9 May 2019

Chinese developers in FSM face hitches amid growing opposition

1:26 pm on 9 May 2019

Chinese developers in the Federated States of Micronesia (FSM) are facing increasing opposition from local communities, with one company blaming racism for setbacks it has faced there.

Sunset in Colonia, Yap.

Sunset in Colonia, Yap. Photo: Wikimedia Commons

A proposal by Kingma Holdings to set up a 100-room hotel in Yap worth around $US25 million was in March put on ice when the state's Governor, Henry Falan, voided the agreement because it exceeded the maximum legal lease term.

"Rule of law is of [sic] essential to sustainable development, and therefore we must ensure our laws are carefully complied with in any development effort," Mr Falan said in the letter, which has not previously been reported.

Despite the termination of its lease agreement - which was controversially signed with an administration which lost a tight election in November - the Shenzhen-based Kingma said this week it was in negotiations with the government for a new lease.

"While this news may be disappointing, it is not my intention to end our conversation on new development projects here," Mr Falan said in the March letter.

Kingma's representative for its Yap operation, Jackson Henry, said he had been advised by local officials to begin public consultations on the proposal.

The company has projected income from the 'Happiness Resort' in the state's capital, Colonia, at $US1.6 million in its first year, with a 10 percent room occupancy tax to be paid to the Yap State Treasury, according to a copy of its business plan.

Despite its pitch as a boon for the state of around 7,000 people, a post by Mr Henry in a local Facebook group on 26 April quickly attracted hundreds of comments, with many deriding the plan as an effort by China to expand influence in the Pacific region.

"It's a debt trap," posted one commenter.

Mr Henry, who operates a real estate firm in Palau, said Chinese were being wrongly stereotyped by Pacific communities.

"Every time a Chinese comes to try and do business in Micronesia, Yap, in any other place, the first thing that happens is the people just stand up and say 'hey, we don't want you,'" he said in an interview, adding that he would advise Kingma that it might be easier to give up on the project.

Still, it's not just locals that are raising opposition in Yap, a state that has in recent months become a flashpoint against Chinese investment in FSM.

While running for governor last year, Mr Falan campaigned in part on a commitment to review controversial developments, including at least one Chinese project. In October, local media reported him saying he was dismayed by a 50-room hotel proposed by Hong Kong-based Unique Eminent.

Despite a legally murky memorandum of understanding signed last year, the project never got off the ground, according to Mr Henry and Joyce McClure, a local journalist. A consultant with Unique Eminent did not respond to emailed questions.

The Governor's office did not respond to interview requests or emailed questions.

Joyce McClure's

Joyce McClure Photo: Twitter/ Joyce McClure

Ms McClure, a freelance reporter who this year faced calls for her expulsion - apparently over her scrutiny of Chinese investment in Yap - said that during her conversations with Mr Falan, he had expressed caution about Chinese developers.

"He is concerned about the kind of development that investors are bringing to Yap," she said.

Ms McClure said this position was key to the outcome of the November election, in which Mr Falan triumphed over incumbent Tony Ganngiyan, who had signed off on the original lease agreement with Kingma.

According to Ms McClure, it was the first election where people in Yap went against the will of the chiefs.

Tom Tamangmow, a manager with Yap's Visitors Bureau, said locals were not racist towards Chinese but rather they wanted to preserve the culture of the state and prevent it from becoming a mass tourism destination.

"The Yapese people have survived for so many years even on the very little that they have. I think they can still go on with the little that they have. They're not desperate to be millionaires overnight... What good for a person that would gain everything in this world and lose their soul?"