Politics • The government continues to run at a deficit, its 2010 audit had the most problems identified and the highest level of questioned spending in many years—including outright theft by government employees, and the government was forced to delay the 2011 audit for lack of preparation, an audit that is expected to continue the trend of accountability problems from 2010. Most Pacific countries are buffeted with reports by such institutions as the Asian Development Bank, International Monetary Fund and World Bank calling for fiscal reform and improved governance, and the Marshall Islands is no different. But in 2009, the government’s cabinet impanelled a taskforce composed mostly of Marshall Islands citizens to evaluate fiscal problems and presAir Marshall Islands: The country’s national airline provides a vital link to remote islands, but since 2007 despite large injections ent a Comprehensive Adjustment of funding from government, has been unable to provide reliable service. Photos: Giff Johnson Program to decision makers. The CAP report offered the government a series of options for reducing government spending, starting with cutting back subsidies and ingrained perks to government VIPs and landowners. More than three years later, virtually nothing in the CAP report has been acted on—with one exception—telling the country what national leaders think about reform, even reform urged by its own citizens. The one exception is a piece of legislation aimed at overhauling SOEs introduced to parliament in October. If passed at a future session of parliament, however, it will require an onerous level of reporting—busisince the implementation of ness plans, strategic plans, By Giff Johnson the second Compact funding performance reviews, all package with Washington. with timetables spelled out The Marshall Islands is one of Although Compact grant in the legislation—that will the most aid-dependent nations in funding is declining and is probably join the United the world, with 70 percent of its slated to end altogether in States-required quarterly national budget funded by donors. 2023, the Ministry of Educareports from the Ministries Despite 26 years in a Compact of Free Astion, the government’s largest of Health and Education as sociation relationship with the United States employer of personnel, is curan exercise in meaningless that articulates the goal of developing greater rently 90 percent dependent paperwork that helps neither self-sufficiency, the Marshall Islands is as defor salaries on US funding. the donor nor donor recipipendent today as when the first Compact was • Since the government ent to evaluate or improve implemented in 1986. airline Air Marshall Islands performance. The country is now at the halfway mark in collapsed with plane and With 60 percent of the naits second Compact—the economic package of financial problems in 2007, it tional budget paid for by the which expires in 2023—and the lack of reform has never rebounded, providUnited States, and another across government is becoming an increasingly ing unreliable service despite 10 percent accounted for pressing problem. government injections of by Taiwan and other donor The government is financially stressed belarge subsidies. The lack of grants, it would appear the cause: reliable air service to the outer country ’s leaders—there • Nine state-owned enterprises (SOEs) lost islands has helped undermine Marshall Islands President Christopher have been four presidents money over the past three years, and the governLoeak...has thrown his weight behind public a nascent tourism industry since 2007—are complacent ment was forced to provide an average of $8.2 education reforms. that has seen visitor numbers about attacking financial million in subsidies annually to keep them afloat. slide from 7,000 in 2007 to problems and reform needs. The subsidy required by SOEs, which doubled 4,000 a year ago and the country’s flagship dive But the lack of reform is putting the governin the past decade, amounts to about 25 percent destination at Bikini Atoll shut down. ment on the spot financially and creating fertile of the government’s locally generated revenue. • Performance in government offices, with a ground for donor-driven reform programs in• The Marshall Islands Social Security Adfew notable exceptions, has declined. The issue stead of home-grown decision making. ministration has warned for more than three surfaced just before the last session of parliayears that the retirement system urgently needs ment came to a close in October, when Majuro Reforms legislative reforms to halt its downward spiral MP David Kramer, in remarks on the floor, said Among plans now capturing leadership attento bankruptcy in 10 years. But no action has donors are giving the country a lot of funding, but tion are a World Bank-driven plan to break up been taken. the government is very slow to use this money the government telecommunications monopoly • US provided grants through the Compact to deliver needed services to the public and is by liberalizing the telecom sector by offering of Free Association decline $500,000 annually, taking too long to get needed projects moving to government up to $13 million if it meets the which means that this fiscal year that started improve the quality of life for citizens. conditions for sector reform. October 1, the grant funding is down $5 million
Reforms needed but slow in coming
But there are some good news in the mix
32 Islands Business, November 2012