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The FSM National Government along with the respective State Governments has made progress in creating a conducive business environment to enhance foreign investment outlook and advancement of our own local businesses. Concrete steps have been taken in enacting and amending laws, such as the bankruptcy law, secured transaction law, foreign investment laws, as well as mortgage and land leasing laws, to establish this pathway. In doing business or investing in the FSM, each State has their own priorities and foreign investment regulations. Interested investors are urged to consult with the individual State authorities as to their options. Opportunities are bountiful and restrictions should not be construed as constraints. Business partnership, joint venture, and other arrangements
Investment Opportunity
The key core investment sectors with great potential opportunities are as follows. In addition the improvements in the major infrastructure will create the underlying environment for more investment opportunities in the other key sectors of tourism, agriculture, fisheries/aquaculture and manufacturing:
AGRICULTURE: Agricultural production in the FSM is generally locally-based and small scale. Food is grown for local consumption and to support the relatively small export sales in regional markets, primarily Guam, Saipan and the Marshall Islands. Major export products include bananas, betel nuts and citrus.
Investment opportunities in this sector are expected to be small-scale joint venture arrangements aimed at increasing FSM exports to existing regional markets and expanding to other markets in the region such as Guam, Palau, Marshall Islands, Australia, Japan and hopefully soon into China.
Opportunity Bananas ▪Over 22 varieties of bananas are grown in the FSM, 13 of which provide 50_100% of daily estimated Vitamin A requirements. Kosrae and Pohnpei¡¯s karat and uht en yap varieties provide 25 and 250 times the beta-carotene of the common Cavendish banana respectively. ▪Investment ▪Buyers / Distributors Betel nut ▪Previously the predominant exporter of betel nut in the region, Yap saw a significant proportion of its crop destroyed in the 2004 typhoon. This presents an opportunity for growers to replant the entire crop in a more organized and efficient manner, and once again become the prominent supplier in the region. ▪Development ▪Investment ▪Buyers / Distributors Coconuts ▪Virgin coconut oil processed from fresh coconuts is being marketed by health food companies as having several nutritional benefits, including boosting immune systems. Fresh coconuts require significantly less labor to produce than copra, thus earning a higher return for farmers. ▪Copra: Although the world market for copra has fallen, copra is used to produce local specialties like coconut soap. Copra is also proving itself to be a promising biomass energy resource. ▪Development ▪Investment ▪Buyers / Distributors Noni ▪Noni is naturally abundant throughout the FSM and presents a lucrative opportunity for coordinated harvesting and export. Acclaimed for its health benefits, noni is distributed in over 50 countries by more than 200 companies. The noni industry is expected to pass the $1 billion mark in 2005. Noni juice retails for $42 per liter.more than 200 companies. The noni industry is expected to pass the $1 billion mark in 2005. Noni juice retails for $42 per liter. ▪Investment ▪Buyers / Distributors Pepper ▪Pohnpei pepper is regarded as one of world¡¯s finest peppercorn varieties. Once a high end gourmet product distributed worldwide with prices reaching $5 per ounce and netting farmers $6000 per acre, several local farmers are once again producing Pohnpei pepper for export. ▪Investment ▪Buyers / Distributors Sakau (Kava) ▪In addition to serving a thriving domestic market, sakau (also known as kava) is being exported and marketed in international health food stores as a dietary supplement for such ailments as anxiety, insomnia, and pain and muscle tension. ▪Buyers / Distributors
MANUFACTURING:
Opportunities in the manufacturing sector in the FSM focus primarily on small_scale production and most manufacturing draws from the natural resources that are abundantly available on the islands such as coconut palms, clean water, and ocean resources. As per the recent Third Economic Summit, the goal of the manufacturing sector is to improve the competitiveness of these locally available factors of production to promote manufacturing sector development.
Manufacturing Projects Opportunity Assembly-line manufacturing ▪Assembly-line for pre-fabricated consumer goods such as clothing, luggage, home d¨¦cor, etc. ▪As an FAS of the US, the FSM is entitled to special duty waivers for goods exported to the US. ▪Investment ▪Distributors Beer Breweries ▪With high per capita beer consumption levels, the opportunity for the FSM to develop its own brewery seems potent. This could be done in a two step phase, first with canisters of draft beer retailed at pubs and bars across the islands and then the same beer being bottled and canned nationwide. ▪Investment ▪Breweries ▪Distributors Coconut Products ▪Ponape Coconut Products (PCP) Consumer Products has been operating since 1974 and produces body soap, laundry soap, oils, suntan oil, shampoo, and other products. The company¡¯s machinery is less than 10 years old. Product quality is regarded as high by buyers in Guam & Japan, and PCP is seeking financial investments to further develop the operation. ▪Coconut Development Authority (CDA) is a government agency experimenting with alternative uses of copra and fresh coconuts, including virgin coconut oil, coconut milk, and other products. Opportunities exist for private investment in the processing of these products, as well as export. ▪Opportunity exists for coconut product development in Chuuk similar to the CDA in Pohnpei. ▪Buyers / Distributors ▪Investor ▪Management, Marketing & Product Development Water ▪Tropical Waters Kosrae, Inc. (¡°MELO¡±) proposes to bottle Kosrae¡¯s abundant spring water primarily for export as a high-end product, similar to the ¡°Fiji water¡± model. Transportation and bottling arrangements have been identified, and initial efforts to market the water as exclusive product via product placement are being explored. Opportunities are available to invest in and distribute this unique product. ▪Investment ▪Buyers / Distributors
FISHERIES / AQUACULTURE:
The FSM is home to the world¡¯s richest tuna fishing grounds. The country maintains a 1 million square miles Exclusive Economic Zone from which it generates revenues of approximately $10 million per year for fishing licenses granted to vessels predominantly from Japan, Taiwan, Korean, China, the U.S., and most recently, the European Union (EU). It is said that the Western Pacific is the only tuna area in the world not being over-fished and conservation efforts are underway to ensure that this remains the case. The ocean is undoubtedly the country's most important resource. The approximate market value per year of tuna harvested within the nation¡¯s EEZ is about US$200 million. At present, the nation has full ownership of tuna stocks capable of a sustained yield of well over 100,000 tons each year.
Opportunity Carolina Fisheries Corporation (CFC) Private company wholly-owned by Pohnpei state currently operates two small purse seiners, whose catch is transshipped through Pohnpei to canneries in Thailand. Larger boats could increase efficiency and cost-effectiveness potentially providing a handsome return. ▪Investment Chuuk Fresh Tuna Inc. State-owned transshipment facility provides complete State government has invested $7M since early 1990¡¯s. Opportunity for private fishing company to take over the entire operation. ▪Investment ▪Leasing options Pacific Tuna Industries, Inc. (PTI) State-owned transshipment and cold storage facility in storage facility in Kosrae, currently idle. Suitable for use as processing plant or other fishing activities with investment. ▪Investment ▪Development Yap ¡°Diving Seagull¡± State-owned fishing corporation operates one purse seiner. ▪Investment Tuna Cannery / Processing Opportunity exists for tuna cannery or processing facilities. Recent dramatic escalation of world fuel prices and the demand for seafood products makes sense to invest in the mist of the supply. ▪Investment ▪Development
The FSM¡¯s extensive reefs and lagoons offer several promising opportunities for aquaculture ventures both for export as well as domestic consumption. Activities are currently underway to research and develop such products as giant clams, aquarium clams, corals, black pearls, and sponges. Fish farming for endemic species of fin fish such as groupers, rabbit fish and other high demand species could be developed with the right investment and target market.
Giant Clam Projects Opportunity National Aquaculture Center (NAC) Currently seeking international markets and export opportunities for shells, meat, and the aquarium trade. Expressions of interest in joint venture partnerships or wholesale privatization are encouraged. ▪Buyers / Distributors ▪Investment / Privatization Black Pearl Projects Opportunity Nukouro Black Pearls Seeking buyers and distributors for international trade. ▪Buyers / Distributors
The tourism industry is perhaps the FSM¡¯s largest growth opportunity of all. A traditional island life-style, as well as the beauty of the surrounding islands and sea, makes the FSM one of the last truly unspoiled paradises on earth. Each state has its own set of languages and dialects, its own unique customs and practices, and its own traditional cultural heritage, thus creating four distinct worlds in one ¨C Federated States of Micronesia.
The islands of FSM contain some of the world's most renowned dive destinations. Divers worldwide are being increasingly drawn to the underwater wreck museums of Chuuk, and to Yap, home of the giant manta ray with wingspans of even 18 feet. Perhaps lesser known, but no less spectacular, are the coral gardens, shipwrecks, and steep drop-offs of Pohnpei and Kosrae. The unique topological of the islands, its people as well as historical wealth are the unique selling points for the FSM and have helped to establish the country as a sought-after tourist destination
INFRASTRUCTURE DEVELOPMENT:
The Federated States of Micronesia has begun to accelerate the implementation of the Infrastructure Development Projects (IDP) under the Compact of Free Association. These major infrastructure developments encompasses the areas of airports, seaports, roads, schools, hospital, dispensaries, electricity, water distribution, sewage disposal systems and many other needed infrastructure. Approximately $52 million worth of projects will be bidded out in the near future. An average $19 million will be made available each year as grants for infrastructure projects until the expiration of the Compact in 2023.
The improvements in the major infrastructure will create the underlying environment for more investment opportunities in the other key sectors of tourism, agriculture, fisheries/aquaculture and manufacturing.
Further Opportunities for Partnership and Investment in FSM
Project Opportunity Telecommunication Submarine Cable FSM Telecommunication Corporation (FSMTC) would like to establish a domestic submarine cable network that would link the FSM islands states and interconnect with the FSMTC¡¯s international cable network. Independent Fuel Storage Facilities FSM is seeking serious partner(s) to design, build and operate fuel storage facilities in the States of Yap, Chuuk and Pohnpei. Waste Management and development of waste disposal systems in Yap and Chuuk Each of the islands on Yap and Chuuk as it exists now has a sub-optimal waste disposal system, primarily dominated by and-fills. A large opportunity exists for a waste management company to come in, develop a waste collection and processing methodology and build a robust business around it. Port Authority Management Kosrae State Port Authority seeks to privatize the management component of its airport and seaport. Management partner will be selected through competitive bidding process. Suppliers for island importers/wholesalers Island importers seek suppliers for such wholesale and retail products as animal feed, liquid petroleum gas, construction materials and supplies, rice, cement, used/refurbished cars and appliances, etc. Bowling Alley With few existing entertainment options, there is an opportunity to open bowling alleys in the different FSM states. The competitive spirit of local population could be channeled into leagues, community events, and inter_municipal tournaments for all ages and genders. A 12_lane, pre_fabricated facility with synthetic lanes would require an investment of approximately $500,000. Outer Island Transport With few reliable transportation and freight options to and from the outer islands, an opportunity exists for a private company to profitably operate efficient inter_island transport. Demand is high, as such a service would support eco_tourism opportunities to the outer islands that are currently difficult for tourists to access, as well as increase the ability of outer islands to get their goods to the FSM¡¯s economic centers. Meat processing plant / slaughter facility Interest exists to open a slaughter facility in the FSM to process both local and imported meat, for both local demand and export. Feasibility study would need to be conducted first. Useful Information for Investors
Useful Information FSM Tax Summary Import Tax (Duties & Customs) ▪ 3% - 100%, based on product category ▪ Assessed on the CIF value of the products ¡®Gross Revenues¡¯ tax ▪ $80 for the first $10,000 of gross revenues and 3% for any excess in the calendar year, paid quarterly. ▪ Businesses with less than $2,000 gross revenues eligible for total refund on taxes paid Wages and Salaries Tax ▪6% for the first $11,000 and 10% of additional income ▪ Income less than $5,000 entitled to $1,000 income rebate Social Security Tax ▪Both the employee and employer each contribute 6% of wages and salaries ▪ Maximum tax of $5,000 per quarter
For more information on Investment in the Federated States of Micronesia, please visit the FSM Investment Website:
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