Compact of Free Association:

Negotiations Should Address Aid Effectiveness and Accountability and Migrants' Impact on U.S. Areas

GAO-02-270T: Published: Dec 6, 2001. Publicly Released: Dec 6, 2001.

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The Compact of Free Association between the United States and the Federated States of Micronesia and the Republic of the Marshall Islands provides direct U.S. economic assistance and extends U.S. domestic programs and federal services to these two Pacific Island nations. The Compact also allows for migration from Micronesia and the Marshall Islands to the United States and establishes U.S. defense rights and obligations in the region. The Compact's economic assistance provisions were scheduled to expire in late 2001. However, the provisions will remain in effect for two more months while the United States and the two Pacific Island nations renegotiate them. Congress must renegotiate and reauthorize the expiring provisions by late 2003 for economic assistance to continue uninterrupted. The $1.6 billion provided under the Compact through 1998 has had little impact on economic development in Micronesia and the Marshall Islands and was subject to limited accountability. U.S. oversight was limited by interagency disagreements between the Departments of Interior and State, a lack of resources devoted to Compact oversight, and Interior's belief that Compact provisions restricted its ability to require accountability and withhold funds. Because of the lack of opportunities in the region, thousands of citizens in Micronesia and the Marshall Islands have migrated to the United States. Migrants to Guam, Hawaii, and the commonwealth of the Northern Mariana Islands generally work in unskilled, low-paying jobs. Between 1996 and 2000, the local governments have spent at least $371 million on assistance--primarily health care and education. Since 1987, several multilateral organizations and donor nations, including the United States, have given nearly $12 billion to the two Pacific island nations to promote economic self-sufficiency and alleviate poverty. The major donors believe that many Pacific Island nations will not be able to improve development without continued assistance.

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