Koror (Pacific Note) — Palau’s economy is forecasted to grow by 2 percent in 2016 and 5 percent in 2017, according to the Asian Development Bank (ADB). The island nation, which has a population of around 20,000, has benefitted from its strong tourism growth compared to other nations in the North Pacific.
Palau’s tourism industry, however, is less concerned with raising the numbers and more focused on inviting “quality” visitors. While Palau is estimated to continue its growth for the next year, they remain vulnerable to environmental impacts.
Revised estimates show Palau’s economy grew by 9.4 percent in Fiscal Year 2015, well above the earlier estimate of 6.7 percent. The growth reflected a dramatic increase in tourist arrivals, in particular by visitors on package tours from the People’s Republic of China in 2014 and 2015.
However, the challenges to sustaining such high increases in visitor arrivals became clear this year, prompting government measures to slow tourist inflows and encourage Palau’s development as a high-end ecotourism destination.
Tourism is the driver of Palau’s economy, accounting for close to 85 percent of its gross domestic product (GDP). While the nation welcomes a surge in tourism, its infrastructure can’t cope with the growth. Palauans are also worried that the influx will have a long-term damage to its pristine environment.
In 2015, Palau’s tourist arrivals reached 160,000, an unprecedented growth mainly due to packaged tours from the mainland Chinese market. The growth proved to have impacted several tourism sites, with extreme overcrowding reported at locations such as the UNESCO Rock Islands, the famous Jellyfish Lake and snorkeling sites.
Palau is a diving mecca but the tourists it has been attracting in the past two years are not big spenders. The government in 2015 tried to control the tide of Chinese tourists to the island nation by reducing the number of charter flights from China into half.
“Do we want to control growth or do we want growth to control us?” Palau President Tommy Remengesau Jr. asked reporters.
“It will be irresponsible for me as a leader if this trend continues. I am not only looking at the present but, as a leader, I am looking after tomorrow.”
But the number of hotels, restaurants and guides catering to the Chinese market would suggest that citizens of the world’s second-largest economy are likely to keep coming. The November 2016 tourist arrivals showed a continued drop in visitors with year to date arrivals registering at 128,536 from January to November, compared to the same period in 2015 with 149,352 tourists.
What was the reason for the drop? Drought and doubts on the recovery of Jellyfish Lake which suffered jellyfish population decline this year. Known for its stingless jellyfish species, the lake is the most popular tourism destination in Koror.
However, the decline in tourism numbers is not much of a concern for the Palauan government, which favors quality over quantity tourism. “While the numbers went down, the actual tourist spending went up. Therefore we were able to collect more tourists than what we expected. So it confirms our direction that we don’t concentrate so much on arrival numbers but get less tourists who spend more which equates to more tax dollars. We go for quality rather than quantity which is consistent with the pristine paradise banner to create a goal of high end, high value tourism,” Remengesau told reporters.
“We’re working to protect our island beauty while attracting those who spend more so that we won’t be a crowded destination and that opportunity to business and economy will go to the Palauan people who will continue to benefit from it,” he added.
Remengesau said his government will work with Congress in 2017 on a piece of legislation that will set clear direction on how to implement “Pristine, Paradise, Palau” and make it a high-end destination.
“Part of the law is to approve only five-star hotel development in Palau. A five-star also means that hotel development that invest here will be asked to contribute to their own sewage, own power generation, provide their own water source and to share those infrastructure investment with the community and Palau, in return, will provide a tax break. Since they invested in these infrastructures, then we will offer a tax break so it’s kind of a win-win situation for Palau and the investor,” Remengesau said.
The president said that growth in a small island like Palau should be done carefully. “There’s a right way to do things and there’s a wrong way to do things. Development coming to Palau can be over the ocean, in the mangrove, crested on the hill, but if you do it right, it will not impact in the environment. We have seen it in the Maldives, Mexico and others that the best spots around the world have blended in with the environment,” he said.