MicSem Publications

Economic Development in Yap

by Francis X. Hezel S.J.

October 06, 1990 Economics

Reflection Weekend on Yap
October 6, 1990

The one-day workshop began with a case study, a development proposal for a fish cannery that would be financed by foreign investors and employ 300 people. The participants, about 45 people including a good number of high government employees, briefly discussed the pros and cons of this proposal.Several concerns emerged in the brief discussion. They included these:

Ownership of the cannery. Would it be local or foreign?

  • Jobs. Would the project provide jobs for local people? Or would the jobs be taken by alien workers? What sorts of jobs would these be? What would be the salary level?
  • Environmental impact. Would the cannery result in pollution of natural resources in any way?
  • Social and cultural impact. Would this project have an adverse effect on the culture? Would it lead to a further breakdown in Yapese values in any way?
  • Infrastructure. Would the project put a drain on the present infrastructure (schools, hospital facilities, etc.)?
  • Contribution to the state economy. Would the cannery bring into the economy significant revenues? Would it increase the tax base in any appreciable way?

The attitude of the group was one of general suspicion regarding any large-scale projects. Most participants wanted assurance that this or similar projects would not have a negative impact on their society before they endorsed it.

What is development? The word "development" implies growth. When coupled with the adjective "economic", it is usually understood to mean growth in income or money –for individuals and for the state as a whole. Yet, participants objected to looking at development only in economic terms. More important than a mere increase in money is the betterment of the quality of life. Economic development, therefore, has to be seen as just one component in what could be called "human development". There is no point in increasing monetary income if this should have the effect of reducing the overall quality of life among the people of Yap. And this could happen if such project were to upset the ecological balance and the cultural values that are so important in Yap.

In that case, we asked, why not simply remain where we are? If economic development projects are seen as risky propositions, why bother with them at all? Why not accept what we have right now and live with this for the foreseeable future? Why gamble on such new
enterprises as fishing industries, garment factories, tourism and other development projects that might make substantial changes in the quality of life in Yap? After all, Yap does not seem to need the additional jobs. Anyone who wants wage employment can do what so many others have done in the last four or five years –move out of Yap in search of jobs in Guam, Saipan or the US. There are more than enough jobs to go around, providing people are willing to leave Yap to find them.

Economic development means more money. Money means change, and change means pain. Why inflict such pain on a society that has already experienced its share of painful transitions.

Many participants felt that, despite all the apprehensions about development, Yap cannot remain as it is. For one thing, all living things (including societies) change, and Yap, despite its reputation for conservatism, is no exception. Some felt that change is not only inevitable, it is also desirable. There are features of Yapese social life that should be changed (although there was no attempt to specify just what features these were).

At this point, we introduced the question: why economic development? Many of the people attending the workshop clearly thought of development as a way of increasing the income of individuals. It was a way of giving them more jobs, more money, more purchasing power, and more goods. Yet, this ignores an even more important aspect of economic development: its impact on the government. We then turned to the importance of economic development for to the importance of economic development for the state and national governments.

The urgency of economic development stems not from the need of individuals in Yap, but from the need of the government. The Compact of Free Association with the US was negotiated to allow the FSM the time and resources to develop its economy during the 15-year Compact period The original goal of the negotiators was that, by the end of this period, PSM would have taken long strides towards self-reliance. With the help of US funds earmarked for development, the FSM was to build up an economy capable of generating much of the money it would need to support its own government. As it did this, its dependence on the US would decrease. Although FSM might still require some assistance at the end of the Compact period, the hope was that this assistance required would be smaller than formerly and that FSM would be in a better position to move towards full independence in the future, if it should desire this. We began the afternoon session with a short presentation by one of the expatriate planners on the workings of a economy. The economy can be broken down into two main sectors: private (or commercial), and public (or government). In the past, the economy of Yap has been built upon government spending. The funds for the government have come, for the most part, directly from the US. This money has supported the Yap state government, and it also has fueled the growth of a private sector that includes restaurants, bars, stores, gas stations, and many other things. In Micronesia it has always been the government (the US government, in fact) that has shored up the economy.

In most countries, it is the other way around. The private sector is much bigger than the government sector, and it is through taxes on the private sector that the government supports itself and provides all those services that people expect of it. These include such things as building and maintaining roads, providing health care and education, furnishing protection through the police, and conducting dealings with other countries. In order to cut down its dependence on direct us funds, Yap will have to build up a private economy that is large enough not just to provide the foreign food and other goods and services that Yap needs for its own people, but large enough also to provide a tax base ample for the support of its government.

We can think of this in terms of two large water tanks. One tank, the government tank, is now being filled largely by water that comes from a well (US government). A little of the water filling the government tank, about 10 percent of the total, comes from another tank (the private sector). At present, the well is in danger of drying up, and the private sector tank is too small to provide enough drain off water to fill the government tank. The job, therefore, is to build a much larger private sector tank, one big enough to fill the government tank from the overflow.

Yap State's government operations budget is now about $8 million a year, with less than one million coming from the private sector. The task we face is to build a strong private economy, so strong that it can provide from its taxes the $8 million needed to run the government. Now only do we have to achieve this huge turn-around, but we have to do it in just a few years. There are 11 more years in the Compact period, and we are each of the states is supposed to be well on its way to turning around its economy by the end of the Compact period. There is a deadline that is quickly approaching.

Aren't there any alternatives to accomplishing this heroic task in just a few years time? participants asked. Some suggested that the FSM might seek aid from other countries to replace the aid it would lose at the end of the Compact period. Others thought that the US
might be willing to continue aid even after the end of the Compact. But if the US did continue its aid, FSM might have to surrender some of this political freedom. The US could require that FSM enter into a new commonwealth relationship in exchange for the
additional money that FSM would need. If so, this would result in a lose of autonomy for FSM and for Yap.

All of this results in a fearful dilemma for Yapese. On the one hand, economic development is the pathway to change and entails the risk of altering radically the cultural and physical environment.On the other hand, economic development on a large scale is necessary if Yap is to ever be able to support its own government. The size of the government might be cut down, but this would mean reducing such services as hospital care, education, electrical power, and field trip service.

What sort of economic development, then, is appropriate for Yap? To get participants thinking along these lines, we furnished three examples of development projects: a large farm project, a golf course, and a resort hotel on an outer island. Participants were divided into three groups, with each small group discussing one of the projects. They were to evaluate the project and decide whether or not it was appropriate for Yap, in the light of the concerns expressed at the beginning of the workshop. They were to modify to make it appropriate, if they felt that the initial proposal was unsuitable. When the reports were made, it seemed that all groups were able to modify the project in such a way as to make it suitable for the physical and social environment in Yap.

Finally, we attempted to articulate some of the main guidelines for economic development in Yap. Some of them were:

  • Small is better than big, at least initially.
  • Projects should be submitted to the scrutiny of the people the community in which they will be situated.
  • Involve local people in the decision-making on all projects.
  • Beware of using non-renewable resources on the island.

The workshop ended on a less somber note when the moderator reminded participants that, as troublesome as these times might be they also presented Yapese with new opportunities for the future. The task of development is not easy, especially in the face of declining levels of US assistance and the need for rapid economic growth, but we should remember something on which participants instead from the beginning. The greatest resource that Yap possesses is its people. If these people face the difficult choices before them in an informed and clear-eyed way, there is every reason to believe they will grow rather than be diminished by the development choices they make.