By Daniel Mandell and Anthony Bergin

KOROR, (THE STRATEGIST) — Australian Foreign Minister Penny Wong is leading a bipartisan delegation in the Republic of Palau, an island nation of around 18,000 people that sits just north of the equator in the western Pacific Ocean. What Palau lacks in size it makes up for in strategic importance: as the island furthest to the west in the second island chain between the United States and mainland Asia, it stands to play a critical logistical role in any military conflict that may occur in the region. Until very recently, Australia largely ignored the north Pacific. Last December, Australia opened an embassy in Palau.

Since gaining its independence in 1994, Palau has remained steadily pro-Western in orientation. It has maintained a compact of free association with the United States, which grants the US the right to prevent foreign military forces from entering Palau’s 600,000-square-kilometre exclusive economic zone. It is one of just 13 nations that recognise the democratic Republic of China (Taiwan) rather than the communist People’s Republic of China. Still, it’s no secret that Beijing has sought to pry Palau away from the US and its democratic partners. Wong’s visit is thus an important reminder that, in this increasingly contested region, every island matters.

Although it’s commendable that Wong has made it a point to personally visit Palau (as well as other Pacific island countries), to ensure China’s efforts remain futile Australia should do more than provide a photo op. Luckily, there are several areas where Australia might assist Palau, including many that stand to create new opportunities for Australian businesses and people.

For example, although Australia helped Palau obtain its first submarine fibre-optic cable and has recently helped secure the funding for a second, the island’s high-speed internet capability largely stops at the water’s edge. There remains a dearth of infrastructure within Palau’s archipelago to capitalise on the potential of these cables. If Australia committed to supporting the development of necessary infrastructure, it would help Palau create a solid backbone for economic growth. To twist an old adage: rather than just handing Palau a fish so it could eat for a day, Australia would be providing a fishing pole so Palau could fish for its future.

In addition to helping lay the groundwork for the development of new economic sectors, Australia can help Palau further develop what was, until the pandemic, its primary economic activity: international tourism. In recent years, the main source for tourists has been China, followed by Japan and Korea. The failure to see and promote Palau as a unique tourist destination is the failure to leverage one of Australia’s greatest strengths: its people. The development of people-to-people ties through activities such as leisure tourism is an ideal way to reinforce Palau’s pro-Western orientation. Australia should promote tourism to Palau by establishing a direct flight from northern Australia, providing hospitality training opportunities and providing funding specifically for upgrading tourism-related facilities and creating a relationship between tourism authorities.

Relatedly, Palau has only a single public high school and just one community college. Students typically go to the US for higher education and remain there after graduation. This leads to brain drain, depriving Palau of needed skilled labour. Australia should join Japan and Taiwan in offering scholarships to students, as well as opening up additional skills-training opportunities for working professionals, that provide first-rate experiences but require Palauans to return to their country at the end of the programmes.

When these newly trained professionals return, they need to be able to succeed in opening new businesses. However, a lack of collateral often makes it difficult for Palauans to secure the capital necessary to fund the development of a business. Australia might make small-business loans or grants available to individuals who want to develop new businesses in the country, as well as foster links with business incubators in Australia so that Palauans can receive support and mentorship, and funding, to start new businesses.

Of course, even if new educational and skills-training opportunities can facilitate additional economic activity in the country, there will still be a need for access to external labour markets. Here, too, Australia can help. The government has already announced that it is expanding available visas for Pacific islanders to work in Australia. It should ensure those visas are available to Palauans as well.

There are also many areas beyond economics in which Australia could make a big impact. One is in the development of new, high-quality housing. A lack of domestic capacity and resources means that there are limited options for new housing that is energy-efficient and that can withstand a typhoon—an increasingly frequent occurrence due to climate change. Australia could provide grants to the National Housing Commission so that it can retain expert consultants who can provide advice on urban planning and sustainable development.

Palau’s lack of domestic capacity extends to other areas as well, including the island’s Foreign Investment Board (which still keeps all of its records on paper), its ability to patrol its EEZ (with only two vessels, one of which is an Australian-donated Guardian-class patrol boat) and even the ability of its government lawyers to do basic legal research (the database they use was created in the early 2000s). Australia should work with the US to provide more assistance and resources in law enforcement; for example, there are very limited human resources in the Attorney General’s Office to prosecute felonies.

Like other Pacific island countries, Palau requires assistance with climate-change mitigation (including relocating its only hospital to a less flood-prone area) and moving to renewable energy. Australia is extremely capable of helping in each of these areas, and has usefully financed a solar project.

Perhaps most importantly, though, Australia should continue to increase its participation in discussions with the U.S, Japan and Palau’s other allies about supporting Palau’s relatively new National Security Coordination Office, ensuring that Palau can protect itself, its people and its resources—whether on land or at sea—from those who would try to take advantage of a small country, extort or coerce a small government, or abuse the goodwill of a proud Pacific culture.

In all this, Australia stands to receive a benefit from its assistance, be it from a new tourism market for its people, new economic opportunities for its businesses, or a new place for its navy to visit and train. That’s surely better than just writing another cheque…. PACNEWS

Daniel Mandell is a Council on Foreign Relations – Hitachi International Affairs Fellow and a visiting research fellow at the Japan Institute of International Affairs. Anthony Bergin is a senior fellow at ASPI

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