1 2010 STATE of the STATE MESSAGE by GOVERNOR ...

2010 STATE of the STATE MESSAGE
by
GOVERNOR
SEBASTIAN L. ANEFAL
January 29, 2010
Acknowledgments
Mr. Speaker and members of the Seventh Legislature of the State of Yap, and most of
all, the People of the State of Yap: I am most honored to communicate to the
Legislature today my third annual State of the State Message. In the same vein, Mr.
Speaker and members of the Seventh Legislature, I offer due recognition and pay my
respect to the Council of Pilung and Council of Tamol, the State Judiciary and the entire
leadership of Yap in the delivery of this Statement concerning the state of affairs of the
State of Yap. In remembrance of all the state leaders, who have in recent years
departed us, I offer them special tributes and ask thy Lord for His blessings on their
souls and His wisdom and guidance for the state leadership.
Introduction
At the outset, Mr. Speaker, I beg your indulgence if at any given point this message
should seem a bit tedious, if not wearisome. However, I am sure you would appreciate
not just the importance of sharing the few milestones of the past year period, but
perhaps equally important for us is the need to take a closer glimpse at the current
condition of the State of Yap and the challenges confronting us now and those ahead of
us while maintaining a steady forward movement in the same breath. Moreover, the rest
of our people are eager to know the current state of affairs, listening and eying for
tangible development changes as well, and so it may not serve justice to anyone if I
were to zip through so quickly.
In this Message, therefore, I attempt to provide an overview, which in some cases
include short synopsis of what each of the main sectors has done up to the time being.
Since assuming office a little over three years ago, quite a number of significant issues
have come our way although more than two third of such issues were inherited from the
prior years of stagnation. As such, I have herein highlighted the main issues and
provided a snapshot of how we have countered some of them in the past year, and
suggested how we might mitigate certain pending and unexpected challenges in the
days and months to come.
More importantly, however, I have spent a bit more time on trying to capture what this
Administration believes are issues of high priority concern, which have and are likely to
continue taking up much of our effort and energy today and the many days ahead.
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State of the State
Ladies and Gentlemen, a review of the state of affairs of our State must first take into
account the global economic crisis that has reached our shore. Like the FSM’s major
international and regional partners, the State of Yap has been and is still experiencing
the adverse impacts of this economic turmoil. The recent international financial meltdown,
in conjunction with an earlier fuel crisis and a continuing food crisis, has placed
our islands in a state of economic crisis. In addition, climate change, compounded by
H1N1, has continued to threaten food security, if not our very existence. The global
economic recession and the outbreak of H1N1 were the apparent culprits behind the
declines of the number of tourist arrivals in Yap in 2009.
This global recession is intensified by our own nation-wide recession, which has been
on-going since 2005. The average income of our people has declined during this period.
This decline is an indication of not only lower wages, but also of lost jobs as a good
number of the FEMA-funded projects has been completed. While figures are not yet
final, it is projected that this economic crisis will continue this year and into the near
future.
These recessions have left our island state with potentially unprecedented financial
challenges. For example, the state (CIP) investment in the Monetization Program with
the FSM National Government had lost a staggering estimated value of $8.7 million in
FY08, but gained an estimated amount of roughly $4.4 million in FY09 (period of Oct. 1,
08-Sept. 30, 09), discounting what we have tapped for government operation cost. The
short story is that our reserve has not only lost its value, but it has lost it strength; thus,
the financial health of the government has deteriorated from what it was once.
In addition, the banking sector has shown an overall slowdown in commercial lending
and a reduction in consumer spending. In the 2008-2009 period, consumer loans
nation-wide decreased by $1.3 million and development bank loans decreased by $1.5
million. No doubt, this is a mirror reflection of banking sector activities in Yap as well.
These trends are likely to continue several years to come.
Moreover, the economic crisis is having major impacts on every aspect of the
population’s everyday life, and its consequences are felt both in the work environment
and in the households. Burdened with money devaluation, declines in tourism receipts
and reductions in the value of remittances and international investments, more Pacific
countries are facing difficulties in the economic downturn, and Yap is no exception.
Coupled with these challenges, the buying power of the dollar has also greatly
diminished.
Poverty throughout Yap perhaps does not necessarily mean hunger or destitution, but
rather the continuous struggle to meet essential daily living expenses in the world of a
cash economy, particularly for those who require cash payments. Now, even families in
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the most rural or outer islands have to find cash for nearly every day needs. Cash is
needed for bus fares, school fees, bills, food stuffs, medicines and essential goods. It’s
becoming harder and harder to get to the end of the month.
Despite the existing social protection policies and our traditional practices and cultural
values, there are more and more families suffering from hardship in this island region.
Lacking sufficient funds, governments too often opt for the worst solution by cutting
social expenditure. And not supporting the vulnerable in these times of global economic
crisis can only lead to even longer lasting consequences on the well being of the
population.
Sadly, no citizen has been left untouched by this current global economic crisis. And
there are no quick and easy fixes to the recession plaguing our economy. Indeed, it is
likely to get worse before it gets better.
We now face a financial storm of unparallel magnitude. It is therefore imperative that we
examine and improve upon all existing opportunities, both internal and external, to
enable us to respond to this crisis today and in the future.
Responses to Crisis
From day one, in partnership with the Yap State Leadership and the FSM National
Government, this Administration has been working to respond to these growing crises
and to build a bridge to a better economy. Unfortunately, this is easier said than done,
especially at this juncture. I will cite some of these action-oriented responses in this
Address. Our strategy is, and shall continue to be, broad-based and focused on
measures that have an immediate impact on our economy and that lay a strong
foundation for long-term sustainable economic growth and development.
Infrastructure Development
During this past year we have made great strides in freeing up some of the available
funding toward implementation of infrastructure projects for the state that have sat idle
since 2004. All told, this represents more than $29.0 million worth of infrastructure
projects, including $2.0 million dollars worth of completed projects and on-going
construction, roughly $20.3 million worth of projects in the design phase and about $7.0
million in projects pending task orders for design work.
In United States Federal Aviation Administration funded projects, under the Airport
Improvement Projects are about $16.0 million worth of two projects nearing completion,
namely the ARFF and Airport Apron, both of which will soon be turned over to state
custody after completion this year.
Furthermore, matching funds for the state's ADB Omnibus Infrastructure Development
Projects loan have been matched with Compact Infrastructure Sector grants. This will
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esult in more than $4.8 million dollars worth of additional infrastructure project for water
improvement in our state.
These infrastructure projects, combined with the handful remaining FEMA projects,
represent perhaps the largest outlay of money in the history of our state. In fact, it is
projected that these construction projects will result in the creation of at least over 100
jobs and new income of approximately $5.8 million. Due to the great significance of
these projects to the welfare of our people, they will require the continued personal
attention of this Administration.
As part of the Administration’s goal, the basic infrastructures that need immediate
attention had to be timely addressed so that public services were not unduly disrupted.
While the Administration shall continue to work with the Legislature in getting the entire
Yap main road system fully developed, the immediate remedy to worsening condition of
certain segments of the road system must be brought to the forefront. In this regard, we
have and we will continue to ask for funding for certain badly needed heavy equipment
for dredging coral material and for fuel for secondary road maintenance. Nonetheless,
we sincerely wish to thank the Legislature for having appropriated the $3.5M for the
Northern Yap Road Resurfacing and Elevating Project, which is expected to get
underway with its engineering works this year.
In addition to the State-funded road projects, there are several ongoing road-related
projects funded by FEMA consequent to typhoon Sudal that are also nearing
completion.
The restructured Infrastructure Project Improvement Council (IPIC) has now produced
the final draft of the Infrastructure Maintenance Plan (IMP) with an updated Master List
of projects. The Master Project List will, of course, be reprioritized as necessary to cope
with ongoing and changing needs and the financial landscape on hand to determine
which projects could be addressed. With the IMP in place, the local matching funds
from FY 04 onward for the Infrastructure Maintenance Fund (IMF) under the amended
Compact have been posted and the OIA/DOI-matching has been drawn-down on a
project-by-project basis for repair and maintenance projects in mainly the Health and
Education sectors, as well as other needy sectors.
A replacement US certified engineer has been recently posted in Yap to hopefully
expedite design and engineering works needed for prioritized infrastructure projects in
the health and education sectors as identified for Yap in the FSM Infrastructure
Development Plan.
Two major infrastructure projects in Health and Education whose engineering and
design works have been a nightmare since FY 05, the Yap Memorial Hospital
Renovation and ECE Center projects, among a total of about eight OIA-approved
projects, are expected to be implemented this year. The challenge to complete all the
design work needed for the approved projects through the FSM Project Management
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Unit remains a monumental task, a slow and cumbersome process with which the state
government has practically no control.
Transportation (Sea & Air)
Perhaps, it may be appropriate to first look directly at the handling of our transportation
and transportation-related infrastructure needs. No doubt transportation is an important
cornerstone to the local economy because our main link to the remote islands is largely
through the state-owned vessels, and to the larger world domain by means of both sea
and air transport with assets owned and operated by private enterprises, in addition to
the road network system connecting communities on the main island as far as ground
transportation is concerned.
So we begin with the inter-island sea transport situation. We are, for nearly two years
now, still in the process of getting rid of the MS Micro Spirit. However, until we can find
a more reasonably genuine and responsive proposal from a reliable buyer or buyers to
purchase the vessel, the vessel remains under the ownership of the state government.
All attempts thus far to sell the vessel to interested buyers from Fiji and the Philippines
have not materialized due to varied factors, such as typhoon devastation in the
Philippines and political instability in Fiji. It has been unfortunate and quite frustrating,
but no one perspective buyer has been sincere enough to hold to their end of the deal.
We believe the global economic crisis to a large extent has a role to play with the
offered sale of the vessel. Regardless, we shall continue on with the sale of the vessel.
We may all remember that, early 2007, the state government acquired the MV
Hapilmohol 1 through the FSM National Government from the Government of the
People’s Republic of China. Under previous arrangements, the State of Yap was the
final recipient of the vessel and thus has the use-right of this vessel. Since arrival in
Yap, the MV Hapilmohol made a handful of voyages to the neighboring islands up to
December last year. Since acquisition, she has been intermittently tied-up at the
dockside awaiting resolution of technical problems mainly due to defects, low quality
and lack of spare parts needed for repair. I wish to say that this Administration has
repeatedly done what it could as expeditiously as possible in terms of seeking the much
needed technical assistance through the national government from the Chinese
government each time a major mechanical problem was encountered. To date, I wish
to advise the people and the State Leadership that the boat is constantly being repaired,
and it is likely that continuous mechanical breakdown will be anticipated more and more
frequently coupled with the issue of high fuel cost, both of which would make it even a
harder challenge to provide field-trip services to the neighboring islands. While we
remain persistent with both the FSM National and Chinese governments, the State must
make the best prudent policy determination for acquiring a more lasting arrangement
and/or the ways and means necessary to acquire a replacement field-trip vessel, if the
state government, as opposed to the national government or some other private entity,
should continue on with rendering and subsidizing the field-trip services for the outlaying
islands.
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A growing difficulty continues to be with the function of harbor pilot as it remains an area
largely regulated by the national government. The certification process and qualification
criteria required by the national government tend to impede the opportunity of having as
many qualified harbor pilots as possible; thus, the unavailability of licensed harbor pilots
has potential negative impacts on commercial shipping activities in the ports of entry in
the state. While a number of candidates’ applications had been resubmitted, followed
up, discussed but are still pending with the national government, several cargo shipping
companies have threatened to bypass port calls scheduled for Yap due to unavailability
of certified harbor pilots in Yap at critical times.
On air transportation, the airport facilities are important components of the whole
transportation formula, which in essence is part and partial of the overall economic
development effort of the State Government. Without the basic infrastructures, our
economy will hardly grow, if not suffer. More specifically, the challenge of finding the
means to repair the Woleai and Fais airstrips and to construct piers for docking vessels
at the most populated outlaying islands remains a priority consideration, if the economy
of these small and remote islands were to be developed.
In as much as actual work is concerned within the Yap International Airport parameters
under the Yap Airport Terminal Rehabilitation Project co-funded by the FAA Airport
Improvement Project (AIP), we now have an upgraded security fence, a beacon system,
lighting systems and new signs in place. Moreover, certain changes have taken place
in the airport terminal building areas, including the departure, arrival, and cargo sections
of the terminal building. Certain minor renovation work of the airport has been ongoing
but anticipated to be completed soon. Other components of the AIP are expected to
complete soon when materials are brought in, including the Yap Apron Reconstruction
Project with its groundbreaking in 2008 with subsequent change orders late last year,
followed by the Aircraft Rescue Firefighting Facility (ARFF) project and the FSM Border
Security Management System project. The shoulders and turn-around basins of the
runway as components of the change-orders to the AIP are ongoing. In about a year’s
time when all these components are finished, the Yap International Airport should be
back to normalcy. I might add that in as much as we may wish to take credit for any of
these AIP projects, they are wholly administered by the FSM National Government in
conjunction with FAA, leaving us with not much say but as the recipient end-user at the
period of project completion.
Health and Education
While modest improvements have been made in the areas of health and education, we
have not achieved a record of steady and sustainable progress. In both sectors, many
of our challenges can be met through the support of improved facilities, better and
increased numbers of licensed, trained and certified professionals and staff, and further
collaboration with the national government which, in certain extent, is at the forefront of
many programmatic responsibilities.
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In the area of health, it is crucial that we advance our experience-sharing and
partnership with other hospitals in our region to respond to expanding health threats.
And in education, I encourage parents to be more personally involved in the education
of their children. Our young people are a primary resource for our growth and have a
critical role to play in our island communities. This involvement does not stop at the
family level, but must include a more proactive and focused approach from all
stakeholders - government, traditional and community leaders, civil societies, churches
and, of course, the youth themselves.
Energy Reform
In 2008, before the international financial crisis, our primary financial concern was the
increase in energy costs. As you will recall, all resident consumers in the state were
paying over $6.00 per gallon at the pump, while in the outer islands they were paying
more than $7.00 per gallon. Although fuel prices have recently lowered, we can assume
they will once again increase as international markets recover with increasing demands.
We must therefore continue to take the needed steps to ensure an affordable and
renewable energy future for Yap.
To respond to this reality, we instigated through YSPSC an assessment study
underwritten by the US DOI on the rate structure and on a clean energy transition
package to provide affordable renewable energy sources and also to ensure a cleaner
environmental future in the State of Yap.
Yap State and the National governments, together with YSPSC are developing a policy
of rural electrification through solar energy and the action is consistent with National
goals for economic and social development, while at the same time benefiting the
environment by reducing and/or entirely avoiding the introduction and use of fossil fuels
for electricity generation on the outer islands. The action is consistent with and supports
the on-going solar electrification program of both National and Yap Governments which
is a central aspect of the National Energy Policy and Yap State Action Plan. The action
will build upon past solar electrification activities supported by other donors, as well as
the support provided by the 9th EDF and the European Union (EU) itself. As the
transition from fossil to renewable energy would be capital sensitive, the process would
largely be carried out in phases over a period of several years depending on the
availability of funds and the expertise support required. The challenge is the required
resources needed to make the change.
Our State together with the other States’ and National governments diligently but
aggressively collaborated for the creation of the FSM Petroleum Corporation to work
together to enable us to buy and sell cheaper fuel than the monopolistic set up of
yesteryears. While the FSM PetroCorp has only been in existence for little over a year,
some level of stability has been realized and passed onto the FSM consumers.
Telecommunications
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In March of 2010, we could look forward to hopefully a noticeable national milestone,
the global connection of Pohnpei State to a submarine fiber optic cable. As we look
forward to this connection, and the economic door of opportunities that it may open, we
are conscious of the real need to connect Yap State to a cable and allow the benefits to
flow to our State, as well. The bottom line at the end of the day, nevertheless, is money
for the cable project.
While official dialogue is carried out by the National Government concerning the
submarine fiber optic cable project, informal communication between Yap and Palau
has been renewed with the President Toribiong Administration. Palau recognizes the
advantages of cost-sharing a cable with Yap with either option of connecting to Guam or
to the Philippines. We must strategically position our preparedness to coincide with
Palau in moving forward with a submarine fiber optic cable project so that we do not
miss the boat altogether.
Moving Forward
My friends and fellow citizens, in moving forward, let us be reminded that we have
rough seas ahead of us. With that in mind, we must carefully consider the best
approach towards a successful reform.
For the Executive Branch, we believe that success must begin with 'good governance',
a government system that is fair, accountable, efficient, transparent and well planned.
To achieve this goal, we must establish appropriate criteria and measurements of our
overall performance. While achieving good governance will be difficult, we believe that it
is our government’s only course for success.
Tax Reform
For our broad reforms to bear long-term impacts we must finalize our collaboration with
the other state governments and the national government concerning the proposed tax
reform and improve collections and distribution at both the state and national levels.
This reform should equalize our tax burdens. This should result in tilting revenue
streams in favor of the states and result in long-term beneficial impacts for our people.
I am committing this Administration to work closely with state and national leaders to
have the necessary enabling legislation considered for passage during the ensuing
year. It is high time that we have this new tax system in place so that our people and
businesses can enjoy the resulting benefits.
Strengthen Business Environment
My friends, it is also high time to tackle the difficult problem of business development
through a comprehensive approach. As a state within a nation, we must create
domestic opportunities for our people to stem the current brain-drain and shore up the
necessary human capital for nation-building in terms of “building a new Yap for the
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people of Yap”. To accomplish this, I will continue to work toward strengthening
education at all levels of the public school system.
In addition, we must as an individual state, recognize the need for and appreciate the
injection of foreign investment dollars in the local economy. For this to happen, we must
work cooperatively with all concerned stakeholders for improvements of our foreign
investment laws and regulations as a state being part of a nation, as one rotten apple
among many in the basket would normally spoil it for all. The framework that we
develop can both protect our local businesses and allow for their growth with new
partners from abroad. This will only occur if all four states join together with the national
government to create an environment that is conducive for business investment
activities at the state level. At that stage, more aggressive and vigorous promotional
approaches must be launched for Yap to entice foreign investment.
Reduction in the Government Workforce
With a strengthened business environment, the State of Yap will be able to move
forward with the very real need to reduce its government workforce. Expanding
business capacity and reducing the government workforce must go hand-in-hand. The
current recession requires that we continue to work towards right-sizing the state
government at all branches and levels. This exercise must be an integral part of the
self-assessment through a state economic summit process. We must not forget,
however, that this effort ought to be accompanied by government sponsored initiatives
that focus on employee retraining and private sector opportunities. I call on the
Legislature to grant financial assistance needed to move in this direction.
Food Prices
On the domestic front, we must also recognize that food prices may no longer be
affordable to a sizeable segment of our population. I realize that these higher food
prices are hitting us where it hurts. We must therefore take whatever actions necessary
to reduce these costs, both in the short and long-term. We must respond to this reality
through the stimulation of competition in the market place and in the development of
healthy and affordable domestic food products. Let us focus on increasing the use of
local foods as a step in the right direction to food security. It is a healthy step. It is
suggested that the Legislature should entertain measures that would restrict or levy
taxes on imported processed food commodities to which import substitutes are readily
available locally.
Agriculture and Aquaculture Opportunities
We must also do a much better job in taking advantage of the market opportunities for
our own domestic agriculture and aquaculture products in the Micronesian region,
especially taking into account the expansion of the economy in Guam due to the coming
United States military buildup, given our close proximity to Guam. To assist our people
in this area, this Administration will continue to work diligently with all concerned parties
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to remove trade barriers in the region, and eliminate unnecessary import and export
requirements on agriculture and aquaculture products.
Environment
Turning to an important area, I would like to underscore the importance of integrating
environment in our social and economic development planning, as it is one of the critical
pillars of sustainable development. Environment must underpin all our planning and
implementation strategies. In this way, we will be promoting a holistic and coherent
approach to sustainable development efforts across these islands.
In this connection, I am pleased to note the proactive participation of our government at
the national and regional levels with input to feed into the ongoing international debates
to address climate change. There is no doubt that climate change is the single most
serious threat to our islands and our very existence as a people.
I therefore call on all governments and the civil society to redouble their effort in climate
change adaptation.
I also urge the State Leadership to unite with the Administration in implementing the
Micronesia Challenge, a sub-regional initiative to conserve and protect our valuable
natural heritage -- our environment. The potential of this initiative to leverage external
assistance is enormous.
Furthermore, I call on the Legislature to put in place conservation and protection
measures to safeguard the fragile biodiversity of the island terrestrial and marine
environment.
Culture
As part of our sustainable development strategy, we must recognize the importance of
the cultural identity of our people. The cultural practices of the living Yapese is, indeed,
as valuable as any, but we absolutely have none to spare in exchange for another
culture.
Within this context, we must recognize the need to develop cultural industries and
initiatives that present significant economic opportunities for development without
diluting our cultural identity. A classic example of such initiatives is the Yap Traditional
Navigation Society’s first annual canoe festival celebrated late last year. These
initiatives and industries have the potential to expand and diversify our economy and
develop resilience against external economic shocks to which we have no control. As a
step to help move us in this direction, I seek local and international financial support in
funding our Museum and Archive project proposals.
Regional Initiatives
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In order to respond to the many needs of our community, we must also work with our
closer neighbors to identify sub-regional initiatives that will increase capacity, cut costs
and widen our responses to island issues.
I therefore intend to become even more active in Micronesian Chief Executives' Summit
and be involved with the Micronesian Presidents' Summit to strengthen our capacity to
be proactive toward environmental issues, particularly through the Micronesia
Challenge and other initiatives in the areas of energy, tourism, invasive species,
telecommunications and solid waste management.
I will also work towards the establishment of the Micronesian Center for a Sustainable
Future, a proposed sub-regional institution that will strengthen our island capacities,
cultures and political outreach to the world.
It is time that the islands of Micronesia stand together as a united front in the regional
and international forum.
Conclusion
My friends, the issues that we face today are not new. Through our cooperative actions,
at the national and state levels, and at the legislative and executive levels, we must
arrive at a consensus on a way forward during these difficult economic times.
On our part as leaders and officials of our people’s government, we must continue to
support the aspiration and effort of our people to permit them to perform as productive
members of our island society the best way they could. This government must lay the
needed foundation, including basic public infrastructures, that supports and spurs
overall economic growth and development for the years ahead.
In my inaugural statement I said it is our view that the development of our small island
economy depends heavily on how we support the private sector. At this juncture, it
continues to be our vision that the legal framework relative to private sector growth and
development needs to be reassessed and government operational structure reformed to
reflect changed circumstances. To a comforting level, foreign investments must be
enticed into areas reserved not for local interest. The productive sectors of the island
economy must be nurtured toward export orientation activities where and when feasible.
This is the only sure way the revenue generation base for the government may be
enhanced to augment the dwindling Compact grant streams over the future years. Once
again, this Administration will endeavor to undertake its best effort in this area. I call
upon the Legislature to institutionalize policy initiatives that will facilitate movement in
this direction.
To conclude this remark, I again thank all for giving me the opportunity to speak to you
by way of this statement. I have tried to highlight the few critical challenges facing us,
but not in any way to discredit the remaining bulk of issues in our path as they should
also be addressed as we march forward. This is done with the hope that we would
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egin reassessing what we should collectively consider as priorities of this government
for the people it is meant to serve, given its limitations and recognizing full well that it
could not spread itself thinly among every issue. Regardless, it is imperative that the
collective leadership find the common grounds upon which we stand ready to accept
and take on the challenges of tomorrow after addressing those that have been hovering
over us for so long. I remain highly confident that, as a people, we can and we will again
stand with firm determination to do the best we can, as we have done on countless
occasions in the past, not for us alone but for many generations yet to come after our
children and their children.
Ladies and Gentlemen, with a focused effort, there is no doubt that the State of Yap will
overcome this current economic crisis and continue to move forward to expand
economic options for all of our citizens. For every crisis there is an opportunity. I
therefore call on all of the people of this State to rise to the occasion and to innovatively
grasp whatever opportunity may come our way. We must view the current crisis as a
test to our resolve and a chance for all of us to unite together to take on these
challenges as they come.
I thank you all and may God bless all of us and our great State of Yap.
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