Initial economic impact of COVID-19 reported for Micronesia, Marshall Islands, and Palau: media release

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WASHINGTON, 23 June 2020 – US Department of the Interior Assistant Secretary, Insular and International Affairs Douglas W. Domenech today announced the publication of three technical notes from the Graduate School USA’s Economic Monitoring and Analysis Program (EconMAP) providing an initial assessment of the economic impacts of the novel coronavirus disease 2019 (COVID-19) on the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau. 

“While each of the three Freely Associated States continues to remain free of COVID-19 cases, the slow down and near termination of transportation across the region has had strong repercussions on their economies,” said Assistant Secretary Domenech. 

“It is hoped that the data and analyses in these technical notes can help illuminate impacts as FAS leaders draft fiscal measures and implement mitigation strategies to maintain financial and economic stability now and as they emerge from the impacts of COVID-19.”

Funded through the US Department of the Interior’s Office of Insular Affairs (OIA), the projections made in the EconMAP technical notes assume that travel will remain limited for all three of the FAS through fiscal year 2021 or until a COVID-19 vaccine is developed. 

The technical notes also utilize economic modeling techniques that project the economic impact of the COVID-19 pandemic without consideration of any external donor assistance and in the absence of any confirmed domestic cases. Should any of the three FAS report COVID-19 cases and develop community transmission, the projected negative impacts of the pandemic could be compounded. 

As laid out in the reports in more detail, the following highlights reflect initial expected COVID-19 impact in each FAS in fiscal years 2020 and 2021.

The Republic of Palau

The Republic of Palau – Heavily dependent on tourism with 20 per cent of all its workers employed in the tourism industry, Palau attracted 90,000 foreign visitors in fiscal year 2019, with the tourism industry contributing 20 per cent to gross domestic product. Prior to the pandemic, Palau’s fiscal year 2020 first quarter tourism numbers were on track to grow more than 30 per cent and estimated to attract 116,000 visitors for the year. Instead, it is now projected that Palau will experience a 51 per cent reduction of tourists, with a total expected of about 44,075 visitors, and a further 89 per cent reduction in fiscal year 2021.

Overall, Palau is expected to experience a 22.3 per cent decline in GDP and a loss of 3,128 jobs, primarily in the private sector.

The fiscal deficit for Palau, resulting from the loss of tax revenues such as the payroll tax, gross revenues tax, hotel room tax, and import taxes, is projected to be about US$40 million; however, this impact is partially mitigated by Compact grants and trust fund revenues. Construction and infrastructure projects already planned for Palau are anticipated to serve as an important economic stimulus when the cyclical negative impact of COVID-19 on Palau’s economy is being realized.

The Federated States of Micronesia

The Federated States of Micronesia (FSM) – While the FSM does not enjoy the same level of visitor arrivals as Palau, the majority of the COVID-19 impact will also be felt in the private sector, namely in the transportation and tourism sectors. The hotel and restaurant industries are projected to fall by 46 per cent in fiscal year 2020 and then an additional 75 per cent in fiscal year 2021, reflecting the absence of tourists and minimal interstate visitors. Similarly, the transportation sector, which includes shipping, port services, aviation, and airport ground handling, is projected to decline by 27 per cent in fiscal year 2020 and an additional 14 per cent in fiscal year 2021. Notably, the total projected loss to the FSM economy will be the most severe decline in the FSM economy since the start of the amended Compact period in 2004. 

Ultimately, the FSM is expected to experience a 6.9 per cent decline in GDP and a loss of 1,841 jobs, reflecting an 11 per cent reduction of employment levels in the FSM compared to fiscal year 2019. 

Optimistically, given the FSM’s strong fiscal position at the outset of the COVID-19 pandemic, the application of targeted internal and external assistance, including Federal assistance, to bolster health sector investments, improve resiliency in the health system, provide budgetary resources to offset revenue losses during the pandemic, and to provide direct support to affected individuals and businesses, will be sufficient to offset much of the projected threat to the FSM economy and to its fiscal position going forward.

The Republic of the Marshall Islands

The Republic of the Marshall Islands (RMI) – The overall RMI economy relies very little on tourism and visitor arrivals with the hotel and restaurant sector representing only 2.3 per cent of GDP. It is, however, more heavily dependent on the public sector, which includes important fisheries activity and sovereign rent receipts. The Marshall Islands Marine Resources Authority is already seeing declines ranging from 30 to 50 per cent across aquarium fish exports, the tuna loining plant operations, purse seining operations, and shore-based support to the longline fishing industry. With airline travel to the RMI near complete shutdown, wholesale fuel operations are projected to drop by 45 per cent, reflecting the loss of nearly all of its aviation fuel sales. 

Overall, the RMI is projected experience a 6.9 per cent decline in GDP and a loss of 716 jobs.

The projected impact on tax revenues, employment, and job loss coupled with potential significant reductions in fisheries revenues may result in a sizeable fiscal shock in the range of US$14 to US$20 million, larger than previous fiscal downturns experienced by the RMI. The RMI will benefit significantly from donor assistance that can help mitigate the projected negative impacts on the economy as a whole and to avoid a dangerous deterioration of its fiscal position. 

Breadth and depth of impact in three countries

In all three countries, the breadth and depth of economic impact will be substantial in the tourism, transport, and fisheries sectors, again under the current modeling with each country still reporting zero COVID-19 cases. Although Palau is hardest hit due to its tourism-centered economic structure, the FSM and RMI are also deeply affected. The EconMAP team expects to update the technical notes to eventually quantify the full range and impact that internal mitigating efforts and external donor assistance will have in each FAS, eventually providing a full report to better understand the combined impact of assistance and the net impact of the COVID-19 response.

The full and complete COVID-19 technical notes for the FSM, RMI, and Palau can be accessed at http://www.pitiviti.org. EconMAP technical notes are intended to provide a concise and timely analysis of an immediate situation for decision-makers, utilizing currently available data sets and macroeconomic tools developed in close collaboration with stakeholders.

All three FAS governments are working closely with Federal partners in the United States government, including the Department of the Interior, to invest in strengthening their health systems and to mitigate the impact on affected individuals and businesses. For a partial list of US Federal assistance to the FAS related to the COVID-19 pandemic, visit https://www.doi.gov/oia/covid19.

Funded through the Office of Insular Affairs’ Technical Assistance Program, EconMAP is managed by the Graduate School USA’s Pacific & Virgin Islands Training Initiatives. EconMAP produces annual economic statistics and economic reviews for the RMI, FSM, and Palau, as well as occasional technical notes on emerging issues.

The Assistant Secretary, Insular and International Affairs, @ASIIADomenech, and the Office of Insular Affairs (OIA) carry out the Secretary of the Interior’s responsibilities for the US territories of American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the US Virgin Islands. Additionally, OIA administers and oversees federal assistance under the Compacts of Free Association to the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau.

For more information, contact Tanya Harris Joshua, Deputy Policy Director, Office of Insular Affairs – Policy Division, US Department of the Interior, ph. 202 208 6008 | mob. 202 355 3023.

Japan does not support US big-eye proposal at Tuna Commission

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Japan believes that the US proposal to increase its bigeye catch limit is not fair.

The proposal would reward countries for better than minimum observer coverage on their longline vessels and for banning transshipment of fish. Transshipment is well-known as a key risk area for misreporting on fish catches and for potentially other illicit activities such as trafficking people or drugs.

FFA Members including Tonga have expressed strong concerns regarding the US proposal.

Head of Japan’s delegation to the Tuna Commission in Honolulu Mr Shingo Ota told Pacific Editors Japan does not like the US proposal as there are many other factors to be taken into account.

In the case of Japan, he said, they have been providing catch support which is a fundamental basis of stock assessment, therefore this scientific contribution should be appreciated.

The view from Japan is US is picking up only limited factors which are in favour of their operations and it is unfair. The United States has acknowledged it will be the only country eligible to benefit.

Ota also denied suggestions made in the US proposal that observer coverage on the Japanese fleet has gone down in the past year. He said the US figures are misleading and wrong. Ota emphasised that Japan is actually implementing its requirement for a minimum of 5% coverage.

He said while some of the fleets had little bit less than 5%, others had more than 5%.

On observers, Japan said it had had some unfortunate incidents in the past. Sometimes observers get depressed and they really want to return to port. Therefore, the fishing vessel had to quit fishing operations. Ota said Japan is working on this issue and that’s why electronic monitoring would be one of the solutions.

Pacific countries have proposed that this year’s Tuna Commission pass a resolution in supporting better working conditions for crew and observers working in the tuna fleets of all member countries.

Ina letter to the Commission the FFA Chair, Tepaeru Herrmann said: “The issue of poor labour conditions and mistreatment of workers on fishing vessels is vitally important, both to the Pacific and across the globe. Not only is the reputation of the WCPO fishery threatened by this, but our own citizens are at risk of being subjected to deplorable working conditions,”.

Ota said while Japan was very much supportive of the idea it the questioned if the Tuna Commission is best placed to handle this issue.

“The International Labor Organisation has a convention which deals with exactly the same topic so I think it would be natural to ask the members to ratify the Convention rather than discussing this issue at WCPFC,” Ota said

Japan fears the resolution, which is non-binding, might lead on to a push for binding labour standards.

It is easier to accept if it is a non-binding resolution, but what comes next is the question,”  Ota said. ……ENDS

Japan speaks out on ‘unfair’ US proposal

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Japan said that the United States proposal to that the Tuna Commission increase its catch-quota on for bigeye tuna is “unfair,”

“I think the US is picking up only limited factors which are in favour of their operations. So, I think it is unfair,” the Head of Delegation for Japan Shingo Ota told reporters at the Tuna Commission meeting.

Pacific nations and other members of the WCPFC are locked in tense discussions over the future of the tropical tuna fishery which includes bigeye tuna as well as skipjack and yellowfin.

WCPFC’s current members are Japan, Australia, China, Canada, Cook Islands, the European Community, the Federated States of Micronesia, Fiji, France, Japan, Kiribati,Korea, the Republic of Marshall Islands, Nauru, New Zealand, Niue, Palau, Papua New Guinea, Philippines, Samoa, Solomon Islands, Chinese Taipei (Taiwan), Tonga, Tuvalu, the United States of America, and Vanuatu.

Ota was quick to criticise the US proposal, joining other Pacific nations in resisting any increase in the quota: “We don’t like it. 

“Their proposal is if a country has better observer coverage and does not conduct transshipment they can receive more allocation,” Ota said.

The US is seeking a higher catch limit for bigeye tuna by its Hawaii-based longline fishing fleet.

In its proposal, Washington highlights the significant levels of monitoring and control it maintains in the fishery, outperforming other members of the Commission.

The US points out that while large longline fleets are maintained by Japan, Korea and Taiwan have failed to meet the Commission’s minimum requirement of placing independent fisheries observers on 5 per cent of their vessels the Hawaii-based US fleet does better.

 Figures included in the proposal show the US fleet has achieved observer coverage of about 20 per cent in its deep-set fishery and 100% in its shallow-set fishery.

But Japan said the figures cited in the U.S proposal that suggest observer coverage on the Japanese fleet has gone down in the past year are “misleading.”

“Actually, the U.S figures are not correct and we are actually implementing 5% coverage. In some of the fleets a little bit less than 5% but some of the fleets are more than 5%,” Ota stated. 

United States seeks increase in its tuna catch limit

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Honolulu, Hawaii- The United States is seeking a higher catch limit for bigeye tuna by its Hawaii-based longline fishing fleet at the annual meeting of the Western and Central Pacific Fisheries Commission (WCPFC) taking place in Honolulu this week.

The move comes as Pacific Island nations through their two main inter-governmental fishing agencies have made it clear they are not willing to increase the total bigeye catch in Pacific waters.

In its proposal to the 27-member rule-setting body, the United States highlights the significant levels of monitoring and control it maintains in the fishery, outperforming other members of the Commission.

,Washington points out that while the large longline fleets maintained by Japan, Korea and Taiwan have failed to meet the Commission’s minimum requirement of placing independent fisheries observers on 5 per cent of their vessels the Hawaii-based US fleet has consistently outperformed minimum requirements.

Figures included in the proposal show the US fleet has achieved observer coverage of about 20 per cent in its deep-set fishery and 100% in its shallow-set fishery.

With ‘essentially no at-sea trans-shipments’ taking place in the fishery the US argues it has been contributing highly certain catch data and other fisheries information, and making an important contribution.

The US proposes that as an incentive for Commission members to provide better quality catch data would be to increase catch limits by 1 per cent on 2018 levels for every 1 per cent of observer coverage achieved over the 5 per cent minimum. They also propose that catch limits should be increased by 10 per cent on 2018 levels for every member that achieves 100 per cent trans-shipment free fishing.

The US proposal admits that under current conditions the its fleets would be the only ones eligible to receive an increase in their catch limits.

It comes as the Science Committee of the WCPFC confirms advice that bigeye tuna is not overfished or experiencing overfishing. 

However, Pacific nations do not want to see an increase in the catch of bigeye.

The CEO of the 8-nation Parties to the Nauru Agreement group Ludwig Kumoru said although the US fishing industry is laudable for its efforts to put in measures to improve monitoring and control of their fishing vessels, the number of observers should not “directly relate to how much fish should I take from the ocean.”

 He said that the amount of observer coverage or number of observers one places on the vessels does not relate to the amount of fish one catches.

“Therefore good reporting should not be used as a condition to increase catch. We should instead concentrate on bringing in conservation measures that actually support sustainable fishing,” he said.

Although he doesn’t agree with the proposal, Kumoru said it will be up to the Commission members to decide on the matter.

“I think we should concentrate on bringing in conservation measures that actually support sustainable fishing.” Kumoru said.

The director General of the 17-nation Forum Fisheries Agency (FFA) Dr Manu Tupou-Roosen said that although the science says that bigeye tuna looks to be in healthier state than previously thought, they have advised the Commission to maintain current fishing limits and take a precautionary approach.

Dr Manu Tupou-Roosen stressed that the FFA wants to see a strong tropical tuna measure from this week’s Commission meeting which include a healthy bigeye tuna population.

 “I mentioned earlier priorities of FFA members going into this meeting and that is to maintain the strength of the tropical tuna measure and not to weaken the existing provisions,” Dr. Roosen said.

She also commended United States continued cooperation with the Commission’s rules.

“So we are confident that we will reach a successful resolution of the ongoing issue with the US,” she said.

The environmental groups PEW and WWF see the US proposal as an “interesting idea” especially in the context of it being an incentive to fishing nations to improve monitoring control and observer coverage, but believe the Commission should still prioritise the population of the bigeye.

“ We are fully in support of improving observers coverage, we also think that trans-shipment should be banned unless best practices are in place to ensure its verifiable and legal. And we see this incentive system as an interesting idea.  However, the Commission needs to be careful that the overall catch of big-eye does not increase past the scientific advice,” said Dave Gershman, Pew Charitable Trust Global Tuna Conservation Officer.

“If you increase the catch of big-eye through one proposal, you need to kind of reign it in in a different way. If they can structure it in a way where it doesn’t lead to an increase in big-eye catch then that would be the way to go.”

Bubba Cook, WWF Western Central Pacific Tuna Programme Manager said: “The US proposal sends a strong statement that if we have greater observer coverage and we’re able to get better refined data on these stocks, we may actually be able to catch more than what we’re catching right now.”

WCPFC chairperson Rhea Moss-Christian said that the US approach is a “relatively new one,” and she cannot determine yet how the Commission members will respond to the proposal.