Federated States of Micronesia (FSM) and ADB

ADB supports the Federated States of Micronesia through investments in energy, water, transport, and education, including through technical assistance for related public administration reforms.

ADB's Work in the Federated States of Micronesia

The Federated States of Micronesia (FSM) comprises four states—Chuuk, Kosrae, Pohnpei, and Yap—spread across 607 islands in the northwestern Pacific. As a small island developing state, the FSM experiences barriers to growth due to its geographic isolation, small population, and associated capacity constraints and exposure to natural hazards. In 2021, the FSM’s economy was significantly impacted by border closures linked with the coronavirus disease (COVID-19) pandemic but it has started recovering in 2022 as travel restrictions eased.

Development assistance under the Compacts of Free Association with the United States (US), despite declining over time, has nevertheless boosted the FSM’s fiscal position. On 8 March 2024, the US government signed into law the 3rd Compact, a renewed 20-year agreement that allocates budget support and special funds.

The FSM joined ADB in 1990. ADB’s support to the country seeks to (i) reduce energy costs by increasing the supply of renewables; (ii) manage risks by improving disaster risk financing and public financial management; and (iii) create value by delivering safe water and sanitation services, strengthening human capacity, supporting private sector development, and improving accessibility through climate-resilient roads and bridges.

As of 31 December 2023, ADB has committed 68 public sector loans, grants, and technical assistance totaling $218 million to the FSM. ADB’s current sovereign portfolio in the FSM includes 8 grants worth $71.3 million.

Cumulative sovereign loan and grant disbursements to the FSM amount to $112.95 million. These were financed by regular and concessional ordinary capital resources, and the Asian Development Fund, and other special funds.

In 2023, ADB committed $18 million in additional financing to cover escalating project costs and further boost the climate resilience of water supply and sanitation services in Chuuk. This will help expand the water supply network to reach more than 8,000 extra people on Weno Island, the largest urban center in Chuuk State, while improving the sustainability of safe water and sanitation to avoid pollution in groundwater reserves. The project will also contribute to reducing the transmission of hygiene-related and waterborne diseases during periods of excessive rainfall triggered by climate change.

As part of ongoing project readiness financing, ADB committed a $5-million grant in 2022 to help ensure the success of future energy projects in the FSM. This initiative ensures that resulting projects are adequately prepared for implementation, thereby facilitating the timely and cost-effective achievement of projects’ targets and objectives.

ADB also committed nearly $30 million in grant assistance for the FSM’s COVID-19 pandemic response. Other ongoing projects in the FSM involve basic education and a project readiness financing to prepare an investment in transport. ADB’s Private Sector Development Initiative is strengthening the FSM’s business environment by increasing access to finance.

As disasters become more frequent and severe in FSM, ADB stands prepared to offer two types of grant financing—through the contingent disaster facility and the Asia Pacific Disaster Response Fund (APDRF)—to facilitate timely disaster response and early recovery efforts. FSM participated in Phases 2 and 3 of ADB’s Pacific Disaster Resilience Program. In 2020, ADB disbursed $6 million under Phase 2. Phase 3 financing of $6 million became available in January 2021 and was utilized in 2022 to aid the government in addressing the COVID-19 pandemic. Since 2009, FSM has been able to access the APDRF, including a recent $1.5 million allocation during the COVID-19 pandemic.

Photo: Asian Development Bank
The overall objective of the Omnibus Infrastructure Development Project is to enhance public health and the environment through assistance to support economic growth and poverty reduction in Chuuk through improvements to the electrical power sector. Photo: Eric Sales/ADB

Operational challenges. The FSM continues to experience both physical and governance constraints that affect project implementation. As a federation, each state enjoys considerable autonomy with responsibility for public services devolved from the central government. This structure could hamper coordination with development partners and place fiscal pressure on state governments. As the FSM’s small population can migrate to and work freely in the US, outward migration further contributes to capacity constraints in the public and private sectors. ADB and the FSM are working to strengthen collaboration between partners, and between the state and national levels, and to identify and address development priorities. The bank’s ongoing support also helps address long-term capacity constraints and infrastructure gaps and strengthen governance.

 

Knowledge Work

ADB brings added value to its members beyond its role in project financing. ADB acts as a knowledge broker by helping its members engage in regional issues including climate change and ocean health. ADB’s key publications, such as the Asian Development Outlook and Pacific Economic Monitor, help with macroeconomic forecasting and assess economic and key topical issues to guide national policy development and decision-making.

With knowledge support and activities being demand-driven, ADB works closely with the FSM in identifying and responding to both country and regional knowledge needs. ADB is making technical assistance available to the FSM to support upstream work including sector and scoping studies; and climate and disaster risk assessments, plans, and strategies. The FSM participates in ADB’s regional conferences and training programs to access regional best practices and improve the capabilities of policymakers, civil servants, and the technical workforce.

Shareholding and Voting Power

Number of Shares Held
426 (0.004% of total shares)

Votes
39,540 (0.297% of total membership, 0.457% of total regional membership)

*Overall capital subscription
$5.72 million

*Paid-in capital subscription
$282,000

*United States dollar figures are valued at rate as of 31 December 2023.


ADB Governor: Rose N. Nakanaga
ADB Alternate Governor: Lorin Robert
ADB Director: Rachel Thompson (Australia)
ADB Alternate Director: Lisa Wright (Australia)
ADB Director’s Advisor: Sweety Kalbesang (Palau) and Sabuhi Jafarov (Azerbaijan)

 

Financing Partnerships

Financing partnerships enable ADB’s financing partner governments or their agencies, multilateral financing institutions, and private organizations to participate in financing ADB projects. The additional funds provided may be in the form of loans and grants, technical assistance, and nonsovereign cofinancing.

Cumulative cofinancing commitments in the FSM:

  • Sovereign cofinancing: $2.78 million for 2 investment projects and $4.31 million for 7 technical assistance projects since 1992
 
Photo: Asian Development Bank
Financing Partnerships. Photo: Mark Floro/ADB
 

Future Directions

ADB’s Pacific Approach, 2021–2025 serves as the country partnership strategy for the FSM and focuses on building resilience against economic shocks, delivering sustainable services, and promoting inclusive and sustainable growth while recovering from the impacts of the COVID-19 pandemic. The priority areas under the strategy include (i) a more programmatic approach to climate change support; (ii) a deeper focus on long-term capacity support, including the use of capacity supplementation; (iii) increased flexibilities in procurement and contracting; and (iv) an emphasis on gender equality.

Recognizing the need for capacity support to complement physical infrastructure, ADB is also helping improve utility and public sector performance alongside infrastructure works.

This article was originally published in the ADB and the Federated States of Micronesia: Fact Sheet. Updated yearly, this ADB Fact Sheet provides concise information on ADB's operations in the country and contact information.

Last updated: 29 April 2024

Contacts

Federated States of Micronesia Pacific Country Office
Established: 2021
Ground Floor, One World Plaza
Kapweresou Street, Kolonia Town, Pohnpei 96941
Federated States of Micronesia
Tel: 691 320 2639
adbpacific
@ADB_Pacific

Division of Investment and International Finance
Department of Finance & Administration
PO Box PS 158
Palikir, Pohnpei 96941
Tel: 691 320 2639
www.dofa.gov.fm

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