The Micronesian Alliance
Hezel and Lightfoot as U.S. Economic Policy "Myth Busters"
November 01, 2005

By Oliver Wortel
The Micronesian Alliance

KOSRAE, FSM - Working for the Asian Development Bank, the pair advocate the status quo for the FSM and openly critisize both ADB and U.S. policy. In a move to put a more compassionate and community friendly face on it's various development mandates within the FSM, the Asian Development Bank (ADB) sent the team of Francis Hezel and Chris Lightfoot through a tour of Yap, Kosrae, Pohnpei and Chuuk presenting a report on some of the misperceptions about the state of the national economy and where it is headed.

Hezel, a well-known social commentator and author wthin the FSM, is the Director of the Micronesian Seminar based out of Pohnpei, an institution that houses one of the greatest collections of Micronesian literature, photographs, films and other material in the Pacific.

Lightfoot, who for some time in the 90's led the Economic Policy and Advisory Team (EMPAT) that the ADB had established to restructure the economy of the FSM, is a consultant economist based out of Australia with extensive experience in the economics of development and the use of natural resources, particularly within the Asia-Pacific region.

Self-styled "myth busters", as Hezel told the audience at the end of the presentation, the two rather generally yet methodically took apart eight of the most talked about features of the new FSM High Growth plan, supported by both the U.S. and the ADB, amongst others.

In summary, the two strongly disagreed with - in apparent contrast to the nation's stated goal over the next 20 years - the idea of huge outlays of government funds to boost up the tourism, agriculture and fisheries industries, argued for a more organized focus and reliance on remittances from FSM nationals living abroad and gave serious recognition to the subsistence lifestyle as a measure of wealth rather than one of poverty.

The two on several occasions openly criticized both U.S. assumptions toward the FSM on the development of its economy over the 15-year course of Compact I as well as some of the ADB's own development goals within the region.

"Fisheries are where the most lessons are," said Lightfoot emphatically, taking aim at the first of the Big Three projected economic linchpins of the federation. "They are a world commodity and the profit margin is very small and the fleets move around the world looking for it." Lightfoot noted the increasingly and highly competitive nature of the search for marine life as profit and protein. He also cautioned against throwing more government resources into any fishing infrastructure, including ships. "The experience in most of the countries is the same," said Lightfoot. "Whereever they've pursued it, they've failed." When one respondent asked why, Hezel added, "Have you known any (FSM) government venture that has worked?" Instead, the duo recommended the government continue to focus on selling what are knows as "access fees" to foreign countries. "Papau New Guinea, the single biggest fish resource in the world biased access to the locals but very little came out of it in terms of dollars. They removed impediments and started charging access fees and the profitability expanded terrifically," said Lightfoot. According to their report, revenue immediately went from $12 million to between $60- 80 million annually. "The fish move. Bottom line. That's a reality. The government should get out of it."

The "myth" of a nation of islands being able to purchase their way into the world tourism industry was discussed as well. "If you build it, they will come," is a fiction according to the pair. Lightfoot stated that a mangrove boardwalk built through the mangroves of Pohnpei, for example, "would not bring a single extra tourist" if the other basic conditions of the industry are not met first. Again, there was a strong caution for the government not to invest millions into the industry in order to buy a place on the traveler menu of the global tourism sector. "Trying to buy your way into it is very risky," said Lightfoot. "We are a bit skeptical about doing this. You have to be very cautious."

Lightfoot added that the government can actually be an "impediment" to tourism growth. The pair of presenters noted that there were two basic ingredients needed for tourism to grow. The first is a regular schedule of consistent plane arrivals and the second is a relaxed land tenure system that allows leaseholds by foreigners. The ADB has been trying with some success over the last several years to crack the tough land and water ownership laws that keep those resources firmly in the hands of FSM citizens. Part of the ADB's Private Sector Development (PSD) loan program in the FSM calls for the states to pass mortgage and land lease laws allowing easier access by foreign investors and business interests. Although the various state legislative bodies grumbled, filibustered and struggled with the decision to go along with the PSD loan provisions, most have passed the mortgage and investor-friendly land lease laws that would open the door to greater foreign interest, investment and development.

Ultimately, stated Lightfoot, in matters of land, "There has to be a balancing mechanism" that allows for the privatization of land, "but don't allow locals to lose access to land." The U.S. also has also focused heavily on the development and fostering of the private sector through the support of regulatory restructuring as well as facilitating partnerships between U.S. and FSM government and business interests.

In the presentation, Hezel criticized certain assumptions made by U.S. officials during Compact negotiations with the FSM, particularly as it related to those surrounding the development of the private sector in the first 15 years of the U.S. - FSM Compact era. "15 years is a very short time to develop an economy with limited resources, a far-ranging geography and different cultures." Hezel stated that "implicit in U.S. rhetoric" is the assumption that the FSM should have a more developed economy. "We are taking issue with that," stated the director of the Micronesia Seminar in Pohnpei, and added, "There has to be a certain amount of realism."

On agriculture, again contrary to neoliberal economic policy and planning, the pair posited that it was a myth to assume the sector was "underperforming." "There's actually a lot of agriculture and you can't actually say it's underperforming," said Lightfoot. "It's a big contributor. It's performing at a very high level. The idea that this is a substandard activity is absolutely silly," added Lightfoot when he noted that over 45% of Micronesians live mostly on a subsistence diet.

The "subsistence economy," as Hezel reaffirmed it, "provides a supplementary income for many people" and adds to the overall opportunity and quality of life of the people. The discussion led into what was termed as the myth of limitless growth, a development fallacy that Lightfoot pointed out is "really bad economics." According to the pair there are, or at least should be, limits to growth, two primary factors being location as well as the natural resource base available.

The ADB-funded presenters also made particular note - a common refrain amongst international banking institutions (see "Hezel Interview: Media, Governance and the Island Way", Alliance Issue #10 for a more detailed discussion on the subject) - that for monies to flow and economies of developing countries to grow, local governments must have transparency and consistency. "Said Lightfoot in a generalization of the FSM: "Government is anything but transparent and consistent."

Poverty, always a contentious and particularly sensitive issue within the islands, was also broached as a myth from the presenters collective perspective. Hezel confronted the (non)issue head-on, explaining that banks and other financial institutions view poverty as being "prevalent" according to capitalistic and materialistic standards, while the people within the FSM would generally agree that poverty is "nonexistent." Hezel pointed out that the Pohnpei Chamber of Commerce holds the latter view.

"There is a subsistence affluence that exists, so people do not need as much money to take care of themselves, said Hezel on the value of the local lifestyle, often not counted in economic graphs and models. Ultimately, added Hezel, the question boils down to: "What do people need to be healthy and happy?"