Chief negotiators for Palau and the U.S. sat side by side at Palau’s capitol, Ngerulmud, and initialed the Compact Review Agreement on May 17.
The agreement reportedly increases Palau’s economic assistance amounts by more than double. According to a press release, “The total of new assistance is $889 million over the first 20 years alone, which is more than twice the amount negotiated in 2020. On a relative basis, it is nearly three times as much as in the 2010 Agreement.”
Palau’s Ministry of Finance and lead negotiator Kaleb Udui, Jr., and U.S. Special Presidential Envoy Joseph Yun are expected to travel to Papua New Guinea over the next few days for a formal signing of the agreement. Also expected to be there is the Federated States of Micronesia’s leadership and negotiating team, which also recently initialed their Compact Review Agreement with the U.S. The FSM’s new leadership was recently elected. Last week, the FSM Congress elected President Wesley W. Simina and Vice President Aren B. Palik, of Kosrae State. The Compact Review Agreement for FSM was negotiated by the previous administration under then-President David Panuelo.
U.S. President Joe Biden was also expected to attend. However, the White House, on May 17 (Guam time) announced Biden wouldn’t be attending the signing ceremony so he could attend meetings with Congressional leaders on the national debt ceiling.
“Revitalizing and reinvigorating our alliances and advancing partnerships like the Quad remains a key priority for the President. This is vital to our ability to advance our foreign policy goals and better promote global stability and prosperity. We look forward to finding other ways to engage with Australia, the Quad, Papua New Guinea and the leaders of the Pacific Islands Forum in the coming year,” according to the White House press release.
Palau, FSM and the Republic of the Marshall Islands are sovereign nations that also have special relationships with the U.S., which is defined in their respective Compact of Free Association. These treaties essentially allow the U.S. security and defense use of their oceans and in return are to help the COFA nations improve public health, safety and education infrastructure and build an economy. The COFA agreements last 50 years with reviews of various sections every 15 to 20 years.
All three nations signed memorandums of understanding with the U.S. earlier this year. However, RMI is calling for a return to the negotiating table. The FSM has initialed their Compact Review Agreement. There’s been talk that they will not be attending the signing ceremony in PNG.
U.S. Special Presidential Envoy Yun, during his remarks, thanked President Whipps for his determination to ensure a fair and mutually beneficial Agreement. President Whipps thanked Minister Kaleb Udui, Jr. and Special Presidential Envoy Yun, for their “unwavering commitment to strengthening the partnership between the U.S. and Palau, which is critical to maintaining peace and stability in the Indo-Pacific region,” according to the press release.
"We also thank the U.S. for appointing Special Envoy Yun to give whole of government attention to the 30th anniversary review," President Whipps stated. "Because of this consideration, both sides were able to discuss their needs and pen this agreement."
Whipps was sworn into office in 2021. He and Palau’s negotiating team were made privy to what had been discussed previously. He called for negotiations to be renewed, and even called for someone with more authority to lead the U.S. negotiating team. President Biden then appointed Yun.
Palau’s press release states, in part: “This Compact Review Agreement more than doubles the funding originally proposed at the onset of the negotiations. It also addresses Palau's specific circumstances from the last few years, which includes a decline in tourism due to China's ban on tourism to Palau. That decline was exacerbated by the global pandemic. President Surangel S. Whipps, Jr. speaks at the crowded rotunda at the nation’s capitol building on May 17. According to the press release, the total of new assistance is $889 million over the first 20 years, which is more than twice the amount originally offered to Palau in 2020. “On a relative basis, it is nearly three times as much as in the 2010 Agreement. It is also more on a relative basis than in the Compact itself.”
"This agreement recognizes our relationship - Palau and U.S. - is an enduring partnership, and that economic assistance should continue just as strategic denial right and U.S. military presence will and should continue," Whipps said.
The press release also lists other key points of the agreement:
The Agreement commits the U.S. to providing $20M in Fiscal Year 2024 – a year before the end of the current Compact assistance period. It increases by 2% a year through FY 2043 for education, health, climate change and the environment, justice and public safety, and audits. The amount would increase slightly each year to $29.1M by FY43.
It also includes $10 million a year for six years beginning in FY24 to help Palau pay what it had to borrow because of the impacts on the economy of COVID-19 and China cutting off tourism, two-thirds of what Palau had to borrow.
The Agreement commits the U.S. to providing $50M each FYs ’24 and ’25 for the Trust Fund. The Trust Fund will be authorized to distribute up to $15M a year, also for education, health, climate change and the environment, justice and public safety, and audits or distribute 4% of the Fund over three-year periods, whichever amount is greater.
The Trust also will be able to distribute another, up to $5M a year, or 1.5% of the three-year average balance of the Fund, whichever is greater, if the President of Palau declares an emergency need and the U.S. agrees.
