The proposal is “nothing more than an arbitrary determination made without due consideration of the facts of the ground here with respect to the funding Palau needs to continue to thrive,” said the island nation’s chief Compact representative Joshua Koshiba in a letter to Alcy Frelick, director of the U.S. State Department’s Office of Australia, New Zealand, and Pacific Islands Affairs.
America’s annual financial assistance to Palau ended last Sept. 30, but the U.S. promised to extend it for a year while the two nations “review” their Compact’s funding provisions.
Koshiba called the Oct. 19 meeting with the U.S. team as a charade because America did not consider the financial analysis presented by Palau.
He said Palau will not be pressured by a timetable set by U.S. which wanted the review concluded last Oct. 19.
“We will not agree to accept a package that we do not believe is responsive to the requirements of the review, is adequate and in our best interest,” Koshiba said.
The U.S. offered a financial package of $178.5 million but this included over $22 million to support the U.S. Postal Service for Palau and the two other Freely Associated States — the Marshall Islands and the Federated States of Micronesia.
Palau wants the U.S. to continue the level of financial assistance originally set by their Compact — at least $15 million in direct assistance, which amounts to $225 million for the next 15 years.
Koshiba said the U.S. proposal minus the postal service money will total $156 million.
This, he added, is inadequate and will reduce the per capita income of Palau by 23 percent in the next six years and 14 percent in the next 15 years.
The proposal, he said, will also mean a 26.4 percent cut in Palau’s budget — or 12.9 percent of the island nation’s gross domestic product.
Moreover, he added, this will mean that Palau’s Trust Fund will be depleted by 2028, well before the 50th anniversary of the Compact in 2044.
Koshiba, in his letter to Frelick, said: “We are under the distinct impression from your repeated statements about Palauan independence, foreign aid, and aid levels to other countries etc., that you consider Palau to be nothing more than another foreign country seeking aid and the U.S. is nothing more than another donor to Palau.”
Koshiba said Palau chose free association with the U.S. and is not just another independent country.
“Palau gave the U.S. significant basing rights for 50 years and right to deny access to any other country in perpetuity — a cession that can call our national sovereignty into question,” he added.
Koshiba said the U.S. must “improve” its proposal and Palau, for its part, is ready to make any potential modifications.
Another meeting, however, is not necessary unless the U.S. gives a meaningful response to Palau’s economic analysis of the existing proposal, he added.
