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  • Writer's pictureBy Gabriel McCoard

Glimmers of hope amid economic chaos

Palau President Tommy Remengesau recently objected to the World Bank’s call to categorize his nation as a “high-income” economy. For now, he has a point; 2020 has been a bad year for pretty much everything, but particularly for tourism, and the region could very likely see its economy shrink for several years. Even in the best of times, tourism-based economies are problematic, subject as they are to economic hiccups and dependent on low wage jobs. The World Bank estimates that 200 million people worldwide who work in the industry have lost their jobs since the pandemic began.

His remarks do, however, throw a wrench into the Colonial Oppression narrative – whether you call it Dependency Theory or any variant – but confirm modernistic ideas that nations go through stages of growth akin to a person growing up. Much like teenagers who want to be treated like an adult without any responsibility, developing nations need to reckon with whether sovereignty is about creating a functioning society, or taking junkets.

In his defense, other countries have done the same. Being high income changes the financial terms for participating in the global economy. Less concessionary financial instruments, higher interest rates, and the like.

Palau is well-off compared to its neighbors. I once attended Xavier High School’s Cultural Day celebration and noticed that of all the students representing every corner of Micronesia, only the Palauan parents were there, for they were the only ones who could afford a plane ticket.

Palau has long had certain advantages, and advantages beget benefits. Palau is closer to Asia. Non-stop flights eliminate the need for a U.S. transit, useful for those not legally permitted to enter the United States. Palau’s Rock Islands are a natural phenomenon with virtually no comparison, and there are far worse ways to spend a weekend than getting a full body sunburn while snorkeling with sea turtles and boating over a Mitsubishi Zero fighter plane downed in battle 70 years ago; the Battle of Peleliu highlighted Palau’s geopolitical potential in ways that, say, Operation Hailstone did not for the Federated States of Micronesia.

The international community – whether it actually exists is a subject for another time – has bestowed its blessings on Palau. Many international organizations accompanied by well-off American attorneys and dive guide playboys of many nations are drawn to service in Palau in a manner reminiscent of New York investment bankers vacationing at the Greenbrier Resort: worldly travel without discomfort.

The Greenbrier, for those not familiar, is one of America’s oldest and most exclusive resorts, a wealthy island in a sea of poverty, for it lies in West Virginia, one of the poorest states in the Union. It housed Cold War nuclear bunkers for the U.S. Congress, and while I don’t like to spread rumors, rumor has it that Air Force One made a stop on Sept. 11.

Both Palau and Tinian are offering glimmers of hope in the chaos of the 2020 economy.

The media has already reported on Palau Sea Ventures v. Koror State Legislature, in which a private company sought to develop a publicly owned lot adjacent to their business. The legislature, after the business and public lands authority executed the lease, passed a law restricting the lease of the specific parcel. The trial court ruled in favor of the company, finding that the legislation could not be applied to a lease made before the law’s existence, and more significantly, that it violated the Article IV, Section Six of the Palau Constitution, which states, “Contracts to which a citizen is a party shall not be impaired by legislation.”

The court interpreted that clause to mean that entering into a contract was a profound right that Palau protects under its constitution.

On appeal, the Palau Supreme Court agreed that the act could not be applied to an already existing lease but did not consider the constitutional issue of the gravity of contract impairment as a violation of a fundamental right.

Relying upon the doctrine of constitutional avoidance – some might call it the doctrine of judicial laziness – the Supreme Court found that since the act was already invalid, it did not need to consider any questions over the importance of the right to contract, but did not invalidate the lower court’s ruling.

This case could pave the way for greater private development in Palau, thereby lowering dependence on multi-lateral lending, and the rules of global finance.

The other development is the possible opening of a U.S. Department of Agriculture-licensed and inspected slaughterhouse on Tinian. I’m uncertain of the current state of the project, but USDA-certification removes a barrier to market access. USDA certification is the gold standard of the food safety regulatory industrial complex, allowing inspected meat to be sold in throughout the U.S., and making exporting to international markets easier. All of which makes it easier for farmers and ranchers to bring their products to market, even if on a small scale.

Real economic development requires a multi-pronged approach. Let’s hope the next year brings real opportunity for real people.

Gabriel McCoard is an attorney, who previously worked in Palau and Chuuk State. He is currently weathering the pandemic stateside. Send feedback to

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Dec 26, 2020

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