When Palau became independent in 1994 in entered into a Compact of Free Association with the United States. Under the Compact, Palau is to receive grants of totaling about $600 million over a fifteen-year period to 2009. In the meantime, the government is to be engaged in developing ways to make the economy self-sufficient. A major part of the strategy was the building of a trust fund. The government's first five-year national development plan (1987–91) was the first phase of its fifteen-year development program. The plan focuses on the development of a private-sector production-based economy, efficient public-sector management, development of natural resources to earn foreign exchange, personnel development, regional development, and environmental preservation.
Long term prospects for the tourist sector have brightened because of the expansion of are travel in the Pacific and the rising prosperity of leading East Asian countries.