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U.S. funding likely well beyond 20-year compact

By Giff Johnson MAJURO, Marshall Islands (Marianas Business Journal, June 6, 2011) – The signing of an amended Compact of Free Association by Marshall Islands and U.S. State Department negotiators in 2003 appeared to cement long-term American presence in this western Pacific island group.

Although the Compact itself provided for only a 20-year funding package, a subsidiary agreement authorizes the United States to use Kwajalein Atoll - home of a key missile testing range run by the U.S. Army - through 2066 with an option for the Defense Department to extend another 20 years.

But landowners, whose approval of any lease is required by the Marshall Islands Constitution, refused to extend a land use agreement beyond the 2016 expiration of the first Compact’s military use and operating rights agreement for the missile range. For eight years landowners held out, seeking higher rental payments and financial commitments from the two governments to rebuild deteriorating infrastructure and housing on overcrowded Ebeye Island, where about 12,000 islanders live next to the Army base. They didn’t get either.

The U.S. and Marshall Islands governments agreed on US$15 million annually with inflation adjustment but the landowners wanted US$19 million.

The lack of landowner approval threatened not only the future of the U.S. presence at Kwajalein beyond 2016, but also the multi-million dollar Compact grants and trust fund investments, which are tied to the U.S. presence at Kwajalein. The dispute was about the rent levels, and did not reflect an anti-U.S. stance.

But building on months of back and forth since late 2010, in early May a flurry of negotiating activity to hammer out the terms of a land use agreement acceptable to all parties accomplished a final document that was signed with great ceremony on Ebeye and Majuro by the four traditional chiefs of Kwajalein, and the approximately 85 clan heads and commoner representatives on May 10 and 11.

A key element for the signers was that the approximately US$4 million in annual rent difference between the first and second Compact’s Kwajalein rent agreements had been piling up in an escrow account at the Bank of Guam since 2004. When the landowners signed the agreement in May, U.S. Ambassador Martha Campbell authorized release of the windfall US$32.2 million escrow fund.

With the signing, the Defense Department has full use of Kwajalein for 75 more years. This eliminates a major roadblock to smoother relations with Washington, and is expected to open the door to addressing Ebeye Island’s festering health, social and infrastructure problems.

With the lack of an agreement no longer a lingering issue, Marshall Islands Foreign Minister John Silk said, "Now the real hard work can begin to develop Ebeye and the nation." Speaking for the landowners, Kwajalein Senator Tony deBrum said after the land use agreement signing that "some say this is the end of a long journey - please, it is just the beginning." He described the agreement as a "pathway to make the relationship closer" and to spur development.

Critical problems have long plagued Ebeye. A U.S. Army Corps of Engineers report issued in June 2010 said that Ebeye’s sewer, water and waste management infrastructure was either not working or on the verge of collapse, posing critical health threats to the population. The Army Corps’ observations mirrored a Trust Territory report from the late 1970s, which delivered a similarly devastating critique of Ebeye’s failing infrastructure.

"Ebeye’s critical utility infrastructure is deteriorated and is unable to sustain the current population," said the 85-page report issued last year. "The sanitary sewer treatment plant has not operated in five years. Raw sewage is released directly to the ocean approximately 500 feet offshore. Sanitary sewer equipment is inadequately sized and dilapidated from lack of maintenance and spare parts."

The landowners have put together a preliminary plan for overhauling Ebeye with a price tag of US$570 million. The Army report offered 24 projects to solve the major infrastructure problems on the island. If even a portion of the landowners’ plan or the Army report get acted on through U.S. and Marshall Islands agreement on infrastructure development, it will mark the first major overhaul of Ebeye’s essential infrastructure in more than a quarter century.

By confirming U.S. use of Kwajalein, the landowners have a new opportunity to drive improvements at Ebeye and other islands in the atoll. The deal also gives the Marshall Islands an increased buffer should the Defense Department decide to pull out of Kwajalein at a future date. The U.S. cannot terminate the agreement before 2023, and must give seven years warning before it can leave after that, with various levels of termination payments required for the agreement to be terminated between 2024 and 2053.

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