Pointing out the record $326 million gross domestic product and 12% economic growth in 2024, President Surangel S. Whipps Jr. said during his annual address to the people of Palau on April 24 that the state of the republic is “strong.”
This was Whipps’ first State of the Republic Address of his second term. As the incumbent candidate, he won the November 2024 election having been challenged by former president Thomas Remengesau Jr.
During his address, he listed several economy-focused bills that his office has sent to the Olbiil Era Kelulau, Palau’s congress, saying that while there’s been much improvement thanks to the passage of minimum wage increase legislation, the comprehensive tax reform bill, and fintech legislation for digital residency and Palau savings bonds, there’s more work that needs to be done.
“Sometimes we must be bold,” he said, pointing out that the political independence Palau enjoys today is because past leaders believed in Palau. “We can find better ways to improve the lives of our people—if we are willing to embrace change.”
Whipps started with education, which has been at the center of much transformation during his first term. The largest and most controversial change was the shift from the traditional American-style nine-month school year to a year-round schedule. This new format spreads the approximately 180 days of instruction across the calendar year, with shorter but more frequent breaks. Dale Jenkins, former headmaster at St. John’s School in Guam and most recently the head of Palau’s Ministry of Education, implemented the change, saying it made more sense given Palau’s climate. Jenkins also collaborated with Ngiraibelas Tmetuchl, Minister of Human Resources, Culture, Tourism and Development, and partnered with Four Seasons to develop a program that uses the breaks for activities like SCUBA certification. Upon successful completion and high school graduation, students are offered internship opportunities through the program.
Whipps reported on the millions of dollars that have been invested in school renovations, air conditioning classrooms, and new or renovated school and sports facilities. Many of these facilities will support or host meets, races and various games during the upcoming Pacific Mini Games but are also a long-term investment in students’ health and athletic programs.
A new school will be constructed in Airai. The state government transferred property to the national government. With the construction, it’s anticipated that infrastructure will be built that will benefit the community around the new school site. The school will serve communities in the larger northern island. It will include a special education facility for the national special education program.
He also congratulated the MOE elementary school teachers who have just earned bachelor’s degrees in special education from the University of Guam, and seven teachers completed master’s degrees in STEM curriculum development at the University of Hawaii. In terms of classroom teachers, the Ministry of Education expects additional support from incoming Japan International Cooperation Agency, which has provided volunteer teachers to Palau for many years. In addition, teachers who are Peace Corps volunteers are expected to join MOE this summer.
The president also reported the national government’s response to the drug and organized crime activity that increased in 2023 after reopening borders which were closed because of the COVID-19 pandemic. In November 2023, Palau became the 196th member of INTERPOL, which allows them access to international data and information. The government has also equipped customs officers with biometric airport scans and new patrol motorcycles donated by Japan. Customs and law enforcement agencies have increased cooperation with U.S. and Taiwanese partners, leading to a sharp rise in drug-related prosecutions and fines.
The president also said the Division of Corrections facility will be open this year. The completion of the long-awaited project has been delayed, partly because of labor and supply-chain issues caused by the COVID pandemic. The hope for the new corrections facility is it will provide rehabilitation programs that will help people with drug addictions and educational programs. Whipps also encouraged the OEK to pass legislation with tougher penalties on drug-related crimes and hold public safety officers accountable.
On health, Palau has invested more than $6 million in upgrades to the Belau National Hospital and community health centers, adding new diagnostic equipment and electronic medical records. A feasibility study is underway for a new hospital. The government has also expanded subsidies for disabled residents, children and retirees, with more than $4.6 million in assistance budgeted for 2025.
Whipps congratulated the Koror and Airai state governments for passing legislation granting paid maternity leave. Whipps said these are important as the nation is seeing more women in the work force and management roles. He pointed out a recent study that showed the number of women in management climbed from 30% to 50% from 2013 to 2023.
Scientific studies for Palau’s marine spatial plan have recommended closing 50 nautical miles around the islands to commercial fishing. This would allow Palau to protect more than 30% of its ocean while also expanding domestic fishing zones, which is necessary as the government works to reinvigorate its fisheries industry in a way where more local, and often smaller, fishing companies are also able to compete. The government is also working toward local tuna processing and building a new fishing port.
Regionally, Palau is leading the Unlocking Blue Pacific Prosperity initiative, aiming for 100% sustainable management and 30% protection of the Blue Pacific Continent. The effort is backed by a $100 million pledge from the Bezos Earth Fund and seeks to balance conservation with economic development for Pacific communities.
Economic recovery is accelerating. After inheriting more than $164 million in debt, the government renegotiated loan terms and secured grants, including $10 million per year for six years from the Compact Review Agreement to pay down debt.
Tourism arrivals surged in 2024 with new hotels under construction and targeted marketing driving growth from Taiwan and Australia. The presence of U.S. military partners has contributed an estimated $41.6 million in economic impact over the past year or so.
Palau implemented comprehensive tax reform in 2023, shifting more of the tax burden to visitors and broadening the base to include profit-generating businesses. The minimum wage was raised to $4.25 per hour in October 2024, with another increase to $5 scheduled for 2025. Business licensing has surged, particularly in tourism, and sector revenues nearly doubled from $38.67 million in 2023 to $73.15 million in 2024.
Innovation is also fueling growth. The Digital Residency Program has generated $6.1 million in revenue and attracted digital residents from 148 countries. The soon-to-come Palau Savings Bond program will allow citizens to invest in national development.
Looking ahead, the government is pushing for legislation to establish a Ministry of Interior, introduce a Limited Liability Company law, and reform procurement bonding to help smaller local firms compete for government contracts. mbj