Compact of Free Association: Proposed U.S. Assistance to Palau and Its Likely Impact Page: 3 of 25
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Chairman Bingaman, Ranking Member Murkowski, and Members of the
I am pleased to be here today to discuss the September 2010 agreement
between the U.S. and Palau governments.' The Compact of Free
Association between the Government of the United States and the
Government of the Republic of Palau, which entered into force in October
1994, provided for several types of assistance aimed at promoting Palau's
economic advancement and eventual self-sufficiency.2 In addition to
establishing Palauan sovereignty and U.S.-Palau security and defense
arrangements, the compact provided economic assistance to Palau.3 This
assistance comprised, among other things, direct economic assistance for
15 years to the Palau government; the establishment of a trust fund
intended to provide Palau $15 million annually from 2010 through 2044;
investments in infrastructure, including a major road; and the provision of
federal services, such as postal, weather, and aviation. The compact also
established a basis for U.S. agencies to provide discretionary federal
programs related to health, education, and infrastructure. In June 2008, we
projected that U.S. assistance to Palau from 1995 through 2009 would
exceed $852 million, with assistance under the compact accounting for
about 68 percent and assistance through discretionary programs
accounting for about 31 percent.4 We also reported, in 2008, that the
likelihood of the Palau trust fund being able to sustain the planned
payments through 2044 was uncertain.
The September 2010 agreement between the U.S. and Palau governments
(the Agreement) followed a formal review of the compact's terms required
'The Agreement between the Government of the United States of America and the
Government of the Republic of Palau Following the Compact of Free Association Section
432 Review, Sept. 3, 2010.
2See Proclamation 6726, Placing into Full Force and Effect the Compact of Free
Association with the Republic of Palau, 59 Fed. Reg. 49777 (Sept. 27, 1994). Congress
approved the Compact of Free Association in Public Law 99-658 of Nov. 14, 1986, and
Public Law 101-219 of Dec. 12, 1989. The grant funds specified by the compact are backed
by the full faith and credit of the U.S. government.
'nless otherwise noted, all years cited are fiscal years (Oct. 1-Sept. 30). In addition, all
dollar amounts in this report are in current (i.e., nominal) dollars.
4GAO, Compact of Free Association: Palau's Use of and Accountability for U.S.
Assistance and Prospects for Economic Self Sufficiency, GAO-08-732 (Washington, D.C.:
June 10, 2008).
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United States. Government Accountability Office. Compact of Free Association: Proposed U.S. Assistance to Palau and Its Likely Impact, text, June 16, 2011; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc290966/m1/3/: accessed July 16, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.