Taiwan-Backed Projects Boost Palau’s Infrastructure, But Lawmakers Raise Concerns Over Oversight

By: Eoghan Olkeriil Ngirudelsang

KOROR, Palau (December 4, 2025) — Taiwan’s long-running Economic Stimulus Program (ESP) continues to shape Palau’s infrastructure landscape, with more than $6.28 million in new projects completed this year alone. But as ribbon-cutting ceremonies highlight improvements across the states, lawmakers are again questioning how the annual $10 million grant is allocated — and who ultimately benefits.

Since independence, Palau has relied heavily on development grants from its partners to upgrade public infrastructure, from water systems to interstate roads. Nearly all 10 Babeldaob states now have primary roads connecting to the Compact Road, with only short remaining segments in Ngchesar and Ngatpang still incomplete.

The Republic of China–Taiwan has been the most consistent funder, providing around $10 million annually for ESP projects — public works designed to stimulate local economies.

$6.28 million in ESP projects completed this year

This year’s latest set of Taiwan-funded ESP projects, celebrated across eight states, included 13 completed public infrastructure upgrades. These ranged from road paving to school access improvements, a community center, and upgrades to Palau International Airport’s customs inspection facility. Six projects involved road paving totaling more than 28,000 linear feet.

FY 2024 Taiwan ESP-Funded Projects

(Table reconstructed from FY 2024 ESP-funded CIP data.)

Public infrastructure funded by Taiwan’s ESP grants can now be seen across all 16 states, with visible improvements in mobility, access to basic services, and community facilities.

Lawmakers challenge fairness, transparency of ESP allocations

Despite the visible benefits, the ESP grant remains a politically contentious issue in Palau. Unlike most foreign grants — which come with defined purposes — Taiwan’s $10 million annual stimulus fund leaves final project selections to the President.

Some senators argue this creates an opaque, uneven system.

During recent budget debates, lawmakers attempted to introduce language requiring legislative approval for grants. But the proposal proved impractical, since most grants from the United States, Japan and other partners already have fixed purposes and strict timelines. Additional approval layers, they warned, could discourage agencies from even applying.

President Surangel Whipps Jr. defended existing accountability measures at a Dec. 3 press conference, saying audits and oversight procedures are already in place.

Still, senators continue to raise concerns. Among the contentious questions were why Oikuul and Ngatpang received $3.6 million worth of FY 2024 projects.  Senator Melairei — formerly director of the Capital Infrastructure Projects Office — raised the question, inferring that favoritism could play a role.

But others point out that the issue is not who selects the projects but the existing government bonding requirements.  This, they say, is in Congress’s hands to remedy.  Current rules require 10% bid security and 100% performance and payment bonds for all public infrastructure contracts, limiting the smaller and medium-sized contractors from taking on multiple projects at once or taking on larger projects.

Long-term benefits, recurring controversy

Taiwan’s ESP grant remains one of Palau’s most influential development tools. But questions over equitable distribution, transparency and potential conflicts of interest continue to surface during every budget deliberation.

As Palau continues to depend on external grants for infrastructure and essential services, lawmakers and the administration remain divided on how to manage oversight without discouraging development.