CHINESE ACTVITIES ARE ATTRACTIVE TO CASH STRAPPED

C O N F I D E N T I A L KOLONIA 000008 SIPDIS E.O. 12958: DECL: 1/15/2019 TAGS: PREL EAID FM CH SUBJECT: CHINESE ACTVITIES ARE ATTRACTIVE TO CASH STRAPPED MICRONESIANS REF: KOLONIA 188 AND PREVIOUS CLASSIFIED BY: Miriam K. Hughes, Ambassador, Amembassy Kolonia, State. REASON: 1.4 (b),(d) ¶1. (SBU) SUMMARY. China's competition for resources and influence in the Federated States of Micronesia (FSM) shows no sign of diminution. In the absence of substantial indigenous enterprise, Micronesians are favorably inclined to accept offers of assistance. Recent developments include proposed soft loans to launch harbor-based businesses in three FSM states, emergency assistance funds, generous exchange visits and a spurt in construction of a Pohnpei State Government building. End Summary. MARINE INFRASTRCTURE ¶2. (C) China's state-affiliated company Luen Thai, which operates a productive fish loin factory in the FSM capital State of Pohnpei, has submitted proposals to establish processing plants in the other three FSM states, including Kosrae, Chuuk and Yap. When Pohnpei port is flush with fish carriers, Luen Thai employs up to 100 workers to filet the fish for onward shipment. Workers include Chinese and, on an as-needed basis, Micronesians. ¶3. (C) In Kosrae State, Luen Thai has held out the promise of employment for some 200 Micronesians if the Governor agrees to rehabilitate and reopen a large, defunct fish processing plant in which the Governor previously had financial holdings. Kosrae's Attorney General (protect) said China offered a USD $7 million soft loan to start up the harbor-based plant. Although the Attorney General claimed she had warned the Governor of pitfalls and highlighted questionable elements in a draft contract, she opined it was a deal that Governor Robert Weilbacher was unlikely to dismiss. When asked, Govenor Weilbacher informed Ambassador that Luen Thai had extended similar proposals for "shore based infrastructure" projects to the states of Chuuk and Yap. He said a consolidated contract was now on the desk of FSM President Mori. Mori may only be constrained by a vigilant and increasingly antagonistic FSM Congress, which bears constitutional authority to approve any foreign grant and loan over USD $50,000. SPEEDY DISASTER ASSISTANCE ¶4. (C) When President Mori declared a disaster declaration in the aftermath of a king tide that impacted several islands and atolls on December 8-9, China immediately contributed USD $100,000 and additionally tapped an existing economic assistance account to authorize USD $1 million for longer term relief. Assessment reports on damage to the islands are not yet complete. FSM Foreign Secretary Lorin Robert advised that China drew upon an existing USD $2 million economic assistance agreement, which was established to send several medical doctors to work in the Chuuk State hospital. Robert said this account, which China used to release immediate aid, will be replenished to support the provision of doctors. MICRONESIAN MARINERS IN CHINA ¶5. (C) Australian Embassy colleagues advise that China has sponsored eight sailors - out of a total Micronesian crew of 45 who man three Australian patrol boats gifted to the FSM - for three-month study programs in China. None of these mariners has completed a high school education, the Australian Ambassador commented. She added, "Who knows what they are studying?" MICRONESIA'S BIGGEST BUILDING ¶6. (C) As Chinese laborers continue non-stop construction of a compound for the Pohnpei state government, this building has taken on relatively massive proportions. It will be the largest structure in the FSM. Governor John Ehsa confided that he fears Pohnpei State will be unable to cover cost of electricity for such a big building. A large part of the cost will be individual air conditioning units for the many rooms. Ingeniously, the Governor suggested he intended to appeal to the Chinese Ambassador for solar roof technology to power the entire compound. HUGHES