The Federated States of Micronesia’s Economic and Cultural Integration

By:

Name of your College or University:
Radford University
Name of the course:
Economic Development
Date:
April 16, 2009
Contents
I Abstract 4
II Background Information 4
III Problem Identification 5
IV Methodology 6
V Resuts 6
VI Discussion 7
VII Solution 8
VIII Conclusion 9
IX Data Sources Utilized 10
APPENDIX 12

List of Illustrations
I Map of Micronesia
II Age Structure
III Labor Force
IV Educational Attainment
V Annual Percent Change In GDP
VI GDP Composition by Sector
VII Tourist Arrivals
VIII Ratio of Imports to exports
IX Current account balances
X population growth

I. Abstract
As the “virus” of globalization spreads across the world, every sovereign nation’s culture and economy reacts and adapts differently than others. Not every economy and culture chooses a similar “angle of attack” at overcoming the international pressures and for various distinctive reasons. How vast of a role does culture have in the integration of its market with world markets and how does it influence its potential for economic sustainability and long-term growth.
As the world becomes flatter (The World Is Flat – Thomas L. Freidman), the capacity to maximize consumption increases. With this increased demand comes a need for the increase of supply. This is the simplest definition of growth. When the land’s natural resources can no longer sustain economic growth, an economy must import its resources and the abundance or scarcity of these natural resources (along with other variables) determines the amount of demand for foreign goods. This in turn, causes a demand for further imports than exports causing a current account deficit in which the Federated States of Micronesia currently has a $-34.3 million (FY08 est. cia.gov) and struggles to continue on the positive side (reference Figure 9).
Along with this, comes the inability of self-sufficiency. Under the Compact of Free Association, the U.S. provides for roughly 40% of the FSM’s annual real GDP. Without this and other foreign aid, the FSM could not afford to employ two-thirds of its government employees. Becoming a self-sustainable economy will take an ongoing process and will entail international participation.

II. Background Information
The Federated States of Micronesia (FSM) is encumbered in a 270 sq mi of 607 mountainous islands in the Western Pacific Ocean, North of Papua, New Guinea and consists of four major islands; Chuuk, Kosrae, Pohnpei, and Yap (reference Figure 1). The state of Chuuk has the highest population and largest population density. The state of Kosrae is the smallest state in terms of land area and population density. The state of Pohnpei is the largest state in terms of land area.
The Federated States of Micronesia has a population of 107,434 (2009 est.) cia.gov. Figure 2 displays the breakdown of the population by age and gender. The population growth rate is - 0.238% and population density is 171.25 per km2. The birth rate is more than 3% and is moderately high but remains almost invariable because of emigration into the U.S (reference Figure 10).
The Federated States of Micronesia was acquired by the United States as a United Nations Trust Territory of the Pacific Islands and gained their independence in 1986 under the Compact of Free Association with the United States. This initial agreement also included the Republic of the Marshall Islands (RMI) and the Republic of Palau. It was essentially designed for the continued use of the Republic of the Marshall Island’s Kwajalein Atoll as a U.S. military missile tracking station currently the Ronald Reagan Ballistic Missile Defense Test Site (1999 - Present).
This compact would last from 1986 until 2001 and would provide the FSM specifically almost $1.3 billion in grants and services