Economy of Palau

Since the end of World War II, the major employer in Palau has been government—first the U.S. Navy, then the Trust Territory of the Pacific Islands, and finally the government of Palau. Nevertheless, in the rural areas outside Koror the subsistence economy is active. Women typically gather and cultivate taro, sweet potato, and cassava, and men fish and tend pigs, which are used at customary feasts. Nearshore reef fishing is carried out on a subsistence and small-venture basis, but it does not generate significant government revenue. Offshore tuna fishing by foreign vessels provides a small amount of government revenue through the sale of licenses. There are no major exportable crops; tuna and clothing are the country’s main exports. Tourism grew considerably during the late 20th century and has also made some contribution to the republic’s economic growth. The country’s per capita income is one of the highest in the region.

The U.S. dollar is the official currency of Palau, which does not have a central bank. In 1997 the country joined the International Monetary Fund. There is heavy reliance on financial assistance from the United States. Following allegations in 1999 that Palau was the site of money-laundering activities, the government established financial regulatory bodies in the early 21st century and introduced tighter banking regulations.

Foreigners, particularly from the Philippines and Taiwan, constitute a growing segment of Palau’s labour force. By the early 21st century, foreigners accounted for more than two-fifths of the country’s paid workers. While the constitution allows for the formation of unions, at the start of the 21st century no such organizations existed in Palau. In 1998 the country adopted its first minimum-wage law; the law, however, does not apply to foreign workers.

Koror has a system of paved roads. There are stretches of paved road on Babelthuap, and in the mid-1990s construction began on a 53-mile (85-km), two-lane highway. Known as the Compact Road because its construction was a term of the Compact of Free Association, it was completed in 2007. The roads built in 1944–46 by U.S. military forces on Peleliu and Angaur are still usable. Transportation between islands is usually by boat or airplane. There is regular commuter service from Koror to Peleliu and Angaur, and trips by speedboat to coastal villages on Babelthuap usually can be completed in a few hours. There is an international airport located on Babelthuap.

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Government and society

The constitution of the Republic of Palau established a presidential form of government, which was installed in 1981. The executive consists of the separately elected offices of president and vice president, the Council of Chiefs to advise the president on traditional laws and customs, and the cabinet. The Olbiil Era Kelulau (National Congress) consists of the Senate and the House of Delegates. Both executive and legislative branches are elected for four-year terms. Voting is open to individuals age 18 and older. The Palau judiciary consists of the Supreme Court, with both trial and appellate divisions, the Court of Common Pleas, and the Land Court. At the local level, each of the 16 traditional settlement areas constitutes a state with an elected governor and legislature. Palau has no armed forces; the United States is responsible for protecting the country. Some Palauans volunteer to serve in the U.S. armed forces.

Education is compulsory between ages 6 and 14, or until the student completes the eighth grade. There are public and private elementary and secondary schools, and instruction is given in both English and Palauan. Palau Community College (1993), which provides vocational and academic courses and is open to students from throughout Micronesia, originated as a vocational school in the 1920s, during the Japanese administration. Although there is no higher educational institution in Palau, government scholarships are available to young Palauans wanting to further their education in universities abroad. The country has near-total adult literacy.

Health care is provided by the hospital on Koror; field dispensaries and a small number of private clinics supplement services in remote parts of the country. The incidences of mental illness, suicide, and alcoholism in Palau are higher than in most countries.

Cultural life

Pragmatic adaptation, persistence of wealth-exchange customs, and competition characterize Palauan society. Palauans adapted to a century of colonial intrusion—Spanish, German, Japanese, and American—by viewing reality as something imposed from the outside to which one must adjust quickly if it is to be manipulated. Reciprocity and redistribution customs carried out between clans exchange food and services for money and gifts at births, house completions, and funerals. Women are the strength of society and control land, money, and titles. Men, previously occupied as fishermen and warriors, continue their traditional tasks in the rural areas and, as an adaptation to modern society, compete for elected office and in business.

Traditional art forms persist in chants and storyboards, which are now made for sale to tourists rather than for decoration of men’s clubhouses. The Belau National Museum (1955) in Koror has a small but instructive collection of artifacts. The Etpison Museum (1999), also located in Koror, has photographs, maps, and cultural artifacts among its collections. Many sporting activities centre on Palau’s waters and beaches. Baseball is an increasingly popular sport. For a discussion of the culture in its broader regional and historical context, see Micronesian culture.

History

Large hillside terraces, numerous stone ruins, and megaliths on Babelthuap give evidence of a vital culture before contact with European explorers. The first extensive contact of Palauans with Westerners took place after the shipwreck of the East India Company’s packet Antelope in 1783. George Keate’s An Account of the Pelew Islands (1788), which recounted the friendship and high adventure found in Palau, served to fuel the European myths of the noble savage and the island paradise. The first 70 years of the 19th century were punctuated by the occasional visits of whalers and traders, who left beachcombers and firearms behind. Diseases communicated by contact with Europeans led to the deaths of many islanders, and firearms were prized for intervillage warfare, which was ended in 1883 through the peaceful intervention of Capt. Cyprian Bridge of HMS Espiegle. Spanish and German colonial influence was expressed through Roman Catholic missionaries. The Japanese navy expelled the Germans at the beginning of World War I, and, although the Japanese period is locally remembered as one of economic development and order, the Palauans were a marginal minority by 1936. Japan lost Palau in World War II in a struggle that was socially destabilizing and confusing to the Palauans.

After a short period of administration by the U.S. Navy, Palau became part of the United Nations Trust Territory of the Pacific Islands under U.S. administration in 1947. A constitution was adopted in 1981 (following two prior referendums), and elections were held in the same year. The country became internally self-governing in 1981. Palau signed a Compact of Free Association with the United States in 1982, but the required number of voters failed to pass the referendum until 1993. The compact required that the United States remain responsible for external security and defense and that it provide financial assistance for Palau, but conflict arose over Palau’s constitutional prohibition on the operation of U.S. nuclear-powered or nuclear-armed vessels and aircraft within the jurisdiction of Palau. According to the terms of the compact, the United States reserved this right as well as the right to neither confirm nor deny the presence or absence of such weapons in Palau. Several attempts were made to revise the constitution, revise the compact agreement, and secure Palauan approval, and the United States dissolved the trusteeship in 1986. In 1992 voters approved an amendment that reduced from three-fourths to a simple majority the popular vote required to override the antinuclear provision of the constitution. This cleared the way for approval of the compact in 1993, and under its terms Palau became independent in October 1994. Palau joined the United Nations the following December.

In 1985 volatile internal politics resulted in the assassination of the first president, Haruo I. Remeliik. In August 1985 Lazarus E. Salii was elected to serve out the four-year term begun by Remeliik in January 1985, but Salii’s term was also cut short, when he committed suicide in August 1988. By the early 1990s, however, Palauan politics had stabilized.

In September 1996 the bridge connecting Koror with Babelthuap island collapsed, killing two people and wreaking havoc on the national economy. The capital, cut off from the international airport on Babelthuap, found itself isolated from the rest of the country, as well as from the outside world, and telecommunications, water, and power were disrupted for most of the population. The Japanese government contributed some $25 million for the construction of the replacement Babelthuap-Koror bridge—of a suspension design, rather than a concrete cantilever like the first—which was opened in 2002.

Palau lent its support to the U.S.-led coalition during the Iraq War, in which Palauan troops served as part of the U.S. military.