SEATTLE, Washington — In 1982, the U.S. concluded the Compact of Free Association (COFA) with three Pacific island countries: the Marshall Islands, Micronesia and Palau. Effective since 1986, this agreement guarantees the latter aid and access to U.S. federal agencies’ programs, while permitting their citizens to work in the United States.
The Compact of Free Association
Prolonged until 2024, it prescribes that aid takes the form of grants subsidizing education, healthcare, environmental protection or infrastructure building and maintenance. Local governments may also spend the money on stimulating private enterprise or improving public sector facilities.
These investments are important since their recipients are vulnerable to natural catastrophes that undermine economic growth and oblige the authorities to redirect funds from new initiatives toward reconstruction.
Disasters aside, there are ordinarily few development prospects in the Pacific. Subsistence farming and fishing are widespread, whereas business engagement remains limited. In Micronesia alone, one in four live below the poverty line and the government is the predominant employer.
Although the Palauan situation is slightly better, as 48% of the labor force reportedly had private-sector jobs in 2015, financial assistance is still desirable.
The COFA has actively sought to mitigate these problems through certain measures put in place.
COFA’s Mitigation Measures
- Disaster Relief. To respond to tropical cyclones, the U.S. maintains the Disaster Assistance Emergency Fund, tasked with coordinating disaster response and recovery in the Marshall Islands and Micronesia. In 2019, it was allocated $244,260 for this purpose. The Federal Emergency Agency (FEMA) conducts disaster preparation activities and can provide additional funding, should the U.S. leadership sign a disaster declaration, as President Trump did in 2018 in the aftermath of the Tropical Depression Jelawat.
- Investment in Infrastructure. Under the COFA, Palau, Micronesia and the Marshall Islands obtained $105 million between 1986 and 2001 to create a robust domestic energy network and resultantly make access to electricity stable and more affordable. In turn, this was to incentivize investment in local businesses due to the diminishing overhead costs and greater trust in the local power supply. The U.S. also supports housing schemes such as the Mid-Corridor Housing Project on the Kwajalein Atoll, Marshall Islands. It received circa $2 million from the Joint Economic Management and Financial Accountability Committee (JEMFAC) in 2019. Another COFA initiative, the Ebeye Water Supply and Sanitation Project, has extended clean water access to 300 households in Ebeye, the Marshall Islands’ second-largest city with a population of 15,000.
- Healthcare Provisions. Within the first 15 years of the COFA’s existence, the U.S. offered Palau almost $9.5 million to develop and sustain its medical programs, including creating new treatment centers and issuing hospital referrals. Micronesia and the Marshall Islands received close to $27 million of healthcare aid in that period. As recently as in 2019, the former acquired funding to renovate the state hospital on the island of Pohnpei, inhabited by more than 36,000 people.
- Professional Opportunities. Besides enabling the islanders to work in the United States, where they may earn higher salaries and send remittance payments home, the COFA has been allocating resources for post-secondary education scholarships. These are designed to help students afford their studies in the U.S. and attain the expertise, which they could theoretically bring back to their home nations. Moreover, the locals often join the U.S. military in pursuit of social mobility, with Micronesia boasting a particularly high per-capita enlistment rate: more than 1,000 out of only 107,000 Micronesians are currently in active service.
The Compact of Free Association will expire in 2024, having invested $2 billion in Palau, the Marshall Islands, and Micronesia with the goal of enhancing the local living standards, expanding access to educational and professional opportunities for young Pacific islanders and ameliorating the dire economic impact of disasters on the poorest and the most vulnerable.
For maximum spending efficiency, grant expenditure is decided upon collectively by the United States and the recipient states. The latter annually sends delegates to the White House and to Congress to report on the projects’ implementation as well.
Those investments have seen developmental benefits. In the period 2003 to 2013, the Micronesian economy grew by an impressive 19% and generated approximately 1,300 new jobs, despite the country’s remote location and exiguous resources.
In 2019, both the Marshall Islands and Micronesia registered at least 3% GDP growth, and neither have suffered from negative growth since 2015.
In Palau, however, economic expansion has been more desultory over the past 10 years, while the national economy contracted on four occasions.
The COFA is a unique international agreement between the U.S. and Palau, Micronesia and the Marshall Islands. Since 1986, its provisions have been supporting living standard improvements in the Western Pacific and considering that there have been positive developments in the region, the COFA’s assistance is certainly worthwhile.
– Dan Mikhaylov