VZCZCXRO7279
RR RUEHKN
DE RUEHKN #0031/01 0710920
ZNR UUUUU ZZH
R 120920Z MAR 09
FM AMEMBASSY KOLONIA
TO RUEHC/SECSTATE WASHDC 2229
INFO RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHMFIUU/COMNAVMARIANAS GU
RUEHKN/AMEMBASSY KOLONIA 2592

UNCLAS SECTION 01 OF 02 KOLONIA 000031 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/ANP 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EAID FM
SUBJECT: COMPACT INFRASTRUCTURE PROJECTS START IN THE FSM 
 
REF: KOLONIA 17 
 
1.(U)  Summary.  Ground breaking ceremonies took place at three 
sites on Pohnpei, capital of the Federated States of Micronesia, 
where construction of schools will follow.  These projects are 
funded under the Infrastructure Sector of the Amended Compact of 
Free Association.  Startup of a main road in Chuuk State is 
expected to follow, along with other projects.  However, 
selection of projects, contracting procedures, and equities 
among the four FSM states remain controversial.  The FSM 
Congress passed a resolution in February 2009 to transfer the 
Project Management Unit, which oversees Compact infrastructure 
projects, out of the office of President Mori.  End Summary. 
POHNPEI HOSTS GROUND BREAKING CEREMONIES 
¶2. (SBU) On March 9, Pohnpei State Governor John Ehsa hosted 
ground breaking ceremonies at Kolonia Elementary School and 
Pohnlangas High School, culminating over four years of efforts 
to start up Compact infrastructure projects in the capital state 
of the Federated States of Micronesia (FSM).  At the ceremony, 
the Governor praised the unique bilateral cooperation embodied 
in the Compact.  Privately, Pohnpeian officials remarked that 
mental exhaustion from protracted wrangling over these projects 
precluded jubilation.  The FSM National Government's Project 
Management Unit (PMU), which is funded by the U.S. to oversee 
Compact infrastructure projects, neglected to invite the U.S. 
Embassy to the ceremonies.  In a response to a last-minute 
invitation from the Governor's office, the Embassy's Department 
of the Interior (DOI) representative attended. 
¶3. (U) A third ground breaking ceremony was held at the Nanpei 
Memorial High School in Nett Municipality on March 10.  The 
Ambassador attended this event, having been invited by Governor 
Ehsa.  (Note:  The FSM Department of Foreign Affairs protested 
through the Vice President the poor handling of scheduling and 
invitations.  The PMU neglected to invite other national 
officials, including the Secretary of Education.) 
¶4. (U) The two-story buildings at each of the three Pohnpei 
sites will consist of eight classrooms and ancillary computer 
laboratories.  The total Compact funding for these school 
projects is $4.6 million.  (Note:  All figures are in U.S. 
Dollars.)  In her remarks, Ambassador Hughes said, "The United 
States is pleased that vital infrastructure projects have begun 
to get underway."  She reminded that the Compact is intended for 
the benefit of the people, and urged the Micronesians to "work 
together as much as possible and as transparently as possible to 
ensure that the Compact delivers results." 
OTHER PROJECTS WILL FOLLOW 
¶5. (U) Projects in the other three FSM states are expected to 
follow, starting with Phase One of three phases of the 
reconstruction of a main road in Weno, Chuuk State, at a cost of 
some $26 million for the first phase.  Ground breaking 
ceremonies have reportedly been delayed in Chuuk owing to the 
state government's preoccupation with vote counting for 
elections that took place March 3 and the alleged failure of the 
PMU to designate a construction manager for this major project. 
¶6. (U) Yap State expects to get an early childhood education 
center and renovation of its hospital.  However, Yapese 
officials have complained that a last-minute change of plans 
mandated by the PMU and DOI's Office of Insular Affairs would 
eliminate a second floor from the education center, which was 
intended for teachers' offices and a conference room for 
activities such as teacher training, leaving only four 
classrooms on the ground floor.  Yap representatives stated that 
the U.S. committed to a two-story structure as far back as 2005 
when construction cost was estimated at $1.8 million.  The 
latest design would boost the cost to $3 million, including both 
floors.  Elimination of the second floor would cut costs back to 
$1.8 million.  Yap's Director of Education asserted that the 
full project was essential to accommodate a growing stream of 
children between the ages of 3 to 5, many of whom have migrated 
from neighboring islands owing to adverse climate conditions. 
The children are currently subject to double shifts in two 
overcrowded classrooms. 
¶7.  (SBU) Yap Governor Sebastian Anefal, who is a former 
Secretary of Foreign Affairs and an influential Compact 
negotiator, said PMU estimates for state hospital renovations 
had fluctuated wildly from an original cost of $4.2 million to 
$13 million, including elaborate landscaping, and finally $8 
million.  He complained about impediments to communicating with 
the three-person PMU in the FSM capital of Palikir, remarking 
that he himself had urged that the PMU either get the price down 
or consider building an entirely new hospital.  He complained 
that Yap, which has maintained a record of fiscally responsible 
governance, had been neglected in infrastructure and indeed 
short-changed.  He had not expected Compact implementation to be 
quite so formidable, he said. 
¶8.  (SBU) In Kosrae State, construction of two elementary 
schools in Utwe and Lelu is under way at a total cost of over 
$3.7 million.  However, the PMU determined that faulty soil 
foundation surveys by the original design company GMP of Hawaii 
needed to be rectified.  Consequent adjustments impeded progress 
 
KOLONIA 00000031  002 OF 002 
 
 
and put both schools, which were scheduled for completion in 
December 2008, considerably behind schedule.  GMP, which managed 
the original PMU that the FSM established, has filed 
counter-claims and threatened law suits on this and other 
projects, which could potentially impede infrastructure that is 
just getting started.  GMP is reportedly pressing claims for 
$2-3 million for work that the company alleges was performed but 
not compensated.  It is unclear whether Compact money might be 
used to repay GMP. 
INFRASTRUCTURE MANAGEMENT SPARKS CONTROVERSY 
¶9. (SBU) As infrastructure finally gets moving, perceived 
favoritism of one state over another has generated palpable 
political tension.  Reftel reported on a dispute over the 
appropriation of Compact Infrastructure Sector funds, which has 
exacerbated clashes between the President and the FSM Congress. 
At the same time, these disagreements have fueled a healthy 
assertion of democratic advocacy and demands for transparency. 
From the perspective of the four states and their Congressional 
representatives, decisions about Compact infrastructure projects 
often appear to be irrational, expensive and shrouded in 
secrecy.  They are demanding more information, consultation, and 
responsiveness to the needs of their citizens.  An overt 
dialogue is probably salutary and overdue, so long as it does 
not degenerate into destabilization that can be blamed on the 
Compact and its implementation. 
¶10. (U) On February 7, 2009, the FSM Congress passed a 
resolution that calls upon President Mori to transfer the PMU 
from his office back to the Department of Transportation, 
Communication and Infrastructure (TC&I), where it was situated 
previously.  The resolution states that the President 
transferred the PMU to his office without consultation with the 
Congress.  Consequently, coordination supposedly faltered and 
the Congress no longer has oversight through its Committee on 
Transportation and Communication.  Members of the FSM Congress 
have indicated that if the President fails to act upon this 
Congressional resolution, they will introduce legislation to 
mandate a transfer of the PMU back to TC&I and they will seek to 
fulfill a national plan to assign at least one TC&I coordinator 
to each state in order to facilitate infrastructure project 
coordination. 
COMMENT 
¶11. (SBU) Despite delays and complications, ground breaking 
ceremonies for buildings, roads and hospitals generate hope and 
excitement, particularly at the local level.  The success of the 
infrastructure projects will bring credit to the intentions and 
friendship of the United States, as well as to the credibility 
of the Compact as a working bilateral instrument. 
Unfortunately, the capacity of the Micronesians to manage and 
implement such a load of projects remains extremely limited. 
Few engineers exist in the FSM, and the Micronesians lack 
contracting and accounting experience. 
¶12. (SBU) Post recommends consideration of the assignment of a 
qualified American construction engineer and contractor - even 
on a TDY basis - to directly oversee management and 
accountability of a program that is expected to exceed $125 
million USD of our taxpayers' money.  Such a manager, who could 
come from the U.S. Army Corps of Engineers or USAID, for 
example, might be covered by Compact infrastructure funds 
allocated to the FSMNG.  President Obama's recent pledge to 
strengthen development, while cutting waste and reforming 
federal contracting, can be applied positively to our programs 
in the Federated States of Micronesia. 
HUGHES