Atolls In Limbo

The Marshalls constitution requires approval of landowners for any use of land. The U.S. Congress has set a 2009 deadline for resolving the Kwajalein package. But there has been no movement since early 2003, when the amended Compact was first signed, and, in fact, the two sides are more polarized than ever. The landowners say that they want to begin preparing now for closure of the key missile-testing base in 2016-when the current lease expires. Whether it's a bargaining point or firmly held belief, the position of the landowners has serious-and at this point somewhat unknown-ramifications for the overall Compact relationship with the U.S.

Another, somewhat lower profile, indication of how the land situation is affecting national development can be seen in the difficulty in moving forward Compact-funded education infrastructure projects. Of nine elementary and high school building projects scheduled for 2005, worth about $14 million, all but two have land-related potential hold ups. These range from boundary disputes and expired leases to lack of land and difficulty in gaining landowner consent for new sites.

The Marshall Islands has important changes to make to its private sector and business climate if it is to navigate towards a more vibrant economy.Photo: Giff Johnson

At least one factor in the land use problems, particularly noticeable in Majuro, the national capital, is the influx of people and funds from both the People's Republic of China and Taiwan, the latter with which the Marshall Islands has diplomatic ties. The increasing dominance of Chinese and Taiwanese in the business sector has become a significant political issue, fostering complaints from the public and debate on the floor of the Nitijela (national parliament). But the bottom line is that Asian businesses have been willing to pay, and local landowners have been happy to accept, well in excess of what has been the going rate for land-$3,000 per acre per year-to gain access to land in Majuro.

That development that has sent Majuro land values skyrocketing and made government access to land increasingly problematic. Why rent prime property to the government for a school at $3,000 an acre when you can get double or triple that amount for the same land from an off-shore investor?

With the prodding and aid of the Asian Development Bank, the government last year established a Land Registration Authority with the goal of identifying land with clear title in an effort to both bring clarity to the land situation and make it easier for potential investors to locate usable land that isn't subject to disputes. But the process is only just beginning and a long way from showing firm results.

For as long as anyone can remember, government has been the business of the Marshall Islands, much as it has been in other U.S.-affiliated islands. The government payroll has risen since ADB-supported cutbacks in the late-1990s to more than $25 million annually-in a $115 million annual budget. But, with the exception of some improvements in health and education delivery, there is, as Chief Secretary Robert Muller notes, a "malaise" in the government.

"The present dysfunction of the public service is a combination of not following their own rules and emphasis more on the employee than the mission," says Jerry Kramer, chief executive officer of Pacific International Inc., the largest construction company in the country. "If the government were a private business and used the Public Service Commission as it now operates, they would be bankrupt and out of business in a very short period of time."

Local businesses have long-pushed for greater privatization of government services. But little has changed in recent years, despite rhetoric from both government leaders and the ADB about the importance of privatization. Local businesses want involvement in government decisions that affect private business, but generally don't see much real communication between the two sectors. Kramer highlights a number of key problems: "There is little interface between the government and the people who are served," he says. "There is broad expertise in our community but no medium through which all stakeholders can meet to discuss plans that will contribute to our economic and social development." He and others see the lack of any system for addressing complaints or poor performance by government agencies as a serious inhibitor to progress. One recommendation coming from the private sector is for the creation of an ombudsman's office.

But there are gaps in understanding and appreciation of the situation. While government leaders point to this year's national budget of $115 million-the highest ever-as being evidence of a prospering nation, local business people and other observers see the closing of the tuna loining plant, and the consequent loss of about 650 jobs, as a more significant indicator of the health of the local economy. Given that there was virtually no increase in the number of jobs available in the country between the 1988 and 2000 censuses-the major development since then being the loining plant-the significance of the loss of a large number of jobs cannot be understated.

"Marshallese citizens must have more income for the economy to develop," Kramer comments. "A rich government doesn't equal a rich country." Indeed, the first detailed socio-economic survey of a densely populated urban area in Majuro conducted last year was startling. Nearly 50 percent unemployment, lack of money to pay for water, sewer and power services and high levels of water pollution were found to be a fact of life in this neighborhood of 2,000 people-but it clearly offers a snapshot of the reality of urban life for many in Majuro today.

While tourism has made some important gains-notably the dive and sports fishing operations, and the hosting of regional conferences and workshops-its impact on employment remains modest since visitor numbers are still relatively small.

Funding under the Compact is largely focused on education and health. But even that may not be enough, given the neglect in years past. There clearly needs to be more emphasis on education, youth services and health services geared to young people, who make up a majority of the population. "If kids are educated, they will come back and fix the problems," says Kramer. "Otherwise the cycle of dependency-of uneducated, unhealthy kids having more kids-will continue."

As the Marshall Islands moves into the second year of its new 20-year Compact with the United States, its basic funding is assured. The challenge now is to effectively tackle the numerous socio-economic problems that are festering below the surface in the country, address privatization as a way to give the government more resources to focus on the education and health sectors, and to resolve the impasse with landowners at the missile testing range. It's a hefty agenda, but one that's critical to progress in this central Pacific nation.