VZCZCXRO5871
PP RUEHKN RUEHKR RUEHMJ
DE RUEHKN #0017/01 0400101
ZNR UUUUU ZZH
P R 090101Z FEB 09
FM AMEMBASSY KOLONIA
TO RUEHC/SECSTATE WASHDC PRIORITY 2196
RUEHC/DEPT OF INTERIOR WASHINGTON DC
INFO RHHJJPI/PACOM IDHS HONOLULU HI
RUEHKR/AMEMBASSY KOROR 0304
RUEHMJ/AMEMBASSY MAJURO 0400
RUEHKN/AMEMBASSY KOLONIA 2557

UNCLAS SECTION 01 OF 02 KOLONIA 000017 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ECON PGOV EAID FM
SUBJECT: FSM STATES/NATIONAL LEADERSHIP CONFERENCE URGES MOVEMENT OF 
ALLOCATED COMPACT FUNDS TO ACTUAL PROJECTS 
 
REF: 02/06/09 E-MAIL WEMHOENER-CUITECJ-NEVILLEPW 
 
¶1.  (SBU) SUMMARY:  On January 29 the FSM National Congress 
requested the President convene a leadership conference to 
consider the public infrastructure sector grant.  Allocated 
funds were not moving to actual projects.  During the February 
4-6 conference, President Mori suspended debate on 
infrastructure funding and called for a smaller working group to 
draft legislation which would expedite funding.  With the 
support of conference participants, the President passed the 
draft legislation to Congress by the morning of February 6. 
Although immediate tensions on infrastructure related spending 
appears to have eased, the conference did not address reasons 
for the initial delays.  END SUMMARY. 
 
Congress Calls on President to Host Conference 
--------------------------------------------- - 
 
¶2.  (U) Highlighting more than $100 million in infrastructure 
grant funds currently available through Compact Funding, but not 
yet utilized, the FSM National Congress passed a resolution on 
January 29 requesting the President to host a State/National 
Leadership Conference by February 4 (Ref).  The resolution noted 
that Congress was concerned about implementation procedures for 
public infrastructure grants and stated that the purpose of the 
meeting was to discuss the public infrastructure sector grant 
and other relevant matters. 
 
¶3.  (U) Per the resolution, President Emanuel Mori convened the 
leadership conference on February 4.  Approximately 80 people 
attended.  He invited representatives from the national 
legislature, the governors of each state, and representatives 
from the Department of Interior and Department of State. 
 
 
Discussion Starts 
----------------- 
 
¶4.  (U) The four Governors, President, Speaker and others agreed 
that Infrastructure spending was more than just putting up roads 
or buildings; rather it was the means towards sustainable 
economic development through secondary benefits.  Pohnpei 
Governor John Ehsa complained that of $131 million of public 
infrastructure related funds available since 2004, only $51 
million was obligated to date and only $15 million spent.  Ehsa 
argued that if the Conference was able to find a way to expedite 
the funding process, using those numbers, the FSM will be able 
to support $260 million in infrastructure projects by 2014. 
Getting the money moving would be an economic stimulus. 
 
¶5.  (U) Ehsa quickly moved to his primary complaint: the process 
is too slow and cuts out the States.  The States want to share 
in the responsibility of making sure the funds get to the 
projects in a timely manner.  Ehsa added that under legislation 
currently before the National Congress, Pohnpei would receive 
$15 million.  That does not cover the full amount for proposed 
projects, however, and without full funding the State cannot 
award contracts.  The money will continue to languish and 
projects will not start. 
 
¶6.  (U) Chuuk Governor Wesley Simina added that the current 
funding process is too convoluted.  He stressed that it was 
important to discuss the means to permanently expedite the 
process and suggested the leaders use a January 5, 2009 letter 
from Speaker of Congress Isaac Fagir to the President that 
itemized concerns as a point of reference for discussions. 
(Note:  Post does not have a copy of the letter and is not aware 
of its contents.  End Note.) 
 
Working Group Is Formed 
----------------------- 
 
¶7.  (U) Noting some of the concerns raised, Mori commented that 
it was not time to discuss the implementation problems of the 
past because "we all know what they are."  He then stated that 
the focus must be on moving the money that is currently 
available to the projects already approved.  Mori finally 
suggested, and everyone concurred, that a small working group 
draft legislation he could submit to Congress.  The group was 
composed of members of the larger meeting, including 
representatives from the States and the Executive Branch.  The 
legislation should immediately release funds that are already 
available. 
 
¶8.  (U) The working group presented a draft bill to the 
conference during the opening session on February 5 (Ref).  Upon 
reading the draft bill, each governor immediately raised 
questions on implementation.  Yap Governor Sebastian Anafel 
summarized his concern by asking that once Congress approves the 
 
KOLONIA 00000017  002 OF 002 
 
 
funding, "Then what?"  Previous bills have also approved funding 
and projects still did not move forward.  Chuuk Lt. Governor 
Johnson Elimo questioned the validity of the dollar amounts 
given in the bill, to which the President replied that the 
Congress can review the numbers.  Despite the concerns raised, 
each governor voted to have the President submit the bill to 
Congress.  Ehsa opined that the bill permits the states to act 
as contracting officers, which will let them work directly to 
release funds. 
 
¶9.  (SBU) Post has also received anecdotal reports that during a 
scheduled February 6 private breakfast between President Mori 
and the four governors, each of the governors complained about 
the working group's proposed legislation.  Although Post does 
not have details of the private meeting, other participants at 
the conference, including Program Management Unit Special 
Project Manager for Legal Affairs Dana Smith, questioned the 
legality of the bill.  Legislative Counsel Lam Dang raised 
concerns about the use of a funding formula, which the United 
States has rejected, putatively designed to divide funding 
fairly between the states on an annual basis.  Despite the 
concerns raised, Congress passed the bill on February 7. 
 
Other Agenda Items 
------------------ 
 
¶10.  (U) In addition to discussion on infrastructure issues, 
Mori drafted an agenda which included the Government of Japan 
Non-Project Scheme; Airport Improvement Projects; Air/Sea 
Transportation Issues; Five-Year Compact Review; and other 
issues.  Various representatives from the Department of 
Transportation, Communications & Infrastructure (TC&I), led by 
Secretary Francis Itamai, spoke on transportation issues. 
Regarding airport improvements and the Japan Non-Project Scheme, 
TC&I described in detail the expected benefits from the outside 
funding, but noted that the FSM must provide some matching 
funds.  All participants agreed that the FSM (or the individual 
State governments if appropriate) should make the funds 
available as quickly as possible. 
 
¶11.  (U) Regarding air transportation, the President tasked the 
Department of Foreign Affairs with trying to entice other 
airlines to the FSM.  TC&I then described the lack of reliable 
sea transportation through the islands, particularly due to the 
age and disrepair of the State and federally owned ships.  The 
FSM has only one ship operational for inter-island travel. 
Following a brief discussion the President tasked the DFA to 
approach donors with a request to replace or repair FSM's ships. 
 Due to time limitations, the President dropped all other agenda 
items. 
 
COMMENT 
------- 
 
¶12.  (SBU) Towards the end of the Conference Mori noted that the 
government "got the message" that the money needs to get moving. 
 In that regard, the national government is likely to release 
some of the backlogged funds to individual high profile projects 
such as Phase I of the Chuuk road project.  The stated goal of 
the conference, however, was to discuss implementation 
procedures for infrastructure grants.  On only a few isolated 
occasions did the Governors appear to raise questions directly 
related to funding procedures, but when the questions were 
deflected the Governors did not press further.  The bill 
Congress eventually passed to address immediate funding concerns 
does nothing to prevent the same problem from arising again. 
Summarizing the conference's outcomes, Yap Senator Joseph 
Urusemal stated he feels likes Pontus Pilot.  We are "washing 
our hands and letting others decide."  His assessment, though 
colorful, may be accurate.  END COMMENT. 
DOUGLASSWD