(Portions of SORA that were lightly summarized at the SORA address will be printed in the next 3 issues Island Times as information for our readers in Palau and across the globe.)
My fellow Palauans, it is important to remember where we came from just 20 years ago to comprehend the vibrancy of our nation and of our people. When I gave my first Inauguration Speech in 2001, I warned that we were entering a ‘non-payday weekend’. I said that Palau would need to run on ‘E’. Not ‘E’ for Empty, but ‘E’ for Efficiency, ‘E’ for Effectiveness and ‘E’ for Excellence. This was because in the 90’s we were riding high and spending more than we brought in. We had depleted our cash reserves, and it was necessary to establish a new model of government and governance in Palau – a model of careful planning, a model of fiscal prudence, a model of institution building, and a model of self-reliance – all to ensure a brighter future for our children.
At the beginning of the New Millennium in Palau, it was evident that we could no longer continue to spend more than what we brought in. From 1995 to 2000, we had the luxury of a number of Compact and other revenue resources that allowed us to increase local expenditures for operations by 20%. These funding resources included upfront Compact payments such as the Energy Production, the Capital Account, the KB Bridge Settlement, and the UMDA stock sale proceeds. By 2000, these funding resources were either fully expended or committed and it was apparent that the high expenditure rate after the implementation of the Compact could no longer be sustained. In order to ensure that government services continued to be responsive to the needs of our people, it was imperative that we started living within our means.
Faced with this stark economic reality from day one, it was not easy to follow through on my commitment to “Preserve the Best; and Improve the Rest.” But I believe that, twenty years later, we will leave this government much stronger than we found it. We have preserved much that is dear to us, and while we have done much, work continues to improve the rest.
We responded to our fiscal deficiencies by setting in place a planning regime that ensured that we could assess the problem and follow through on the solution. We adopted the Management Action Plan with six simple Guiding Principles to stabilize our country.
- To Improve the quality of life of the People of Palau; 2. To focus on quality Services while aiming to Reduce Costs; 3. To Ensure Accountability of Representatives and Staff; 4. To Create a Viable Organizational Structure; 5. To Ensure Fair and Considerate Management of Employee Impacts; and 6. To foster a strong sense of Community While Ensuring ongoing communication during the process of change –
With these simple standards, we rolled up our sleeves and went to work to stabilize our economy and to establish the strong foundations for our future. In 2002, I suggested that Palau was at a crossroads. In 2004, I stated that there were dynamic new signs of growth. In 2005 I declared that our economy was emerging, in 2006, I indicated that our future was promising and in 2007, I affirmed that we were back on track.
In these early years, we focused on establishing strong governmental institutions that would withstand the test of time. We began our journey looking first to strengthen our Public Financial Management framework. We gained passage of the Budget Reform Act and introduced performance budgeting to Palau. We streamlined government structures aimed at improving services and upgraded our financial management system to improve accounting of our revenues and expenditures. We then implemented a Cost Reduction Plan to help contain the cost of government. We outsourced government services and implemented policies to help strengthen the private sector. We also eventually gained the passage of a Statistics Act so that we could evaluate the effectiveness of policy actions in progressing our development objectives. And in order to involve all sectors of our society in our development planning process, we encouraged and organized collaboration and cooperation with traditional, community, and state leadership as exemplified by the National/State Leadership Symposium.
The result of all of our efforts was a viable government structure with enhanced fiscal management and infrastructure planning capacity, and a strengthened private sector. These results were so evident that, by the end of our first eight years in office, in 2008, Stephen McGann, the head of the U.S. group entering into negotiations on the Compact of Free Association Review stated that, “Australia and New Zealand aside, Palau is the best run country in the Pacific.”
When we came back into office in 2013, we once again found ourselves with a huge budget deficit and limited financing resources. We therefore focused our efforts again on instituting prudent management and budget policies to right the ship. In this context, by prioritizing our expenditures and enhancing revenue opportunities, we were once again able, in 2016, to balance our budget. We created the General Fund Reserve, devoting 2% of our unrestricted revenues and all unspent appropriations to the fund. From these resources we have been able to build a reserve, in just four years, of approximately $26 million. It is out of this fund that we recently authorized $10 million for the COVID-19 pandemic emergency.
Because we were running on empty when we came into office, with absolutely no funding from infrastructure development, we were required to be creative in our efforts to identify new funding sources and to expand the resources previously made available by our development partners. Due to the strong relationships that we have made with Japan, Taiwan, Australia, New Zealand and the European Union, we have been able to support capital projects totaling over $400 million. We were also able to manage this onslaught of projects through the creation of the Public Sector Investment Program (PSIP), which identified and prioritized current and future projects.
In our early years, we oversaw the completion of the Compact Road, funded by the United States, which has so changed our lives and allowed many of us to move back to our families’ home states. We also witnessed the completion of the National Capital, aided by low interest loans from Taiwan. This was a critical step to our long-term plan of moving our population north. When the KB Bridge collapsed, Japan stepped in and provided no cost funding for its replacement through the construction of the Japan-Palau Friendship Bridge.
Along with our Compact Road and KB Bridge projects, we also undertook to connect our island and our people with better and new roads, including the Metropolitan Road Project and the Compact Connecting Road Projects (including the Airport-Ngerikiil Connection Road and Compact-Kokusai connection Road), along with road paving projects throughout our many states and villages in Palau. To make sure that this extensive road system survives into the future, we established a Road Maintenance Fund and earmarked the Road Use Tax to fund future road maintenance costs, as well as providing matching funds for Compact-funded infrastructure projects such as the Compact Road.
Less sexy, but just as necessary for our development, were projects for the development of the Malakal Sewage Treatment Plant; the capping of the Malakal landfill, and the development of a new landfill in Aimeliik; the Koror Airai Sewer Project; and the Koror-Airai Water Supply System Improvements.
We have also greatly strengthened our tourism sector through the construction of the New Airport Terminal Building, funded by Japan, and the current expansion of the facility with our Japanese partners in our country’s first ‘Public Private Partnership’. With U.S. funding, we improved our Airport runway and constructed the Aircraft Rescue and Fire Fighting (ARFF) Building and Airport Loading Bridges, along with fencing around the Airport.
In the energy sector, we purchased two new large generators to provide an additional 10 megawatts worth of more efficient and reliable energy. To help reduce our carbon footprint over the long term, we also undertook to increase our renewable energy sources by expanding solar energy applications in both the public and private sectors, including our hospital, schools, sports facilities, parks, roads, and large commercial buildings. In fact, the energy needs of Kayangel State are now 100 percent solar powered. We have secured an additional $3 million grant for the NDBP’s Energy Efficiency Program that will help reduce the costs of power for our homes and businesses. We have also secured concessionary financing for the PPUC for capital investments in their power generation and distribution systems.
This week, PPUC announced the preferred bidders for a Solar Power generation facility that will meet our Nationally Determined Contribution to greenhouse gas reduction by achieving 45% renewable energy by 2025. This project will be the culmination of over a decade of work, from the 2010 National Energy Policy and the establishment of the Palau Energy Administration to the capacity-building work we have undertaken in these recent years. It will reduce power bills throughout the Republic, and help stabilize the finances of PPUC. I look forward to working together, as one Palauan team, to ensure the success of this critical project.
In support of our National Marine Sanctuary, we received a grant of approximately $100 million from Japan that provided a new Japanese 40meter Surveillance Vessel and companion smaller reef surveillance vessels; a New Marine Security Administration Building; and an enhanced PMDC Clam Hatchery Facility and wharf. In addition, Australia will soon be providing us with a brand-new Surveillance Vessel to further augment our fleet.
In order to enhance our telecommunications, we accessed financing from the Asian Development Bank to install our first fiberoptic submarine cable, which is now providing us with high speed internet. In the near future, we will enhance this greatly improved internet system with a second cable, which will not only expand our capacity and enhance speed, but will also provide redundancy, meaning that if one of the cables is cut, service to our people will continue uninterrupted. The Belau Submarine Cable Corporation has taken the first step by securing Palau’s place on a new cable from California to Indonesia, with the full support of our national leadership.
We have also enhanced our governmental and our cultural infrastructure by constructing and supporting the Cultural and Performing Arts Center, the Belau National Museum, the National Gymnasium, and the Weather Service Station. We are also currently constructing a new Corrections Facility and the One-Stop-Shop Building.
It is our plan to accelerate and expand our infrastructure investments to increase construction activities during this crisis to help raise revenues to support our economy and our people.
Ladies and Gentlemen, when I came into office in 2001, I said that ‘Our Environment is our Economy’. That is because we felt it necessary to preserve and protect our goose that lays the golden egg, the natural environment that brings tourists to our shores in the first place. It was therefore necessary to put into place a comprehensive Sustainable Development Framework, which recognized the balancing act required to expand economic opportunities for all Palauans in a sustainable manner that will preserve the same opportunities for our children far into the future.
To begin this process, we created the Office of Environmental Response and Coordination, known to you as OERC. Through this Office we were able to increase funding for and coordinate our efforts to respond to the international and regional issues of Climate Change and Biodiversity, as well as the many other international environmental issues. Our active participation and frequent international leadership in these international environmental treaties have resulted in sustained support for our domestic initiatives. We also created the National Environmental Protection Council to identify Palau’s most pressing environmental issues and help plan for our national response.
Our efforts to respond to climate change and related impacts to our pristine coral reefs were greatly assisted through the creation and the work of the Palau International Coral Reef Center, which has become locally and internationally relevant, and has contributed to better informed decisions regarding the management and conservation of the region’s and the world’s marine resources.
With these planning processes and institutions in place, we were able to lead the effort to adopt the Micronesia Challenge in Palau, the FSM, the RMI, Guam, and the CNMI, whereby we agreed, as a region, to “effectively conserve at least 30% of near shore marine and 20% of the forest resources across Micronesia by 2020.” To raise funding for this initiative, we amended the Protected Area Network Legislation and set aside traveler fees to not only fund protective measures but to also fund environmentally friendly development projects. We also gained membership in the U.S. Coral Reef Task Force and co-chaired, with Japan, the International Coral Reef Initiative, hosting meetings of both. Through these many efforts, of all of the jurisdictions involved in the Micronesia Challenge, only Palau has met its fundraising goal to achieve the Challenge’s mandates.
In our second administration, we progressed these efforts forward by establishing one of the largest marine sanctuaries in the world, the ‘Palau National Marine Sanctuary’. We also led the world community in establishing an ‘Ocean’s’ Sustainable Development Goal that focuses international efforts to establish the international rules and regulations to save our degraded Oceans for our children.
We also: Passed legislation banning Deep Sea Bottom Trawling; Passed a successful Recycling Law and companion regulations; Put in place a comprehensive oil exploration regime and framework with the grant assistance of the World Bank, which led to the creation of a Task Force on the issue and the eventual passage of a Petroleum Law; Established the PNMS Endowment Fund to implement the Sanctuary; and Became the 2nd Country in the world to ratify the PARIS Climate Agreement.
God willing, we are also scheduled to host the Oceans 2020 Conference this year in December, where we will highlight the importance of Oceans to all Island People and, through this conference, expand and enhance Ocean Initiatives worldwide. As a companion component to this Conference, we will also hold a Pacific Ecological Security Conference for Pacific jurisdictions and partners throughout the Pacific to foster and finance more active and better financed efforts to prevent and eradicate the invasion of foreign marine and terrestrial species in our region.
(To be continued…)