August 09, 2010

By Bill Jaynes
The Kaselehlie Press

Federated States of Micronesia-The FSM Congress is currently in the process of holding public hearings regarding a proposed $22 million concessionary loan from the People 's Republic of China. If Congress votes to accept the loan ,the money would be used to revamp the main ports of the Federated States of Micronesia by adding fish processing plants and other facilities at all of the ports. Proponents of the plan say the loan would act to increase the FSM 's share in Pacific fisheries revenue and would provide nearly 1300 jobs for FSM people.

"The plan calls for approximately 50 foreign nationals who would be employed as management and as experts.1291 of the jobs would go to Micronesians," said James Movick, consultant for the FSM 's Department of Resources and Development R&D).

Movick says that the plants could provide employment opportunities for FSM citizens who are not already fully engaged in the work force, people who may have found it difficult to find employment in the past due to a shortage of jobs in the FSM. Employees

Terms of the proposed loan have not yet been set in stone but discussions have included a five year grace period before repayment must begin and the FSM would be charged a very low interest rate after that time on a 20 ear term.

The Pacific Ocean covers 63.8 million square miles, more than a third of the world 's surface. However, much of that water is not productive for commercial fishing. Although the FSM 's exclusive economic zone (EEZ)covers only 909,000 square miles of the Pacific (1.4 percent)the FSM 's waters are some of the most productive fishing waters in the Pacific Ocean, second only to Kiribas.

It 's not quite fair to say that the Federated States of Micronesia earned only one third of one percent of the $5.2 billion fishing industry in the Pacific. The country charged $20 million last year for fishing access fees. That earnings figure does not include income earned by Yap Seagull which has its own purse seiners and has a market of its own. It doesn't include port fees or land based support services such as lodging, meals, provisioning, mechanic cal servicing, or bunkering for fishing vessels that enter FSM ports. It doesn't include Gross Revenue or payroll taxes earned from ancillary services either.

The exact am mount of income that is brought into the FSM from fisheries activities that take place in its EEZ is very difficult to pin down. Even so, there is at least one thing about which the people of the FSM agree. Not nearly enough fisheries income stays in n the SM.

"We need income generation for our people. We need onshore investment (in the FSM).We need to pump business into our ports and we need jobs, " Movick exclaimed.

The loan,if it is ratified by Congress would be used to build plants within the FSM ports to facilitate transshipment and pre-processing of fish.

The operation of those plants would be contracted out. Contra acting out the operations would insulate the FSM government from operational risks, Movick said.

The decision to pursue a contra actor to run the facilities was based on an underlying philosophy that government should not be in business.

"In the fishing industry, companies can have a really good year follow wed by two or three really bad years. This is a way for the FSM to provide employment for its people but also to separate the government from operational risk, " Movick postulated.

A profit sharing arrangement with each of the FSM states is part of th he arrangements that have been discussed with h China.

R&D searched for fishing companies currently operating in the Pacific that already have the resources such as ships, market resources, transportation mechanisms and expertise. The department came to the conclusion that Luen Thai is currently the only truly viable choice currently operating in the North Pacific.

Movick said that since the company began business relations with the FSM in 1993, "There has not been one single incident where they have failed to do their work or to keep their agreements." He said that the corporation functions as, "good corporate citizens.""

"We receive offers all the time from companies from other countries but when we get past the hype it 's just a lot of talk," Movick said." Luen Thai has already demonstrated that they can manage projects like these. The FSM needs more than just talk. "

Though Luen Thai is a fishing company based in China, the loan that Congress will be considering is not at all dependent upon the selection of Luen Thai or any other Chinese fishing company.

Congress passed a resolution during its last regular session requesting President Mori to look into the feasibility of an exclusive fishing arrangement with one country. When asked if that resolution was in preparation for consideration of the concessionary loan, Movick shook his head. "No, if I'd known about it I might have asked the Chairman to postpone the introduction of that kind f resolution.""

Movick said that either contractually or by legislation, the contra actor who manages the fish processing facilities would be required to provide the same services for other fishing vessels that they provide for their own vessels and at the same price. The contractor would not have exclusive fishing rights to the FSM 's EEZ. Fishing vessels arriving at port facilities would be handled on a first in first out basis.

"This is a way for the FSM to participate in more of the tuna profits other than just by issuing fishing permits," said Marion Henry, who was then the Acting Secretary for the Department of Resources and Development.

Since the time of the interview Congress confirmed him to be the FSM Secretary for R&D after President Manny Mori nominated him for the position.

Fishing companies operating in the FSM could choose the status quo in terms of their operations but Henry and Movick don 't think they'll do that.

Fish processed in the FSM before shipment will save operators a significant am mount of cash currently lost by transporting whole fish to other countries for processing. Movick and Henry said that the services that the FSM would offer if Congress accepts the loan would save fishing companies money in terms of labor costs as well and that money would stay in the FSM instead of going to other countries as is s currently the case.

They said that leadership in Kosrae is keenly interested in the proposal. Waste generated by a plant there could be used for their crab farming program. They said that in Micronesia some of the fish processing by product such as blood meat and other fish parts that are not commercially marketable are put to use as food by the people. There are many uses for fish by-product including use as animal feed and composting.

Movick said that cook loining plants would be able to process as much as 100 tons of fish per day. The first of the plants could open in Pohnpei by early 2012 if Congress agrees to o the loan package.