Compacts of Free Association

Federated States of Micronesia

Republic of the Marshall Islands

Office of Insular AffairsU.S. Department of the Interior

Level and Structure of Assistance• Goal – supporting increased self-reliance of FASGoal – supporting increased self-reliance of FAS• $3.5 billion U.S. commitment over 20 years$3.5 billion U.S. commitment over 20 years• Direct Grants – $125 million per yearDirect Grants – $125 million per year• Trust Fund Contributions - $34 million per yearTrust Fund Contributions - $34 million per year• Targeted Sectors – Education, Health, Public Targeted Sectors – Education, Health, Public

Sector Capacity Building, Private Sector Sector Capacity Building, Private Sector Development, EnvironmentDevelopment, Environment

• 30% set-aside for construction of public 30% set-aside for construction of public infrastructure facilities with priority on supporting infrastructure facilities with priority on supporting delivery of education and health servicesdelivery of education and health services

Program Management•The RMI and FSM governments are responsible for the The RMI and FSM governments are responsible for the management and monitoring of the day-to-day management and monitoring of the day-to-day operations of all Sector grants and their activities. operations of all Sector grants and their activities. •Interior is not charged with program delivery. Interior is not charged with program delivery. •Interior has limited resources for oversight. Compact Interior has limited resources for oversight. Compact program funding is not dedicated to oversight.program funding is not dedicated to oversight.•Interior supports (with limited funds) targeted Interior supports (with limited funds) targeted technical assistance throughout all insular areas.technical assistance throughout all insular areas.•Comparatively, USAID allocates between 8%-15% of Comparatively, USAID allocates between 8%-15% of program funds for delivery, administration and program funds for delivery, administration and monitoring of its programs. monitoring of its programs.

Target: Target: AccountabilityAccountability and Self- and Self-SufficiencySufficiency

• Security, political independence, and stability was achieved – Security, political independence, and stability was achieved – Compact 1987-2003Compact 1987-2003

• Economic provisions are not designed to guarantee results Economic provisions are not designed to guarantee results but rather to enhance opportunities. but rather to enhance opportunities.

• Accountability standards under “Compact 2”are greatly Accountability standards under “Compact 2”are greatly enhanced- they have not translated into better outcomes or enhanced- they have not translated into better outcomes or overall performance.overall performance.

• Sector grants are not directly targeted toward increased Sector grants are not directly targeted toward increased economic self-sufficiency.economic self-sufficiency.

• Still, increased self-reliance, at whatever level may be Still, increased self-reliance, at whatever level may be attained, is expected as of FY 2023. attained, is expected as of FY 2023.

ChallengesChallenges• FAS political and social conditions challenge, FAS political and social conditions challenge,

respectively, effective compact grant implementation respectively, effective compact grant implementation and better health and education performance. and better health and education performance.

• Success is immensely reliant upon: Success is immensely reliant upon: • Commitment of our FAS partners to design and Commitment of our FAS partners to design and

implement fiscal and economic policy reforms;implement fiscal and economic policy reforms;• FAS Capacity to manage, implement and FAS Capacity to manage, implement and

administer available resources;administer available resources;• Political courage to realign resource allocations to Political courage to realign resource allocations to

match stated policy objectives;match stated policy objectives;• Quality of the partnership Quality of the partnership

Where do we have influence?Where do we have influence?• overall quality and use of overall quality and use of

professional design standards for professional design standards for infrastructure projects.infrastructure projects.

• minimally on what is happening minimally on what is happening insideinside the classrooms. Requiring the classrooms. Requiring qualified teachers and supplies in qualified teachers and supplies in the classroom, allocation of funds the classroom, allocation of funds toward basic instruction.toward basic instruction.

ToolsTools• Country level diplomacy: voice of the Ambassador Country level diplomacy: voice of the Ambassador

and the USG country teamand the USG country team• JEM committee control of sector allocations JEM committee control of sector allocations

(thumbs up/down)(thumbs up/down)• Leverage at the margin in special casesLeverage at the margin in special cases• TA targeted at identified weaknessesTA targeted at identified weaknesses• Donor coordinationDonor coordination