Geography

Palau consists of 343 islands, nine of them inhabited, some 500 miles east of the Philippines.  These are the western-most islands of Micronesia. 

Scenically, Palau is one of the most spectacular places on earth.  The main islands are the exposed peaks of an undersea mountain range.  But the crowning glory is the Rock Islands, hundreds of sheer limestone pinnacles rising from the sea, and plunging to depths of one thousand feet or more beneath the waves.

Palau’s lies just outside the Indo-Pacific region, the center of marine diversity on the planet; this, combined with the underwater topography and convergence of ocean currents, has created some of the best scuba diving in the world.  The main environmental challenge is global warming, which can wipe out entire coral ecosystems and has already impacted the country's treasure-trove of marine life.

History

The Caroline Islands including Palau were settled from Southeast Asia perhaps as early as 3,000 years ago, and substantial stone ruins on other islands dated as early as the 7th century AD attest to the existence of a sophisticated civilization nearly 1,000 years before the arrival of Europeans.  The development of this civilization was predicated on trade and cultural exchanges between the disparate islands, and that necessitated long voyages by outrigger canoe.  Micronesians were then the greatest sea voyagers in the world.

The Spanish first colonized the region, primarily using Guam as a stopover between the Americas and the Philippines.  In the 19th century, European traders introduced guns and  diseases, causing catastrophic epidemics; the population declined by 90%.  Christian missionaries followed.

In 1899, the Spanish sold Micronesia to the Germans, who in turn lost it to the Japanese during World War I.  The US took over after World War II, administering the entire region as the UN Trust Territory of the Pacific.  Independence commenced in 1994, but Palau is still party to a 'Compact of Free Association' with the US, under which it cedes control of its foreign and defense policies in return for large economic subsidies.

People

The population is 19,000.  The overwhelming majority are of Micronesian descent, and practice Christianity.  Palauan and English are the official languages.

After decades of close ties with the US, Palauans have become very Americanized.  However, in the remote outer islands a few people still maintain a more traditional lifestyle.  The average Palauan lives very comfortably, thanks to the US subsidies.

Economy

Palau is a middle-income country, with a GNP per capita of about $5,000.  Tourism, fishing and copra production are the major industries, with tourism of ever-increasing importance. 

Overall, foreign aid represents 65% of GNP, highest in the world.  Although the Japanese provide some, most is attributable to US payments under the Compact.

Tourism arrivals were 64,000 in 1998 (more than three tourists for every Palauan), and are climbing.  The capital, Koror, has the feel of a boomtown, with new hotels catering to Japanese, US or Taiwanese divers springing up at frequent intervals.  Outside the dive resorts, tourists are scarce.

Sources:  World Bank (1998 data), Dorling Kindersley World Reference Atlas, UNDP Human Development Report, Lonely Planet