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Palau, U.S. ink second compact review agreement, solidifying diplomatic ties

Updated: May 19, 2023

By Ongerung Kambes Kesolei

Koror-- Palau and the United States reached a major milestone in their diplomatic relations with the initialing of the second compact review agreement in the Capitol Building rotunda at the national capital in Ngerulmud, Mekekeok.

The ceremonial event was witnessed by Palau President Surangel Whipps Jr. and top government officials, lawmakers, traditional leaders and students. Notable among the U.S. delegation who accompanied U.S. President Biden's Special Envoy for the Compact Negotiations Joseph Yun for the event were the Assistant Secretary of the Interior for Insular and International Affairs Carmen Cantor, Deputy Assistant Secretary of the Interior for Insular and International Affairs Keone Nakoa, and former Ambassador to the Marshall Islands Karen B. Stewart.

Kaleb Udui Jr., Palau's chief compact negotiator, and his U.S. counterpart, Ambassador Joseph Yun, put their initials on the 20-page agreement late afternoon Wednesday. The ceremony marks a crucial step in concluding the discussions on the major economic assistance while further solidifying the strong relationship between the two countries.

Yun explained the significance of the initialing event to the Palauan people.

"Of course, we wanted to do it here and this ceremony is to show that to our Palauan friends," Yun told the packed rotunda.

After the initialing, the agreement is set to be signed next week in Papua New Guinea during the gathering of Pacific leaders.

U.S. President Joseph Biden was originally scheduled to attend the PNG meeting but canceled due to the ongoing debt ceiling negotiation with the U.S. Congress.

However, the formal signing of the renewed compact agreement will be done between Udui and Yun.

"Let’s be straightforward, we want to show off our agreement that’s why we are doing it (in Papua New Guinea)," Yun added.


Palau’s event comes after Yun and FSM's lead negotiator Leo Falcam yesterday initialed the agreement on Monday. It is reported that initialing by the Marshall Islands is "doubtful" as the pact may not be finalized in time for the U.S. special envoy’s visit.

The negotiations, Yun explained, was centered on a strong people-to-people tie based on shared values and history, a commitment to mutual defense, and an emphasis on economic relationship and assistance.

Udui emphasized that the outcome of the negotiations provide a path for Palau to gain real independence. “After so many years, we want to be on our own and this I think will help us get there," he said.

"We're talking about defense. We're talking about our economic development, and there is that independence, which is vital to our partnership because we are one of the United States' biggest supporters in international fora," Udui said.

He said the U.S. has assisted Palau in joining international organizations that guided the Pacific nation through economic independence.

"With economic independence comes financial independence, and that financial independence will grant us the autonomy we need to safeguard our country and protect our allies by staying within our borders," Udui explained.


"This is really what we worked together to put into this agreement that will make our lives better and will make us independent. I think that’s a significant achievement for us," Udui added.

Under the renewed Compact, which if approved by the U.S. Congress will take effect on Oct. 1, 2024, Palau will receive $890 million for the next 20 years.

Additionally, the new agreement includes provisions for continued assistance based on negotiations at that point. Palau will receive $5 million annually for infrastructure projects and an additional $5 million for infrastructure maintenance. Furthermore, there will be six years of funding, amounting to $10 million per year, to alleviate the majority of Palau's COVID-related borrowing. Moreover, the Compact Trust Fund will receive $100 million from the United States in two installments commencing in fiscal year 2024.

U.S. federal programs and services will continue as they exist and the two countries intend to continue discussion regarding additional programs and services.


The agreement is a culmination of talks that was called into an early start by then U.S President Trump in 2019.

However, it wasn't all positive developments. The ceremony was overshadowed by the absence of Senate President Hokkons Baules and most senators who chose to boycott both the initialing of the agreement and the earlier morning briefing on the compact's conclusions at Ngarachamayong provided by the president and his negotiating team.

The senators claimed they had not been kept informed about the compact discussions and were abruptly urged at the eleventh hour to endorse a document about which they barely had knowledge.

The potential consequences of the boycott on the forthcoming endorsement of the Palau National Congress for the renewed compact economic assistance remain uncertain at this time.

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