Chinese government provides grant to Micronesia for Hapilmohol-2 (H-2) Passenger and Cargo Vessel Project (Linked to Project ID#94666)

On March 11, 2020, the Twenty-First Congress of the Federated States of Micronesia (FSM) approved a resolution (C.R. No. 21-95, C.D. 1, C.D. 2) allocating USD 10 million of funds previously granted by the Chinese Government for the acquisition of a new vessel for the State of Yap. Then, on October 15, 2020, the Micronesian Secretary of Transportation and the Chinese Ambassador to Micronesia, on behalf of their respective governments, signed a contract for the implementation of the Passenger and Cargo Vessel Project. This project would involve the construction of a new 600-tonne class cargo and passenger ship: Hapilmohol-2 (H-2). H-2 is intended primarily to connect the State of Yap and will serve as a replacement for the aging Hapilmohol-1 (H-1), which had previously been granted by the Chinese government in 2007 (captured via Project ID#40029). The ship is expected to increase Micronesia's maritime transport capacity, stimulate the flow of people and goods, better assist the citizens of Yap dispersed throughout the outer islands, and provide nation-wide services as necessary. China and FSM jointly participated in the ship's design. The ship's construction was undertaken by an unspecified Chinese manufacturer. The implementation contract further specified that the ship would have a designed cruising range of no less than 2,500 nautical miles and an endurance of no less than fifteen days. Originally, the project was expected to sail from China to Yap 390 days from the signing of the contract, or around November 15, 2021. However, the handover ceremony of this project did not take place until June 28, 2022. Ambassador Huang Zhen and the Micronesian Minister of Transportation signed the formal handover documents. The ship subsequently was to be handed over by the national government to the Yap State government. The ship's contract also included a technical assistance component captured via Project ID#94666. The agreement stated that, starting from the second year after the ship’s delivery, upon the conclusion of its one-year warranty period, China would be responsible for dispatching four technicians to the FSM once a year. These technicians would carry out a 14-day technical inspection and maintenance on the ship. This would occur for four consecutive years.

Additional details

1. The planned completion date of November 15, 2021 is derived from 390 calendar days from the commitment date of October 15, 2020. 2. The grant funds for this project were committed at an earlier date based on the language of the FSM resolution's purpose: "to allocate the equivalent of $20,000,000 from previous grants from the People's Republic of China not yet allocated to the Federated States of Micronesia." Later, "WHEREAS, the People's republic of China has designated millions of dollars in grant funding to the" FSM. It is likely that they were provided via an Economic and Technical Cooperation Agreement - an ETCA - or some other variety of umbrella agreement. This is because, first, similar projects have used ETCA funds in Micronesia in the past (see projects #40012, #73403, #64510 and #89238, for example). Second, ETCAs are often used to fund projects by committing general grant funds first, then later allocating them to specific projects. Lastly, the FSM resolution states the available grant funds are "the equivalent of" 20 million USD, which is consistent with ETCAs providing grants in RMB. 3. This is the third ship donated by the Chinese Government to Micronesia. The previous two vessels are captured via Project ID#40029 and Project ID#64190.

Number of official sources

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Number of total sources

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