United States Department of State

Federated States of Micronesia United States Department of State

While the government of the Federated States of Micronesia (FSM) expresses public interest in finding ways to increase foreign investment, there are many structural impediments to foreign investment and economic progress in general that would require constitutional change, which is unlikely in the foreseeable future. Many political leaders at both the state and national level are owners of the largest businesses on the islands, and strongly oppose the needed structural changes that would increase competition to their own interests. The FSM scores in the lowest quintile in almost all measures of economic activity and the climate for doing business. The most important impediments derive from land and contract issues. Foreign ownership of land is prohibited; most land is owned and passed on within the clan structure, leading to conflicting title claims, the need to negotiate leases with multiple parties, and the possibility of dramatic changes when the original senior lessor dies. There is no system for land title insurance in any of the four states. The combination of these factors placed the FSM at 189 out of 189 in registering property in the World Bank Doing Business report.