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  • By Ongerung Kambes Kesolei and Bernadette H.

On the right track Remengesau focuses on protecting gains

Koror — The government of Palau has been able to balance the budget, pay the bills, increase the cost-of-living allowance and bring up to date the government’s contributions to retirees’ pension, Social Security and Health Care Fund, a government operated medical insurance.

President Tommy E. Remengesau Jr credited the robust economic performance of recent years for strengthening the national government financial position.

“Over these next four years, we will focus our efforts on protecting and building upon the gains that we have made,” Remengesau said in his state of the republic address to the Olbiil Era Kelulau on April 13. “In this effort, we must make sure that our government is a caring government that is responsive to the needs of our people.”

In his 75-minute speech, the president highlighted the economic gains Palau has made in the last four years as a basis to continue the policies that have been put in place.

He said that after a slowdown in fiscal 2013, government revenues bounced back recording an average growth rate of more than 8 percent over the next three years.

“Tax collections increased an average of a 14 percent over the past two years, fueled by wage increases in the government and private sectors,” Remengesau said pointing out that argument against minimum is not being supported by economic data.

Remengesau, who is serving his last term in office, said he is committed to safeguarding family income gains and retirement benefits’ by committed to continuing to raise the minimum wage in line with cost of living increases so that families can meet their basic needs.

“Specifically, we must safeguard family income gains and retirement benefits; further strengthen education, health and public safety services; increase support for our youth, aged and vulnerable populations; expand our capacity to protect and preserve our environment; and contain the cost of our government operations,” Remengesau said.

Remengesau noted that the economy has continued to perform in a positive territory despite the downturn of the tourism industry. “[D]espite a drop in tourist arrivals of approximately 22,000, Palau’s economy still grew in 2016 by 1.6 percent, driven by expanded construction activities and sustained consumer spending from wage increases,” he said.

The president added that despite the 24 percent in overall tourists’ numbers, especially from mainland China, the more important gauge is that revenue per arrival and visitor nights have increased by approximately 9 percent and 5 percent respectively.

Palau relies heavily on tourism, external grants, and food and fuel imports, although the Asian Development Bank’s latest economic outlook on Palau painted a bright picture, policies on tourism may pose downside risks to its growth and development.

The latest draft Palau Trade Policy Framework released in February by the Ministry of Finance said that “the financial market volatility and recessionary conditions in Asia, the U.S. dollar, and natural disasters (and relating to climate change) can potentially derail economic progress already made and weaken the external and fiscal positions.”

“Overall economic outlook for 2017 contains a lot of uncertainties but it looks like there is good opportunity to correct bureaucratic and policy mistakes that have been clearly debunked by the past couple of years of political posturing,” according to Mark Rudimch, vice president of the Palau Senate and the Chair of the Committee on Ways and Means.

Liliana Warid, private sector development specialist with ADB’s Pacific Liaison and Coordination Office, said Palau should target high spending tourists and avoid attracting the low spending guests.

“To sustain economic growth and build on the success of earlier business environment reforms, Palau should seek to reduce overall tourist numbers while increasing individual tourist spending,” she said.

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