[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
U.S. ASSISTANCE TO MICRONESIA AND THE MARSHALL ISLANDS: A QUESTION OF
ACCOUNTABILITY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ASIA AND THE PACIFIC
OF THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, JUNE 28, 2000
__________
Serial No. 106-139
__________
Printed for the use of the Committee on International Relations
Available via the World Wide Web: http://www.house.gov/
international--relations
______
U.S. GOVERNMENT PRINTING OFFICE
66-709 cc WASHINGTON : 2000
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa TOM LANTOS, California
HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey ENI F.H. FALEOMAVAEGA, American
DAN BURTON, Indiana Samoa
ELTON GALLEGLY, California MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California ALCEE L. HASTINGS, Florida
PETER T. KING, New York PAT DANNER, Missouri
STEVE CHABOT, Ohio EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South BRAD SHERMAN, California
Carolina ROBERT WEXLER, Florida
MATT SALMON, Arizona STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York JIM DAVIS, Florida
TOM CAMPBELL, California EARL POMEROY, North Dakota
JOHN M. McHUGH, New York WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina BARBARA LEE, California
PAUL E. GILLMOR, Ohio JOSEPH CROWLEY, New York
GEORGE P. RADANOVICH, California JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
Richard J. Garon, Chief of Staff
Kathleen Bertelsen Moazed, Democratic Chief of Staff
------
Subcommittee on Asia and the Pacific
DOUG BEREUTER, Nebraska, Chairman
JAMES A. LEACH, Iowa TOM LANTOS, California
DANA ROHRABACHER, California HOWARD L. BERMAN, California
PETER T. KING, New York ENI F.H. FALEOMAVAEGA, American
MARSHALL ``MARK'' SANFORD, South Samoa
Carolina MATTHEW G. MARTINEZ, California
MATT SALMON, Arizona SHERROD BROWN, Ohio
JOHN McHUGH, New York ROBERT WEXLER, Florida
RICHARD BURR, North Carolina JIM DAVIS, Florida
PAUL GILLMOR, Ohio EARL POMEROY, North Dakota
DONALD A. MANZULLO, Illinois GARY L. ACKERMAN, New York
EDWARD R. ROYCE, California ALCEE L. HASTINGS, Florida
JOHN COOKSEY, Louisiana
Michael P. Ennis, Subcommittee Staff Director
Robert King, Democratic Professional Staff Member
Matt Reynolds, Counsel
Alicia A. O'Donnell, Staff Associate
C O N T E N T S
----------
WITNESSES
Page
Susan S. Westin, Ph.D., Associate Director for the International
Relations and Trade Division, U.S. General Accounting Office
(GAO).......................................................... 7
Allen Stayman, Special Negotiator for Compact of Free
Association, Bureau of East Asian and Pacific Affairs, U.S.
Department of State............................................ 23
Ferdinand Aranza, Director, Office of Insular Affairs, U.S.
Department of the Interior..................................... 25
Fred Smith, Special Assistant to the Undersecretary for Asia-
Pacific Issues, U.S. Department of Defense..................... 28
APPENDIX
Prepared statements:
The Honorable Doug Bereuter, a Representative in Congress from
Nebraska....................................................... 44
Susan S. Westin.................................................. 48
Ferdinand Aranza................................................. 64
Allen Stayman.................................................... 71
Fred Smith....................................................... 80
The Honorable Robert Underwood, a Delegate in Congress from Guam. 83
The Honorable Edward Royce, a Representative in Congress from
California..................................................... 85
Additional material:
Answers to Questions for the Record submitted to the Department
of State by the Honorable Richard Burr......................... 86
Answers to Questions for the Record submitted to the Department
of the Interior by the Honorable Richard Burr.................. 92
Materials for the Record submitted by the Ministry of Foreign
Affairs of the Marshall Islands................................ 95
U.S. ASSISTANCE TO MICRONESIA AND THE MARSHALL ISLANDS: A QUESTION OF
ACCOUNTABILITY
----------
Wednesday, June 28, 2000
House of Representatives,
Subcommittee on Asia and the Pacific,
Committee on International Relations,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 2:25 p.m., in
room 2172, Rayburn House Office Building, Hon. Doug Bereuter
(Chairman of the Subcommittee) presiding.
Mr. Bereuter. The Subcommittee will come to order.
I regret we have had a delay because of a series of House
votes. It is a hectic day, and we will do our best to try to
give the subject of today's hearing the rapt attention it
deserves, but we will undoubtedly be interrupted. I myself am
involved in a Banking Committee markup and will have to leave
at least briefly for one of the votes.
Today we meet in open session to receive testimony on the
impact of U.S. financial assistance to the Federated States of
Micronesia (FSM) and the Republic of the Marshall Islands (RMI)
in view of the ongoing negotiations to renew the financial
provisions of the Compact of Free Association which expires in
2001.
In 1986, the U.S. Government entered in a Compact of Free
Association with the FSM and the RMI. The Compact granted these
former U.S. trust territory districts their independence and
provided a framework for future governmental relations,
including the provision for 15 years of U.S. direct payments
made by the Department of Interior to the bank accounts of the
FSM and the RMI. The direct payments from Interior were to be
used for such purposes as capital construction projects, energy
production, communication capabilities, and recurring
operational activities such as infrastructure maintenance.
Nineteen U.S. Federal agencies have provided aid through
grants, loans, equipment, and technical assistance.
Title II of the Compact, regarding economic relations, and
Title III, regarding the defense veto and additional base
rights but not the right of strategic denial or the use of
Kwajalein Atoll, will expire in 2001. The United States is
already engaging both Micronesia and the Marshall Islands in a
new round of negotiations to extend these Compact titles.
However, before negotiations proceed much further, I believe it
is incumbent on us to examine carefully and objectively the
record of the Compact since 1986 in order to provide a more
accurate and acceptable direction for relations in the future.
It is in this context that the Chairman of the Senate
Committee on Energy and Natural Resources, Senator Frank
Murkowski (R-AK) and I tasked the General Accounting Office
(GAO) to undertake a two-part review of the Compact.
The first report, which was issued last month, examines,
one, the cost to the U.S. of providing assistance to the FSM
and the RMI from fiscal years 1987 through 1999; and second,
funds provided prior to the Compact for the effects of nuclear
weapons testing on what is now the RMI. According to the GAO,
more than $2.6 billion--yes, this is ``B'' for billion--in
financial and other assistance has been provided to the FSM and
the RMI during this time period.
Of that, approximately $2 billion has been through
quarterly cash payments with minimal or no oversight to the
islands' bank accounts. The remaining $500 million was provided
by 19 Federal agencies in various services such as education,
Head Start and Pell grant funding, weather forecasting support,
preventive health services, Job Training and Partnership Act
aid, and the like.
This translates over the past 13 years into approximately
$1.5 billion to the FSM, a nation of 131,500 people, and $1.1
billion to the 50,500 inhabitants of the RMI.
The GAO found significant inaccuracies and inconsistencies
with the data being used by the Department of the Interior to
supervise and monitor Federal assistance programs. In fact,
Interior is still unable to document $27 million in
reimbursements. As the GAO reports, ``Collectively, therefore,
Interior's ability to accurately report on assistance provided
is called into question.''
This Subcommittee's own initial investigation revealed that
Interior has assigned only one mid-level individual, only one
individual in the field to simply monitor, not to manage, these
vast sums of American aid. His responsibilities are extended
even further to also include the distant, Freely Associated
State of Palau, also a former trust territory, and its $14
million annual aid program. In other words, one individual has
a jurisdiction extending over an area of 2,400 miles in length
and four time zones. I am told there is only one other
individual identified in the Office of Insular Affairs with
exclusive responsibilities for the FSM and RMI, and this person
is in Washington DC. The neglect and indifference of the
Interior Department is nothing more than a failure by our own
government to fulfill its basic responsibilities to the
American taxpayer. That is my conclusion.
Before another dollar is blindly committed, we need to get
the U.S. Government's own affairs in order. Given what the GAO
has revealed, I have serious concerns about the Interior
Department's ability to manage U.S. assistance and advance
economic development in the FSM and the RMI. Indeed, Interior's
only other experience in this field is with the Bureau of
Indian Affairs, and we are all too aware of the billions of
dollars in missing Indian trust fund moneys and the deplorable
conditions in and the vast number of failed economic
development programs on America's own Indian reservations.
We need to examine the following question: should some
other agency have primary responsibility?
The second part of the GAO review focuses on the use and
the impact of U.S. financial assistance to the FSM and the RMI.
Where has the $2.6 billion gone? I would say very candidly that
when I visited our four trust territories in the Pacific in the
early 1980's as a very junior member of the Interior and
Insular Affairs Committee I saw endemic waste, mismanagement,
and massive corruption in at least one of those territories.
Unfortunately, as the GAO will report, it is evident that
corruption, waste, mismanagement, and misuse of funds
continues. The abuse continues to divert a significant amount
of the resources that ought to have gone to the people of the
region but didn't.
America's investments in Micronesia and the Marshall
Islands seem to have disappeared or to be rusting away in
perpetuity. Most economic development projects have failed. The
squalor I saw on Ebeye almost 20 years ago apparently still
remains there today, perhaps even more intolerable despite $1.1
billion in overall assistance to that area.
Sixty million dollars have gone into fishing fleets and
processing plants in the FSM, yet the ships are rusting in the
harbor. They were never appropriate for the kind of fishing
that would make sense, or they are smashed up on the reef and
the plants are empty and closed with little or absolutely no
operational time resulting from those expenditures.
With the renewal of Title II of the Compact, significant
changes are needed to stop this deplorable, outrageous example
of the fleecing of the American taxpayer and to ensure that our
assistance does, in fact, lead the FSM and the RMI on a
successful path to economic self-sufficiency in which all
islands, not just the chosen few, benefit.
A successful Compact with genuine and sustainable economic
development in these Freely Associated States is certainly in
America's short-term and long-term national interest. The
mismanagement and waste of Compact financial assistance is not
a partisan issue; this financial and human tragedy has
transpired through Republican and Democrat Administrations in
Washington, and many different governments in Palikir and
Majuro, largely without public notice.
I am encouraged, although guardedly so, with a few positive
reforms that have already occurred or are being proposed in
both the FSM and the RMI under the new governments. However,
actions speak much louder than word and significant actions are
still needed.
With the current negotiations, both the United States and
the Freely Associated States have a special opportunity to
reformulate our financial relationship. The FSM and the RMI
should recognize that both the world and the U.S. Congress have
changed since 1986. While our special defense relationship
certainly remains of important strategic value--and in no way
is this special defense relationship in question or even on the
table--the Soviet Union and the threats it posed no longer
exist.
In our successful effort to balance the U.S. Federal
budget, certain domestic programs and constituencies have
endured painful cuts. The FSM and the RMI cannot expect to
continue to be shielded from similar experiences. Much, much
more will have to be done with less.
But the good news is that this can be done with no hardship
if the funds are no longer spent in such a scandalous fashion.
The challenge for the negotiations ahead is to determine how
best to do more with less.
I am pleased today to have the opportunity to hear from
both the GAO and the Administration on the Compact's record and
to begin to understand where our government should go from
here. I am going to work with Mr. Lantos and other Members of
the Subcommittee because I think there are tasks beyond this
for the GAO where they can be helpful.
Mr. Lantos, I will introduce our witnesses in a moment but
I want to give you a chance to make any comments at this stage
before I go to introductions.
I would yield to the distinguished gentleman from
California, Mr. Lantos, the Ranking Member.
Mr. Lantos. Thank you very much, Mr. Chairman. Before
making a few comments, I want to pay tribute to my Chief of
Staff, Dr. Bob King, who recently returned from the area, who
has provided me with an invaluable analysis of developments in
this region.
Mr. Chairman, I want to commend you for holding this
hearing. This is not an issue that is at the top of the
headlines, but it represents an area of enormous strategic
interest for the United States. This hearing reflects your
typical thoughtful and responsible approach to dealing with an
issue, an area of importance to our Nation.
The United States has had a long-standing relationship with
the people of Micronesia and the Marshall Islands. For over
four decades, these areas were trust territories of the United
States. When they became independent states in the mid-1980's,
we established a special relationship through a Compact of Free
Association with both the Federated States of Micronesia and
the Republic of the Marshall Islands.
Our particularly close relationship has been very
beneficial to the United States and to these two countries.
This area has great strategic importance for us.
These islands cover a huge area of the Pacific Ocean.
During World War II, American military personnel gave their
lives to gain control of these strategically significant areas.
We continue to maintain a critical military facility at
Kwajalein Atoll in the Marshall Islands. This facility, which
we have leased under an agreement with the Republic of the
Marshall Islands, has great importance for our national missile
defense system testing and for testing other missile and
missile defense systems. This facility is also important in
tracking space activities. It continues to be in our interest,
Mr. Chairman, to maintain close and friendly relationships with
the Marshall Islands and Micronesia.
This doesn't mean that there are not problems in the way in
which the United States' assistance to these two countries has
been administered.
I want to commend you for requesting the GAO report this
hearing will consider. Over the past 15 years, since the full
independence of Micronesia and the Marshall Islands, the United
States has provided some $2.6 billion in assistance under terms
of the Compact of Free Association with these two countries.
This assistance has been very important for both countries, and
the American taxpayers have recognized the importance of doing
this. At the same time, the GAO report clearly indicates that
the handling of these funds has been seriously deficient.
There is plenty of blame to go around. The Department of
Interior has been seriously deficient in its oversight of these
programs. The governments which have received this aid also
have not exercised the oversight that should have been done.
The assistance has not achieved its intended benefit s for the
people of Micronesia and the Marshall Islands.
I want to strongly emphasize, Mr. Chairman, the point you
made. This is not a partisan issue. The Compacts of Free
Association with these countries have been associated with and
administered by Republican and Democratic Administrations over
the course of more than 20 years, during the Reagan, Bush and
the current administration. The problems that are evident are
not the responsibility of any particular administration or any
particular party.
It is my sincere hope that we can continue to deal in a
constructive and bipartisan fashion with the matter of
reconsidering some of the provisions of these two Compacts.
Mr. Chairman, I appreciate the serious and responsible way
you have approached this matter, and I want to assure you that
I will work with you in the same manner to work out solutions
that are in the best interest of our Nation.
Thank you, Mr. Chairman.
Mr. Bereuter. Thank you, Mr. Lantos. I can assure you we
will attempt and we will, without a doubt, work constructively
in a bipartisan fashion; and I appreciated your assurance,
although I knew that it would be there without you mentioning
it.
I want to welcome to the panel today the Delegate from
Guam, Mr. Robert Underwood, and I would just tell him that as
far as this hearing is concerned, today he can consider himself
a Member of the Subcommittee and fully participate.
I will turn now to Mr. Royce, the Vice Chairman of the
Subcommittee, for any comments that he might make before we
introduce our witnesses.
Mr. Royce. Thank you, Mr. Chairman. I will take only a
minute, but let me just say that this Subcommittee is now doing
some very important oversight work, and I want to thank the
Chairman for calling this hearing.
The fraud and the waste and the abuse that the GAO has
managed to uncover here at the direction of the Chairman is
frankly, very troubling. We are not talking about a small sum
of money here, as mentioned; as you go through that GAO report,
item after item is identified as poor planning, poor
management, inadequate construction, inadequate maintenance,
misuse of funds.
Just to tick off a couple here, $180,000 in funds intended
for economic infrastructure upgrade used instead to build a
dock in front of the mayor's house; 600,000 of heavy equipment
purchased for a $1.3 million road used instead for--at the
mayor's personal dock for activities unrelated to road
maintenance.
There is little accountability in these expenditures, and
the Interior Department's reports of these expenditures are a
mess.
This is more than an accountability problem, though, as we
go through it. The GAO has found that the money we have sent to
these countries has done little to promote economic
development, which is the stated purpose of the aid. While this
aid failure is common throughout the world, what is different
here in this case is the amount of money we are spending per
person.
Here is $760 per capita in Micronesia and $1,095 in the
Marshall Islands. Now if you compare that to Africa for a
minute, we are spending some $1 per person per year on the
African continent, and in these islands, we have fostered a
dependence mentality that counters economic development and it
counters independence.
We have, yes, a very strategically important relationship
with the Marshall Islands and with Micronesia, and as we look
forward to renewing this Compact, it is very important that we
understand the problems we have had and it is very important
that we remedy this situation; our failure to do so would hurt
our interests there and would hurt support for American
engagement elsewhere in the world.
That is why I want to thank the Chairman for holding this
important oversight hearing and for the steps that we will be
taking to remedy the situation.
Thank you, Mr. Chairman.
Mr. Bereuter. Thank you very much, Mr. Royce.
Mr. Underwood, do you have an opening statement? If so, you
are recognized.
Mr. Underwood. Thank you, Mr. Chairman. I appreciate your
leadership on this particular issue and bringing attention to
what is not ordinarily understood in the halls of Congress, our
relationship with the Compact States of the Federated States of
Micronesia and Republic of the Marshall Islands. I have a
statement that I would like to enter into the record.
Mr. Bereuter. Without objection.
Mr. Underwood. At the same time, I just want to relate two
perspectives on this particular issue.
First, is that while we certainly have an obligation to the
American taxpayer to ensure that money is spent wisely and to
make sure that the Federal agencies which are responsible for
monitoring and accounting these funds should do their job--and
there is much evidence that perhaps they haven't--we should
bear in mind that this is a very important relationship. This
is a very strategic area. This is an area of the world which
will continue to grow in importance. It represents a
significant part of the Pacific Ocean, and we should bear that
in mind lest we have any difficulties in the future.
Second, I want to also raise the issue, although it is not
entirely within the context of this, to understand that in the
region there live Americans, Americans in Guam and Americans in
the Commonwealth of the Northern Mariana Islands, and that the
nature of the programs that we have in place in the Compact
States of the FSM and RMI have a direct impact on these two
territories, as well as the State of Hawaii--a very dramatic
impact in terms of the utilization of resources. Those of us in
Guam, in particular, want to be helpful to our island brothers
and sisters and neighbors in the region; but at the same time,
we also want to make sure that any negative effects of lack of
economic development which are translated into dramatic out-
migration into a place like Guam, which I represent, should be
considered in the context of the negotiations.
Again, I want to thank you for your efforts in this regard.
Thank you.
Mr. Bereuter. Thank you very much, Mr. Underwood. We will
try not to neglect a consideration of those impacts, and, of
course, we have the people of American Samoa in the region as
well.
Without objection, additional questions for the record will
be submitted by Mr. Burr of North Carolina.
[The information referred to appears in the appendix.]
Mr. Bereuter. The Subcommittee has also received testimony
from the Commonwealth of the Northern Mariana Islands, a letter
from the Minister of Foreign Affairs and Trade of the Republic
of Marshall Islands, which will also be included in the record,
without objection.
Hearing no objection, that will be the order.
[This information is available for viewing in the
Subcommittee's office]
Mr. Bereuter. Testifying first, if she will come to the
witness table--and anyone she would like to bring The
International Relations and Trade Division with her--is Dr.
Susan Westin, Associate Director for the U.S. General
Accounting Office. In this capacity, she has led a number of
cross-cutting assignments on competitiveness, in addition to
heading GAO's assessment of the U.S. response to Mexico's
financial crisis and the second part of the GAO's review of the
FSM and RMI. Before joining the GAO, Dr. Westin held faculty
positions at the University of Toronto, Northwestern
University, and Southeastern University in Washington.
We will then have a distinguished second panel of
witnesses, which I hope we will get to today if we have any
kind of cooperation from our colleagues on the Floor, and I
will introduce them at that time.
Dr. Westin, I am not placing you under time restraints
here. I know that you will use the time judiciously. This is
something we are not going to cut you short on. You and your
team are the primary witness here today, and we want to listen
and hear you in a very thorough fashion.
You may proceed as you wish.
STATEMENT OF SUSAN S. WESTIN, Ph.D., ASSOCIATE DIRECTOR,
INTERNATIONAL RELATIONS AND TRADE DIVISION, U.S. GOVERNMENT
ACCOUNTING OFFICE
Ms. Westin. Thank you, Mr. Chairman. I am pleased to be
here today----
Mr. Bereuter. Are you short some lights that you need to
see?
Ms. Westin. I see I do need my little flashlight that I
brought with me, so I will go ahead and use it.
I am pleased to be here today to provide information
regarding economic assistance provided by the United States
from 1987 through 1998 to the Federated States of Micronesia
and the Republic of the Marshall Islands under the Compact of
Free Association. The Compact represents a continuation of U.S.
financial support that had been supplied to these areas after
World War II under the United Nations Trust Territory of the
Pacific Islands.
Specifically, my testimony will address four main
objectives:
First, how have the FSM and RMI used Compact funding?
Mr. Bereuter. Would you excuse me for just a second? This
is the first time we have used some of this audio-visual
equipment, and I realize that for people here in attendance the
best screen is the one that is behind you. If you want to crane
around or slightly move your chairs, please feel free to do
that.
You may proceed.
Ms. Westin. Right. Mr. Chairman, the same thing will be
televised on the two screens on either side.
Second, what progress has been made by both nations in
advancing economic self-sufficiency?
Third, what has been the role of Compact funds in
supporting economic progress?
Fourth, how much accountability has there been over Compact
expenditures?
I will also provide observations on several issues that
need to be resolved during the ongoing negotiations to renew
Compact economic assistance to both countries.
The main message of my testimony this afternoon is that
both the Federated States of Micronesia and the Republic of the
Marshall Islands remain highly dependent on U.S. assistance.
Furthermore, Compact expenditures have led to little
improvement to date in economic development for the FSM or the
RMI. Many Compact-funded projects have failed due to poor
planning and management, inadequate construction and
maintenance and misuse of funds. In addition, there has been
limited accountability over Compact funds.
Let me first give a little background on the two countries.
The FSM is a grouping of 607 small islands in the Western
Pacific about 2,700 miles southwest of Hawaii, lying just above
the Equator. The FSM has a total land area of about 270 square
miles that occupies more than 1 million square miles of the
Pacific Ocean. The FSM is composed of four states--Kosrae,
Pohnpei, Chuuk and Yap--with an estimated total population of
131,500.
The RMI is located in the central Pacific about 2,100 miles
southwest of Hawaii and about 2,300 miles southeast of Japan.
The country is made up of more than 1,200 islands, islets and
atolls with a total land area of about 70 square miles, about
the same as the District of Columbia. The RMI occupies about
750,000 square miles of the Pacific Ocean and has a total
population of approximately 50,500 people.
In 1986, the United States entered into international
agreements--called the Compact of Free Association--with the
FSM and RMI. The Compact granted independence to these former
trust territory districts, following U.S. administration since
1947, and enabled the newly formed countries to participate in
world affairs as sovereign nations. The Compact provided 15
years of direct U.S. payments to the countries through the
Department of the Interior, to assist them in their efforts to
develop self-sustaining economies. This assistance expires in
the year 2001, although there is a possible 2-year extension.
The Compact also gave other U.S. Federal agencies the authority
to provide assistance such as grants, loans, equipment and
technical assistance.
Turning to the first issue regarding how Compact funds were
spent, we found that the FSM spent over $1 billion and the RMI
spent over $500 million in direct funding provided by the
Compact. There were three types of expenditures made by both
countries: general government expenditures, which supported
salaries and supplies; capital expenditures which supported
infrastructure projects, business ventures and debt service;
and expenditures targeted to support specific sectors such as
energy, communication, health and education. In the RMI,
Compact funds were also spent to compensate landowners for use
of land on the Kwajalein Atoll by the U.S. military.
Each government has used the money differently. The largest
area of expenditures in the FSM was general government
operations, which accounted for over 47 percent of the total
Compact expenditures. In the RMI, the largest amount of total
expenditures, or 45 percent, went to support capital fund
activities.
One of the priority areas under the Compact was spending
for capital projects. The FSM and the RMI together spent $484
million in this area to build infrastructure and government
buildings and to support economic development such as fishing
boats and processing plants.
The Compact does not provide guidelines to control the
timing of expenditures. The FSM and the RMI decided to gain
access to funding primarily in the early years of the Compact
by issuing $389 million in Compact revenue-backed bonds. This
funding was used to retire existing debt, fund capital projects
and make financial investments.
This strategy has not paid off for the RMI, which in recent
years has had to use a high percentage of Compact funding to
repay debt. For example, in 1998, RMI used 64 percent of its
Compact funds to service its debt, severely limiting the amount
available to support new capital investment or general
government operations.
The second issue we reviewed was the progress made by the
FSM and the RMI in advancing economic self-sufficiency. The FSM
and the RMI have made some progress in this area, but both
countries remain dependent on U.S. assistance to maintain
artificially high standards of living.
We chose dependence on U.S. assistance as our indicator to
gauge economic self-sufficiency. Total U.S. assistance, which
includes Compact and all other U.S. program assistance, still
accounts for at least half of total government revenue in both
countries, although government dependence on U.S. funds has
fallen from 1987 levels due to, among other things, increases
in local revenues.
As to the third issue, we found that Compact expenditures
of $1.6 billion have led to little progress in economic
development. Substantial Compact expenditures have supported
general government operations that have maintained high levels
of public sector employment and wages, and have acted as a
disincentive to private sector growth.
The FSM and the RMI also spend Compact funds for physical
infrastructure improvements. Both countries viewed these areas
as critical to improving quality of life and creating an
environment attractive to private businesses. For example,
Compact funds of at least $97 million have been spent to
operate and improve energy, including electrical systems. Some
of the power-generating facilities we visited are quite small.
For example the Tonowas power plant runs daily from 5 p.m. To 5
a.m. Provides electricity to 53 households.
The countries have spent $22 million to operate and improve
communications, including telecommunications systems. Access to
and dependability of these services have increased. However,
such improvements have not been sufficient to promote
significant private sector growth, although we identified one
tuna processing plant in the RMI that located to that country
in part as a result of dependable electricity.
Both countries have also spent Compact funds to provide
subsidized transportation systems. These efforts have been
targeted at improving transportation between main population
centers and outer islands. In the FSM, cargo ships purchased
prior to the Compact have been maintained with Compact capital
account funds. In the RMI, the national airline has received
about $30 million in Compact assistance.
Another important government investment has been in the FSM
where the College of Micronesia has received $12.8 million in
Compact funds over the last few years. The college provides the
FSM with its only post-high school educational institution.
I would now like to discuss some examples of unsuccessful
government investment of Compact funds to support business
enterprises.
Government officials from both countries told us that
investing in business ventures had been a bad strategy. During
our visit government officials reported that virtually no
Compact-funded business ventures were operating at a profit, if
at all. One example of a failed business venture is the $60
million in capital account funds the FSM spent on fisheries
activities. The FSM has undertaken an unprofitable fishing
investments in each of the four states.
We visited storage and processing facilities in all four
states of the FSM. Not one of the facilities was operating
during our visit. As you can see, the warehouses are virtually
empty. Officials from all four states of the FSM said that
ventures in fisheries were failures due to inexperience and
poor business judgment.
In Pohnpei, the state government spent $870,000 to develop
a pepper exporting industry. As part of this effort, the
government started a pepper processing plan to provide farmers
an alternative buyer to the one successful private sector
pepper company already in operation. The intent of the project
was to provide an opportunity to pepper farmers to purchase,
process, market and export their pepper at higher prices than
paid by the private sector company. As a result of the
government effort, the private sector company went bankrupt.
Subsequently, the government effort failed and there is no
longer any pepper industry at all in Pohnpei.
In the RMI, almost $2.4 million in Compact funds were
expended to build a garment factory. This facility was a 1993
Marshallese-Chinese joint venture which was to manufacture and
export clothing using Chinese workers. However, management
disagreements ensued and no clothing was ever sold. The
facility has closed.
The RMI used over $11 million in Compact funds to build a
major resort hotel. This hotel was built so that the RMI could
host a meeting of the South Pacific Forum in 1996. The hotel
now operates at a loss and receives government subsidies. For
example, in 1998, subsidies amounted to more than $1 million.
We visited more than 80 projects undertaken with Compact
capital account funds in both countries. We determined that
numerous Compact-funded projects, both infrastructure and
business ventures, experienced problems as a result of poor
planning and management, inadequate construction and
maintenance, or misuse of funds. Let me provide examples of all
of these problems, but keep in mind that these countries had
just emerged from over 40 years of U.S. Administration under a
U.N. Trusteeship, they had few planning and management skills
and little experience in managing projects.
Poor planning and management were evident for several
failed projects we visited. One example was Pohnpei Coconut
Products, a company involved with the production and
distribution of soap and other products made from island-grown
coconuts. Based on a 1996 contract with a foreign national, the
soap company requested and received $133,000 in Compact funding
to purchase new equipment to increase production. The foreign
national disappeared shortly after the equipment was installed,
and the company is currently losing money. As you can clearly
see, the expensive new machinery on the right sits idle and
rusting, while soap is made using the old technology.
The Pohnpei state government, in conjunction with national
government, spent over $21 million in Compact funds on fishing
boats and processing facilities that were not compatible.
Because of poor planning and management, the boats never
returned to profit and the processing plant currently is idle.
According to a Pohnpei government official, the government knew
nothing about the fishing industry when it made the investment
and was duped into paying too much for three 25-year-old boats
that were too small for the Pacific environment. In addition,
the processing plant was intended to process high-grade tuna
not the lower-grade tuna caught by the three boats.
Chuuk State spent Compact funds on a tuna cannery that was
never built. Chuuk spent $2.6 million on engineering designs,
specifications, site plans and other preparatory work for the
cannery. The objective was to plan, design and eventually
construct and operate a cannery on the island of Tonowas.
However, when we visited the island, we found that no cannery
had ever been built.
In the RMI, the government spent $9.4 million in Compact
funds to build a causeway from Ebeye, an extremely crowded
island in the Kwajalein Atoll, to a planned development on the
nearby island of Gugeegue. This causeway was meant to relieve
population problems on Ebeye by allowing residents to move to
Gugeegue. However, the causeway remains unfinished and
residents have not moved. Ebeye officials told us that the
causeway is still covered with water in places during high
tide, and is considered an inadequate and unreliable
connection. Further construction has been halted.
Another example of poor planning we identified was in the
FSM state of Kosrae. The state has used $9.3 million in Compact
funds since 1988 to construct a road around the island. When we
visited, the road was in obvious disrepair, as you can see in
these pictures, and we were told that the road surface had been
largely removed. In reviewing the project file for road
construction, it was revealed that an inferior, although
cheaper, paving technology had been used. Kosrae had been
informed prior to construction that the cheaper paving
technology would not hold up. Kosrae chose the cheaper method
and is now preparing to pave its roads again.
Inadequate construction and maintenance were also evident
during our site visits. In Chuuk, we saw an example of a
partially Compact-funded, poorly constructed dirt road that was
an extension of a concrete road built more than 50 years ago;
and you can see the concrete road as marked in the photograph.
The concrete road is still in good shape while the dirt road
has many potholes.
During our visit to a courthouse in Kosrae, completed in
1998 with $550,000 of Compact funds, large stains were evident
in both courtrooms due to water leaks.
The capitol building in Majuro, RMI, built during the
1990's using $8.3 million in Compact funding, has visible signs
of deterioration. Metal stairs are rusting, elevators are
inoperable and roof leaks appear throughout the building.
We visited schools and hospitals in all four states in the
FSM, which spent $80 million under the Compact health and
education block grants. In Pohnpei and Chuuk, we toured schools
where sections of ceilings were missing, bathrooms were in
disrepair and electricity had been disconnected. Many schools
appeared poorly maintained in these two states. Salaries
consumed 97 percent of the elementary education budget in
Pohnpei and 100 percent in Chuuk, leaving almost no funds for
educational materials or facility maintenance.
At the Pohnpei Hospital, the director told us that the
hospital lacked adequate funding, drugs and supplies. He said
that the entire health care system would collapse without
Compact funds, in part because collection fees cover less than
20 percent of health care costs. As a cost-cutting measure, the
hospital no longer provides sheets to patients. The director
said patients who cannot afford sheets simply lie on hospital
mattresses where their infections seep into the mattresses and
infect future patients. The U.S. embassy reported in January
2000 that because the hospital lacked funding for cleaning
products, infectious viruses had been found in 37 locations,
including 10 sites in the operating and emergency rooms.
In the Ebeye Hospital in the RMI, water leaks were evident
in the surgery ward, as you can see, and the supporting roof
beams were crumbling from rust. The new Ebeye Hospital which is
at least 2 years away from opening will need to have support
beams replaced before construction can continue. The support
beams were not adequately protected from the corrosive
environment and are already rusting away. You can see that in
the photograph on the left.
We identified Compact expenditures that appeared to be a
misuse of funds. For example, in Chuuk, the Udot road and dock
project was intended to upgrade basic social and economic
infrastructure in Udot. The project cost $188,000 in Compact
funding. When we visited the site, we noted that the dock was
built directly in front of the mayor's house. We were told that
the crane used to build the dock would be left to rust after
the dock was completed. The road led from the mayor's house
through the jungle to a small village with few other houses
along the road.
In contrast, at the end of a road was a junior high school
that had received $2,8000 in Compact funding to repair the one-
room schoolhouse. There were no desks or chairs for the
students. Further, we were told the students did not have their
own books and were read to by the teacher who used the one set
of available textbooks.
As another example of misuse of funds, the FSM used funds
in what the U.S. embassy described as ``cars and boats for
votes.'' The FSM public auditor reported that $1.5 million was
spent on cars and boats that were simply given away to
individuals for their personal use. Furthermore, the U.S.
embassy reported another 187 cars arrived in May 1999 and were
used for reelection assistance.
The fourth issue we examined was the accountability over
Compact expenditures. We found that all three governments, the
FSM, the RMI and the United States, provided limited
accountability. Planning and reporting documents of the FSM and
the RMI intended to identify development goals and progress in
meeting these goals were incomplete and insufficient. Both
countries have failed to fully control and account for Compact
expenditures. For example, both countries have not addressed
management weaknesses and misuse of funds identified in
financial and program audits.
In addition, the U.S. Government did not meet many
accountability requirements. For example, required annual
consultations with the FSM and RMI did not take place until
1994, 7 years after the Compact went into effect. Since that
time, four additional consultations have been held with the FSM
and three with the RMI. According to a Department of the
Interior official, the talks have been cordial diplomatic
meetings with little serious discussion of economic growth or
compliance with Compact spending requirements.
Further, we found numerous disagreements between the
Departments of State and the Interior regarding oversight
responsibility of the Congress. These disagreements have led to
limited monitoring efforts. As one example, disagreements
between the Departments regarding which agency has authority
over Interior staff posted in the countries have contributed to
the fact that there are no Interior staff posted in the RMI to
monitor U.S. assistance.
Finally, we have some observations to offer. Throughout the
course of our work, officials from the RMI, the FSM and the
United States identified five issues that they feel need to be
resolved during the course of the negotiations.
First, the objective of future economic assistance needs to
be defined. Should economic self-sufficiency continue to be an
objective? Should funding have more specific objectives and
only be targeted to specific sectors such as education or
health?
Second, the level and duration of assistance need to be
established. How much U.S. funding will be required to meet the
objectives established for future economic assistance? Does the
United States want to enter into another 15-year commitment to
provide economic assistance?
Third, the funding mechanism for assistance must be
determined. What are the costs and benefits of block grants,
the funding mechanism used in the current Compact versus other
options such as loan guarantees, project funding or a trust
fund? Should countries be allowed to use funds as collateral
for issuing bonds? How does the choice of a funding mechanism
affect the cost of program administration and the degree of
accountability?
Fourth, the degree of accountability over expenditures must
be established. Should spending of assistance across time be
more tightly controlled by the United States? Should
traditional grant conditions be applied, such as the ability to
withhold funds if performance requirements are not met? Should
there be more specific controls over the eligible uses of funds
rather than the broad categories of allowable expenditures
currently permitted? How could incentives for accountability be
built into future assistance?
Fifth, the administrator of future U.S. assistance should
be determined. Which agency or agencies should be responsible
for administering assistance? How should staffing issues be
resolved? How should the costs of administration be budgeted?
Should all Federal agencies provide assistance independently,
as they do today, or should there be a central fund?
Mr. Chairman, this concludes my prepared presentation. I
will be happy to answer any questions you or other Members of
the Subcommittee have.
[The prepared statement of Ms. Westin appears in the
appendix.]
Mr. Bereuter. Thank you very much, Dr. Westin. I want to
thank you and all of the staff who assisted you in the field
activities and the investigations that were conducted in the
preparation of your report. As I mentioned to you in a preview
examination of this, it seems quite apparent to me that we have
more work to do and that we will be requiring some additional
assistance from the GAO.
I am not, a person easily given to overstatement, but I am
outraged by what I see in terms of the use of the funds that
have been provided. I am saddened because I have some idea,
about how these funds could have brought great benefit to the
people living in the Federated States of Micronesia and the
Marshall Islands. Of course, we are concerned about what has
happened to our other two trust territories as well. One is the
Commonwealth of the Northern Mariana Islands and the other,
with which we have a Compact which came into effect later, in
Palau.
I recall thinking my first visit there--and this is before
the Compacts were signed, when they were still indeed trust
territory--about how many foreign firms took advantage of
trusting people in those areas, provided inappropriate kinds of
inducements for business contracts and made off with an
extraordinary amount of money.
Second, I thought how inappropriate the buildings were that
were being built with U.S. Government aid, inappropriate kinds
of constructions for tropical environments. I saw that the
buildings built many years earlier by the Japanese, appropriate
for a tropical environment, were, despite their age, much
better suited to the environment.
When I looked at the rust already taking place on those
beams, 2 years before the hospitals opened; when I saw those
barren classrooms in that junior high school, where we had
spent the grand sum of some $2,000-plus; and when I saw the
trucks and cars that were obviously misused--I saw the worst-
case scenario, or examples of it at least.
It is hard to know where to proceed with questions, and I
do hope and expect that you, Dr. Westin, will be able to stay
around as we go to our next panel because I think it could, in
fact, lead to some dialogue between the two of you under
questioning from myself or some of the Members.
I wanted to ask whether or not you have been able to
investigate whether or not there are other significant donor
sources to the Federated States and to the Republic of the
Marshall Islands, such as multilateral institutions, such as
nonprofit organizations or any other foreign aid, other
countries providing foreign assistance?
The second question: would you indicate to me, based upon
that examination of debt structure, and I think the example you
gave us was from the Marshall Islands, with debt servicing
leaving only 15 percent of this Compact expenditure available
to support new capital investments, general government
operations and so on, when would the RMI have paid off its
indebtedness?
Ms.Westin. To answer your first question first, yes, of
course, I will be willing to stay around after the other panel.
To answer the question on foreign assistance, there are a
few other donors to these countries such as Japan, Australia,
China and Taiwan. But we are not able to identify any figures
in the financial statements that would let us know what these
amounts of assistance are. We do know that some countries
provide assistance for particular projects; for example, Japan
might be asked, and it will be agreed that they will plan and
build and help with the operations of a particular project.
Officials have told us that some of these are quite successful.
Mr. Bereuter. Is it tied aid then, in effect, in some
cases?
Ms. Westin. Yes, that is correct, because they do take into
account the planning all the way through, but it is not aid in
the sense of giving the money to the government. The whole
project is done, so the money never shows up in the financial
statement. With regard to the multilaterals, the Asian
Development Bank has provided technical assistance to both
countries. We haven't looked specifically at the nongovernment
organizations that are there, but we did meet people who worked
for them; but we haven't looked specifically at how much money
they have spent there.
Your other question was on looking at the debt structure of
the RMI, giving that example. The bonds that they issued
earlier in the life of the Compact, I believe, are structured
to be paid off by the year 2003. So given that the Compact has
room in it for a 2-year extension, those bonds will be paid off
at the end of the time of the current Compact, plus the 2-year
extension.
Mr. Bereuter. Dr. Westin, have you looked at it enough to
know whether this is a normal pay-down process or if this has
balloon retirement at the end?
Ms. Westin. I think that it is a normal pay-down process.
One of the things we did try to get after though is how were
the proceeds of the bond issue spent.
Mr. Bereuter. That is my next question.
Ms. Westin. The idea was to get the money earlier in the
life of the Compact and make good investments. We are actually
not able to answer that question in any great detail because
the bond proceeds would, in general, be transferred into the
general government fund and then not tracked any further as
expenditures coming from the specific bond proceeds.
Mr. Bereuter. Dr. Westin, what are the specific,
``interagency disagreements in the United States on levels of
and responsibilities for oversight'' which have, ``limited the
U.S. Government's ability to meet its accountability
requirements''? Can you at least give some examples of those
kind of interagency disagreements?
Ms. Westin. I am sure you will want to pose that question
to the next panel, as well, but it is our understanding that
there is not complete agreement between the Departments of
State and the Interior, for example, who had the responsibility
to actually call the annual consultations every year; and as we
noted, we think that this lack of having these annual
consultations for the first 7 years of the Compact really had
an impact on these countries. In our view, that is the time
that these annual consultations could have provided the most
help to the countries in terms of discussing what the money was
going to be used for, and in terms of discussing progress and
economic development.
Another disagreement, as I mentioned, seems to be about who
is going to have authority over the person posted in-country;
and so there is no Interior staff person posted right now to
the RMI, and as you mentioned, the one Interior person who has
responsibility, has responsibility for overseeing the program
assistance, not the direct Compact assistance that we have been
talking about.
Mr. Bereuter. That is for the Marshall Islands and Palau?
Ms. Westin. Exactly.
Mr. Bereuter. Finally, and then I will move to my
colleagues for some questions you mentioned that there are
perhaps 17 or 19 other agencies that are providing direct
assistance in accordance with the Compact. That is a
significant amount of money, but it is, overall, a minor
percentage of the money.
To what extent are they more or less effective in
overseeing expenditures? Do they have the same kind of
accounting and documentation requirements or difficulties that
you seem to demonstrate in the Department of Interior or have
you had adequate amount of time to investigate their
stewardship?
Ms. Westin. We didn't focus on the program expenditures. If
you will allow me, let me check with my colleagues on this to
see if we have a more specific answer.
Mr. Bereuter. If they are speaking directly, just have them
identify themselves.
Ms. Westin. I will have Leslie Holen address this. She was
the project manager on the job.
Ms. Holen. The one comment that might be made is that by
the end of fiscal year 1998 these two countries wrote off over
50 million in questioned costs. We were not able to determine
precisely which of those costs were direct Compact funding
versus program funds. But we were told that a significant
amount of it is program funding from other agencies, and they
took no action to try to resolve the questioned costs.
Mr. Bereuter. I will turn now to Mr. Royce for questions he
may have, and then go to Mr. Underwood.
Mr. Royce. Thank you, Mr. Chairman. I guess I would start
by just noting that you stated that the country spent $1.6
billion in Compact funds, and the earlier GAO report identified
$2.6 billion in Compact assistance. So there is a billion
dollar difference there. What makes up that figure?
Ms. Westin. What makes up that figure is in our work we
just looked at the $1.6 billion in direct Compact funding. We
didn't look at the part that goes for the nuclear compensation,
and we didn't look at the funding from the 19 U.S. agencies.
Nor did we include Fiscal Year 1999 in our analysis.
Mr. Royce. I see.
Ms. Westin. So these three things make up the other
billion.
Mr. Royce. One of the questions I would have is, to your
knowledge, has the U.S. Government done anything at this point
to try to recover any of the funding in these cases? Is there a
provision in the Compact to accomplish collection from the
government in some way where governments--where these
governments in the Marshall Islands and Micronesia have
misspent the money?
Ms. Westin. We do know that within the U.S. Government
these cases of misuse or misspending were certainly known. We
are not aware of any organized effort on the part of the
Departments to address this problem, and it can be difficult to
track and verify the money. Even in cases where the annual
audits conducted by an independent auditor identified possible
misuse, we didn't see evidence that the U.S. Government was
taking action.
But it is unclear whether the U.S. Government can recover
funds that are misspent. Most direct funding is guaranteed
under the Compact and it appears that the Compact itself, the
way it is written, makes it difficult, if not impossible, for
the U.S. Government to withhold funding in cases of misuse.
Mr. Royce. Might make it impossible to withhold funding in
cases of misuse?
Ms. Westin. Yes.
Mr. Royce. The State Department--in the testimony that they
are going to give later today, they will announce that they are
exploring a policy that no new Federal program would be
extended to the Marshall Islands or to Micronesia unless, in
their words, ``it directly advances the goal of economic self-
sufficiency.''
Now, I am not sure exactly how you define ``economic self-
sufficiency.'' I mean, self-sufficiency in this case might be a
somewhat meaningless term. Is the United States, for instance,
self-sufficient? Were these islands self-sufficient previously?
So there is an ambiguous term that the State Department is
using there in terms of setting its own goal; I wanted to make
that point. My real question is, are there Federal programs
that we are extending today that we should terminate today
regardless of the State Department's view of this economic
self-sufficiency argument in your view?
Ms. Westin. Mr. Royce, I think that is probably a question
that you should put to State Department and Interior. We looked
at the way that the funds have been used.
Your point on self-sufficiency, I think is well taken. When
we were asked to look at the progress made in achieving self-
sufficiency, we looked at the Compact; and in the Compact
itself, self-sufficiency is not defined, and that is why we had
to choose an indicator to use. As I said, we chose the
indicator of reliance on the U.S. as compared to the percentage
of government revenues they raised. They have made some
progress in that area. For example, FSM, I think in 1986, 83
percent of its government revenues were from U.S. assistance.
It is down to something like 53 or 54 percent now.
Mr. Royce. I see. Dr. Westin, what is the share of the
economy there locally that is expanding or where do those
revenues--where are those revenues that displace in the private
sector? Where are those revenues?
Ms. Westin. They are raising revenues from local taxes and
also from fishing licenses.
Mr. Royce. I see. Dr. Westin, I thank you for a very
thorough report; and again, I thank the Chairman for this
hearing.
Mr. Bereuter. Thank you very much.
Mr. Underwood, you are recognized for 5 minutes.
Mr. Underwood. Thank you, Mr. Chairman; and again I want to
thank you for the courtesy you have extended to me.
Dr. Westin, I was not here for your entire testimony, but
as I understand it, you did give some graphics on the nature of
rusting in the tropics. I just want to point out a little--just
to give some balance to the picture, a little ditty that I used
to hear as young man in Guam, that people in Navy used to say,
and that is, ``In God we trust, in Guam we rust,'' and by that,
meaning that the tropical environment is a very punishing
environment.
I just last year bore witness to a Seabee project, and this
is--represents some of our best engineering that we can think
of, a Seabee project for a recreational facility that had to be
redone in Guam because the rebarbs were not done appropriately
and they were not taken care of. So it is a punishing
environment and at times it is true that maybe sometimes the
best thinking and the best engineering does not go into it.
In the nature of, I wanted to ask a question, I guess that
is developmental in nature. These nations are relatively young
nations. We are talking about a timeframe in which, if we made
comparisons to the United States' growth from 1776 to 1789 we
barely had a Constitution out 13 years after independence. So
now we have these countries that are in a period of rapid
change and rapid development and, in a sense, trying to find
their sea legs as they deal with the issue of whether there is
such a thing as economic self-sufficiency, the question asked
by Mr. Royce, or perhaps more appropriately, the notion that
there is some kind of at least economic stability, some kind of
stable economic structure, some kind of rule of law, some kind
of process whereby we can actually begin to think of serious
economic development in the future. So I have two questions
that are kind of predicated on that.
First of all, let us say for the sake of argument that
every dollar was spent appropriately and every dollar was
accountable--we could track where every dollar went. Would
there be--would we be closer to, ``economic self-sufficiency,''
or is the challenge so daunting in these areas that we would
still have a ways to go? That is the first question.
The second question is that, as you examine--perhaps the
question was, when you do a GAO study, sometimes these
questions are not asked in the developmental way, ``Is it
better in 1980 than it was in 1990,'' as opposed to saying,
``Well, where are we in 1999?''.
So would you venture any commentary on whether things have
actually been on the upswing, that things are getting better;
that perhaps they are not where we would like them to be, but
would you venture any commentary on the developmental nature of
where we are going with this economic assistance?
Ms. Westin. You have certainly posed some very weighty
questions, and the first one is the challenge, I think as you
put it, if every dollar had been spent appropriately and
accounted for, would it still be a ways to economic self-
sufficiency?
I don't think that I can answer that definitively based on
GAO's work, but it seems to me that, yes, we probably would not
see these island countries at self-sufficiency.
What we focused on, though, was really to look and see
whether we thought the dollars had been spent appropriately;
and I think what I would like people to take out of our work as
the next Compact is restructured is to think about what
accountability measures need to be built in, so the dollars are
spend more appropriately and accounted for.
With regard to the second one, has there been improvement,
yes; and in the photographs that I provided, I did show
examples of the power plants, there have been infrastructure
improvements, including telecommunications.
The difficulty, though, is--from what we have heard is that
although these companies are not losing money, if the United
States' assistance didn't supply incomes to many of the
citizens of these countries, there wouldn't be people to pay
for the electricity; and it is not clear that they could be
self-sustaining companies in that sense.
But, yes, there have been infrastructure improvements that
have taken place.
Mr. Bereuter. Would the gentleman yield?
Mr. Underwood. Yes.
Mr. Bereuter. Talking about the power plants and seeing
some of the equipment, I want to remind you of what you and
your staff told me about the almost total lack of maintenance
and how the infrastructure there and equipment is going to have
a very short life unless there is an allocation for
maintenance.
I hope I am not misstating what you said, but that is my
recollection.
Ms. Westin. Yes, sir. But also that we did visit power
plants where they do understand the problem of maintenance, and
in some examples are really paying attention to this.
Mr. Bereuter. Thank you for yielding. If you have----
Mr. Underwood. No, I think that takes care of it.
Mr. Bereuter. Mr. Rohrabacher, the gentleman from
California, is recognized.
Mr. Rohrabacher. Thank you very much.
I am a little disturbed by a mind-set that I am reading
into some of the things that are happening here, Mr. Chairman.
It just seems to me it is like we are not talking about people
who are free and independent and have their own country, but
about people who have some relationship with the United States,
and that we have some responsibility to tell them how to run
their lives.
When you treat people like Indians on a reservation, they
are going to end up like a lot of Indians ended up in the
United States on reservations. Our reservations were a national
disgrace, where the American Indian tribes were dependent on
our government running their lives for them. It seems to me
what we have got here is the same thing.
By the way, people treated Indians as if they couldn't run
their own affairs and, thus, they ended up being unable to run
their own affairs. I am very proud now that the American
Indians are emerging from that dependence and declaring their
independence from these Federal programs. They want to be
independent now in the United States, and they are making great
progress in our country, in California especially. I know the
Pechanga Indians are making substantial progress, and just 50
years ago they were living in squalor.
Micronesia and the Marshall Islands are located halfway in
the Pacific between Asia and the United States, and I would say
they are a very important piece of territory for the world.
Especially the Kwajalein missile range, which was developed,
Mr. Chairman, at a cost of $4 billion to the United States, is
even more important now than perhaps it was a few years ago. We
have to recognize that. We know how many lives it took to free
these islands--not just these but the others in the Pacific
during World War II--and we also know that these islands have
been used for weapons testing.
There have been 67 nuclear weapons tests on these islands
in which a large number of islanders were irradiated and many
were displaced. So there have been major problems to overcome,
and it just seems to me--from what you are telling us, it looks
like a mess out there right now.
I am especially alarmed because I have always been ringing
the alarm bell about what the Communist Chinese are doing. The
Communist Chinese are involved in the Pacific. The largest
Chinese land satellite tracking system, electronic spy station,
in the Pacific, built by the Chinese army, is located on
Tarawa, which is 500 miles south of this missile testing range
in Kwajalein. So there are other Chinese activities going on in
other islands throughout the Pacific, and we have to be
concerned about this. If the Communist Chinese are acting the
way the Japanese acted before World War II, they could pose a
strategic threat to us.
Furthermore, we need to develop an antimissile system which
means we will need the Kwajalein range. So these things we are
discussing today are not things that we should just shrug our
shoulders and say, so what.
Apparently, what you said, we have grants of over $1.5
billion to these islands, and there are only 130,000 people on
the islands; and take a look at--for what we got, it is clear
that that money was pretty much wasted, at least a large hunk
of it was wasted.
So let me just state my gut reaction to this, and then get
your reaction: When you treat people like children, they are
going to act like children. If you are going to treat people
like they are not responsible, they are not going to be
responsible.
The Marshall Islands now have a new government that is
committed to honest government--at least they say they are--and
I will put in the record, a letter that Chairman Bereuter
received from the new head of the government there, who is the
Minister of Foreign Affairs and Trade for the Marshall Islands,
making his commitment to reform; I will put that in the record
with your permission, Mr. Chairman.
Mr. Bereuter. It is already in.
Mr. Rohrabacher. Thank you.
It seems to me that we have got to reexamine the
fundamental relationship that we have and have had with these
islands for the last 10 to 15 years.
They say that insanity is doing more of the same and
expecting different results. Well, perhaps it is time for us to
do just this, and that is, figure out how much Kwajalein is
worth, really worth, because they--we have been--it sounds to
me like we have been giving them these grants. We haven't just
been paying them the rent which they are due and giving them
tremendous responsibility of handling their own affairs.
What about a system of just giving them the money that
would be a fair rent for Kwajalein and the use of their islands
and letting them run their own affairs, rather than having such
oversight and such involvement of the U.S. Government and the
rest of their affairs?
Ms. Westin. As I had previously mentioned, we look at the
payments to Kwajalein as part of this $1.6 billion. The option
to renew the lease on Kwajalein has already been extended for
15 years, and I think some of your questions will probably be
better directed to the next panel, to the representative from
DOD.
With regards to just letting these people run their own
affairs, I think that is something that needs to be determined
in the next negotiations. There are different strategies; do
you just decide that you are going to set up a trust fund and
not have accountability? The last point----
Mr. Rohrabacher. I don't understand what we have to decide.
Aren't we talking about sovereign entities, yes?
Ms. Westin. Yes.
Mr. Rohrabacher. What are we deciding this for?
Mr. Bereuter. Will the gentleman yield?
The Compact under which we were providing financial
assistance will basically be completed in most respects, as I
understand it, next year--and there is already pressure to
extend these Compacts, and so the question--indeed, we need to
basically reexamine this relationship and financial
accountability here. You are absolutely right; I think we have
a task ahead of us.
Mr. Rohrabacher. I am no expert on this. I stopped in the
Marshall Islands once several years ago, so I am no expert. But
my gut instinct tells me that, give people their due, treat
them like adults, and give them a fair price for Kwajalein, and
they will have to look and find out exactly what agreement was
made.
I hope we are giving them market value, because we need
that facility; and if we need it, we should give them a fair
price for it and then let them run their own affairs. People
will always surprise you if you expect them to be responsible
and treat them as adults.
So thank you very much, Mr. Chairman.
Mr. Bereuter. I agree with a lot of what the gentleman
said, but I wanted to mention this--of the $2.6 billion that
has been provided to the two Freely Associated States that are
the subject of the hearing today, approximately $2 billion of
the $2.6 billion has gone in direct quarterly cash payments, so
basically they have been treated like adults.
I guess we did, like others that had a colonial
relationship with African countries, do a good job of putting
in place managerial skills ahead of time. We did protect them
from the international scalawags that are out there that took
advantage them in a whole lot of ways. I know if the gentleman
had visited Ebeye with me, which is a small island right near
Kwajalein where I stayed for 2 days, he would be very upset
with the conditions that these people were living under and
under an American flag.
Mr. Bereuter. I do remember how money that was going to
help the nuclear affected people in the Marshall Islands was
being diverted and not going to the people that deserved it at
that time. Now this is before the Compacts were concluded.
We have got a task ahead of us. In fact, I think there
needs to be something of a special task force just to focus on
this issue and work with every kind of expertise we can find to
get the right kind of arrangements for an extension, if we have
an extension, and I am counting on the gentleman. I think there
is nothing better than to visit the place, though; and
certainly my knowledge is obsolete but, having some background
in design and construction, there is no excuse for what I saw
of that new hospital. I would prefer a Japanese-built building
of 40 years ago to what we are putting up there today.
Thank you, Dr. Westin. We are going to be in touch. If you
can stay as suggested, I would appreciate it.
Ms. Westin. Certainly, Mr. Chairman, thank you.
Mr. Bereuter. Now we would like to call our second
distinguished panel.
Representing the Department of State is Mr. Allen Stayman,
who has served since June 1999, as the U.S. Special Negotiator
for the Compact of Free Association. Prior to this posting, Mr.
Stayman was Director of the Office of Insular Affairs and
Deputy Assistant Secretary for Territorial and International
Affairs at the Department of the Interior. It was in these
capacities that he has testified before this Subcommittee in
previous years. From 1984 to 1993, Mr. Stayman was a
professional staff member with the Senate Committee on Energy
and Natural Resources.
Representing the Department of the Interior is the current
Director of the Office of Insular Affairs, Mr. Ferdinand Danny
Aranza. A native of Guam, he previously served as legal counsel
to the former delegate from Guam, Congressman Ben Blaz, who
served on this Subcommittee during his tenure in office.
We are also honored to have Mr. Frederick C. Smith, a
Special Assistant to the Under Secretary of Defense for Asia-
Pacific issues. For over 25 years, Mr. Smith has been actively
involved in studying, formulating and implementing U.S. defense
policy, first as a naval officer and now in a civilian
capacity. Before his current posting, he served as a visiting
professor at the U.S. Naval Academy and as Principal Deputy
Assistant Secretary of Defense for International Security
Affairs.
Gentlemen, thank you very much for making yourself
available to us today to help us understand this current
situation, then to begin, after today, to look for a proper
course for the Congress. I understand you are going to testify
in the order of your introductions. So any kind of statements--
and I know--I think you all have written statements--they will
be made a part of the record in their entirety, and if you
would try to keep your oral comments to, say, 5 to 8 minutes
each, then we will have time for questions.
Mr. Bereuter. Mr. Stayman, we turn to you.
STATEMENT OF ALLEN STAYMAN, SPECIAL NEGOTIATOR FOR COMPACT OF
FREE ASSOCIATION, BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS,
U.S. DEPARTMENT OF STATE
Mr. Stayman. Mr. Chairman and Members of the Subcommittee,
let me begin by thanking you for requesting these two GAO
reports. It is my intention as the special negotiator to
consider them carefully in order to ensure the effective use of
future U.S. assistance.
Let me summarize by touching on five topics.
First, in response to GAO, the Department concurs with the
recommendations of the May GAO report that future Compact
provisions, require that reliable data be maintained to ensure
better accountability. We also generally agree with the second
report regarding problems with the use of Compact funds in
advancing self-sufficiency, and in accountability. My colleague
from the Department of the Interior will speak in more detail
to our understanding regarding these problems.
Second, the Department shares the assessment of the GAO
that, notwithstanding these problems with the existing economic
program, the Compact has successfully met two of its three
primary goals, providing for a transition from trusteeship
status and meeting U.S. security interests. The Compact was
negotiated and implemented during the Cold War when political
and security objectives were a more immediate priority for the
United States than was advancing economic self-sufficiency. It
was not until 1993 that a high priority was accorded to
economic development.
Third, the United States has a continuing interest in these
countries, which justifies some level of continued economic
assistance. These interests include maintaining economic
stability and our support for their economic reform strategies;
second, sustaining the political stability and close ties we
have developed; third, assuring that our strategic interests
continue to be met; and, fourth, developing a strategy for
ending mandatory annual payments by the United States by a date
certain. While we recognize the need to continue some level of
financial assistance, I want to emphasize our belief in
appropriate reductions in future assistance and to greater
accountability.
My fourth topic is an update on our talks. We are
negotiating with the FSM and RMI separately. The talks with the
FSM are progressing smoothly. We have had two negotiating
sessions, and our next round is scheduled for September. Formal
talks with the RMI government have been delayed by a relatively
recent change in government. We are pleased by the democratic
transition to a new government and with their commitment to
reform and accountability. The new government is currently
updating its economic development strategy, and we plan formal
talks after the update is completed.
Finally, I would like to share our general approach to the
negotiations which has four elements:
First, financial assistance. We share GAO's view that there
must be effective accountability in any future assistance.
Accordingly, we believe that future funds should be provided
through a limited number of grants, each with clearly defined
scope and objectives. We also believe that the Administration
must have the necessary authority and resources to ensure that
reasonable progress is made toward these objectives.
Second, the Department is interested in the concept of the
trust fund as a means to terminate mandatory annual financial
assistance by a date certain. We are still analyzing what the
appropriate trust fund design and the level of funding might be
and what contributions should be expected from non-U.S. donors.
Third, regarding program and services assistance, for the
same reasons that we believe some level of financial assistance
should continue, we believe some program and services
assistance should continue. Generally, these programs and
services are targeted to priorities, social and economic
objectives such as small business loans, supporting the postal
system and assuring safe air transportation.
The fourth element in our approach deals with migration.
The Compact currently provides that citizens of the Freely
Associated States may freely enter the United States as
nonimmigrants. Annual reports to Congress have documented the
substantial impact of this migration to Hawaii, Guam and the
Northern Mariana Islands. Of particular concern are migrants
who have communicable diseases and criminal records. These
conditions are currently grounds for inadmissibility to the
U.S. under the Immigration and Nationality Act.
We are considering three responses to the migration issue.
First, we believe our approach of committing substantial future
assistance to improve health and education of potential
migrants can significantly reduce Compact impact. Second, we
are exploring several options for determining admissibility of
FAS migrants prior to entry into the United States. Third, we
intend to increase compensation to Hawaii, Guam and the
Northern Mariana Islands.
Thank you for this opportunity to present the Department of
State's views today. Let me assure you that we will continue to
take every opportunity to keep the Committee informed as
negotiations proceed.
Mr. Bereuter. Mr. Stayman, thank you very much for that
succinct statement.
[The prepared statement of Mr. Stayman appears in the
appendix.]
Mr. Bereuter. Next, we would like to hear from Mr. Aranza.
Mr. Aranza, you may proceed as you wish.
STATEMENT OF FERDINAND ARANZA, DIRECTOR, OFFICE OF INSULAR
AFFAIRS, U.S. DEPARTMENT OF THE INTERIOR
Mr. Aranza. Thank you, Mr. Chairman, Members of the
Subcommittee. Thank you for having this hearing, and I am very
pleased to represent the Department of Interior's view on the
U.S. Compact with the Marshall Islands and Micronesia.
We concur with what has previously been stated by GAO and
by my colleague at State Department. We concur that the primary
U.S. political and strategic interests were achieved
successfully by the Compacts. The Marshall Islands and
Micronesia made a successful transition from trust territory
wardship under U.S. supervision to fully functioning sovereign
democratic governments, and also the U.S. obtained defense
access rights and the right to deny access to other countries
in those strategically located regions in the Pacific.
But with respect to accountability and economic objectives,
we also concur that results thus far have, at best, been mixed.
I would like to use my time this afternoon to summarize why we
believe the current Compact is having limited impact in
achieving FAS economic development and ensuring proper
accountability in the use of Federal funds.
Despite 15 years of Compact financial support for the
general operations of the FAS governments and a program of
capital investment, the FAS are not yet self-sufficient. Part
of the reason is that the Compact did not require a system of
goal setting and accountability for results tied to receipt of
funding. The Compact and its related agreements instead created
a system that allowed financial assistance to flow
uninterruptedly to these nations while limiting the United
States' ability to affect the results of that spending.
The Federal assistance management regime described in the
Compact of Free Association is unique and a Federal grant
management practice. The negotiators created a system that
bears little resemblance to established accountability measures
that characterize the use of Federal funds. The result is a
system of payments largely bereft of performance standards,
cost principles and procurement rules found in OMB circular A-
102, the ``Common Rule'' for grant management.
Mr. Chairman, I believe this is a critical point to
understand a little more thoroughly. The Compact's current
structure of direct flow-through financial assistance that is
guaranteed by the full faith and credit of the United States
has a profound impact on the U.S. ability to effectively
monitor and control these funds.
Compact financial assistance cannot be considered grants in
the normal sense defined by the Federal Government. This
distinction was first drawn by the Interior's solicitor, who
opined that the only rules that could apply to Compact funds
were those found in the Fiscal Procedures Agreement, the
Compact Act and the laws of the Freely Associated States. This
conclusion precluded application of normal Federal
accountability rules.
For example, normal grant funds under normal Federal
regulations are transferred only when needed for immediate
payments. In addition, grant funds normally may not be
invested. Grant funds normally are also subject to clear
conditions and performance expectations. Allowable costs are
also well-defined. Finally, normal grant funds can be withheld
at any time for nonperformance by the U.S., and we also have
the clear authority to recoup funds that were not used
appropriately.
In contrast, the payment structure of direct financial
assistance under the Compact is much more of a flow-through
concept.
First, under the Compact, the Fiscal Procedures Agreement
required the quarterly transfer of money to the Marshall
Islands and Micronesia at predetermined dates rather than when
funds are actually needed.
Second, Compact financial assistance is transferred to
interest-bearing accounts, as opposed to the normal rule that
Federal grant funds cannot be invested.
Third, the Fiscal Procedures Agreement is silent on most
performance measures, and the Compacts themselves have no clear
standards for what constitutes economic self-sufficiency or,
for that matter, no clear goals or objectives for economic
development in the Marshall Islands or Micronesia.
Fourth, the definitions of what constitute appropriate uses
of Compact financial assistance for current account or capital
expenditure uses are vague, broad and overlapping.
Finally and most importantly, Compact financial assistance
payments are further guaranteed by a pledge of full faith and
credit in a court of claims. This pledge of full faith and
credit, in our opinion, removed one of the most important
management accountability tools, the ability of the Federal
Government to withhold funds for noncompliance.
However, even though we lack traditional grant management
tools, at Interior we tried to address the roots of inadequate
local management performance through our technical assistance
program. We have a program with the USDA graduate school to
provide a curriculum of management and accounting classes to
meet the needs of individual government. We have also recently
joined forces with the Asian Development Bank to provide in-
country advisory teams to bolster the analytic capacities of
the Freely Associated States. We have also consistently
provided special attention and technical assistance to
bolstering local audit capabilities.
It is the view of the Department of Interior that the
economic goals of the Freely Associated States can be better
met if future U.S. assistance is provided with clear
expectations about results and with clear standards of
performance. We would support the application of the Common
Rule and the Code of Federal Regulations to Compact grants.
These rules, which are familiar to both the Marshall Islands
and Micronesia as they administer domestic Federal programs,
call for basic common-sense practices in government management.
The rules require effective accounting and reporting, free and
open competition in procurement, and define criteria for
acceptable expenditures. Grants developed under these rules
will require performance goals and standards and the approval
of scopes of work and budget projects.
We have current examples of how normal grant procedures can
work to protect the integrity of U.S. taxpayer dollars in the
Marshall Islands and Micronesia. In 1994, for example, section
221-B health and education funding was withheld from the FSM
until the State of Chuuk settled medical debts with Guam
Memorial Hospital. Unlike the other provisions of the Compact,
this was not a full faith and credit provision and therefore we
felt we had the ability to withhold funds.
Furthermore, separate from Compact financial assistance,
the Department of Interior has discretionary technical
assistance grants to help them with capital infrastructure and
operations and maintenance; and with respect to these funds, we
have suspended these grants until certain performance standards
were adhered to. For example, there was some mention about the
hospitals and the utilities. We had some operations maintenance
grants where we did force the local governments to adhere to
hiring trained professionals to help them maintain their
utility companies. We cite this as an example of where, if you
have regular grant conditions, we can enforce better
accountability. When effective enforcement tools are available,
we believe we can ensure that Federal funds are used as
intended.
Mr. Chairman, just one more minute, sir.
In addition to imposing more normal grant conditions to
financial assistance under the Compact, we also often speculate
how much more accountability would have been achieved if
additional and more appropriate administrative and financial
resources were devoted to the Department of Interior.
For example, in the waning years of the trust territory
there were at least 43 FTE's, or full time equivalents, at
Interior involved in monitoring and in controlling a $93
million a year program. Today, in contrast, we only have four
full time equivalents devoted to Freely Associated States
matters, including Palau, for a $145 million a year program. So
we would suggest that one of the things that could be
considered is also increasing our administrative resources to
deal with monitoring and accountability.
Mr. Chairman, that concludes my oral statement. I would be
glad to answer any questions you might have.
Mr. Bereuter. Thank you. Your last point prompts questions,
but we will wait on that.
[The prepared statement of Mr. Aranza appears in the
appendix.]
Mr. Bereuter. Next, we would like to hear from Mr.
Frederick C. Smith. Mr. Smith, you may proceed as you wish.
STATEMENT OF FREDERICK C. SMITH, SPECIAL ASSISTANT TO THE
UNDERSECRETARY FOR ASIA-PACIFIC ISSUES, U.S. DEPARTMENT OF
DEFENSE
Mr. Smith. Thank you, Mr. Chairman, Members of the
Subcommittee. I appreciate this opportunity to appear today to
talk about the significance of our security relationship with
the Freely Associated States.
The Department of Defense has four basic interests in the
Freely Associated States: access by U.S. military forces to
utilize the territories of the FAS for transit, overflight and
occasional emergency use; continued unimpeded operation of the
Kwajalein missile range in the Republic of the Marshall
Islands; the ability to deny military use of Freely Associated
States territory to foreign nations, the so-called strategic
denial clause of the Compact; and possible contingency use of
land areas, air fields and harbors.
In return for these rights of military uses and access, we
are committed to provide security to these nations and their
peoples, ``as the United States and its citizens are defended.
This is an obligation greater than the United States has
assumed under any of its mutual defense treaties. We seek peace
in this area of the world. In time of peace, the Department of
Defense seeks to shape a strategic environment that will
sustain the peace and prevent unrest and conflict. We wish to
dampen the sources of instability by maintaining a policy of
forward engagement and military presence.''
The Department of Defense has an extremely important
interest in continuing the use of the Kwajalein missile range
and the facilities of the Kwajalein Atoll. The requirements of
our missile and space surveillance programs, together with our
strong interests to maintain full range of military access and
security engagement options provided by the Compact, make
renewal of the Compact a high priority for the Department of
Defense. Renewal of the Compact will help the United States
achieve its security objective of maintaining peace and
stability in this region.
Thank you very much, Mr. Chairman.
Mr. Bereuter. Thank you very much, Mr. Smith.
[The prepared statement of Mr. Smith appears in the
appendix.]
Mr. Bereuter. We will move to the 5-minute rule, but we
will proceed until we are interrupted by votes or we exhaust
our questions, and I would like to begin with you, Mr. Aranza.
In your very last statement, you talked about the number of
full time employees (FTE) you had. When we were still dealing
with these areas as trust territories, 43 FTE were involved in
monitoring and controlling only a $93 million program and two
predecessor subagencies of the Department of the Interior. Now
you are indicating you are unable to dedicate more for the
Office of Insular Affairs and Interior than four FTE's to the
Freely Associated States, including Palau, for a $145 million
program. Do you have a reduction in administrative budget? You
are suggesting an administrative budget increase, and why isn't
this is a sufficient priority of Secretary Babbitt that
additional resources, if needed, are devoted for this function?
Mr. Aranza. Mr. Chairman, a few years ago, I believe in
1995, the predecessor of my office, the Office of Territorial
and International Affairs, was headed by an assistant
secretary; and we had 45 FTE's. But at that time there were
calls on the Hill for the dissolution of that particular
office, and there were also reorganization efforts within the
administration that resulted in a significant downsizing of the
office from 45 to something like 25, and that downsizing has
significantly impacted our ability to effectively oversee
Compact funding.
Mr. Bereuter. It sounds like a downgraded interest or sense
of responsibility, and that is a judgment on priorities within
the Department of Interior, isn't it?
Mr. Aranza. Mr. Chairman, we are currently undertaking a
very serious look at how we are organized as an office and how
we should beef up our staffing to more adequately handle
Compact funding, especially if the future Compact funding is
restructured to be less of a pass-through and more of a grant
type system.
Mr. Bereuter. I will come back to you in a minute. I am
sure you are happy to know.
Mr. Smith, I just wanted to know if you still have civil
action (CAP) teams in the Freely Associated States or Federated
States of Micronesia or any other former trust territories?
Mr. Smith. Yes, I believe we do.
Mr. Bereuter. I think they have played, for the amount of
money, a significant role and that they are a good use of
resources of the Department of Defense. As a matter of fact,
they have saved a number of lives of people diving in the
harbor. I can tell you one of my constituents was saved by a
group there, and it has happened on several occasions.
Mr. Aranza, why is it that the Department of Interior
didn't ensure the annual consultations with the FSM and the RMI
were held during the first 7 years of the Compact? What was the
impact of not holding those meetings?
Mr. Aranza. Mr. Chairman, we would agree with GAO that not
having those hearings did have a significant impact on the
Federal Government's ability to track and monitor the
developments in both the Marshall Islands and Micronesia.
However, at the beginning of the Compacts my understanding is
that the administration's policy was a lot more hands-off, and
there was a lot less priority given to accountability and
financial management issues than there is right now. In fact,
it was under this administration that we initiated these annual
consultations.
Mr. Bereuter. Do you feel that the Department of Interior
is now, even since 1987, adequately monitoring the Compact
expenditures for the RMI and the FSM?
Mr. Aranza. Mr. Chairman, I do not believe that we are
adequately staffed and have the resources to monitor the sheer
amount of money that is going out to these islands. So adequacy
of resource is one issue.
The other issue, as I stated in my statement, is the flow-
through nature of these funds and the lack of normal grant
conditions and performance standards and other protections that
we normally have in our normal programs.
Mr. Bereuter. Am I to take that as a yes, we believe we
have not adequately monitored the grant programs? You are
giving me reasons.
Mr. Aranza. Given the constraints that we have, Mr.
Chairman, I wish we had had a more ideal situation, but I think
the Department did the best it could under less than ideal
conditions.
Mr. Bereuter. My time has expired. Mr. Underwood.
Mr. Underwood. Thank you, Mr. Chairman.
I would certainly like to advise our good friend here, Mr.
Aranza, that sometimes it is just better to take the lumps. On
this particular issue it is rather obvious that Interior hasn't
done the job that it could have done.
Just so that you know--and I would take a little bit of
time to explain perhaps a little bit of perspective on the
issue of the Compacts. It was a trust territory--a single trust
territory of the United States given to the United States by
the United Nations at the conclusion of World War II. But
unlike all the other trust territories around the world, in the
United Nations this was designated a strategic trust. As a
result of that strategic trust, the United States was able to
perform nuclear testing, wall off a significant part of Saipan,
bring in troops from Nationalist China and train them there.
They did a number of other things which, by any other
definition of trust territory, would have been seen as
inappropriate; and that relationship--I guess that relationship
which--for a long time, the people in Micronesia would say,
well, we have the trust and the United States has the
territory.
That trust territory relationship has morphed into these
Compacts, and there is a series of kind of tradeoffs, if you
will. One is that it is not a, strictly speaking, relationship
of one foreign country to another. There is strategic denial.
The United States can deny that element of sovereignty to these
Freely Associated States. The United States, in turn, allows
migration as nonimmigrants into U.S. territory. Of course it
would go without saying that Guam is disproportionately
affected by that far beyond the State of Hawaii and far beyond
the CNI which had a significant population to begin with of
people from these areas.
So we have--and, in addition to that, you have these
financial arrangements. Some are straight-up cash payments.
Some are treated as domestic programs. I think it is incumbent
on us here to make clear I think, you know--and, obviously, we
are all going to have different points of view--to make clear
what we expect at a minimum out of this next round or this
ongoing round of negotiations.
It is clear to me that Kwajalein, it is indispensable. You
can't replicate it. The people will say openly that they can
replicate it, but you can't really replicate it. Would you
agree with that, Mr. Smith? I mean, people can say we can move
to Wake, but, in reality, you can't replicate what you do in
Kwajalein in Wake.
Mr. Smith. It is unique.
Mr. Underwood. Certainly we have to deal with the problems
that are associated with accounting for the funds, and the
Department of Interior may need a little assistance on that.
But they certainly deserve a few lumps in this process.
But, most importantly, I just want to ask, and from my
perspective I just want to make clear, that when these Compacts
were negotiated there was a commitment made to the areas that
were nearest to it--and Guam is the nearest to it--that if
there were adverse consequences that there would be what is
referred to as Compact impact assistance. Since the beginning
of these Compacts it has been--the total we think is over $70
million; and, to date, we have received probably about between
15 and $20 million from the Federal Government. What I
certainly would like to see is that issue rolled into because
the right to freely migrate as nonimmigrants into U.S.
territory is a feature of these Compacts.
I think, because all of these things fit together in some
way, I certainly am interested, Mr. Stayman, in your proposal.
Maybe you could explain a little bit about what admissibility
means in your proposal in discussions with the Freely
Associated States and what is your impression as what would
happen if we didn't deal with the issue of admissibility and
Compact impact assistance and we severely restricted any kind
of economic assistance in the future. What would happen in the
region? What would happen in the State of Hawaii? What would
happen in general?
Mr. Stayman. It is pretty clear, Congressman, that if there
were to be a serious disruption to the economies out there,
there would be an increase in migration. That is one of my
concerns, is that while we develop a new program the temptation
is to drastically reduce our level of assistance. I think we
have to be cognizant of the social, economic and political
consequences of a sharp reduction and also the migratory
consequences. We have to get the FAS to develop their economies
so there will be an incentive to stay at home. People come to
Guam because there are better schools and better hospitals and
better paying jobs.
The first part of your question was about admissibility.
One of the problems we are trying to address is the fact that
the Compact Act not only provided for free entry into the
United States as a nonimmigrant, but it waived the passport and
visa requirements. By waiving those requirements, the Compact
Act made it very difficult for the Federal Government to make
determinations on admissibility. What I mean by that is, under
the current law, the U.S. has the right to not admit people
into the United States for a number of reasons. The ones that
are most obvious, as I stated in my statement, if they are
criminals or they have a communicable disease.
Because there is no mechanism to enforce that law, one of
the principles of my approach is to try to come up with a
mechanism to do that. As I understand from the report which the
Governor of Guam has filed with the Department of the Interior,
the relative impact of these migrants on the communities of
Guam and Hawaii is disproportionately large. One statistic that
I remember is that nursing home care in Guam, 90 percent of it
is for servicing this migrant population; and you have that
occurring in many social programs.
So we think if we are able to establish effectively--I will
call it screening, although that is probably not the right
technical team. We hope we can determine admissibility and make
sure that those people who have communicable diseases or who
are likely to become a public charge as a result of chronic
diseases, will be screened and we will be able to deal with
this problem while preserving the general underlying intent of
the Compact, which is to allow the people of FAS to come to the
United States, in order to strengthen our ties, and to provide
education opportunities and employment opportunities.
Mr. Bereuter. The time of the gentleman is expired on this
round. The gentleman from California, Mr. Rohrabacher, is
recognized.
Mr. Rohrabacher. We certainly shouldn't be permitting
people with communicable diseases to come into the U.S. and
into our territory from anywhere.
Let me ask the panel. We have renewed the contract for
Kwajalein for 15 years, is that right?
Mr. Stayman. This is correct.
Mr. Rohrabacher. How much is being given and who is it
going to?
Mr. Smith. Mr. Congressman, I have a figure, that for the
Kwajalein-related payments, there are currently $13 million per
year.
Mr. Rohrabacher. $13 million, and that is going to continue
for 15 years?
Mr. Smith. Yes, sir.
Mr. Rohrabacher. Thirteen million a year for 15 years, and
who is the money going to? I understand that is not going to
the government of the Marshall Islands.
Mr. Smith. Yes.
Mr. Stayman. I believe the breakout is roughly that about
$7 million of that goes to the landowners. The rest goes to the
local government.
Mr. Rohrabacher. Local government meaning the government of
the Marshall Islands.
Mr. Stayman. I believe it goes to the Kwajalein Atoll
government.
Mr. Rohrabacher. Nothing goes to the Marshall Islands
government at all.
Mr. Stayman. In fact, all of this money is paid to the
Marshall Islands government. The U.S. does not pay this money
directly to any landowners. It is the responsibility for the
RMI government to make distribution.
Mr. Rohrabacher. $13 million for the Kwajalein--for our
Kwajalein base and that operation there and $7 million goes to
the local people who used to own the land.
Mr. Stayman. The landowners.
Mr. Rohrabacher. Six million goes to the local government.
That is not the Marshall Islands government. What is left for
the Marshall Islands?
Mr. Stayman. Of this $13 million, I don't believe any goes
to the Marshall Islands government, the Federal Government. It
would go to the equivalent of their state government, their
Kwajalein government.
Mr. Rohrabacher. I don't quite understand that. I mean, it
seems to me when we are dealing with another country or trying
to respect these people as another country we shouldn't be able
to have a base there especially an important military base like
this----
Mr. Stayman. Let me try to clarify, if I might. The 13 is
not the total payment. There is a payment under section 211
which is paid to the government of the Marshall Islands. Out of
that amount they then have internal agreements to make
payments.
Mr. Rohrabacher. How much--the $13 million is being paid in
one account or something from an account. How much is being
paid altogether to these people for us to use this $4 billion
missile testing range?
Mr. Stayman. The 2001 projected payment for 211 is $19.1
million.
Mr. Rohrabacher. So $19.1 million; and of that I take it
that $6 million is going--the Marshall Islands government is
able to keep for themselves, is that right?
Mr. Stayman. I am sorry, it is a little more complicated.
Of that $19 million, $11 million would be passed through for
Kwajalein. The other two million we talked about is, in fact,
in another account, section 213.
Mr. Stayman. It is very complicated.
Mr. Rohrabacher. There is only 130,000 people on these
islands, and it doesn't seem it would have to be complicated
with that small a number of people.
Mr. Stayman. All I can say is that is what was negotiated.
Mr. Rohrabacher. Tell me about it.
Mr. Bereuter. Would the gentleman yield?
Mr. Rohrabacher. Yes.
Mr. Bereuter. I will give you more time.
It would be helpful to the gentleman, to me, and to all of
us if we could have an identification of the money coming for
the lease for Kwajalein, where it goes; and then, separate and
apart from that, the Compact money that has gone to the
Republic of the Marshall Islands. Would be what you would like
to have?
I thank the gentleman for yielding. Go ahead.
Mr. Stayman. We will make that available, Mr. Chairman.
Mr. Rohrabacher. You don't have that now?
Mr. Stayman. I have it in front of me.
Mr. Rohrabacher. Tell me about it.
Mr. Stayman. Right now, the Marshall Islands receives a
total of $40.2 million. There are----
Mr. Rohrabacher. Before that, that is Compact money, right?
Or whatever you want to call it.
Mr. Stayman. Right. Out of that, $13 million basically goes
for Kwajalein.
Mr. Rohrabacher. Thirteen million goes for Kwajalein. But
of that $13 million, you are saying that $7 million goes to the
local owners and $6 million goes to the local government. How
much goes to the Marshall Islands, for Kwajalein? All of that
$42 million has to be considered for the use of Kwajalein, is
that what you are saying?
Mr. Stayman. No. That is our total Compact assistance. I
think part of the difficulty may be here is that the United
States does not generally associate a payment directly with
military use.
Mr. Rohrabacher. We have a $4 billion facility there. We
are dealing with 130,000 people and, in their country, that is
their only real asset, their only big asset, except maybe fish
around the islands or something like that. I just want to know
how much we are paying those 130,000 people to use that $4
billion facility that is so important to our national security.
Mr. Stayman. We are paying $11.1 million under section 211
and $1.9 million under section 213.
Mr. Rohrabacher. Say it again.
Mr. Stayman. Eleven point one million plus $1.9, so that is
$13 million.
Mr. Rohrabacher. Thirteen million. That is going to the
landowners and the local government. You have 130,000 people
who consider themselves a nation. How much are we paying that
nation? The $13 million, nothing is going to the entity of the
corporatized 130,000 people.
Mr. Stayman. It is question of whether or not you consider
Kwajalein to be part of that country. It is the second largest
city. It is where, I don't know, 30 percent of the population
lives.
Mr. Rohrabacher. Right. Kwajalein is definitely part of the
Marshall Islands. All right, and you are saying----
Mr. Stayman. I am just describing the structure.
Mr. Rohrabacher. How many landowners are there? Let me ask
you that.
Mr. Stayman. I am afraid I don't know.
Mr. Rohrabacher. Are we talking about a dozen?
Mr. Stayman. Dozens.
Mr. Rohrabacher. So is it $7 or $6 million a year that we
give to the dozens of landowners.
Mr. Stayman. The $7 million.
Mr. Rohrabacher. $7 million. We are giving $7 million a
year to dozens of landowners. We are giving $6 million a year
to some local Kwajalein government, which I will have to learn
about that. But we aren't giving anything to the rest of the
Marshall Islanders specifically to rent this facility.
Mr. Stayman. That is my understanding.
Mr. Rohrabacher. All right. Does that seem reasonable to
you?
Mr. Smith. If I may interject----
Mr.Rohrabacher. Sure.
Mr. Smith. Around the world with many different countries
where we have military access and operating rights we give aid
and assistance to that country, but it is never called rent per
se for the facility, but we give--as part of the access
agreement we agree to give a certain amount of level of aid or
assistance.
Mr. Rohrabacher. So you would assume that the rest of that
$42 million--that is, basically what we are giving them, in
order to have Kwajalein, otherwise, we wouldn't give them
anything.
Mr. Smith. I don't know if that is true. Because I am
assuming that the rest of the $40 some million goes the other
projects.
Mr. Rohrabacher. Let me put it this way to you. If we
consider $13 million as the basic payment there, and the price
of constructing the facility was $4 billion, so that is $4
billion. I am not sure if that is the value is more than $4
billion. That is pretty low rent for $4 billion facility, OK.
Anyway, I just think that when we are trying to deal with
what is going on in the Marshall Islands, we have to deal with
people fairly. Yes, we have been the biggest guy in the block
in the whole Pacific for a long time; and, if we are going to
demand responsibility we better make sure everything is based
on fairness and equity.
I am not sure. I have not studied this. I don't know it. I
can only go from gut instincts. It just seems like there is
some incongruity in these numbers somewhere.
So, with that said, I am sure that Chairman Bereuter and I
will eventually come to the bottom of this. But thank you very
much.
Mr. Bereuter. Thanks for your valiant effort, Mr.
Rohrabacher.
I would like to start on a second round of questions here.
I am back to Mr. Aranza, you will be happy to know.
In cases where the FSM and the RMI have outstanding debt to
U.S. institutions such as hospitals, what action does the
Department of Interior take to help resolve those problems? Do
you feel you have a responsibility? If so, is it being
discharged?
Mr. Aranza. We have the authority, and we have, in at least
one instance, actually, withheld funds under the Compact that
were not full faith and credit until such time as one of the
Chuuk States repaid one of the hospital debts. That was the
Guam Memorial Hospital debt that I mentioned earlier.
Mr. Bereuter. Guam Memorial.
Mr. Aranza. Right.
With respect to other hospital debts, it would kind of
depend on the source of the money or the debt. I think that if
it is full faith and credit, direct cash payments, there is
very little that the Department of the Interior or any other
Federal agency could do in terms of using that money to
leverage repayment of medical debt.
Mr. Bereuter. Mr. Aranza, I remember how much difficulty
the trust territories were having in getting professional
medical care people at that time and how, in many cases, they
relied on what you might call as medical missionaries who were
doing works, church subsidized medical personnel. Is that a
significant problem yet today? Is it one of the reasons why
there may yet be so many people going away apparently to Guam
for medical services?
Mr. Aranza. Yes, that is true.
Mr. Bereuter. Does program assistance expire in 2001?
Mr. Aranza. Federal program assistance? Mr. Chairman, I
believe that the different Federal agencies' programs have
their own independent authority, and they are reauthorized at
different times by Congress. They don't find their origins in
the actual Compact.
Mr. Bereuter. I am sure that would be true of some or most.
Can you investigate this matter for us to see if there is any
programs that will end automatically in 2001 at the end of the
Compact or if all of the programs providing direct assistance
in humanitarian housing and so on have their direct
authorization?
Mr. Aranza. Be glad to look into that.
[The following answer was submitted by Mr. Aranza.]
If any of the direct Federal programs, that is, grant
expenditures authorized under the Compact Act, sections 105(h),
111, and 226, will end on September 20, 2000/2003, it will be a
coincidence of their authorizing legislation. None of them is
tied statutorily to the Compact or the Compact Act. Of course,
the guaranteed Federal services provided for in Compact section
112 (foreign Service Institute training) and Compact section
221 (a) (Weather Service, audits, Postal Service, and FAA)
will, if not renewed, end on September 30, 2001/2003. However,
these are not programs from other Federal agencies, but rather
reimbursements by the Office of Insular Affairs to other
Federal agencies.
Mr. Bereuter. Thank you.
Now the system of land tenure in both the FSM and RMI
appear to be one of the greatest impediments to the development
of private enterprise. That was a problem in Northern Marianas,
too, but in some cases they took a better solution in the
commonwealth. What kinds of specific assistance has the
Interior Department provided to assist land title registration
and reform of the land tenure system? Mr. Stayman, is it
possible that State Department ought to be providing that
assistance since you do that, I hope, very well in other parts
of the world?
Mr. Aranza, first, do you want to tell me what you know
about that problem and whether or not there is any effort to
try to provide assistance?
Mr. Aranza. In terms of land tenure, Mr. Chairman, I am not
specifically aware of any technical assistance that my office
provides specifically for that issue.
Mr. Bereuter. We have land title registration problems
which apparently are an impediment to development in these
islands I am told. I know that has been the case elsewhere. Mr.
Stayman, has the State Department ever thought about providing
direct assistance to the Freely Associated States?
Mr. Stayman. Generally, Mr. Chairman, the State Department
does not provide assistance to these two countries largely
because of the amount of assistance they are getting from the
Department of the Interior.
Mr. Bereuter. I know you don't, but have you ever
considered it?
Mr. Stayman. We have in some limited areas, particularly
the public diplomacy area. We do have some spending there,
although it is not a State department program.
Of course the Peace Corps is there, and that is important
to their education system. So there are some other programs
associated with State which are extended. We haven't looked at
the specific example you are referring to, but we would be
happy to do that.
Mr. Bereuter. Apparently, staff asked a question of how
much of the Kwajalein lease payment does the Kwajalein Atoll
development authority receive. The question was asked about
what has Kauta done with the resources? I understand they
walked out of the room and refused to answer.
Given that 20 percent of the RMI population lives in
Ebeye--and I tried to describe to you the squalor that existed
with the highest concentration of population in the Pacific on
that one island--what percentage of the RMI government
resources are allocated to services and development? Got any
rough idea, Mr. Aranza?
Mr. Aranza. Not at this specific time, Mr. Chairman. I will
be sure to get back to you on that one.
Mr. Bereuter. You know why all those people are living in
Ebeye, don't you? You want to tell us about that?
Mr. Aranza. Because of Kwajalein.
Mr. Bereuter. Because of Kwajalein and the extended family,
10, 12, or 15 people come to be supported by the one person who
has the job across on Kwajalein.
Mr. Stayman. If I could just add, Mr. Chairman, I think
that this goes to the heart of finding that the GAO made, that
much of our assistance was used ineffectively because of bad
planning and bad management. As I understand it, the RMI
government provides very little money to Kwajalein because
Kwajalein is, in effect paid through sections 211 and 213.
There are a substantial amount of resources going into
Kwajalein, but it is the poor planning and poor management on
the island which results in many of these problems.
It is important to note the trend in Ebeye. In the early
1990's, when the Ebeye government had first been organized,
they went out and hired professional city manager--they went
out and hired professional managers for their utilities; and
around the 1993-1994 timeframe the situation there had improved
dramatically.
However, there were some political crises there. There was
change in management; and we saw the use of resources revert to
the old pattern, which was funds were generally put almost
exclusively into payroll. So money was taken out of hiring
professionals to run the services and the utilities. It was
taken out of maintenance. It was taken out of supplies. I think
we have to be cognizant of what GAO has said that many of the
problems here were not due the a lack of resources but to a
lack of planning and a lack of management. That is my view of
what the problem is in Ebeye.
Mr.Bereuter. Now in Enewetak, of course, these people are
greatly affected by fallout from nuclear hydrogen bombs.
Therefore, we moved them off the island, we scraped the entire
surface of the island off and buried it or took it away, and we
allowed them to move back. When I was there, it was like a
large sand dune with foot-high palm trees and absolutely
nothing for the people to do.
Then they decided that the levels of radiation were too
high again, and they moved all of these people off again. When
I saw them they were living in, for example, flimsy packing
crates on other islands with no discernible way to make a
living; and they had to depend upon the food coming in provided
by the United States irregularly, sporadically, during that
period of time, with absolutely nothing to do, with no way to
make a living. Then they moved back again, and then they were
taken off again. They decided it wasn't adequately safe for
them to be there. So what has happened to the people of
Enewetak?
Mr. Stayman. The people of Enewetak are now living on their
atoll. I was not aware that that particular group had been
moved off. The Bikinians had been moved off and moved back, and
the Rongelaps had been moved off and have not moved back. As
far as I recall, the Enewetak community was relocated after the
cleanup.
But you are absolutely correct, Mr. Chairman. The
conditions on the island were such that it was virtually
impossible to grow foodstuffs.
Mr. Bereuter. Like a sand pile. Absolutely sand pile.
Mr. Stayman. Yes, a concrete pile is better. Congress
provided, in fact, just a couple of years ago, machinery to
break up the surface. It is basically like concrete.
Mr. Bereuter. It is Rongelap.
Mr. Stayman. Rongelap is one of the other four affected
atolls.
Mr. Aranza. Mr. Chairman, if I could just note, from the
Department of the Interior, separate from the compact pact, we
provide about $1.1 million a year for Enewetak support.
Mr. Bereuter. Do you think it gets to the people?
Mr. Aranza. Yes, I do.
Mr. Bereuter. I hope that is right.
Mr. Underwood.
Mr. Underwood. Thank you, Mr. Chairman.
On the issue of Ebeye--and I am--actually, I did get a
chance to visit Ebeye. It was early last year, and the
conditions are appalling. It is very difficult to describe to
people who have never been there.
I think it is about 10,000 people on one square mile. They
have some community showers in some instances and, only a few
palm trees, hardly any trees at all, nothing. It is kind of
wall-to-wall people who take the water taxis to work in
Kwajalein.
But that also presupposes a difficult question on what we
propose to do in terms of whether we should monitor that more
carefully or we should welcome at this as a sovereign to
sovereign relationship and say, well, you get the money and
this is basically what it is for and you decide how you want to
handle that. That is a very difficult call.
So yet I feel as a person who has--certainly has traveled
throughout the region continually over the past couple of
decades that at times the situations are used to kind of create
a lot of emotional support, but then sometimes you don't see
the kind of infrastructure support which would go toward
ameliorating it.
I do want to point out to Mr. Rohrabacher, I don't know, do
you represent Costa Mesa? You should be proud to know that the
largest community of Marshallese outside of Hawaii and the
Marshalls live in Costa Mesa.
Mr. Rohrabacher. We are trying to make sure they are all
Republicans.
Mr. Underwood. Well, the interesting thing is they are
nonimmigrants, so they don't become citizens. They just live
there. But----
Mr. Bereuter. Would the gentleman yield? Just a little bit
of staff input back here. He contends that the largest group
outside of Hawaii and Guam is employed by Tysons food in Iowa.
Mr. Underwood. There are a few hundred of them working at
Tysons. That makes the chicken taste better, I guess.
Just going back to the issue of strategic denial--maybe Mr.
Smith would like to answer the question. Strategic denial in
the height of the Cold War seemed very critical and very
crucial to the relationship of the United States to the region.
How important is strategic denial as a concept today and what
are we denying and to whom and potentially to whom and how
important is it in the constellation of our strategic thinking?
Mr. Smith. It is important. I would say that certainly the
future is uncertain, and I am not aware right now, today, that
we are denying any access to other countries, but it is
something that we feel we--it is good to have for the future.
There is probably any number of scenarios you might develop,
and I think Mr. Rohrabacher mentioned about the Chinese
possibly being active in this region, and maybe for some reason
we may want to exercise it in the future.
Mr. Underwood. I guess the strategic denials--we are not
denying anybody. It is Micronesians that are denying it in
response to this provision. But how critical is it to our
thinking? I mean, what could conceivably happen? What about the
issue of recognition of diplomatic recognition of different
countries, as apparently happened in the case of the Marshalls
where we switched between Taiwan and the PRC and kind of flip-
flopped?
Mr. Smith. As I understand, the strategic denial applies to
military user access; and I don't believe it extends to the
diplomatic.
Mr. Underwood. Maybe Mr. Stayman would have--is there any
thinking about that in the State Department, any source of
concern to that? Because I know that the Marshall Islands
switched their recognition in the past year.
Mr. Stayman. The Compact doesn't provide for, I would say,
nondefense. The U.S. does not have the right to object to
actions by these governments that are not connected with
defense.
Mr. Underwood. I understand that. I am just wondering
whether there is any concern in the State Department. Has there
been any discussion on this particular issue? It is rather
obvious that, in this instance, it appears that the Marshall
Islands switched from the People'S Republic of China, from
recognizing the PRC to Taiwan in order to secure some financial
advantage. So is that a source of concern? Is it an item for
discussion? Or are you simply saying, well--I mean in the
nature of State Department activities, trying to move people in
a certain direction is part of it, isn't it?
Mr.Stayman. We recognize their right to exercise their
sovereignty in this area.
Mr.Underwood. Thank you.
Mr.Bereuter. Gentleman from California is recognized.
Mr.Rohrabacher. You have to remember up until recently
Communist China has been our strategic partner, according to
this administration. I mean, how can you expect any answer
except for the one you just received? In fact, the Marshall
Islands and these other islands in the Pacific, in fact, their
friendship and good relations with the United States and
America's ability to be the dominant power in this arena is of
incredible strategic importance to the United States of
America. Otherwise, we have a potential enemy right on our
doorstep. Instead, we can hold at bay any potential enemy
because we have friends that are there in this vast Pacific
area. Of course, when you have an Administration that bends
over backward not to see a threat from Communist China, you are
going to have that type of answer.
Let us talk about the Chinese in the Pacific. What about
the listening post in Tarawa? Was that built by the Chinese
military?
Mr.Smith. I am not sure if it was built by the military or
some other arm or agency of the Chinese.
Mr.Rohrabacher. Is that aimed specifically at overseeing
what we are doing in Kwajalein? Is that what they do in this
big dish out there?
Mr.Smith. I am not really familiar with this facility, but
I assume that it is a space tracking station and----
Mr.Rohrabacher. You are not familiar with the facility? Who
is?
Mr.Smith. Not that facility.
Mr.Rohrabacher. Who is familiar with that facility if you
are not familiar with it? It seems to me that would be
something of interest to us. Of course, they are our strategic
partner, so we don't have to worry about that. Who would be
knowledgeable about that facility?
Mr.Smith. I can find somebody who knows.
Mr.Rohrabacher. All right. I would suggest that the fact
that there is an ultramodern piece of technology sitting on an
island 500 miles from our missile testing range, that that
would be of some interest to the United States of America and
what its capabilities are, what the purpose of it is and what
type of visitation that it has from what branches of the
Chinese Government. Is there some indication of more Chinese
activity in these Pacific islands?
Mr.Smith. Mr. Rohrabacher, with the Freely Associated
States I specifically asked several people that question about
possible Chinese military activity in this particular region,
and I was not able--nobody knew of any specifically. There is
certainly economic and trade activities there.
Mr.Rohrabacher. Of course, we have a problem with Communist
China in that they have taken all of their military people--not
all of them, but a huge chunk of their military apparatus, and
they have given them civilian clothing and started calling them
businessmen. Like COSCO is really the merchant marine of the
People's Republic of China, but they just took the merchant
marine uniforms off, and now it is supposedly a private
shipping company.
Li Ka-Shing, who is one part of the inner leadership in
Beijing, is not just a billionaire whose people are conducting
other types of businesses throughout Panama and elsewhere. So
you don't see any threat, Chinese threat?
I guess we might as well not even proceed with that line.
Let me just say this, that I do perceive a threat from
Communist China. That is where--and that is clear from what has
been going on in this Congress and for the last 2 years. That
is something that----
I believe the Communist Chinese have to be viewed in the
same way that the Japanese were viewed in the 1930's. The
Japanese viewed themselves as the dominant force in Asia, and
they had a right to, the Japanese had a right to dominate all
of Asia or at least their co-prosperity sphere, and the United
States was the only thing that stood in their way. Thus, we
were their enemy in their mind, long before we officially
admitted that.
I think the same is true with the Chinese now. The Chinese
believe they have a right to dominate all of Asia, or at least
a huge hunk of Asia; and, just like the Japanese, the Pacific
plays a major part in this strategic game. The Marshall Islands
play an even greater part because they are not only part of a
strategic positioning but the Kwajalein missile range will
permit the United States to develop an antimissile system that
will eventually save us and perhaps could deter aggression from
the Communist Chinese in the future. Something of enormous
value to our country because now we understand, after years of
foot dragging, that a missile defense system is actually
important.
Finally, let me just say this for the record and that is,
Mr. Chairman, we should never underestimate the importance that
the Pacific Ocean. The ocean itself is going to play to the
nature of humankind. I am the Chairman of the Space and
Aeronautics Subcommittee so I spend a lot of time studying
about the future of space and America's position in space. I
happen to believe that, as important as space is to us, we also
have overlooked the fact that the ocean will be at least that
important to the future of the human race.
The Marshall Islands and others, while they are going
through a period now where they seem less significant than they
did 50 years ago during World War II, there will be a time when
these islands and mankind's commitment to the ocean will find
these people in the forefront of developments that will affect
life on this planet and will push their lives forward so that
they don't live in squalor and they aren't taken for granted
and that they are treated fairly.
So thank you very much, Mr. Chairman, for this hearing.
Mr. Bereuter. Thank you very much, Mr. Rohrabacher.
Gentlemen, I want to thank you for your testimony, for your
responses to our questions. We will need your input, your
assistance for some time to come as we look at this subject.
We share jurisdiction with the Resources Committee. In
fact, we offered an opportunity to have a joint hearing with
them. It was not convenient at this time, so we embarked on
study and investigation.
I would, in thanking you once more for your time and asking
for your future assistance, ask Dr. Westin if she could come
back to the witness table very briefly. I have one area to
investigate with her, and I think it should be informative for
everyone here. Thank you, gentlemen.
Dr. Westin, I would simply like to ask you to clarify for
everybody's interest, for me, and for the Subcommittee what
will happen now. What are the timeframes for reaction from the
agencies with respect to the second part of your study, which I
understand you hope to print--to release to the public in
September? Can you lay out just what will happen at that point.
How much time they will have to respond to some of the
information that you presented today and for their input to be
considered?
Ms. Westin. Yes, Mr. Chairman. Thanks for the opportunity
to clarify that. Because I had mentioned that we do have a
report based on our work coming out in September, a written
report. In this report, we expect to have recommendations to
the agencies. I know that we will have recommendation on
accountability. There may be other recommendations as well. We
are still working through those based on our findings. We also
may have in the report matters for Congress to consider.
GAO procedures are that when we do a report involving
agencies we give the report to the agencies and they have a
chance to comment. We will print their written comments as part
of our report with our responses. Or if they disagree with our
findings we will also talk about that, and they will have about
30 days to answer.
Also, the Compact provides for 45 days for both the
Republic of the Marshall Islands and Federated States of
Micronesia to comment, so we will provide that report to them
as well. Once we have back their comments, we consider their
comments and pull it all together, answer what needs to be
answered. We expect the printed report to be available to the
public about the end of September.
Mr. Bereuter. Thank you very much. I think that is
important to lay that out. So the two Freely Associated States
will have 45 days, and those comments will be a part of the
report, along with the 30-day notice comments.
Ms. Westin. For the agencies, yes.
Mr. Bereuter. Very good. Thank you very much, Dr. Westin;
and thanks to your staff for all of your work on this to this
point.
The Subcommittee is adjourned.
[Whereupon, at 4:55 p.m., the Subcommittee was adjourned.]
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