Cover Story
Majuro Miracle
Significant Progress Has Been Made In The Marshall Islands, But It Is Only The Beginning
The Marshall Islands rocketed into 2002 with a fabulous “block party” in downtown Majuro that featured dancing in the streets, live bands, food, drinks and good cheer by thousands of residents and visitors. This New Year’s Eve extravaganza, the third consecutive bash, was the biggest, the result of local businesses, government agencies and the tourism office coming together to sponsor the festivities.
The challenge facing the country is how to marshal a similar level of vigor and cooperation for economic and national development as the nation heads into its second, and possibly last, long-term funding pact with the United States.
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The Marshall Islands has been confronted, over the past two years, with a series of critical U.S. General Accounting Office reports by auditors who looked under every financial rock and a few more from 1986 to the present.
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Two messages emerged from these reports: 1) accountability and adequate management over spending of U.S. funds in the Marshall Islands was limited, particularly in the early years; and 2) the hands-off attitude by the U.S. (until the end of the first 15-year deal) in terms of auditing and economic consultations sent the wrong message, encouraging many of the problems “uncovered” by the GAO in the waning days of the first Compact.
Push for accountability
There is a growing group (though still a minority) of mostly younger Marshall Islanders who are promoting accountability in government. The roots of the Marshalls new push for government accountability and transparency, however, remain relatively shallow.
The government of President Kessai Note, the first to publicly acknowledge corruption as a problem, has only been in office for two years. Still, there are some hopeful signs emerging.
During the mid- and late-1990s, the Marshall Islands Social Security Administration (MISSA), which operates the country?s retirement and health funds, was the target of charges of mismanagement and abuse. But in fewer than two years, a new board and administration headed by Saane K. Aho, installed by the Note government, took MISSA from being one of the nation’s worst run agencies to the best.
Two and a half years ago, MISSA operated at a deficit of $3 million. MISSA ended the last fiscal year, on September 30, with $170,000 in the bank. The change was the result of aggressive tax collections and administrative cost cutting. Moreover, the agency that was repeatedly in no condition to be audited in the mid- and late-1990s recently completed its 1997 through 2001 audits.
The Ministry of Finance has been in an equally troubling situation, with an early 2001 report calling its tax collection system “dysfunctional.” But since the government appointed long-time deputy secretary Saeko Shoniber as the permanent secretary 11 months ago, there has been a transformation. More taxes are being collected, audits are current, and, most importantly the Marshall Islands ended FY2001 with a $2 million surplus.
Five years ago, the U.S. Department of Interior halted funding of the Ebeye Hospital and threatened the Marshall Islands with having to pay back part of the $4.5 million spent because of questions of mismanagement. Last year, Interior agreed to resume funding for the hospital and related infrastructure on Ebeye. Similarly, as further evidence of a new mood among U.S. agencies about funding projects in the Marshall Islands, the national government received more than $650,000 in special grants (on top of approximately $9 million in ongoing federal grants) during 2001, the majority from the U.S.
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Fourteen months ago, a cholera outbreak killed six people on Ebeye and forced a quick public health response. In January, Ebeye’s new $10 million, 33-bed hospital opened, an indication of the transformation that is taking place in infrastructure improvements on the overcrowded island that serves as the bedroom community for the 1,500 Marshall Islanders who work at the Army’s Kwajalein missile testing range.
The Marshalls has also fully established its banking commission and financial intelligence unit, linked closely to the U.S. Department of Treasury. Government officials expect that, later this year, the Marshall Islands will be removed from the international Financial Action Task Force’s “blacklist” of countries considered uncooperative in the fight against financial crimes.
“We need to be accountable not for the donors but for the health of our own economy,” says Baron Bigler, longtime general manager of the Marshall Islands Trust Company, the country’s ship and corporate registry. “If it satisfies the US and other donors in the process, fine.”
Dependent mentality
But the fact remains that the Marshall Islands has little in the way of a productive economy. U.S. funding comprised more than 50 percent of the current year’s national budget, and while dependence on U.S. funding has decreased modestly since the Compact started in 1986, if U.S. funding was withdrawn, the country would collapse. Relations with Taiwan, which are bringing considerable financial aid into the Marshalls, have had a major impact on government services and infrastructure development since 1999. But U.S. funding remains the dominating factor in the economy.
The Marshalls is laboring under many of the usual developing country problems: isolation, economies of scale, demand for imports exceeding exports, etc. It has to contend with another, more difficult problem as well. “A dependent mind-set is handicapping the Marshall Islands’ development,” reported Meto 2000, an economic report produced jointly by the Asian Development Bank and the Marshall Islands government.
This attitude of dependence and complacency — “the government will take care of the problem” — is a holdover from the earlier U.S. Trust Territory administration and is only slowly receding. Part of the problem can be fixed on the alarmingly bad public school system, where many students graduate from high school with barely a second or third grade reading ability. This in turn forces the two-year College of the Marshall Islands to devote a large chunk of its resources to teaching developmental courses in an attempt to get students to qualify for college-level credit courses.
Niche market developments
Since the Marshall Islands Visitors Authority was established in 1997, there has been aggressive, focused promotion of niche market tourism for the Marshalls. This tourism push has been aided by several key events:
The Marshalls only saw 1,323 true visitors in 2000, according to Visitors Authority statistics. For the first eight months of 2001, the Marshalls was on track to pull in its highest visitor count ever — 16 percent higher level than the previous year. But that was before September 11. And although the Marshalls was not affected as dramatically by September 11 fallout as Guam and Saipan, it did experience some downturn.
Still, overall the number of visitors has been slowly moving upward. Just 45 scuba divers traveled to Bikini to dive on the World War II wrecks in the first year, 1996. In 2001, about 340 dove Bikini, injecting $255,000 directly into the Bikini community as every Bikini man, woman and child received $85 in December from the dive program. Meanwhile, the hiring of Satoshi Yoshii by Robert Reimers Enterprises to run its Marshalls Dive Adventures has brought an increasing flow of Japanese divers to the country to dive such atolls as Arno, Mili and Majuro, as Yoshii has targeted that market.
Products from the islands
Robert Reimers Enterprises black lip pearl harvest in October was the biggest since it launched its pearl farm in the mid-1990s. While it was small by commercial standards — estimated at just $50,000 — the harvest suggests the potential for this sustainable commodity. The difficulty has been finding funds needed to expand the pearl farm located on Arno, though RRE officials believe they have an adequate supply of pearl oysters to produce two harvests in 2002.
While much research has been put into pearl growing in recent years, there is little focus on pearls from the government’s fisheries operation, which is heavily involved in commercial fisheries expansion. Commercial fisheries have been on the upswing since the late 1990s when the Marshall Islands Marine Resources Authority streamlined permitting, reduced fees and generally adopted a more business-oriented approach.
The Marshalls earned an average of $4.5 million annually from fishing license fees in 1999 and 2000, about double the level of the early 1990s. More significant has been the ongoing tuna transshipment operation using Majuro as a base, where purse seiners off-load their catches onto waiting mother ships and then head directly back to fishing grounds. Nearly 600 transshipment vessel visits occurred in 1999 and 2000.
The significance of this is not in the fees generated, which amounted to only $346,800, but rather in the spin-off spending for supplies, fuel, entertainment and meals. A fisheries official estimated that more than $5 million was being spent annually in Majuro by the purse seine fleet in 1999 and 2000.
Counting on the Compact
The Marshall Islands immediate future hinges on the outcome of the Compact funding renegotiations that are now in progress. A national trust fund, started late last year with a more than $14 million deposit by the Marshall Islands government, offers the hope of funding future government services adn suggest a departure from a mentality that in the past saw all money available spent immediately.
President Note has established his administration as a stable, if uninspiring, government. His administration affords the Marshalls its best opportunity in obtaining favorable terms from the US for future funding by its demonstrated commitment to accountability.
Then it will be up to the Marshall Islands to improve its education and health systems, and to devote needed resources to fisheries and aquaculture so that the country can begin reducing its dependence on funding from Washington.
Photo: Floyd Takeuchi
