2024 Second Compact financial agreement not funded yet

By: L.N. Reklai

“We can’t wait for 2020 as compact funding is ending in 2024. Let’s get together so that when 2024 rolls around we’ll be in a better position to handle it,” stated presidential candidate Surangel Whipps Jr. during the last presidential debate regarding the ending of Compact funding.


The year 2024 is a subject of an on-going election debate because it is suppose to be the date the second financial assistance agreement under the Compact of Free Association executed in September 2010, is to expire.

To date, that agreement has not been implemented. The two proposed legislations in the House and the Senate of U.S. Congress that would appropriate funds for the agreement have not been ratified since the agreement was signed in 2010.

“The proposed Agreement enjoys US Executive and Congressional support and we have been assured that it would be approved eventually. So while we continue to seek its speedy ratification, we are also focusing our efforts on creating an enabling environment where growth and development is sustained. We will continue to pursue policies that promote and foster growth opportunities that will ensure continued investments in our people and basic infrastructures. Our objective is to be in a much better position come the year 2024, where we have our economic foundations strengthened, our natural resources protected and our cultural integrity intact.  Our aim remains to develop our country to be less reliant on financial assistance from the United States and create a self sustaining economy to see us through the year 2044 and beyond,” asserted President Tommy  Remengesau Jr. in a statement on positioning Palau beyond 2024.

“We are in much better position today, in relation to the economic requirements mandated under the second financial agreement approved in 2010. For example, this year our domestic revenue represents 67% of our total government revenues whereas the US Government Accountability Office (GAO) projections called for 59% by 2024. We have not received any funding under the 2010 Agreement but even with the DOI direct assistance, our domestic revenue have exceeded projections provided by the GAO,” added Elbuchel Sadang, Minister of Finance.

According to GAO estimates, domestic revenues should grow from 40 to 59% of total government revenues by 2024 and reliance on US assistance under the agreement should drop from 28% to 2% of overall government revenues.  The contribution of an additional $30.25 million to the Compact Trust Fund plus the delayed withdrawals totaling $89 million through 2023 provided under the Agreement would help ensure that the Trust Fund is not depleted before 2044. Scheduled withdrawals from the Trust Fund is intended to replace the annual direct assistance from the US.

In September of this year, two more U.S. congressmen join others in the US Congress and US government agencies such as the Department of Defense, to support ratification of the law approving the second financial agreement under the Compact of Free Association with Palau.

“Our Compact with Palau was concluded in 1994. It does not have a termination date and requires a review on the 15-year, 30-year, and 40-year anniversaries,” reported Frankie A. Reed, Deputy Assistant Secretary, Bureau of East Asian and Pacific Affairs in a statement before Senate Committee on Energy and Natural Resource on June 16, 2011.

“Palau has been and continues to be a strong partner with the United States. Its location on the westernmost point of an arc from California to the Philippines creates a security zone that safeguards U.S. interests in the Pacific,” testified Reed.

The Compact of Free Association was aimed at advancing Palau’s self-sufficiency and economic development.  The Compact included direct financial assistance to Palau for the first 15 years, contribution to Palau’s Trust Fund which is suppose to provide Palau with $15 million each year from 2010 to 2044, construct a road system known as Compact Road and federal services including postal, weather and aviation.

In 2010, Palau and United States signed an agreement for additional financial assistance through 2024.  These include $107.5 million in direct assistance to Palau government operations, $40 million for infrastructure projects, $28 million for infrastructure maintenance, $10 million for debt reduction and $30.25 million additional contribution to the Compact Trust Fund.

Palau’s Compact of Free Association with the United State of America does not terminate in 2024.  The extended direct financial assistance under the new Agreement when approved is set to end in 2024 and thereafter replaced with scheduled withdrawals from the Compact Trust Fund.  All the terms under the Compact are subject to periodic review in 2024 and 2039. [/restrict]