U.S. - Pacific
Power or Partnership?
Compact II Isn’t a Nation-Building Deal
Representatives from the United States and its two partners, the Federated States of Micronesia and the Marshall Islands, are just now leaving the negotiations table with a new agreement for U.S. funding under Compact II.
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The problem with these new funding provisions is not so much the dollar figure as the controls on the funds. The U.S. has insisted on establishing a five-person Joint Economic Management Committee that would meet to decide on whether FSM and RMI had complied with U.S. funding terms.
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The U.S. has written these procedures into the funding agreement for a commendable reason; it wants these Island nations to use its financial aid responsibly. Many Micronesians would applaud these measures, since they see this as a means of holding the governments to their commitments and imposing on them a new standard of honesty and transparency. If the U.S. saw itself as erring by inattention during the first Compact funding period, this plan seeks to compel everyone to look at the books many times over during Compact II. Should FSM or RMI fail to comply with these requirements, funding can be wholly or partially withheld.
As well-intentioned as these requirements are, they may be counterproductive in the long run. As the recent record suggests, they will cause resentment toward the U.S. and, even more importantly, they simply won’t work.
Restrictions of any sort can be annoying, but the proposed controls under Compact II are seen by some FSM leaders as an infringement on FSM sovereignty. Admittedly, it’s common enough for political leaders to bandy about this charge, but it should give U.S. pause when a thoughtful, soft-spoken person like Congressman Isaac Figir delivers a major speech in which he urges the FSM to turn down the financial aid rather than accept money subject to the current oversight provisions. U.S. officials argue that since the money belongs to the U.S., the latter should have the right to determine how it’s spent. True enough, but the mechanisms under Compact II allow U.S. oversight on how all the money is spent, local island revenues as well as U.S. aid. No multi-national donor nor international organization, even the most heavy-handed, has yet demanded such broad financial control as to give them veto power over every dollar spent.
Micronesian leaders may feel they have been demoted to the status of an irresponsible teen-ager who, because of a couple of lavish purchases he once made, has had his allowance cut and lost the right to spend it as he wishes. “Give us time to get our house in order,” is the plea of the new nations to the U.S. The U.S. response is, in effect, “You’ve already had 15 years. How much longer do you need?”
Those without a sense of history are condemned to repeating the past. Perhaps the old saw should be rephrased: Those without a sense of history are bound to demand of other nations what they themselves could not have done under similar circumstances.
The controls won’t work because the mechanisms that the U.S. has proposed in the new funding agreements represent a series of hurdles to be jumped before funding is released. Islanders have mastered that system. Administrators have become proficient in the intricacies of presenting budgets and financial statements that pass muster. The point of the exercise is to play the system so that it disgorges the money that the program provides. FSM and RMI administrators will comply with the requirements, but they won’t learn how to manage their resources any more efficiently. Their effort will go into doing all the things that have to be done to ensure the funds, but there will be little attention given to creative ways of making the funds deliver more effective services.
Meanwhile, the U.S. will have squandered an opportunity to become a respected partner in the development of these nations in favor of becoming a resented watchdog. Although the U.S. will remain a benefactor of FSM and RMI, it will have created an adversarial climate rather than a collaborative one.
So what will work?
There is another model, one that will ensure a good measure of accountability while strengthening the relationship between the U.S. and the two island nations it supports. In this model, a team would be positioned on the ground to work with local decision-makers before the budget is completed. The team would assist Micronesian administrators in shaping the budget to reflect development goals while tailoring it to fit projected revenues. The team would be engaged in training local personnel as they work to develop strategies for what the countries would hope to achieve. Because the team was resident in the islands and worked with island officials on a day-by-day basis, they would be aware of the political currents on the local scene and would be in a position to help navigate these currents.
This model might sound fanciful, a liberal’s dream of what should be rather than what could be—were it not for the fact that the model has been operational in FSM for some time. The Economic Management Policy Advisory Team is a small group of expatriates and local counterparts who are based on Pohnpei, but travel widely throughout the FSM. As their name suggests, they are an advisory team, with no stranglehold over the local political authorities, no power of veto over government decisions.
At the end of the day, however, it was not EMPAT, the small group of expatriates and locals who knew the economics of the place better than anyone else, who made the decisions. It was the country’s political leaders—the president and governors, the elected legislators, the magistrates and other officials. There was never really any doubt who had the last word, but it was also clear that there was plenty of talk before the final decisions were made.
Ironically, as the U.S. is casting about to find a system of fiscal oversight that can keep FSM and the Marshalls toeing the line, EMPAT is preparing to disband. The one financial management mechanism that appears to have worked is about to be discarded because the Asian Development Bank and its donor nations, including the U.S., fail to see the importance of this model for small developing countries.
Yet Washington decision-makers feel that to check the well-publicized abuses in FSM and the Marshalls, there is simply no substitute for the power of the purse. In the eyes of U.S. officials, a reversion to the sort of controls that were exercised prior to the independence of FSM and the Marshalls in 1986 is more than justified.
Nation-building is a long and demanding task that continues long after the constitution is signed and the first local government assumes power, as Americans should know from our own history. In the case of these Micronesian nations, the task may be even more complex inasmuch as islanders have to make a transition from an island-based subsistence economy to a globalized mixed economy.
My view is that the new nations don’t need watchdogs so much as partners. They can benefit from people they can talk to, learn from, argue with and complain about. These partners—or mentors, if you like—are people who are their friends at the end of it all. They are the kind of people who not only lament their failures, but also cheer their successes.
Professional teams, expanded slightly to include expertise in education and health services and lodged in Majuro and Pohnpei, could offer oversight without usurping decision-making authority. They would provide solid input into development planning rather than simply punishment after mistakes are made. If incentives were offered—the sum of money, for instance, that represents the difference between what the island nations are asking and what they are receiving—these teams would be able to hold out the promise of a few million dollars more for a job well done. Such teams working under such conditions could make a real difference for FSM and RMI. A healthy partnership of this sort offers the best chance of making the Compact II agreement work—for the next 20 years and beyond.
