Cover Story
Palau's Building Boom!
U.S.- Funded Babeldaob Road to Drive Future Development.
While much of Micronesia remains in the economic doldrums, the Republic of Palau is enjoying a construction boom. Fueled by U.S. funding from the Compact of Free Association and by private, mostly off-island, investment, this boom is changing the look of the capital, Koror, and will soon encompass neighboring and largely rural Babeldaob Island.
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Much of the current activity is occurring in Koror.
• The Palau International Coral Reef Center, a $7.3 million showcase for Palau’s underwater wonders funded by the Japanese government, opened last month.
• On Malakal Island the Morita Corporation has begun construction of the Marina Village, a mixed-use development that will include a boat marina, a 40 to 50 room hotel, retail space, an over-water pub, an ocean-front boardwalk, a new Dive Shop, and a new Yamaha dealership.
• Morita Corporation is involved in two additional projects: the development of a five-star 60-unit Quest Resort on Ngerur Island, offshore from the Palau Pacific Resort, with completion set for spring 2003. In addition, Morita is planning a dolphin research and encounter facility in Malakal.
• Koror State Government is soliciting proposals for a new $2 million capital building in the middle of town, so all of its departments and branches can be housed together. After years of discussion, Koror State and the national government have agreed on a wetlands/ponding concept for a new $5 million sewage treatment plant which will alleviate the environmental problems being created by the increasing demands of a growing population on the existing over-burdened plant.
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• Prominent businessman and politician Surangel Whipps is nearing completion of a multi-story expansion of his landmark commercial building in downtown Koror, on a nearby site Hanpa Construction is beginning to occupy its new four-story retail and office building, and a local developer is planning a 20-unit luxury townhouse project on Nikko Bay, with completion estimated by the end of 2001.
• Showing that the construction boom isn’t merely a government-funded phenomenon, on the back streets of Koror, literally dozens of apartment buildings and residences are under construction. National Development Bank of Palau President Tukana Bovoro reports that the NDBP lent $3.2 million as of November, 2000 nearly all for residential loans. He believes that the demand for residential construction in Palau will increase at least $5 million over the next three to five years.
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But the current government, hotel and business expansion in Koror may be viewed in a few years as minor blip on the screen next to what is anticipated for Babeldaob, once the circle-island road opens that heavily rural area to development and population spread. Until recently it wasn’t possible to undertake a project of any appreciable size in Babeldaob due to the poor conditions of the coral and dirt roads crisscrossing the island. Daewoo Corporation, which won the $89 million construction contract for the new 52-mile Compact-funded road, expects to complete the project late in 2003.
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Linking the islands of Koror and Babeldaob is a temporary floating bridge, installed in 1997 after the collapse in 1996 of the 20-year-old concrete bridge. A new suspension bridge is under construction by Kajima Corporation with $25 million from Japan. Completion is scheduled for December this year, but work is progressing at a rapid pace and it could be open for traffic earlier. Once the new bridge and the Babeldaob road are completed, many projects planned for Babeldaob will start in earnest — among those planned are two golf courses, one in the state of Airai and one in Aimeliik. The Babeldaob road will also allow work on the new National Capital in Melekeok to pick up speed. Black Micro Corporation of Palau has signed a contract with the national government to construct the new facility at a cost of $23 million. Sitework has started under a separate $1 million contract.
The new temporary Palau International Air Terminal is complete and in operation. Requests for proposals for demolition of the old terminal have been issued, and the Japanese government is designing a new terminal building that will be built this year.
Beyond these largely government-backed projects, many local entrepreneurs and outside investors are considering hotels and other commercial projects. The Foreign Investment Board, which reviews and approves projects funded or controlled by non-Palauans, in 1998 issued a certificate for the Hong Kuo Resort in Ngermid Village, on the shores of Nikko Bay, that is being funded by Taiwan interests. Sitework was completed last year, but work on the environmentally controversial project was later halted. Glenn Seid, president of the local development company Midcorp, the partner of the Taiwanese investors, reports that a letter of intent has been signed with the Hyatt hotel chain to manage the resort. It is being redesigned to reduce the number of units from 450 to 300, with construction expected to begin this July. The F.I.B. in 1998 also issued a certificate to a group of Taiwanese developers for a 160-room hotel on the water at Malakal Island. Construction of the project is expected to commence this July.
Some critics of foreign investment laws in Palau charge that they work more to prevent investment than to encourage it. In response, the Olbiil Era Kelulau (O.E.K.), the national legislature, wants to revise the laws, even to the point of eliminating the Foreign Investment Board altogether and replacing it with a body which would promote rather than control investment and development. A bill has passed the Senate and had its first reading at the House of Delegates during 2000.
Newly elected President Tommy Remengesau Jr. has taken a position in favor of foreign investment and what he terms "balanced development," in keeping with his campaign slogan of "Preserve the Best, Improve the Rest." He supports revision of the current foreign investment laws to streamline the process by which outside investors obtain permission to undertake projects, but at the same time intends to initiate a control system to ensure that the fragile environment of Palau is protected.
Remengesau has said he will support the effort to put planning documents and development controls in place for Babeldaob, to ensure that projects which are undertaken there are appropriate and benefit the people of the Republic to the greatest extent possible.
Financing these projects will take a major influx of capital. In response, Palau has attracted more than 40 foreign banks. One problem affecting bank loans is that there are no banking laws, and while a banking commissioner has been appointed, the post has no budget or staff.
Not surprisingly, land prices are skyrocketing. Palau law presently does not allow foreigners to own land, but 50-year leases to non-Palauans are common. Nick Captain, president of The Captain Company in Hagatna, Guam, has been appraising land in Palau for years. Land values are "on fire," he said.
In a recent newsletter, Captain reports: "A number of Palau real estate records were set in recent years, including the first land deal in excess of $200 per square meter, the first land deal above $100 per square meter not located on Main Road, and the first land deal above $100 per square meter not located on Koror Island. In 1999 alone, our data base shows over 100 real estate transactions in Palau."
A serious impediment to any development in Palau is the difficulty of obtaining either clear title or an undisputed lease on land parcels — as demonstrated by the reported 8,540 land cases filed in the courts as of November 1999 (an average of one case for every two residents of the country). A legislative mandate from the O.E.K. calls for all cases to be resolved by December 31, 2002, but that schedule is considered optimistic by some observers.
Some residents are voicing concern about development taking place on Babeldaob without the benefit of proper planning. The Association of Governors of the 16 states of Palau responded by retaining the architectural and planning firm MWM Architects, Inc. of Oakland, California and Tamuning, Guam, that will prepare a land use policy master plan for all of the states. The project, starting this year, will include the preparation of a building code for the country, as well as planning documents for all of the states.
Koichi Wong, the long-time National Planner for Palau, is optimistic that the new planning document will be coordinated with the Master Plan for the country adopted in 1996. Wong is preparing a lengthy list of issues for the new administration to consider and act upon, which he hopes will result in a better planned and more appropriately developed future for the country.
