KOROR, Palau: Empty hotel rooms, idle tour boats and shuttered travel agencies reveal widening fissures in the tiny Pacific nation of Palau, which is caught in an escalating diplomatic tug-of-war between China and Taiwan.
“There is an ongoing discussion about China weaponising tourism,” said Jeffrey Barabe, owner of Palau Central Hotel and Palau Carolines Resort in Koror. “Some believe that the dollars were allowed to flow in and now they are pulling it back to try and get Palau to establish ties diplomatically.”
In the commercial centre of Koror, the Chinese pullback is obvious. Hotel blocks and restaurants stand empty, travel agencies are boarded and boats which take tourists to Palau’s green, mushroom shaped Rock Islands are docked at the piers.
The Chinese government was “putting an effort to slow or stop tourists going to Palau”, said the Taiwanese-controlled airline, which has experienced a 50 percent fall in bookings since the China restrictions began.
Asked if designating Palau an illegal destination was a way of putting pressure on it to move away from Taiwan, China‘s Foreign Ministry said relations with other countries had to happen under the framework of the “one China” principle.
“The one China principle is the pre-condition and political foundation for China to maintain and develop friendly cooperative relations with all countries around the world,” it said in a statement to Reuters, without specifically addressing the Palau issue.
Taiwan’s Ministry of Foreign Affairs says China has lured four countries to switch diplomatic recognition from Taipei to Beijing in the past two years by offering generous aid packages and investment.
“While Taiwan faces serious diplomatic challenges, the government will not bow down to pressure from Beijing,” the ministry said on its website. “Taiwan will work with friendly nations to uphold regional peace and stability and ensure our rightful place in the international community.”
SHIFT IN FOCUS
Palau President Tommy Remengesau Jr. said there had been no official communication from Beijing on the tourism restrictions.
“It is not a secret that China would like us and the diplomatic friends of Taiwan to switch to them, but for Palau it is not our choosing to decide the one China policy,” he told Reuters in an interview in Palau’s second biggest city, Meyuns.
Remengesau, whose second and final term as president ends in January 2021, said Palau welcomed investment and tourism from China but the current administration’s principles and democratic ideals aligned more closely with Taiwan.
Palau was adapting to the China pullback by focusing on higher spending visitors rather than mass tourism, which had taken a toll on the environment, said Remengesau, dressed in a lemon coloured shirt and white shell necklace.
“The reality is that numbers did not mean big revenues for Palau. It actually made us more determined to seek the policy of quality versus quantity,” said Remengesau, who in 2015 declared most of Palau’s territorial waters a marine sanctuary the size of California.
Former Palau government officials say Beijing is trying to cement its influence in the region ahead of the expiry of the Compact Funding agreements between the United States, the Federated States of Micronesia, the Marshall Islands and Palau in 2023 and 2024.
The United States provides around US$200 million a year on average to the Compact states and is responsible for the defence of the three countries, which each hold a seat at the United Nations.
Last December, the U.S. belatedly approved US$124 million in assistance for Palau through till 2024, but has not announced any plans to extend the Compact agreements.
“The United States and China are not zero-sum competitors,” a U.S. State Department spokesperson told Reuters. “However, we have concerns about the sustainability of debt loads for countries highly indebted to China, as well as the environmental, social, or labour conditions that often come along with Chinese-financed projects.”
A June Security report from the U.S.-China Economic and Security Review Commission said Beijing’s increasing economic engagement in the Pacific was driven by its diplomatic and strategic priorities, including reducing Taiwan’s international presence, gaining access to natural resources and developing a blue water navy.
Former Micronesian government officials said Beijing also wants to extend its Belt and Road Initiative to Palau, and could provide an important source of investment once the Compact agreement expires.
Toribiong, who served until 2013, told Reuters Palau should not isolate itself.
Palau receives US$10 million annually from Taiwan, as well as education and medical scholarships.
China‘s total goods trade with the Pacific Island Forum member countries reached US$8.2 billion in 2017 versus US$1.6 billion for the United States, according to the U.S. security report. Chinese concessional loans to Pacific islands have also risen sharply.
In contrast, Washington’s efforts to strengthen its position in Palau have been largely superficial, according to locals who cite examples of bigger U.S. flags on their official vehicles and increased public signage.
At a lush forest site leased by China‘s Hanergy group, a rusting metal gate blocks the entrance with no sign of construction. Hanergy did not respond to requests for comment regarding the development.
Jackson M. Henry, a real estate appraiser in Koror who helps Chinese companies lease land from local clans, said he was trying to set up channels to aid Chinese investment into Palau ahead of the next election in 2020. Pro business candidate Surangel Whipps Jr. was an early favourite to win the vote.
For Graphic on Taiwan’s political allies, click http://tmsnrt.rs/2hpQ0xx
(Reporting by Farah Master; Additional reporting by Ben Blanchard in BEIJING, Jessica Macy Yu and Yi-Mou Lee in TAIPEI and David Brunnstrom in WASHINGTON. Editing by Lincoln Feast.)