The North Pacific country of Palau is made up of more than 200 volcanic and coral islands, many of them surrounded by a single barrier reef. Historic relics indicate the existence of an ancient culture on the islands, but its recent history has been dominated by foreign powers, such as Spain, Britain, Germany, Japan and the US. Fierce battles were fought on Palau during World War II. After the war, the US administered the islands as part of the UN Trust Territory of the Pacific.
In 1978, Palau opted for independence instead of becoming a part of the Federated States of Micronesia. But the islands did not attain independence until 1994, once a Compact of Free Association with the US was approved.
The islands receive large amounts of US aid: the total over the last 15 years is an estimated $852 million. The aid makes the US responsible for Palau’s defense and gives it the right to maintain military bases there. Though direct aid was set to end in 2009, Palau now wants 35 more years of direct aid.
Palau’s tropical waters are home to a wealth of marine life, making it a big attraction for divers. Tourism is still low key, although it is growing. Palau maintains diplomatic relations with Taiwan, and a large number of Taiwanese tourists visits the islands. Taiwan is also a big aid donor.
Palau’s first president was assassinated in 1985. The current president is Johnson Toribiong, a US-educated lawyer and former ambassador to Taiwan. He aims to make Palau less dependent on American aid and to expand the country’s economy beyond tourism.
Sources: BBC, International Crisis Group, CIA World Factbook.