The two-China rivalry over the Pacific islands

Koror — It’s the People’s Republic of China (‎Beijing) versus the Republic of China (Taiwan) in a battle for influence over the largely U.S. oriented Pacific islands and the rivals have racked up some wins and losses. As the two Chinas seek closer ties with the islanders, the distractions in Washington D.C. appear to be creating greater opportunity for their campaigns.

This has created some confusion, reflected by a recent letter received by Palau’s Minister of State Faustina Rehucher-Marugg. Five members of Palau’s House of Delegates expressed concern about a statement by Palau’s Ambassador to Taiwan Dilmei Olkeriil to the effect that the country is not establishing a diplomatic relationship with (mainland) China.

Regardless of urging from some legislators, Palau is steadfast in retaining its policy of ties with Taiwan, which has provided the young republic with an annual “stimulus” grant of $10 million since then.

“Right now mainland Chinese tourists dominate Palau’s tourism market by a significant margin and fuel Palau’s economy. Our economy is dependent upon strong tourist spending, as virtually every commercial sector is tied to tourism,” the delegates stated in their letter.

Delegates Gibson Kanai, Mario Gulibert, Swenny Ongidobel, Jonathan Isechal and Mario Ngemaes took offense to the ambassador’s statement that Palau’s relationship with Taiwan is “extreme stable.”

A notice issued by the Chinese government in December named Palau on the list countries where travel agencies are not allowed to advertise group tours.

But despite the potential impact of such notice on tourism, Palau remains. “Palau is a country of laws, it is a democracy and we make our own decisions,” the Financial Times quoted Olkeriil Kazuo, spokesperson for Remengesau, as saying.

Chinese tourists sightseeing on foot in Koror.

Taiwan, aside from Japan and the United States is considered one of Palau’s strong allies and Palau’s support of Taiwan is reciprocated by aid for infrastructure, roads, scholarships and other projects.

While Palau has received more than $200 million in national development assistance since 1999 from Taiwan, the lawmakers in their letter to the minister threatened to cut the budget for Palau's continued outright support for one of Palau's biggest development partners.

“The ambassador’s careless and untimely dismissal of the valuable partnership between Chinese investors and Palau officials offends the very relationships that Palau has worked to develop. These missteps are unacceptable and counterproductive, and they will be addressed through future funding decisions of the house,” the letter stated.

In 2017, Palau received 57,866 tourists from China, a big chunk of its overall tourism arrivals of 122, 566 last year.

In fact, in 2015, Palau received an overwhelming 88,476 tourists from China and this could have continued to soar if President Tommy Remengesau Jr. had not cut the charter flights from China in half that year.

According to a 2015 economic review study, the rapid growth in tourism in Palau is due to the large influx of visitors from China in the package tour segment of the market.

The result has been an increase in hotel accommodations and “increased utilization of capacity of lower grade hotels,” which is not the direction Palau wanted

Remengesau has time and again reiterated that his administration is adopting a policy to attract high value tourists.

Tourism grew despite Palau diplomatic ties with Taiwan, and China has nothing to do with it with the government continuing to encourage “high value” customers regardless of what country they came from.

Eight Pacific Island countries have formal diplomatic relations with mainland China; they are the Cook Islands, Federated States of Micronesia (FSM), Fiji, Niue, Papua New Guinea (PNG), Samoa, Tonga, and Vanuatu, while the others such as Palau, Republic of the Marshall Islands, Solomon Islands, Tuvalu, Kiribati and Nauru recognize Taiwan.

According to a recent Lowly Institute for International Policy report, Chinese aid in the Pacific amounts to close than $1.8 billion and in FSM alone, the aid from mainland China is $40.6 million.

From infrastructure and roads to housing for politicians, the People’s Republic of China is very much in FSM when it comes to aid.

On Jan. 4, three-days before United Airlines terminated flights between Yap and Palau, a delegation from FSM led by President Peter Christian took off from Yap International Airport in the Harbin Y-12 airplane that was donated to Caroline Islands Air by China, to meet with Palauan counterparts to sign an air agreement for the airline to take over the route.

The simple gesture was made to address the huge gap created by United Airlines pulling out of the route due to lack of passengers. But it also underscores the diplomatic battle between China and Taiwan that is being played out in the Pacific islands.

In the Micronesian region, the three independent jurisdictions are split with Palau and the Marshall Islands recognizing Taiwan while the FSM holds diplomatic ties with China.

Whether by design or not, the China-donated aircraft has provided a seeming solution for the hole left by United at a time that the supply of Chinese tourists to Palau is under threat.

Last November, China’s National Tourism Administration issued a directive warning of steep penalties to agencies supporting group travel to Palau. Radio Free Asia, which first reported on the story, said it was confirmed by Chinese officials that the ban was politically motivated. While not a new policy, the meaning was clear at a time that Taiwan President Tsai Ing-wen announced additional flights to Palau.

Also while that was announced, Taiwan said it will add more direct flights from Taiwan to China via China Airlines.

"Beginning next year, more direct flights will be added between Taiwan and Palau to facilitate more exchanges by the two peoples," Tsai told Palau's House of Delegates Speaker Sabino Anastacio, who arrived in Taiwan on Nov. 18 for a five-day visit.