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The economy of the Federation of Micronesia is still very dependent on money from the United States. When the 15-year treaty (the Compact of Free Association, which involved the Federation of Micronesia receiving an annual sum of money in exchange for the exclusive presence of the US military in the area) between the United States and the Federation expires, they will have received a total of approximately USD 1.3 billion. The money is being used to improve infrastructure and stimulate small business. However, if one looks closely, there is little sign of real progress. Some airports have been added and some more paved roads. A number of electricity projects have also been realised. Much of the money has most likely disappeared into a number of bottomless pits.

As in other Micronesian countries, the Federation government is the largest employer, accounting for about two-thirds of the total labour force. The balance between imports and exports is seriously distorted. Annually, about 167 million dollars are imported and only about 88 million dollars are exported! The main export partners are Japan, the United States and Guam; the main import partners are the United States, Japan and Australia.

The waters around the Federation contain the most tuna in the world. Annually, about 250 million dollars' worth of tuna is caught, especially by Taiwanese and Chinese fishermen. They pay between 15 and 20 million dollars annually for the fishing rights. After the American aid money, this is the most important income for the Federation. Attempts to set up their own fishing industry have failed so far. Foodstuffs, machinery and chemical goods are imported. All states have international airports and the important ports are located in Kolonia (Pohnpei), Colonia (Yap), Lepukos (Chuuk), and Okat and Lelu (Kosrae).


Most people on Kosrae make their living from agriculture and fishing, which is mainly focused on the domestic market. Agricultural products such as bananas, limes, tangerines and taro are exported on a modest scale to Majuro, Pohnpei and Guam, among others.

The FSM Aquaculture Centre produces giant mussels for restaurants in Pohnpei and Chuuk. Fruit bats from Utwe Island are sold as a delicacy to Saipan. Commercial fishing of its own waters is not yet possible due to the infrastructure on Kosrae.


Because the Federation government is located on Pohnpei, the majority of the labour force works for the government. Agriculture is very important to Pohnpei but is still primarily focused on the domestic market. The island is home to the Ponape Agriculture & Trade School, the only agricultural trade school in all of Micronesia.

Pohnpei also has a number of pepper plantations. Besides copra, extracted from the pulp of the coconut, black and white pepper are Pohnpei's main export products. Other coconut-related export products are oil, soap and shampoo. Recently, a textile factory was built on Kosrae and a modern way of making money is selling internet domain names to FM radio stations (the internet extension of the Federated States of Micronesia is FM


Chuuk is also largely dependent on the funds made available by the treaty with the United States (Compact). This money should mainly be used for social and economic projects, but at the moment, it is mainly spent on maintaining an enormous government apparatus with more than 3,000 civil servants. Chuuk therefore regularly receives criticism from the other states. Every year, Chuuk's budget shows a substantial deficit, which it tries to reduce by, for example, shortening the school year. The situation got so out of hand that even the tourist office was closed for several years.

According to government figures, 20% of the labour force on Chuuk is unemployed. In reality, this percentage is probably much higher. Agriculture and fishing are mainly focused on the domestic market. Breadfruit, coconuts, bananas and taro are the main crops. Kopra provides some income. Chuuk has a small fishing fleet that fishes for the local market.


Although Yap has its economic affairs in the best shape, American money is still indispensable here. Agriculture and fishing are aimed at the domestic market. The production of copra takes place mainly on the remote islands. The betel nuts grown on Yap are of excellent quality and are even exported, although some countries have imposed an import ban because it is considered a drug.

Kolonia is home to a textile factory, the only major manufacturing activity in the entire Federation. It is a Taiwanese enterprise employing a few hundred Chinese on a contract basis, giving Yap only a little extra tax revenue. Most of the textiles are sold to the United States.

The American fishing company Mid Atlantic recently delivered nine fishing vessels to Yap. Fish processing activities now contribute to Yap's economy and tourism also plays an increasingly important role in the island's economy.

Very noteworthy is the stone money that used to be used on Yap, and is now only occasionally used on special occasions. In the Yapese language, the money is called "rai". They are large flat stones with a hole in the middle. They can be up to 3.5 metres in diameter and sometimes weigh between 4000 and 5000 kilograms! The size of the stone is not always decisive for its value. The age and history of a stone also contribute to its value. The stones are often just lying around by the side of the road, but everyone knows who the owner of the stone is, even if he moves to another island.

Japanese counted 13,281 of these "coins" in 1929.


Galbraith, K. / Micronesia Lonely Planet

Levy, N.M. / Micronesia handbook Moon

CIA - World Factbook

BBC - Country Profiles

Last updated May 2024
Copyright: Team The World of Info