Palau - Domestic policy

Tourism remains Palau's primary industry. Much of it results from scuba diving and snorkeling in Palau's rich marine environment. Some 85% of tourists come from Japan, Taiwan, and the United States—spending in the 1990s four times the amount they did in the 1980s, accounting for roughly half of the nation's GDP. The Asian economic crisis of the late 1990s adversely affected Palau, whose dollar-determined prices seemed high. Remengesau, however, has frequently stated that the nation's tourism and other industries have recovered well from this regional crisis.

Remengesau has maintained an interest in developing and promoting Palau as an ecotourism and world-class diving destination. At the same time, he supports infrastructure construction projects that will open up more of the country to population expansion and development. The Compact Road on Babeldaob, overseen by the U.S. Army Corps of Engineers, will permit Palauans, now concentrated in Koror, to move out to the 16 states of Babeldaob. The president sees this one project alone as opening up the whole island to development opportunities. In addition, a new capital complex on Babeldaob, to be completed in the first decade of the twenty-first century, will also encourage population movement.

At the same time, however, Remengesau is determined that only through controlled development will Palau's economy be sustained; he has remarked that the worst thing would be for Palau to develop too quickly. Although the government views tourism infrastructure development as a priority (including two high quality hotels, a golf course, and the largest dolphin park in the world), it wants to balance tourist numbers with the need to maintain Palau's pristine environment. To achieve such balance, the country promotes high-income, low-volume tourism.

One of Remengesau's primary responsibilities is to administer external assistance. Palau was scheduled to receive more than US $450 million in assistance over 15 years under the terms of the Compact of Free Association with the United States. In addition, Palau can participate in some 40 U.S. federal programs. The United States made its first grant of US $142 million in 1994; additional annual payments are forthcoming through 2009. With this end of support in view, Palau is faced with ensuring its long-term economic viability by becoming less reliant on foreign assistance. In 1994 a trust fund was created for the nation to draw upon after the Compact grants stop. The Compact of Free Association Trust Fund grew from US $60 million in 1994 to US $145 million by 2002.

In that year, through an agreement between Remengesau and the Congress, trust funds were withdrawn for the first time ($5 million to cover excess government expenditures). In the same year, the president urged passage of legislation to revise the country's laws on foreign investment and its tax laws, and to allow the government to issue bonds. Remengesau was also concerned about a noncompliance rating issued to Palau's banking industry by the IMF in May and urged changes in the country's banking oversight program.

In 2002 President Remengesau proposed three constitutional amendments to the country's legislators. One would require presidential and vice-presidential candidates to run on the same ticket; a second would transform the Congress from a bicameral to a unicameral body; and the third would allow for dual citizenship. Pending Congressional approval, the amendments will be submitted for a public referendum in the 2004 elections.

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