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

2. 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

3. Myth #1 Population Growth is a Problem

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

5. Myth #1: Population Growth is a Problem 198719952004 In FSM12,20916,00315,156 Overseas (est)7292,0637,947 Wage & Salary Employment (all sources) Persons per Job 198719952004 FSM Jobs7.87.29.2 Total Jobs7.46.46.1

6. Myth #2 Out Migration is Causing a Brain Drain

7. 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%

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

9. 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.

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

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

12. Myth #5 Agriculture: Under-performing

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

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

15. Myth #6 FSM must be Domestically Self-Reliant

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

17. Myth #6: FSM Must be Domestically Self-Reliant

18. “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

19. Myth #7 Poverty is Prevalent/Non-Existent

20. 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

21. 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