Palau’s economy is dominated by tourism, subsistence agriculture, and fishing. The government is the country’s largest employer. The Compact of Free Association with the United States governs the relationship between the United States and Palau. Palau’s per capita income is nearly USD 16,400 per year.
Palau’s economy contracted in 2008 and 2009, due to the global economic crisis, and its effect on tourism spending and other outside investment into Palau. The number of tourist visitors rebounded in 2010, hit new records in 2015, but the number of arrivals fell in 2016. However, Palau’s present hotel and other infrastructure limit its ability to absorb potential major increases in tourist numbers.
The Foreign Investment Act provides the approval-process guidance for foreign investment, and the Foreign Investment Regulations reserves some businesses to Palauan citizens, including wholesale or retail sale of goods, all land and water transportation, travel and tour agencies, and commercial fishing. Other sectors are semi-restricted, requiring a Palauan partner, though no fixed percent of ownership is required.
Palau’s economy uses the U.S. dollar. Palau has a strong banking sector with three FDIC–insured U.S. banks.
Palau’s judicial system is viewed by Transparency International and other observers as professional and fair. Regulatory and accounting systems are generally transparent and consistent with international norms.
Foreigners cannot own land in Palau, but they can lease land and own buildings on leased land. Establishing secure land title may be complicated due to the complexity of the traditional land ownership system and occasional over-lapping claims.
Palau is not a member of the World Intellectual Property Organization, the WTO, or any other organization or convention protecting intellectual property rights.
Palau has no bilateral investment protection agreements, and is not a member of any free trade associations. Foreign labor comprises a large proportion of Palau’s labor force.
U.S. citizens are exempt from the Palau’s normal resident visa requirements. A visa is not required for U.S. citizens visiting Palau for one year or less, provided the visitor otherwise complies with applicable regulations.
Table 1: Key Metrics and Rankings