Economic Myths (A Reality Check) Presented by: Fr. Fran Hezel & Chris Lightfoot

Economic Myths 1.Population Growth is a Problem 2.Out-migration Causing Brain Drain 3.Fisheries: Hundreds of Millions there for the Taking 4.Tourism: Build it and they Will Come 5.Agriculture: Under-performing 6.FSM must be Domestically Self-Reliant 7.Poverty is Prevalent / Non Existent

Myth #1 Population Growth is a Problem

Myth #1: Population Growth is a Problem FSM Resident and Non-Resident Population

Myth #1: Population Growth is a Problem In FSM12,20916,00315,156 Overseas (est)7292,0637,947 Wage & Salary Employment (all sources) Persons per Job FSM Jobs Total Jobs

Myth #2 Out Migration is Causing a Brain Drain

Myth #2: Out Migration is Causing Brain Drain High School Graduates x Place of Residence (2000) In FSMOverseas 36.0% 53.0% College Graduates x Place of Residence (2000) In FSMOverseas 5.0% 2.0%

Myth #3 Fisheries: Hundreds of Millions there for the Taking

Myth #3: Fisheries: Hundreds of Millions there for the Taking Profit & Loss in FSM Public Owned Fishery Enterprises Source: Matthew Jacobs, (2002) Micronesian Counsellor, Issue 40.

Myth #4 Tourism: Build it and They Will Come

Myth #4: Tourism: Build it and They Will Come

Myth #5 Agriculture: Under-performing

Myth #5: Agriculture - Underperforming Subsistence Share of Economy Source: FSM Department of Economic Affairs

Myth #5: Agriculture - Underperforming Exports ($ ‘000)

Myth #6 FSM must be Domestically Self-Reliant

Myth #6: FSM Must be Domestically Self-Reliant Imports and Exports

Myth #6: FSM Must be Domestically Self-Reliant

“The Prescription” Rule of Law Enforced Stable Government Functioning Markets Non-Discriminatory Laws Transparent & Consistent Governance Secure, Transferable Property Rights in Land Harmonised & Straightforward Investment Procedures

Myth #7 Poverty is Prevalent/Non-Existent

What Does the Future Hold? Likely Outcomes Remittances become a major source of income Household production remains important support for livelihoods Extent of Government services will be closely linked to Compact funding Fishing Licence Fees Significant but Highly Variable Possible Additional Outcomes Increased Tourism Development of Small Niche Industries Likely Impact on Livelihoods No Significant Change in Livelihoods of FSM Residents Increasing number of families moving overseas to find work

Where to now? What Should be Done? Initiate Strategies to Increase Value of Remittances Establish Conducive Environment for Investment Ensure Compact Trust Fund Achieves Potential What Should Not be Done? Pursue investment fantasies using limited Gov’t funds Allow the size of Gov’t to grow to unsustainable levels