all products originating
from developing member countries, provided certain rules of origin
are met. Potential for duty-free access to Japan and other Asian
markets also exists.
All exports of products as well as re-exports of import products
are tax free.
The Exclusive Economic Zone (EEZ) includes some of the richest
tuna fishing grounds in the world.
Government-subsidized water and electrical services in all four
states of the nation.
Young and relatively inexpensive labor force.
Low local taxes.
Along with significant US financial assistance, the US also agreed
to extend several programs to the FSM, including the US Trade
and Development Program, the Small Business Administration, the
Economic Development Administration, the Farmers Home Administration,
the Job Training Partnership Act, and the Overseas Private Investment
Corporation (OPIC). OPIC is particularly important in that it
provides political risk insurance, finance, direct loans, and
loan guarantees.
The FSM Government welcomes and supports foreign investment as
part of its overall economic development strategy.
A tropical paradise with year-round warm climate in a myriad of
islands, the FSM has a clean and unspoiled environment and rich
natural beauty.
FSM Policy on Foreign Investment
The Federated States of Micronesia welcomes foreign investments,
aware that foreign capital, management, and technology are critical
to the country's development. Preference is given to investments
that are constructive and healthy.
Within the National and State Development Plans, the FSM is committed
to the acceleration of industrial development. It seeks to encourage
capital inflow from abroad, and to ensure that both the foreign
and domestic investors and the country profit through the processes
of growth and expansion. Investment in the FSM should:
- earn foreign exchange;
- create a significant number of jobs;
- make efficient use of local raw materials;
- offer prospects for future expansion;
- stimulate technological development;
- develop new and modern industries;
- manage use of natural resources;
- protect the environment;
- offer training to local workers at all levels of the business enterprise.
The development plan for the FSM places high emphasis on the role
of the private sector in the development of the country. This
emphasis is reinforced by the objective set forth in the plan
for manufacturing and industrial sectors. The plan mandates that
the government will work to:
- create a favorable environment for the operation and growth of
existing businesses;
- encourage and actively promote local and foreign investment in
resource-based and appropriate non-resource-based and other manufacturing
operations;
- strengthen private interstate and external trade;
- facilitate the development of the construction industry through
legislation, skills development, and favorable financing.
Establishing a Business in the FSM
Conducting business in the FSM is similar to operating a business
in the US because FSM business laws have been modeled after those
in the US.
Businesses may operate as sole proprietorships, partnerships or
corporations. Whatever its form, FSM laws do not require local
citizens to share in the ownership of the business if a foreign
investor prefers 100% ownership. The preferred approach, however,
is for outside investors to enter into joint ventures with local
partners. Foreign investment permit regulations, for example,
require that consideration be given during the review process
to the extent of local ownership in the business.
The reality of the situation is that participation of a FSM citizen
partner will, in all but the most unusual situation, be beneficial
to the outside investor.
The FSM Government will assist investors who request for assistance
in identifying prospective local citizen partners, although investors
are also free to do so on their own.
Investors to choose to manage their investments in the FSM will
need foreign investment permits to reside in the country for the
duration of their investment. If ownership in the business is
20% or less, such an investor is required to secure work permits.
For more information on investing or establishing a business in
the FSM, please contact the following national or state agencies:
Secretary Department of Resources and Development
FSM National Government
P.O. Box PS-12
Palikir, Pohnpei FSM 96941
Phone: (691) 320-2648
Fax: (691) 320-5854
Chairman Pohnpei Foreign Investment Board
P.O. Box 539
Kolonia, Pohnpei FSM 96941
Phone: (691) 320-5296
Fax: (691) 320-5296
Chairman Chuuk Foreign Investment Board
P.O. Box 280
Weno, Chuuk FSM 96942
Phone: (691) 330-2552
Fax: (691) 330-2233
Director Department of Resources and Development
Yap State Government
P.O. Box 336
Colonia, Yap FSM 96943
Phone: (691) 350-2182
Fax: (691) 350-2571
Chairman Kosrae Foreign Investment Board
P.O. Box FIB
Tofol, Kosrae FSM 96944
Phone: (691) 370-3170
Fax: (691) 370-2004
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