Accountability: Progress, Challenges, and a Call to Protect the Public Auditor's Offices

Keynote Speech of David B. Cohen, Deputy Assistant Secretary of the Interior, Joint Meeting of the Association of Pacific Islands Public Auditors and the Island Government Finance Officers’ Association, Honolulu, Hawaii, December 6, 2007.

Good morning. When I spoke before the Island Government Finance Officers’ Association on Tuesday, I noted that Priority 1 for the Department of the Interior’s Office of Insular Affairs is promoting private sector economic development in the islands, and Priority 1-A is ensuring accountability for public funds—particularly the Federal financial assistance provided to the islands by my office and others. On Tuesday, I spoke about Priority 1. Today, I will speak about Priority 1-A.

We say over and over again that accountability is one of OIA’s two top priorities, and we have backed up our words with deeds. For example:

• We worked with our colleagues in the Marshall Islands and the Federated States of Micronesia to negotiate a detailed, comprehensive accountability program for funds provided under the Compacts of Free Association.
• As part of our effort to implement the Compacts, we have established an office here in Honolulu dedicated to ensuring that there is accountability for Compact funds. We have also added personnel in the freely associated states for that purpose.
• We have revamped the way that we allocate Capital Improvement Project funds, instituting a competitive process that rewards good fiscal management.
• We have established the position of Accountability Policy Specialist at our headquarters in Washington, D.C.
• We have a longstanding contract with the USDA Graduate School to provide training for island officials, with an emphasis on financial management and improving compliance with the Single Audit Act.
• We have sponsored numerous conferences, workshops and training programs involving officials from the islands and our colleagues at other Federal agencies.
• We fund training for public auditors, including programs that enable personnel from the islands to work and train at various Interior Inspector General offices.
• We have revised our criteria for granting technical assistance to focus primarily on our top two priorities, including promoting accountability.
• We have greatly increased coordination with other Federal agencies to focus on improving the administration of Federal grant programs in the territories and freely associated states.
• We completely revamped OIA’s Financial Assistance Manual for the first time in a decade.

Our efforts, together with the hard work of our colleagues from the islands and our Federal colleagues, have yielded positive results. When I took office in 2002, not a single one of the 11 nations, states and territories that we serve was submitting timely or clean Single Audits. Today, the record on timeliness is almost exactly the opposite: only one of our 11 jurisdictions is not current with its Single Audits. In addition, Palau’s Single Audits have been timely and clean for the past three years, Pohnpei’s have been timely and clean for the past two years, and Kosrae became the newest member of the “Timely and Clean Club” this past year. Pohnpei is in a club of its own, having completed Single Audits for the past two years that were timely, clean and with no questioned costs. Pohnpei will soon be the rule and not the exception, and just as we all worked together to turn the situation around with regard to timeliness of audits, we will do the same with regard to cleanliness.

Although we very much value our positive relationships with our colleagues in the islands, we have taken tough action when tough action was called for. We have been forced to withhold grant assistance on a number of occasions. We hate to do that, because our grants fund important programs in health, education and other crucial areas. We recognize, however, that it is better to withhold funds and preserve them for future use than to release funds into an insecure environment, risking that they will never be properly used to address the needs of the people.

We have excellent working relationships with the governments of almost all of our island communities. This enables us to work through some very difficult issues. A while back, we made the very difficult decision to put American Samoa on high risk status. We imposed a very high bar to have that status lifted: Two consecutive timely and clean Single Audits, two consecutive balanced budgets, and sufficient progress on American Samoa’s fiscal reform plan. The plan was adopted pursuant to a Memorandum of Agreement for fiscal reform that I signed with the late Governor Tauese Sunia. Governor Togiola Tulafono has embraced these conditions as a challenge and an opportunity for his government to greatly improve its ability to serve the people of American Samoa. He wants American Samoa to meet those conditions and in so doing become a model for fiscal management in the islands. For our part, we have responded with substantial technical assistance to help American Samoa develop the tools and skills necessary to effectively manage its government finances.

In Kosrae, we have supported a process, involving the new government of Kosrae, the new government of the Federated States of Micronesia and the USDA Graduate School, to address an urgent fiscal crisis. With financial assistance from our office and the FSM National Government, Governor Robert Weilbacher, his team and the Kosrae legislature have taken painful and courageous steps to restore that state to fiscal health.

We are working with FSM President Manny Mori and Governor Wesley Simina to support a similar fiscal recovery plan that is being developed for Chuuk. We had previously worked with the Chuuk State Government and the FSM National Government to establish the Chuuk Financial Control Commission to review and certify all transactions involving Compact funds. OIA has placed a full time accountant in Chuuk to ensure compliance.

All of us working together have made significant progress to improve accountability and fiscal management in the islands. We have a tremendous way to go, however, before the overall performance of the islands in fiscal management could be called acceptable.

I am proud of the progress that we have made together to improve accountability because we have done so in the face of daunting challenges. Each of our insular areas has small populations and educational systems that range from significantly below to very far below mainland standards. The best and brightest often have to leave the islands to find decent job opportunities. As a result of all of these factors, each of the insular areas has a severe shortage of the type of educated talent that is necessary to ensure good fiscal management. As you can tell by looking around this room, there are many educated and talented people in the islands. There just are not yet enough of them.

In the islands, talent pool shortages cannot be solved by attracting people over from the next town or the next county. The islands have to shore up deficiencies in critical skill areas by enticing people to travel thousands of miles from home. The islands typically do not have the resources to provide a sufficient financial incentive to entice talented people to do this.
Almost all of the insular areas are made up of multiple islands, in some cases in the hundreds or thousands. This creates the additional challenge of providing essential government services to people on several islands, some of them remote. It requires duplication and makes it harder to achieve economies of scale. All of this further drains resources that are needed to attract good talent.

I do not offer these observations as excuses. However, we cannot do our jobs effectively if we do not have a proper understanding of the challenges that we face.

Are some of the islands’ fiscal management problems caused by corruption? Of course, but there is corruption all over the world, including on the U.S. mainland. The corruption that exists in the islands only makes it harder for the islands to address the challenges that I have just described.

For all of these reasons, it has taken a great deal of work by all of us to achieve the accountability gains that we have achieved in recent years, and it will take a tremendous amount of additional work to raise ourselves up collectively to an acceptable level. We are committed to doing that work.

One thing is clear: Our efforts cannot succeed unless each of our island communities has a strong, active, independent, conscientious, properly staffed and properly funded public auditor’s office. The management of public funds is a complicated business, and regular, impartial review of our work is essential to ensure that good value is received for the people’s money.

OIA has taken steps to encourage each of the island governments to strengthen their public auditor’s offices. For example, we rate each of your public auditor’s offices and use that in our determination of the amount of grant funding that various jurisdictions will receive.

To be frank, however, I am not satisfied. None of us should be satisfied. We still have jurisdictions that have not had a qualified public auditor in place for an unacceptably long period of time. We still have public auditor’s offices that do not have the staff or budget to do an effective job. We still have public auditor’s offices that are too vulnerable to political retaliation.
Protecting the auditors is always a challenge. The problem is that auditors routinely have to be critical of those who have control over their budgets, personnel decisions and other important matters. And, speaking for the finance officers’ side of the room, there is not one of us, myself included, that has not been ticked off from time to time by the work of an auditor. The problem is that each of us has a tendency to believe that we are perfect, and that anyone with the gall to suggest otherwise obviously does not know what they are talking about. Or perhaps they are criticizing us out of irrational hatred or jealousy. Why would they be jealous of us? Because, as noted earlier, we are perfect. Most of us, however, are able to take a deep breath and get beyond those sentiments. Once we do so, it becomes easier to appreciate the way in which the auditors keep us on our toes and help us to do a better job of serving the people. And just as we are not really perfect, auditors are not perfect either. However, their imperfect attempts to do their job are essential to our ability to improve in our imperfect attempts to do our job.

Earlier, we notified each of your governments that the failure to have a public auditor’s office meeting minimal standards would eventually result in a loss of eligibility for OIA technical assistance funds. Today, I would like to start a process where we all work together to flesh out that concept. I would like all of us—finance offices, public auditor’s offices, the USDA Graduate School, Interior’s Inspector General’s Office, OIA—to work together to craft clear, objective and reasonable standards that must be met in order to ensure continued eligibility for technical assistance funds. The objective will be to ensure that public auditor’s offices are protected in their independence and are properly funded and properly staffed with qualified people, starting from the very top. We will work together to establish reasonable time frames and reasonable procedures. We have no desire to cut off technical assistance funds simply because a public auditor’s office is not perfect, or does not meet the “gold standard” in terms of budget and staffing. We simply want to ensure that public auditor’s offices are not allowed to fall so far as to become irrelevant, unable to perform their role in any significant fashion. Sadly, that has occurred in at least some of our jurisdictions, and that is the problem that we must work together to address.

We are about to spend an entire day together, and hopefully I have given us something to talk about. To the extent that our agenda is too crowded to make significant progress on this topic today, let us resolve to carry on this conversation by email and other means as we work toward our objective.

The process that I have proposed today will be an important step in our effort to improve accountability for public funds in the islands. We should be proud of the progress that we have made to date, and continue to be committed to making progress in the future. We will definitely continue to make progress as long as we remember why we are here: To make life better for the people of the islands.

Thank you.

Getting in the Way of Prosperity: The Seven Deadly Sins

Keynote Address by David B. Cohen, Deputy Assistant Secretary of the Interior, Annual Conference of the Island Government Finance Officers’ Association, Honolulu, Hawaii, December 4, 2007.

Thank you for inviting me to speak. As always, it is an honor to be here with you. Ever since I took this job in June 2002, we have been consistent in expressing the top two priorities for the Office of Insular Affairs. Priority 1 is helping the insular areas promote private sector economic development. Priority 1-A is promoting accountability, particularly for the Federal financial assistance that we provide for the islands. Normally, when I speak before this group, I speak about Priority 1-A. There is an obvious relationship between Priority 1-A—promoting accountability—and your jobs as government finance officers. Today I would like to speak about Priority 1, because I believe that there is also an important relationship between your jobs and the urgent need to promote private sector economic development in the islands.

Why have we made private sector economic development Priority 1? The reason is that in most of the insular area economies, there is an unsustainable imbalance between the public and private sectors. In a healthy economy, a strong private sector creates jobs and generates income and wealth, which can be taxed at a reasonable rate to fund essential services for the public. The private sector dominates the economy. In many island economies, this model is turned on its head: The economy is dominated by the public sector. Since the public sector generally is a consumer and not a producer of wealth, this type of economy can only be sustained with outside subsidy. I have referred to these island economies as being “upside down in the middle of the ocean”. These economies will have to get right side up in order to get their heads above water.

Many island economies have evolved in this manner for several reasons. For one thing, island communities—and small island communities in particular—face unique barriers to private sector economic development. These communities tend to have small populations, few resources and remote locations. That means that they are heavily dependent upon transportation systems to bring people and goods to and from their islands, and that transportation is likely to be significantly more expensive than it is in more populated areas. This, in turn, tends to make everything else on the island more expensive. The cost of doing business is therefore high.
Many island communities are subject to destructive weather patterns, and in the salty ocean air, the climate often corrodes what it does not destroy.

There are cultural and historical forces in play here as well. Pacific cultures, for example, are sharing cultures. The philosophy is “what we have today, we share today”. Pacific cultures do not have the selfish gene that triggers the generation of wealth in a free market economy. Sharing is a virtue and selfishness a vice, but enlightened self-interest has proven to a useful tool to enable societies to achieve a comfortable standard of living.

Ironically, the Pacific virtue of sharing, when combined with outside financial assistance, has helped to create the bloated public sectors that we see today in many island communities. The island instinct is to share financial assistance from donors in much the same way that food is shared. Since donors generally do not allow island governments to allocate their aid to people in the form of cash, they tend to allocate the aid in the form of public sector jobs. More aid tends to result in more government jobs. Since the Department of the Interior’s Office of Insular Affairs provides more aid to the Pacific islands than any other U.S. agency by far, we have been, inadvertently, the greatest U.S. contributor to this phenomenon.

The result is not only an oversized public sector, but also a public sector mindset where government jobs are deemed to be provided for the benefit of the recipients rather than for the benefit of the public. The public sector budget is not oriented to provide public service, but rather to provide public jobs. This means that the public as a whole tends not to receive good value for public expenditures, and donors tend to get frustrated when we attempt to measure the performance of our assistance.

In many island communities, outside subsidies and other distortive policies tend to make government jobs significantly higher paying than private sector jobs. This tends to encourage the islands’ best and brightest to aspire to public sector employment and look down on private sector employment. In some islands communities, the overwhelming majority of the indigenous workforce is employed by the local government and the lower-paying private sector jobs are filled almost exclusively by foreigners. These communities become two-tiered societies where a largely unproductive local government workforce is kept afloat by outside subsidies and outside labor. This type of arrangement, besides being economically unsustainable, can create tension within the society and give rise to a sense of dependence and helplessness in the indigenous population.

These problems tend to exacerbate themselves in a vicious cycle. A society that cannot sustain itself without outside subsidy generally cannot afford to invest in education, health, infrastructure and other essential building blocks of a strong and prosperous society. This lack of essential investment tends to weaken the private sector, sending the most talented locals overseas in search of opportunity and making the community more and more dependent on imported labor willing to work for lower wages.

These problems do not exist only in the islands. Small island communities are particularly vulnerable to them, however. These problems can be overcome by intelligent policy, strong leadership and a commitment to good governance. Overcoming these problems requires the development and maintenance of a business climate that enables business to create jobs, to foster prosperity and to assume its natural role as the engine that drives the economy.
That is where all of you come in. All of you are responsible for executing policy, and as any sports fan knows, good execution typically is the difference between success and failure. However, most of you also have sufficient stature within your local governments to have an important influence on the formulation of policy, and not merely its execution. When your respective governments consider reforms designed to improve the business climate, you are likely to be involved in the discussion. You might even be the driving force behind the discussion. With so many things beyond your control, it is all the more important for you as government leaders in small island societies to act with wisdom and political courage to address the things that you can control. Small island societies can successfully transcend their limitations, but there is little room for error.

One of the problems that I have observed with the relationship between the public and private sector in insular area economies is an inability of the public sector to get out of the way. That does not mean that island governments should abandon their duty to regulate business in a reasonable manner. It simply means that in some cases, government actions and failures to act needlessly obstruct economic progress. I have come up with a list of Seven Deadly Sins that could cause island governments needlessly to get in the way of the economic advancement of their own societies.

I will introduce the First Deadly Sin by noting something that most of us love about the islands: the unhurried pace. I remember overhearing a Samoan man and a Mexican man talking to each other about their respective cultures. The Mexican man said, “Mexicans are a hard-working people. New immigrants come to the U.S. and take jobs that Americans won’t take. In successive generations, they work themselves up from the working class to the middle class and beyond. Still, with some of my people some of the time, there’s this culture of ‘mañana’—tomorrow. What needs to get done can wait until tomorrow.”

The Samoan guy said, “Yeah, I think I know what you mean. In the islands, we always say ‘fai fai lemu’.”

The Mexican guy asked: “What’s that?”

The Samoan guy responded: “Well, I think it’s like your ‘mañana’, except without the sense of urgency.”

I remember hearing Willie Kostka, a Pohnpeian who heads a conservation NGO in Micronesia, poke good-natured at his fellow islanders. He said, “Haoles come to the islands and they see young men standing around and they think that islanders are lazy. We’re not lazy. We’re just patient.”

Well, the First Deadly Sin on my list of seven what I will politely call the Sin of Patience. Patience is indeed a virtue, unless one becomes excessively and discourteously patient with other people’s time. In business, time is money, and when government officials fail to act responsively in a timely fashion, it can drive away potential investment. Businesses greatly value a bureaucracy’s ability to process permits and licenses expeditiously and to respond quickly to inquiries and requests.

The Second Deadly Sin is the Sin of Complication. Needlessly complicated, protracted, redundant and even contradictory permitting, licensing and other regulatory procedures discourage the formation and retention of businesses.

The Third Deadly Sin is the Sin of Competitiveness. This sin occurs when the government sees a private company succeeding in a new type of business and decides that jumping into that business would be a good way to support its bloated public payroll. This is likely to result in both the private company and the government ultimately failing at the business. The private company is likely to fail because the government will not compete fairly. The government will fail because governments are notoriously bad at running businesses. The best way for a government to generate revenue from a profitable business is for it to get out of its way and tax it—reasonably.

The Fourth Deadly Sin is the Sin of Opaqueness. Government procedures should be transparent in order to inspire the confidence and full participation of the private sector. If good companies cannot be satisfied that they will be competing on a level playing field, they will stay away and the community will miss out on the capital, technology, know-how and economic activity that good companies can bring to the islands.

The Fifth Deadly Sin is the Sin of Favoritism. Favoritism comes in many varieties, including nepotism, where one favors one’s family; cronyism, where one favors one’s friends; xenophobia, where one favors one’s countrymen, and self-dealing, where one favors oneself. By creating an uneven playing field, it scares away businesses that can bring good things to the islands.

The Sixth Deadly Sin is the Sin of Fickleness. Businesses value consistency more than anything else. There is nothing more frustrating than policies that constantly lurch back and forth, to and fro, with the political wind.

The Seventh Deadly Sin is the Sin of Arbitrariness. Decisions made by government officials should be based upon objective standards applied consistently. Government leaders who retain too much discretionary power are in a position to benefit themselves at the expense of their constituents. It is best not to leave government leaders with too much discretionary power, as it is a strong invitation to abuse.

These sins are committed by government officials all around the world, not merely in the islands. They are certainly committed all across the United States by Republicans and Democrats alike. As I noted earlier, however, small island communities have a very narrow margin of error, and hence it is all the more imperative to avoid these sins. Those who commit the sins of Lust, Gluttony, Greed, Sloth, Wrath, Envy and Pride should seek forgiveness from God. Government officials who commit the sins of Patience, Complication, Competitiveness, Opaqueness, Favoritism, Fickleness and Arbitrariness should seek forgiveness from their own people.We all know that island communities face many challenges. It is important to remember that these challenges can be overcome. They can only be overcome, however, if government leaders do everything in their power to discharge their duties with the highest degree of skill, judgment, integrity and vision. Given everything that is at stake for the people of the islands, to do anything less than that would be a sin.

Thank you.

Guam's Military Expansion Must be Good for Guam and Good for the Neighborhood

Remarks of David B. Cohen, Deputy Assistant Secretary of the Interior for Insular Affairs, Public Policy Institute Distinguished Speaker Series, College of the Marshall Islands, Majuro, Republic of the Marshall Islands, November 30, 2007.

Yokwe. It’s a pleasure to be back in the Marshall Islands. Before I launch into the topic that I was invited here to speak about, I would like to offer a few remarks about the forum itself: the new Public Policy Institute of the College of the Marshall Islands.

To me, the fact that the College of the Marshall Islands has established the Public Policy Institute is a sign of the tremendous progress that this institution has made in a very short period of time. Three short years ago, this college was on the verge of losing its accreditation from the Western Association of Schools and Colleges, which would have almost certainly required it to close its doors. Closing the doors to this college would in turn have closed the door on the future to countless young Marshall Islanders for generations to come, depriving this country of its almost exclusive source of locally trained teachers, nurses and other professionals.
In the Fall of 2004, we convened an emergency task force that included the college, the Government of the Marshall Islands, my office, the good offices of the U.S. Ambassador, the Pacific Post-Secondary Education Council, and others. I personally attended the first meeting of the task force here in Majuro in October 2004, and we helped the College put itself on the road to recovery. A crucial component of that plan was an ambitious capital improvement plan to shore up deficiencies in the Colleges aging campus. The Nitijela approved a plan to provide $3 million annually to support this plan with Compact funds and funds from other sources. I had the pleasure of touring this campus earlier today and must say that I am astounded by the progress that has been made thus far and by the progress that is on the way. I toured the site of the future lab school for elementary and junior high school students here in Uliga who were forced to abandon their decrepit and unsafe former school site. This exciting plan will leverage resources in a manner that will simultaneously improve elementary and post-secondary education in the Marshall Islands.

Another urgent priority for our emergency task force was to find effective leadership for the College. A few months after our initial meeting, the College’s Board of Regents was preparing to offer the job to Wilson Hess, who had very impressive credentials as a college president in Maine. I happened to be in Majuro during Mr. Hess’s first visit to the Marshall Islands. He attended a Chamber of Commerce luncheon at which I spoke. I directed a few remarks to Mr. Hess. I essentially said that Mr. Hess, as a statesider, might soon be asked to consider moving his family thousands of miles away to a remote atoll in the middle of the Pacific. That would be a very difficult decision to make. I pointed out to Mr. Hess that in that room with us on that day were a number of bright, talented former statesiders who had made that very same decision and decided to make these islands their home forever. If I recall correctly, former statesiders in the room on that day included Al Fowler, Jack Niedenthal, Jerry Kramer, Giff Johnson, and many others. And I said to Mr. Hess, that if you want to know what’s so special about these islands that would inspire someone from the states to give up everything on the mainland and make this place their home, ask these people. And he did. And I don’t know what they told him, but whatever it was must have been compelling because he’s been here doing a great job for the past two years.

Three years ago, this College was grasping for a miracle just so it could keep the lights on. Today, with the Public Policy Institute, it has shown that it is no longer focused on merely surviving, but is actively seeking to make a contribution to the intellectual life of the Pacific. I don’t know if my speech tonight will advance that objective, but I believe that it’s inspiring that the College has put itself in the position to host such a program. I am very exciting about all of the wonderful things that this College will be able to do, all of the contributions that it will be able to make to this community, when it finally frees itself of the last vestiges of its academic sanction. I am confident that it will do so in the near future, and thank everyone who played a role in making it happen.

I’ve been invited to the Marshall Islands to speak about something that is planned to occur almost 2,000 miles away from here: the military buildup in Guam. That isn’t so strange when you consider the cultural, political and transportation links between the two Micronesian island communities, which are likely to cause events in Guam to be felt here in the Marshalls. That is especially true given the magnitude of what is planned to happen in Guam.
The title of my remarks tonight is “Guam’s Military Expansion Must be Good for Guam and Good for the Neighborhood.” This is a quote from my boss, Secretary of the Interior Dirk Kempthorne.

The Department of Defense is planning to transfer approximately 8,000 Marines and 9,000 family members from Okinawa to Guam at a cost of more than $10 billion. This cost will be shared between the U.S. Government and the Government of Japan. The existing U.S. Navy and U.S. Air Force bases on Guam will also undergo improvements costing additional billions of dollars.

The Department of the Interior has a great interest in these developments. The Department has two responsibilities that connect us to the realignment of Pacific forces. First, the Department of the Interior is responsible for generally administering the Federal Government’s relationship with the United States territories, and for administering the financial assistance that the U.S. provides to the freely associated states, including the Republic of the Marshall Islands, under the Compacts of Free Association. Second, the Department of the Interior chairs the Interagency Group on Insular Areas, which is tasked with coordinating Federal policy with respect to the U.S. territories.

The Interagency Group on Insular Areas, or “IGIA”, was re-established by President Bush on May 8, 2003 when he signed Executive Order No. 13299. The President designated the Secretary of the Interior as the presiding officer of the IGIA, and the Secretary of the Interior has offered the services of the IGIA to the Department of Defense to help coordinate Federal agency participation in this important base realignment project. In this regard, the IGIA has established a Working Group on Guam Military Expansion to address issues related to the military buildup. In addition to Defense and Interior, the Working Group includes the Departments of State, Agriculture, Health and Human Services, Labor, Justice, Transportation, Housing and Urban Development, Education, Veterans Affairs, Navy, the Small Business Administration, Office of Management and Budget, and others. We view the Guam relocation as a project of the Federal Government, not merely the Department of Defense. We are also working closely with the Government of Guam and Guam’s Delegate to the U.S. House of Representatives, and will be working closely with the leaders of other island communities as well.

The Department of the Navy has established the Joint Guam Program Office, or “JGPO”, to coordinate the planning and implementation of the buildup. JGPO is led by Retired Marine Corps General David Bice, who reports to the Assistant Secretary of the Navy for Installations and Environment, B.J. Penn. I work very closely with General Bice on the interagency coordination effort within the Federal Government and on coordination between the Federal Government and the Government of Guam.

General Bice and I host quarterly meetings of the Interagency Task Force, which was formed specifically to identify and address the impacts of the buildup on Guam. The most recent Interagency Task Force Forum was held last week at the Pentagon, and was attended by a delegation from Guam led by Governor Felix Camacho. The Interagency Task Force includes five subgroups that focus on (1) labor and workforce issues, (2) civilian infrastructure needs, (3) health and human services requirements, (4) the environment, and (5) socio-economic issues. Each of these subgroups has been working hard with the Government of Guam to identify issues that we will need to address in order to the buildup to proceed smoothly, and to develop strategies to address those issues. As we have become immersed in these issues, one thing has become abundantly clear to all of the participants: we all have a great deal of work to do.
I would like to speak in a little more detail on labor and workforce issues, since these issues present a potential opportunity for the people of the Marshall Islands.

The relocation of Marines from Okinawa will require the construction of a new U.S. Marine Corps base and other facilities to accommodate 8,000 Marines and 9,000 family members. It is anticipated that such construction will require 12,000 to 15,000 skilled construction workers. Currently, the number of journeyman construction workers that are labor-eligible on Guam is limited. It is estimated that 75 percent of such workers will have to come from outside of Guam.

Where will these workers come from? The fifty states could in theory provide all of Guam’s labor needs. However, because of Guam’s great distance from Hawaii and the U.S. mainland, we have not counted on being able to rely upon labor from the fifty states. Hawaii is by far the closest state to Guam, and its construction industry has been kept very busy recently. If construction workers in Hawaii can find all the work they need in Hawaii, it would be difficult to entice them to Guam. This is especially true because the pay scale on Guam is generally lower than that in Hawaii and the other U.S. states. It will be interesting to see whether the sub-prime mortgage issues that the U.S. economy has been dealing with lately will significantly dampen the availability of credit for commercial construction projects in Hawaii and the Western U.S., including Las Vegas. If this happens, and we hope that it doesn’t, it could result in a significant downturn in construction activity in the fifty states. This, in turn, could motivate more skilled construction workers from the fifty states to consider opportunities in Guam.

Other potential sources of labor for the Guam buildup exist in nearby Asian and Pacific nations, particularly the Philippines. I’m excluding the Marshall Islands and the other freely associated states here, as I will discuss them in a moment. These Asian and Pacific nations collectively, and in many cases individually, have more than enough skilled construction workers to satisfy all of Guam’s needs. Workers from these nations, however, require H-2B visas in order to work on Guam. H-2B visas allow the importation of temporary workers to the U.S. for temporary jobs, and nationally only 66,000 of them are issued annually. The Guam requirement for construction workers alone is approximately 20 percent of this nationwide cap. Clearly, without a change in the law, our ability to get the needed construction labor from these Asian and Pacific nations—again, excluding the freely associated states—will be very limited.

Well, such a change in the law has indeed been proposed. H.R. 3079, legislation that would federalize the immigration system of the Commonwealth of the Northern Mariana Islands, was recently approved by the U.S. House of Representatives Committee on Natural Resources. The version of the bill reported out of committee would exempt Guam from the national cap on H-2B visas, allowing Guam to bring in all of the construction workers that could be demonstrated to be necessary for the military buildup or other projects. The passage of this legislation in its current form is not yet certain. For one thing, the companion bill in the Senate, S. 1634, does not currently include the H-2B visa cap exemption for Guam. Also, the current CNMI administration is funding a vigorous lobbying effort to defeat H.R. 3079, notwithstanding the fact that it would offer the CNMI and Guam unprecedented flexibility within the U.S. system to bring in the workers, tourists and other visitors necessary to build a strong economy. An earlier lobbying effort by the CNMI government in the late 1990’s and early 2000’s resulted in the House defeating a CNMI immigration federalization bill that had been unanimously passed by the Senate. It should be noted, however, that circumstances are drastically different this time around.

The last potential source of labor that I will discuss is the one of most interest to most of you in my audience today: Citizens of the U.S. territories and the freely associated states, including the Marshall Islands. Although there are many legal and cultural distinctions between citizens of the territories and those of the freely associated states, I will discuss them together for two reasons. First, citizens from both the territories and the freely associated states can travel to and work in Guam without obtaining a visa. Second, the number of skilled construction workers from both the territories—especially the nearby Pacific territories—and the freely associated states is rather limited, giving rise to the challenge to train these potential workers as quickly as possible in order to avail of their access advantage for living and working in Guam.

That access advantage may effectively be erased if H2-B visa caps are lifted for Guam. Opportunities for newly skilled laborers from the freely associated states and territories could also be diminished if a downturn in the U.S. construction industry were to attract a higher-than-expected number of experienced construction workers from the U.S. mainland to Guam. In any event, however, if a significant number of workers from the freely associated states could become qualified for skilled construction jobs in Guam, it would be good for the freely associated states and good for the U.S.

As you know, the Compacts of Free Association allow citizens of the freely associated states to travel to the U.S., including its territories, without a visa and stay indefinitely to work, study or simply live. Guam has always received a significant number of migrants from the freely associated states, although most have been from Chuuk, other parts of the Federated States of Micronesia, and Palau. If you look at a map of the U.S.-affiliated Micronesian islands, the Marshall Islands are situated in the northeast corner, poised like an arrow pointing up at Hawaii and beyond to the U.S. mainland. The Compact migration patterns of the Marshallese have traditionally followed that arrow.

Officials from Hawaii have long complained that Compact migration puts a strain on their local resources for social services, law enforcement and infrastructure. For our part, my office has consistently pointed out that Hawaii receives a great deal of benefit from the Compact, and that many Marshallese migrants are contributing to the dynamism of Hawaii’s economy. Also, millions of dollars are paid each year to Kwajalein landowners for the right to use the U.S. Army base in Kwajalein, and it is logical to assume that a significant share of that money ends up in Hawaii. Still, it is true that Hawaii receives a significant number of migrants from the Marshalls and other freely associated states that may not yet have the skills to be net contributors to the economy. For that reason, my office is committed to provide $600 million over 20 years in “Compact Impact” grants to Hawaii, Guam and other Pacific territories that receive migrants from the freely associated states.

It is important to note that “Compact Impact” grants should not stigmatize communities from the freely associated states as being burdens on the states and territories to which they migrate. Thousands of Marshallese, for example, have migrated to Arkansas and Missouri to work for Tysons and other companies. There has been no outcry from those states that the Federal Government should provide them with “Compact Impact” grants. To be fair to Hawaii and Guam, however, Marshallese travel the great distance to Arkansas or Missouri for one reason only: to work. These Marshallese workers are net economic contributors to the communities in which they live. Most citizens of the freely associated states who migrate to Guam or Hawaii also do so to work, but because of the proximity of these places to the freely associated states, they could also be expected to attract a higher proportion, as compared to the U.S. mainland, of citizens who are not yet ready to be net economic contributors. If we could help some of these migrants and potential migrants to acquire the skills necessary to participate in the Guam military buildup, we would simultaneously be furthering a number of objectives. We would reduce the pressure on Hawaii and Guam to address the needs of migrants who do not yet have the skills to be net economic contributors. We would provide citizens of the freely associated states with skills which could be converted into good jobs, which in turn could take pressure off of the social service budgets of their home countries and the places to which they migrate, and create more income for their home countries in the form of remittances. And, not incidentally, it would help us find the labor necessary to implement the Guam military buildup.

Keep in mind that the job opportunities on Guam will not be limited to those 15,000 or so skilled construction jobs. The needs of Guam’s current population have already overrun the capacity of its civilian infrastructure, which will have to be significantly improved and expanded in connection with the military buildup and the population increase that will come with it. That population increase is estimated to be 35,000 to 40,000 people or more, an increase of over 20 percent, mostly civilians. All of these new people will need places to live, places to shop, places to dine, products and services to buy, roads to travel on, utilities to serve them. All of these needs will give rise to business opportunities and job opportunities. These people will also need places to visit for a change of pace, and many nearby island communities will be waiting to fill that need. Majuro is only a four-hour direct flight from Guam.

In order for the Marshall Islands and other island communities to be able to take advantage of this potential increase in tourism, they will have to make the commitment to make their islands pleasant destinations for tourists. Natural beauty is not enough. Tourists today expect good service, good amenities, good logistics, good infrastructure and an overall pleasant experience. In order to achieve all of this, the private sector, not bureaucrats, will have to take the lead. However, the private sector must be supported from the highest levels of government, which must be absolutely commit itself to provide a business climate that will enable the private sector to effectively develop the tourist economy. I have said in the past that Pacific economies are “upside down in the middle of the ocean,” with bloated governments suffocating the private sector rather than strong private sectors leading economic growth. For Pacific economies seeking to capitalize upon opportunities in the region, this model simply won’t do.

A number of citizens of the Marshall Islands and other freely associated states already have the skills to participate in the economic activity that is expected to be generated on Guam or otherwise from Guam, including tourism opportunities. Many more, however, will need to be trained. Clyde Bishop, U.S. Ambassador to the Marshall Islands, has stressed the need for this type of training. We don’t have much time, however. The construction required for the location of Marines is scheduled to start in 2010 and finish in 2014. Since it typically takes an apprenticeship of three to five years to qualify as a journeyman in one of the construction crafts, the time available to train people from scratch is extremely limited. Keep in mind, however, that Guam’s economy will generate opportunities other than those for journeyman construction workers, and there should be plenty of opportunity left over after the people of Guam have been properly taken care of. And in any event, training for the citizens of the freely associated states will be beneficial to the freely associated states and to the U.S. regardless of whether that training is ultimately put to use in Guam, in Hawaii, on the U.S. mainland or back at home.
We’ve been contemplating these issues in Washington, in consultation with our colleagues from the islands. We’re looking at training programs that could be implemented in Guam, the Northern Mariana Islands, Hawaii and the freely associated states. We’re discussing eight-week boot camps that could provide some training for unskilled labor. We’re discussing apprenticeship programs. We’re looking at how the private sector can help. We’re discussing the existing capabilities of the community colleges in the region, and how we can help to expand those capabilities. We’re looking at possible Federal funding sources, although the Federal Government cannot do this alone. The U.S. Departments of Labor and Education are looking at their resources, and my office will almost certainly assist the training effort with technical assistance grants. We can also use funding provided under the Compacts of Free Association, provided that the governments of the Marshall Islands and the Federated States of Micronesia believe, as I hope they do believe, that this is a high enough priority.

We’re still in the process of figuring out who can bring what to the table, and it will take a great deal of communication between the Federal Government and the islands in order to get this right. The colleges are our natural partners in this endeavor, and we need your help to figure out how we can leverage our resources with your resources, expertise and commitment in order to get the most out of our efforts. Those of our partners who are willing to bring the most to the table are likely to get the most out of it, and the people of the islands will benefit.

In June, I had the pleasure of accompanying my boss, Secretary of the Interior Dirk Kempthorne, on a tour of the U.S.-affiliated Pacific islands. Assistant Secretary of the Navy B.J. Penn was with us as well. Our tour included stops in Kwajalein, Ebeye, and here in Majuro. Everywhere we went, people wanted to know about the Guam military buildup. And everywhere we went, Secretary Kempthorne stressed the need to ensure that Guam’s military buildup is “good for Guam and good for the neighborhood.” To remove any doubt, the “neighborhood”, as Secretary Kempthorne envisions it, includes the entire U.S.-affiliated Pacific, and certainly the Marshall Islands. If the project is planned and implemented properly, Secretary Kempthorne’s vision will indeed come to pass, and the military expansion on Guam will be good for this entire neighborhood.

In order for us to realize this positive scenario, we will have to do our homework. We will have to identify critical path items and potential bottlenecks, and find ways to ensure that we address our challenges in a timely fashion. We don’t have all of the answers yet, but we have begun in earnest the task of identifying issues and developing solutions. This effort will take a great deal of collaboration among the Federal Government, the Government of Guam, the people of Guam, the private sector and peoples of the islands, including the Marshall Islands and the other freely associated states. With its central role in providing support to the islands, the Department of the Interior is prepared to do its part to make sure that this massive endeavor is good for Guam, good for the neighborhood, and good for the United States of America.

Kommol tata.

Unlocking the Value of Real Estate in Micronesia

Keynote Speech of David B. Cohen, Deputy Assistant Secretary of the Interior for Insular Affairs, Fourth Micronesia Real Estate Investment Conference, Guam, September 28, 2007.

Hafa Adai, ladies and gentlemen. Thank you for inviting me to be here with you today. I believe that most of you are familiar with the U.S. Department of the Interior’s role in Micronesia and in other island communities. For those of you who don’t know, the Secretary of the Interior generally administers the U.S. Government’s relationship with its territories, specifically Guam, American Samoa, the U.S. Virgin Islands and the Commonwealth of the Northern Mariana Islands. He also administers the financial assistance we provide to the nations in free association with the U.S., namely the Marshall Islands, the Federated States of Micronesia and Palau, under the Compacts of Free Association. Those duties are delegated to me and my staff in the Office of Insular Affairs. OIA has an annual budget of $430 million, most of which is provided to the Pacific in the form of grants. Five of the seven jurisdictions that we are responsible for are in Micronesia.

Our top priority for the islands is private sector economic development, and the showcase event for our efforts in that regard this year will be our fourth Conference on Business Opportunities in the Islands, which will be held right here on Guam on October 8 and 9. I hope to see all of you at our Conference, which will be held at the Hyatt Regency. The Conference will offer an excellent opportunity to learn about business opportunities throughout the U.S. insular areas, including but not limited to those related to the Guam military buildup. It will also offer an excellent opportunity to meet the people you need to meet, in both government and the private sector, to pursue those opportunities.

The theme of my talk is “Unlocking the Value of Real Estate in Micronesia”. We’re all aware of exciting developments here on Guam. I’ll touch on those, but I also want to talk about the rest of the region. In most parts of Micronesia, unlocking the value of real estate will require reform of policies relating to real property. As we will discuss, some of these policies are deeply rooted in culture, and we must all respect the fact that it will be for the indigenous people of Micronesia to decide how best to harmonize their economic aspirations with their respect and reverence for their own culture. We can point out the economic costs and benefits of those policy choices, but we must respect that those policy choices are for the people of the Micronesian region to make.
Let’s start our tour of Micronesia here in Guam. We all know about the planned relocation of 8,000 U.S. Marines and 9,000 of their dependents from Okinawa to Guam. The cost of the relocation will exceed $10 billion, and will include the construction of a new military base. The existing military facilities on Guam, including Naval Base Guam and Andersen Air Force Base, will require complementary upgrades that will cost in the billions of dollars. One of the upshots of all of this is that the total population of Guam is likely to increase by over 35,000, or more than 20 percent. Some will come because they were ordered to come, but many will come voluntarily because of the economic opportunities that will be generated by the buildup. Most of these new people will be civilians. These people will need places to live, places to shop, places to dine. They will need utility service, and places to dispose of all of the solid waste that they will generate. All of this will have important implications for the real estate market on Guam. Demand for real property will increase significantly, and the last time I checked, the supply of real property on Guam has not increased. We can therefore expect significant upward pressure on real property values, some of which is likely already reflected in the market in anticipation of events to come.The other major driver of Guam’s economy is tourism, and much of the recent real estate activity on Guam has been driven by tourism. Japan’s Ken Corp., in particular, has been very active, with its recent $73 million purchase of the Hilton Guam Resort and Spa adding to an impressive stable that now includes the Hyatt Regency Guam, the Pacific Islands Club, the Sheraton Laguna Resort, the Santa Fe and the Country Club of the Pacific. All of these acquisitions have occurred since May 2005. Ken Corp. and/or its affiliates reportedly now own over 40 percent of the major oceanfront hotel rooms in Guam. This is a clearly a vote of confidence in Guam’s future, a display of optimism that may becontagious. With so much of Guam’s tourism infrastructure under its control, Ken Corp. now has the ability to significantly redefine Guam’s image in the eyes of the international traveling public. It has the incentive, and has shown the inclination, to move Guam’s tourism industry up-market. It has the ability to market Guam’s new image in Asia, and this should benefit not only Ken Corp. but its competitors in Guam as well. The pressure on room rates in Guam is now upward, not downward. Ken Corp. has a network of well-heeled potential travelers from its properties in Japan, which are largely high-end residences for ex pats. If Ken Corp. has the ability to convince a significant number of these ex pats to vacation in Guam, it will be good for Ken Corp. and good for Guam.

The Northern Mariana Islands, as we all know, is currently suffering through difficult economic times. The tourism market is still recovering from the cessation of scheduled service from Japan Airlines in 2005. That decision was implemented just four months after the visit of the Emperor and Empress of Japan to Saipan brought the natural beauty of that island to millions of Japanese television sets, providing what would have been, under other circumstances, a tremendous marketing boost to Saipan in its efforts to attract Japanese tourists. Instead, the JAL pullout resulted in a sharp drop in tourism and left the Hotel Nikko, owned by a JAL affiliate, in a state of limbo. The hotel, which is in need of renovation, is reportedly offering deep discounts to Japanese tour operators. This in turn is putting downward pressure on room rates in Saipan.
We see, however, some parties making significant real estate bets on the CNMI’s future. At least one of these parties has the ability to influence whether its bet will pay off, and that’s good news for the CNMI. KUMHO Asiana is seeking a 40-year lease so that it can operate the Lao Lao Bay Golf Resort on Saipan, and reportedly plans to develop a resort next to the golf course. This investment cannot succeed without a steady flow of tourists to the CNMI. Fortunately for KUMHO Asiana, it owns an airline. Its airline, Asiana Airlines, has recently stepped up service between Korea and Saipan. The Saipan World Resort is also now in Korean hands, and recently underwent a major renovation that included the addition of a large water park. The Korean bet on Saipan, backed up with the ability to bring more tourists there, is an important source of hope for the CNMI’s future.

There is a great deal of hope in Palau. Tomorrow, I travel to Palau to dedicate the Compact Road, which was funded by my office for approximately $150 million. The road will open up Babeldaob, which is Palau’s largest island the second largest island in Micronesia after Guam, to significant economic development for the first time. Palau recently moved its capital to Babeldaob. The new capital complex in Melekeok sits high atop a hill overlooking the ocean. Even with the new Compact Road, it is a significant commute from the population center in Koror. It is clear that they are going to have to develop a new community near the new capital complex. Everything I just said about the expected new residents of Guam applies equally to the people who will need to live near the new capital of Palau. They’re going to need places to live. They’re going to need places to shop. They’re going to need places to dine. They’re going to need utilities. The Compact Road will also open up tourism development opportunities that never existed before.

In fact, the entire region has something to look forward to as Guam prepares to welcome tens of thousands of new residents. As beautiful as Guam is, these new residents are likely going to want to get off the island every now and then. As Guam becomes more fast-paced and urban, places like Yap, Chuuk, Pohnpei, Kosrae and the Marshall Islands could provide Guam’s new residents with an opportunity to relax in an environment of pristine natural beauty. Since Guam serves as the air transportation hub for the region, all of these places, in addition to Palau and the CNMI, are readily accessible from Guam. There is now a greater potential for resort development in these areas.

That’s pretty much the backdrop. But before you go rushing out to make real estate investments throughout Micronesia, you might want to listen to the rest of my speech. I don’t intend to discourage anyone from investing in Micronesia; quite the contrary. But it is important for investors to have a strong idea of the issues that must be addressed in order to invest successfully in the region.

The first thing you need to know about investing in land in Micronesia is that there isn’t much of it. The name “Micronesia”, as many of you know, is derived from the Greek words for “small islands”. If you add up all of the land area of Guam, the CNMI, Palau, the Marshall Islands and all four states of the Federated States of Micronesia, you end up with a grand total of 910 square miles. That’s significantly smaller than Rhode Island, the smallest State in the Union, which weighs in at a relatively hefty 1214 square miles. We’re standing on the largest piece of real estate in all of Micronesia, the island of Guam.

The second thing you need to know about investing in real estate in Micronesia is that there is a strong cultural underpinning to all matters affecting land. Land is sacred throughout Micronesia, as it is throughout the Pacific islands. In Micronesia, one’s identity is deeply tied to one’s land. With its ability to produce food and medicine, land is seen as a source of life. This is why the idea of losing one’s land carries a deep sense of emotional loss that is akin to the loss of life. Micronesian culture, like other island cultures, emphasizes sharing. Land is therefore generally held communally, passed down from generation to generation by blood ties and administered by traditional leaders in accordance with the culture.

Generally, in Micronesian cultures, the concept of alienating one’s land to aliens is, well, alien. In most places outside of Guam, it is not possible for non-indigenous people to own real property. In the Northern Mariana Islands, for example, Article 12 of the CNMI Constitution restricts the acquisition of permanent and long-term interests in real property in the Commonwealth to persons of Northern Marianas descent. In 2011, persons of Northern Marianas descent—that is, the indigenous Chamorros and Carolinians of the CNMI—will have the opportunity to vote on whether this policy should be retained, abolished or perhaps modified. In the meantime, non-locals can acquire leasehold interests in real property for terms of up to 55 years.

Throughout Micronesia, with the exception of Guam, real estate investment by off-islanders is generally done through long-term leasehold arrangements. The basic limit on lease terms varies from jurisdiction to jurisdiction. In general, however, to state the obvious, restrictions on alienation affect the risk profiles and economics of real estate transactions throughout Micronesia. Restrictions on alienation tend to discourage investment by limiting the time horizon in which the investor can get a proper return on an investment, by limiting options for financing and by limiting exit strategy options. Restrictions on alienation also reduce the ability of indigenous landowners to realize the full economic value of their real property, by limiting the market in which a landowner can sell real property interests and reducing demand of outsiders for real estate investment. This is not to say that alienation restrictions are bad policy, particularly in light of the cultural reasons for having them. This is merely to point out that alienation restrictions have an economic cost and tend to dampen—not eliminate, but dampen—real estate investment activity. Real estate investors understand that no environment is perfect, and are adept at figuring out how to make an investment worthwhile notwithstanding particular challenges that may exist in any particular jurisdiction.

In addition to the maximum term of the lease, there are a number of other things that an outside investor would want to know before making a real estate investment in most parts of Micronesia: What happens to the improvements after the lease expires? Are there reliable ways of ensuring that the lessor has clear title to the property? Are there strong regulatory and judicial institutions that can be relied upon enforce rights to the property, if necessary? Can financing be obtained on the security of a leasehold interest in real property? Are there procedures in place that would give lenders the comfort they need to provide financing, including the ability to foreclose upon and alienate real property interests in an event of default? Are there reliable institutions to enforce the rights of lenders? Are there foreign investment laws or other laws that impact what types of investment that outsiders can make, and how they should to structure those investments? Can outsiders do business directly, or do they need local partners? How do real estate restrictions affect the range of exit strategies?

The answers to these important questions vary from jurisdiction to jurisdiction. Indeed, in addition to differences among the CNMI, Palau, the Marshall Islands and FSM on matters of real property law, each of the four states of the FSM—Pohnpei, Chuuk, Yap and Kosrae—establishes its own real property laws and there is significant variance from state to state. I won’t attempt to answer all of these questions for each jurisdiction now, but you can obtain helpful information from our website (www.doi.gov/oia), from the Asian Development Bank and from the jurisdictions themselves. The most important form of due diligence, however, is to consult with banks, attorneys and other professionals who are actually operating in these jurisdictions. They are the ones that can give you the best idea of how the legal and institutional framework really works in practice, and whether there are tried and tested workarounds that can be used to address particular challenges.

Throughout Micronesia, policymakers are taking a fresh look at real property laws. A parade of consultants, including some funded by my office, has advised them on the economic costs of their current policies, and suggested ways in which Micronesian societies might better unlock the economic value of their precious land in ways that are consistent with their culture. Thus, throughout Micronesia, legislators have recently considered and in many cases adopted proposals to increase maximum lease terms, to establish or strengthen land registration systems, to expand the ability of outsiders to invest in land and to strengthen the institutional framework in ways that would encourage financing and investment. For many of these policymakers, land issues trigger deep-seated concerns that are difficult for outsiders to fully understand.

One of the concerns that we hear expressed over and over again is that “We don’t want to become another Waikiki.” The first reaction of some outsiders might be to laugh and respond that “There’s no danger that you will ever become another Waikiki.” But if one takes the time to understand what a Pacific Islander means when he says this, one can appreciate and respect the concern. When people throughout the Pacific say that they don’t want their island to become another Waikiki, they’re not necessarily suggesting that their island is about to be overrun by several million tourists from around the world each year. Pacific Islanders look at the Waikiki experience through the perspective of the Native Hawaiians, and see it as a symbol—rightly or wrongly—of the loss of one’s land, the loss of one’s culture, the loss of one’s language, the loss of one’s identity; of making outsiders rich at the expense of the indigenous people. Reasonable people can debate whether this is best way to interpret the history of Waikiki’s development, but it is certainly an impression that is widely held and deeply felt throughout the Pacific. Outside investors should be respectful of these concerns and the culture that underlies them, and should be prepared to address these concerns.

Policies affecting real estate investment in Micronesia are in a period of flux. Some places in Micronesia have policies and environments that are less than ideal for real estate investors, but that would not necessarily preclude a successful venture if one goes in with a full knowledge of the circumstances and a clear sense of how to work around imperfections in the system. Could policy reform relating to land issues bring more prosperity to Micronesia, and more opportunity for outside investors? Undoubtedly, but it is up to each society and each culture to strike the balance that it chooses to strike between culture and prosperity, or to find the best way to harmonize the two.

Micronesians understand that change is necessary. No culture is cast in stone. Christianity, for example, was alien to the Pacific until the 19th Century; today, it is a fundamental part of most Pacific cultures. We should always remember, however, that a culture exists to serve the needs of the people, not the other way around. A culture that does not adapt to the changing needs of the people becomes irrelevant over time, leaving the people with the choice of abandoning their culture or following it into irrelevance. People therefore do tend to adapt and evolve their cultures over time, but at a pace and in a manner of their own choosing. How much of the value of real estate in Micronesia will be unlocked in the foreseeable future will be determined by Micronesians themselves, and that is as it should be. Even today, there are plenty of excellent real estate opportunities in Micronesia beyond Guam. Even though the value of real estate in Micronesia is not, to again follow the theme of my remarks, completely unlocked, astute investors can still find ways to open the door in ways that will benefit themselves and benefit Micronesia.

Si Yu’us Ma’ase.

The Need for Alternative Energy Solutions in the Pacific Islands

Remarks of David B. Cohen, Deputy Assistant Secretary of the Interior for Insular Affairs, Annual Meeting of the Pacific Power Association, Majuro, Republic of the Marshall Islands, August 7, 2007.

Yokwe, ladies and gentlemen. It’s an honor to be invited to speak at this year’s meeting of the Pacific Power Association. Thank you for inviting me to be here with you today. It’s great to be back here in Majuro. We were here about eight weeks ago with Secretary of the Interior Dirk Kempthorne, and we very much appreciate President Note, the Marshall Islands government and the people of the Marshall Islands for having provided us with a very productive and educational visit.

I believe that most of you are familiar with the U.S. Department of the Interior’s role in the Pacific and with our other island communities. For those of you who don’t know, the Secretary of the Interior generally administers the U.S. Government’s relationship with its territories, specifically Guam, American Samoa, the U.S. Virgin Islands and the Commonwealth of the Northern Mariana Islands. He also administers the financial assistance we provide to the nations in free association with the U.S., namely the Marshall Islands, the Federated States of Micronesia and Palau, under the Compacts of Free Association. Those duties are delegated to me and the office that I run, the Office of Insular Affairs. OIA has an annual budget of $430 million, most of which is provided to the Pacific in the form of grants. Much of those grants go to support infrastructure projects, including power.

Secretary Kempthorne had quite a trip throughout the Pacific. We stopped in Midway, Saipan, Guam, Palau, Pohnpei, Kwajalein, Ebeye, Majuro and American Samoa. We listened to the concerns of local leaders everywhere we went, and everywhere we went, the high cost of energy was near the top of the agenda.

With some analysts predicting that the price of oil may reach $100 per barrel in the not-to-distant future, energy costs are a worldwide concern. I can’t think of anywhere, however, where the impact of energy prices is greater than it is in the islands. Because the islands depend on the ability to have relatively small quantities of fuel transported great distances, it is almost impossible for the islands to purchase fuel on favorable terms. This is compounded by the fact that the generating equipment that the fuel is used for is, in the islands, typically out of date and inefficient. The islands therefore have to pay more for fuel and have to buy more of it to produce a given amount of electricity than is the case, say, in almost every stateside community. That is why some island utilities have to charge more than 30 cents per kilowatt hour. The cost of electricity in the islands is a significant competitive disadvantage when it comes to trying to attract and retain business investment, which makes it even harder for the islands to develop the economies of scale necessary to avoid astronomically high energy costs. The economies of most of our island communities are depressed as it is, and the economics of energy are a massive burden that weighs them down as they try to improve their standards of living and quality of life.

None of this is news to anyone here. Many of you have already had to face your governor, your president, and your legislature and explain why you had to double—or more—power rates to customers. And why that would just barely allow you to buy enough fuel to keep your generators turning—and not enable you to buy the new equipment you desperately need, or perform the preventative maintenance and conduct the training that Tony is always harassing you about. Rising energy prices have sparked public protests in some island communities.
Throughout the world, people are talking about the need to reduce dependence on oil. Nowhere is this a greater imperative than in the Pacific. There are, of course, both environmental and economic reasons for the need to reduce dependence on oil. If oil and other carbon-based fuels indeed contribute to global warming, then the low-lying islands of the Pacific will be the first casualties of the world’s failure to reduce its collective carbon footprint. It is fitting that we are holding this conference in Majuro, a place that some scientists have predicted could one day be underwater. We all hope and pray that those predictions will not come true, but the people who live here have no choice but to take them seriously. I’ve been to Majuro many times, but never cease to be amazed at the view of this atoll from the airplane as you fly in. Majuro, and the other low-lying atolls of the Marshall Islands, are such thin, fragile necklaces of land in the middle of a world’s largest ocean. From the airplane, you wonder how people can live on what looks like such an isolated, precarious sliver of land. That feeling is in no way abated as you drive in from the airport. Throughout your entire ride, the lagoon is immediately to your left and the mighty Pacific Ocean is immediately to your right. And as many of you know, that tiny little bridge that you cross on the way in from the airport—the one that rises maybe about seven feet off the ground—when you’re at the top of that bridge, you’re at the highest point in Majuro.
That is why island communities have to lead the way to a future of alternative energy. In addition to the environmental concern, there is, as I noted earlier, a compelling economic incentive for the islands to reduce their dependence on oil.

It would be a great boon for the islands if they could produce energy from the elements that they have in abundance—sun, water, wind…and even coconuts. For many years, we’ve heard talk about the ability to Ocean Thermal Energy Conversion, or OTEC, technology to produce electricity and fresh water for many island communities. We should all be following with great interest the projects that are moving forward in Diego Garcia and right here in the Marshall Islands, in Kwajalein. If it can work there, it can hopefully work in other island communities where the ocean depth grows steeply from the shore. Solar power and wind power have been in commercial operation for a longer period of time, and we need to aggressively find ways to harness these technologies in ways that make economical and technological sense for small island communities.

I’ve heard of other possibilities as well. Some have suggested, for example, that the geothermal resource in places like the Northern Mariana Islands can be harnessed for cost-effective energy production. I’ve also read promising literature on wave energy technology, although the feasibility of this technology for many of the tropical island communities represented here has not yet been established.

We need to find out which alternative energy solutions are right for the islands. Some of these technologies may not work in the islands or may not work period, but they should be thoroughly explored.

The economic advantage of all of these renewable energy technologies is that their operating costs are not affected by the price of oil. The economic disadvantage is that they tend to have higher capital costs than more conventional technologies. These higher capital costs can be made up over a lifecycle of lower operating costs, but the challenge then is to amass the capital needed to build these renewal energy facilities in the first place. This strains a resource that is even scarcer in the islands than oil: cash.

I have to believe, however, that where there’s a will, there’s a way. For one thing, multilateral institutions have shown a willingness to provide financial support for alternative energy projects in the region. These initiatives are promising, and perhaps those of us in the donor community could do a better job of coordinating our efforts to help the islands fund alternative energy projects. We also have to find ways to involve the private sector and private investors. Many of you may not know this, but I haven’t always been a government bureaucrat. Until five years ago, I actually had to work for a living and be a contributing member of society. I was an attorney—OK, I realize that it may be a stretch to call an attorney a “contributing member of society.” But when I was a private sector attorney my main specialty was project finance, primarily financing energy projects through bank loans, other private investment, bonds and public-private partnerships. I believe that there is an opportunity to finance alternative energy projects in the islands through these means as well, although some projects may need some support from the donor community in order to make them financeable. But if we rely on government and the donor community alone, we’re never going to make sufficient progress.
I understand that many island communities have some degree of wariness about public-private partnerships, which in some contexts is synonymous with privatization. Some island communities, such as the CNMI and Guam, have been willing to involve the private sector in energy functions that the islands have traditionally handled through the public sector. Public-private partnerships can be attractive ways to access capital for energy systems and improve their management. I have a theory about why public-private partnerships, which have been successful around the world, have traditionally been a harder sell in the islands. It’s true that collective ownership is engrained in Pacific cultures. But also, local government employees tend to be the group that is most suspicious of public-private partnerships, because they see it as a threat to their jobs or an indictment of their performance. I believe that the concerns of public employees can be assuaged on both counts, but these perceptions persist. In the islands, at least in the U.S.-affiliated insular areas, local government employees tend to make up a vastly disproportionate percentage of the electorate. That in itself, I believe, is a serious structural problem for the economies of the U.S.-affiliated insular areas, and one of the many negative effects of this structural imbalance is that it makes it politically more difficult to consider public-private partnership solutions that could benefit the community.

We should continue to explore the feasibility of larger scale power generation facilities that use alternative energy technologies. However, there is much that can be done on a smaller, more localized scale to enable the islands to harness the benefits of alternative energy.
Many of you here are already working on establishing alternatives in photovoltaic or solar energy in your communities. I commend these efforts, especially right here in the Marshall Islands. This is a promising source of energy for many island communities, especially those that aren’t competing to set the world’s record for the most rainfall.

Another interesting development has been the use of biofuel from coconuts which can be used to fuel lamps and even diesel vehicles. I know some vehicles in the North Pacific are already using coconut oil diesel fuel, including right here in the Marshall Islands. I was quite pleased to learn that all of the U.S. Peace Corps vehicles driving around the island of Pohnpei are fueled by coconut oil, and leave in their wake the pleasant smell of coconut as they drive by.

The way to get these projects moving is for innovative private sector companies to see them as business opportunities in your island communities. Once again, the Department of the Interior will provide an excellent forum for these opportunities to be explored. Our fourth Conference on Business Opportunities in the Islands will be held on Guam on October 8 and 9. As in past years, alternative energy and other infrastructure will be among the topics addressed. The major headline will be the Guam military buildup, which will entail a government investment of approximately $16 billion. That public sector investment will spur a great deal of commercial opportunity for many businesses, not just those companies that are fortunate enough to get direct contracts with the Department of Defense. Consider that the Guam buildup will result in Guam’s population increasing by 35,000-40,000 people, or over 20 percent. Those people will need places to live, places to shop, places to eat. They will need products and services to buy. And they will most certainly need energy.

There are plenty of opportunities in the other island communities as well. Almost all of the island communities are looking for ways to address their energy needs. Some business opportunities can be supported by financial assistance from the Office of Insular Affairs, the U.S. Department of Agriculture, multilateral institutions and others to support infrastructure development, engineering, consulting, feasibility studies and other activities. Other opportunities will be viable without public financial support.

The Conference on Business Opportunities in the Islands is one-stop shopping for opportunities in all of the U.S.-affiliated island communities. Last year’s conference in Honolulu was hosted by Secretary of the Interior Dirk Kempthorne, and was attended by President Note of the Marshall Islands, President Remengesau of Palau, then-President Urusemal of the FSM, the Governors of the territories, high-ranking U.S. government officials, officials of multilateral institutions such as the Asian Development Bank, high ranking officials from all of the island communities, potential local business partners from all of the island communities, and businesses from all over the U.S. and the world. It’s the one venue where you learn about opportunities in the islands and actually meet the government officials and potential local partners that you’ll need to meet to pursue these opportunities. I encourage all of you to attend, especially the private sector representatives that are here today. You can register online at www.businessopportunitiesconference.com. Space is limited, and we always fill up quickly.
I thank you all for listening to my infomercial, and to my musings on the great need in the islands to develop alternative energy. We all know the saying that the definition of insanity is doing the same thing over and over again and expecting a different result. Continuing to rely on the same old energy solutions will yield the same old result: Excessively high electricity prices, arrested economic development, living standards that don’t improve. We’re going to have to find a better way. I look forward to working with all of you to help find that better way, so that all of our island communities can enjoy a strong and prosperous future.

Thank you and Kommol Tata.

Saipan Chamber of Commerce Annual Installation Dinner Speech, 2007

Remarks of David B. Cohen, Deputy Assistant Secretary of the Interior for Insular Affairs, Saipan Chamber of Commerce Annual Installation Dinner, Saipan, Commonwealth of the Northern Mariana Islands, January 5, 2007.

On Monday, I attended the inauguration of Governor Felix Camacho of Guam. His inaugural address was entitled “A Season of Transformation”, and he spoke of the tremendous changes that Guam was about to undergo as a result the expected military buildup there. The Commonwealth of the Northern Mariana Islands is also entering a season of transformation. The forecast for the upcoming season in the CNMI, however, is much stormier than that for its neighbor to the South.

“Federalization” of the CNMI is almost certain to occur in the near future. Of course, “federalization” means a number of different things, and the final contours of the impending federalization are not fully certain. What is certain is that these islands will soon undergo a transformation that may rival the transformation that came with the rise of Saipan’s garment industry.

Under the worst case scenario, the transformation of this society will be abrupt and painful. I’m sorry to say that in my opinion, the worst case scenario is much more likely in this case than the worst case scenario usually is. Can there be Federalization Without Strangulation? I’m afraid that we may soon find out.

As I’m sure you’ve heard by now, federalization of the CNMI minimum wage is on an extremely fast track. It is woven into the bill to increase the Federal minimum wage to $7.25. Under the Democrats’ proposal, the CNMI minimum wage will increase from $3.05 to $7.25 over a four-year period, jumping $1.50 in the first year alone. This could very likely result in a complete and immediate exodus of what’s left of Saipan’s garment industry.

One does not have to be a fan of the Saipan garment industry to recognize the danger of its abrupt departure. The garment industry has in recent years accounted for about 35 percent of the local government’s revenues. Could the local government absorb the rapid loss of such a large portion of its revenues and still protect the health, safety and welfare of its people? Could the economy survive an immediate exit of the garment industry at a time when the other pillar of the economy, the tourism industry, is also reeling? I’m afraid that we may soon find out.
The fact is that Saipan’s garment industry appears to be on its way out anyway. In the long run, I believe that the absence of the garment industry will be good for the CNMI. In order to enjoy the long run, however, we have to survive the short run. Left to its own devices, the steady downsizing of the garment industry had been dragging the CNMI’s economy down to a hard landing. Pushing the industry out the door may result in a crash landing. Unfortunately, there is no soft landing in sight—but it is easier to survive a hard landing than a crash landing.
Congress has expressed an interest in federalizing immigration in the CNMI as well. The timing and terms of any immigration federalization legislation are not yet clear. What I do know is that the U.S. Senate has given my office a lengthy homework assignment—24 complex questions about labor and immigration in the CNMI, due January 26. A hearing is likely to follow shortly thereafter. To state the obvious, federalization of immigration could also have a profound impact on the CNMI economy.

Those who are leading the charge for federalization should actually be given a great deal of credit. It was their pressure several years ago that led to very significant improvements in labor conditions and protections for the CNMI’s guest workers. Just as people like Congressman George Miller deserve credit from the CNMI, so too should they give credit to the CNMI for the progress that has been made here in recent years. Conditions here are far from perfect, but they have improved to the point that this is now a place that deserves to be defended.

The actions that Congress is considering would have a drastic impact on the CNMI. Why, then, should the CNMI not at least be allowed a seat at the table at which its fate will be determined? I have testified before Congress, on behalf of the Bush Administration, in favor of granting the CNMI a delegate to the U.S. House of Representatives. The CNMI is still the only U.S. territory or commonwealth without representation in Congress. The finest sons and daughters of these islands are fighting and dying so that the peoples of Iraq and Afghanistan can elect representatives to their respective national legislatures. And when they return home to Saipan, to Tinian, to Rota, why is it that these brave men and women cannot elect a representative to their own national legislature, the U.S. Congress?

I was at a meeting the other day, and one of our local legislative leaders remarked that at most, only 20 percent of the Members of Congress have even heard of the CNMI. And I thought to myself, “That’s the good news; the bad news is that that 20 percent has only heard about the CNMI because they read Ms. Magazine.” Most Americans who have any sort of impression at all about these islands have the wrong one. There was an old country song that went, “If I didn’t have bad luck, I wouldn’t have any luck at all.” Well if the CNMI didn’t have bad publicity, it wouldn’t have any publicity at all. I’m sure that a lot of people hear “Northern Mariana Islands”, scratch their heads and say, “Isn’t that where Jack Abramoff is from?”

In negative political campaigns, your opponent tries to define you in a negative way before you have the chance to introduce yourself to the public. This is what has happened to the CNMI. Jim Benedetto, Interior’s Federal Ombudsman and an extremely dedicated defender of the rights of CNMI guest workers, has documented the unfair and misleading nature of Ms. Magazine’s recent article on Saipan. But do you know what struck me about that article? Not a single islander was quoted. This was supposed to be a comprehensive story about Saipan, and not a single islander was quoted. There were a couple of mentions of former Governor Pedro P. Tenorio—Teno—but he was the only islander that was even mentioned in that whole long article. If you read that article, you could easily conclude that the only people on these islands are greedy businessmen, exploited workers and the occasional visiting politico or lobbyist. No indigenous people. No indigenous culture. It’s as if you didn’t exist. And nobody is going to care about your well-being if they don’t know that you exist.

The political leaders in Washington need to know who you are. They need to see your face. They need to hear your voice. You need to introduce yourself.

The political leaders in Washington need to meet Chamorros. They need to meet Carolinians. They need to meet Filipinos, Koreans, and people from across Asia and around the world who have made these islands their home. They need to meet small business owners who are struggling to survive. They need to meet working men and women who are afraid of losing their jobs. They need to meet men and women who are back from Iraq, and widows who lost their husbands there. They need to meet social service workers who can barely cope with this tidal wave of human need. They need to meet the clergy. They need to meet the Manamko. They need to meet young people who don’t want to be forced from home to find their future. They need to see the human face of the Northern Mariana Islands. I realize that you can’t all afford to just pick up and fly to Washington to meet your leaders. But if you can do it, now is the time.
The political leaders in Washington need to meet the people who would suffer if there is a fiscal and economic meltdown in the CNMI. The garment factory owners would not suffer—they could simply move their operations to places where workers get paid pennies and have no rights. Jack Abramoff would not suffer. Tom DeLay would not suffer. The people who would suffer are the people that everyone claims to have sympathy for—workers, small business owners, Manamko, mothers, children.

Ladies and gentlemen, I address you tonight not as members of the business community, but as members of the entire community. In times of crisis, there can only be one community. If any portion of this community is at risk, then everyone is at risk. You are all in the same boat, and if that boat sinks, then everyone drowns.

It is important for this community to come together now because Washington needs to hear your voice. And in order to be heard, you need to speak with one voice. For a community this small, Washington simply will not take the time to decipher many voices speaking in cacophony. That’s why it’s so important to transcend the divisions that exist in this community to find the common ground. Businesses in the CNMI right now just want to survive. Workers want to make sure that their rights are protected, and that they can earn decent wages to support their families. Everyone wants to protect jobs. Everyone wants a strong economy. Everyone wants good infrastructure. Everyone wants a local government that has the resources to provide the critical services that the people need. There is no reason why this community cannot come together behind an agenda that addresses the legitimate concerns of the new Congress but protects the legitimate interests of every segment of this society. And if you can make a compelling case for such an agenda in a strong, united voice, then maybe Congress will listen.
Well, now you’re forewarned that the typhoon is approaching. As you well know, you never really know what’s going to happen with a typhoon until it happens. Sometimes it veers away at the last minute. Sometimes it slams through the island in a direct hit. But if there’s one thing islanders know how to do, it’s how to weather a storm. And how to rebuild. And how to come together when it really matters, no matter how much small island bickering goes on when the sun is shining.

Of course, analogies only go so far. There’s nothing you can do to control a real typhoon. But there may still be hope that your actions can protect you from the typhoon of my analogy. Regardless of what happens, a concerted effort that brings this community together can only be a good thing. You should at least make the effort. You have nothing to lose, everything to gain and your community to save.

Si Yu’us Ma’ase.

A Commitment to Sustained Economic Growth: What Does That Really Mean?

Opening statement delivered by Chairman David B. Cohen at both the annual meeting of the Marshall Islands-U.S. Joint Economic Management and Financial Accountability Committee (JEMFAC), held in Honolulu on August 30, and the annual meeting of the Federated States of Micronesia-U.S. Joint Economic Management Committee (JEMCO), Honolulu, Hawaii, August 30 and 31, 2006.

Distinguished cabinet officers, members of the Committee and other dignitaries:
Good morning. I welcome those of you who have traveled to Honolulu for our annual meeting today. I deliver this opening statement not in my capacity as Chairman of this Committee, but as the head of the Department of the Interior’s Office of Insular Affairs, the manager of the grants provided by the United States under the Compacts of Free Association.

This week, the United States has the honor of hosting the annual meetings of both the U.S.-Marshall Islands Joint Economic Management and Financial Accountability Committee, or JEMFAC, and the U.S.-Federated States of Micronesia Joint Economic Management Committee, or JEMCO. In order to save paper, I have drafted a single opening statement to address both meetings. This is what we environmentalists call “recycling.”

I will confine my remarks to what I believe to be the single most important issue that we face today: How will the Marshall Islands and the Federated States of Micronesia achieve the type of private sector economic growth that will enable them to survive as economically viable nations after the Compact grants expire in 2023?

At the Third FSM Economic Summit, the nation’s leaders committed to a strategy of sustained economic growth. In fact, it does not appear that the FSM or the RMI have any choice but to commit themselves to the pursuit of sustained economic growth. The amount of Compact grants in 2023 will be substantially less, in both nominal and real terms, than the amount of Compact grants today. Even with today’s level of Compact assistance, economic growth is negative in the FSM and stagnant in the RMI. The standard of living in both the FSM and the RMI is determined almost entirely by the level of Compact grants and, to a much lesser extent, other aid from the U.S. and other donors. Unless Compact funds are spent in a manner that promotes sustained economic growth, the economic viability of both the RMI and the FSM will be threatened as Compact grants continue to decline.

Both the RMI and the FSM will receive income from Compact trust funds after 2023, but those trust funds in no way alter the urgent need for sustained economic growth. Even the most optimistic hopes for the trust funds would merely have them replace the level of grant assistance to be provided in 2023—a level of grant assistance that is much less than the levels that are producing stagnant to negative economic growth today. There is simply no escaping the imperative for both the RMI and the FSM to do everything in their power to promote sustained economic growth.

Let us then take this opportunity to remind ourselves of what it means to commit to sustained economic growth. First and foremost, sustained economic growth means sustained private sector economic growth. The public sector-dominated economies of the RMI and the FSM are heavily dependent upon foreign aid. A large public sector can only exist by draining wealth that is created elsewhere. Only the private sector can create new wealth, and therefore only the private sector can provide the engine necessary for sustainable economic growth. Additionally, in no particular order:

A commitment to sustained economic growth means a commitment to identifying and fostering potential competitive advantages for the economy, and a recognition that the Compact itself is an important competitive advantage.

A commitment to sustained economic growth means a commitment to making significant reforms to improve the business climate—not as an end in itself, but as a necessary means of building a stronger and more prosperous society for all of the people.

A commitment to sustained economic growth means a commitment to getting government out of the business of competing with business—that is, getting the government out of commercial enterprise.

A commitment to sustained economic growth means a commitment to privatizing services that can be provided more effectively by the private sector.

A commitment to sustained economic growth means a commitment to nourishing, not stifling, the creative entrepreneurial spirit.

A commitment to sustained economic growth means a commitment to opening up the economy to foreign investment, because in a closed economy, a few well-connected businessmen get rich while everyone else stays poor. Indeed, a commitment to sustained economic growth means a commitment to proactively identifying and pursuing good outside businesses that can, together with local businesses, bring jobs, capital and opportunity to the islands.

A commitment to sustained economic growth means a commitment to making the approval process for foreign investment transparent, objective, fair, simple and quick.
A commitment to sustained economic growth means a commitment to streamlining the regulatory and permitting process.

A commitment to sustained economic growth means a commitment to ensuring that all businesses can compete on a level playing field, free from government favoritism.

A commitment to sustained economic growth means a commitment to tax reform—that is, designing a system that encourages growth and investment and yields sufficient revenue for the government to provide essential services.

A commitment to sustained economic growth means a commitment to land reform—that is, designing a system that protects cultural values but that gives businesses, government and the donor community the protection they need to build the infrastructure that’s necessary for economic growth.

A commitment to sustained economic growth means a commitment to developing a legal system necessary to support commerce and finance, including comprehensive contract law, sales law, secured transactions law and bankruptcy law.

A commitment to sustained economic growth means a commitment to true capacity building, so that government can develop the strong institutions necessary to protect the legitimate rights of those who engage in commerce and finance.

A commitment to sustained economic growth means a commitment to true capacity building, so that government can generate and report the economic statistics necessary to enable both the public and private sectors to make informed decisions.

A commitment to sustained economic growth means a commitment to public sector reform, so that the public sector can support, rather than get in the way of, the development of economic opportunity.

A commitment to sustained economic growth means a commitment to good governance and good financial management.

A commitment to sustained economic growth means a commitment to good infrastructure.

A commitment to sustained economic growth means a commitment to developing a work force that is healthy, well trained and well educated.

A commitment to sustained economic growth means a commitment to spending Compact funds not for short-term political gain, but to build the solid foundation necessary to give our children hope for the future. A commitment to sustained economic growth means recognizing that there is not enough money in the Compact to do both.

A commitment to sustained economic growth means having the wisdom and self-honesty to recognize that we are way behind schedule, and that further delay threatens the future of our children.

Most of all, a commitment to sustained economic growth means having the courage and the political will to face reality and do what’s right.

We now look forward to hearing your vision for fulfilling all of the commitments that are necessary to secure the future of your nation and its people. I’m sure that we will have plenty of questions, but our main questions will be these: What can we do to help? How can Compact funds best be deployed to support your vision? How can we work together to make your vision a reality?

It is now up to you to articulate a credible vision for sustained economic growth, and to take ownership of that vision. We are here to listen and to lend support. The vision is yours. The future is yours. The floor is yours.

Thank you.