By Mar-Vic Cagurangan
Palau may not have been able to bag everything it hoped for under the renegotiated terms of the Compact of Free Association, but at some point, a deal had to be closed and the nation had to settle for a compromise, President Surangel Whipps Jr. said.
“Of course, we want more. Our citizens demand more. But we also have to be reasonable and fair,” Whipps said. “At the end of the day, I think it's a win for Palau. It's a win for the United States.”
The COFA Amendment Act renews the U.S. economic assistance to the freely associated states, which include the FSM, Palau and the Marshall Islands. The $7.1 billion package, which includes $634 million for the U.S. postal service, is broken down into $3.3 billion for the FSM, $2.3 billion for the Marshall Islands, and $889 million for Palau.
“It definitely helps us a lot a long way,” Whipps said. “What's more important is where we are now.”
What Palau stands to receive is a little more than double the $400 million initially offered by U.S. negotiators. Palau’s 20-year economic provisions are set to expire at the end of September this year, but negotiators agreed to renew their agreements one year ahead. New provisions begin this year, along with the remaining $2 million in grants from the expiring cycle.
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“We were able to really go back to the United States and ask them to really look at Palau's needs and the challenges that we have,” Whipps said.
Palau’s economy dropped 30 percent due to a decline in tourism that resulted from China’s travel ban to the Pacific island nation. The economic hardships had forced Palau to resort to massive borrowing. Despite pressure from Beijing for Palau to sever ties with Taiwan, Whipps refused to cave in.
COFA grants Washington exclusive defense rights in Palau, where the U.S. military is currently building an over-the-horizon radar system to keep China at bay.
While the U.S. and Palau have sealed their renewed agreements, Whipps said China remains relentless in its attempts to impose its influence in the island nation.
“We definitely see the influence that the Chinese have on certain politicians because there are promoters of their policies and interests,” he said.
He cited, for example, the Palau Senate’s December 2023 resolution that seeks to block any U.S. plans to deploy missile batteries in Palau. “That’s a clear demonstration of how China is operating to help people feel that there’s this militarization and the U.S. military buildup is unsafe for Palau,” Whipps said.
“You begin to wonder what motivated that resolution. It's really an anti-U.S. resolution and really a pro-China resolution, if you really drill down to what is going on.”
While China hasn’t given up on its attempts to make further inroads to Palau, COFA keeps the nation fortified. “The U.S. military is also looking at expanding the seaport and the airports in the outer islands,” Whipps said.
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In exchange for exclusive U.S. defense rights, Palau has secured COFA funds for health, education, security, infrastructure and climate change.
“That's critical to help us develop economic stability, pay off our debts that have been piled on, and hopefully put Palau on a path to economic growth that can provide the opportunities and bring home young people who have left Palau,” Whipps said. “At the same time, it will lift the standard of living of all those living in Palau.”
But negotiations aren’t over, and Palau is bent on leveraging its strategic value to U.S. Indo-Pacific strategy.
Beyond COFA agreements, Palau is negotiating with the U.S. on other federal programs that are currently not available under the treaty. “One of the areas that we've been trying to get the U.S. to understand is the importance of FEMA assistance to help us in times of disaster,” he said.
He said Washington tries to counter-offer with “some other forms” of assistance. “But FEMA is really important for Palau because we get hit with typhoons and our homes were not built to survive these things,” Whipps said.
Palau is also seeking U.S. assistance in building a new hospital that can withstand the impact of climate change. “Our hospital is built on the coastline,” he said.
The list also includes runway expansion and building power resilience. “These are things that are still ongoing discussions with the United States besides those other provisions for smaller projects, Whipps said. “There are more major projects that we need to continue. These are areas where really it benefits the U.S. military and Palau because these are those joint partnership things.”
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