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Washington, Palau renew Compact's economic provisions

Updated: Jan 12, 2023

U.S. and Palau negotiation panels today signed a memorandum of understanding to continue Washington's economic assistance to the Pacific nation. Photo courtesy of the Office of Palau President

By Mar-Vic Cagurangan

The United States and Palau today signed a memorandum of understanding to renew the expiring economic provisions of the Compact of Free Association between the two nations.

“The understanding reached today covers assistance over the next 20 years that is more than twice the 2020 package and assistance past 20 years,” according to an announcement from the Office of the President of Palau.

The actual amount of U.S. assistance to Palau has yet to be disclosed. Tia Belau reported that $400 million was the 2020 figure that floated during the administration of former President Tommy Remenegsau, whose term ended in 2021.

If the value of the economic package "is more than twice the 2020 package" as announced, then Palau may stand to get at least $800 million.

In a Feb. 14, 2022 report, the U.S. Government Accountability Office said the U.S. Department of the Interior, which has oversight over the freely associated states, was "scheduled to have provided $803 million to Palau by 2024."

Currently, the economic provisions of the compact are set to expire in 2024.

Officials said the new economic assistance would begin as early as Oct. 1, depending on the final agreement and the subsequent congressional approval.

“The memorandum of understanding was signed as part of ongoing Compact-related negotiations and confirms our shared vision for a strengthened and lasting partnership that will continue to benefit both nations and the entire Pacific region,” a statement from the U.S. State Department said.


The compact grants the United States “strategic denial”—the option to deny foreign militaries access to the freely associated nation and provide for U.S. defense sites.

According to the State Department, the signing of the memorandum affirmed “our close and continuing partnership" and reflected "our consensus reached on levels and kinds of future U.S. assistance to be requested for Palau’s economic development.”

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The MOU was signed by Joseph Yun, special presidential envoy for compact negotiations, and Kaleb Udui Jr, Palau’s finance minister.

“The understanding also recognizes the reduction in Palau’s revenue from its largest industry, tourism, due to geopolitical pressures and Covid-19 as well as increasing sea-level rise and related challenges. It was preliminarily agreed to recognizing the government of Palau’s efforts to cope with these challenges,” the presidential office said.

President Surangel Whipps Jr., who attended the signing in Los Angeles, CA., is expected to provide details of the memorandum of understanding when returns to Palau on Jan. 20.

Palau rejected the initial package offered by the U.S. in 2020.

“From the start of the negotiations in my administration, Palau's team has been guided by principles of partnership and resiliency,” Whipps said.

Noting Palau’s strategic importance to regional security, Whipps said the relationship between Washington and the Pacific nation “should be a partnership.”

“The compact and its economic assistance provisions should be a mechanism for Palau to increase its resiliency from threats like the pandemic, climate change, and market disruptions,” Whipps said.

Read the full story in the February 2023 issue of the pacific Island Times.

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