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Whipps says US economic assistance must extend beyond 20 years

Surangel Whipps Jr.

By Mar-Vic Cagurangan

Palau officials said they have sealed a fair deal with the United States under the Compact of Free Association, which they said was negotiated based on mutual satisfaction.

At least for now.

But in exchange for permanent rights to the Pacific nation’s defense, Washington must continue its economic assistance to Palau beyond the 20-year term set by the compact, President Surangel Whipps Jr. said.

“The perpetual defense rights have value,” Island Times quoted Whipps as saying. “We can look at U.S military use of our country as another source of revenue into our economy. They continue to use the country beyond 2044, then financial support to Palau should also continue beyond 2044.”

Palau has been a component of the U.S. Pacific theater, but its role has expanded under the U.S. Indo-Pacific strategy, which is being amplified amid the burgeoning geopolitical conflicts in the region.

Last month, the Naval Facilities Engineering Systems Command Pacific awarded a $118.36 million contract to Gilbane Federal to build the reinforced concrete pads and foundations that will support the installation of the tactical mobile over-the-horizon radar equipment in Koror.

While the compact’s economic provisions are set to end in 2024, Palau and the U.S. have signed a memorandum of understanding for the renewal of assistance packages a year ahead of their expiration.

The proposed new economic provisions, which will be incorporated into the U.S. government’s fiscal 2024 spending policy, would be in place for the next 20 years.

"As we continue to give U.S. rights to our defense and denial rights for any other country, we will continue to receive assistance from them,” Kaleb Udui Jr., Palau’s finance minister and chief negotiator, said in a press conference held Jan. 31.

“So, while the agreement is for 20 years, we can sort of say that this is perpetual and the next negotiating team doesn't need to start from zero," he added.

Details of the memorandum of understanding are still being kept concealed.

Island Times reported that the specifics of the memorandum will be revealed once U.S. President Biden has submitted his budget request to the U.S. Congress.

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Whipps said Palau’s economic predicament has compelled the government to take out a lot of loans to fund its operations.

In September last year, the Asian Development Bank approved a $30 million policy-based loan to help Palau’s economy rebound from the Covid-19 pandemic.

Quoting Whipps, Island Times said Palau's loan payments that were deferred will be due starting next year.


At the Jan. 31 press conference, Udui emphasized that the MOU “is not an official document." Rather, he added, “this is a demonstration of commitment for the economic package.”

“The importance of this MOU is that we try to get money one year earlier. And this is something that the U.S. negotiating team recognizes,” Udui said.

He noted that Palau is currently under a lot of financial pressure because the country’s tourism has not recovered.

“We had to borrow money to be able to find our way through this difficult time. So that's a very significant part of why we did this,” he added.

The MOU, Udui said, was an important step in Palau’s dialogues with Washington.

“Let's see if this language can be kept in the agreement when once it's finalized but this is something I think that is very important for our country,” he added.

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