Toribiong said that after 2009, Palau is allowed to withdraw at least $15 million from the Compact Trust Fund.
“The expiration of the Compact economic provision will not have an immediate impact,” Toribiong said.Palau wanted a continuance of the economic assistance after 2009. Palau’s Trust Fund now amounts to over $130 million.Earlier Vice President and Finance Minister Kerai Mariur said that Palau will also prepare a budget without the Compact funds.Toribiong meanwhile said that he has introduce a measure which will repeal the current foreign investment law to promote investments in the country.He said a reform in the investment law will generate more revenues for Palau to cushion the blow of the Compact expiration.The president also recently introduced a law making areas at the capitol area in Melekeok State a tax-free zone.An economic advisor during the Compact briefing last week said that re-negotiation of Palau’s Compact agreement with the U.S.is “not a given.”While, Palau is hopeful that the U.S. under President Obama’s administration will pay more particular attention to the Pacific region, this is the worst time for the U.S. to give out financial support due to the recession, the advisor said.Kevin O’ Keefe, Palau’s Compact Economic Advisorduring the briefing, last week said that one of thedisadvantages of the review for Palau is that a re-negotiation maynot be forthcoming.Another disadvantage, Keefe said is that Palau “graduating” from the economic provision is a “default option.Palau’s strong fiscal responsibility and that the fact that Palau compared to Federated States of Micronesia (FSM)andRepublic of the Marshall Islands (RMI) are among theadvantagesto the Compact review, according to O’ Keefe.The economic provision of the Compact will expire in October 2009. Under the Compact, Palau has been getting at least $13 million in subsidies and grants.Toribiong admits that Palau is racing against time and the country has no control overwhen will the U.S. be willing to sit down with Palau to review or renegotiate the terms of the agreement.
