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House panel looks at aid to Marshall Islands Wednesday, Jul 25, 2007 By Aaron Sadler Stephens Washington Bureau WASHINGTON - Federal officials Tuesday prodded the Marshall Islands government to leverage U.S. aid toward economic development in order to sustain the country's struggling economy. Officials said the economic outlook is bleak for the tiny island nation in the western Pacific when U.S. grant money stops in 2023. A Government Accountability Office report presented to a House subcommittee said the islands have "limited prospects" for reaching economic development goals. The report said the islands' government has not enacted policy to generate economic growth. The stagnant economy is among factors that drove large numbers of Marshallese to the Springdale area, which has the largest concentration of Marshallese outside the islands. The estimated Marshallese population in northwest Arkansas is about 6,000. About 60,000 people live on the islands. The Marshall Islands will receive about $64 million in federal aid this year as part of its Compact of Free Association with the United States. The two countries entered into the compact in 1986 with the goals of achieving self-government and economic self-sufficiency for the islands. As part of the compact, grant assistance gradually decreases until 2023. At that time, the Marshall Islands is expected to use money from a trust fund to operate. The United States and Taiwan have contributed to the trust fund, which now has assets of close to $80 million. In the meantime, the country should use U.S. grants to entice business development through improved health care and education, said David Cohen, deputy assistant secretary of the interior for insular affairs. "Those will be long-term improvements," Cohen told the subcommittee. "In the short term, we believe that there is a need for the (government) to take action to improve the business climate, including tax, land and foreign investment reforms." Both Cohen and the GAO report criticized the islands for a massive increase in government employment and salaries over the last three years. In 2004, government payroll was $26.4 million. It was $30.1 million last year. "The increase in employment ... has not been accompanied by an increase in the effectiveness of government services," Cohen said. Gerald Zackios, the islands' foreign affairs minister, said land registration laws have been changed to help improve private-sector development. He called for the U.S. Postal Service to exempt the islands from international postal rates in order to encourage more business. Zackios also asked for grant awards to be adjusted to fully account for inflation, given the rising costs of fuel. |
