Archive for the ‘Palau – Chronology’ category

Testimony of Robert Scher Deputy Assistant Secretary of Defense, Department of Defense’s Support of the Palau Compact Agreement Review

June 18, 2011

Robert Scher
Deputy Assistant Secretary of Defense
South & Southeast Asia
Before the
Senate Committee on Energy and Natural Resources
June 16, 2011

Department of Defense’s Support of the Palau Compact Agreement Review


Members of the Committee, thank you for the opportunity to appear before you to discuss the importance of the Palau Compact Agreement. Since its enactment in 1994, the Compact has served as an important foundation for our security strategy in the Asia-Pacific region, providing the United States with critical access, influence, and strategic denial of access to other regional militaries. Our Compact with Palau, coupled with our compacts with the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI), has enabled DoD to maintain critical access and influence in the Asia-Pacific region. Passage of S. 343, a bill to amend Title I of PL 99-658 regarding the Compact of Free Association between the United States and Palau, is vital to allowing the Department to continue to benefit from the security arrangement afforded by the Compact. Today, I would like to take the opportunity to discuss the importance of Palau and the Compact to preserving U.S. national security interests in the Asia-Pacific region.

Palau’s Contributions to American and Global Security

Let me begin by discussing Palau in the context of the regional security environment in the Western Pacific. The Pacific Islands region is sparsely populated, physically isolated, and geographically widespread. However, Palau lies at a pivotal crossroad in the Pacific, an area near critical sea lines of communication and rich fishing grounds.

It is also located directly in the so-called “Second Island Chain” from Mainland Asia, close to all of the major East and Southeast Asian powers. With our strategic interests and equities expanding in shifting more toward the Asia-Pacific region, having Palau as a strong partner in the Pacific is increasingly important to maintaining military, as well as political and diplomatic, leadership in this quickly evolving strategic environment.

We must take note of critical security developments in the Pacific that require the Department’s sustained presence and engagement. Broadly speaking, countries such as China, Russia, and the Arab states are actively courting Pacific Island States, challenging the security status quo in the region, and increasing their economic, diplomatic, and military engagement with the island States. These critical security developments require sustained U.S. presence and engagement in the region.

Our relationship with Palau under the Compact would be reinforced with passage of this legislation and would ensure the United States the extraordinary advantage to deny other militaries access to Palau. For these reasons, it is imperative that the U.S. Government sustain this advantage.

Since the Compact of Free Association between the Government of the United States of America and the Government of Palau went into effect in 1994, the United States has taken full responsibility for the security and defense of Palau. This unique security arrangement has created a steadfast and reliable partner that helps the United States advance its national security goals in the region.

Palau in the Regional Security Context

I would also like to highlight the extraordinary service of Palauans in the U.S. Armed Forces and contributions to U.S. security. Under the provisions of the Compact, Palauans are able to serve in the U.S. Armed Forces. In fact, Palauans serve in the U.S. Armed Forces in impressive numbers. Sadly, five Palauans have made the ultimate sacrifice, and numerous others wounded, fighting on the battlefield in Afghanistan and Iraq since 9/11. Their sacrifice in the defense of the U.S. homeland and U.S. and Coalition security interests should not go unnoticed. Furthermore, in 2009, Palau stepped up to offer resettlement to six Uighur detainees from Guantanamo Bay at a time when other countries were hesitant to take these individuals.

Most notably, our commitment to the Compact with Palau allows the Department to leverage Palau’s strategic geopolitical position to sustain U.S. security interests in the region. The United States exercises full authority over and responsibility for the security and defense of Palau, an arrangement similar to those that we have with the Federated States of Micronesia and the Republic of the Marshall Islands. With this authority and responsibility, the United States is entitled to military access to the lands, water, and airspace of Palau and retains the right to deny such access to the military forces of other nations.

Our current security arrangement affords us expansive access, which will be an increasingly important asset in the defense and security interests of the United States in the Asia-Pacific region in coming years.

The Department recognizes the strategic value of the Compact, and we hope to continue to utilize it to serve our national security interests.

U.S.-Palau Defense Relations

We have growing national security interests and equities in the Western Pacific, a region that is traditionally overlooked and undervalued. Together with the two other Compact States, the Federated States of Micronesia and the Republic of the Marshall Islands, Palau forms part of an important security zone under exclusive U.S. control that spans the entire width of the Pacific when we include Hawaii and the U.S. territories, Guam and the Commonwealth of the Northern Mariana Islands. Palau’s location makes it an important part of the U.S. strategic presence in the Asia-Pacific.

The Palau Compact affords us strategic positioning in a country with a unique geopolitical position in the Asia-Pacific. The region’s lack of political and security infrastructure has given rise to a trend of growing transnational crime, which underscores the importance of continued DoD engagement in the Western Pacific. With this in mind, the Department seeks to develop creative ways to remain strategically engaged in the region. Recognizing that Palau has no military and only limited law enforcement capabilities and resources, the Department’s engagement with Palau primarily focuses on helping them develop maritime security and humanitarian assistance capabilities.

First, maritime security has been one of the most fruitful areas of cooperation between our two nations. DoD sends mobile training teams to Palau to help train local security personnel in maritime security-related matters. Palau’s EEZ is part of the Pacific’s richest fishing grounds and has traditionally faced serious problems with foreign exploitation of the fishery resources. Large numbers far-ranging fishing vessels from other pacific nations threaten encroachment. Japan, China, Taiwan, and the United States participate in a highly competitive multi-million dollar tuna industry. The Department is currently reviewing ways to use existing DoD assets and cooperative mechanisms to enhance maritime domain awareness in the region.

To combat illegal fishing, the U.S. Coast Guard has entered into a shiprider agreement with Palau, which enables Palauan security officials to embark on transiting U.S. Coast Guard vessels to conduct maritime patrol of its enormous, under patrolled Exclusive Economic Zone (EEZ). This kind of shiprider agreement allows the U.S. Coast Guard to play a more active role in developing partner law enforcement capacity of the island States. In addition, we are cooperating with Japan, Australia, Palau, the Marshall Islands, and Micronesia to bring to fruition the Sasakawa Peace Foundation’s $10 million initiative to support maritime surveillance in all three Compact States.

Second, the Department’s humanitarian programs have been very well-received in island communities. These programs primarily focus on the removal of explosive remnants of war from the World War II era, humanitarian projects, and prisoner of war/missing in action operations. DoD’s 12-person Civic Action Team maintains a rotational presence in Palau, conducting small- to medium-scale humanitarian and civic action projects in the health, education, and infrastructure areas.

Especially notable are the large-scale, multinational, pre-planned humanitarian missions, the U.S. Air Force’s Pacific Angel and U.S. Navy’s Pacific Partnership, which include medical and engineering projects in remote regions that are conducted in close coordination with local communities. In the summer of 2010, more than 1,900 Palauans were treated, 14 community service projects were completed, and more than 1,000 man hours spent across the three states of Koror, Peleliu and Angaur when USS BLUE RIDGE (LCC-19) stopped in Palau as part of Pacific Partnership 2010.

Also, the longest running humanitarian campaign in the world, Operation Christmas Drop, which provides air-dropped supplies to the people of the remote Micronesian islands each December, celebrated its 58th anniversary in December 2010 and continues annually to assist the remote islands of Palau. These humanitarian missions are evidence that the Department’s engagement in Palau extends well beyond traditional security parameters.


In conclusion, U.S. power projection in the Asia-Pacific region will continue to be essential to our national security interests. The U.S.-Palau Compact is a strategic asset for U.S. presence in the Western Pacific, an increasingly important region. Loss of the defense rights and exclusive access granted to the United States under the Compact would adversely affect U.S. national security. Our relationship with Palau is unique and reliable.

Passage of the proposed legislation approving the results of the 15- year Compact Review would ensure this important security agreement continues and would reassure Palau of our sustained commitment to Palau and its people and of our shared interest in regional and global security. I urge you to support the continued security agreement the United States has developed with Palau over the years and ask for your support of the proposed legislation.


Statement of the H.E. Johnson Toribiong, The 15th Anniversary Review

June 18, 2011

Statement of the H.E. Johnson Toribiong
President of the freely associated state of Palau before the U.S. Senate Committee on Energy and Natural Resources on S. 343, a bill to Approve the Agreement reached in the 15th Anniversary Review of the Compact of Free Association between the United States and Palau June 16, 2011


Chairman Bingaman, Ranking Minority Member Murkowski, and Distinguished Members: Thank you for this opportunity to testify on S. 343, the bill introduced by Senators Bingaman and Murkowski to approve the Agreement Between the United States and Palau reached in the 15th Anniversary Review of the relationship between the United States and Palau and Palau’s assistance needs required by Section 432 of the Compact of Free Association between our states. I am here to urge its expeditious approval. Mr. Chairman, I wrote you in February expressing my deep appreciation for your attention to Palau over the years, your sponsorship of this bill, and your leadership in continuing assistance to our islands while the Congress considers the Agreement. I reiterate this appreciation today.

Senator Murkowski, you are also owed Palau’s profound gratitude for your leadership regarding the Agreement.

Committee staff members Allen Stayman and Isaac Edwards are as well. Palau’s thanks apply for the letters that the Committee’s bipartisan leadership sent United States executive branch officials asking about the importance of the Compact and the Agreement to United States security interests and requesting a proposed amendment to the legislation to provide the budgetary offset that is needed under United States law and congressional rules to enable the legislation to be considered.

In response, the Departments of Defense and State wrote that the legislation is “vital” to United States security, also using words such as “critical,” “increasingly important,” and “invaluable.” In the words of the Defense Department, a failure to pass it would “jeopardize” United States defense—which understands the situation in Palau. The State Department also wrote that the Department of the Interior has assured that congressional budget requirements would be met.

I hope that the Interior Department makes a proposal for this purpose soon. To help explain why and why this legislation is needed, I will outline the background of the relationship between the United States and Palau and the Agreement that the bill would approve.

It began with the Battle of the island of Peleliu in 1944 when the United States liberated Palau from Japan in one of the bloodiest battles of World War II. Originally expected to be over in four days, it lasted for more than two months, also resulting in casualties on Angaur and Ngesebus, two other islands of Palau. All told, the United States Armed Forces, consisting of 1st Marine Division, later relieved by the Army’s 81st Infantry Division, suffered a total of approximately 9,500 casualties in Palau, including almost 2,000 killed in action.

Through this, valiant Americans liberated Palau from the yoke of colonialism that had weighed heavily on my people for almost 100 years, from the time that the Spanish wrenched freedom from our ancestors, through the era of German rule, and lastly, under the Empire of Japan. Liberation also set in motion events that 50 years later would lead to Palau regaining its sovereignty. Nevertheless, the gargantuan battle devastated our islands and left our people destitute. Many Palauans were killed. At the end of World War II, fewer than 5,000 Palauans remained alive.

Having taken Palau, the United States governed it; first, under Naval Administration and then as a part of the United Nations Trust Territory of the Pacific Islands. The territory was the U.N.’s only strategic trusteeship at the request of the United States. This made it the only trusteeship subject to U.N. Security Council as well as Trusteeship Council jurisdiction. A Trusteeship Agreement committed the United States to develop Palau socially, economically, and into a self-governing status—but also gave the United States complete control over the islands for which so many Americans had lost their lives and which had tremendous continuing strategic importance to the United States and international peace.

At first, the territory was governed under a policy that closed the islands off from the world, invested little, and only permitted a subsistence economy. As the years went on, however, the United States began to be pressured by the inherent conflict between its obligation to develop Palau into self-government and its desire to maintain military control over a vast, strategic expanse of the Pacific.

The Kennedy Administration’s two-pronged solution—continued by succeeding administrations—was, one, to extend substantial assistance, particularly several domestic United States programs, to bind the islands to the United States, and, two, to encourage the idea of free association instead of independence. This status would enable the territory to become self-governing, but retain for the United States full military authority almost as if the islands were United States territory. Compacts of Free Association were negotiated with Palau and two other groups of islands of the Trust Territory.

The Compact with Palau, which was signed in 1985, ultimately made Palau a nation, but gave the United States the desired control over a strategic expanse of the western Pacific the size of Texas between the Philippines, Guam, and Indonesia, as well as military basing rights for 50 years. In consideration, it also committed to give Palau budgetary, developmental, and program assistance, and permits Palauans to enter and work in the United States, as well as to join the United States Armed Forces as—many do.

The Compact as negotiated was not universally embraced in Palau. It took two United States laws, the second enacted in 1989 addressing concerns of many of our people, and seven referenda in Palau before it was finally approved in our islands. And then it took years to obtain United Nations Security Council approval because of questions as to whether the Compact’s United States military rights were more extensive than can exist in another sovereign nation and inconsistent with the fundamental principle of free association.

Palau finally became a state in free association with the United States on October 1st, 1994.

The Compact specified assistance for 15 years and provides, in Section 432, that subsequent assistance for at least the duration of the 50 years of base rights would be determined in periodic joint reviews of Palau’s needs. Some of Palau’s needs during Years 15 through 50 of free association were to be met through a trust fund. But the framers of the Compact wisely recognized that more would be needed and Palau’s needs could not be projected so far into the future. The reviews were also mandated so that both of our freely associated states could re-evaluate the relationship as a whole on a periodic basis. So, the Compact provides for assessments of our association and of the assistance that Palau needs at the 15, 30, and 40-year marks. It also commits the United States to act on the needs of Palau identified in the reviews.

The 15th anniversary of the Compact occurred on October 1, 2009. Because the assistance specified in the Compact was to expire September 30, 2009, Palau sought to begin the 15th Anniversary Review in 2008. However, although some United States officials agreed to take steps in this regard, the effort failed. The process did not get seriously started until early 2009 when I visited new Secretaries Clinton and Salazar. Then, beginning in May 2009, my Compact Review Advisory Group began to meet with a team of United States representatives led by the Department of State.

The Review was protracted due to delays on the United States side. This necessitated a continuation of assistance to Palau for essential government services in Fiscal Year 2010 based on Fiscal Year 2009 funding which you, Mr. Chairman, others, and, then, the United States Administration requested. Agreement was finally reached last September 3rd after the personal involvement of Secretary Clinton, Assistant Secretary of the Interior Babauta, Deputy Secretary of the Interior Hayes, then Deputy Secretary of State Lew, Deputy Assistant Secretary of State Reed, and others, and constructive work done by all involved with the United States team.

Senior United States officials encouraged me to sign the Agreement last summer so that it could be approved by the United States Congress in time for Fiscal Year 2011 appropriations. Ultimately, however, it was not submitted to you for approval until this past January. This necessitated another continuation of assistance to Palau for essential services based on Fiscal Year 2009 funding, which I appreciate you, Mr. Chairman, urging and Chairman Inouye of the Appropriations Committee insisting upon.

It also resulted in new requirements regarding the Agreement’s approval in the United States Congress. The assistance that the Agreement would provide would be considered mandatory appropriations. Last year’s PAYGO Act created a requirement that the cost be offset. New House rules require that the offset be in the form of a reduction in other mandatory spending to make the legislation even eligible for consideration—and leaders of the new House majority have made clear that this is important politically as well. Under the Agreement, Palau would be provided assistance totaling $215.75 million from Fiscal Years 2011 through 2024—although more than $13 million of this was already appropriated in the continuing appropriations for Fiscal Year 2011.

The total amount is critical for Palau but it is much less than what was provided during the first 15 years of the Compact. In addition, the Agreement would, in response to demands of the United States negotiators, phase out assistance for essential government services and infrastructure by Fiscal Year 2024, with assistance for government services totally ending in Fiscal Year 2023, a year before the next review.

There are other issues: There is no provision to adjust amounts for inflation as in the Compact and the revised compacts with the other freely associated states; the subsidy for the United States Postal Service would continue even if institutes international rates for Palau delivery; and Palau would have to begin paying for audits the United States wants.

The Agreement would also require mutually and expertly determined substantial Palauan spending and revenue reforms. These reforms will require tough measures but are intended—and needed—to strengthen Palau’s budgetary practices and its economy. The reforms would ultimately lessen our islands’ absolute need for United States assistance. This will create a stronger, more self-reliant Palau, which is what our islands should be and which would be a better partner for the United States.

Finally, the Agreement would also make changes in United States programs and services in response to requests of various United States agencies in areas including civil aviation, postal service, telecommunications, and weather reporting, amending seven of the Compact’s subsidiary agreements. The Agreement would, additionally, amend the Compact to reflect Palau’s current practice of issuing machine-readable passports, which enhance United States border security.

Strategic control of Palau and its extensive waters and base rights are not all that are at stake for the United States. Our relationship is based upon our common interests and ideals. For example, year in and year out, Palau votes with the United States in the United Nations more than any other member state. It has stood alone with the United States on key votes, including those concerning Israel and Cuba, despite pressure and entreaties from other nations that have offered friendship.

The Government of Palau’s agreement to the request of the United States that we provide a home for Chinese Muslims that the Bush Administration determined it had erroneously detained at Guantanamo is another example of the unmatched alliance between Palau and the United States. We agreed to provide this sanctuary when no other nation would. Many Palauans had strong reservations, however, and we also did so over the strong objections of the Government of China, which had made economic overtures to our islands. In fact, Palau has provided third-country refuge to more former Guantanamo detainees than any nation other than predominantly Muslim Albania to assist the United States.

And there is no more telling demonstration of the closeness Palau feels to the United States than the record of Palauans serving in the Armed Forces of the United States, which I have been told is at a higher rate than any other state of or associated with the United States. Palauans have fought alongside their American comrades-in-arms in Lebanon, Vietnam, Iraq, Afghanistan, and in other theaters of war, and have given their lives and limbs in this service. Just last month, I attended the funeral of another young Palauan who was killed in the Afghanistan. Three of his siblings continue to serve in the United States Army.

Palau is the United States’ closest and most loyal ally. The vast majority of Palauans are happy and proud to be able to help the United States and give back to a nation that has done so much for them.

But there are elements that who would use any failure of the United States to live up to its commitments under the Compact to try to diminish the confidence of Palauans and others in the strong relationship between our freely associated states and to encourage Palau in a different direction.

A failure of the United States Congress to approve this Agreement or an undue delay in assistance which now constitutes 24% of Palau’s budget would encourage some—including some in Palau who questioned the Compact even when it was approved—to argue that Palau should move away from the United States and look elsewhere.

And if there is no agreement or an end to essential assistance, many Palauans would insist on an end to the United States military rights under the Compact that the Department of Defense has advised are essential to United States security and for maintaining regional peace.

Already some Palauans are enticed by the new economic power of China, which clearly wants more influence in Palau. We all want greater economic interaction with China, but it should be without compromising the close alliance between Palau and the United States.

I, personally, have a fundamental and enduring commitment to strengthen the relationship between Palau and the United States. This reflects the real desires of the majority of my people. But we will all face a very serious challenge if this Agreement is not approved, and it is simple logic that United States military rights under the Compact and other Palauan support for the United States under the current association could not be expected to continue if the United States does not continue to meet the promise of the Compact.

The relationship will also be significantly—and very unadvisedly—undermined if assistance that the Government of Palau absolutely needs to continue critical services to its people is allowed to lapse even if the Agreement is subsequently approved by the United States Congress. In this regard, United States officials should plan to continue assistance on at least the current basis if they do not act to enable the Agreement to be approved by United States law soon. The delay in United States action on the Agreement has already led to substantial questions about it being raised by influential leaders of our island. The danger of the growing doubts should be recognized by United States officials. The history of the Compact in Palau should not be forgotten. I am, however, hopeful that this hearing will be at a catalyst for the United States executive branch and congressional action needed to approve the Agreement, and am confident that Palau will reflect its appreciation for the United States by approving the Agreement.

I respectfully request the Committee to favorably report the bill and lead the Congress in its enactment.

Thank you for your attention and consideration.

Statement of Anthony M. Babauta: Compact of Free Association, S. 343

June 18, 2011

Statement of Anthony M. Babauta
Assistant Secretary of the Interior
– Insular Areas, Department of the Interior
Before the Senate Committee on Energy and Natural Resources
Regarding S. 343 and the Agreement between the Government of the United States of America and the Government of the Republic of Palau Following the Compact of Free Association Section 432 Review

June 16, 2011


Chairman Bingaman and members of the Committee on Energy and Natural Resources, I am pleased to be here today to discuss S. 343, a bill that would amend Public Law 99-658 and approve the results of the review of fifteen-years of the Compact of Free Association between the Government of the United States and the Government of the Republic of Palau (ROP). My colleagues from the Departments of State and Defense will discuss the importance of the United States – Palau relationship as it relates to national security and our policies in the Pacific. My statement today will focus on the financial assistance components of the new agreement with Palau for which the Department of the Interior will be responsible.


The Department of the Interior and the Government of Palau have been partners since 1951, when the Navy transferred to the Department of the Interior the administration of the United Nations Trust Territory of the Pacific Islands. Since the end of World War II, Palau has emerged from its status as a war-ravaged protectorate to become a sovereign nation and member of the world community. Consistent with the provisions of the 1994 Compact of Free Association, Palau has exercised its sovereignty in accordance with the principles of democracy and in a firm alliance with the United States.

The Compact of Free Association has proven to be a very successful framework for United States – Palau relations. The goals of the first fifteen years of the Compact have been met: the trusteeship was terminated; Palau’s self-government was restored; a stable democratic state was established; third countries were denied military influence in the region of Palau; and with United States financial assistance, a base for economic growth has been provided.

The original financial terms and conditions of the Compact have been fully implemented by the United States and Palau. The United States, through the Department of the Interior, has provided over $600 million of assistance including $149 million used to construct the 53-mile road system on the island of Babeldoab and $38.7 million for health care and education block grants. Most of the funding, $400 million, was expended on activities defined under Title Two of the Compact, which included general government operations, energy production, communications, capital improvements, health and education programs and establishment of the Compact Trust Fund.

The Compact Trust Fund was an important feature of U.S. assistance. Capitalized with $70 million during the first three years of the agreement in the 1990s, the objective of the trust fund was to produce an average annual amount of $15 million as revenue for Palau government operations for the thirty-five year period fiscal year 2010 through fiscal year 2044. The fund also generated $5 million in annual operational revenue for Palau since the fourth year of the agreement, totaling $60 million for the years 1998 through 2009.

Palau has made strong economic gains under the Compact of Free Association. Its growth, in real terms, has averaged just over 2 percent per year. Palau’s governmental services are meeting the needs of its community. Palau has taken control of its destiny and is moving in the right direction.


As both the United States and Palau began the required Compact section 432 review several years ago, each side took pride in the growth evident in Palau. However, the review, which examined the terms of the Compact and its related agreements and the overall nature of the bilateral relationship, also focused attention on several important issues. The United States and Palau agreed that prospects for continued economic growth relied on four key factors: 1) the viability of the Compact trust fund and its ability to return $15 million a year; 2) the implementation of fiscal reforms to close the gap between Palau’s revenues and expenditures by shrinking its public sector and raising revenue; 3) the promotion of increased foreign investment and private sector growth, and, 4) the continuation of certain United States assistance, including access to United States Federal domestic programs and services.

From the perspective of the United States, the viability of the Compact Trust Fund was of paramount concern. The economies of Pacific islands are always fragile; their size, distance from markets and relative lack of resources make growth a perennial problem. Although Palau has some relative advantages in contrast to other Pacific island countries, the Compact Trust Fund was established with the intention of providing a relatively secure revenue base for Palau’s government through fiscal year 2044. As the 15-year review began, Palau’s trust fund, which had earned roughly 9 percent annually since its inception, had suffered significant losses. As GAO reported in 2008, it was uncertain that the trust fund could pay $15 million annually to the Government of Palau through fiscal year 2044.


The condition of the Compact Trust Fund, the need for fiscal and economic reforms, and the goal of strengthening conditions for private sector growth became the focus of the bilateral review. I believe that the Agreement Between the Government of the United States of America and the Government of the Republic of Palau Following the Compact of Free Association Section 432 Review (Agreement) that arose from the 15-year review, and which is embodied in S. 343 will address these concerns, maintain stability, promote economic growth and increase the progress already made under the Compact of Free Association.

The Agreement extends United States assistance, in declining annual amounts, through fiscal year 2024. The total of direct financial assistance to Palau under the Agreement is $229 million, although $13.1 million of that amount has already been appropriated for direct economic assistance by congressional action in fiscal year 2010 and $13 million in fiscal year 2011.

Under the Agreement, in 2011 the United States is to provide Palau $28 million (of which $13 million is the aforementioned direct assistance), and the amount will decline every year thereafter. The declining amount of assistance is intended to provide an incentive for Palau to develop other sources of local revenue and serves notice that the Palauan government has agreed that it will need to make systemic adjustments to its government in order to live within those same resources.

The Agreement contains five categories of financial assistance to Palau.

Direct economic assistance. The Agreement provides for direct assistance for education, health, administration of justice and public safety, in amounts starting at $13 million in 2011, declining to $2 million, the last payment, in 2023. The timing of direct assistance payments is conditioned on Palau’s making certain fiscal reform efforts. If the United States government determines that Palau has not made meaningful progress in implementing meaningful reforms, direct assistance payments may be delayed until the United States Government determines that Palau has made sufficient progress on the reforms.

Infrastructure projects. Under the Agreement the United States is to provide grants to Palau for mutually agreed infrastructure projects—$8 million in 2011 through 2013, $6 million in 2014, and $5 million in both 2015 and 2016. The Agreement does not name any projects.

Infrastructure maintenance fund. Under the Agreement, a trust fund will be established to be used for maintenance of capital projects previously financed by the United States, including the existing Compact Road. From 2011 through 2024, the United States government will contribute $2 million annually and the Palau government will contribute $600,000 annually to the fund. This will protect crucial United States investments in Palau that significantly contribute to economic development.

Fiscal consolidation fund. The United States will provide grants of $5 million each in 2011 and 2012 to help the Palau government reduce its debt. United States creditors must receive priority, and the government of Palau must report quarterly on the use of the grants until they are expended. This fund will also simplify needed economic adjustments to Palau’s fiscal policies.

Trust fund. The Agreement increases the size of Palau’s trust fund directly and indirectly to bolster the likelihood that the trust fund will yield payments of up to $15 million annually through 2044. First, the United States will contribute $3 million annually from 2013 through 2022 and contribute $250,000 in 2023. Second, the government of Palau will delay withdrawals from the fund, drawing $5 million annually through 2013 and gradually increasing its withdrawal ceiling from $5.25 million in 2014 to $13 million in 2023. From 2024 through 2044, Palau is expected to withdraw up to $15 million annually, as originally scheduled. Under the Agreement, withdrawals from the trust fund may only be used for education, health, administration of justice and public safety.


The United States and Palau will work cooperatively on economic reform. The Agreement requires the two governments to establish an advisory group to recommend economic, financial and management reforms. Palau is committed to adopting and implementing reforms. Palau will be judged on its progress in such reforms as the elimination of operating deficits, reduction in its annual budgets, reducing the number of government employees, implementing meaningful tax reform and reducing subsidies to public utilities.

Palau’s progress in implementing reforms will be addressed at annual bilateral economic consultations. If the government of the United States determines that Palau has not made significant progress on reforms, the United States may delay payment of economic assistance under the Agreement.

The Agreement also continues to provide other United States services and grant programs, including the United States Postal Service, the National Weather Service, and the Federal Aviation Administration. The Postal Service moves mail between the United States and Palau, and offers other related services. Palau maintains its own postal service for internal mail delivery. The National Weather Service reimburses Palau for the cost of operating its weather station in Palau, which performs upper air observations twice daily, as requested, for the purpose of Palau’s airport operations and the tracking of cyclones that may affect other United States territories, such as Guam. The Federal Aviation Administration provides aviation services to Palau, including en-route air traffic control from the mainland United States, flight inspection of airport navigation aids, and technical assistance and training.

The proposed legislation will also allow the continuance of other Federal program services currently available to Palau under separate authorizing legislation, including programs of the Departments of Education and Health and Human Services. The general authorization for Palau to receive such services was created by the Compact, but individual program eligibility has been created by specific laws that include Palau as an eligible recipient.

The Palau Compact legislative proposal does have PAYGO costs. These costs are included in the President’s Budget along with a number of legislative proposals with PAYGO savings. Some proposals that fall under this Committee’s jurisdiction include:

* Net Receipt Sharing, which takes into account the costs of managing Federal oil and gas leases before revenues are shared with the States;
* Terminate payments for reclaiming abandoned coal mines to states that are already certified as having cleaned up all of their priority sites; and
* Production incentive fees on non-producing Federal oil and gas leases.

Each example by itself could provide more than enough savings to offset the costs of the Palau Compact. These proposals are also viable; Net Receipt Sharing, for example, has been enacted for four years through annual appropriations language.

The Administration looks forward to continuing our partnership with Palau. The Department of the Interior is proud of the positive advancements our assistance to Palau has provided over the last fifteen years and looks forward to the progress that we anticipate will be made over the next fifteen years.

Compact of Free Association with the Republic of Palau: Assessing the 15-year Review

June 17, 2011

Compact of Free Association with the Republic of Palau: Assessing the 15-year Review

Frankie Reed
Deputy Assistant Secretary
Statement before Senate Committee on Energy and Natural Resources
Washington, DC
June 16, 2011


Chairman Bingaman, Senator Murkowski, and Members of the Committee, I am here today to testify on the importance of our bilateral relationship with Palau as well as to discuss the Compact with Palau and proposed legislation approving the results of the mandated 15-year Compact Review. History has proven that this small Pacific island nation remains indispensable to our national security and other core interests in the Pacific. Current and future challenges convince us we must remain steadfast and true to a thriving relationship that delivers much more than it costs in dollars and cents.

Our Compact with Palau was concluded in 1994. It does not have a termination date and requires a review on the 15-year, 30-year, and 40-year anniversaries. Our two governments worked closely over 20 months of negotiations to conclude the 15-year review last September, which resulted in an agreement I signed with President Toribiong. The legislation now proposed to implement the agreement is the outcome of that review and is the manifestation of the shared commitments between our two governments.

The Palau Compact Review legislation amends Title I of Public Law 99-658 regarding the Compact of Free Association between the Government of the United States of America and the Government of Palau. In formal language, this bill approves the results of the 15-year review of the Compact, including the Agreement between our two governments following the Compact of Free Association Section 432 Review. It appropriates funds for the purposes of the amended PL 99-658 for fiscal years ending on or before September 30, 2024, to carry out the agreements resulting from the review.

Palau has been and continues to be a strong partner with the United States. Its location on the westernmost point of an arc from California to the Philippines creates a security zone that safeguards U.S. interests in the Pacific. That relationship was born in World War II and has been built over the decades since 1945.


Allow me to look back to the end of World War II. In 1947, the United Nations assigned the United States administering authority over the Trust Territory of the Pacific Islands, which included Palau and island districts of Micronesia that we had liberated from Japanese occupation. During that period, the United States built roads, hospitals and schools and extended eligibility for U.S. federal programs in the Trust Territory. In the following years, the trustee islands sought changes in their political status. Palau adopted its own constitution in 1981, and the governments of the United States and Palau concluded a Compact of Free Association that entered into force on October 1, 1994. The Compact fulfills our solemn commitment to Palau’s self-governance in accordance with the freely expressed wishes of the Palauan people. The Compact also provides for an important element of our Pacific strategy for defense of the U.S. homeland and allows us to carry out important foreign policy objectives.


Mr. Chairman, the United States paid dearly in blood in WWII to free Palau. It is a story that every American should understand and that generations before us have seen as creating a sacred trust to remember and honor.

Rising from those ashes, with the strong and steady support of the American people, Palau rebuilt its infrastructure and modeled its government upon the principles of democracy, human rights, and fundamental freedoms. President Toribiong recently signed an Executive Order designating the last Monday of May Memorial Day in Palau, an official holiday. On this day, the people of Palau honor those who paid the ultimate sacrifice to defend the freedom and democratic principles we all enjoy today. On May 30, President Toribiong and our U.S. Ambassador to Palau laid wreaths on the grounds of the WW II monument in Peleliu State. More than 2,000 American soldiers lost their lives and more than 10,000 were wounded in the Battle of Peleliu, one of the bloodiest battles of WW II. Palau remains a strong reliable partner and continues to share our values through these historic ties.

The United States can count on Palau to vote with us on controversial issues in multilateral fora. On a number of important resolutions in the General Assembly over the past year, Palau stood by us and provided critical votes. For example, Palau has voted with the United States on controversial resolutions related to Israel 100 percent of the time and on human rights issues, 93 percent of the time. Palau’s overall voting coincidence with us is at 87 percent.

Although Palau is a steadfast and committed friend of the United States, China, the Arab states, Cuba and others are actively courting Palau, and the other Pacific island nations, as they seek to build influence in the region. The United States must maintain and strengthen its relationship with Palau by maintaining our strong friendship and upholding our commitments as set forth in the Compact.

The results of the 15-year Compact Review as reflected in the subsequent legislation nurture our unique relationship. By supporting the Compact Trust Fund, the United States contributes to Palau’s development and secures our security interests. Our contribution represents a vital link between our two countries. Implementation of the results of the Compact review sends a reassuring signal to Palau and others in the Pacific region and beyond that the United States follows through on its commitments, in good times and in difficult times. These are indeed difficult times for us. However, it is essential to our long-term national interests to make sure that the United States remains true to its identity as a Pacific power. Meeting vital interests more than six decades ago, the United States invested blood and treasure. Today, it remains in our strategic, political and economic interests to nurture Palau’s young democracy, support its development, and increase its self-sufficiency.

U.S. Defense Interests in Palau

Mr. Chairman, the United States and the people of the Pacific have fought side-by-side. Our identity as a “Pacific power” was, in many ways, forged on the beaches of the Pacific during World War II.

The importance of our special relationship with Palau is most clearly manifested in the U.S. defense posture in the Asia–Pacific region, which forms a north-south arc from Japan and South Korea to Australia. Maintaining U.S. primacy in the Pacific depends on our strong relationship with the Freely Associated States of Palau, the Marshall Islands and the Federated States of Micronesia, which along with Hawaii, Guam, the Commonwealth of the Northern Mariana Islands, American Samoa and the smaller U.S. territories comprise an invaluable east-west strategic security zone that spans almost the entire width of the Pacific Ocean.

Additionally, critical security developments in the region require the United States’ sustained presence and engagement, particularly given the range of U.S. strategic interests and equities in the Western Pacific. Essential elements of our presence include the Reagan Ballistic Missile Defense Test Site on U.S. Army Kwajalein Atoll and disaster relief operations throughout the region. This posture will become increasingly important as regional powers become increasingly active and seek to supplant U.S. military leadership and economic interests in the region. Following through on our commitments to Palau, as reflected in the proposed legislation, buttresses our defense posture in the Western Pacific.

Palau does not maintain its own military forces, but under the terms of our Compacts, their citizens are eligible to serve in the U.S. Armed Forces. And they do. Palauan citizens volunteer in the U.S. military at a rate higher than in any individual U.S. state. Approximately 200 Palauan men and women serve in our military today, out of a population of about 14,000. Palau is indeed a strong partner who punches well above its weight. We are grateful for their sacrifices and dedication to promoting peace and fighting terrorism. Palau has deployed soldiers for U.S. coalition missions and participated in U.S.-led combat operations in the world’s most difficult and dangerous places. Since 9/11, at least six Palauans lost their lives in combat.

Just this year, Sgt. Sonny Moses was killed in Afghanistan while serving with his comrades providing computer training to Afghan citizens. Sgt. Moses was the youngest of eight children of Mr. and Mrs. Sudo Moses and when his body came to Palau for burial, three of his siblings came home in U.S. uniform. Of the family of eight, four chose to serve in the United States military. And during the motorcade for his procession to the Capitol the streets of Koror were lined with citizens waving U.S. and Palauan flags. This sad occasion shows just how close the ties between the United States and Palau truly are.

President Toribiong’s niece and Minister Jackson Ngiraingas’ son both serve in the U.S. Navy. The son of Minoru Ueki, Palau’s Ambassador to Japan, serves in our army. Palau Paramount Chief Reklai has a daughter and son in the Army. Palau’s Ambassador to the United States Hersey Kyota has two adult children serving in the Armed Forces. He has several nephews serving in the Army and Marine Corps. Similarly, many other Palauan sons and daughters of other government officials and of ordinary Palauan citizens served honorably in U.S. military units over the past decades and most recently in Afghanistan and Iraq.

The Compact and our continued commitment to Palau, as manifested in the proposed legislation, will reinforce an important element of our Pacific strategy for defense of the U.S. homeland. As you will hear from Deputy Assistant Secretary of Defense Robert Scher, the U.S.-Palau Compact includes provisions that close Palau to the military forces of any nation, except the United States. The United States enjoys access to Palauan waters, lands, airspace, and its Exclusive Economic Zones (EEZ), a vital asset for our defense and security needs. Our relationship with Palau allows the United States to guard its long-term defense interests in the region.

Beyond Defense Interests

The importance of our strong relationship with Palau extends beyond defense considerations. Palau works closely with the U.S. to detect and combat international crime and terror. In 2009, Palau resettled six ethnic Uighur detainees from Guantanamo at a time when few other countries were willing to step up. Palau was the first island partner to sign the U.S. Coast Guard ship rider and ship boarding agreements that bolster law enforcement in the vast Pacific region.

Our people-to-people ties continue to grow. Since 1966, more than 4,200 Peace Corps Volunteers taught English, offered life skills education, and supported economic development, education, capacity building, and marine and terrestrial resource conservation in Palau and in the two other Freely Associated States. Today approximately 55 Peace Corps volunteers serve in Micronesia and Palau.


Mr. Chairman, the President, Secretary Clinton, and others in this Administration deeply appreciate the historic World War II legacy of the Pacific and the strategic role it plays, particularly in keeping the Pacific Islands allied with the United States. Today, we find ourselves in a tumultuous global political environment that calls for wisdom and long-term strategic vision. An investment in Palau today will help to ensure Palau will continue to stand with us as a staunch, dependable, democracy tomorrow.

Palau is important, but why enact the U.S.-Palau Legislation now?

Palau’s stable government is modeled on our own. Palau shares our vision on important international goals for human rights and democracy. The maturity of the democratic process in as relatively young a state as Palau is a testament to the strong values of the people of the Pacific and reinforces the value of the Compact as a vehicle for their transition to greater self-sufficiency.

Palau was the first insular area, including the U.S. territories, to get a clean audit opinion on the government’s financial statements. Public facilities are in good repair, and Palau puts a great deal of care into maintaining a pristine environment, especially by addressing critical areas of energy, water, sewer, and transportation. They understand the importance of continuing efforts to operate within a balanced budget.

We must remain true to our commitment to the people of Palau. The bottom line is that Palau is an irreplaceable and loyal partner, who shares our interests in preserving regional and international security. Failing to affirm the results of the 15-year review of the Compact with Palau is not in our national interest. We appreciate the interest and leadership of this Committee in considering this legislation promptly and hope both the Senate and the House will pass it this session.

Although the Department of the Interior is responsible for implementing and funding the Compact programs, I would like to say a few words about the assistance package resulting from the 15-year review. The direct economic assistance provisions of the Compact expired on September 30, 2009. The outcome of the 15-year review resulted in an assistance agreement that provides $215.75M to Palau over the next 14 years and enables Palau to transition to reliance on a $15 million a year withdrawal from its trust fund; instead of the $13 million in direct assistance and $5 million from its trust fund that it has come to rely on, The assistance package included in the legislation, which provides approximately $215 million to Palau divided over the next 14 years, reflects an effort to ease Palau off of U.S. direct economic assistance as it continues to grow and reform its economy. As a result of the Compact review, Palau will have continued eligibility for a wide range of Federal programs and services from agencies such as the U.S. Postal Service, federal weather services, the Federal Aviation Administration, the Department of Agriculture, and Health and Human Services.

If the bilateral agreement between our two countries is not implemented, the trust fund would be unable to provide a steady outlay of $15 million a year from now until 2044, which was the intended purpose of the Compact negotiators in the 1980s. The Trust Fund suffered considerable shrinkage as a result of the recent global financial crisis. For the smooth continuation of our bilateral relationship, it is crucial that we provide Palau the assistance agreed to in the Compact review.

Mr. Chairman, in closing I would like to emphasize that Palau, a small island country far away in the Pacific, was our protectorate and is now our ally. The people of Palau are woven into the American fabric, serving with distinction and honor in our military and living and working beside us in the United States. Thanks to its geography, Palau is a unique outpost in our security arc in the Pacific. It is a place America liberated with its blood and that now helps us protect the western flank of our homeland. The economic center of gravity continues to shift to the Asia Pacific, and the vital importance of a stable, increasingly prosperous and democratic Palau to U.S. interests in this dynamic region continue to grow.

I hope that my testimony today, coupled with that of my colleagues from the Department of the Interior and the Department of Defense, has given you a more robust and complete picture of the key role played by the Compact in not only cementing our partnership with Palau, but also in serving the interests of the United States.

I look forward to working with you and other Members of Congress to secure and advance U.S. interests in Palau by passing the legislation implementing the results of the Compact review.

Thank you again for giving me the opportunity to testify before you today and to clarify the importance of this legislation. I look forward to answering your questions.

President Toribionq’s SORA 2011

April 30, 2011

A Le Ko Kau Forum | April 29, 2011 at 11:06 pm | Categories: Uncategorized | URL:

Text of President Johnson Toribiong’s
2011 Annual Progress Report Delivered to the
Senate and House of Delegates of the Eighth Olbiil Era Kelulau on
April 28, 2011


Reklai, Ibedul, Ebil Reklai, Bilung, Mr. Senate President and Honorable Senators, Mr. Speaker and Honorable Delegates of the Eighth Olbiil Era Kelulau, Distinguished members of the Diplomatic Corps, Honored guests, my fellow Palauans, Ladies and Gentlemen.

Good morning. I am honored and privileged to be able to present to you today my State of the Republic message.

Article VIII, § 13 of our Constitution states that, “The President shall make an annual report to the Olbiil Era Kelulau on the progress of his administration.” I humbly stand before you today to deliver the annual progress report of my administration. Thank you for your attendance this morning.

This is the third time that I have had the honor to deliver a report on the progress of my administration.

As you may recall from my inaugural address, I identified the challenges that I perceived our young Republic faced at that time and expressed my optimism that together we would be up to the task of dealing with them. It was my belief then and I say it now that working together we can turn the very challenges we face into the promise of a brighter future for us and our future generations. We all know that overcoming our challenges takes time and requires unwavering dedication, hard work, and sacrifice.

Before proceeding with my progress report, let us first count some of our blessings. First, let us remind ourselves that we are a blessed people inspired by the resilient Palauan spirit of our ancestors. We have already overcome our historical challenges–domination by foreign colonial powers and the devastation of WorId War II-to rebuild our culture, our islands and our government to be what it is today, a sovereign nation in free association with the United States of America.

Honorable Senators and Delegates, we took office in the fifteenth year of the Compact of Free Association when on September 30, 2009 direct financial assistance and some programmatic assistance and grants from the United States were to end. We were to rely on our own resources and the proceeds from the Compact Trust Fund. Regretfully, we must acknowledge that we had not adequately prepared ourselves to do so. As a result we faced a serious financial challenge, a challenge that was intensified and made worse by the global economic recession that was in full force in 2009. I am proud to be able to say that my Administration persevered and prevailed when we convinced the United States Government that the operating requirements of our Government necessitated the extension to Palau of direct financial assistance and programmatic assistance and grants at the same level as before to continue through FY 2010 and 2011. God has blessed us to have such a faithful ally and friend as the United States.

At this time recent events require me to pause for a moment and to express on behalf of all of the people of Palau our heart-felt condolences and sympathies to Mr. and Mrs. Sudo Moses ofNgchesar State for the untimely loss of their son, Sergeant E-5 Sonny J. Moses, who died on April 18 while on duty with the U.S. Armed Forces in Afghanistan in the fight to defend and preserve freedom. May God grant comfort and peace to his parents, family members and friends.

I also want to once again convey to the Government and people of Japan through their representative, H.E. Ambassador Yoshiyuki Sadaoka, our sincere condolences, sympathies and prayers. It was only a little over one month ago that Japan was ravished by an unbelievably intense earthquake and an equally unprecedented tsunami. Mr. Ambassador, we grieve with you at the loss and suffering of so many of your citizens.

In this latter regard, I want to thank the people of Palau for their generous contributions to the fund drive that the Office of the President and the Palau Red Cross Society organized. On the first day alone over $25,000.00 was contributed to help the victims of this disaster in Japan. Ultimately over $30,000.00 was contributed. Ambassador Sadaoka, it is but a small amount, but we hope it will in some way be able to relieve the suffering and help to rebuild your country.

In my annual progress report this year, I believe it is important that we review and consider our situation in light of the continuing global and regional economic malaise and our local economic situation. It is in this context that I can say with confidence that the state of the Republic is fundamentally sound. Essential public services are being adequately provided in spite of our tight budget.

However, there are still challenges ahead. For instance, we still need to grow our private economic sector. We have to wean ourselves from our excessive dependence on foreign assistance and assume responsibility for our future. You may not be aware, but it takes a great deal more money beyond and above the amounts set forth in our annual budget to sustain our Government’s operations and, by extension, our economy. Since I took office Palau has received over $72 million in grants and other assistance from our overseas friends: over $36 million alone from the United States for infrastructure and other programs, and over $32 million from the Republic of China in stimulus funds. While we should be extremely grateful for this assistance, it is unsustainable in the long run.

As you may recall the very first bill I sent to the Eighth Olbiil Era Kelulau was intended to reform our antiquated investment laws to make Palau more investment friendly–or better yet, the most investment-friendly nation in the Pacific-in order to attract investment to Palau. This is the challenge of our present generation. We must exert every effort to bring investment to Palau to grow our national economy, thereby increasing employment opportunities for our people, making our land productive, and increasing our local revenues.

Government does not create wealth; it only creates the environment in which wealth can be generated. There may be a fear amongst some of us that we will be overwhelmed and unable to compete if we liberalize our investment laws. That fear is but a figment of their imagination. To use a sports analogy, our baseball team has become the team to beat in our region, not because we only played the game among ourselves, but because we challenged outside teams with more experience and talent and learned how to get better as a result.

I note that most Palauans who have migrated to the United States have almost all lead productive and successful lives on foreign soil. By the same token, we should not fear competing with outside investors, especially on our own soil. We have the ability, indeed the authority, to set the ground rules, which can make Palau an investment-friendly nation while fairly protecting our people’s interests. To quote from U.S. President Franklin Roosevelt that “the only thing we have to fear is fear itself.”

I have streamlined our foreign investment regulations to make them as investment friendly as possible to the extent permitted by our antiquated law. I urge the Olbiil Era Kelulau to take action on the first bill I introduced almost two and a half years ago.

We need to create an economy here in Palau capable of providing the jobs necessary to reverse the sad and troubling situation that has seen hundreds, if not thousands, of the sons and daughters of our soil leave Palau to seek opportunity elsewhere, perhaps never to return, because there are no jobs and opportunity for them here, because the economy is stagnant. We cannot continue to rely on the Government as the main source of employment in Palau. It is our foremost responsibility to create an economy that gives our citizens the maximum opportunity to make the most of their own lives here in their homeland.

Let us meet our generation’s challenge with resolve and take every action necessary to move Palau forward toward more and more economic self-sufficiency.

We are located in the world and in a region beset with civil strife and conflicts caused by a variety of problems: corruption in high places, overpopulation, unequal economic opportunity, ethnic and political turmoil , and class and religious conflict. And then there are the natural catastrophes so prevalent on our rim of the Pacific that visit peaceful communities unannounced and wreak disaster.

The challenges we face in Palau are real and loom large to us, but they are minor by comparison to those confronted by some of our neighbors. While we have our disagreements in Palau, we are a people united by a common language, culture and belief in God. We live in a beautiful, clean and healthy environment that sustains our basic needs. Let us always remember that we all live here together, and that we must work together. We are indeed a blessed people and we should never forget that or take it for granted. Let us ever be thankful to the Almighty God for protecting our island nation and us from natural and man-made disasters and calamities.

My report of the progress of my Administration should be considered in light of Article VI of our Constitution which states that “[t]he national government shall take positive action to attain these national objectives and implement these national policies: conservation of a beautiful, healthful, and resourceful environment; promotion of the national economy; protection of the safety and security of persons and property ; promotion of the health and social welfare of the citizens through the provision of free or subsidized health care; and provision of public education for citizens which shall be free and compulsory as prescribed by law.” These goals are foremost on my mind in every decision I have made during the course of my Administration.

Despite having to work within severe financial constraints, the Ministry of Education is continuing to provide and improve the level of education of our youth. Congratulations to Minister Masa-aki Emesiochl are in order.

For example, Palau High School has been fully accredited for the period of 2010-2013. For this I thank the Minister, his Directors, the Palau High School principal, teachers and staff. Palau High School has benefited from much needed renovations and repairs to improve its facilities. A fence has been constructed around the Palau High School to provide security for the students and to allow the school administrators to better monitor the students throughout the school day.

A new solar system has been constructed at the Ministry of Education to provide electricity, thanks to the Republic of China. The savings realized will free up money for other educational purposes.

Although the Compact of Free Association was due to expire in September 2009, the United States has continued to extend educational grants and other programmatic assistance for education in Palau at the same level as Palau previously received through Fiscal Year 2009, even though the recent Compact Review Agreement has not yet been ratified by the U. S. Congress. As an aside, you should know that the new Compact Agreement prioritizes education and will continue to provide financial assistance to education in Palau through 2024. The transition from the old to the new has been seamless.

New school buses are now transporting students to school from various villages all over Babeldaob and Koror. One of the new school buses was acquired for Ngchesar Elementary School through the auspices or” Japan Grassroots Aid. The safety of our students is my Administration’ s biggest concern and the Ministry of Education is making every effort to ensure their safety.

Although his budget was already stretched, I directed the Minister of Education to provide free lunches to all public school students. The Minister has successfully done this. No student should fail because of hunger. Free lunches are a small price to pay to achieve this goal. Beginning the next school year, however, we will need a supplemental budget to ensure that the students’ lunch program can continue.  Palau High School now has wireless internet connectivity. Internet access is critical component of education for our students in this day and age of modem technology.

Last year I appointed a Task Force to make recommendations on how to improve our public school system. It has delivered its report to me with its recommendations. One of the principal recommendations is to consolidate the elementary schools in Babeldaob due to ever decreasing number of students at each school. My Administration has already started to implement this recommendation. Starting this year in September, the elementary schools of Ngiwal and Ngchesar will be consolidated with the Melekeok Elementary School. This will improve the educational environment for all of the students from those communities as well as to make the delivery of services more efficient and less costly in the long run.

We have constructed a covered basketball court at Harris Elementary School, the second biggest elementary school after Koror Elementary School. We thank the Republic of China for the grant that made the construction of this new gymnasium possible.

A new gymnasium has also been built at the Peleliu Elementary School through a grant from the Government of Turkey. We express our sincere thanks to Turkey for funding this new gymnasium for students and the community of Peleliu.  We have expanded the number of overseas scholarships available for Palauan students and improved the manner by which the scholarships are awarded. Many of our students are awaiting these scholarship opportunities, some of which are offered by our diplomatic allies.

We have developed a healthy life style curriculum that will become part of every student’s required courses of study. I believe that health of our youth is as critical to their development as is their education.

The Ministry of Education is working hand- in- hand with the Ministry of Health to promote careers in health and medical related fields. A special educational program has been established for this purpose to address the ever decreasing number of health care professionals in our island nation. At this time, we have to bring in doctors and nurses from off-island to help in the delivery of health care services. This is an important educational path by which to address the anticipated shortage of health care officers-doctors and nurses in the future.

I want to recognize the achievement of our Ministry of Education on their Pacific Islands PRIDE Project. Our Ministry of Education excelled by completing 100% of its PRIDE projects, an achievement that made Palau stand out among the Pacific islands that participated in this program. PRIDE was a program sponsored by the Pacific Island Forum as a Pacific regional project to improve the delivery of basic education for the Pacific children, including our children.

One indicator of the growing success of public education in Palau is the spelling contests held annually. The contests have been won in recent years by Angaur, Meyuns, and Harris Elementary School. Kayangel Elementary School was second place, behind Angaur Elementary School, in the 2011 Elementary School Spelling Bee.

The Minister of Education is now in the process of implementing a program to prepare our students for college utilizing federal grants in the amount of $1.5 million. This is very important program for our college-bound students and our Ministry of Education is now working with Palau Community College to ensure that this program will be of great benefit to our students.

Under the steady hand of its President, Dr. Patrick Tellei, our Palau Community College is thriving and we are very proud of that fact. Let me cite few notable accomplishments. The PCC Endowment Fund has reached $2 million. Its Fifteen Year Institutional Master Plan has been completed.

The Palau Tourism School of Excellence, a joint effort between Palau Community College, Ministry of Education and Belau Tourism Association has been completed. The Tan Siu Lin PCC Library is open and serving the entire nation. The college has an enrollment over 650 students. The college has enjoyed and continues to enjoy an accreditation status from the Accrediting Commission for Community Junior Colleges since 1979. During a comprehensive visit in 2010 to the campus, the Commission acted to place PCC on a warning status and required the college to address four recommendations and to report to the commission by March 2011. The college has done that and we hope the warning status will be removed after the June 2011 Commission Meeting. Let me be clear, the college is fully accredited. We know that PCC requires financial support and my administration is committed to doing that.

At the pre-school level , we have a successful Belau Head Start Program, which is federally funded. This program serves to improve social competence and increase school readiness of children from low-income families, which virtually include all Palauan families. More than 500 children are participating in this program.

Finally, we have a Special Educational Program for the least fortunate of our children, the handicapped children, our special children. This program is being funded by Federal grant and indeed challenges our spirit of compassion. There are 150 children enrolled in this program. This program reaches out beyond the limits of resources and capacities of families. Those who devote their time and energy to run this program and keep our special children deserve our utmost commendation.

The Ministry of Health in particular has vastly improved the delivery of its services over the last year. This is due in large part to the dedication and hard work of its Minister, Dr. Stevenson Kuartei, and his staff.

According to our hospital records, the leading causes of deaths of our citizens are accidents, cardiovascular diseases, strokes, and diabetes. These are life-style diseases. Under Minister Kuartei’s guiding hand, the Ministry of Health has not only improved the delivery of standard medical services to the people of Palau, but it has also adopted and promoted a more holistic approach by promoting healthy diet and life style. The Ministry of Health’s emphasis is on prevention.

Minister Kuartei has been instrumental in promoting within the Pacific Islands Health Officers Association (“PIHOA”), of which he is the current President, a regional and international campaign to combat non-communicable diseases (“NeD’s”), which has been declared by PIHOA as a pandemic crisis killing more of our people than communicable diseases. Eating the right foods and taking exercise on a regular basis will reduce the number of noncommunicable diseases which result from obesity and unhealthy diet and life style so prevalent in our community; diseases such as cardiovascular disease (heart attacks), diabetes, strokes and high blood pressure. Ultimately, this preventative approach to medicine will result in better health, longer lives, and more productive lifestyles for the people of Palau. It will also result in lower costs and a better utilization of resources.

In keeping with its healthy life-style policy, the Ministry of Health has declared the premises of our hospital to be a chew and tobacco free zone.

To assist the Ministry in implementing its prevention agenda, during my first year in office I issued an Executive Order requiring the establishment of a healthy lifestyle curriculum for our schools. The Ministry of Education is tasked with teaching this subject and I am pleased to report that this curriculum has now been finalized and will commence this coming school year.

Not only is the Ministry of Health working hard to prevent diseases, it is also working hard, and may I add, successfully, to reduce communicable diseases. It continues to emphasize the need for all persons in Palau, particularly the children, to be vaccinated. Our vaccination program is being vigorously provided and promoted. And this happens to be in compliance with one of the recent amendments to our constitution which makes it the right of our citizens to receive preventive health care.

Similarly, the Ministry is working hard to counteract the resilient problem of sexually transmitted diseases.

To support its efforts in ameliorating, curing and preventing disease, the Ministry has procured an improved CAT scan machine, a 16 slice CAT scan, which is 16 times better than our last one, ten new hemodialysis machines, and a new x-ray machine, all of which were made available by generous grants from the Republic of China, for which we are most thankful.

Our Ministry of Health also has received the volunteer services of a very talented group of physicians from the Republic of China and the Republic of Korea, and to these countries and their physicians, I convey our deep sense of appreciation.

One of the most important achievements over the last year is the supply of drugs that are on stock at the hospital. The hospital has been able to improve its stocks so that it now has available at anyone time almost 100% of the basic drugs recommended, and at a lesser cost. This is quite an achievement given the lack of resources available to the Ministry and its history in this regard.

As you are probably all aware, the cost of medical services is spiraling out of control everywhere. The Ministry has been a strong proponent of the Health Care Savings and National Insurance Plan that recently went into effect on April 1st. This Plan is critical to the sustainable provision of health care to our citizens.

Hopefully over the long run this Plan will assure that all the people of Palau will receive the medical services they require and, importantly, that the hospital is paid for the services it renders. The Plan appears to be on track and initial reports are positive. Although it has been difficult in the present economic environment, the National Government has so far found the resources to pay its obligations to the Plan, and with improved local revenues the National Government will be better prepared this coming fiscal year to shoulder the increased costs imposed by the Plan. My Administration will do what it can to support the Plan and to make sure that the National Government’s contribution is paid on a timely basis.

Finally, I want to complement PIHOA and our Ministry of Health on its declaration of a health emergency. As I stated before, NCD’s are on the increase in our community. My administration will do all that is necessary to reduce their prevalence.

Palau’s resident population is approximately 20,000, of which more than 5,000 are non Palauan, principally our guest workers or, as they are commonly referred to, our foreign workers. According to the most recent statistics available, the number of our visitors to Palau is more than 85,000 annually, and growing exponentially, perhaps to exceed 100,000 this year. This combination makes up the social environment of Palau today.

On the one hand our economy needs foreign workers as our own citizens are not enough to man our growing tourism, construction, and other industries. On the other hand we have to avoid the deleterious effects that a lax immigration policy may cause. Our small island nation is much too small to absorb an unlimited number of outsiders. We simply do not have the space or resources. There are notable examples of Pacific island communities and cultures that have been devastated by unchecked immigration. We must balance the two objectives.

We welcome our foreign workers and must treat them well, but at the same time we must curtail their number. To allow an unlimited number of foreign workers into Palau in the long run will have a negative impact on our culture, economy, social welfare and security. I am also informed by the United States that based upon certain cases regarding the treatment of foreign workers by their employers here in Palau, the United States’ assessment of Palau’s position on “Trafficking in Persons” (“TIPS”) has become a concern. After I became aware of the situation, I immediately took affirmative action to investigate and solve this problem and to do what is necessary to ensure that it does not happen again. On this issue, I am consulting with the U.S. Government, as it is a matter of great concern to the United States and to all our allies around the world.

I took action last year to implement a regulation requiring the annual registration of certain aliens in Palau to ensure that our foreign workers are here lawfully, and that their rights are honored and their obligations enforced. As you may be aware, there was a lawsuit filed regarding this regulation and a decision rendered that was unfavorable to the Government. We respectfully disagree with the decision and have appealed it. Regardless of the outcome of the appeal in the case involving this regulation, to protect our national interests ultimately this regulation should and will be implemented in some form in accordance with our Constitution.

We also must address and resolve our immigration issues because these issues affect our diplomatic relations and our citizens’ immigration rights and privileges in other countries. The unchecked presence ofaliens in Palau also poses a potential security concern for us. In short, our immigration issues are being addressed properly and are now being brought under control.

Our Attorney General’s Office is now fully staffed and working hard to catch up on a backlog of cases. The criminal and civil cases related to the Pacific Savings Bank’s failure are again proceeding on track.

Related to the collapse of the Pacific Savings Bank, I am happy to report that at my request, the Republic of China agreed to permit my Administration to use a portion of an ROP loan to pay Palau Savings Bank depositors. At this juncture, we have been able to pay 298 depositors whose deposits were $5,000 or less. The total amount of the payments made to those depositors last year was $427,049.53.

We are anticipating an additional sum of money in the near future, which will also be used to relieve the financial suffering of other PSB depositors.

Over the past year, the Bureau of Public Safety has diligently carried out its duties to protect life, property, and to keep the peace, and maintain law and order. Working hand in hand with the Office of the Attorney General, Minister Johnny Gibbons and the Bureau of Public Safety is doing an exceptional job of law enforcement and the administration of justice. There are now 78 prisoners in the Koror Jail: 74 of which are men, and 4 of which are  women. I must say, though, that our prison facilities are antiquated and overcrowded. We need to build new jail facilities, particularly to better accommodate female and juvenile prisoners and detainees.

Our marine law enforcement capabilities, as you may be aware, are limited as at this time our only patrol boat, the HI Remeliik, is in Australia for repair and refitting, which will extend the vessel’s longevity for another fifteen years. The HI Remeliik left for Australia in November of last year and is due back in Palau in July of this year. During this period our territorial waters and Extended Economic Zone were largely left unguarded.

For this reason, I recently accepted the offer of Sea Shepherd, a private organization, to help monitor our waters free of charge to Palau. Due to certain international issues raised by our allies, however, I have decided to hold those arrangements in abeyance pending further review.

It should be reported that Australia and the United States navies have been helping Palau to patrol our waters over the years, and we thank them for that.

In addition, we have had discussions last year with a Japanese NGO, the Sasakawa Peace Foundation, in consultation with official representatives from Japan, United States, Australian and New Zealand, on its proposal to assist us patrol our territorial waters. Our territorial waters and Extended Economic Zone extend 200 miles seaward from Kayangel in the north all the way down to Ochiariki, also known as Helen’s Atoll, approximately 300 miles to the south.

Last year the HI Remeliik was able to leave port to patrol our waters on an average of only 5 times a year, this because of its limited budget for fuel. The cost of fuel for each trip is approximately $40,000. This is one of the challenges that we intend to address in the coming year.

I am proud to report that our police officers are continuing to participate in international and regional peace keeping missions.  Last year the Republic of China donated twelve brand new cars to our Ministry of Justice.  Once again we thank them for its generous support.  In addition, OISCA, a Japanese NGO, donated three fire trucks and three ambulances to our Ministry of Justice, for which we thank them. OlSCA is an NGO working with our people to promote an interest in agricultural development.

Finally, the Office of the Special Prosecutor is still vacant. After several months of search for an interested and qualified attorney for this position, I finally nominated Mr. David Hutton to this post and submitted his appointment to the Olbiil Era Kelulau in January of this year.  Mr. Hutton’s appointment is still pending before the Senate, and I urge you to consider and approve his appointment. I am concerned that such a long delay may prompt him to withdraw his appointment to this position.

In any event, the Palau Attorney General advises me that, except for two, most of the cases that the Special Prosecutor was handling can be handled by her office without any conflict.  It was for this reason that I submitted a bill to the Olbiil Era Kelulau to phase out the Office of the Special Prosecutor by 2013, the first year of the next President’s term, and in lieu thereof to put in place a system where a special prosecutor would be appointed on a case-by-case basis when the Attorney General determines it has a conflict that disqualifies it from handling that particular case. This would have the added effect of saving our Republic over $300 thousand every year.

Although most of us do not think of the Ministry of Public Infrastructure, Industry & Commerce on a daily basis, it certainly affects our lives regardless of whether we are conscious about it. The water we drink, the toilets we flush, the electrical power we use, the roads we drive on, the public buildings we frequent, our docks and our airport, are all responsibility of this Ministry. Every Capital Improvement Project in Palau is overseen by this Ministry.

The total infrastructure in Palau is estimated to be about $800 million. Each year millions of dollars of new infrastructure is added. It is not an overstatement to say that without the important work done by this Ministry, life here in Palau would grind to a halt. Minister Jackson Ngiraingas is another hardworking and dedicated public servant who is doing an outstanding job with less than sufficient resources. Like all my Ministers, I commend him.

Over the last year the Ministry has worked hand in hand with the U.S. Federal Aviation Authority (“FAA”) to continue to develop the international airport at Airai. The new hardstand for airplane parking located at the northwest comer of the airport is almost complete. It will increase the capacity of our airport and will help Palau to fulfill its obligations under the Compact of Free Association to support the U.S. military. The FAA funds that have been generously given to Palau by the Unites States for various improvements to the Palau International Airport. A total of $40 million, which includes technical assistance. We are most grateful to the United States for its thoughtful support.

The state-of-the-art Airport Rescue and Fire Fighting Facility (“ARFF”) at the airport is still being improved with grant funds provided by the FAA.  Palau received a grant of about $400 thousand late last year from the U.S. Department of Interior that will enable Palau to procure more up-to-date security equipment such as metal scanners, etc. The new facilities and equipment give Palau International Airport the ability to handle more traffic than ever. Thanks have to be extended to the United States for its continuing assistance.

As you may not be aware, over the last year Palau has been the recipient of more and more scheduled air service. One of the largest carriers in the United States and in the world, Delta Airlines, in December of last year initiated a schedule of four flights a week directly from Japan to Palau. Because of the recent disaster in Japan that service has been temporarily reduced, but hopefully it will increase in the near future. The advent of more and more scheduled service to Palau has caused the number of tourists coming to Palau to increase exponentially. This is a very welcome sign for our economy as tourism had declined precipitously in the period of 2007-2009. However, in 2010 we saw an increase of 19.07% in the tourists coming to Palau, up to almost 85,600. So far every month this year has seen an increase in tourists over the same months last year. Until the recent cutback, Palau was on pace to receive perhaps as many as 100,000 tourists this year.

As part of Delta’s entry into the market, the Bureau of Aviation has made several improvements at the airport terminal, including new check-in counters and expanded capacity within the secure waiting areas, including more seating. A new architectural and engineering design is being completed to expand and make our terminal building more accommodating and visitor friendly. This is expected to be completed hopefully within the next year.

On the issue of security at our air and sea ports, Palau is working with appropriate agencies of the U.S. Government to strengthen security. Security is a sensitive and critical issue in this day and age, and my administration is committed to assuring every reasonable effort is taken to ensure the safety of our ports. It cannot be overstated that the security and safety that Palau provides is one of the factors that has made Palau an attractive tourist destination. Thanks to $5 million in assistance from the Government of Japan, at this very moment photovoltaic panels are being installed at the Palau International Airport to help reduce the cost of providing electricity to our airport terminal building . We are most grateful to Japan for its thoughtful and generous support.

I am proud to be able to inform you that Palau is on track to developing a new water and sewer entity to oversee the improvement of our water and sewer systems. Water literally is life. We use water every day. However, we must plan years, if not decades ahead, to address the need for the repair and maintenance to this critical public infrastructure.

The Ministry of Finance, in cooperation with the Ministry of Public Infrastructure, Industries and Commerce, is working proactively to make sure that high quality and safe water is available in the future. My Administration introduced legislation in the Olbiil Era Kelulau last year to address these issues. The legislation is still pending. When passed, Palau will be able to obtain several millions of dollars in a low interest loan from the Asian Development Bank (“ADB”).

The money from the ADB loan will be used to install meters to all customers, to detect and replace faulty water and sewer pipes, to develop new sources of water, to construct new sewer treatment facilities, to improve the dam, to improve water treatment, etc. As part and parcel of the plan developed in conjunction with the ADB, the National Government has instituted a new schedule of fees for water and sewer service. The low interest loan from the ADB will be paid by the new fees.

Like power and telecommunications, under the proposed legislation a public corporation is necessary to ensure the sustainable availability of fresh water to our people. At this time, the cost of providing water, primarily to Koror from Airai, is being subsidized by the National Government. The cost of operating the water pumps in Airai alone is $1.56 million a year. The cost of operating the sewer system is $360 thousand a year, and this also is being subsidized by the National Government. The consumers of water and sewer must be the ones to bear these costs.

Last October, I sent representatives to Washington to work with the Department of the Interior (“DOl”) to find the resources necessary to repair the faulty sections of the Compact Road. I am happy to announce that their mission was successful and that the DOr was able to locate sufficient money to pay for the repairs. The actual work will begin in the not too distant future. Just two weeks ago representatives ofthe U.S. Army Corps of Engineers were present on island inspecting the sections to be repaired.

The United States Civic Action Team continues to maintain its presence here in Palau and with our support it has been of great help in the construction of several of our capital improvement projects. There are several such projects, but I would particularly like to mention the construction of the Airai Dispensary, and the security fence around Palau High School. Palau is the only Freely Associated State where a Civic Action Team still maintains a presence. My Administration intends to do all that is necessary to keep them here.

Construction is underway for a few of our other CIP projects and many have been completed.

The construction of the building located in Airai on north side of the Compact Roadacross from the airport to house the National Emergency Management Office is about to be finished. This project is being funded by a grant from the European Union of more than $750,000.

The Republic of China continues to provide “stimulus” grants to fund several projects, a few of which have been completed with a few others to be completed shortly. These projects are:

• Melekeok Main Road Rehabilitation Project Phase V

• Melekeok/Babeldaob Baseball Field Improvement Project

• Ngardmau Road Paving Project Phase II

• Ngchesar Road Paving Project Phase V

• RaP-Energy Efficient Bldg. Project (to house the Archive)

• GB Harris Elementary School Basketball Court

• Ministry of Education Solar Power Project

• Airai Rabbit Fish Hatchery Project

• Malakal Marine Resource Project

• Agriculture Development Center

• Koksai-Ngchesar Compact Connecting Road

• CT-Scan

• Ten Hemodialysis Machines

• Portable X-ray Machine

In addition, also through grants from the Republic of China, my Administration has overseen the establishment of demarcated marine sanctuaries in each of our sixteen states. These sanctuaries will help to ensure the sustainability of our marine resources, which we rely upon for our sustenance.

The Republic of China is providing a grant to purchase a ferry boat, which will be used to serve outlying states, particularly Angaur. The boat is now under construction in Taiwan and will be launched in the near future.

Again with a grant from the Republic of China, we have also planted 10,000 coconut trees in the ten states constituting Babeldaob using seedlings primarily purchased from Ngedebus Island of Peleliu and Kayangel State. This project is intended to improve our food security and is part of a greater program known as the “Green Revolution”.

Two fish aggregating devices (“FAD’s”) also were installed within our Extended Economic Zone with funds from the ROC. The FAD’s attract pelagic and other fish to congregate around them making it a resourceful place for our local fishermen to fish. The Republic of China has also funded a Pottery-Making Project at the Belau Museum. I attended the ribbon cutting ceremony for it on Tuesday, April 25.

I would like to mention another very important project funded by Japan through the Pacific Islands Forum. It is a reverse osmosis water-making machine proposed to be installed in Peleliu State at a cost of $4 million. Funding from Japan for similar water purification devises for the States of Angaur and Kayangel is forth-coming.

Your Excellencies, Ambassador Helen Patricia Reed Rowe, Ambassador from the United States to Palau, Yoshiyuki Sadaoka, Ambassador to Palau from Japan, and Maggie Taiching Tien, ambassador to Palau from the Republic of China, please accept my Administration’s thanks and the profound thanks of all the people of Palau for your countries’ generosity. Managed by the very capable Faustina Rechucher-Marugg, the mandate of the Ministry of Community & Cultural Affairs is to promote, protect and preserve Palau’s cultural, historical, and traditional heritage. This is an important mission as the preservation of our traditional heritage is critical to the preservation of our Palauan identity and national pride. In one of the recent amendments to our Constitution, the National Government is required to take affirmative action to assist our traditional leaders, which includes the men and women who occupy positions oftraditional leadership.

Representatives of the Ministry attended and showcased our cultural and traditions, especially our traditional performing arts, at the 2010 World Expo that was held in Shanghai. Palau was very well represented at the Expo, which helped to promote Palau’s tourism industry and respect for our traditional heritage.

At the present time the Ministry is overseeing a grant that it received from the Federal Republic of Germany to translate all of the writings of Dr. Augustin Kramer, a German anthropologist who documented Palauan life and culture in the early 1900’s. Herr Kramer’s anthropological studies of Palau constitute important historical records of Palauan culture at the cusp of the modem era.

The Ministry of Community and Cultural Affairs is in the process of helping to record and to repatriate several tradition chants that were recorded by various anthropologists during the era from 1909 to 1936.

As you are aware, there are several hundred, if not thousands, of Japanese war dead unaccounted for, particularly on Peleliu. At the request of the Japanese Government, efforts to discover their remains and to repatriate them to Japan have begun again in earnest. It is a moral obligation for Palau to permit and assist in this humanitarian quest.

This Ministry is currently overseeing the removal of ordinance left over from World War II. My Administration has been able to obtain funds from Canada and from the Federal Republic of Germany to support and continue this important program, each contributing $100,000.00 to this project.

The Ministry of Community and Cultural Affairs recently has helped to organize and support the annual meeting of the Mechesil Belau. It is extremely important that Mechesil Belau be supported in order to preserve and spread cultural awareness.

This Ministry continues its active programs of preserving cultural and historical sites. This Ministry is now housed in a brand new energy efficient building constructed in Airai with grant funds from the Republic of China. All of the historical archives are in the process of being transferred to the new building, where they will be kept in much better condition than the building in which they were previously housed.

This Ministry continues to support our yearly Youth Day and youth conferences as well as to support and conduct programs for the aged and disabled. One of the programs is the U.S. Job Corps Program. The number of young Palauans attending this particular program continues to increase.

I am happy to report that the Micronesian Games held last August in Palau were a success. The Ministry of Community and Cultural Affairs assisted by supporting that event.

The Ministry is tasked with supporting the Palau Museum. I am told by many Palauans that they have never visited their own museum. I urge you all to do so. You will be amazed at the number and quality of the displays at the museum. Visit the Museum and renew, refresh, and reinvigorate your spirit of being Palauan, a person indigenous to these islands.

My Administration has placed a great deal of emphasis on a “Green Revolution” in Palau so as to improve our food security. Freedom from hunger is man’s first basic human right. There is no freedom without food. I intend to continue to focus over the remainder of my term in office on food security in Palau. We must be able to sustain ourselves without outside help if the worst case scenario were ever to occur.

The Ministry of Natural Resources, Environment & Tourism, under the guidance of Minister Harry Fritz, is tasked with implementing the Green Revolution. The planting of the 10,000 coconut trees and the installation of the FAD’s I mentioned earlier are part of the Green Revolution administered by the Minister.

Over the past year and in conjunction with the Fiscal year 2011 Budget the National government, through this Ministry, has required each State to designate and maintain a marine sanctuary. This was done in order to ensure that at least a portion of the reefs in each State remain healthy and continue to sustain us and our traditional food sources for generations to come.

Utilizing Republic of China grant funds, we have constructed an agricultural development center in the State of Ngchesar. The center will soon be up and running as it is scheduled to be connected to the power grid in the very near future.

Utilizing Republic of China grant funds, we have established or are in the process of establishing reef fish hatcheries. This will allow us to repopulate the natural ocean stocks. Facilities for fish hatchery have been constructed in Airai, for rabbit fish and in Malakal for grouper.

Similarly, the Republic is in the process of restocking giant clams.

Palau recently was able to sell its unused off-shore fishing days at sea for approximately $600,000. As you may be aware, each year each of the Pacific countries members or Parties to the Nauru Agreement (“PNA”) is allocated a certain number of fishing days that can be used by the purse seiner vessels that fish in our region. As other countries have more productive fishing grounds than Palau for this purpose, purse seiners do not use all of the days that are available within Palau’s fishing grounds. Palau therefore has an excess that can be sold. The money received as a result of that sale of the unused fishing days has been deposited into our National Treasury and I will shortly be asking the Eighth Olbiil Era Kelulau to use it to supplement the 2011 Budget for unanticipated expenses for critical government services.

Palau continues to be one of the world leaders in the advancement of effective conservation management of its natural resources through the Protected Areas Network (“PAN”). I am advised that Palau now has $3.6 million in the Micronesian Conservation Trust Fund, which is to be used towards the Micronesian Challenge and the PAN. The PAN provides both technical and funding support to local communities to ensure the sustainability of their natural resources that lead to improvement of their livelihoods. To date, Ebil Channel at Ngarchelong State, Ouselesoukl to Ngmai flat of Ngiwal State, Ngardok Lake Nature Reserve, Melekeok State, Mesekelat located in Ngchesar State and Helen Reef of Hatohobei State are members of the network while other state have begun the process of identifying conservation sites to the PAN system.

In a continuation of such efforts, projects such as the Pacific Adaptation to Climate Change pilot project under the Food Security and Food Production scheme, taking into account the impacts of climate change that began in Ngatpang State, has now been up-scaled to national efforts in all the states.

Additionally, the impacts of climate change will potentially affect our nation’s current  and future water resources. To date, my Administration has initiated two programs that will work to address our water resources . The Asian Development Bank Program will help us identify and implement water infrastructure services while the Integrated Water Resources Management Project, a program jointly funded by the European Union and the Global Environment Facility.

The National Government is working to develop a “national comprehensive water policy” for the Republic of Palau.

Last year, at the 10th Conference of the Parties for the United Nation’s Convention on Biological Diversity, Minister Harry R. Fritz declared to the world the designation of the Palau waters as a “Marine Mammal Sanctuary” that builds on my earlier initiative of Palau being the first country in the world to be a “Shark Sanctuary”.

The Ministry of State, under the very capable guidance of Dr. Victor Yano, its Minister, continues to faithfully perform its duties.

Over the past year Palau has established new diplomatic relations with several countries. In addition to those over 50 relations previously established, the past year Palau established relations with Malaysia, the United Arab Emirates, the Kingdom of Cambodia, the Kingdom of Belgium, and Egypt.

I am happy to say that last year I attended the Pacific Islands Forum in Vanuatu and was elected Chairman of the Small Island States grouping within the PIF. As a result of our membership in the PIF Palau has received approximately $4 million in grants that are being used for the water projects in Peleliu, Kayangel and Angaur that I mentioned earlier.

There are challenges that remain in relation to our diplomatic ties. We need to more fully fund our United Nation Mission to assure that Palau is always qualified to vote in the U.N. General Assembly, and we also need to fully fund our Embassies, including the Consulate Office in Guam.

My Administration will be asking the Olbiil Era Kelulau to reconsider refunding a Liaison Office in Saipan. Our fellow citizens in Saipan need a means of keeping in touch with the events in their homeland and a liaison office is the most efficient means for them to do so.

In 2006, the Universal Periodic Review (“UPR”) was created as a new UN mechanism designed to monitor and review human rights records in each member states of every four years. Pursuant to Executive Order No. 285, I established a Universal Periodic Review Task Force comprised of Government Directors, Division Chiefs, Program Managers and Agency Heads. The Executive Order authorized the Task Force to prepare, coordinate, consult and submit the Report. The Minister of State chaired the UPR Task Force.

The Republic of Palau was selected by the Human Rights Council of the United Nations to submit its UPR report on February 1 of this year. The Palau report will be reviewed in Geneva next week on May 3.

According to the United Nation’s Trafficking in Persons Report, Palau has been identified as a country with Human Trafficking activities. A Task Force through an Executive Order No. 293 has been created to investigate violations of Human Trafficking in Palau.

A Palau delegation of five headed by the Honorable Minister of Justice, assisted by the Palau Attorney General, the Vice President’s Chief of Staff, the Director of Foreign Affairs, and one of my Special Assistants, will travel to Geneva to present Palau’s human rights records report through the Universal Periodic Review process. The TIP issue is among the issues to be discussed.

The Ministry of Finance is undoubtedly the most important Ministry in all of the Government, and certainly the most scrutinized. Without constant vigilance and the efforts of this Ministry to collect revenues, the National Government would be unable to provide the services to the citizens and residents of Palau and would be unable to pay the numerous Government employees who provide those services; services such as education, medical services and police protection.

For those of you who are not aware, I am happy to report that for the first time in many years my Administration was able to propose, and the Eighth Olbiil Era Kelulau was able to pass into law, a balanced or slightly surplus budget. In other words, the amount budgeted to be spent by the National Government for Fiscal Year 20ll-which runs from October of 2010 through September of 201I-is actually supported by the amount of local revenues being collected by our Ministry of Finance. This achievement helps to address and retire the accumulated deficit that my Administration inherited when we first took office.

A deficit of roughly $10 million still remains to be paid. This accumulated deficit prompted my Compact Review team to ask that $10 be included in the Compact Review Agreement signed on September 3 of last year with the United States Palau to be used to payoff the accumulated debts. When this money is received and the payments occur, which I expect will be sometime this calendar year, the numerous local vendors to whom debts are owed will be fully paid and our local economy should see a real upsurge in activity.

I am pleased to report that as of April 23 of this year, our Ministry of Finance has collected $20,432,029 .00 in local revenues. This is significant because that sum is equal to about 59% of our FY 2011 local revenue projection. If the trend holds up, by the end of the third quarter Palau will have collected significantly more revenue than projected, only the second time since FY 2000 that this will have occurred.

I am pleased to report that the Compact of Free Association Trust Fund, which balance was $108 million when I was inaugurated in 2009, now has a balance of$16l million. The Ministry of Finance, under the leadership of Vice President Kerai Mariur, should be commended for managing our finances in a very responsible and transparent way, which has allowed basic government services to be provided even with our limited means. Indeed, we have financial challenges, but under the able management of the Vice President I am confident that we will overcome our financial challenges.

I would like to thank the Olbiil Era Kelulau for enacting the revolving line of credit for our National Government. This gives my Administration the financial flexibility necessary to take care of cash flow problems. We have arranged this line of credit with the Bank of Guam, but we have yet to utilize it.

Finally, the Open Ship Registry Act, which was enacted into law last year, is in the process of being implemented. After a Request for Proposals was issued, I selected the company that I believed to be the most qualified and well equipped to administer this matter. The Registry will open up a new source of revenue for Palau. I have recently sent to the Olbiil Era Kelulau a legislative measure to facilitate the administration of the Registry.

The on-going collection of the Green Fee is going well. The work required to implement the fee, however, was not adequately funded this year, thus presenting some obstacles. I will be asking the Olbiil Era Kelulau for additional funding in Fiscal Year 2012 to cover the additional work required.

Our Social Security Administration is financially solvent and its program is sustainable.

There are now 2,600 people receiving benefits from Social Security. However, of greater concern to my Administration is the sustainability of our National Pension Plan. It pays out more money than it takes in. There are now 1,389 beneficiaries receiving benefits from the Pension Plan.

The current state of the Pension Plan is due primarily to the failure of the National Government to pay its original contribution when the Plan was first implemented in 1987. The National Government was legally required to contribute $1.5 million for the first five years of the Plan plus interest. The money to make the contribution was available in the early years of the Compact, but it was never paid.

We all must address the looming financial crisis of the Pension Plan. I intend to submit legislation to address the problems. Nothing will be taken off the table to assure the long term stability of the Pension Plan.

In spite of the fact that the Palau Public Utilities Corporation (“PPUC”) is presently coping with the rising cost of fuel and unpaid bills to the National Government, the PPUC has been doing an admirable job in generating power on a sustainable basis since shortly after my Administration took office. My Administration is now working with the PPUC to address, reconcile our books and pay the National Government’s outstanding bills. This is a continuing challenge to the National government.

The PPUC also suffers from the loss of its savings of more than $2 million in the now defunct Pacific Savings Bank.

Palau law gives the Palau National Communications Corporation (“PNCC”) the authority and obligation to control and operate telecommunication services in Palau formerly operated by the Government.

As I will advise a bit later in my presentation, Section 5 of the new Compact Agreement that I signed with the Government of the United States in Honolulu, Hawaii on September 3, 2010, provides that Palau will receive grants totaling $40 million towards one or more mutually agreed infrastructure projects, including $8 million in Fiscal Year 2011. As you may be aware, for some time now my Administration has been pursuing the installation of an underwater fiber optic cable linking Palau with the outside world for communications purposes. This is my highest priority for the new infrastructure. It is a critical component. Palau ‘s economy will never develop unless and until we have access to broadband Internet access that only an underwater cable can provide.

With my consent and at my urging, over the last year PNCC has taken the lead in developing a plan outlining the available alternatives for an underwater fiber optic cable. PNCC will ultimately be responsible for procuring, operating and maintaining the underwater fiber optic cable. At its own expense PNCC has developed a Palau Submarine Fiber Optic Cable Business Case & Feasibility Study, which I fully support and endorse.

PNCC’s Study concludes that the best alternative available to Palau is to recover and reroute an existing underwater cable. As the global need for Internet bandwidth increases, existing underwater cables are being replaced with cables of greater capacity. This alternative to deploying a brand new cable will save Palau as much as $20-25 million over the cost of new cable yet provide Palau with more than sufficient capacity to handle its bandwidth needs into the foreseeable future. The savings are immense and can be used to fund other essential capital improvements in Palau. Moreover, the cable will be available for use within a relative short period of time, perhaps within one year.

PNCC now has an opportunity to purchase an existing cable connecting Guam to the Philippines. However, the date to tender proposals is rapidly approaching. PNCC is in the process of seeking a bridge loan to fund the procurement of this cable. I have proposed to the Office of Insular Affairs within the U.S. Department of the Interior that the underwater fiber optic cable linking Palau to the outside world be the first mutually agreed infrastructure project funded by the new. If the United States agrees, I intend to use the available grant funds to fund the purchase, recovery and redeployment of the cable to Palau.

The Compact of Free Association is undoubtedly the most important matter with which my Administration has dealt. I am very pleased to report that the Review of the Compact mandated by Section 432 of the Compact was successfully completed last year when I signed a new Agreement with a representative of the United States on September 3, 2010 in Honolulu, Hawaii.

To quickly review, Section 432 of the Compact provides that “[u]pon the fifteenth …[anniversary] of the effective date ofthis Compact, the Government of the United States and the Government of Palau shall formally review the terms of this Compact and its related agreements and shall consider the overall nature and development of their relationship. In these formal reviews, the governments shall consider the operating requirements of the Government of Palau and its progress in meeting the development objectives set forth in the plan referred to in Section 23l(a). The governments commit themselves to take specific measures in relation to the findings of conclusions resulting from the review.”

The effective date of the Compact was October 1, 1994. The fifteenth anniversary occurred in 2009. Although efforts were made in early 2008 to begin the Review, largely because of the Presidential election cycles in our respective countries, nothing occurred. It was not until early 2009 that efforts began in earnest to follow the mandate of Section 432.

Commencing in May of 2009 here in Palau, with several subsequent meetings held both in the United States and Palau, Compact Review Advisory Group led by Ambassador Joshua Koshiba met with a team of representatives from the United States Department of State. Although the Review was at times contentious, my team persevered and the meetings concluded in a new Agreement signed by me on September 3, 2010.

The new Compact Agreement was submitted by the U.S. department of State to the United States Congress in early February of this year. It was introduced in the Senate of the United States Congress by Senator Jeff Bingaman of New Mexico as S. 343. It is currently pending in the Senate Committee on Energy and Natural Resources, of which Senator Bingaman is the Chairman.

A hearing had been scheduled by the Senate Committee on Energy and Natural Resources for April 14 at which I was to testify about the new Agreement. However, because of the then ongoing debate over the Fiscal Year 2011 U.S. budget and questions as to whether the U.S. Government might have to temporarily shut down, the hearing was postponed to mid June. I am happy to report that the new Agreement is also being fully supported by the U.S. Department of Defense, which will be sending a high ranking official to testify at the hearing before the Senate Committee on Energy and Natural Resources.

The new Agreement will extend financial assistance to Palau for another 15 years, through 2024, for operations, construction, maintenance and trust fund, debt service contributions totaling $229 million, or an average of $16.4 million annually. Importantly and as I indicated above, the new Agreement provides $40 million to Palau for new infrastructure projects . The new Agreement also provides additional money to support the U.S. Postal Service and the delivery of mail to and from Palau. Finally, the new Agreement continues Palau’s eligibility for programmatic grant assistance for such things as education and health care. This programmatic assistance has no cap and brings several millions of dollars each year to Palau.

I am also happy to report that although the funding provisions of the Compact expired in 2009 and although the new Agreement has yet to be ratified by the U.S. Congress, that Palau is already benefiting from the new Agreement, as the U.S. Congress, in its most recent Continuing Resolution budget, enacted funding for Palau for Fiscal Year 20l l-s-this year-at the same level that Palau had previously received. This year’s funding was, at one point in the U.S. budget process, in some doubt as the U.S. House of Representatives has passed a resolution that would limit funding to Palau for Fiscal Year 2011 to only $2.1 million. However, with the hard work of our consultant in Washington D.C. and my Compact Review Advisory Group. and with the firm support of Palau’s friends in the U.S. Congress, the final budget bill that passed just about two weeks ago provided Palau with funding at the previous level of about $13 million.

In closing, I want to emphasize that while the foregoing is fairly representative of the progress that my Administration has achieved over the last year, it is not at all inclusive. Things such as the good will and recognition in international fora that Palau has curried over the last year cannot be readily quantified. Yet that is something my Administration promotes regularly. Good will with our diplomatic allies and partners are the keystone of my policy.

My Administration is acutely aware of the growing economic difficulties many of our people are facing. The cost of everything from gasoline to food to electricity is increasing on a daily basis and, as much as I would like to provide some relief, there is little I can do by myself. Within certain bounds I can regulate, but for the most part I can only recommend legislation to the Olbiil Era Kelulau and enforce such laws as may be passed by the Olbiil Era Kelulau.

For that reason I have submitted several measures to the Olbiil Era Kelulau over the last year to, among other things, increase the minimum wage, give wage and salary tax relief to those who need it most, to increase local revenues by raising certain fees and taxes paid by visitors to

Palau, and to reform our antiquated foreign investment laws. All of those bills are still pending.

I implore you to consider and pass them forthwith.

As I said at the beginning, while we have our disagreements, we are a people united by a

common language, culture, kinship and belief in God. We all live together on these beautiful islands. Our common goal should be to improve the quality of life of our people. Let all of us strive to be a part of the solution to the problems we face, and not be part of the problems themselves.

Finally, I thank the people of Palau for their prayers, patience and support as I endeavor to the best of my ability, with the assistance of my Ministers and staff and with the understanding and cooperation of the Olbiil Era Kelulau, to make each day of the future better than today. And

above all, let us keep in mind the words of the Preamble to our Constitution which reads: “We venture into the future with full reliance on our own efforts and divine guidance of the ALMIGHTY GOD.”

Thank you and may God Bless Palau.

The Contemporary Pacific – Palau in Review

April 27, 2011


Pacific Islands Development Program/East-West Center
With Support From Center for Pacific Islands Studies/University of Hawai‘i


Volume 23, Number 1, Spring 2011, pp. 199-207

Micronesia in Review: Issues and Events, 1 July 2009 to 30 June 2010

Donald R. Shuster

President Toribiong began the year under review with an “Open Letter to the People,” a sort of economic manifesto, outlining what he plans to accomplish over the course of his administration. Relying heavily on Palau’s National Master Development Plan, the president advocated a shift in economic activity from the public to private sector, strengthening government agencies, identifying financing strategies, revising Palau’s foreign investment law, and gradually reducing the size of government. He concluded, “As our government’s revenues grow due to increased private sector economic activity, and as savings are realized by downsizing of our government, I intend to direct more and more funding into education, health care, public safety, and maintenance of our infrastructure” (TB, 13-18 July 2009, 12).

Vice President Kerai Mariur, who is also minister of finance, remained busy with money matters. The National Emergency Committee, which he chairs, finalized the Palau National Disaster Risk Management Framework. Mariur also worked with emergency specialists from the Centers for Disease Control and Division of Strategic National Stockpile in holding a hands-on, “real emergency” workshop for officials from Palau, the Commonwealth of the Northern Mariana Islands, and the Federated States of Micronesia.

During the year, Toribiong made a key cabinet change, replacing the forthright and assertive Sandra Pierantozzi with Victor Yano, MD, as his minister of state.

A tug-of-war occurred between the Acting Independent Counsel/Special Prosecutor Michael Copeland and the attorney general’s office over the Pacific Savings Bank scandal. As discussed in previous reviews (see Shuster 2007, 2008, 2009), the bank collapsed in November 2006 after being declared insolvent due to insiders’ loans, fraud, and outright theft. At the time the bank was placed under receivership there were some 7,000 depositors, with accounts valued at more than $20 million. Many of these depositors have received payouts from the receiver, who borrowed money from the government of Palau to make the payments; however, since large depositors still have not been compensated, the bank issue has become very sensitive. As acting independent counsel and special prosecutor, Copeland had possession of the assets and work product relating to the 2006 failure of the bank. Copeland and the attorney general accused and counter accused one another of ethics violations in relation to the case. Apparently the issue was resolved when Copeland resigned and departed from Palau in September. What happens to the bank’s remaining 641 depositors, who were cheated of some $18 million, remains to be resolved. They are concerned that payment to the bank’s receiver and collections attorney may eat up a sizable portion of their $18 million. President Toribiong met with the depositors in April 2010 and the depositors welcomed the president’s commitment to revive the bank (TB, 12-18 April 2010, 1, 15).

President Toribiong was busy with many international activities during the year. He met with the other freely [End Page 199] associated states’ presidents in the Republic of the Marshall Islands. They issued a comprehensive communiqué at the conclusion of their meeting that included statements about the Micronesian Center for a Sustainable Future; airport improvements; the Pacific Plan, which emphasizes climate change and energy initiatives; the Hokkaido Declaration, whereby Japan will deliver assistance to be maximized by the Micronesian governments; policies for enhanced mitigation of climate change; and several other matters. Toribiong led his government in discussions with US military officials in the Palau-US Joint Committee meetings, which have taken place nearly every year since 1994. Perhaps the most significant issues discussed were the Uighurs (who were then still in detention at Guantanamo); the Myanmar refugees in Palau; annual security updates to Palau; and the sharing of surveillance information.

In September, Toribiong spoke to the United Nations (UN) and referenced his remarks to ongoing global issues of climate change, environmental degradation, and the global financial crisis (TB, 28 Sept-4 Oct 2009, 1, 15). He emphasized efforts being made by the Micronesian states in Green Energy Micronesia, whereby the Islands are seeking to expand efforts in spreading renewable energy methodologies. He also offered Palau as a national shark sanctuary for the world as a response to shark finning. Finally, Toribiong called for the establishment of an “Organization of Tuna Exporting Countries” (OTEC) to give Island states fair value for their threatened resource and to make tuna fishing sustainable.

While in New York, the president carried out some important courtesy meetings with US Secretary of State Hillary Clinton and former Ambassador Peter Rosenblatt. Interested in gaining the support of Arab nations with regard to the OTEC proposal, Toribiong met with Sheikh Hamad Bin Khalifa Al-Thani, the emir of Qatar; Taïb Fassi Fihri, the minister of foreign affairs and cooperation for Morocco; and Sheikh Abdullah Bin Zayed Al Nahyan, minister of foreign affairs for United Arab Emirates, regarding establishment of diplomatic relations and Palau’s pending support for ratification of the International Renewable Energy Agency. At the end of the year, Toribiong was in Copenhagen for the international climate change conference.

Following on his efforts at the United Nations, in February Toribiong convened a meeting of eight Pacific Island nations’ heads of state for the purpose of discussing a new tuna fishing regime. The pact that the heads of state signed created a cartel to conserve and regulate tuna stocks in the central and south Pacific and to maximize benefits to the member nations. These nations are Parties to the Nauru Agreement (PNA) and signed the treaty in 1982 attempting to control, regulate, and maximize the returns to them from tuna fishing in their waters by boats mainly from Japan, the United States, and Taiwan. The value of the fish taken is estimated to be about $2 billion annually. The Koror declaration establishing the Organization of Tuna Exporting Countries is an agreement designed to increase the economic value and derive greater [End Page 200] benefits from the tuna resource for the member states.

In late 2009, Palau received six ethnic Uighurs, who arrived under tight security from the US prison facility in Guantanamo Bay, Cuba. The men, who are from China’s far northwestern Xinjiang Uygur Autonomous Region (also known as East Turkistan), could not return to China because it was highly likely they would be arrested as rebels. Palau agreed to take the men on a temporary basis and was paid some $98,333 per person for resettlement, medical, and translator costs. In Palau the men found freedom, friendliness, and care. They attended special classes in the English language and job training at Palau Community College, but as the months went on, they began to yearn for social life in a Uighur community. Such communities exist in Australia, and President Toribiong has contacted officials there regarding a transfer and permanent resettlement. According to the US-Palau diplomatic agreement, the United States is to work closely with Palau to arrange for the transfer to a third country, with the costs of such transfer borne by the United States. Furthermore, while the Uighurs are in Palau, the republic and the United States shall consult on a regular basis, at least twice annually, and Palau shall provide monthly reports to the United States on the status of the Uighurs, and conduct weekly in-person meetings to verify identification and status (health) of the men. These weekly meetings shall take place for at least one year. The Uighurs have joined a Muslim community of about 300 in Palau.

Republic of China (ROC) President Ma Ying-jeou made his first visit to Palau at the invitation of President Toribiong. He was warmly received and was treated to a baseball game between Palau and a Taipei team, a visit to a rock island and jellyfish lake, a tour of many infrastructure projects built with generous Taiwan funding (especially the impressive national capitol in Melekeok State), and banquets and dinners in his honor. President Ma brought a ninety-member entourage. Fortunately Palau has sufficient first-class hotel accommodations for such a large group of visitors. The bilateral discussions included medical assistance, aquaculture, vocational training, agricultural cooperation, green energy, and cultural exchanges. For discussions on cultural exchanges Ma brought along the minister of the Council of Indigenous Peoples, Sun Ta-chuan. This was President Ma’s first visit to Taiwan’s six Pacific allies, and Palau was the last stop on his homeward journey.

Following on the heels of President Ma’s visit came Taiwan’s Fleet of Friendship, making its ninth visit to Palau. Consisting of the flagship and two frigates, the fleet visited Palau for just two days, 13-15 April. The ships’ combined crews of 813 men included cadets from the ROC Naval Academy, who gained invaluable training during the worldwide voyage.

Palau has been bothered by two international confidence men. James Dugan came to Palau and attempted to enter $22 billion dollars in certificates of deposit into a Palau bank. The certificates were bogus. Dugan was arrested, tried, found guilty, and jailed for six months. He also paid a $10,000 fine and was subsequently [End Page 201] deported. Morris Davidson, the second con man, has been in and out of Palau since 1990. He has cooked up grandiose schemes of huge condominiums and hotels for Peleliu and Angaur islands but has no certificates or permissions to do business in Palau. Davidson befriended the former governor of Peleliu, Jackson Ngiraingas, for whom he provided several all-expense-paid trips to Malaysia to meet various high-ranking officials there. In exchange, Jackson, as a cabinet minister, persuaded President Toribiong to appoint Davidson as Palau’s honorary counsel to Malaysia. Davidson’s alleged wheeling, dealing, and cheating caught the attention of Palau’s Council of Chiefs. These highranking traditional leaders wrote to President Toribiong and respectfully requested that the president discharge Davidson, order him to stop his false Internet advertisements about Palau, and investigate Minister Ngiraingas for improper and unethical activities. The president attempted to subdue this issue by relieving Davidson of his honorary title, but the complaining, albeit muted, continues.

Palau’s international friends include Taiwan, Japan, Germany, Malaysia, and Australia. Taiwan has lately provided $10 million in grant assistance and several scholarships. Japan also offers scholarships and, in addition, grant assistance for grassroots projects in health care, elementary education, environmental protection, poverty relief, and public welfare; a steady stream of Japan International Cooperation Assistance (JICA) volunteers; and generous financing to the Palau International Coral Reef Center. Japan has also conducted research on freshwater eels (unagi) and on the ancient coelacanth fish. Germany recently provided a $9,000 grant to Palau’s community health support organization. The former prime minister of Malaysia, the honorable Abdullah Ahmad Badawi, received red-carpet treatment on a visit to Palau 1-3 July 2010, and it is hoped his country will also provide grant assistance to Palau. During annual talks with Australia’s ambassador, Susan Cox, the ambassador assured Palau of her nation’s ongoing support for the Pacific Patrol Boat Program, which has provided funding for two in-country advisors and boat refitting as needed. In recent talks with the ambassador, Palau’s Ministry of Education and Palau Community College sought support for an ongoing education cohort program as well as a Teacher Training Academy.

At the close of the year in review, Palau was set to receive its first resident US ambassador, Helen ReedRowe, who as of this writing has been nominated by President Barack Obama but not yet confirmed. Since Palau’s independence in 1994 the US ambassador to the Philippines was also accredited to Palau, with the embassy in Koror being headed by a chargé d’affaires. Reed-Rowe has served in diplomatic posts in the Republic of the Marshall Islands, Jamaica, and Niger, and lately was assigned to the State Department in Washington DC She is a career member of the Senior Foreign Service.

Palau worked for much of the year to amend the 1994 Compact of Free Association agreement with the United States, as the financial provisions officially expired in September 2009. A one-year extension at current funding [End Page 202] levels was provided to allow time for the negotiations to be completed. Palau and the United States have agreed on a final financial package valued at $250 million over fifteen years, although as of this writing the final agreement has yet to be signed. What appears to be holding up a final agreement is the bickering between bureaucrats in the United States Departments of State and Interior over minor matters that boil down to micromanaging. Toribiong has stated that he will resist all efforts to micromanage his government: “These may seem to be small matters, but if we don’t get them right they will affect us in the long run” (TB, 10-16 May 2010, 7).

The much-anticipated fifty-threemile compact road on Babeldaob, which Palau accepted, suffered a serious collapse near Ngchesar State during the year. Repair of the 200-foot section damaged by heavy rains will cost at least $2 million. A temporary road has been established around the collapse.

The US State Department gave Palau a Tier 2 rating in a 2010 report regarding Palau’s compliance with the Trafficking Victims Protection Act. The report was critical of Palau because of its weak record in protecting trafficked persons. Trafficking in persons refers to forced labor, sexual exploitation, and modern-day slavery. In 2005 Palau placed on the books a stringent law against trafficking in persons, and four traffickers were successfully prosecuted in 2007. The guilty parties successfully appealed, and the cases have not been pursued after decisions on the appeals. The formerly guilty parties had forced fifteen Filipinas and nine Chinese waitresses into prostitution through food deprivation, confinement, and illegal salary deductions. The State Department’s report stated that Palau offered minimal protective services to victims of trafficking and no long-term protection. Help has been provided for many years by Palau’s Catholic Church. In terms of prevention, the Palau government was found deficient, and the country is not a party to the 2000 UN Trafficking in Persons Protocol. People in Palau realize that there are Palauan individuals who have no business bringing in foreign workers because the latter will be exploited.

The Olbiil Era Kelulau, Palau’s bicameral national congress of thirteen senators and sixteen delegates, was scolded in the press for its poor showing in passage of laws—only a dozen in fourteen months. Furthermore, the state governors complained loudly to the congressmen about the lack of public hearings on major changes in public policy, the 5 percent reduction to the states’ block grant funding, and salary increases given to top executive officials. The governors stated that the congress was neglecting the states (TB, 15-21 Feb, 1, 15). Furthermore, stark differences of opinions plagued the Senate. Harsh words from a spokesman for the Senate majority reflected poorly on that body. At issue was a reshuffling of committee leadership, with the minority (5 versus 8 in the majority) losing some positions. Also, former Senator Santy Asanuma was prevented from attending a session of the Senate’s Committee on Foreign Affairs in late April. This violates a basic right guaranteed by the Constitution of Palau (article 4, section 12): [End Page 203] “A citizen has the right to examine any government document and to observe the official deliberations of any agency of government” (Republic of Palau 1979). Asanuma has filed suit in Palau’s Supreme Court. Such intolerance for an honest minority and a basic constitutional right were very problematical in 1987, Palau’s period of violence and lawlessness.

It appears that Palau is becoming a class society—the rich, the very rich, and the poor. A state by state survey conducted in 2009 and reported in Tia Belau (TB, 28 Sept-4 Oct, 2) reveals that from a total of 3,128 Palauan households, 88 percent earn $20,000 annually or less. A total of 205 families have no income, and 136 of these families reside in Koror, where the cost of living is the highest in Palau. The survey also revealed that 65 families make $50,000 or more and most also live in Koror. Coincidently, a Palau news report revealed that food theft and shoplifting of food are on the rise, with some 80 percent of Koror robberies involving theft of food items.

Tourism, a major money earner for Palau, was off to a very good start in 2010. February arrivals were 6.2 percent above the previous year. Future prospects look very positive because Palau will soon be served by regular flights of Asiana, Korean Air, Continental, Pacific Flyer, Delta, and China Airlines. Palau receives about 80,000 visitors per year and will likely exceed that number for the year under review.

The Palau Ministry of Health is carrying out a major offensive on lifestyle diseases (ie, noncommunicable diseases). These include cardiovascular diseases, cancers, respiratory diseases, and diabetes. It is estimated that Worldwide these diseases kill about 35 million people a year. Furthermore, considerable efforts are being taken to reduce sexually transmitted diseases, tuberculosis, and tobacco use. Palau is a signatory to the Framework Convention on Tobacco Control along with some 168 nations out of 195 eligible. With membership come responsibilities, including the implementation of effective, evidence-based measures to decrease the prevalence of tobacco use. Seminars, conferences, and workshops have been held in Palau regarding these health issues, and there have been numerous announcements, newspaper advertisements, and even road banners. Also during the year under review, the national congress passed a health insurance law, which was signed by the president. Funding for the program will come from 2.5 percent contributions each from employer and employee. The employee’s share will pay for future health insurance bills, while the employer’s share will go toward a medical savings fund. The president recognized that the privatesector employees might find it difficult to contribute their share (TB, 10-16 May 2010).

Maria Hindenburg, DMD, opened Palau’s first private dental clinic in June. With seventeen years of practice, Dr Hindenburg offers a full line of dental services, including cleaning, extraction, root canals, and restorative procedures.

At over twenty years of age, the “Blue Corner Buddy,” a large unicorn fish, was indecently caught and killed in November. The unusual fish was so popular among tourist divers and dive guides that he became the most photographed animal at Palau’s [End Page 204] internationally known Blue Corner dive location. During his life, Buddy became not only a friend to divers but a living treasure as well.

Deaths of people have been costly to Palau this year. Ebilreklai Kimiko Rengul, the female counterpart of Melekeok’s first-ranking chief, Reklai, passed away on 4 July 2009. She died at age 90 and received the accolades of a flag at half-staff and a presidential proclamation in addition to chiefly ceremonies and time-honored traditions. Jonathan Koshiba died in October. A longtime Palauan employee of the Trust Territory government on Saipan and recording secretary of Palau’s first and second constitutional conventions (1979 and 2005), he had extraordinary knowledge of the founding document and its various amendments, which he was always delighted to share with local officials and expatriate visitors.

Redechor Mutsuo Delkuu passed away at age 76 in the Belau National Hospital. As the highest traditional chief of Kayangel Atoll and Kayangel State, he was one of the longest serving members of Palau’s Council of Chiefs. Cristobal Temael also died in December. Temael, who held the chiefly title Esebei-ra-Ibedechang of Ngaraard State, was a caring and generous man, active in both Palau’s Guam and Ngaraard communities.

However, at the funeral in January of Bechek-Idil Riuch Rubeang, the second highest female chief of Ngatpang State, fighting (both verbal and physical) broke out among women as to who should receive the title of the deceased. Senior strong women of the Inglai clan must decide who is to be the new titleholder. Until the offending factions within the clan agree on that issue, tensions will persist.

William V Vitarelli, affectionately known as “Bit” or rubak (respected elder), died in January at his home on Maui at age 99. Now among the “cosmic forces of the universe” (one of his favorite phrases), Vitarelli was the first American educator to come to Palau in 1949, just after finishing a PhD at Columbia University. He took the Trusteeship Agreement’s responsibilities seriously and began many grassroots projects, such as a sawmill, an agriculture produce market, handicraft production, school materials production, boatbuilding, and dancing. He was an innovator, a talented artist, and an independent thinker. He assisted Palauans in development efforts and reminded them of their greatness as a people. Perhaps his most memorable achievement, with Ngirchobcketang Sechalboi Wasisang, was the founding of the Belau Modekngei School in Ngatpang State in 1974. These two men, characterized as the ends of rainbows, are celebrated whenever Palauans see a rainbow in Palau’s sky.

Saito Baudong, a man of many achievements, was eulogized by former President Tommy Remengesau and former Speaker of the House Ignacio Anastacio. Baudong was a policeman, director of agriculture, member of the first Palau Congress, member of the Ngchesar State Council, and national legislator representing Ngchesar for nineteen years. He passed away in early January and is survived by his wife, 12 children, 33 grandchildren, and 13 great-grandchildren. He held two traditional titles and his funeral generated $65,515, five Palauan moneys, [End Page 205] 136 toluk (turtle shell plates used by women on very special occasions), and one piece of land.

Rdang-era-Iterir Feliciano Blailes passed away in February. “Sano” was an agriculture teacher and a skilled caretaker and butcher of farm animals. He retired in 2001 as vice principal of Palau High School and made many contributions to Ulimang, Ngaraard State. He was a superb baseball player, having played for Red Torch in the 1970s when the team won the Palau championship five consecutive years. Assistance and support for Sano’s funeral and family totaled $63,000 and many pieces of Palauan money.

Uchel Singeru Ngirchelui of Meyuns hamlet passed away at 69. He was buried in his clan’s stone platform (odesongel) and left behind his wife, 13 children, 26 grandchildren, and 7 great-grandchildren. As a hamlet chief, he served in the Koror House of Traditional Leaders.

Kemrekl Nicholas Rechbei, the seventh ranking chief of the village of Ngerous, Ngchesar State, died at age 60. Ceremonies of respect were held at the Koror State Legislature and at the national level as well. The title Kemrekl was removed according to Palauan ritual prior to burial.

In March, Helen Kebekol Towai passed away. She was the third ranking member of Ngarachamayong, the Koror council of female chiefs. She was laid to rest in her clan’s stone platform in Koror. Also, Ebil Magdelena Yamada passed away on March 27 at age 84.

Ngirngesechei Masao Ueda, a chief of Ngiwal State and former minister of health, died at age 69. He served in former President Kuniwo Namakura’s cabinet from 1992 to 2000. Ueda also was a longtime employee of the Trust Territory government and director of health services. One of his major achievements was the completion of the first grant application for a program for the elderly in Palau. The Old Age Program of today is a direct descendant of that early effort.

Paul Ho, a well-known Chinese businessman from Macau, died unexpectedly in his car outside the Sea Passion Hotel, Malakal. The apparent cause of death was a heart attack. Ho held Portuguese, Canadian, and Chinese passports and normally acted as an honest broker between Palauan businessmen and foreign investors. Ho is credited with arranging for Palauan table tennis players to go to China for training. He assisted investors in building the Papago Hotel, establishing the rock quarry in Ngeremlengui, and persuading China Airlines to fly between Taiwan and Palau. A memorial service for Ho was held at the National Hospital’s Roman Tmetuchl Chapel.

Fermin Kebekol, one of the most gifted and colorful men of Angaur, died at 65. He lived on Saipan for many years and bought a large piece of land near the airport, subdivided it, and sold it to his Angaur friends. He was a songwriter and had composed many famous tunes. Mihaina Rdiall also passed away in April 2010. Rimud Moses Sam died at 71; during his years as the director of the Bureau of Arts and Culture, he produced many reference books on Palauan history, traditions, and customs. Lastly, Masuo Kyota was laid to rest in Ngeremlengui State. A leading member of the prominent Kyota family, [End Page 206] he served as Speaker of the state legislature and as director of the Palau Housing Authority.

Special thanks to Yoichi K Rengiil for comments on an earlier draft of this review.

Donald R Shuster, who has written the political review of Palau for this journal every year since 1990, is a professor of education and Micronesian studies at the Micronesian Area Research Center, University of Guam. He has worked and lived in the Pacific since 1965 and focuses his research efforts on Micronesia and the Republic of Palau. With recent publications including a history of baseball in Palau and a biography of Father Felix K Yaoch, SJ, he is now working on a biography of Thomas O Remengesau, interim president of Palau in 1988 and longtime district administrator during the Trust Territory years.


Shuster, Donald R. 2008. Micronesia in Review: Issues and Events, 1 July 2006 to 30 June 2007: Republic of Palau. The Contemporary Pacific 20:209-215.

———. 2009. Micronesia in Review: Issues and Events, 1 July 2007 to 30 June 2008: Republic of Palau. The Contemporary Pacific 21:136-143.

———. 2010. Micronesia in Review: Issues and Events, 1 July 2008 to 30 June 2009: Republic of Palau. The Contemporary Pacific 22:152-161.

TB, Tia Belau (This is Palau). Koror, Republic of Palau. Weekly.

Palau – Chronology of Key events

April 16, 2011

Greetings Palau Education & the Pacific readers,

I guess your wondering about this post.  It’s quite out of the usual, however, just to inform you that since January 2011, 152 articles have been recorded to our archives.  Thanks to you, our viewer count is steadily increasing with 2,180 views to date.  Although slow, I try as much as possible to provide relevant and interesting literature for everyone.

Now, to complete this site with past articles of Palau, I managed to create a slide show of our republic highlighting key events that took place while we were out.  BBC News provides a great overview of Palau’s yesteryears and I bring to you now, a flashback.

Consider our site organized and up to speed in compiling this year.   I thank you for reading and sharing your views and hope that you continue to visit soon.

So without further a do!  Palau as it was…

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