The Federated States of Micronesia became a US-administered Trust Territory of the Pacific Islands in 1947. This followed successive colonization by the Portuguese, Spanish and Germans, and latterly Japanese rule between the two World Wars, under a mandate from the League of Nations (a forerunner of the United Nations). In November 1986, the Federated States signed a Compact of Free Association with the USA, allowing for near-independence with US defense support. Admission to and support from the South Pacific Forum – an association that groups Australasia with the smaller Pacific island
nations – has been particularly valuable. Other than political matters, successive governments – including the present administration of Premier Leo Falcam, elected in 1999 – have been pre-occupied with the economic situation, as the Federated States suffer from remoteness and lack of industry and infrastructure. There is some development potential, particularly in the fishing and fish-processing industry, but Micronesia has some way to go before it ceases to be dependent on aid from the USA, which amounted to US$1.3 billion between 1986 and the end of the last century. In 1991, the Federated States of Micronesia were admitted to the UN.
Government The locally drafted constitution promulgated in May 1979 provides for a separate legislature for each of the four states of Kosrae, Yap, Pohnpei (formerly Ponape) and Chuuk (formerly Truk) and for a federal legislature (congress) of 14 senators. Each state elects one senator for a four-year term; these four are known as the ‘senators-at-large’. The other 10 senators are elected for two years and their representation is allocated according to the population of each state. The president and vice-president are elected by the congress senators-at-large.
Economy Subsistence farming and fishing are of declining importance as tourism has come to dominate the domestic economy and fishing is largely pursued by foreign commercial concerns operating under license. Mineral resources are limited to a few high-grade phosphate deposits. Sales of these licenses account for over one-third of national income.
Aid from the USA has been a vital source of income: under the Compact of Free Association with the USA, which was amended in 2004, the Federated States of Micronesia will continue to receive millions of dollars in annual aid until 2023. The compact also established a Trust Fund that will eventually provide the islands with annual payments in perpetuity. However, the decline in US help has depressed the economy. Growth was just 0.3% in 2005, while inflation was 2.2%. Unemployment was measured at about 22% in 2000.
The Federated States of Micronesia is a member of the South Pacific Commission and the South Pacific Forum. The main industries the FSM profit from are tourism, construction, specialized aquaculture, wood, pearls and craft items from shells.
