Overview

The Republic of Palau consists of a tightly clustered archipelago of approximately 300 (Source: Palau Visitors Authority) islands with a total land area of 458 square kilometres, 1,500 kilometres to the east of the Philippines. The country's resident population of approximately 18,000 people live on nine of the islands. The capital of Palau is Melekeok, 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 legislature Olbiil Era Kelulau (National Congress) is bicameral, comprising the Senate and the House of Delegates. The Senate has up to 13 members elected nation-wide. 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 most recent being in November 2020). The President and the Vice-President are elected by popular vote. The incumbent President Surangel Whipps Jr assumed the office on 21 January 2021. President Whipps Jr is both Head of State and Head of Government. The Hon. J. Uduch Sengebau Senior is Palau's Vice President.

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

The Republic of Palau's Compact of Free Association with the United States was first agreed in 1986 and came into effect in 1994. The compact terms are indefinite, while the economic elements have a 50-year term, with reviews throughout the course of the term.  Palau and the United States commenced negotiations in 2022 for the Compact’s next review. Under the Compact, and in exchange for exclusive military operating rights, the United States 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 US 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.

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 established formal diplomatic relations with the Republic of Palau on 1 October 1994 and enjoys a close and friendly relationship. The Australian Embassy in Koror, Palau was established in 2019 and is responsible for Australian affairs in Palau.

Development assistance

Australia's bilateral aid program in the Republic of Palau, prior to Palau’s graduation from Official Development Assistance (ODA) on 1 January 2022, traditionally focused on digital sector reform, economic reform, health security 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 deliver effective and sustainable development outcomes. The Australian Volunteers Program provides opportunities for skilled Australians to contribute to the Australian Government's development cooperation program.

See the Australian Volunteers website for further information.

New Colombo Plan

From 2014 to 2020, 75 New Colombo Plan students have visited the Republic of Palau. Fifteen of these students were from Flinders University and collaborated with the Micronesian Shark foundation to learn about marine tropical ecology, as well as the history, tradition and local language of Palau.

Economic overview

The International Monetary Fund characterises the Republic of Palau as a high-income microstate'. Palau's GDP per capita is just below 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, predominately as part of the Compact State Agreement with the United States, as well as tourism. Palau faces structural constraints similar to other small island states: a narrow economic base, remote location, small population, infrastructure challenges, limited business climate, and exposure to climate change impacts. Tourism has the potential to drive Palau's economic growth however this sector has been significantly impacted by COVID-19.

Trade and investment

Australia's merchandise trade with the Republic of Palau in 2019-20 totalled $1.779 million and was dominated by Australian exports (principally tobacco, prepared or preserved meat and medicaments).

High level visits

• December 2021: former Minister for Foreign Affairs and former Minister for Women, Senator the Hon. Marise Payne visited the Republic of Palau on a bilateral visit to officially open the Australian Embassy, Koror.
• December 2019: Ambassador for Women and Girls, Dr Sharman Stone visited the Republic of Palau to engage in high level meetings to discuss issues relating to gender equality and gender-based violence.
• February 2019: Former Assistant Minister for International Development and the Pacific Anne Ruston attended the 19th Micronesian Presidents’ Summit in Palau.
• June 2018: Former Minister for Foreign Affairs Julie Bishop, former Minister for International Development and the Pacific Concetta Fierravanti-Wells and their then portfolio counterparts Senator Penny Wong and Senator Claire Moore visited Palau.
• April 2018: Former Minister for International Development and the Pacific Concetta Fierravanti‑Wells visited Palau.
• July 2014: Former Deputy Prime Minister, the Hon. Warren Truss, and the former Parliamentary Secretary to the Minister for Foreign Affairs, Senator the Hon. Brett Mason, attended the 45th Pacific Islands Forum.