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Federated States of Micronesia, Economy

dried coconut meat, Compact of Free Association, exclusive economic zone, main islands, Copra

The FSM’s economy is relatively simple. United States funds are the only major source of income. By the terms of the Compact of Free Association, the United States provided the FSM with about $1.39 billion between 1986 and 2001. With additional grants from the United States, the FSM’s total income from U.S. funds averages about $100 million a year. Small amounts of aid come from other donors as well. The FSM also receives income from the sale of licenses to foreign fleets to fish in its exclusive economic zone. Copra (dried coconut meat) is the only cash crop but it is of minor value.

The government is the largest employer. It provides all basic services and supports large bureaucracies at both the national and state levels. Even in remote areas, local officials, teachers, and health-care workers are government employees. Most outer islanders, however, still engage in subsistence activities.

Commercial enterprises flourish and provide additional employment in urban areas. Included are businesses that sell foodstuffs, household appliances, and motor vehicles.

Tourism also provides income and in the early 1990s more than 20,000 visitors arrived annually. However, significant growth is hampered by the remoteness of the islands and the country’s poor infrastructure.

The national currency is the United States dollar. The Federated States of Micronesia is a member of the United Nations and the International Monetary Fund.

Each state has an international air terminal and port facility. The four main islands have major airline service. Local enterprises manage air transport to some of the outer islands. Several shipping lines provide monthly service from elsewhere in the Pacific, Asia, and the United States. Small vessels shuttle among the islands. Roads are generally poor.

Given the large area that the islands cover, radio is the most important means of communication. Each state operates a station. There are television stations, but service is limited. The national government publishes a newsletter in English.

The production of electricity is also a government function. Diesel-powered generators are the sole source of energy.

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