Palau (11/03)

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--Koror (pop. 13,303).
Terrain: varies from mountainous main island to smaller, reef-rimmed coral islands.
Climate: tropical.

Nationality: Noun and adjective--Palauan.
Population: 19,976. Age structure--35.4% under 18, 6.6% over 65.
Growth rate: 2.3%.
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 64.5 yrs.; female 70.8 yrs. Infant mortality rate--20/1,000.
Work force: Government--26%; tourism--10%; other services--28%; construction--11%, agriculture--3%.

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.
Political parties: Palau Nationalist Party, Ta Belau Party.

GDP: $109.5 million.
GDP per capita: $5,482.
National income (GDP + foreign assistance): $143 million.
National income per capita: $7,475.
GDP composition by sector: Public Administration 29%, Trade 24%, Construction 12%, Hotels/Restaurants 6%
Industry: Types--Government, tourism.
Trade: Exports ($9 million)--fish, garments, handicraft. Export markets--U.S., Japan, Taiwan. Imports ($86 million)--fuel, food and beverages, manufactured goods. Import sources--U.S. + Guam (48%), Japan, Singapore, Taiwan, Korea.
External debt: $20 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 the Palauan population lives in the capital city of Koror on Koror Island. The constitution calls for a new capital to be established on the bigger but less developed island of Babeldaob--the second-largest island in 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 the districts of Palau and the Marshall Islands declined to participate. Palau instead approved a new constitution and became the Republic of Palau in 1981, 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 to select the president and the vice president, who run on separate tickets. 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. Each state also elects its own governor and legislature.

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

The judicial system consists of the Supreme Court, National Court, the Court of Common Pleas, and the Land Court. The Supreme Court has trial and appellate divisions and is presided over by the Chief Justice.

Principal Government Officials
Head of State and Government--President Tommy E. Remengesau, Jr.
Vice President--Sandra Sumang Pierantozzi
Ambassador to the U.S.--Hersey Kyota

Palau maintains an embassy at 1150 - 18th Street NW, Suite 750, Washington, DC 20036. Tel: 202-452-6814.

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 $5482 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 grew by 3.3% and 3.1% in 2000 and 2001 respectively.

Tourism is Palau's main industry. Activity focuses on scubadiving and snorkeling among the islands' rich marine environment, including the Floating Garden Islands to the west of Koror. The number of visitors--85% of whom come from Japan, Taiwan, and the U.S.--reached nearly 67,000 in 1997, more than quadruple the level of a decade earlier. Tourism earned $67 million in foreign exchange for Palau in 1996, accounting for roughly half of GDP. Arrivals from Asian countries dropped in 1998 and 1999 due to the regional economic downturn and remained at about 57,000 per year for 2000-2002.

The service sector dominates the Palauan economy, contributing more than 80% of GDP and employing three-quarters of the work force. The government alone employs nearly 26% of workers. 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. U.S. grants in 2001 totaled $20 million.

Construction is the most important industrial activity, contributing over 9% of GDP. Several large infrastructure projects, including the rebuilding of the bridge connecting Koror and Babeldaob Islands after its collapse in 1996 and the construction of a highway around the rim of Babeldaob, boosted activity at the end of 1990s.

Agriculture is mainly on a subsistence level, the principal crops being coconuts, root crops, and bananas. Fishing is a potential source of revenue, but the islands' tuna output dropped by over one-third during the 1990s.

The main economic challenge confronting Palau is to ensure the long-term viability of its economy by reducing its reliance on foreign assistance. Palau has created a trust fund to be drawn upon after the cessation of Compact grants, the value of which had grown to $140 million by the beginning of 2000, but has been static in 2001-2002.

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 Trust Territory of the Pacific Islands territories to gain its independence. Under the Compact, the U.S. remains responsible for Palau's defense for 50 years.

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. Palau was admitted to the United Nations on December 15, 1994, and has since joined several other international organizations.

Principal U.S. Officials

Ambassador (accredited to both the Philippines and Palau; resident in Manila)--Francis J. Ricciardone
Charge d'Affaires--Ronald A. Harms

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

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