The Federated States of Micronesia is a nation of islands that consists of four states; Kosrae, Pohnpei, Chuuk and Yap. Located north of the equator in the western Pacific Ocean, it is comprised of 607 islands. The estimated population according to the United Nations in 2005 is a total of 108,000 where the majority lives in the coastal area.
The primary economic activities of the Federated States of Micronesia are Fishing and Agriculture. Fishing industry being the main contributor amongst the industries, annually a fee of 20 million US Dollars is paid by foreign commercial fishing fleets in order for them to operate in the FSM waters. Adding close to 80% of export revenue, the islanders export marine products and fish to Japan as well.
On the other hand the importance of farming and agriculture is declining; the main crops are coconuts, bananas, betel nuts, cassava, and sweet potatoes. From this sector there is less than 10% in the formal labour force and the contribution for export revenue is less than 7%.
Mining can be taken in to consideration as well, since the island is comprised of a few minerals that is relatively worth exploiting.
One might have a perception that the Tourism Industry will do well for an island, however due to the remoteness of location and the lack of development in infrastructure, this industry is not actively promoted. The Asian Development Bank has identified that this sector has the potential to grow; unfortunately, due to aforementioned limitations, tourism has not boomed for this island nation. Statistics show that approximately 15,000 tourists visit these islands per year and the main attractions are World War II battle sites, scuba diving, ancient ruined cities of Nan Madol and Pohnpei.
The Manufacturing industry is relatively modest as it mainly consists of the garment factories situated in Yap and production of buttons made out of trochus shells.
The GDP composition by sector is as follows: Agriculture 47%, Industry 10% and Services 43%.
Given that this trying nation has the following statistics and information on imports and exports:
Exports: $123 million (f.o.b., 2000 est.)
Exports – commodities: fish, garments, bananas, black pepper
Exports – partners: Japan, United States, Guam, China (2010)
Imports: $82.5 million f.o.b. (2010 est.)
Imports – commodities: food, manufactured goods, machinery and equipment, beverages
Imports – partners: US, Australia, Japan (2010)
As the United States of America has pledged to spend 1.3 billion US Dollars on the islands from 1986-2001, the funding is the island’s primary source of revenue. USA provided FSM 2 billion US Dollars in grants and services under the terms of Compact Free Association; in order to extend the period of the financial grants, renegotiations regularly takes place.
As the administrator of the Compact Money, the public sector of FSM takes a central role in the economy where 50% of the population is employed by the national and state level governments, they contribute approximately 40% to the GDP.
Taking the above in to consideration, the total Labour Force is 37,410 (2000) and the unemployment rate as at 2010 is 15%.