II.

Economy and Government

The main economic activities are subsistence fishing and farming. The country uses the US dollar as currency. A Compact of Free Association with the United States, which was established in October 1994, provides Palau with US$500 million in US aid over 15 years in return for the United States having the right to maintain military bases on Palau and exclusive military access to Palauan waters. In 1997 official development assistance amounted to US$4,814 per person. The most important foreign exchange earners are tourism, handicrafts, tuna fishing, and copra production. The population earns a per capita income of US$5,000, which in 1996 was twice that of the Philippines and much of Micronesia. Prospects for the tourist sector have been improved by the expansion of air travel in the Pacific.

The government consists of the bicameral Palau National Congress (Olbiil Era Kelulau), with a 16-member lower house (the House of Delegates) and a 16-member upper chamber or senate. The Congress is headed by a president, separately elected every four years. The last elections were held in November 2000. Tommy Remengesau is the president, also elected in 2000.