PACIFIC ISLANDS REPORT

Pacific Islands Development Program/East-West Center
With Support From Center for Pacific Islands Studies/University of Hawai‘i

PALAU’S GREATEST CHALLENGE: ECONOMIC SELF-SUFFICIENCY

By Johnson Toribiong

After Palau regained its sovereignty and independence in 1994 in Free Association with the United States of America, we celebrated the achievement of our first national goal of political independence which our previous leaders worked so hard for.  But our political independence under the Compact of Free Association with the United States (the Compact) was not the end of our national quest since full independence requires economic self-sufficiency without which our independence and sovereignty will always have a hollow ring.

After the implementation of the Compact, economic self-sufficiency became our next, and continues to remain as our most important, national goal.  This is why the implementation of the Compact was preconditioned upon the adoption of an economic development plan by our Government.  And at the cost of approximately One Million Dollars, our Government in collaboration with outside experts formulated and adopted our Palau Economic Development Plan, which was to be our road map toward economic independence in conjunction with the Compact.

Our Economic Development Plan in its preface states “[p]olitical autonomy and economic self-sufficiency are the two major components of independence.”  It further stated that this “Plan represents a major milestone in the Republic’s development of economic self-sufficiency which is an essential element of nationhood. The Plan is designed to move Palau towards more balanced economic growth throughout the Republic by creating an infrastructure foundation upon which all States can build sustainable economies.”

The Compact, of course, was not intended to create a welfare state as that would be unsustainable in the long run and, of course, that would have been below the sense of dignity of our political pioneers and likewise would be, as it should be presumed, demeaning to our pride and honor as masters of our own homeland. The Compact was intended to create as much as possible a reasonably self-sufficient independent nation in Free Association with the United States.  Of course as “freely associated state” of the United States, certain rights and benefits are being and hopefully will continue to be extended to us by the United States.

We have fared reasonably well as an independent nation internationally and domestically, but we should recognize that our national revenues depended upon the levels of the Compact funding and foreign grants over the years. Times were better in the early years of the Compact and became more and more difficult as we approach the 2009 Compact Review when grants for the operation of our Government will be phased out.  And under the terms of the Compact, as they stand today, post 2009 Palau should rely on its Compact endowment funds, federal programs as extended to us by the United States federal laws, and local revenues.  With this sobering fact in mind, we, that is our leaders, must be well-prepared to confront the 2009 Compact Review and the period thereafter in order to meet the challenges of declining Compact revenues by creating a Master Economic Development Plan which will lead us to a future that is at the very least not worse off than the first fifteen (15) years of the Compact.

With regards to the 2009 Compact Review, we must ask whether we have been following the guidelines of our Palau Economic Development Plan since the Compact was implemented.  If we did, then to what extent did we come close to the realization of economic self-sufficiency? If not, then we must ask ourselves why not?  Did our Economic Development Plan become outmoded by unforeseen events which rendered it ineffectual as a plan for our nation’s economic self-sufficiency?          .

If our Economic Development Plan was disregarded, then we must ask ourselves, whether our decision was justified?

In any event, we must do our due diligence to forge an economic development strategy by which Palau will be able in the most practical means to realize its goal of economic self-sufficiency, which will sustain our independence as a young and small, but proud Pacific island nation.

It should be noted that our own Constitution directs our national Government to take positive action to attain, among other objectives, the “promotion of the national economy.” And one of the most important economic policies that we should consider is that which encourages and promotes investments, programs and projects that generate employment for our people, while expanding our tax base and thereby raise the level of our national revenues.

Our labor and foreign investment laws, which we inherited from our last foreign administrator, and which we continue to espouse, make it easier to bring in foreign workers and more difficult to bring in foreign investors?  This raises a fundamental question we should ponder.  Why do we continue to keep these laws as they have been, when foreign workers take money out of the country by the millions while it is very difficult to bring in foreign investors who bring in new money, generate more employment for our people, and expand our tax base which will result in more revenues for our Government?

There are approximately six thousand (6000) foreign workers in Palau today, and they send millions upon millions home each year.  And this fact leads to the next question:  Is it a good public policy to encourage employment of foreign workers?  If not, why do we encourage their employment by excluding them from the local minimum-wage law and thereby encourage their employment by local employers in stead of Palauan employees?

We have grant writers.  Why not investment promoters? We need both with full knowledge that grants should supplement, not supplant, our locally-generated revenues.

Creation of jobs for our people within our national economy, especially in the private sector, should be one of our priorities.  We know that it is the private sector which constitutes the foundation of our economy and sustain our Government. But today, our Government is still very much dependent upon foreign largess, and this is justifiable as it should during the transition period as we move toward a more self-sufficient economy.  Likewise, as it was in the pre-Compact period, the employment of choice by our people is still the Government employment because it provides better benefits. This is understandable, but it is also a living proof that economic self-sufficiency still remains as our greatest challenge. We must reverse this situation, because unless and until the private sector of our economy has become the major source of livelihood and employment for our people, we cannot be, or claim to be, economically self-sufficient.

It should be our national policy to generate more and more good-paying jobs for our people within the private sector in relation to our Government.  Our Government and our private sector should have a symbiotic relationship by working together to balance the benefits between the pubic and private sectors and strengthen each sector in order to facilitate the attainment of our seemingly elusive national goal of economic self-sufficiency.

Should we not consider the economic policy of requiring our Government to award contracts to companies which undertake in good faith to employ Palauans at the national and state levels?  And shouldn’t the same policy be applicable to foreign investors? Now, foreign investors have the option of either employing a certain percentage of Palauans among its employees or simply investing not less than a fixed amount of capital into their business in order to be eligible to do business in Palau.

On foreign investments, our Economic Development Plan at §12.12 recommends that “[i]ncentives will b e given to encourage foreign investors with the necessary financial resources and technical expertise to exploit the gas, oil and mineral resources identified in the exploratory stage of development to have potential.”  Our Government is subscribing to this recommendation by working with the World Bank to establish a legal frame work within which exploration and possible exploitation of such resources will take place.  If such valuable resources are indeed present in sufficient commercial quantities, they should be readily accepted as God’s gift to us.

If we conclude that we are just as much dependent upon foreign grants as we were during the pre-Compact days and early Compact years, then the challenge of our economic self-sufficiency has indeed become a much greater challenge than when the Compact was first implemented. It behooves us, especially our leaders, to engage in an intensive and in-depth “Self Review” before the 2009 Compact Review.  We must fashion a better and more effective economic development plan by which our nation will indeed achieve as much as possible a substantial degree economic self-sufficiency, and then make right decisions, though hard they may be, to implement that plan.  Otherwise, the price we will have to pay for it in the future may be more painful.

In view of the state of our current economic development, I dare say economic self-sufficiency is still the greatest challenge facing our present generation; we cannot afford to fail in our effort to meet this challenge.  We must take it on as a matter of survival for our nation.  Without substantial economic self-sufficiency, our cherished  nation, the Republic of Palau, will continue to become more and more subservient to our grantor nations, and in the long-run our independence may become a mere charade as our grantors overtime may begin to feel “compassion fatigue” for us. We must take every action to ensure that our economic development will continue to move forward toward economic self-sufficiency.

Regardless of where we are as a nation on the road toward economic self-sufficiency, I am optimistic about our future because I believe in the true Palauan spirit of survival, self-reliance, perseverance, cooperation and commitment toward the achievement of our well-defined goals.  It was with that spirit that, we, as a people, have survived many historical obstacles, including colonial exploitation and the atrocities of World War II, since time immemorial. And I believe in my heart that if we harness the inspiration and strength from the reservoir of that spirit within us, we, as a proud and honorable people, will surely overcome the obstacles before us and achieve our goal of economic self-sufficiency in due course. This will make our nationhood whole and our independence secure.  This valiant spirit is reflected in the Preamble to our Constitution: “We venture into the future with full reliance on our own efforts and divine guidance of Almighty God.”

May God Bless the Republic of Palau.

Johnson Toribiong, an attorney and past president of Palau’s Constitutional Convention, is thus far the only declared candidate for Palau’s presidential race in 2008.