Palau country brief

Overview

The Republic of Palau consists of a tightly clustered archipelago of 340 islands with a total land area of 458 square kilometres, some 1,500 kilometres to the east of the Philippines. The country's resident population of approximately 18,000 people live on only eight of the islands. The capital of Palau is Ngerulmud, located on Babeldoab, the largest island.

Political overview

Palau is an independent country in a Compact of Free Association with the United States. It is a democratic republic with directly elected legislative and executive branches.

The bicameral legislature Olbiil Era Kelulau (National Congress) is comprised of the Senate and the House of Delegates. The Senate has up to 13 members elected nation-wide (11 in the 2016 elections). Each of the 16 states elect one representative to the House of Delegates. A Council of Chiefs – an advisory body – is comprised of sixteen tribal chiefs (one per state). It advises the President on matters concerning traditional laws, customs and their relationship to the Constitution and the laws of Palau.

Elections are held every four years (the last in November 2016). The President and the Vice-President are elected by popular vote. The incumbent President, HE Tommy Remengesau Jr, is serving his fourth term and second in succession, having also served successive terms from 2001-2009 (the constitution prevents incumbents seeking three consecutive terms). President Remengesau is both Head of State and Head of Government. The Hon. Raynold Oilouch is Palau's Vice President and Minister of Justice (and an Australia Awards alumnus).

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.

Compact of Free Association with the United States

Palau’s Compact of Free Association with the United States was first agreed in 1986 but not brought into effect until 1996. It envisaged a 50-year term, with reviews set for 15, 30 and 40 years. Under the Compact, and in exchange for exclusive military operating rights, the US provides Palau with economic assistance (including sector grants and trust fund contributions), access to federal services and programs (for instance postal and meteorological services), permission for citizens to enter, work/study and reside in US states and territories, and assumes responsibility for Palau’s defence and security.

Under the original arrangements, the United States Government provided approximately USD700 million in assistance over the compact's first 15 years. Amendments agreed to in 2010, were enacted by US Congress in 2017. Compact payments from 2010 to 2016 were subject to annual appropriations and averaged USD13.15 million per annum. Compact payments over 2010-2024 will total USD216 million.

The Department of the Interior is the US agency responsible for oversight and coordination of US funding assistance under the Compact of Free Association.

Bilateral relations

Australia enjoys a close and friendly relationship with Palau. The Australian Embassy in Pohnpei, Federated States of Micronesia is responsible for Australian affairs in Palau.

Development assistance

Australia’s bilateral aid program in Palau focusses on digital sector reform, and improving social and economic opportunities for women and girls.

More information on development assistance to Palau.

Australia Awards

Australia Awards are an important component of the Australian Government's overseas aid program.  Australia Awards Pacific Scholarships provide opportunities to study at selected education institutions in the Pacific region.

For more information see the Australia Awards website.

Volunteers

The Australian Volunteers program promotes economic growth and poverty reduction in the Indo-Pacific region by assisting host organisations to deliver effective and sustainable development outcomes. 

See the Australian Volunteers website for further information.

Direct Aid Program (DAP)

The DAP supports projects which directly contribute to the welfare and income-generating capacity of poor or disadvantaged groups, or enhance the long-term productivity and sustainability of the physical environment.

Visit the Australian Embassy in Micronesia website for further information on DAP.

New Colombo Plan

In 2016, ten students from the University of New South Wales visited Palau to identify opportunities to help communities design local solutions to the challenges of climate change. In late 2017, another 15 students - from Flinders University - spent two weeks in Palau learning about marine tropical ecology, as well as the history, tradition and local language of Palau.

Economic overview

The International Monetary Fund characterises Palau as a ‘middle-income microstate’. Palau’s GDP per capita is comparable to that of the Commonwealth of the Northern Mariana Islands, significantly more than that of the neighbouring Federated States of Micronesia and Republic of the Marshall Islands, but around half that of Guam. Palau’s economy is dominated by grants and tourism, and faces structural constraints similar to other small island states: a narrow economic base, remote location, small population, inadequate infrastructure, weak business climate, and exposure to climate change impacts. Tourism has the potential to drive Palau’s economic growth, but a surge in the low-budget segment has stretched capacity, infrastructure and supply chains, and put Palau’s pristine environment at risk. President Remengesau has sought to reposition Palau’s tourist industry to target high-value tourism under the banner of Pristine Paradise, Palau.

Trade and investment

Australia’s merchandise trade with Palau in 2016-17 totaled $2.54 million and was dominated by Australian exports (principally prepared or preserved meat; and telecommunications equipment and parts).

High level visits

July 2014: Deputy Prime Minister, the Hon. Warren Truss, and the Parliamentary Secretary to the Minister for Foreign Affairs, Senator the Hon. Brett Mason, attended the 45th Pacific Islands Forum.

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Last Updated: 10 August 2017