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Government of the Federated States of Micronesia

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.

Photo: A road on PohnpeiSitting 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