Cover Story
Hot Spot #2: Marshall Islands
The Battle For More Compact Money Dominates
Marshalls, FSM want more but US not prepared to pay more
The 210,000 inhabitants of two Central Pacific atoll nations are quivering with relief, although not all that happily so.
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They’ve just had another lifebelt thrown grudgingly to them. They can cling to it for 20 years. After that, their former ruler, and still partially so, the United States, hopes to leave them to fend for themselves, although it intends to cling on to a war rocket testing base it has at Kwajalein Atoll in the Marshall Islands.
In October, the Marshall Islands and Federated States of Micronesia, after months of protracted wrangling that even the United States States Department conceded was “rancorous”, initialled an agreement to a successor for the 15-year-long compact of free association consisting of hundreds of small, poor islands spread over several million square kilometres of the Pacific, the Marshalls (74,000 people) and Federated States of Micronesia (136,000 people) were seized from Japan by the United States in 1945 and then ruled as military colonies in a fashion that ruined their simple economies, destroyed much of the local culture, and turned the once self-sufficient people into dependent addicts of United States imports, including food.
In 1986, after years of negotiations, the Marshalls, with some islands ruined by radiation from United States hydrogen bomb tests, and Federated States of Micronesia were granted something just short of full independence. In return for letting the United States maintain ultimate military and political control of their affairs, the two territories became self-governing states. They became entitled to 15 years of aid totalling about US$1300 million for the Federated States of Micronesia and about US$1000 million for the Marshalls.
They were also entitled to receive various United States federal government services and their citizens were entitled to settle and work in the United States and its other colonies.
At the end of 15 years neither country has all that much to show for the money. The United States blames them for wasting it. They blame the United States for delivering it with too many strings attached, and wrong advice and interference they say caused waste.
The United States went into negotiations intending to cut the money it costs to keep control of the two countries that are no longer strategically important to it as they were, except for Kwajalein, although United States ideas might be changing now that it classes China as the next country it is most likely to have a big war with.
Since they have bad population pressure problems, almost no resources except tuna stocks, small land areas, and highly shaky economies, both small countries went to the United States hoping for more.
The new deal for 2003-2023, which needs to be approved by the United States Congress, will bring the Federated States of Micronesia about US$1800 million in grants and funding and US$960 million for the Marshalls, plus the continuation of some federal government services.
As a ploy for eventually ending aid, the United States will put part of its money into national trust funds it hopes other foreign aid donors will also contribute to.
With a scheme copied from the successful Tuvalu investment fund, the idea is to build up the fund that by investment will produce enough revenue annually to enable the United States to quit the scene after 2023.
The United States insisted on the creation of what is called a “Joint Economic Management and Financial Accountability Committee,” through which it will have a lot of control over how aid money is spent in addition to retaining military and foreign policy controls. Whether the committee will be successful in avoiding the waste of the past 15 years remains to be seen. Federated States of Micronesia and the Marshalls signed up for the 20-year new compact with reservations. In particular, they wanted the United States to agree to make inflation to adjust to aid payments at a rate of 100 percent. But United States negotiations wouldn’t agree to more than a 67 percent rate.
The two islands governments hope to persuade the United States Congress to be a little more generous. But they rely on the United States for about 60 percent of their revenue (in 1998, 54 percent for Federated States of Micronesia and 68 percent for the Marshalls) and have nothing much important to offer back, since they are weakly positioned to deal with one of the world’s proportionally stingiest aid givers.
But then there is Kwajalein. The United States obsession with building military might makes the atoll crucially important to it for weapon research. The current lease on the atoll is due to expire in 2016. On their small, arid, resourceless and overcrowded atolls, the Marshallese, still desperate for money, are now offering to extend the lease until 2053 if the United States agrees to increase annual rent from US$13 million to US$21 million. The United States wants to keep Kwajalein but not pay more.
