Aug 23, 2017 Last Updated 2:11 PM, Jun 12, 2017

Legal wrangle holds up road work

After huge cost overruns, major delays and problems with faulty designs, the largest construction project ever undertaken in the Federated States of Micronesia is now at a standstill with multiple lawsuits looming. Majuro and Guam-based Pacific International Inc (PII) completed about 90 percent of a road and sewer project in Weno, the capital of Chuuk state in the FSM before it was terminated last November by the FSM’s Project Management Unit.

The contract was originally budgeted for US$25 million but costs escalated significantly during construction that started in 2009 because designs provided to PII contained many errors causing repeated changes, delays and millions of dollars in additional costs. After terminating PII and ordering it to demobilise at the end of last year, the FSM called in the multi-million dollar bond PII had posted for the construction project.

United States-funded infrastructure projects in the FSM require a 100 per cent bond be posted by contractors. However, an independent engineering firm, hired by the Saipan insurance company holding the bond, determined that the FSM Government — not PII — mismanaged the construction project. The detailed evaluation of the construction project by engineering firm J.M. Robertson, Inc concluded: “The owner (FSM Government) was found to be in default of the contract for nonpayment of amounts contractually and legally due the contractor (PII) and for other reasons. That included issuing bid documents…that were so highly defective as to be unusable.”

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Balancing the careful development of a deep sea mineral industry and environmental concerns can be a veritable minefield for PACP governments. Which is why an EU-funded project is assisting countries to develop comprehensive national policies, legal frameworks and institutional capacities to better manage this emerging sector. The EDF10 €4.7 million Deep Sea Minerals (DSM) in the Pacific Islands Region: a Legal and Fiscal Framework for Sustainable Resource Management project is implemented by SPC’s Applied Geoscience and Technology Division.

The four-year project promotes a regionally integrated approach to DSM regulation, helping countries balance their regulatory requirements with sufficient incentives and security of tenure to promote investment and private sector participation in national DSM industries. So far, national stakeholder consultations held in Cook Islands, Fiji, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu have helped raise awareness of the opportunities and challenges whilst enabling contributions from a wide range of stakeholders. (Consultations in the five remaining PACPs: FSM, Palau, PNG, RMI and Timor Leste are due in coming months.)

This has helped establish national offshore mining committees and develop country ‘road maps’ outlining the steps for each country to develop appropriate policies, laws and capacities to regulate DSM activities.

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But criminal activity under the radar

As the Federated States of Micronesia (FSM) joins other Pacific countries like Palau and Fiji to enact laws that tackle Trafficking In Persons (TIP), recent analysis has revealed the vulnerability of the Pacific islands region in this organised criminal activity.

TIP, more commonly referred to as human trafficking, has been documented in a number of countries in the region and despite this has largely remained under the radar of national priorities. In March, FSM became the latest in the region to take action, when it announced new laws specifically targeted at human trafficking and related offences along with appropriate penalties for their violation. 

FSM’s failure in the past to address reported human trafficking cases saw it listed as a Tier 3 country in the US State Department’s 2011 Trafficking In Persons Report, meaning it did not comply with minimum standards for the elimination of trafficking. “FSM women have been recruited to the United States and its territories with promises of well-paying jobs, and forced into prostitution upon arrival. Pohnpei State Police received reports that FSM women and children were prostituted to crew members on Asian fishing vessels in Micronesia or in its territorial waters.

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