RNZ Pacific's regional correspondent, Kelvin Anthony spoke to President Surangel Whipps Jr, of Palau, on a range of issues including.

• The response and recovery from Covid-19
• The emergency rift at the Pacific Islands Forum (PIF)
• Palau's new digital residency programme
• The Ocean's Conference
• The escalation of military activity in the Pacific
• Climate change
• The implications of the planned ending of some of the US economic assistance to Palau

Looking at the Compact of Free Association. The United States Government Accountability Office (GAO) released a report last month on the impact of the US ending its economic assistance under the compact for the three Micronesian nations. For Palau, it comes to an end in 2024.

The GAO has found that the State Department has not established timeframes to set up the Palau advisory group on economic reform, which the Palau Compact Review Agreement stipulates is to recommend reforms to enhance long term economic sustainability in Palau. So what does this mean?

Palau has done its part. We have submitted names to the US government for the economic advisory group. We are waiting for the US to approve because it is a joint advisory group. What's most important and the GAO report is looking at is how do we move forward?

Palau has had its relationship with the US for almost 30 years under the trusteeship agreement. The obligations under that agreement were to develop Palau economically, socially and politically so that we can become independent. But the reality is we are a small country and have a small economic base so total independence is not easy for us to do.

The US very much needs Palau in terms of security and defence. I think the intent of the United States is this relationship needs to continue. It should not be severed. If anything, it needs to be strengthened. That is a view that we should all share in the Pacific.

That is where the partnership really begins and that is where it is so important in this review. I know the GAO says everything is okay but the reality it's not.

Since COVID, for example, our total debt load is now about the size of our GDP. We have a pension fund that is in debt about the size of our GDP.

We have economic assistance from the US and from the beginning, was never adjusted for inflation. So, we have serious challenges with the current economic assistance.

I think part of what we need to be talking about with the US is not only defensive security, but economic security, economic resilience and that is really our challenge going forward.

You have mentioned quite a bit about partnerships and their importance. Now a former President Tommy Remengesau Jr. recently at the online discussion on security in Micronesia, he used the Palauan fishermen's adage to explain how Palau is viewed by the US.

He mentioned that sometimes Palau is treated like fish in the net and as America's closest friend does not receive the needed attention friends and partners should receive. He says that the compact would need to "address the basic necessities of partnership". Do you agree with him?

Absolutely. We have seen that over time the importance in terms of the attention that the United States pays on Palau seems to be diminished.

When it comes to security and defence, it is important. But when it comes to economic assistance, or helping really advance society, improving people's lives, that is kind of set aside.

Everything from education programmes, health programmes, and economic assistance, those are all lumped together to make sure that we build a resilient economy that is diversified and that helps us push off threats that are out there.

One of the things that I have been told is that you need to look elsewhere - the opportunities, the sky is the limit. Why are we always focused on the US or other small countries when you look at Asia, there is so much opportunity in Asia? That is just the reality of the situation in Palau and we saw a little bit of that when we had a huge influx of tourists from one of our neighbouring countries, and how it can really impact society and help boost our economy.

So, I totally agree with President Remengesau. Yes, sometimes when you are the fish inside the net and you are already caught, the attention is diminished. But we also understand that we are at the tip of the spear. If you look at the United States, Palau is in the westernmost location in the Pacific that the US has a strategic partnership with.

Now let's talk about the Covid-19 pandemic and recovery. You have already mentioned that the burden from Covid-19 is the same as the GDP. What is the situation right now?

Palau, unfortunately, is no longer a least developed country. During the Covid-19 times, what happened is Palau could not access grants. Unlike our friends from the other FAS's [Freely Associated States] they got grants from the World Bank to help them. They got grants to help their infrastructure, for the telecom systems.

We got loans for our sewer systems, we got loans for our telecommunication, and then we got loans that just subsidise our budget. In 2021 when Covid first hit, 30 percent of our workforce went out of work because we depend on tourism and when half your economy is not operating that means that your government does not have money to pay the bills. We had to go out and ADB came in with loans, and more loans, which we all start paying in 2024. Ironically, that is when the next compact comes in place.

I think that is why it is so important that we look now at how we come up with a strategy that does not send Palau on a downward spiral and backwards, and in a more difficult situation where leadership can easily change its views about the realities. We do not want that to happen.

So, is that what is bouncing back from the pandemic will look like?

Right now, we are digging a deep hole and we do not know how we are going to get out of it and that is why it is important to have these partnerships to help us navigate the best way forward.

Moving on to the Ocean Conference, which was scheduled for early this year, but then postponed to April because of Covid-19. How are the preparations for that going? Is it going to go ahead as planned for next month?

Yes, we are in full gear for the oceans conference only a month away and we want it to be in person. We are so excited that about 60 countries and hopefully more will be able to participate. We very much wanted to be an in-person conference because it is about making commitments.

It is also important that our friends from the Pacific participate. I know there are challenges and I hope that by April, those challenges with Covid have subsided so they can all be here.

It is important that we come up with strong policies that protect our oceans, but also help us manage them sustainably so that we can really build a prosperous future and economically resilient future for our peoples.

For so many years, one of the things that we see is that the ocean is like the waste dump. Pollution continues to rise. We have plastic bottles and waste flowing from all over the world that converge here.

This conference is about bringing people together and making commitments because we really need to provide hope to our children.

Micronesia's withdrawal from Pacific Islands Forum has been a sensitive issue. What would be the correct outcome to fix this rift in the Forum?

I want to make it clear that it was nothing personal against Secretary General [Henry] Puna. It was really about the principle. From the Micronesian standpoint, one of the things that we made very clear is that it is Micronesia's turn and anything less than that is unacceptable.

When the decision was made that we were going to vote this, and we agreed to go to use majority rules to do this, it was clear that our vision of keeping the Pacific together and our vision of building consensus and working in trust was broken. That was the beginning of the rift.

We made it clear that we are not coming back to the table until things change. It is important that the is Pacific together, especially on issues of climate change.

This is our last attempt to resolve and bring everyone to the table and hopefully resolve this. And one of the opportunities I think is that at the Oceans Conference if most of the Pacific leaders are here - it has been a long time since we have met in person - so we understand each other better. I am hoping that many of the Pacific leaders will be here [at the Oceans Conference] so that we can reach out to each other and really build that strong relationship.

Palau's new digital residency programme has stirred some conversation. You introduced it in Palau, and you made sure that it gets enacted into law. Explain to us what this is?

Part of building economic resilience means we need to diversify our economy. We need to look at other opportunities to help develop new types of business opportunities and economic growth.

So, the digital residency programme is the beginning of building that ecosystem that we can attract people that want to be able to invest money, whether it is in the crypto space or any other type of FinTech and also, eventually corporate registry developed companies that are residing in Palau. We have two fibre optic cables that we went into debt to bring to Palau. Since we have the infrastructure, how do we find businesses and development opportunities around that space.

We know we are small, but we want to be able to look at those business opportunities and attract businesses that are operating in the region, especially having in Asia, and maybe having them domiciled in Palau and those people really allowing them freedom wherever they are, to be able to transact business, whether it's in cryptocurrency or in any other type of business.

So, one of the things that we do with a digital residency programme, unlike passports, for example, any citizen of a country can get a passport. But under our digital residency programme, we have to do a background check on you. So, you're selected and then it only lasts for a year. If there are bad activities that come up, you get taken off the programme.

We are trying to create an ecosystem that is KYC/AML compliant, and really something that can generate income and jobs for our people.

What has been the reaction to this new programme so far?

It has been slow but we currently have 800 people that have signed up. We had zero and now we have 800. The goal is 7 billion, but we have got to start somewhere.

Now it is about developing the ecosystem. For example, crypto exchange, we need to get that going, how do we get that going, but in the right way that regulators, and especially the people in the FinTech industry that are comfortable with what we're doing.

We are not interested in money laundering and bringing criminals in. We want to do it the right way because there is a lot of people around the world that want to participate in. One of the examples I use is, the state of Hawaii says you cannot trade in crypto. Well, if you have a digital residence in Palau, the idea is if you are from the state of Hawaii, you would be able to do that in Palau because you would have a digital residence and be able to do this.

Critics of the programme say it could leave it open to cryptos scammers and corruption, and some argue that not enough due diligence has been done on the scheme. Some say that Palau could turn into a "scammers paradise". What do you say to them?

There are always risks. What we are trying to do is do everything we can to mitigate those risks. That is why we're not jumping in and changing everything at once we are taking baby steps.

First, we got the programme up and running. Now, how do we develop that ecosystem to make sure that we keep the scammers out, we protect our people, we protect the digital residents. Those are things that we have to develop because it has got to be sound.

One of the things we're doing is the money that we get from the programme, we are reinvesting in developing that ecosystem, putting the controls in and getting the experts to help us. We understand that there is a responsibility that comes along with this programme and we want to do it the right way and the money that we have gotten so far, we are putting it right back into hiring experts to help us develop the ecosystem and protect us.

So, which part of the world is the programme receiving the most interest from?

We have about a third from the Americas, we have a third from Asia and a third from Europe. So, it is a mix of people and that is what it was developed to be. We want to make the ecosystem so that we can attract citizens from all over the world.

Now, moving on to security. There are concerns about the increased militarisation of the region. What is your position on increased military activity in the Pacific by partners and allies?

I think that is a very big concern for our people.

One of the concerns I have is we are a peaceful nation. But now with all the US military activity in Palau, they put a bullseye on Palau.

Palau, unlike the other FAS states, did not readily accept the compact. It had to be voted on seven different times. Because of the increased militarisation, it creates anxiety in our people.

Now the US is putting a really big radar site in Palau as part of our defence so once again, Palau has become the bullseye. We are at the tip of the spear. Twenty-five years ago, when the compact was first passed in 1994, the US said all those defence things, we do not need them in Palau, they're not important to us. That has completely changed.

It is important that they take care of the people who belong and show that they really care because we are concerned. And that is one of the hotly debated issues in Palau now that there is a bullseye here, because of the new radar sites coming in, what is the US doing? Maybe it is time to increase our partnership with other nations so that we are not a bullseye.

I know that we are in these talks, and I hope that the US is looking at them closely and we can navigate a better future for all of us.

Finally, climate change. The IPCC released its latest report last month, and it confirms what has been already known in the Pacific - that the world is very much off track to achieve the 1.5 decrease goal unless there are dedicated efforts to reduce carbon emissions. What does it mean for Palau?

I made a statement in Glasgow [COP26], and my statement was you might as well bomb us.

I was saying that because when it comes to climate change, were we struggling with it every day. Sea levels rise are now into people's living rooms, when we have droughts, it causes a disaster, so our government goes into debt to try to keep things going.

Then typhoons come, the government goes into debt again to repair damage from all those typhoons. And we have huge rainstorms that cause landslides.

But then added to that, we have our fish stocks that are calculated, we are going to lose 40 per cent of them over the next 50 years. We also have the impacts on our coral reefs with coral bleaching, and then our jellyfish, which are prized and one of our main tourist attractions, disappearing when we have those extreme climate events.

When that happens, for example, that Jellyfish Lake, the jellyfish disappeared for three years, and during that time, tourists do not want to come.

It is everything from our boundaries being challenged. We have islands to the South that are very close to Indonesia. So, the question is, if those islands are suddenly underwater, does our EEZ now shrink.

Then the other question you have is, those islands have people on then, they have cultures that go back thousands of years that have chiefs, and that they have a history. Why should we live in a world where we can do something about this, let those things disappear and become extinct, because of our human choices?

Now we run the risk of islands disappearing because of human choices. It is really our duty is islands to do our part, and really ask the whole world to do their part. Because if we just do our part, and we're only contributing 0.03 percent it is not going to make a difference.

We need the big countries in the world to take responsibility. It is time to hold the large countries accountable. If you want to pollute, you need to pay. I know that we should not be suing, but really, it's about climate mitigation of climate adaptation and about holding people responsible because at the end of the day, we want to hold people responsible.

I had the opportunity of representing our friends from the Marshall Islands, and the high ambition panel in Glasgow and it is just heart wrenching to hear my friend President David Kabua say when you go, you need to impress upon them [developed countries] that if we don't start making serious changes now, we are gone.

The solution is we can make the right choices, reduce carbon emissions, and help save our people and our planet and that culture and the history that we have.