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FSM reacts strongly to GAO testimony

POHNPEI, Palikir (FSM Information Service): July 2000 - The Federated States of Micronesia has issued a statement expressing shock at the testimony by the U.S. General Accounting Office during a recent hearing before a U.S. Congressional subcommittee.

The hearing chaired by U.S. House of Reprentative Doug Bereuter June 28 focused on the financial assistance the United States has provided the FSM and the Republic of the Marshall Islands since the inception of the Compact of Free Association in 1986.

The Chairman of the Joint Committee on Compact Economic Negotiations, also the FSM Secretary of the Department of Foreign Affairs, Epel Ilon, stated in his statement that the GAO testimony "was shocking in that it indicts the FSM on what they perceive as irresponsible manner in which we have managed Compact funds, without also pointing out the substantial progress we have made since 1986, or even more so, since the U.S. Administration of the islands."

The JCN Chairman also expressed concern over the long-term impact of the testimony and the GAO's soon-to-be release report.

"There is much in the testimony that demands our immediate attention, particularly to correct any errors, and to paint a balanced picture of the FSM," wrote Ilon.

Ilon added, that if one questions the impression of the testimony, one only needs to look no further than the press headlines such as "1.6 Billion Dollars Squandered."

"On any informed and objective analysis, this is simply not true of the FSM at all," wrote Ilon.

Ilon wrote that though self-sufficiency, or more accurately, self-reliance has not yet been achieved, the experience of the past 12 years shows that there has been long-term economic advancement in the FSM.

"U.S. Assistant Secretary of State Stanley Roth, testifying before the U.S. Congress on October 1, 1998, stated in part, 'The reality is, there has been some progress [...] I certainly saw significant signs of economic development [...] but they are not ready to go it alone [...],'" wrote Ilon, quoting Roth.

The JCN Chairman pointed out recent estimates of the FSM Gross Domestic Product indicate that since 1987 the FSM economy has grown by an average annual rate of 2.5 percent.

He wrote, "While this rate of growth is modest, it has provided an acceptable increase in GDP during a period of rapidly declining real resource transfers from the U.S."

Furthermore, the JCN Chairman pointed to the commitments that the FSM national and state governments have made to a public sector reform program that has brought about policy reforms, structural adjustments, down-sized the public sector by 21 percent and reduced the wage bill by 29 percent to date.

"Obviously the leaders took serious political risks, knowing full well that the program will impose significant economic hardships on the electorate and unpopularity at the polls," wrote Chairman Ilon.

He also pointed out that the reform program is fully endorsed by the group of foreign donors to the FSM, which includes the United States government, the Japanese government, the Asian Development Bank, and the World Bank.

"In fact a good part of the fund for the program is provided by the U.S.," wrote Ilon.

Ilon states in the statement that it would be foolish to assert categorically that every decision the FSM made as a new, small-island developing country was wise and that management of complex issues and problems always resulted in the correct solution.

"Nevertheless, the taxpayers and citizens of the United States need to know that there is far more good news than bad, and that we have been faithful to the unique and mutually beneficial relationship that exists between the our tow countries," wrote Ilon.

"With the momentum now established, the goal of self-reliance can reasonably be attained within a specified time," continued Ilon.

Ilon also pointed out one major aspect of concern in the testimony and that was the overall impression that level of stewardship of Compact funds by both the FSM and RMI governments has been about the same; thus inferring that some common U.S. response can be applied.

"This is unfair, both to the FSM and the RMI. These are two entirely separate and distinct countries with very different Compact experiences, and each should be entitled to separate treatment in any forthcoming GAO report," wrote Ilon.

The JCN Chairman wrote that the FSM is engaged in serious negotiations with the United States over the expiring provisions of the Compact of Free Association and that the focus must be on the good accomplished, to apply the sometimes bitter lessons learned upon emerging from its territorial status, and to allow the best and most acceptable strategic plan for the future.

"Our success in this venture will set the stage for lasting financial self-reliance and a blueprint for growth and progress," wrote Ilon.

He added that now the impact of the GAO report will be an added burden under which the FSM must work during the negotiations, but the Joint Committee on Compact Economic Negotiations team knows that Representative Bereuter, Senator Frank Murkowski, and their colleagues in the U.S. House of Representatives and Senate are honorable people who want the best for the FSM and its citizens.

"Together, we will work toward that goal," wrote the Chairman.