it wrong

Palau

How to do it wrong

By David North

ALTHOUGH the words are muted, the latest United States Govern ment report on Palau shows an island government marred by extensive corruption, conflict-of-interest and fiscal irresponsibility, as well as lax laws and law-enforcement procedures. Or, to put a more cheerful face on it, it shows how crafty island leaders can secure tangible benefits for their constituents while man

ipulating a series of supposedly sophisti

cated Mainland governments and businessmen.

The two-volume report, filled with specific, damning evidence of island mis behaviour and lack of United States Gov

ernment monitoring, was prepared by

the United States General Accounting Office, (GAO) an investigatory arm of the US Congress. The GAO is known for its ultra-careful work, and its deadly dull prose. Its writers would rather not make a mistake than say anything in teresting, so one must comb the 186 pages of these reports to find its gems.

The report, US Trust Territory: Issues Associated With Palau’s Transition to Self-Government, comes at a time when the Congress is working out an even larger allocation of money to the well-funded islands in hopes that the Compact of Free Association will finally be ratified, but more on that later.

The GAO report does not deal with the nuclear presence issues that have sty mied the Compact, instead it focusses on the matters more amenable to the analy sis of accountants and lawyers govern ment contracts, corruption and law en forcement.

Two small items unearthed by GAO are symptomatic of the condition of the island’s government the lack of cus toms inspectors at the airport, and the government’s expenditures on the house of the late President Lazarus Salii.

Drugs are a growing problem on Palau (see box), and job slots had been created for customs inspectors to open luggage at the airport, but somehow money nev er could be found to fill the jobs, so

luggage was rarely inspected. This de

spite the outpouring, GAO says, of $156,031,000 in US funds to Palau in the period 1981 through 1988. (By ex amining GAO data one can see that the government of Palau gets four to five times as much money per capita in aid than Mainland jurisdictions). How will the lack of customs inspectors be solved?

Uncle Sam has been convinced to come

up with another US$4OO,OOO earmarked for customs officers on Palau. (Similarly, Palau is looking to the Congress to fund the office of an inspector-general to search out fraud, corruption and abuse).

As for the late President’s house, GAO

explored two interesting questions: who

owned it (it was either Salii or his land lord), and should the island government have paid $90,000 for expanding and remodelling it? What is clear from the records is that the island government paid an unnamed landlord $750 a month rent on the place, but it is not at all clear who owned the house at the time. If Salii owned it, then the “land lord” was receiving funds under false pretences. (Here and elsewhere the is land paper trail disappears GAO’s dutiful accountants could not find land sales records on this case.) Of greater moment were the contrac tual manipulations which came in all sizes and shapes.

There was the big bond issue, for US$39B million, that was to be issued through Matthews and Wright, the since indicted Mainland underwriters. GAO notes that the Palau National Develop ment Banking Corporation board mem bers had scant notice of this blockbuster, and signed the papers under pressure from Salii’s associates. The bond issue, later aborted but not because of Palau’s intervention, “appears to have exceeded

Palau’s needs and would have been diffi cult to repay,” GAO says gently. In fact, the debt would have been equal to more than US$2B,OOO for every man, woman and child in the islands.

Then there was the airport. By Pacific standards, Palau’s current landing field is well above average, but the island’s leaders wanted a bigger and better air port and did not want to pay for it.

So, without going through competitive

bidding, and without informing the legislature (the OEK) Palau gave a Japanese firm, Howa Co. Ltd., and an American one GIG International Ltd., the right to build the airport, at their expense, in return for future revenues from the airport and the right to control tourism development rights (such as hotels) in the area. Palau’s Attorney General eventually cancelled the con tract; earlier he had received the mes sage that he “would be history” if he sought to block the deal.

If airports could be built without funds, maybe roads could be, too. A ma

jor Japanese firm, Kawasho Corporation,

agreed to build a 2.5-mile road and wa ter distribution system for the State of Melekeok; (Palau’s 14,000 or so citizens have 16 state governments). The road was built, at a cost of about US$5 million but Melekeok had little money to pay for it. The builders then sought to get Palau

to keep the late President Remeliik’s promises on the matter, to pay for it out of the Compact-connected capital improvement funds (of about US$46 millions but these have not yet arrived.

Kawasho has been paid only $222,000 for its efforts.

GAO is worried that this, and similar road-building projects, none of which are included in the National Develpment Plan, will obligate the $46 million which is needed, GAO feels, for higher priority

projects.

To what extent are Palau’s politicians

profiting by these questionable expendi-

tures? GAO is interested in the question, but does not offer many specifics. It does state that an unnamed member of ionnnn USe n eg ;" eS had $20,000 in Gorones International Construction Corporation which secured without competitive bidding, the halfm.lhon-dollar-a-year contract to manage t e is an s controversia power p am Tha contract was two years old when the legislator reported that he had to date, secured a $12,000 return on his investment. GAO adds that such dealmgs, which would be contrary to most smCms ' aPe n ° Y Similarly, Palau law apparently does not prevent an appointed official from advising the government to sign a con-

tract with a firm he owns. An unnamed consultant to President Salii served as president of Pacific Ventures Inc. at the time that Palau signed two contracts with that firm one to build a new capital building and lease it back to Palau, (yet another instance of creative financing) and the olher 10 '“f a A sencs of A com ' memorative coins. The Assistant Attorne >' General who passed on the contract was also an ‘"corporator of the firm.

GAO’s reaction to all of this was to say that the US Department of the Interior should pay more attention to what is happening in Palau. It made no recommendations for any changes in the way Palau conducts its government.

Meanwhile the deadlock over Palau’s relations with the Mainland continues, As previousl report ed there have been numerous referenda seeking to secure the needed 75 nt appr * va for the us to use nuc f ear mate Vials in the islands, all of which secure 61 percent to 72 nt of lhe vote Wlt |,„ u t that thre e- q uarters approval, Washington will not let the Compact go into effect. Then, in 1987> there was ” botched effort to amend the Palau Constitution in such a Way that the 75 per Cent appr ° Val prOV ‘sion could be softened; that effort was thrown out by courts saying that there had not been enough votes in the legislature to bring it to the people.

The current situation is that the Main land House of Representatives has pas sed a bill pressed by its Interior Commit tee which would give Palau another US$9 million if it approved the Com pact, but it is doubtful that the addition al dollars would attract the needed addi tional votes. The bill was scheduled for a Senate hearing in September, but the

hearing was postponed (as often hap

pens in Washington).

Meanwhile a potential solution to the deadlock has emerged from the latest round of constitution litigation. There are two ways of getting a constitutional referendum on the ballot in Palau; one is to secure a three-quarters vote from each house of the EOK, but that appears unlikely given the mood of the legisla ture. The other way is to secure a peti tion signed by one quarter of the voters.

Were such a petition submitted the chances are good that the voters would

again produce a substantial majority for

the Compact (in this case voting for an amendment to the constitution making the nuclear approval subject only to a majority vote.) In the last constitutional referendum voters approved that prop osed change by the needed margin (a majority of the voters in three-quarters of the states) and probably would do so again but there appears to be no effort to submit such a petition. □