ADB’s Work in Palau

Journey to Prosperity

Palau is one of the most successful economies among the small Pacific island countries, and is partnering with ADB to take its people to the next level of prosperity.

Palau enjoyed a 9.4% gross domestic product growth rate in 2015, one of the highest in the Pacific. With an average income per person of $13,499 per year in 2015, Palau is the most prosperous Pacific developing member country of ADB.

Palau enjoys outstanding natural and cultural resources and has benefited from strong growth in tourism that has driven overall economic growth.

Despite this progress, as a small island state with a population of about 20,000, Palau remains vulnerable to external economic shocks, the impacts of climate change, and other environmental and weather-related risks.

Since 2003, Palau and ADB have been working together to improve public sector effectiveness, facilitate private sector development, deliver safe water and sanitation services, and improve connectivity.

Part of this work includes the construction of a fiber-optic submarine cable system that will link Palau to the high-speed internet cable hub in nearby Guam. This will deliver affordable, accessible broadband connectivity, and will better connect Palau to the rest of the world, promote greater efficiency in its small market, and create jobs.

Currently, Palau relies entirely on satellite links for internet connectivity. The high cost and limited bandwidth restrict internet penetration. In Palau, internet is accessed by only 25% of the population, while 90% have access to mobile phones.

The $25 million North Pacific Regional Connectivity Investment Project will provide higher-quality broadband internet connectivity at a much lower cost to Palau, making it accessible and affordable for the broader population.

ADB has helped overcome another business hurdle supporting the development of a new secured transaction law that is increasing access to business credit. Thanks to a new secured transaction registry, it is now possible for banks to provide loans with greater security, and at reduced risk. The country’s business registration systems have also been modernized to facilitate business growth.

"Palau greatly values our strong relationship with ADB. Throughout the years, ADB has found a way to be responsive to our needs and become an effective and meaningful partner in our country’s development."

Protecting a fragile natural heritage

A major thrust of ADB’s work has been to assist the government with critical investments in water and sanitation services, both to safeguard the health of residents and to help Palau become the island of choice for environmentally conscious tourists.

The $28.8 million Koror–Airai Sanitation Project, approved in 2014, is addressing outdated sanitation infrastructure by rehabilitating the Koror sewer system and developing a new system in the town of Kesbelau in Airai State.

The improvements will provide better sanitation for 80% of Palau’s population who live in Airai and Koror, the country’s most two populous states. They will also protect fragile marine and mangrove ecosystems from pollution, safeguard Palau’s citizens and tourists from waterborne diseases associated with sewerage overflows, and avoid the potential loss of tourism revenue associated with a serious disease outbreak.

This project follows the earlier Water Sector Improvement Program, which responded to concerns about the unsustainable water demand of households and a rising number of tourists. It introduced the necessary policies and plans to deliver sustainable water and sewerage services, and reformed the sector to ensure a better-quality, more reliable service.

The project’s successful actions greatly reduced the number of sewage overflows; ended water supply interruptions; and cut nonrevenue water levels, dramatically reducing the size of government’s subsidies.

“Palau greatly values its strong relationship with ADB,” said Elbuchel Sadang, minister of finance of Palau. “Through the years, ADB has found a way to be responsive to our needs and become an effective and meaningful partner in our development.”

In the coming years, ADB will continue to support higher-value tourism and more inclusive growth in Palau by enhancing public sector effectiveness, facilitating private sector development, delivering safe water and sanitation services, and improving connectivity.

This article was originally published in a special edition of Together We Deliver, which tells 50 stories highlighting the importance of good partnerships in Asia and the Pacific in meeting the complex development challenges of this dynamic region.