Marine Conservation as Economic Policy in Palau

A revamped tourism and commercial fishing industry are Palau’s ambitions for the Marine Sanctuary, but the challenges the country faces in realizing them are many…

SEI Visiting Scholar Justin Alger has travelled to Palau, an island country in the western Pacific Ocean, as part of his research. He looks at how the Palau National Marine Sanctuary was not just a marine conservation initiative but also an economic decision.

Palauan President Tommy Remengesau Jr. announced in 2014 that Palau would close its entire exclusive economic zone (EEZ) to foreign fishing and establish the 500,000km2 Palau National Marine Sanctuary (PNMS). This announcement was not just about marine conservation, but was also a plan intended to strengthen Palau’s economy in the long-run. Palau is heavily dependent on tourism, which contributed 54% of its GDP in 2015. A small amount of commercial fishing also occurs in Palau, but the majority of the profits from it do not stay in the country. These two features of Palau’s economy were integral to Palau’s decision to establish the PNMS.

Palau is a world-renowned dive destination, and for good reason. Its waters are home to an abundance of sharks, mantas, and large coral walls and gardens teeming with fish. Shark finning has long been an issue in Palau’s waters, at first often legally and—following anti-finning regulations—illegally as well. The value of a single shark over the course of its life for the tourism industry in Palau is $1.9 million, as opposed to the roughly $50 that a single shark fin will yield on markets in Asia. Protecting sharks makes good business sense for Palau. The PNMS doesn’t actually cover Palau’s dive sites, which fall within state waters, but the hope is that an abundance of sharks in the open ocean will spill over into the main dive sites. Palau is also counting on this spillover effect to include pelagic fish like tuna in an effort to grow its domestic commercial fishing and sportfishing industries. The PNMS is an effort to protect these species in part so that Palau can earn the most potential value from them.

The PNMS also serves an important branding purpose. Palau has adopted the slogan “Pristine Paradise Palau” in an effort to attract high-value visitors. These visitors are ideally ecotourists that will come to Palau to stay at locally-owned high-end hotels and spend their days diving. Palau has struggled to attract these ideal visitors in recent years despite a rapid influx of tourists. Between 2013 and 2015 the number of visitors to Palau increased by 60%, with 160,000 tourists in 2015 (all in a country with a population of roughly 20,000). The majority of this increase stems from package tours out of mainland China, where the 8,800 visitors in 2013 swelled to 87,000 in 2015. Package tours are bad for tourism in Palau, because the vast majority of the revenue stays offshore. The PNMS and “Pristine Paradise Palau” branding—amongst other policy and regulatory efforts to limit package tours and foreign ownership—are in part an effort to target the high-value visitors that Palau wants.

Commercial fishing in Palau has always been a predominantly foreign enterprise. Palauans are avid fishers, but primarily fish on day trips close to shore, where reef fish are abundant and fuel costs are lower. This preference has left Palau’s pelagic waters open to foreign fishing. The majority of boats never land in Palau, instead purchasing licenses to fish in Palau’s EEZ, and offloading their catch elsewhere. The two tuna companies based in Palau are also comprised of foreign boats, but they generally land their catch of high-grade tuna in Palau, and then rapidly export it on chartered flights mainly to Japan. Aside from modest government revenue from licensing and taxes, the value of these fish is largely realized outside of Palau. Palau’s decision to close its EEZ to foreign fishing was not just a conservation decision, but a recognition that Palau was not the primary benefactor of its marine resources. The PNMS legislation also designated 20% of Palau’s EEZ strictly for the development of a domestic commercial fishing industry, and includes a ban on fish exports in a hope that there is a sufficient domestic market. How Palau hopes to make that transition is still largely uncertain, but the commitment to do so is in place.

A revamped tourism and commercial fishing industry are Palau’s ambitions for the PNMS, but the challenges the country faces in realizing them are many. There is still a high degree of uncertainty over what Palau’s pending national tourism strategy will look like, how viable a transition to domestic commercial fishing and an export ban is, and how Palau can hope to enforce all of these regulations with its limited capacity. The PNMS regulations do not come into effect until 2020, so Palau still has some time to address these challenges. It has also begun receiving commitments of support from a number of governments and NGOs to assist with various elements of the PNMS. These partnerships will be an important part of Palau’s strategy to implement this legislation. These challenges notwithstanding, the PNMS is a marine conservation initiative that explicitly intends to fundamentally alter a national economy. This makes it in the very least unique in its ambition.

Photo: Justin Alger