By Frank Whitman
Palau enters its 29th year of independence facing myriad challenges, most of which are also taking their toll on countries around the world. Palau President Surangel Whipps Jr. is well aware of the problems and is developing strategies to tackle them. In fact, he recently completed a month of travel to destinations from Washington, D.C. to Singapore in an effort to build relationships and generate investment to help develop a stable economy.
His destinations included Japan, Guam, Taiwan, Honolulu (for a meeting of the 20-member Pacific Islands Conference of Leaders), Washington, D.C. (for President Biden’s Pacific Island Country summit) and Singapore.
While in Guam last month, he reflected on the challenges facing Palau, starting with the frequent climate disasters too familiar to most, if not all, Pacific Islanders, including typhoons, drought and sea level rise. “Then we get hit with Covid,” Whipps told the Pacific Island Times. “And with Covid, not only do we get sick, but it devastates our economy.”
In addition to the devastation of Palau’s tourism industry, the main driver of its economy, Whipps is concerned about an increase in the country’s debt (currently a bit more than $20 million, according to the Office of the President); the rate at which Palauans are leaving the country (a 40 percent decline in population since 1994, he said); seemingly out-of-control inflation; the disruption to the global economy caused by the war in Ukraine; rising regional tension with China; the historically slow pace of negotiations over the review of the Compact of Free Association with the U.S. (which have recently picked up pace); and pressure from China to break diplomatic ties with Taiwan.
In the face of the difficulties, however, Whipps remains hopeful. “It’s been a rocky 28 years of independence, but you have to be optimistic,” he said. “We’re very fortunate that God has given us our beautiful country with an abundance of resources.”
Whipps was inaugurated as Palau’s 10th president on Jan. 21, 2021. The country marks Oct. 1, 1994, as the date of its independence.
To address the country’s economic problems, Whipps intends to start by rebuilding tourism, hopefully with the “right mix” of tourists. During a recent state visit to Japan, “my ask to (Prime Minister Fumio Kishida), was ‘send us flights, direct flights as soon as you can,’” he said. “Any airline … we need flights to bring tourists in, because we depend on tourism; we have 2,000 empty rooms.”
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He is also endeavoring to develop tourism markets from Singapore and Australia, and he expects Taiwanese visitor arrivals to return to pre-pandemic levels as Covid restrictions ease in Taiwan.
He is taking steps to diversify the country’s economy. The recent announcement that the U.S. military intends to build an over-the-horizon radar site in Palau represents one area of diversification. “The military coming in provides other employment opportunities; the new radar site is going to provide further development,” Whipps said. In addition, training exercises held in Palau and other visits by military personnel contribute to the economy. Palau is also mentioned informally as a possible site for a new U.S. military base.
It does, however, bring added concerns that Palau now will be a target in the event of a miliary conflict involving the U.S.
Whipps is hopeful that with innovative tax reform a new financial industry would help diversify the economy. “This year Congress has been able to pass laws on tax reform,” he said. The new laws include the Palau Goods and Services Tax Act, the Corporations Registry Act and the Digital Residency Act – “things that I think will help build a foundation for a stronger future.”
The June landing in Palau of a second undersea fiber optic cable, to be fully connected by early 2023, is expected to increase Palau’s ability to host cryptocurrency platforms and similar businesses. “We’ve got to look at other types of opportunities (like) bringing digital nomads; the digital residency program is making use of a blockchain,” Whipps said.
Representatives of cryptocurrency company Binance have visited Palau and Whipps has recently spoken with Vitalik Buterin of Ethereum and invited him to Palau. “Let’s talk about these issues,” Whipps said. “How can we help and become part of this new frontier?”
Palau is widely recognized for its forward-thinking efforts to protect its ocean resources. Among other initiatives, in 2015 the Palau National Marine Sanctuary Act was enacted into law, according to The Nature Conservancy website. Under this law, 80 percent of Palau’s Exclusive Economic Zone was closed to commercial fishing and all extractive activities. “The remaining 20 percent of the EEZ is to be a highly-regulated domestic fishing zone open to traditional fishers and to commercial, domestic fishing fleets,” the website states.
Currently, in line with the sanctuary initiative, Palau is in the process of marine spatial planning - developing a master plan for the ocean starting at the shoreline out to the EEZ. “It’s really to get all the stakeholders together and use science and data to optimize the use of those resources and protect what’s important,” Whipps said. “We’re not fixed to a size that says it should be 30 percent or 80 percent, but to the best size, based on stakeholder engagement and science and data.”
The worldwide goal for such efforts is to have 30 percent of the space protected and 100 percent of it managed. “Palau exceeds that. We’re at 80 percent protected. It’s about trying to find that balance between production and protection,” he said.
Key features of any worthwhile conservation program are that it is sustainable, that it benefits the local people and provides food security, Whipps said.
Whipps noted that modern conservation efforts are similar to the traditional Palauan bul, a practice by which the Palauan chiefs gather and identify an area that was being overfished. They would agree to close it to fishing as it rejuvenated and then go back to fishing there. “It’s worked,” he said. “It’s really a management tool.”
Whipps’ first stop during his September travels was Tokyo where he met Emperor Naruhito and Prime Minister Kishida on his first state visit to the country. “Japan and Palau share a strong relationship and history,” he said. “It was important that we go and continue to strengthen that relationship.”
He noted that Palau recently opened a new airport terminal building built and managed as part of a public-private partnership with a Japanese company that also manages the Haneda Airport in Tokyo. He noted that with the new terminal came debt, but because of the pandemic there are no tourists to generate revenue to help pay the debt.
While in Japan, he signed a grant assistance agreement on an electrification project to provide power on the southern loop of the Compact Road and into Koror. It will open new areas for housing and allow the power grid to bring on renewable energy projects that are coming online, hopefully within the next few years, he said. Palau hopes to generate 100 percent of its power by renewable sources by 2032.
Palau and Japan are also working on other projects related to disaster preparedness, including the installation of an AM radio tower to alert people – particularly those on the more remote islands - about coming typhoons, tsunamis and other disasters.
Whipps said he took on such a hectic travel itinerary because “we’ve got to get tourism energized and the economy going. And we’re trying every way that we can to do that.”
Editor's note: In the print edition of our October issue, a photo of Koror was mistakenly identified as "Capitol of Palau in Ngerulmud. Our sincere apologies.
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