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Growth masks Palau’s flaws

ADB highlights setback in policy enforcement.

TOURISM continues to be Palau’s bread and butter and a contributed to its economic growth for the past two years but a recent private sector assessment by the Asian Development Bank (ADB) says that the country’s strength masks several pressing issues.

The assessment result which has been the result of consultation with the private sector stated, “Palau has registered 2 years of substantial economic growth and per capita income has risen to slightly in excess of $16,000, the second highest in the Pacific region. Yet the strong performance of the economy masks some pressing issues, particularly with respect to the tourism industry.”

It added that aside from tourism industry, Palau has pressing issues with its foreign investment policies, state-owned enterprise efficiency, access to finance and tax laws. Paul Holden, ADB’s Pacific Private Sector Development Initiative (PDSI) lead economist who presented the report at the Palau Chamber of Commerce weeks ago, said that all laws and policies cannot make a difference in making changes unless enforcement is worked on.

Holden said although there is a proliferation of front businesses, getting rid of these businesses would be bad for the economy as they provide a service in Palau especially in the tourism industry. The report also pointed out that in spite of the strong economic performance, a number of pressing problems face Palau,” which will require strategic policy decisions that will impact both the economy and society”. 

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