Palau (12/08)

For the most current version of this Note, see Background Notes A-Z.


Republic of Palau

Area: 458 sq. km. (about 190 sq. mi.) in eight main islands plus more than 250 islets.
Cities: Capital--Melekeok (pop. 391).
Terrain: Varies from mountainous main island to smaller, reef-rimmed coral islands.
Climate: Tropical.

Nationality: Noun and adjective--Palauan.
Population: Approximately 20,000 (non-Palauan population, approx. 5,500). Age structure--less than 15 years old, 5,150; 16-64 years old, 13,600; more than 65 years old, 1,130.
Population growth rate: 1.3%.
Ethnic groups: Palauans are Micronesian with Malayan and Melanesian elements.
Religion: Roman Catholic, Protestant, Modekngei (an indigenous Palauan religion).
Languages: English (official in all 16 states), Palauan.
Education: Literacy--92%.
Health: Life expectancy--male 68 yrs.; female 76 yrs. Infant mortality rate--16.2/1,000.
Work force: Public sector--56%; private sector--44%.

Type: Constitutional republic in free association with United States.
Independence (from U.S.-administered UN trusteeship): October 1, 1994.
Constitution: January 1, 1981.
Branches: Executive--president (head of state and government), vice president, cabinet. Legislative--bicameral parliament elected by popular vote. Judicial--Supreme Court, National Court, Court of Common Pleas, and the Land Court.

GDP (2006, provisional figure): $157.7 million.
GDP per capita: $7,921.
National income (GDP + foreign assistance): $195.4 million.
National income per capita: $9,817.
GDP composition by sector: Public administration 23%, trade 20%, construction 15%, hotels and restaurants 11%, transportation and communications 9%, fisheries 2%, agriculture 1%, manufacturing and mining 1%.
Industry: Types--government, trade, construction, tourism.
Trade: Exports ($5.9 million, 2004)--fish, handicrafts. Export markets--U.S., Japan and Taiwan. Imports ($107.3 million)--fuel, food and beverages, manufactured goods. Import sources--U.S. (Guam), Japan, Singapore, Taiwan, and Korea.
External debt (2006): $38 million.
Currency: U.S. dollar.

The Republic of Palau consists of eight principal islands and more than 250 smaller ones lying roughly 500 miles southeast of the Philippines. The islands of Palau constitute part of the Caroline Islands chain. About 70% of Palauans live in the capital city of Koror on Koror Island. The capital, however, relocated in 2006 from Koror to a newly constructed complex in Melekeok State on the larger but less developed island of Babeldaob--the second largest island in all of Micronesia after Guam.

Palau was initially settled more than 4,000 years ago, probably by migrants from what today is Indonesia. British traders became prominent visitors in the 18th century, followed by expanding Spanish influence in the 19th century. Following its defeat in the Spanish-American War, Spain sold Palau and most of the rest of the Caroline Islands to Germany in 1899. Control passed to Japan in 1914 and then to the United States under UN auspices in 1947 as part of the Trust Territory of the Pacific Islands.

Four of the Trust Territory districts formed a single federated Micronesian state in 1979, but this eventually dissolved as the individual districts--long culturally distinct--opted for more locally popular status. Palau approved a new constitution in 1981, subsequently signing a Compact of Free Association with the United States in 1982. After eight referenda and an amendment to the Palauan constitution, the Compact went into effect on October 1, 1994, marking Palau's emergence from trusteeship to independence.

Palau is a democratic republic with directly elected executive and legislative branches. Presidential elections take place every 4 years, at the same time as the United States' presidential election, to select the president and the vice president, who now run as a team. The Palau National Congress (Olbiil era Kelulau) has two houses. The Senate has nine members elected nationwide. The House of Delegates has 16 members, one each from Palau's 16 states. All of the legislators serve 4-year terms and are limited to three consecutive terms. Each state also elects its own governor and legislature.

The Council of Chiefs, comprising the highest traditional chiefs from each of the 16 states, is an advisory body to the president. The Council is consulted on matters concerning traditional laws and customs.

The judicial system consists of the Supreme Court--with trial and appellate divisions--the Court of Common Pleas, and the Land Court. (Palau's constitution has a provision for an additional National Court, but this is not currently active.)

In November 2008 Palauans elected a new president and vice president: Johnson Toribiong and Kerai Mariur. They will take office in mid-January 2009. The same elections brought sweeping change to the legislature and passed more than 20 amendments to the constitution.

Principal Government Officials
Head of State and Government--President Tommy E. Remengesau, Jr. (Johnson Toribiong is President-elect)
Vice President--Elias Camsek Chin (Kerai Mariur is Vice President-elect)
Ambassador to the U.S.--Hersey Kyota
Ambassador to the UN--Stuart Beck

Palau maintains an embassy at 1700 Pennsylvania Avenue, Suite 400, Washington, DC 20006 (tel: 202-452-6814, fax: 202-452-6281). The Republic of Palau's Mission to the United Nations is located at 866 United Nations Plaza, Suite 575, New York, New York 10017 (tel: 212-813-0310, fax: 212-813-0317).

While calm in recent years, Palau witnessed several instances of political violence in the 1980s. The republic's first president, Haruo I. Remeliik, was assassinated in 1985, with the Minister of State eventually found to be complicit in the crime. Palau's third president, Lazurus Salii, committed suicide in September 1988 amidst bribery allegations. Salii's personal assistant had been imprisoned several months earlier after being convicted of firing shots into the home of the Speaker of the House of Delegates.

Legislation making Palau an "offshore" financial center was passed by the Senate in 1998. In 2001 Palau passed its first bank regulation and anti-money laundering laws.

Palau's per capita GDP of $7,921 makes it one of the wealthier Pacific Island states. Nominal GDP increased by an annual average of nearly 14% from 1983 to 1990, and by an annual rate of over 10% from 1991 to 1997. Growth turned sharply negative in 1998 and 1999 as a result of the Asian financial crisis, but there has been a gradual rebound in recent years and the economy grew by 5.4% in 2005.

Tourism (and its attendant infrastructure changes) is Palau's main industry. Its major draws are its diverse and pristine marine environment, and its above-water tropical island beauty. The number of visitors--75% of whom come from Taiwan, Japan, and the U.S.--exceeded 82,000 in 2006, a 2% increase from 2005. Continental Airlines and Far Eastern Transport (FAT), have direct flights to Palau from Guam, Taiwan, and the Philippines. Japan Airlines runs chartered flights from Tokyo; Korean Airlines does the same from Seoul on a seasonal basis. 

In 2006 tourist spending in Palau was $62 million. Palauan tourism and environmental authorities would like to adjust the industry, simultaneously decreasing tourist volume and increasing income while by attracting more high-dollar tourists.

The service sector dominates the Palauan economy, contributing more than 50% of GDP and employing more than half of the work force. The government alone employs nearly 25% of workers and accounts for 23% of the GDP. One of the government's main responsibilities is administering external assistance. Under the terms of the Compact of Free Association with the United States, Palau will receive more than $450 million in assistance over 15 years and is eligible to participate in more than 40 federal programs. The first grant of $142 million was made in 1994. Further annual payments in lesser amounts will be made through 2009. Total U.S. grant income in 2006 was $23.7 million.

Construction is an important industrial activity, contributing over 15% of GDP. Several large infrastructure projects, including the Compact Road, relocation of the new capital, and new hotels, have boosted this sector's recent contribution to GDP.

Agriculture is mainly on a subsistence level, the principal crops being coconuts, taro, and bananas. Fishing is a potential source of revenue, but the islands' tuna output dropped by over one-third during the 1990s. Fishing industry revenues are mostly from license fees from fishing vessels.

The main economic challenge confronting Palau is to ensure the long-term viability of its economy by reducing its reliance on foreign assistance. The Compact of Free Association created a trust fund to provide perennial budget support when U.S. direct assistance ends in 2009. The value of the trust fund in 2007 was approximately $175 million.

Palau gained its independence October 1, 1994 with the entry into force of the Compact of Free Association with the United States. Palau was the last component of the Trust Territory of the Pacific Islands to gain its independence. Under the Compact, the U.S. remains responsible for Palau's defense for 50 years. The Compact of Free Association is subject to a bilateral review to be completed by the 15th anniversary of its adoption.

Palau is a sovereign nation and conducts its own foreign relations. Since independence, Palau has established diplomatic relations with a number of nations, including many of its Pacific neighbors, and is one of two dozen nations that have diplomatic relations with Taiwan. Palau was admitted to the United Nations on December 15, 1994, and has since joined a number of other international organizations.

Principal U.S. Official

Chargé d'Affaires--Mark Bezner

The mailing address for the U.S. Embassy is P.O. Box 6028, Republic of Palau 96940. Telephone: 680-488-2920/2990. Fax: 680-488-2911. Email: