ADB Continues Support for Good Governance

ADB Continues Support for Good Governance, Inclusive Social Development in Micronesia

MANILA, PHILIPPINES (27 November 2007) - The Asian Development Bank’s (ADB) Country Operations Business Plan for Federated States of Micronesia (FSM) 2007-2009 reaffirms ADB’s commitment to supporting good governance, inclusive social development and sustained private sector-led economic growth.

“ADB’s strategy in FSM for 2007-2009 supports the Government’s twin goals of economic growth and self-reliance, as highlighted in FSM’s Strategic Development Plan (SDP),” said Philip Erquiaga, Director General of ADB’s Pacific Department. “Economic self-reliance and growth are appropriate means to address the current financial difficulties and create a solid foundation for future sustainable growth. ADB will continue to coordinate and cooperate with FSM’s other development partners, particularly in exploring cofinancing opportunities.”

Implementation of the government’s SDP has been slow, due partly to capacity limitations and the government’s federated structure, which presents challenges in reaching consensus on reform and policy coordination. The Federated States of Micronesia relies heavily on foreign aid, particularly from grants provided by the United States government under the Compact of Free Association approved in 1986. Since ADB prepared the Country Strategy and Program Update (CSPU) 2006-2007 for FSM, the island nation has experienced a tightening of the fiscal environment, due to stricter controls on the use of Compact of Free Association (Compact) funds.

The 2007 Asian Development Outlook showed that growth in FSM is expected in the range of 1.0% to 1.5% for 2007, an improvement compared with an estimated contraction of 0.7% in 2006.

“Core issues for FSM in the medium term include public enterprise reform, implementation of tax reforms, strengthening of accountability and transparency, and creation of a conducive environment for private sector development, said Eugene Zhukov, Director, Pacific Department. “The economy will continue to face important budgetary and economic constraints over the medium term. However, it will be crucial to push ahead with reforms if the goal of self reliance is to be achieved by 2023.”

“In keeping with the Country Operations Business Plan for Federated States of Micronesia 2007-2009, ADB is looking into providing technical assistance that will help improve economic planning and management, government performance reporting, the effectiveness of some public utilities, and information sharing between FSM’s congress, state departments and civil society,” said ADB’s FSM Team Leader Anthony Gill.
The Federated States of Micronesia is a grouping of 607 small islands in the Western Pacific. FSM’s 107,008 people inhabit its federation consisting of four States – Chuuk, Kosrae, Pohnpei and Yap. Each State has its own government, language(s), culture and identity.

ENDS

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