VZCZCXRO5679
RR RUEHKN
DE RUEHKN #0045/01 0870437
ZNY CCCCC ZZH
R 270437Z MAR 08
FM AMEMBASSY KOLONIA
TO RUEHC/SECSTATE WASHDC 1985
INFO RUEHKN/AMEMBASSY KOLONIA 2328

C O N F I D E N T I A L SECTION 01 OF 04 KOLONIA 000045 
 
SIPDIS 
 
CORRECTED COPY 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: DECL:  3/27/2018 
TAGS: PGOV PREL EAID FM
SUBJECT: REFORM IN CHUUK IS ALIVE BUT SPUTTERING - DISILLUSION WITH 
MORI   (CORRECTED COPY - ADDS SIPDIS) 
 
REF: 07 KOLONIA 448 AND PREVIOUS 
 
CLASSIFIED BY: Miriam K. Hughes, Ambassador, Amembassy Kolonia, 
State. 
REASON: 1.4 (b), (d) 
 
 
 
¶1.  (C) SUMMARY.  During a recent trip to Chuuk, which is the 
most populous state in the Federated States of Micronesia (FSM), 
Ambassador encountered a deepening spiral of economic and social 
deterioration.  With reluctance, the state government has 
embarked on a mandated program of reform.  A core component of 
that exercise, which was a commitment to cut some 380 state 
positions by October 31, has been delayed and subject to 
manipulation.  Although many employees were abruptly terminated 
on March 7, the FSM Government and the U.S. Department of the 
Interior have still not received from Chuuk a final 
reduction-in-force (RIF) list.  Beneath an amiable and 
disengaged exterior, Chuuk's Governor clearly resents the 
imposition of reform and infrastructure projects.  He and others 
have begun to question President Mori's judgment.  End Summary. 
 
GOVERNOR DALLIES WITH REFORM 
 
¶2.  (SBU)  During a visit to the state of Chuuk March 11-14, 
Ambassador Hughes observed deepening decline.  Chuuk is the 
largest state in the Federated States of Micronesia (FSM), 
containing more than half the nation's population.  In the midst 
of electricity blackouts, social decay and rising out-migration, 
Chuuk's Governor Wesley Simina remains genial and popular.  He 
recently launched a campaign for a second term in office for 
elections that will take place in March 2009.  At this stage, he 
has no opponents. 
 
¶3.  (SBU)  Simina reassured Ambassador that a reduction-in-force 
(RIF) and other reform measures, which the U.S. helped broker 
last July, were well under way.  However, the RIF of some 380 
state employees, which is a centerpiece of the austerity plan 
that is embodied in a Memorandum of Understanding between the 
Governor and President Mori, has proceeded erratically, with 
only partial engagement on the Governor's part and veiled 
resistance by the Chuuk legislature.  Employees who arrived at 
work on March 7 received notices of termination for the same 
day.  Simina claimed over 300 workers departed quietly, and he 
has received only one written complaint.  Each employee will 
eventually receive three weeks' severance pay and a lump sum 
emolument equivalent to one year's salary as part of a `soft 
landing' cushion provided by a Compact agreement and the U.S. 
Department of the Interior (DOI).  Contrary to the reform 
agreement, however, Governor Simina hinted that he might 
reinstate some of the terminated employees in vacant 
Compact-funded positions, and then look for other volunteers to 
leave his government.  Rumors abound that some of the lump sum 
compensation will be channeled to support the Governor's 
reelection campaign. 
 
¶4.  (SBU)  Ambassador noted that although the U.S.-FSM Joint 
Economic Management Committee (JEMCO) had approved in principle 
a lump sum grant totaling U.S. $2.3 million, actual release of 
the money would depend upon receipt of a credible, final RIF 
plan and conforming proof of state severance payments.  So far, 
composition of the list has fluctuated and it has not moved 
forward from Chuuk to the FSM Office of Statistics, Budget, 
Overseas Assistance and Compact Management (SBOC).   The 
Governor said his Attorney General, who heads the reform task 
force and is known as a crony, was working on the RIF list. 
 
¶5.  (C)  Meantime, the dedicated but struggling new Chuuk 
finance director whom President Mori installed, Gillian Doone 
(reftels), asserted privately to the Ambassador that he would 
personally check every state personnel action to ensure 
termination and to deny rehiring of the same people.  The 
(American) Chairman of the Compact Finance Control Commission, 
Alan Burnham, whose independent oversight office is situated 
outside the government compound, additionally reassured 
Ambassador he would exercise the same vigilance.  Neither of 
these capable officials has so far seen any personnel paperwork, 
however. 
 
¶6.  (C)  While Director of Administrative Services Doone 
continues to enforce strict control on runaway spending ploys by 
all branches of the state government, he claimed that personal 
intimidation has intensified, motivated by Chuukese politicans. 
"They are trying to break me down," he said.  Doone is now the 
subject of two lawsuits for supposed non-payment of services. 
The terms of his state contract have been repeatedly challenged. 
 Owing to threats against his family, he has removed his two 
daughters from school.  In spite of such obstacles, Doone 
asserted he has dug in his heels and committed to stay for the 
duration of his contract, which expires in April 2009.  He has 
 
KOLONIA 00000045  002 OF 004 
 
 
delivered three state radio broadcasts on the long-term benefits 
of austerity.  If he succeeds in balancing the budget, it is 
conceivable that Gillian Doone could emerge as a hero and even 
make a run for office. 
 
(C)  RISING SKEPTICISM OF PRESIDENT MORI 
 
¶7.  (C)  Like other friends and supporters of President Mori, 
Doone (strictly protect), raised some quiet but probing 
questions about recent judgment calls that may reflect on the 
political skills of the FSM President.  Early praise for Mori's 
concerted initiative to lift his home state of Chuuk out of debt 
now shows signs of souring.  Mori has maintained that the 
wellbeing of the entire nation depends upon progress in Chuuk. 
He has publicly staked his political career on fostering 
improvement.  However, the four FSM states cherish their 
considerable Constitutional autonomy, and Chuuk, which has 
suffered from chronic insolvency, is ultimately the Governor's 
territory. 
 
¶8.  (C)  In general, Mori has exercised pressure on Governor 
Simina quietly and strategically.  Publicly, the Governor 
continues to hail his collegial relationship and dialogue with 
the President, despite their differences.  Recently, however, a 
strain has begun to show, reflecting Simina's pique that he may 
have lost control.  When Ambassador asked about his priorities 
for Compact infrastructure projects, the Governor was vague. 
Then he suddenly launched into seething criticism of Mori's push 
to contract with a French company to undertake a preliminary 
survey of a Compact road construction project in the heart of 
Weno.  During a visit to Chuuk the previous week, Mori and an 
FSM team vowed to compress the road survey timeline to six 
months.  "And I don't even know that company.  I didn't ask for 
this!" Simina steamed.  He charged that Mori's initiative to 
centralize infrastructure projects "has done nothing for the 
states." 
 
¶9.  (C)  Governor Simina directed deepest venom at Mori's 
administration of a U.S. $4 million grant that China provided 
last September to support stabilization programs in Kosrae and 
Chuuk.  Under Mori's personal direction, Chuuk's entire U.S. 
$3.5 million share of the grant was applied to reimburse debts 
to the FSM Government, including payments to Social Security, 
life insurance, the FSM Bank and income tax.  Simina confided 
that he and his Attorney General had argued forcefully with the 
President for a portion of the grant.  Simina claimed he had 
intended to use a modest amount to begin to repay U.S. 
Department of Agriculture Rural Development loans, whose default 
rate in Chuuk now exceeds 26%.  However, the President ceded 
nothing. 
 
¶10.  (C)  Gillian Doone shared his confidential opinion that 
Mori's hard line on the China grant had been a mistake that may 
have irrevocably alienated state leaders.  Criticism of recent 
actions by Mori additionally emerged in conversations with 
officials of Chuuk's judiciary branch and the business 
community, who include some members of Mori's extended family. 
They expressed astonishment and concern about several of Mori's 
Cabinet appointments.  In particular, the newly installed FSM 
Attorney General Maketo Robert (Chuukese) is a well known 
troublemaker in Chuuk, who has earned notoriety by reportedly 
profiting from illicit land deals.  Robert authored a (failed) 
FSM Congressional bill that would have conferred amnesty on 
Congressmen who had been convicted of criminal conduct.  Robert 
is currently suspended from the bar owing to other malpractice 
allegations. 
 
¶11.  (C)  A leader of Chuuk's women's association told the 
Ambassador, "Everyone is whispering about Maketo, Maketo, Maketo 
Robert.  He has done bad things in Chuuk.  What is the matter 
with President Mori?"  A seasoned state official opined that 
Mori seemed to have caved to pressure by some corrupt FSM 
Senators.  He predicted that a bullying Congress, which carries 
preponderant weight in the FSM Government, now "has Mori over a 
barrel."  Perceiving weakness, such a Congress might get its way 
with the President for the next three years of his term of 
office, with the potential to cause significant disruption, the 
official said. 
 
WHILE THE QUALITY OF LIFE UNRAVELS 
 
¶12.  (SBU)  As political intrigue deepens at the national level, 
conditions in Chuuk continue to unravel.  Chuuk's population of 
approximately 54,000 is concentrated in the capital island of 
Weno and additionally scattered among some 24 principal islands 
and more than 200 outer islands and islets, which are situated 
some 140 to 160 miles away from the capital.  Political will is 
weak among these dispersed populations, with the possible 
exception of the island of Faichuuk, whose citizens have 
mobilized vociferously to support secession as a fifth FSM 
 
KOLONIA 00000045  003 OF 004 
 
 
state.  Faichuuk is located outside Chuuk lagoon, which is one 
of the largest lagoons in the world, where U.S. forces sank more 
than 60 Japanese warships in World War Two. 
 
¶13.  (SBU)  Today, intra-island ship traffic within and beyond 
the lagoon has almost ground to a halt owing to the economic 
crisis and rising price of fuel, which costs more than US $5 a 
gallon.  The Chuukese complained that construction material, 
food and basic medical supplies can no longer reach most of the 
islands. Small motor boats, which transport people and their 
sparse supplies, are dangerous outside Chuuk's protective reef, 
where weather is unpredictable.  A sizeable vessel that China 
donated remains moored in Weno harbor.  The `Chief Milo' makes 
only occasional runs because its outmoded engine consumes 
inordinate amounts of fuel.  China's Ambassador Liu Fei told 
Ambassador Hughes she is frustrated by the ship's inoperability. 
 So far, Beijing has failed to authorize a costly proposal of 
Ambassador Liu to return the ship to China to replace its 
inefficient engine, she said. 
 
¶14.  (SBU)  While the Peace Corps has a few volunteers in Weno, 
they removed most all others from the lagoon islands following a 
2007 inspector general's report. Three volunteers remain in the 
Mortlocks, about 140 miles from Weno, where a small landing 
strip can accommodate occasional flights by Caroline Air.  The 
FSM Peace Corps Director described to Ambassador a trip he 
recently made with a female Peace Corps official to assess the 
inner lagoon island of Fefan, which is the birthplace of 
President Mori.  The Peace Corps officials encountered 
excrement-smeared docks and aggressive harassment by Chuukese 
youths aimed at the female visitor.  They departed immediately. 
 
¶15.  (SBU)  In Weno, raw sewage extrudes along side streets, 
houses and disintegrating schools, most of which lack working 
lavatories.  Water pipes and storage tanks are contaminated, 
including in Chuuk's sole, dilapidated hospital.  The Public 
Safety Director's office will not receive calls after 5:30 pm, a 
`911' number rarely works, and  the Harbor Master said he had 
not held port drills "in a long, long time," although he seems 
to keep a close eye on local traffic.  Chuuk's Chief Justice, 
who said his department will lose 43 employees in the RIF, 
acknowledged a backlog of over 3,000 court cases.  Many paper 
files were lost; nothing was automated. 
 
¶16.  (SBU)  Telephone, telecommunications and electricity 
services have all begun to  break down for protracted periods 
owing to lack of revenue collection. One of the hospital's two 
overworked surgeons commented that patients regularly contract 
diseases in the hospital that they did not have before they came 
in.  Owing to the lack of an automatic switch on the electrical 
generator, surgical procedures are subject to brief but 
potentially mortal blackouts.  "When that happens, we try to 
stop cutting," remarked a Philippino surgeon, who pleaded for 
immediate assistance with beds, doctors, an incinerator, 
stretchers and a sea transport ambulance. 
 
COMMENT - A DEPENDENCY SYNDROME IMPEDES PROGRESS 
 
¶17.  (C)  In the face of a massive economic and systemic 
breakdown, the people of Chuuk seemed resigned.  An inability to 
hold leaders to account and an attachment to aid as a panacea 
contribute to local immobilization.  Ambassador spoke to the 
chamber of commerce and Chuuk's main women's organization about 
initiatives they could undertake at the grassroots level. 
Drawing upon remarks that Secretary Rice recently made at 
Georgetown University, Ambassador described how some countries 
had adapted to globalization and seized opportunities to 
strengthen the rule of law and generate income.  In general, 
however, audiences responded with questions about Compact 
benefits, transit visas for Chinese, and international 
assistance.  While reforms imposed from the top down may 
eventually advance reform in Chuuk, it is clear that they will 
also generate resistance aimed at protecting vested interests. 
Some observers maintain that Chuuk is inherently `ungovernable.' 
 A crisis of confidence in President Mori could further 
exacerbate instability. 
 
¶18.  (SBU)  Chuukese are now departing for the United States in 
record numbers. Some of those who remain behind fear that an 
unforeseen calamity, such as a cholera epidemic or a typhoon, 
could wipe out vulnerable island populations.  Timing is 
propitious now to consider novel approaches aimed at inspiring 
civic engagement and empowering more citizens.  The Embassy has 
discussed with DOI and others ways to think outside the box and 
engage the Chuukese in relevant types of transformational 
diplomacy.  DOI's new financial management software for the FSM 
has begun to work in Chuuk.  The hospital needs immediate 
attention in areas where the Centers for Disease Control and 
Prevention may be able to help.  From the ground up, other 
opportunities exist, including to:  restore 24-hour radio 
 
KOLONIA 00000045  004 OF 004 
 
 
service and increase public broadcasts; stimulate awareness of 
more practicable approaches to land ownership; and encourage 
small-scale business development.  In a state that has descended 
close to rock bottom, progress will be gradual.  However, the 
Micronesians note and appreciate American attention that is 
aimed at helping them build their own capacity. 
HUGHES