good morning the oversight hearing by the subcommittee on insular affairs will come to order the subcommittee is meeting today to hear testimony on the implementation of the compact of free association between the united states and the republic this oversight hearing has been convened by the subcommittee to gather testimony and discuss with our witnesses the implementation of the compact of free association between the united states and the republic of palau the compact is now in its fourteenth year and i believe that this oversight hearing may be the first held by this committee since the palau compact came into force in one nine hundred ninety four since becoming chairman of the subcommittee i have had the pleasure of not only meeting with president tommy r and various officials from the republic of palau who traveled to washington d c in the past year and a half but my a dear colleague congresswoman badajoz who will join us later and i visited the island in august islands in august of two thousand and seven during that trip i was impressed with polish development the thoughtfulness of her traditional and elected leaders the concern the people have for preserving their natural environment and the pace of development that these leaders and vision and and embrace even though i didn't go area greater in size than that of the u s mainland a main interest when becoming the administering authority of these islands via the united nations was to develop and implement a policy of strategic denial it was a lesson which world war two had taught and which served us throughout the cold war era today u s military and diplomatic presence in the pacific is still at the forefront but the focus of these islands in large measure because of the aspirations of the islanders themselves has changed our relationship once defined in terms of administering authority and wards is now framed by friendship partnership and mutual respect and alliance it is in this regard that the subcommittee looks forward to hearing from our witnesses this morning are aware that title two of the u s pullout compact which set forth palau has access to u s assistance and participation in federal programs is set to expire next year for the record in may two thousand and seven a bipartisan and by camera letter was sent to secretary of state rice urging a formal review of the u s pilot compact required under section four thirty two a request was also made by congress for the government accountability office to review the compact for accountability condition of the island's economy and to identify amendments in similar contacts which may be relevant to the poll out compact employees of the department of state serving as the chair of the into agency group on freely associated state affairs has held the view sessions with officials from poll out our friendship partnership and alliance have been an overall success at palouse leaders have position them their nation for steady growth now is a time when our presence in the pacific and then and this success should be augmented without interruption with that will we'll recognize the ranking member and other members when they arrive and mr ford to me will give his opening statement at that time i'd like to recognize the first panel of witnesses representing the department of interior the department of state and the go government accountability office and the chair now recognizes mrs savage from the department of into his office of in fla fails to testify for five minutes welcome back thank you very much it's a pleasure to be here madam chair and members of the subcommittee on insular affairs i am pleased to be here today to discuss the implementation of the compact of free association with the republican poll while the hearing is particularly timely as the government palauan the government of united states prepare for the required review of the compact my statement will focus on the financial system components of the compact for which the department of interior has been responsible allows compact of free association was implemented in fiscal year nine hundred ninety five when compact direct funding expires on september thirtieth two thousand and nine the department of the interior will have provided approximately six hundred million dollars of assistance to p including one hundred forty nine million used to construct the turnkey fifty three mile road system on babble the plows largest island three hundred seventy two million dollars will have been expended on activities defined under title two of the compact and another thirty eight point seven million dollars on compact section two twenty one block grants for health and education much of the funding provided directly to plough was partially adjusted for inflation the amount of inflation payments will have been approximately ninety nine million dollars for the fifteen year period the financial assistance package of palau's compact is always different in key respects from the assistance that the united states provided the republican the marshall islands and the federated states of micronesia the most significant difference for palau's the establishment of a trust fund capitalized with seventy million dollars within the first three years of the agreement the object of the trust fund is to produce an average annual distribution of fifteen million dollars for plows government operations for thirty five years beginning in fiscal year two ten it was recognized that the fun might or might not produce this amount and the excess or variance was to accrue or be absorbed by the government to pull out trust fund proceeds of also provided operational funding for pullouts since the fourth year of the raymond the compact with subsidiary agreements also provided for the construction of the road around bob the road which was completed last year became the largest public works project ever undertaken by the in the insular areas by the department of the interior was compact that other unique features its program of capital improvements was funded by a single payment of thirty six million dollars to the government in one thousand nine hundred five by agreement palau also received twenty eight million dollars for energy purposes in a lump sum and fiscal year nine hundred ninety five other direct funding myriad assistance to the f s m n r m y allow receive annual funding for operations communications marine surveillance scholarships and special block grants funds are also provided by d l i'd perform annual audits and support operations of the national weather service the federal aviation administration and the postal service the weather service and f a a now receive direct funding to support their operation and pull out the department of the interior views the r o p and the compact as a success story law has made strong economic gains since approval of the compact its average growth in real terms has been just over two percent in recent years annual rate annual real g d p growth as average in excess of five percent per year domestic revenues have increased from thirty six percent of government expenditures to nearly sixty percent the strategies and funding mechanisms created under the compact have been successful as has been reported by the government accountability office the trust fund has a good chance of meeting its goal of producing an average amount of fifteen million dollars for government operations the government will be able to withdraw fifteen million dollars per year from its trust fund for the plan thirty five years if the trust fund earns a compounded annual rate of at least eight point one percent as i noted earlier the compa road has been completed and now provides new opportunities for opening in developing ploughs largest island construction of the road was a turnkey responsibility in the united states originally described as eighteen foot wide with a double bitumen a surface treatment and two foot shoulders the road instead is a modern roadway built to united states standards the road bed travels the fifty three mile circumference of babel dob linking the business center of karrar with the new capital mela kiosk and makes formerly inaccessible land a natural attractions available for development the road is a tribute to the fruitful partnership of the department of the interior palauan the us army corps of engineers which manages construction plows made progress in installing the sorry public infrastructure using compact funds and other outside donor assistance increased attention to management of its infrastructure in addition to planning for maintenance investment and maintenance is necessary currently pull our relies on outside assistance for maintenance and is likely to continue to do so in the future social services provided by plow are meeting the needs of the community it reports that it's child abuse ation program reaches ninety eight percent of the population in for infant mortality rates have decreased life expectancy has increased was developed improvement plans for all of it public schools and has developed a system wide national student assessment test its graduation rates compare favorably with any nation the department of the interior's found pull out to be a reliable partner especially in the past eight years while i was been a leader of all u s affiliated insularis in the area of countability and financial management making steady improvements in its ability to reliably report on the use of funds for nine hundred ninety five to two thousand and two pull our received qualified audit opinions on its government financial statements but for now two thousand and three to two thousand and six allows financial statements consistently received unqualified opinions indicating that the auditor considered the statements reliable was also provided annual economic reports charting its use of compact funds in conclusion the department of the interior believes ploughs compact has been a success allows been a reliable partner in its use lies to compact funding effectively to achieve positive results the department of interior is participating in the bilateral consultations being held intent anticipation of the fifteen review fifteen year review provided for in the compact and looks forward to the continuation of those consultations and the subject subsequent review thank you thank you  s policy towards pullout since we've already heard about issues related to the compact of free association from time percentage and i'll focus my remarks as i did a couple of days ago on the state of diplomatic relations diplomatic relations between the united states in palau the u s relationship with pullout began after the second world war when pullout became part of the u n trust territory of the pacific islands under the administration of the united states today fourteen years after independence large numbers of palauans visit reside and work in the u s without visas as allowed under the compact the u s has over forty ongoing projects in pull out contributing to its development in areas of health education transportation agriculture and the environment overall the us and plough and join extremely close and cooperative relationship rooted in shared historical experiences family ties and our work together across many different areas of common interest also we are strong and active partners in multilateral bodies such as the united nations since president to remind us ours inaugurated in two thousand and one we've had many chances to reaffirm the relationship including through meetings among senior level officials the plow government is a committed and valued partner in the war on terror and many people our ends serve with the u s military their military contribution is strong proof of palau support for america sadly since two thousand and four three palauans have died on active duty in the u s armed forces two of them while serving in iraq for th sacrifice we send heartfelt condolences to their families and express our gratitude for their service and sacrifice our cooperative relationship in the international arena includes palouse continued support of most us initiatives in the un with the voting coincidence that is consistently in the top ten among members of the general assembly ploughs votes overwhelmingly with us on issues of great importance including those relating to the middle east we greatly appreciate ploughs strong support of the un and other multilateral bodies which reflects our common goals and shared values another recent notable success with pull out with the ship rider agreement in two thousand and eight plow became the first country in the pacific to sign a permanent ship rider agreement with the united states this agreement unable palauan law enforcement officials to ride u s ship this and participate in law enforcement exercises at sea our governments further strengthen the coordination through what's called a vessel monitoring system agreement the fundamental and enduring commitment of both sides to the relationship has continued to strengthen our deep friendship the compact calls for the two governments to review the terms of the compact and the overall development of the relationship on the fifteenth thirty five and forty of anniversaries of the effective date of the compact the first of these anniversaries is in october two thousand and nine responding to requests from congress and the government to pull out we've begun consultations and preparation for the review with an eye to expediting the formal review itself the consultations have been very positive and helpful to date u s officials about twice with their plough and counterparts and marching karrar and just last week as you know in washington both sides of agreed to continue to exchange information over the next few months and to hold one or two more consultations in order to gain an even better understanding of each other's positions president romanticize graciously offered to meet with the delegation in late september on the margins of the un general assembly we are working towards completing the formal review by the end of october allow has developed substantially since the inception of the compact in one thousand nine hundred four through u s assistance ploughs become more self reliant increased its revenue base expanded infrastructure and private sector jobs have provided high quality education healthcare to palauans both the united states and plow can be proud of what has been accomplished and we look forward to  office of five man thank you madam chair and members of the subcommittee thank you for inviting g a o to participate in this hearing in the context of a two thousand and nine review of the compact u s g a o to examine economic assistance to plough accountability over ploughs use of funds and its prospects for achieving economic self sufficiency we should all report this week in my remarks today will key off that work regarding u s assistance a similar to interiors presentation through two thousand and nine us will have provided roughly eight hundred fifty two million dollars under the compact and related agreements through four distinct mechanisms first direct financial support represents the largest share of four hundred eleven million dollars or roughly half of u s assistance these funds provide for government operations kaplan prove ment's block grants to states an investment plus trust fund amongst other uses second discretionary federal programs represent the next largest share roughly two hundred sixty seven million dollars health and education grants supporting for example community health centers headstart special education teacher training in the pla community college make up more than half of us program assistance third u s postal weather and aviation in kind services cost us agencies roughly twenty five million dollars and fourth the construction of the fifty three mile road built to u s standards linking kora with the new capitol complex and previously isolated communities cost roughly  hundred forty nine million dollars or seventeen percent of u s assistance g a o has concerns that road maintenance may not be well incorporated into ministry level planning although some new funds have been i did by the u s for this received unqualified opinions single audit show recurring internal control weaknesses in areas such as procurement cash management and real property inventory additionally in two thousand and six interiors i g reported on the limited accountability for compaq direct assistance particularly in the capital infrastructure account palauan has developed plans to correct these internal control weaknesses and g e o s recommended interior targets future technical assistance towards bill building full of palau's financial management capacity ploughs long term prospects for self sufficiency depend on at least four factors one levels of continued u s assistance to viability of its trust fund three ongoing fiscal reforms and for private sector growth regarding u s assistance given the anticipated ten million dollar increase in palau's annual trust fund withdrawals we calculate that the end of compact direct assistance will result in a net decline of less than four percent in national government revenues however changes in discretionary federal program funding could have a significant impact on the government's fiscal position and made directly impact social welfare moreover unless an agreement is extended pullout will lose postal whether in aviation services in two thousand and nine regarding the trust fund we calculated an annual return of at least eight point one percent will allow ploughed withdraw fifteen million dollars per year from its trust fund for the planned thirty five years however market volatility makes it very possible that the trust fund will be depleted prior to that date and because trolls are not ingested for inflation they will lose considerable value over time and fiscal reform experts suggest to pull out modernize its income and business taxes improve tax collection and reduce its public sector wage bill in order to close the gap between its revenues and its expenditures in the private sector although in large measure successful restrictive foreign investment laws weak oversight of financial institution limited access to land in a small pool of skilled pool skilled laborers are seen as the key constraints to growth in closing palauans made considerable economic progress over the past decade with a sustained three percent real growth and a per capita g d p of seventy five hundred dollars plus other significant donors and access to financing in the context of the current compact review our work suggests that the us should support palau's fiscal reforms promote sustainable private sector growth and structure any continued programs or services with an eye towards palau's stated goal of economic self sufficiency but i'm sure this completes my remarks i'm happy to answer your questions amended compact with s s m in the marshall islands which are oriented around sector grants declining sector grant assistance and contributions to the trust fund with a number of accountability measures built in to those sector grants the current compact with palauans oriented around direct financial support goes to the budget in various purposes within the national budget apollo and the other purposes that we've discussed including the road is use funds the united states has recently granted pull out for road maintenance or are there additional actions needed by the united states uscis palauan is cheering the potential economic benefits on that new i realize thank you madam chairman the part of the agreement of the compact required that the united states provide a maintenance plan with the road and that that that makes sense plan was submitted prior to the opening of the road to the government of poland in fact we had a couple of seminars about the months of what it was going to take in terms of financing and organization of maintenance institutions because it is a significant has a significant impact on their budget our estimates of maintenance ran anywhere between around a million dollars to three million dollars a year depending on the well i depending on the way the road the road life and activities i mean just the just the daily activities of making sure that the culverts are clean and  spectating inspecting the roadway daily is an expensive proposition fortunately we we were able to we are able to assist palau a little bit in this regard because of a of a three million dollars that has been authorized by congress  to provide discretionary federal programs and compact federal services to palau as anyone anyone at all can answer well if we are discussing  the extension or looking at the federal system there are programs and services agreement which would need to be continued although there is eligibility for pullout to continue to receive certain federal programs a restoration or we knew all of the federal programs and services agreement would make implement those programs are simpler however of the as was said earlier the continuation of such programs as the weather service the f a a and the postal service would require an update  to that agreement every week if i could just jump in on that car place now just i mean that's kind of the sixty four dollar question from the standpoint of u s government and that's one of the things that the that all of us are working together on and one of the reasons why we've kind of stepped up the pace of the interagency consultations on where to go from here is a question that we know we need to we need to answer better but we don't have a perfect answer to right now but you anticipate that congress will have to take some action but i wouldn't be at all surprised qwest that's a good mic jail is provided considerable data to suggest that the bailout trust fund may not be able to pay out fifteen fifteen million dollars each year through two thousand forty four what are some of the options that might be available to deal with this risk thank you the the options are first to  not draw fifteen million dollars out on the annual basis i think that's unlikely to happen but there's no requirement that the full withdraw be made a secondly polo could seek another donor and then aside from the  possible strategies different strategies for investment it's important for the the plough trust fund to continually monitor its own status so that it will have a clearer sense the trust fund will will each year there will be additional clarity as to what the status is and its likelihood of reaching twenty forty four and if the annual the annual fifteen million dollar withdrawal so as we have with the other compact trust funds we recommend continued village vigilance and analysis of the status of the trust fund going forward ok and anyone again can answer this question the main area of weakness in the reports on palau is the internal financial controls and i wanted to i'd like to hear what are some of the recommendations or approaches that are being considered in working with allowed to improve that and to know financial management that seems to be the biggest weakness that the that has been reported on this morning chairman i think at the interior department we recognize both the strengths and weaknesses of pull outs financial performance because i think in a comparative basis they're relatively strong but certainly improvements are necessary i think in the long run the most important aspect of improving and maintaining its capacities in financial management will be really in succession planning and in making sure that a new generation of financial managers is trained in place and we've had we noted the geos recommendation on that and we've had some preliminary discussions with our one of our train wreck their recommendation that additional resources or a full time staff member be provided to oversee that is that the recommendation to talk about actually yes and also to make sure that sufficient personnel are are available i think our really has kind of a heroic financial staff there people in there who have been doing a good job for a long time with a little personnel support and we've had discussions with both our training arm which u s d a graduate school and also with the minister of finance and with some of the planners about some approaches to take so  that there is a continuation and improvement ploughs services there we expect that certainly our technical assistance programs will continue to effect well after two thousand and nine and any circumstance observe that the the palauan single lot of us have received unqualified opinions for the last four years which is a statement that the single audits themselves are sufficient quality for the auditors to render render an opinion in addition the number of internal control weaknesses and compliance issues that have served is actually considerably lower than in other settings that we've been talking about the other compacts recipients however there are some internal control vulnerabilities these are statements from the single auditor that program the financial programs at risk for problems with accountability problems with real property or cash management alike and so we certainly have not nor has the g s found any major problems with with waste or fraud or anything the like but do observe that there are some weaknesses in the structure which as we've been discussing discussing tend to relate to capacity constraints in the finance ministry technical assistance grants could target for improvement considering the fact that i'm under the impression that palau among the three micronesian entities really is probably the most stable economically and my wrong on this observation that the economy to a large extent to a similar extent oriented around spending of the public sector the public sector wages exceed private sector wages by a large workers and other foreign nationals largely from the philippines and other places further to the east and the unskilled worker population is made up to a considerable extent by foreign workers marshallese immigrants so i don't know the answer you question formally i think in general it's it's the conventional wisdom would be that the palauan migrants are doing better on the whole but i to approve its compact of free association as compared to the f s m and the marshals would you care to share that with us that's actually this will be a little bit of a dodge congressman but that's actually a great question perhaps to pose to the next panel who can maybe tell you why it took that long i mean i guess the favorable interpretation is that they were deliberative about it they want to make sure that you know had had thought through these issues or conducted sixty seven exploded sixty seven nuclear devices in the marshall islands and then the french exploded two hundred ten nuclear devices in french polynesia the pacific really our treatment of the marshallese i might say to this day it's just shameful and the way our country has treated the marshallese people there to this day they still have not been given proper medical treatment being exposed directly to nuclear contamination or radiation as a result of our nuclear testing program i was invited by the president of context on two years ago this is where the soviet union conducted its nuclear testing program whereby they exploded over five hundred nuclear devices which by the way occluded the most powerful hydrogen bomb ever exploded in the history of this planet because we initiated it in doing it in the marshals by exploding the what was known as the bravo test which used a thousand times more powerful hydrogen bomb that we've voted in the marshal's thousand times more powerful than the bombs we exploded in hiroshima and nagasaki and to this day we still have not cleaned up done a very good job in not only helping medically the people of the marshallese not even a little sense of compensation we haven't even gone through that and we've done it for the for the  seattle washington the what we've done there i know this is nothing to do with follow but i think the general connect it to the extent that this is probably one reason the sensitivity why the palauans wanted to be absolutely certain that if there is to be where have thirty thousand nuclear bombs and among the five permanent members of the security council what are they going to do with thirty thousand nuclear bombs i wonder but gentlemen i just wanted to  riddled with so much so many problems not only financially ministre to really perhaps you've been politically can you share with us or why the difference  place that you know i first went down there with a planeload of the younger asians who are going down there today cation because it's it's so beautiful down there so they've got they've had a bit of that advantage in the tourist industry and that of course the distances that they deal with are not as great so i think you know some of the variables are political some of them are geographics of them or have to do with natures pouty those are just some of the factors and you know what i would stay away from is getting any kind of ethnographic kinds of explanations because i don't have the expertise to do that and i'm not sure that those are very valuable to get into any time i really think that this is a great development and i appreciate the work that you gentlemen do and making every effort to make sure that we give support that is necessary for our friends in want to thank you for your leadership in ensuring the compact relationship between the united states and our friends and allies in the pacific is strengthened i very much appreciate the exercise of oversight that we are engaged in with this series of hearings and today's hearing is timely given the challenges that congressional responsibility associated with the renewal and the reauthorization of the compact with the republic of polo i stated on tuesday of this week that the people of guam are at the heart  the center of the special relationship shared between the peoples of f s a and the united states and the same is true with respect to pull out palau is our neighbor and friend in the pacific and together our governments and our people are working together to conserve our diverse and precious natural resources to advance our economic growth regionally and to preserve our culture i am very much interested in learning about the status of the negotiations to renew the compact what the changes in tail and how we can improve the workings of the compact and i extend a very warm half a day to our delegation this morning thank you filipinos unskilled labor are remitting from their wages from polo back to their homeland so flow is actually a wealthy enough country that is hiring labor from a lower income country and  country with a lower income than theirs and those workers are remitting back home ok i'm not going to say i mean this not to say that there aren't palauans who are also remaining right we don't we don't know about we don't have any knowledge of that correct because it's my understanding that poland living in the united states are actually more assimilated into the society than maybe that the ones from fs i'm r m i have been again i can tell you numerically there's somewhere between thirty five the best there is not good information on the level to which they rem but to everyone i guess the governor palauan the testimony today will be outlining a proposal for further u s assistance that they believe is fully consistent with the intent of the compact and which will enable them to continue on their successful development path the proposal consists of three parts and has been of the truss fun continued access to federal programs and support for a certain infrastructure projects they have indicated that share that they share th proposal and some of the consultations as well as other met with other members of the into agency group for your consideration of response and while i would anticipate that you don't have a formal answer i was wondering if if there were any reaction that you could share with us to the proposals from apollo state interior and then a comment from jail on the proposals consultations with them and because we're trying to keep the discussions in confidence their work with a plow is what i wanted i want to do with apologies for happy come back later once we've gotten further along here is just characterize kind of where the two sides stand and i can tell you in general things are going pretty well and that's are going to move very good and i think we are going to find answers to a lot of these these and you think that  a you know if you don't have to really anyway but we're kind of we're you know we're we're in mid stream here with this and you know i feel bad about not being able to tell you more but we you know we want to take to the review as a whole not in piecemeal fashion and and just to avoid you know the bear trap of trying to negotiate kind of publicly it's not so much about you it's about this microphone and the people who are listening and so i'd rather kind of keep it comment on those requests further madam chair i wouldn't it would be not appropriate for us to comment on the ongoing discussion and the request and the contact with you i would say with respect to the trust fund there's a number ways to think about the long term success of the trust fund so if the trust fund is intended to provide fifteen million dollars to twenty forty four and ideally provide either fifty million dollars for a longer period of time or perhaps have the ability to provide inflation adjusted and over over the twenty period to twenty forty four so we should be inflation adjusted such that the fifteen million doesn't lose considerable value over time so one could think about providing additional resources to the trust fund at in one large lump sum early on one could think about additional funding to the trust fund over a thirty five year period one could actually think about simply providing some form of at least in part levels of continuing discretionary federal program assistance having been out there recently i would say that discretionary program assistance appears to play a significant role in the social well being in palau the health and education sector grants in particular the airport improvement grant which was sizable in recent years has made a considerable difference in federal programs have played an important role in the recent past and i did i'd agree with this with the valley living did you have any other questions rig constructing a new capital and this is not with federal funding from the united states am i correct on this generally speaking yes the there was a small amount of money that was made available to allow for planning purposes was used for writing things but the funding that built the capital the office was an original package of money that was divided up among the trust territory entities and so in the case of the office and they got four sixth of it so it didn't go as far for p fact that allows trust fund will annual distributions from the trust fund will rise from five million to fifteen million dollars and the other donor systems as a percentage of government revenues will not change dramatically what will happen over time is anybody's davies i think we may have had a dialogue previous to this as you well know we have a very unique situation in the pacific region in that six percent require nations have formal diplomatic relations with taiwan and i'm referring to palau the marshal's care of the solomons nauru in vanuatu i recall that you had indicated concern at least in the state department i'm sure that you're not advocating this for the concern about checkbook diplomacy that seems to be coming out forthcoming especially as a rivalry currently exists between china and taiwan and there was a serious issue i think it was new guinea where there was some money coming out of taiwan where the foreign minister of taiwan has had to resign because there was involvement of some thirty million dollars in aid that was supposed to go to the pub or new guinea and once he found out that the money disappeared so the foreign minister of taiwan had to resign are you very serious about the concerns that you expressed in our previous discussions about checkbook diplomacy going on now and in the pacific especially with the actions taken by china as well as taiwan it is it is a serious concern and it's something that increasingly we we raise with both  taiwan and the p r c and i spoke to this briefly in the last hearing a couple of days ago we tried to impress upon them the importance of transparency and of working towards good governance and we've begun to discuss whether we can come to some sort of agreement formal or otherwise terms of what our overall goals ought to be in that part of the world so it's something that does concern us and what concerns us most of all is one money that nobody can really track it begins to play a role in politics and of course we try to bend over backwards in terms of th the assistance the resources that we provide in the pacific to adhere to a certain set of principles and to do it very much in the open so that's the nature of the dialogue that we're having with the with that with the beijing but the bottom line is to answer your question directly yes we're concerned well as you know in our last consultation here to express concern about checkbook diplomacy and i said no what about our cash diplomacy that we currently have with iraq where we can't even account for a billion dollars in cash that we gave to the iraqi people just don't want to reflect a sense that we have a double standard here saying putting your fingers about others doing checkbook diplomacy and yet we conduct a cash diplomacy in our dealings with a country like iraq and and we can't even seem to account for the cash some eight billion dollars that have been dished out to the iraqi people and their leaders so i i just wanted to express his concern that in the diplomatic front i suggest that maybe before we start expressing that concern about checkbook diplomacy between see maybe we ourselves are probably doing it ourselves and then it just doesn't seem to ring right in my humble opinion and i may be wrong on this but so next year come next year what's to happen everything is going to come out very positive in our relationship with palau we're going to work toward that and congressman and we hope we hope it will mr s are there any concerns that we have an anticipation of what's going to happen come next year in two thousand and nine based on the review and i'll have mr goulden at the same question as well all of the issues that are salient are being discussed right now between the government apply the governor of the united states certainly were aware of what was reported and we're aware of the history that we've had a full discussion we're having a full discussion with allow so i'm quite sure that we'll come to an accommodation that meets the needs of both parties it's a good thing but i don't have a tremendous amount to add we're not parties to the to the i'm going review the trust fund is a key issue continue program assistance is a key issue and micronesia we're dealing with is three separate entities sovereign countries and yet a very unique compact free compact relationship very unique none of this kind ever that i see in other parts of the world  what is our real geopolitical policy and how we have to stand firm on this encroachment perhaps or through militarily or strategically what is the number one priority that our country has towards micronesia in that sense i think the number one priority and then i alluded to this last time is really to keep faith with them and to help them develop to the point where they can u were down to their benefit that's obviously a benefit to the united states what's important overall about that part of the world is they haven't had a conflict in twenty five years in the in the larger asia pacific area there has been a wars that has engaged us as happened in the in the deeper past and we think that the united states  military umbrella if you will the guaranteed of that we provide helps keep it that way so that's at the forty thousand foot level that's where the united states is coming from in valuing sector business environment and implementing economic reforms can you tell us what reforms have u s agencies sought to during the annual economic consultations and what has been the outcome of these consultation i'm not sure i can really give you any specific examples of the types of reforms that we've sought in those consultations but in general we were looking at recommendations of the of the i m f and other agencies that are engaged with  are economies really have been largely successful because of location because of its their own policies and activity and it's attractiveness as a tourist location so you would say then that the outcomes have been good yes i would well i think that will probably be the subject of some of the discussions that we're having and certainly it's an  issue and their commitment to that so that some of these issues are on the table now and i'm sure will be part of our further discussions you mention the tourism industry what are the number of tourists now that visit to lao i was on a message that i was about eighty thousand a year eighty thousand well it's a beautiful island and i hear a lot of people that say they visit guam and then they visit belo so i thank you very much madam chair i have no further questions good morning madam chair and member so association between our two countries thank you for the invitation to present allows perspective on the implementation of the compact when palau first entered into the compact in one thousand nine hundred four we w excited about our new status were excited about our new status hopeful about our future and cautiously optimistic about the laos ability to achieve our ultimate goal of us your self reliance and economic self sufficiency i mean fourteen years later p we know that we would not have achieved our progress through all of self sufficiency without the financial assistance of united states and access to critical federal programs and services in more terms the u s s provided support to our primary areas of health and education this has resulted in significant improvements in access to primary health and specialized medical care s federal assistance also augments our domestic education system in critical areas including special education headstart and core curriculum development that people up allow express their gratitude for our relationship with the united states not merely through words but also through actions no action speaks louder than the service of our sons and daughters in the u s armed services and a per capita rate higher than that of any state in the united states as you are well aware some of our children have made the ultimate sacrifice in support of our jointly held beliefs our support in the international for  is equally clear and consistent allow has demonstrated that it stands with the united states on critical issues even when they do not have international popularity our support for the us speaks for itself despi island nations we have a fragile economy and unique challenges often we are only one economic event away from reversing the progress that we have made that in particular fraction of our access to u s assistance would be a serious economic event certain to have a detrimental impact on our continued development in order to achieve our goal of economic self sufficien we have provided a three prong economic proposal to the united states first and hans man of the compact trust fund to a level that will surely provide the fifteen million dollars annual operation support that was originally projected to be necessary when the compact was negotiated second pontin use access to appropriate us for those services and programs and third support for appropriate security and defense arrangements we believe that the new and more dangerous international situation makes such a review a logical and practical and can only strengthen our response capacities in the can finalize the compact review process expertise just silly and continue on our pursuit of economic and political independence we ask for congress continue support in our journey thank you very much thank you all now recognize myself for five minutes and with having been to palau i was very much impressed and reading your report as a physician seeing how you reduce infant mortality and increase life expectancy x the even more impressive we really appreciate the work that palau is been doing and the improvements that they've been making  questions and then i'll turn to my colleagues u s provided services are scheduled to expire as everybody discussed in two thousand and nine minute ition us programs remain a significant share of u s assistance so for the record i'd like to ask what is pullouts potential to internally provide the services it currently receives under the u s discretionary federal programs and come back federal services if you didn't if that funding was not be difficult for us to continue to provide the level of education and health services at the press and level with our own revenue and our own  thank you jay a reported importance of palau improving its private sector business environment and implementing economic reforms can you tell us what specific actions by law might be taking to capitalize on potential economic most important project that has been performed by the united states in our country for the longest time citizens of the biggest island in palau bob about have moved to the capital core or which is a very small island to live and work and to seek a better man of their quality of life now that this road this open up we're expecting a transition or a movement back to the big island opportunities are there even for just in the area of tourism allow is not only concentrating on diving industry but now looking into other areas  questions that were raised earlier by the previous panel and maybe there was some reason that you wanted to be the second panel to testify were there any particular issues that you wanted these three gentlem representing the interior department the state department and g a o to bring out or did not bring out that you wanted to share with the committee yes so there was a question on the c ip we do receive  assistance in this nature from our friends in japan and taiwan mr congressman and they are wonderful friends just like the united states and they are closer to us in the region their indication not only because of their economic issues and their own countries but because they have invested in infrastructure which they think if palau a manage them well it would help them to become economic self sufficient nation you're indicated since the time of the end of the implementation of the compact of free association can you provide a listing for the record the number of federal programs that have been terminated since that time i don't mean that you have to come up with a right now but i would be curious if you could provide a listing of all the federal programs that have been terminated since the time of our first round  of the contact and secondly i would like to ask what does your government really need by way of federal programs that you consider to be very very critical  as far as the needs that you now have now i'm not suggesting that we're going to give you the programs but it certainly would be good for the record and justifying also why you need these programs we had a big problem with the postage postal services and we seem to be going back and forth not only you know with the marshals and the others and i say well i think there's some effort now we're trying to put that in place and just that alone has a further programs fell into three categories basically congressman those that were terminated those who are put on a face out schedule and those that continue and we can between ourselves and simply did not get any or any opinion of our bureaucrats you didn't need the program even though you said but we needed right yes yes we do ok and and so we can provide that list of programs that we did have and are no longer available to law to us definitely and the programs that we need i cannot say enough appreciation what the further services have done  safe in terms of security and the highest founders are able to be there recently through the i p program as you mentioned earlier this has been a tremendous help to help palau so that the runway is  services this are just a wonderful program we have made great progress again those are related services and we we definitely need those in the area of postal service congressman i don't know all the that have gone astray in the other two fs states but republic apolo is very happy and we're very gratified very grateful for the present situation with the united states in that arrangement of postal service and this is something that they we think it's very important for us to maintain the security of the maid the services the incoming and outgoing and those would be critical my term reserve madam chair but i just want to note for the record that talking about the federal been stated in your in your testimony direct u s grant assistance under the compact ins in two thousand and nine that's correct yes so i have a three pronged question here for you how does pullout determine its needs for future foreign economic assistance how does palau define the notion of its economic self sufficien and the third part of that and how does palau bridge the gap between the money from the trust fund and current directory assistance  reliance the five proposed principles can be achieved we believe through the implementation of the three prong extension of our system that includes the enhancement of the trust fund them the compact trust fund that has not earned as much as originally envisioned s and is in danger of not being able to produce the and the world revenue to be able to produce and sustain that i'm the world's finest we need the continuation and availability of further programs are very critical in the area of health and education we have made great progress but we must sustain we must sustain that level and the livery of the services as i mentioned earlier our economy is is is very very fragile and unique challenge us you remember the time when we had sars out of necessity we simply close our borders for health and security of the citizens of palau and those who live in the come through there but that is an critical area us such as a case we believe that if we have an educated population it will lead to this development and strength of the private sector that we that we so very lean need s yes we we have examined the shortfall between what we would receive from the trust fund and the other wise up to a three million dollars shortfall we when we approach this with two prong one we're working very hard on simply reducing the public sector we believe that critical services must be provided t and we only fill those which are really critical that's i mention a real thing we do if there are nurses and teachers obviously they're on top of the list we won't touch them but in other areas we do have a cutback and the other thank you that answers my question thank you very much my my colleagues for their questions and missed the who who are tape for his testimony and his answers and i would invite mr bellamy banga to bring some close remark pass in visiting palau the most beautiful islands that i've seen also fishing and everything i wanted the island people i think we find that sense of commonality and i want to know for the record also ending i think sometime this year and i just want to let you know that i have nothing but total admiration for his leadership and for the services that he has given not only to the people of palau but to our and i commend you and the people there yes we continue to have problems but who doesn't as i had indicated earlier i think sometimes those of us here tend to nitpick nit picking is that the way to say i'm still learning english nit picking on the financial management problems of palau when i say we can't even account for the money that we're spending in iraq in the billions and so how can we be pointing fingers and doing this kind of thing can't even account for the trust funds of the american indians have placed in trust years now and we still not come to an accounting of the trust funds that has been given to the congress and to the well for that matter to the federal government do to keep in touch and safe storage i guess you might put it in those dreaded we can't even do but i do want to say personally i look forward in my next residue to apollo do a little diving and fishing but more importantly i want to com american samoa has said as long as i can remember and i've lived on guam almost all my life i was very young girl but i've always remembered that we've had very close relationships with the pull out and i remember my late husband being the first woman governor to ever make a very extensive tour through all of the islands and he had a very close relationship and he didn't my or their skills and and i think over the years this has developed into a family affair and i do want to go on record to say that you know guam has experience now of a very very large military build up and i hope that our brothers and sisters in m participate in some way and if you could i would like to tell you if you could give this message to the president the president has always been a very good friend of mine and i extend my best wishes but i up and again i want to ask the u s department of interior to continue with your negotiations and understand some of the tribulations and trials that the islands have to go through when you're negotiating it's not easy we're so far off and we do have unique situations and unique challenges so i hope that is taken into account when you continue with negotiations and i thank you very much for your testimony please give my best wishes to the people pull out thank you thank you thank you mr d'aleo and i want to also thank our witnesses i want to thank the federal agency witnesses for their testimony this morning and for the ongoing effort to work with the republic of palau and all of the freely associated states realize that the compact agreements we have with the pacific these pacific nations are unique and found nowhere else between a former administering authority and a territory the united states has been active in the pacific for decades we are aware that other countries and that have now and gave specific leaders i don't believe that such countries intentions or their offers of assistance come anywhere close to the aid and support from the u s over the past fifty years but their outreach is new and should cause our government pause to rethink our continued engagement in the pacific and to ensure that we continue to to be there and be of support friendship between countries is significantly valuable and it should never be taken for granted i want to also thank president rehman silane and his chief of staff mr couper today for informing us of the measurable progress which has been made over the course of the past fourteen years because of the compact between our countries also want to recognize and thank embassador kioto as well for his work with us and behalf of the people of palau i commend her people for their economic progress their continued focus on improving government and their commitment to education and health and the environment there is an opportunity in the remaining year of the u s pullout compact to ensure that the success  we all take credit for does not under our bill we look to the deliberative work of the department of state and interior along with apollo and leadership to carefully consider how our countries will move forward in two thousand and ten and that