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MANILA, Philippines (December 17, 2001 - PINA Nius Online)---The private sector's role in the Federated States of Micronesia will be expanded with help from loans totaling US$ 13 million approved by the Asian Development Bank (ADB).

The Private Sector Development Program is designed to create more jobs and reduce dependence on external assistance, the bank said.

The Federated States of Micronesia is weaning itself from heavy dependence on external assistance.

The economic provisions of the current Compact of Free Association treaty -- under which the U.S. provides financial support -- expired in September. The Compact is now being renegotiated and new economic provisions need to be in place within the next two years.

While the Federated States of Micronesia has already made substantial cuts in its bureaucracy, the need to accelerate private sector development is hampered by legal and institutional constraints, the bank said.

This is especially affecting productive sectors like fisheries, agriculture and tourism, it said.

The program is backed by a US$ 5 million policy loan and a US$ 8 million investment loan. It aims to improve the policy and legal environment for the private sector and strengthen capacity to manage land, labor, and capital resources.

It seeks to increase production of tradable goods for domestic and export markets as well as develop a competitive service sector.

It aims to facilitate the use of land and property as collateral to access finances for business development. Legal and other services to start and expand small and medium enterprises will be improved.

The private sector needs a skilled, competitive labor force and advisory support for business development, the bank said.

The policy loan also promotes fiscal discipline and the use of trust funds as a mechanism for long-term self-reliance.

The bank said the investment loan project will establish a secured transaction system, build institutional capacity at the national and state levels to support the program, and support program and project management.

The loans will come from its concessional Asian Development Fund. The Department of Finance and Administration will be the executing agency for the program, which is due to be completed in early 2006.



Earlier, the bank approved a US$ 70 million loan to help reform the public sector in Papua New Guinea.

It said the Public Service Program will support policy and institutional reform to build a performance-based public sector.

It will also help strengthen oversight agencies and improve the delivery of basic services at the national and provincial levels, the bank said. In addition, the program will include reforms of the civil service administration and general management systems.

The government has identified poor governance as a major cause of the deterioration in public sector management in the past 10 years. This has eroded the public sector's capacity to design and implement sound policies and programs.

More than a third of Papua New Guinea's population lives in absolute poverty and over 90 percent of the poor live in rural areas. Health, education and income levels remain low, the bank said.

It said the program will increase poor people's access to health, education, income generation opportunities, transport and other public services, as well as those provided by churches and non-government organizations.

The bank's loan will come from its ordinary capital resources, under its LIBOR-based lending facility. It will have a term of 15 years.

Pacific Islands News Association (PINA) Website: 

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