Palau, US deadlocked over aid package

Updated July 30, 2010 08:05:30

Negotiations between Palau and the US over a $US250 million assistance package have reached an impasse. Public servants face not being paid if the 15-year deal which is before a congressional hearing is not signed soon.

A Foreign Affairs Subcommittee on Asia, the Pacific and Global Environment is conducting the hearings on the aid package which is made possible under a treaty that governs their relations called the Compact of Free Association. Professor Donald Shuster from the University of Guam says bureaucrats managing the negotiations need to get over their petty bickering and move on.

Presenter: Geraldine Coutts
Speaker: Professor Donald Shuster, University of Guam

SHUSTER: The financial section ended up last April with an offer by the US of $250 million for the next 15 years. However there are certain aspects of the US offer that the Palauans don't like and essentially that is micro-managing Palauan affairs and the use of the funding, that's the hold-up right now.

COUTTS: So you haven't got the funding yet, that's on the table but you've got these kinks that need to be ironed out. Can you just explain to what degree the US wants to micro-manage Palauan affairs?

SHUSTER: That's hard to answer because I haven't seen anything in writing regarding the extent to which the US wants to micro-manage.

COUTTS: Perhaps we can take it from another angle, how will this money be spent?

SHUSTER: Some of it's for operating the government, some of it's for capital improvement projects - those are the two major areas.

COUTTS: With this aid package that is on the table, $250 million, what's it going to take from either side to move forward?

SHUSTER: It's going to take some high level involvement by the US, probably at the deputy secretary level or even Secretary Clinton herself to get the bureaucrats to stop fighting amongst themselves between State Department and Interior Department and allow the Compact to go forward. What is going on now is a quibbling I understand in Washington between officials in the State Department and officials in the Interior Department, and possibly some congressmen on how to control the funding. Let me point out one thing, the quibbling that's apparently going on in Washington is amongst mid-level bureaucrats who don't seem to understand that Palau is a sovereign nation. It's not a territory like Guam, not a territory like Puerto Rico. They don't seem to understand that.

COUTTS: What does that mean, what are they failing to understand? Are they saying that the impost of trying to control or micro-manage as you've described isn't appropriate?

SHUSTER: Yes, it's not appropriate because Palau is a sovereign entity, it's a sovereign country, it has a seat in the UN. It's not any longer a territory. And some people still don't understand that. It's not a territory, you can't deal with it like the way the Department of Interior has dealt with the Indians or with Guam or with Puerto Rico.

COUTTS: Well the mid-line bureaucrats that you've described them as, will probably say well yes we know that you're a sovereign nation but you're also getting $250 million dollars so we want to have a say in it on how it's spent?

SHUSTER: Well that's the sticking point.

COUTTS: Well how much will it interfere with Palau's ability to continue to function because this aid package is for the next 15 years under the Compact of Free Association?

SHUSTER: Yeah it'll put a monkey wrench into their budgeting process, because the way the budgeting is being done now it's based on the allocations coming from the Compact arrangement. This will have a serious crunch on the government's ability to pay its bills.

COUTTS: And so does that mean public servants might not get paid?

SHUSTER: That's possible, that's possible, I've heard the ambassador describe those kinds of dire circumstances.

COUTTS: Since you've been closely associated with Palau for such a long time when this was first introduced, this financial package, the Compact agreement with the US, how has Palau changed? Have they managed to stand on their own two feet or are they still indebted to the US and will continue to be so?

SHUSTER: Yes the latter, they'll still indebted to the US and they will remain so until they begin to push for greater economic self-sufficiency, that hasn't been an easy task.

COUTTS: Well how can they do that, what's on the agenda for them to gain self-sufficiency?

SHUSTER: At the highest levels to make up their minds that's what they want to do to off US funding, at least to do it in an incremental way so it doesn't cause major problems.

COUTTS: Are you suggesting that the government is in a comfort zone now, that they're happy to be dependent on US aid?

SHUSTER: Some quarters of the government would agree with that.

COUTTS: And what would you say?

SHUSTER: Other quarters and voters want Palau to be more self-sufficient, but how to get to that goal is the big question.