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Economy of Palau Islands

Palau's per capita GDP of $8,941 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 a gradual rebound followed, and the economy grew by 5.6% in 2007.

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--34% from Japan, 26% from Taiwan, 18% from Korea, and 11% from the U.S.--was 85,593 in 2010, a 10% increase from 2009. Continental Airlines has direct flights to Palau from Guam and the Philippines. Delta Airlines has weekly non-stop flights from Narita, Japan to Palau. Japan Airlines runs chartered flights from Tokyo, and Korean Airlines does the same from Seoul on a seasonal basis.

Palauan tourism and environmental authorities would like to adjust the industry, simultaneously decreasing tourist volume and increasing income 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 about 30% of workers and accounts for 20% of the GDP.

Construction is an important industrial activity, contributing over 15% of GDP. Several large infrastructure projects, roads, and 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.

One of the government's main responsibilities is administering external assistance, and the main economic challenge confronting Palau is to ensure the long-term viability of its economy by reducing its reliance on foreign assistance.

Under the terms of the Compact of Free Association with the United States, Palau received more than $800 million in direct assistance over 15 years and exercised its prerogative to participate in a wide range of federal programs. In early September 2010, the United States and Palau concluded a 15-year comprehensive review of the Compact. A wide range of federal programs will continue for the next 15 years. By the end of 2010, the value of a trust fund set up under the Compact was approximately $160 million.

GDP (2009 est.): $178.4 million.
GDP per capita (2009 est.): $8,941.
National income (GDP + foreign assistance): estimated to be over $200 million.
National income per capita: estimated at $10,000.
GDP composition by sector: Trade--21%, public administration--20%, construction--15%, hotels and restaurants--10%, finance and insurance--8%, transport and communication--8%.
Industry: Types--trade, government, construction, tourism.
Trade: Exports ($5.9 million, 2004)--fish, handicrafts. Export markets--U.S., Japan, and Taiwan. Imports ($129.5 million, 2008)--fuel and related minerals, machinery and transport equipment, beverages and tobacco, manufactured goods, and food and live animals. Import sources--U.S. (Guam), Japan, Singapore, Taiwan, and Korea.
External debt (2006): $38 million.
Currency: U.S. dollar.

Geography of Palau Islands

Location: Oceania, group of islands in the North Pacific Ocean, southeast of the Philippines
Geographic coordinates: 7 30 N, 134 30 E
Map references: Oceania
total area: 458 sq km
land area: 458 sq km
comparative area: slightly more than 2.5 times the size of Washington, DC
Land boundaries: 0 km
Coastline: 1,519 km
Maritime claims:
continental shelf: 200-m depth or to the depth of exploitation
exclusive fishing zone: 12 nm
extended fishing zone: 200 nm
territorial sea: 3 nm
International disputes: none
Climate: wet season May to November; hot and humid
Terrain: varying geologically from the high, mountainous main island of Babelthuap to low, coral islands usually fringed by large barrier reefs
lowest point: Pacific Ocean 0 m
highest point: Mount Ngerchelchauus 242 m
Natural resources: forests, minerals (especially gold), marine products, deep-seabed minerals
Land use:
arable land: NA%
permanent crops: NA%
meadows and pastures: NA%
forest and woodland: NA%
other: NA%
Irrigated land: NA sq km
current issues: inadequate facilities for disposal of solid waste; threats to the marine ecosystem from sand and coral dredging and illegal fishing practices that involve the use of dynamite
natural hazards: typhoons (June to December)
international agreements: NA
Geographic note: includes World War II battleground of Beliliou (Peleliu) and world-famous rock islands; archipelago of six island groups totaling over 200 islands in the Caroline chain.


Government of Palau Islands

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 13 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, 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 took office on January 15, 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 Johnson Toribiong
Vice President--Kerai Mariur
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).

The government is stable, with national elections held every 4 years in the executive branch and Congress. Elections are free and fair, and candidates rely heavily on media campaigns, town meetings, and rallies. There are no political parties, and candidates run on their own platforms.

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.

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.

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History of Palau Islands

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.

People of Palau Islands

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 64% of Palauans live in Koror State's capital city, Koror. (Note: Government offices moved to a new National Capitol Building complex located at Ngerulmud, Melekeok State.) Nationality: Noun and adjective--Palauan. Population: Approximately 20,000 (non-Palauan population, approx. 6,000). 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--95.2%. Health: Life expectancy--male 68 yrs.; female 76 yrs. Infant mortality rate--16.2/1,000. Work force: Public sector--33%; private sector--67%.