Strong economic growth is masking urgent infrastructure and environmental challenges that threaten the long term sustainability of Palau’s economy, says an Asian Development Bank (ADB) report released in Koror today.
Private Sector Assessment for Palau: Policies for Sustainable Growth warns that the rapid growth of low-end tourism could damage Palau’s famed natural environment and World Heritage sites, which are pivotal to maintaining tourism as the country’s leading source of revenue. The report, which was produced by ADB’s Pacific Private Sector Development Initiative (PSDI), was launched today by the President of Palau Tommy Remengesau at an event attended by more than 200 government and private sector representatives.
“Figures showing GDP growth of 5.3% in 2014 and 8.2% in 2015 do not capture the risks that increased tourism numbers bring to popular tourist sites,” said Liliana Warid, Private Sector Development Specialist with ADB’s Pacific Liaison and Coordination Office. “To sustain economic growth and build on the success of earlier business environment reforms, Palau should seek to reduce overall tourist numbers while increasing individual tourist spending.”
The report calls for the creation of a comprehensive national tourism policy and the building of infrastructure that will encourage high-end tourism. It also recommends business laws be amended so an online business registry can be established and a modern business licensing system developed.
Other recommendations in Private Sector Assessment for Palau include further reforms to the finance sector to build the capacity of the National Development Bank of Palau and reduce the financial burden of inefficient state-owned enterprises by having them operate on commercial principles. The report also suggests measures to promote women’s equal access to economic opportunities.
The report builds on a private sector assessment PSDI produced for Palau in 2007, noting the Government of Palau has demonstrated a strong commitment to private sector-led growth in the past decade. The report highlights improved financial regulation, the establishment of a secured transactions framework, and the formation of the Economic Advisory Group comprised of senior government and private sector representatives as particular achievements.
Research for the report was gathered from in-depth consultations with a broad selection of government and private sector representatives.
PSDI is a technical assistance facility cofinanced by ADB and the Governments of Australia and New Zealand. It supports ADB’s 14 Pacific developing member countries to improve the enabling environment for business and support inclusive, private sector-led economic growth. The support of the Australian and New Zealand governments and ADB has enabled PSDI to operate in the region for almost 10 years and assist with more than 280 reforms.
