Marshall Islands, Republic of the

Country Information

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Location and People Historical Background

Socioeconomic Conditions Country Outlook

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Location and People

The Marshall Islands are located in the central Pacific Ocean, some 2,300 miles southwest of Hawaii. They are composed of two nearly parallel chains of low coral limestone and sand islands known as the Ratak (sunrise) group and the Ralik (sunset) group. There are 1,152 small islands and 30 atolls in all, dispersed over an exclusive economic zone (EEZ) of 1.2 million square kilometers of ocean.

The total land area of the Marshall Islands is only 181 square kilometers, but 70% of its 57,000 population of ethnic Micronesians is concentrated on the atolls of Majuro and Ebeye. The remainder live on 19 outer islands, most having fewer than 500 residents.

Historical Background

The first Marshallese came to the islands 2,000 years ago. The islands were notionally a Spanish colony from the 1500s, but the Marshallese had little contact with Europeans until 1860. From then until 1914 German trading companies operated a network of copra trading stations. In 1914 at the outset of World War I Japan occupied the islands and took over the copra trade until World War II. The United States (US) then occupied the islands after a series of major battles.

– = not available; a US$1-a-day benchmark; b 1999 census data; c Pacific HDI calculations using 1998 data

Source: ADB

Key Social and Poverty Indicators
Indicators	'02	'03	'04	'05
Total pop. (‘000)	53.6	54.5	55.4	56.3
Annual pop. growth (%)	1.7	1.7	1.7	1.7
Pop. below poverty line (%)	20.0a,b	-	-	-
Unemployment rate (%)	30.9b	-	-	-
Maternal mortality rate (per 100,000 live births)	73.8	0.0	0.0	-
Infant mortality rate (per 1,000 live births)	28.8	26.8	17.9	-
Life expectancy at birth (years)	62.7	61.0	-	-
Adult literacy rate (%)	91.0	-	-	-
Human development index	0.563d	-	-	-

The country experienced almost four decades under US administration as the easternmost part of the United Nations Trust Territory of the Pacific Islands. Two atolls were used by the US for nuclear testing between 1947 and 1962. The Marshall Islands attained independence in 1986 under a Compact of Free Association with the US. Kwajalein Atoll, a famous World War II battleground is still used as a US missile test range.

Socioeconomic Conditions

Female Copra and Handicrafts Producer, 40 years old (taken from Priorities of the People: Hardship in the Marshall Islands) She is a divorcee with 8 children and 7 grandchildren. Four of her children live on Majuro and two are in the United states. She lives on Ailinglaplap with her two youngest children. They live in a very small, one-room house and have two smaller thatch huts and a sitting area. They have two water catchments but no solar power. Although her former husband is a recipient of Section 177, he does not support her or their children. She says that her life is a struggle and she is exhausted by all the hard work of producing copra: "Life is very complicated without any helper by my side." When she has time, she makes handicrafts. Sometimes her parents help out, but at the moment they are on Majuro. She would like a job, but there are no jobs on the island. If she had help, she could concentrate on handicrafts, which pay more than copra. However, there is no outlet to sell handicrafts on her island. So, unlike copra, she cannot exchange her handicrafts for credit from the store to buy food and other basic items. Secondly, she produces handicrafts as part of a women's club, so the profit is shared amongst members and some is retained by the club. Yet she relies on the club to bring in orders and arrange distribution and sales. In terms of her personal ambitions, she believes a handicraft workshop on the island could provide her with the support she needs to make and sell her own handicrafts. For her children, she wants them to finish school. She says she preaches to them all the time to do well at school and hopes that "seeing me struggle should be enough for them to realize the importance of school."

Read and understand the needs and views of those facing hardship in the Marshall Islands in Priorities of the People: Hardship in the Marshall Islands

In the tiny economy of the Marshall Islands, the state plays a pervasive role, and aid and compensation from the US are its mainstay. The state handles US aid and compensation---which each year contributes some 50--70% of gross domestic product (GDP), and employs a substantial proportion of the workforce.

In spite (or possibly because) of levels of aid that are among the highest in the world (on a per capita basis), the economy has registered many years of low or negative growth. There has been no sustained growth since independence, and per capita income has declined some 20%.

US aid comprises payments under the Compact of Free Association with the US. Compensation is paid by the US for use of Kwajalein Atoll as a military base and for employment on the base, and to the people adversely affected by nuclear fallout from the 1947--1962 nuclear tests.

Other sources of foreign exchange earnings are fees paid by international fishing fleets to access fish resources in the Marshall Islands Exclusive Economic Zone, copra production, and adventure tourism (principally diving and game fishing).

Agricultural production is primarily for subsistence on the outer islands, with coconuts and breadfruit the most important commercial crops. Small-scale industry is limited to handicrafts, and copra. The islands have few natural resources, and imports far exceed exports.

Extended family ties and close relationships within the small population have kept pervasive poverty from being a major problem. There does however exist considerable inequity and hardship.

Declining social conditions and weakening social organization are evident in expanding urban areas. Women continue to lag behind men in all areas in spite of the predominantly matrilineal society. With high fertility and birth rates, the health of women is of concern of the Government. In addition to high prevalence of diabetes, there are other more modern diseases and sexually transmitted diseases (STDs). The population growth rate is still relatively high despite out migration to the US.

The shortage of skills at all levels is a major barrier to sustainable economic growth. Major impediments to the development of skilled manpower are the low level of educational attainment of the labor force. This is attributable to weak public sector management resulting in low quality of education and very high dropout rates.

Country Outlook

The Marshall Islands faces some of the most daunting development challenges of any country in the world. It has a small population living on a tiny land area scattered over an immense area of the central Pacific Ocean, with few natural resources to sustain them and that is now dependent on foreign aid. The highest point in the country is only 10 meters above sea level, placing the country at risk from rising sea levels associated with global warming. Extreme climatic events can have an extremely adverse impact, causing severe damage.

The weak enforcement of the rule of law and a lack of systems of accountability remain priority concerns. This is particularly relevant to public personnel management and public service productivity and performance. Public enterprise reform is needed, and the environment for private sector development requires further improvement. Some powerful traditions need to be addressed, such as gift giving as a means of social cohesion, a political structure that has integrated traditional leadership with the legislature, and now a culture of dependency on the US.

The amended Compact of Free Association with the US aims at addressing some of these concerns. This new financial arrangement between the Marshall Islands and the US was formally agreed in December 2003. During the 20-year period of the amended Compact, annual grant assistance to the Marshall Islands is set to gradually decline. The annual reductions will be matched by contributions to the Compact Trust Fund that was established with technical and financial assistance from ADB. This trust fund is intended to generate sufficient revenue eventually to substitute for the grant component of US assistance by the end of the amended Compact in 2023.

The annual financial support potentially receivable by the Marshall Islands during the 20-year period of the amended Compact is in the order of 60% of the current level of GDP. Under the amended Compact, however, there is a shift from general budgetary grants to sector grants, characterized by enhanced measures for accountability. Sector grant assistance is to be targeted at the key areas of education, health, environment, private sector development, public sector capacity building, and public sector infrastructure and maintenance. Direct grant assistance for private sector development will aim at attracting foreign investment, increasing indigenous business activity, promoting adherence to core labor standards, and maintaining progress toward privatization of public enterprises. Medium-term expenditure plans for the key areas will be scrutinized by a Joint Economic Management and Financial Accountability Committee that has majority US membership. The Committee will fulfill a review and monitoring role with regard to economic development and public financial management.