Koror, Palau- On Monday, Jan. 23, Palau President Tommy E. Remengesau Jr., joined by the leadership of the Palau National Congress and Palau traditional leaders, took part in the groundbreaking ceremony for the construction of a new wharf for patrol boats and administrative building that will house the operations of the Division of Marine Law Enforcement.
The $34-million project, funded with grant from Nippon Foundation and the Sasakawa Peace Foundation, is part of a 10-year $70 million assistance provided by the two foundations referred to as the Support to Enhance Coast Guard Capabilities and Promote Eco-conscious Tourism in Palau. The groundbreaking ceremony came just four days into the new government of Palau, which was installed on Jan. 19. It marked the start of what will be some of the biggest and costliest infrastructure upgrade to this young nation that celebrated its 22nd Independence last October.
Palau is pushing ahead with economic transformation and upgrading which is crucial with Palau’s fiscal condition to worsen if the government can’t earn enough income to replace the $13-million annual grant from the Compact of Free Association-U.S Department of Interior’s Direct Economic Assistance, which is expected to end in 2024. The Compact grants form a big chunk or 15 percent of the total annual revenues. The marine patrol facility is one of several infrastructure development set to break ground this year aimed at laying out stronger economic foundation to promote sustainable and healthy development and attract top-tier investors to the island.
Palau’s plan on developing its economy is to market itself as a world leader in environmental conservation that prides itself in protecting its pristine environment. The nation has made great strides in putting words into actions when it comes to environmental conservation and protection. In 2012, Palau’s Rock Islands Southern Lagoon was granted the prestigious status UNESCO World Heritage. It is a marine area with hundreds of mushroom-like limestone islands considered of such globally significant importance that its disappearance would be an irreversible loss to humanity.
Sixteen years ago, the Palau International Coral Reef Center opened its doors and has built its reputation as a thriving marine research organization, which has put Palau on the map as a leader and a model for developing science-based conservation policies as well as helping guide environmental efforts in the region. Since the dawn of the new millennium, Palau has made waves in the international stage with leading initiatives such as the Micronesia Challenge and the creation of Palau National Marine Sanctuary—closing 80 percent of its territorial waters to commercial fishing. Closing its exclusive economic zone the size of France to commercial fishing activity is a bold initiative if not counter-intuitive that fundamentally shift Palau’s economic focus to solely tourism—carving out a niche market from the eco-conscious travelers.
As Palau continues to depend on foreign donors for development assistance, Japan has greatly filled that niche as a donor country funding multi-million dollar projects that are either ongoing or set to break ground. On Feb. 26, 2016, Palau government signed a memorandum of understanding with Nippon Foundation and the Sasakawa Peace Foundation for a more effective coast guard operation such as surveillance and crackdown of Illegal, Unregistered, and Unregulated fishing, search and rescue, and other coast guard activities.
The planned administrative building will encompass an operation center, large meeting room for inter-agencies communication as well as office rooms for DMLE staff. The existing building will be renovated to house a gymnasium for training and detention rooms. The new berth can accommodate two medium-sized patrol vessels together with other assets safely. A new medium-sized patrol vessel will also be provided by the foundation and can also be accommodated at this berth. Financing the biggest infrastructure projects in years, Palau has looked to mixture of grants, development assistance and loans from international lending institutions.
Water and Sewer Project
The island nation has reached out to Japan for overseas development assistance for the current water supply improvement project to upgrade the Koror-Airai Public Sewer System, which serves more than 80 percent of Palau’s population. The grant agreement for the project worth $17 million was signed between Palau and Japan on May 28, 2015. It seeks to immediately remedy the low to zero water pressure currently plaguing certain areas in Koror and Airai. In addition to improving the Koror water security by installing second treated water transmission lines and removing health hazard asbestos pipes in the network. Since the construction of the state of the art water treatment plant in the mid-1990s, which produces 4 million gallons a day of treated water for Airai and Koror, the main piping system that distributes water was never upgraded. Leaks in the system has reached almost half of the treated water coming out of the plant—water that are lost or not being metered for billing. Most leaks are suspected to be the result of the more than 70-year old asbestos water distribution pipe that has been in use since the Japanese colonial administration in Palau.
Construction of the public water supply improvement project is expected to be completed in March 2018. As Palau urgently needs to address years of neglect on its physical infrastructure and find sustainable growth momentum in the next eight years to stave off the fiscal cliff in 2024, the government has made it a priority to make environment as a selling point to attract the high end, high value developments that can infuse cash directly into the economy.
Palau recognizes that nothing can be more convincing to outside investors than the attitude of the country and its leaders in taking serious responsibility to create a better quality of life in their own island. It was everyone’s consensus that fixing the sewer overflows inundating neighborhoods and roads and discharging to the nearby waters needs to be addressed as a priority agenda. Palau’s former capital and main center of commerce of Koror, has suffered from sewer overflows for more than twenty-years since the last upgrade and expansion to the sewer system.
Palau Public Utilities Corporation, a state-owned enterprise that manages and operates the sewer system, has struggled in keeping the overflows in check with constant pump repairs. This is also exacerbated by the exponential growth of tourism in the last few years, placing the sewer network beyond its capacity. Three years ago, Palau received loans worth $29 million from Asian Development Bank to rehabilitate and expand the Koror Sewer Network and Treatment System, a project that also includes a piloted sustainable sewerage system to be developed for a section of Airai community. About 80 percent of Palau’s population of less then 20,000, who live in Airai and Koror, as well as tourists, will directly benefit from the project, which will improve sewage treatment and the operation of the sewerage network in Koror and minimize the frequency and severity of uncontrolled sewage flows.
The project is linked to Palau’s sanitation master plan, which was developed after extensive stakeholder consultation. With Palau re-branding itself as “Pristine Paradise” in its marketing effort to attract eco-conscious travelers, controlling the sewer overflows was made a priority issue. However, the project comes at a great cost to Palau.
The public law that consolidated two separate government agencies— water operations and electrical company—under one public utilities company is mandated to recover the full cost of water and sewer operations, which is also the loan requirement. Under the full cost recovery, water and sewer rates are passed on to consumers including those areas that don’t have sewer or potable public water supply. This has been recently highlighted by the recent dispute between PPUC—the public utilities company—and the national leadership.
President Remengesau with Speaker Sabino Anastactio and Senate President Camsek Chin wrote PPUC Chairman Sam Masang on Jan. 11 demanding that PPUC to halt billing Angaur state customers for water and wastewater services, until such time as water quality is improved. The completion of the Koror public sewerage improvement is integral part of hotel development plans, as investors are looking for their hotels to be hooked up to the system. Sheraton Palau Resort is scheduled to break ground in Koror in April to build a 15-story, 154-room hotel, which is slated to be open in March 2019, few months after the completion of the sewerage project. A 100 room plus hotel which has been operating for a few years has been hauling hotel wastewater several times a day to the treatment plant is keen to see the sewerage construction completed to finally hookup.
Remengesau disclosed that there are multi-million-dollar hotel projects in the pipeline. “We are looking at ten serious investments that fit with the criteria of high-end development, but what remains is discussion with landowners for the project to take off,” Remengesau said. Many of the investment plans are slated for Koror, a much preferred location for hotel and resort developments for its close proximity to the famous Rock Islands and Palau’s premier dive sites. In line with the sewer upgrade, Remengesau has introduced as one of his first legislation targeting high-end investments to the island. The proposed measure is to restrict foreign investment for hotels to be five-star level in return for tax breaks.. “By limiting proposals to only those that meet the highest standard (rating) available, we can ensure that only top-tier operations will be granted investment opportunities in the future,” Remengesau said in transmitting the bill to the Palau National Congress. Besides the water and sewer infrastructure improvements, Palau is setting its goals much higher with fiber optic connectivity. Palau currently relies on satellite links for internet connectivity, which is costly and limited.
In Palau, Internet is accessed by only 25 percent of the population, while 90 percent have access to mobile phones. Palau upgraded its satellite links by moving to O3b satellites in 2015, which are closer to the earth than conventional geostationary satellites. However the demand for reliable and faster connectivity has led Palau to upgrade to a more stable undersea fiber optic cable. Palau and Asian Development Bank signed the North Pacific Regional Connectivity Investment Project loan agreements for the loan that the country will use to secure a submarine fiber optic cable. The loan was not an easy sell for the Palau National Congress as it comes on top of the almost $30 million loan from ADB for the sewer improvement project. It took a leadership meeting with the public invited to put pressure on the congressmen for the law to be passed and signed into law. Palau National Communications Corp. used to be the dominant player until the creation of another state-owned enterprise Belau Submarine Cable Corp. – the loan recipient which will be the implementing agency for Palau and the party contracting for and owning the cable. Palau will be connected to a trunk of the main cable from the SEA-US consortium project, a trans-Pacific cable that is being constructed from Indonesia to California via Guam and Hawaii. Palau is anticipated to be connected to the fiber optic cable by October. These infrastructure developments tend to be high-cost investments and cause traffic woes and inconvenience to motorists. However, they are vital to a country’s economic growth.