REFORM IN CHUUK IS ALIVE BUT SPUTTERING - DISILLUSION WITH

C O N F I D E N T I A L SECTION 01 OF 04 KOLONIA 000045

SIPDIS

CORRECTED COPY

SENSITIVE
SIPDIS

E.O. 12958: DECL: 3/27/2018
TAGS: PGOV PREL EAID FM
SUBJECT: REFORM IN CHUUK IS ALIVE BUT SPUTTERING - DISILLUSION WITH
MORI (CORRECTED COPY - ADDS SIPDIS)

REF: 07 KOLONIA 448 AND PREVIOUS

CLASSIFIED BY: Miriam K. Hughes, Ambassador, Amembassy Kolonia,
State.
REASON: 1.4 (b),(d)




1. (C) SUMMARY. During a recent trip to Chuuk, which is the
most populous state in the Federated States of Micronesia (FSM),
Ambassador encountered a deepening spiral of economic and social
deterioration. With reluctance, the state government has
embarked on a mandated program of reform. A core component of
that exercise, which was a commitment to cut some 380 state
positions by October 31, has been delayed and subject to
manipulation. Although many employees were abruptly terminated
on March 7, the FSM Government and the U.S. Department of the
Interior have still not received from Chuuk a final
reduction-in-force (RIF) list. Beneath an amiable and
disengaged exterior, Chuuk's Governor clearly resents the
imposition of reform and infrastructure projects. He and others
have begun to question President Mori's judgment. End Summary.

GOVERNOR DALLIES WITH REFORM


2. (SBU) During a visit to the state of Chuuk March 11-14,
Ambassador Hughes observed deepening decline. Chuuk is the
largest state in the Federated States of Micronesia (FSM),
containing more than half the nation's population. In the midst
of electricity blackouts, social decay and rising out-migration,
Chuuk's Governor Wesley Simina remains genial and popular. He
recently launched a campaign for a second term in office for
elections that will take place in March 2009. At this stage, he
has no opponents.


3. (SBU) Simina reassured Ambassador that a reduction-in-force
(RIF) and other reform measures, which the U.S. helped broker
last July, were well under way. However, the RIF of some 380
state employees, which is a centerpiece of the austerity plan
that is embodied in a Memorandum of Understanding between the
Governor and President Mori, has proceeded erratically, with
only partial engagement on the Governor's part and veiled
resistance by the Chuuk legislature. Employees who arrived at
work on March 7 received notices of termination for the same
day. Simina claimed over 300 workers departed quietly, and he
has received only one written complaint. Each employee will
eventually receive three weeks' severance pay and a lump sum
emolument equivalent to one year's salary as part of a `soft
landing' cushion provided by a Compact agreement and the U.S.
Department of the Interior (DOI). Contrary to the reform
agreement, however, Governor Simina hinted that he might
reinstate some of the terminated employees in vacant
Compact-funded positions, and then look for other volunteers to
leave his government. Rumors abound that some of the lump sum
compensation will be channeled to support the Governor's
reelection campaign.


4. (SBU) Ambassador noted that although the U.S.-FSM Joint
Economic Management Committee (JEMCO) had approved in principle
a lump sum grant totaling U.S. $2.3 million, actual release of
the money would depend upon receipt of a credible, final RIF
plan and conforming proof of state severance payments. So far,
composition of the list has fluctuated and it has not moved
forward from Chuuk to the FSM Office of Statistics, Budget,
Overseas Assistance and Compact Management (SBOC). The
Governor said his Attorney General, who heads the reform task
force and is known as a crony, was working on the RIF list.


5. (C) Meantime, the dedicated but struggling new Chuuk
finance director whom President Mori installed, Gillian Doone
(reftels),asserted privately to the Ambassador that he would
personally check every state personnel action to ensure
termination and to deny rehiring of the same people. The
(American) Chairman of the Compact Finance Control Commission,
Alan Burnham, whose independent oversight office is situated
outside the government compound, additionally reassured
Ambassador he would exercise the same vigilance. Neither of
these capable officials has so far seen any personnel paperwork,
however.


6. (C) While Director of Administrative Services Doone
continues to enforce strict control on runaway spending ploys by
all branches of the state government, he claimed that personal
intimidation has intensified, motivated by Chuukese politicans.
"They are trying to break me down," he said. Doone is now the
subject of two lawsuits for supposed non-payment of services.
The terms of his state contract have been repeatedly challenged.
Owing to threats against his family, he has removed his two
daughters from school. In spite of such obstacles, Doone
asserted he has dug in his heels and committed to stay for the
duration of his contract, which expires in April 2009. He has

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delivered three state radio broadcasts on the long-term benefits
of austerity. If he succeeds in balancing the budget, it is
conceivable that Gillian Doone could emerge as a hero and even
make a run for office.

(C) RISING SKEPTICISM OF PRESIDENT MORI


7. (C) Like other friends and supporters of President Mori,
Doone (strictly protect),raised some quiet but probing
questions about recent judgment calls that may reflect on the
political skills of the FSM President. Early praise for Mori's
concerted initiative to lift his home state of Chuuk out of debt
now shows signs of souring. Mori has maintained that the
wellbeing of the entire nation depends upon progress in Chuuk.
He has publicly staked his political career on fostering
improvement. However, the four FSM states cherish their
considerable Constitutional autonomy, and Chuuk, which has
suffered from chronic insolvency, is ultimately the Governor's
territory.


8. (C) In general, Mori has exercised pressure on Governor
Simina quietly and strategically. Publicly, the Governor
continues to hail his collegial relationship and dialogue with
the President, despite their differences. Recently, however, a
strain has begun to show, reflecting Simina's pique that he may
have lost control. When Ambassador asked about his priorities
for Compact infrastructure projects, the Governor was vague.
Then he suddenly launched into seething criticism of Mori's push
to contract with a French company to undertake a preliminary
survey of a Compact road construction project in the heart of
Weno. During a visit to Chuuk the previous week, Mori and an
FSM team vowed to compress the road survey timeline to six
months. "And I don't even know that company. I didn't ask for
this!" Simina steamed. He charged that Mori's initiative to
centralize infrastructure projects "has done nothing for the
states."


9. (C) Governor Simina directed deepest venom at Mori's
administration of a U.S. $4 million grant that China provided
last September to support stabilization programs in Kosrae and
Chuuk. Under Mori's personal direction, Chuuk's entire U.S.
$3.5 million share of the grant was applied to reimburse debts
to the FSM Government, including payments to Social Security,
life insurance, the FSM Bank and income tax. Simina confided
that he and his Attorney General had argued forcefully with the
President for a portion of the grant. Simina claimed he had
intended to use a modest amount to begin to repay U.S.
Department of Agriculture Rural Development loans, whose default
rate in Chuuk now exceeds 26%. However, the President ceded
nothing.


10. (C) Gillian Doone shared his confidential opinion that
Mori's hard line on the China grant had been a mistake that may
have irrevocably alienated state leaders. Criticism of recent
actions by Mori additionally emerged in conversations with
officials of Chuuk's judiciary branch and the business
community, who include some members of Mori's extended family.
They expressed astonishment and concern about several of Mori's
Cabinet appointments. In particular, the newly installed FSM
Attorney General Maketo Robert (Chuukese) is a well known
troublemaker in Chuuk, who has earned notoriety by reportedly
profiting from illicit land deals. Robert authored a (failed)
FSM Congressional bill that would have conferred amnesty on
Congressmen who had been convicted of criminal conduct. Robert
is currently suspended from the bar owing to other malpractice
allegations.


11. (C) A leader of Chuuk's women's association told the
Ambassador, "Everyone is whispering about Maketo, Maketo, Maketo
Robert. He has done bad things in Chuuk. What is the matter
with President Mori?" A seasoned state official opined that
Mori seemed to have caved to pressure by some corrupt FSM
Senators. He predicted that a bullying Congress, which carries
preponderant weight in the FSM Government, now "has Mori over a
barrel." Perceiving weakness, such a Congress might get its way
with the President for the next three years of his term of
office, with the potential to cause significant disruption, the
official said.

WHILE THE QUALITY OF LIFE UNRAVELS


12. (SBU) As political intrigue deepens at the national level,
conditions in Chuuk continue to unravel. Chuuk's population of
approximately 54,000 is concentrated in the capital island of
Weno and additionally scattered among some 24 principal islands
and more than 200 outer islands and islets, which are situated
some 140 to 160 miles away from the capital. Political will is
weak among these dispersed populations, with the possible
exception of the island of Faichuuk, whose citizens have
mobilized vociferously to support secession as a fifth FSM

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state. Faichuuk is located outside Chuuk lagoon, which is one
of the largest lagoons in the world, where U.S. forces sank more
than 60 Japanese warships in World War Two.


13. (SBU) Today, intra-island ship traffic within and beyond
the lagoon has almost ground to a halt owing to the economic
crisis and rising price of fuel, which costs more than US $5 a
gallon. The Chuukese complained that construction material,
food and basic medical supplies can no longer reach most of the
islands. Small motor boats, which transport people and their
sparse supplies, are dangerous outside Chuuk's protective reef,
where weather is unpredictable. A sizeable vessel that China
donated remains moored in Weno harbor. The `Chief Milo' makes
only occasional runs because its outmoded engine consumes
inordinate amounts of fuel. China's Ambassador Liu Fei told
Ambassador Hughes she is frustrated by the ship's inoperability.
So far, Beijing has failed to authorize a costly proposal of
Ambassador Liu to return the ship to China to replace its
inefficient engine, she said.


14. (SBU) While the Peace Corps has a few volunteers in Weno,
they removed most all others from the lagoon islands following a
2007 inspector general's report. Three volunteers remain in the
Mortlocks, about 140 miles from Weno, where a small landing
strip can accommodate occasional flights by Caroline Air. The
FSM Peace Corps Director described to Ambassador a trip he
recently made with a female Peace Corps official to assess the
inner lagoon island of Fefan, which is the birthplace of
President Mori. The Peace Corps officials encountered
excrement-smeared docks and aggressive harassment by Chuukese
youths aimed at the female visitor. They departed immediately.


15. (SBU) In Weno, raw sewage extrudes along side streets,
houses and disintegrating schools, most of which lack working
lavatories. Water pipes and storage tanks are contaminated,
including in Chuuk's sole, dilapidated hospital. The Public
Safety Director's office will not receive calls after 5:30 pm, a
`911' number rarely works, and the Harbor Master said he had
not held port drills "in a long, long time," although he seems
to keep a close eye on local traffic. Chuuk's Chief Justice,
who said his department will lose 43 employees in the RIF,
acknowledged a backlog of over 3,000 court cases. Many paper
files were lost; nothing was automated.


16. (SBU) Telephone, telecommunications and electricity
services have all begun to break down for protracted periods
owing to lack of revenue collection. One of the hospital's two
overworked surgeons commented that patients regularly contract
diseases in the hospital that they did not have before they came
in. Owing to the lack of an automatic switch on the electrical
generator, surgical procedures are subject to brief but
potentially mortal blackouts. "When that happens, we try to
stop cutting," remarked a Philippino surgeon, who pleaded for
immediate assistance with beds, doctors, an incinerator,
stretchers and a sea transport ambulance.

COMMENT - A DEPENDENCY SYNDROME IMPEDES PROGRESS


17. (C) In the face of a massive economic and systemic
breakdown, the people of Chuuk seemed resigned. An inability to
hold leaders to account and an attachment to aid as a panacea
contribute to local immobilization. Ambassador spoke to the
chamber of commerce and Chuuk's main women's organization about
initiatives they could undertake at the grassroots level.
Drawing upon remarks that Secretary Rice recently made at
Georgetown University, Ambassador described how some countries
had adapted to globalization and seized opportunities to
strengthen the rule of law and generate income. In general,
however, audiences responded with questions about Compact
benefits, transit visas for Chinese, and international
assistance. While reforms imposed from the top down may
eventually advance reform in Chuuk, it is clear that they will
also generate resistance aimed at protecting vested interests.
Some observers maintain that Chuuk is inherently `ungovernable.'
A crisis of confidence in President Mori could further
exacerbate instability.


18. (SBU) Chuukese are now departing for the United States in
record numbers. Some of those who remain behind fear that an
unforeseen calamity, such as a cholera epidemic or a typhoon,
could wipe out vulnerable island populations. Timing is
propitious now to consider novel approaches aimed at inspiring
civic engagement and empowering more citizens. The Embassy has
discussed with DOI and others ways to think outside the box and
engage the Chuukese in relevant types of transformational
diplomacy. DOI's new financial management software for the FSM
has begun to work in Chuuk. The hospital needs immediate
attention in areas where the Centers for Disease Control and
Prevention may be able to help. From the ground up, other
opportunities exist, including to: restore 24-hour radio

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service and increase public broadcasts; stimulate awareness of
more practicable approaches to land ownership; and encourage
small-scale business development. In a state that has descended
close to rock bottom, progress will be gradual. However, the
Micronesians note and appreciate American attention that is
aimed at helping them build their own capacity.
HUGHES