Micronesia (Federated States of)

The purpose of this Country Strategy Paper (CSP) is to provide a framework for EC co-operation with the Federated States of Micronesia (FSM) under the Cotonou Agreement. The framework is based on global objectives of EC-ACP co-operation, FSM’s own development policy, an analysis of the political and economic situation in the country, and an assessment of the past co-operation programmes of the EC and other donors. It concludes with the proposed EC response strategy of the 10th EDF and an Indicative Programme.

FSM became signatory to the Cotonou Agreement on 23 June 2000. Under the 9th EDF, the focal sector was renewable energy.

The Federated States of Micronesia (FSM) consists of about 607 mountainous volcanic islands and coral atolls in the Northern Western Pacific scattered over some 2 978 000 km² of ocean. Only about 40 islands are of significant size, several of which are uninhabited. The total land area is approximately 701 km² and the Exclusive Economic Zone (EEZ) is approximately 1.0 million square miles, giving the FSM one of the largest tuna fisheries in the Pacific. The main source of income from offshore fishing is from annual licences granted to foreign vessels. A Fisheries Partnership Agreement between the EU and FSM came into force in February 2007.

FSM was part of the United Nations Trust Territory of the Pacific Islands, under U.S. administration during the period from 1947-86. The four states which make up the FSM agreed to become a federation in 1979. A Compact of Free Association with the USA came into effect in 1986, marking FSM as an independent nation. In 2005, the FSM population was a little over 108,000, but there is a high and increasing rate of migration to the United States. The FSM economic structure is still dominated by a large administration with heavy reliance on external funding. In 2006 FSM's per capita GDP is estimated to be US$2.300. The economy relies on three types of economic activity: 1) subsistence farming/fisheries, 2) wholesale/retail trade, 3) the provision of government services. FSM has a young and rapidly growing population, with some 50% under 18 years of age. The country has rather poor health indicators, particularly in the remote outer islands which basic social services often fail to reach. FSM also faces decreasing education enrolment rates, retention rates and access in the outer islands. Available data suggest that only 41% of the population have access to an improved water source, and 45% to improved sanitation.

Like many other Pacific island states, FSM is vulnerable to natural disasters such as cyclones. It is also classified as a biodiversity "hotspot". FSM’s economic development is directly linked to its beautiful environment, which provides the natural resources for food, shelter, and traditional medicines. The environment also provides potential for the development of tourism.

Under the 10th EDF, the focal sector is Water and Energy (in particular renewable energy) to be delivered, if desirable and feasible, via a Multi-Country Programme. The A envelope (programmable funds) is € 8.3 million and the B envelope (funds to cover certain unforeseen needs) is € 0.7 million. 90% of the A envelope or € 7.47 million is earmarked for the focal sector, the development of renewable energy. Non State Actors will be encouraged to participate in the implementation of the programme. The remaining 10 percent (€ 0.83 million) will be to establish a Technical Co-operation Facility from which necessary Technical Assistance, studies and EDF-related training can be funded.