Country Business Report - Palau

1. South Pacific Business
Environment
Country Report – Palau

2. 2014 MBA 434: Tuesday Session
Unaisi Vuniwaqa
S02000455
Seini Fotu
S02006013
Hanisivai Visanti
S11112274

3. Learning Outcomes
• To identify the Political, Economic, Social,
Technological, Legal and Environmental factors
that influence the business environment in
Palau and Tonga.
• Compare and contrast the business
environments of Palau & Tonga.

4. Outline
Palau
 Introduction
 Business Environment (PESTLE Analysis)
Tonga
 Introduction
 Business Environment (PESTLE Analysis)
Palau & Tonga
 SWOT Analysis
 Comparison
Conclusion
Recommendation

7. Population: 21,000
Capital:
Ngerulmud, Melekeok State
Area: 489 square km
Currency: U.S. dollar (USD)
Upper middle Income
Language
Official : English, Palauan
Recognised: Japanese, Angaur,
Sonsorolese, Tobian
Demonym: Palauan
Drives on the: right
Ports of Entry via Air:
•Seoul, South Korea / Guam
•Honolulu / Guam
•Honolulu
Fishing, mining phosphates &
bauxite
Exports – shellfish, tuna, copra
& handicraft
Imports – foodstuff, fuel,
machinery, equipment
Small scale – fish processing,
bottling, boat building

8. National Plan (Palau)
Palau 2020: National Plan for Development
(25 years)
Medium term Development Strategy
(5 years)
Macro- Plans
Economic Development
Management Action
Plan
Sector Plans
Public Sector
Investment
National Master
Plan Education
National Health
Plan
Biodiversity
Strategic Action

9. Palau National Master Development Plan
To substantially enhance the quality of life of Palauan
VISION:
and future generations of Palauans
The key development goals necessary to achieve this vision are
to;
• Increase real economic growth per capita on a sustained
basis
• Share the benefits of economic growth on an equitable basis;
and
• Enrich and enhance confidence in the Palauan culture, raise
national consciousness, and protect the natural environment
of Palau

10. PESTLE Analysis - Palau
• Political
• Economic
• Social
• Technological
• Legal
• Environmental

11. PESTLE Analysis: Political
Parliament
Multi-Party Democratic Republic
Executive Branch:
•President – Head of State
Legislative Branch:
•Upper House - Senate
•Lower House House of Delegate
4 year tenure (2012)
Council of Chiefs (16)
Constitution
Judiciary
Legal system: Civil Law
•Supreme Court
•Court of Common Pleas
•Land Court
Judges appointed by President
Lifetime tenure
Membership
Asian Development Bank
International Olympic Committee
Pacific Islands Forum Secretariat
Secretariat of the Pacific Community
United Nations
World Bank
World Health Organisation
Relations
Independence USA – 1 Oct, 1994
Strong ties to USA - Duty-free access
*Japan *Guam * South Korea
* Taiwan * Nauru * Pacific Island Nations
Ratings
Corruption Perception Index – Unranked
2014 Press Freedom Index - Unranked
Voting age 18 years old

12. PESTLE Analysis: Economic
Growth Opportunities
Light Manufacturing:
Ngardmau Free Trade Zone Facility
Tourism:
Hotel & Resort Development
Timeshare Marketing / Sales
Film TV & Commercial Productions
Acquaculture – Seafood & Acquarium
Stability
Government major employer
Purchasing Power Parity (83 / 215 in 2013)
Inflation rate - 2013: 3.5% and 2012: 3.8%
Unemployment - 4.2% (162 / 199)
National External Debt:
2011 USD49,515,427 (10.5% GDP)
Government Initiatives
Foreign Investment Reform
Financial Reform
Tax Incentives:
Agri-Business Development & Tax Reform
Regional Integration
Ngardmau Free Trade Zone
Banks
•Bank of Guam
•Bank of Hawaii
•Bank of Palau
•Bankpacific
•Guam Savings Bank
•Pacific Savings Bank
•Melekeok Government Bank
Palau Construction Bank
•World Bank Group – Pacific
Islands
•National Development Bank of
Palau
•Asia Pacific Commercial Bank
•Rizal Commercial Banking Corp.

13. USD 250
USD 200
USD 150
USD 100
USD 50
USD 0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
USD 191 USD 206 USD 209 USD 212 USD 213
USD 198 USD 198
USD 217
USD 232
USD 247
Millions
Palau (GDP) per annum
Year
Data Source: World Bank Indicators

14. 14
12
10
6
4
2
0
8
16
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
12.56 12.96 13.16 13.76
13.38
12.2 12.71 13.37
14.29 14.54
Thousands (USD)
Palau:
GNI per capita, PPP (current international $)
Year
Data Source: World Bank Indicators

15. PESTLE Analysis: Social
Background
Good quality of life
Subsistence agriculture
Matrilineal System
70% Christian
Rich cultural heritage & ethnic cuisine
Ratings
Population rate:
0.79% (2013) from 0.72% (2012)
Life expectancy 72 years old (2013)
High Human Development - HDI 0.775 (60 / 187)
•Literacy
•Poverty
•Life expectancy
Low crime rate:
Felony crimes: 473 (2012) 78 (2013)
Misdemeanor crimes: 762 (2012) 1230 (2013)
Social Life
“No child left behind Act 2001”
92% literacy rate (2013)
100% immunisation:
Polio, measles, Hepatitis B
No Malaria and low TB
High standard of health care
Increase violence – drug & alcohol
Being Palauan means:
• Respect & Humility
• Sharing and cooperation
• Communal activities & decisions
• Work and knowledge & practice culture
• Responsibility and self-reliance
• Spiritual values

16. PESTLE Analysis: Technological
Technology
“Sophisticated”
Unmanned aerial vehicles –
“DRONES”: Exclusive Economic Zone
Submarine cabling system to enable ICT:
•Telecommunications
•Broadband wireless internet
Acquaculture production technology -
giant clams, oysters, scallops & mussels
Looking to solar & hydro power
Infrastructure
“Well established”
24 hr access to electricity and water –
urban & some rural areas
Access to safe drinking water
High level of sanitation & hygiene
80% of urban area paved roads
1 international airport (paved)
2 domestic airports (unpaved)
1 international sea port

17. PESTLE Analysis: Legal
Background
Citizenship by birth only
No dual citizenship
Banks close Saturday & Sunday
CBD closure Sundays
Taxes
No income tax
Corporate tax 4%
General sales tax 7.5%
Social security contribution:
Employee 6% wages
Employer 6% wages
Health insurance contribution:
Employee 2.5% wages
Employer 2.5% wages
VAT: 2015 – 2016 Tax Reform
Bill
Expatriate limitation
No land ownership
Building ownership – 99 year lease
Locally owned:
Wholesale, retail, land & water,
transportation, diving, water sports,
restaurants, resorts & bakeries
Labour force
•No trade unions
•Minimum wage USD3.00 per/hr
•Mismatch jobs to labour force
•No legally prescribed work hours

18. PESTLE Analysis: Environment
Background
“Leaders”
National Marine Sanctuary.
Ban commercial fishing in
Exclusive Economic Zone (EEZ).
Seven Wonders of the Underwater World
Natural Resources
Abundant tuna fishery
Rich biodiversity
Pristine marine ecosystems & environment
Rock Islands (unique & beautiful limestone islands)

19. How Palau ranks on Doing Business topics
Data Source: World Bank “Doing Business 2014 -
Palau
Data Source: World Bank “Doing Business 2015 -
Palau

20. Ease of Doing Business in Palau 2014 - 2015
Palau 2014 (100) Palau 2015 (113)
Starting a business
0
20
40
60
80
100
120
140
160
180
200
Dealing with Constructive
Permits
Getting Electricity
Registering Property
Getting Credit
Protecting Investors
Resolving Insolvency
Enforcing Contracts
Trading Across Borders
Paying Taxes
Data Source: World Bank “Doing Business 2014 - 2015

22. Population: 105,323 (2013)
Capital: Nuku’alofa
Consists 171 islands
3 main groups:
Tongatapu, Ha’apai & Vava’u
Area: 748 square km
Currency: Tongan Pa’anga
(TOP)
Upper middle Income
Official Language: Tongan,
English
Demonym: Tongan
Drives on the: left
Ports of Entry via Air:
•Auckland
•Sydney
•Nadi
•Suva

23. Country Plans (Tonga)
 Guide further formulation plans
 Inform sectors – generate
consultation
 Government foundation – economic
relations & partners
 Indicators - monitor & measure
progress

24. PESTLE Analysis - Tonga
• Political
• Economic
• Social
• Technological
• Legal
• Environmental

25. PESTLE Analysis: Political
Parliament
Constitutional Monarchy
King – Head of State
Prime Minister appt King
Elections November – 2010 & 2014
Judiciary
Legal system: Civil Law
•Supreme Court
•Magistrates Court
•Land Court
Judges appointed by King
Membership
Asian Development Bank
International Olympic Committee
Pacific Islands Forum Secretariat
Secretariat of the Pacific Community
United Nations
World Bank
World Health Organisation
Relations
* People’s Republic of China * Fiji * Russia *Pakistan
* United Kingdom * United States
* Pacific Island Nations
Ratings
Corruption Perception Index – Unranked
2014 Press Freedom Index – Ranked 63 out of 180
Voting age 21 years old

26. PESTLE Analysis: Economic
Growth Opportunities
Tourism
Untapped potential
Rebrand Tonga
Agriculture
Access to new markets
Heat treatment & fumigation
Fisheries – Deep Water Strategy
Timber – Explore Coconut Palm
Sectors & Industries
Tourism, Construction, Fishing & Agriculture
Export Destinations
New Zealand, United States, Hong Kong
Product – squash, fish, vanilla beans, root
crops
Export Origins
New Zealand, Singapore, United States
Products – foodstuff, fuel, machinery, fuel
Stability
National External Debt:
2012 USD197,382,000 (77.2% GDP)
Purchasing Power Parity (147 / 215 in 2013)
Inflation rate - 2013: 1.2% and 2012: 0.7%
Government Initiatives
Intra-Government Co-ordination
Business Licensing Reform
Tax Incentives: Zero (Duty & Consumption)
- Agriculture, Export, & Fishing Industries
Reduced – Tourism & Manufacturing

27. 500.00
400.00
300.00
200.00
100.00
0.00
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
240.79
264.81 296.00 301.06 346.85
318.52
369.21
423.04
471.58
466.26
Millions
(USD)
Tonga - GDP per annum
Ye a r
Data Source: World Bank Indicators

28. 5
4
2
1
0
3
6
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
4.35
4.51 4.62
4.55
4.64 4.79 4.94
5.21 5.37
5.45
Thousands - USD
Tonga - GNI per capita
Year
Data Source: World Bank Indicators

29. PESTLE Analysis: Social
Background
Good quality of life
90% Christian
Rich cultural heritage
Conservative
Ratings
Population rate:
0.4% (2012 & 2013)
Life expectancy 72 years old (2013)
High Human Development - HDI 0.705 (100 / 187)
•Literacy
•Poverty
•Life expectancy
Low crime rate:
22.4% (2007) / 29% (2006)
Social Life
Free education – primary & secondary
Scholarships – higher education
99% literacy rate (2011)
Unemployment - 13% (67 / 199)
99% immunisation (2013):
diphtheria, pertussis (or whooping cough),
and tetanus (DPT)
Universal access health care
Being Tongan means:
• Respect & Humility
• Sharing and cooperation
• Communal activities & decisions
• Work and knowledge & practice culture
• Spiritual values

30. PESTLE Analysis: Technological
Technology
“Developing Sustainable Pathways”
Looking to solar & hydro power:
2010–2020 Tonga Energy Road Map (TERM)
IRENA - International Renewable Energy Agency

31. PESTLE Analysis: Legal
Background
Citizenship: birth & naturalisation (5yrs)
CBD closure Sundays
Taxes
Progressive income tax:
Resident: 15% - TOP100k / 30% - TOP100k +
Non Resident: 37.5% - TOP50k / 42.5% - TOP50k +
Superannuation contribution:
Employee 5% wages
Employer 5% wages
VAT 15%
Tax on Interest 10%
Expatriate limitation
No land ownership
Building ownership – 99 year lease
Labour force
•Right to Trade Unions
•No Minimum wage
•Mismatch jobs to labour force
•65% agriculture

32. PESTLE Analysis: Environment
Infrastructure
“Well established”
24 hr access to electricity and water – urban &
some rural areas
Access to safe drinking water
High level of sanitation & hygiene
27% of urban area paved roads
1 international airport (paved)
5 domestic airports (unpaved)
1 international sea port
Medium threat of natural disasters

33. How Tonga ranks on Doing Business topics
Data Source: World Bank “Doing Business 2014 -
Tonga
Data Source: World Bank “Doing Business 2015 -
Tonga

34. Ease of Doing Business in Tonga 2014 - 2015
Tonga 2014 (57) Tonga 2015 (69)
Starting a business
0
20
40
60
80
100
120
140
160
180
Dealing with Constructive
Permits
Getting Electricity
Registering Property
Getting Credit
Protecting Investors
Resolving Insolvency
Enforcing Contracts
Trading Across Borders
Paying Taxes
Data Source: World Bank “Doing Business 2014 - 2015

35. SWOT Analysis – Palau & Tonga
• Strengths
• Weaknesses
• Opportunities
• Threats

36. Strengths
Tonga
Access to;
 capital
seasonal worker scheme
Online business system
Initiatives to promote
Sustainable energy
(Tonga Energy Road Map)
Geographical accessibility
Palau
Geographical proximity to
Asian markets
Preferential & duty free
trade:
•Compact Free
Association (USA)
•PICTA & PACER
Low tax structure &
incentiives
Low & stable inflation rate
Drones to monitor EEZ
Environmental Legislature
Access regional & international forums
Ease of registering property
Common
Stable political climate
Good legal framework
Good construction regulation
Skilled labour
Local job creation
Good transportation & ICT infrastructure
Low crime rate
Access to quality education
High literacy rate
Excellent health care
Multicultural & diverse
Low CO2 emissions

37. Weaknesses
Tonga
Limited:
Employment opportunities
Access – business sectors
High dependence:
Remittances from abroad
Enforcement existing legislations
Non adherence time schedule
Palau
Geographical isolation
Irregular direct flights
Complex customs and
administrative procedures
Lengthy period & cost to;
•enforce contracts
•formally register a business
•attain electricity
No registry for credit history
Inadequate policies for
corporate governance
Multiple taxation requirements
 Manual mode payment – tax
Lack of skilled workers
Common
Donor dependence
Limited Policies to encourage:
R & Development
Green practices
High dependence:
Imported food & fuel
Economic vulnerability
Sunday business closure
Lengthy period & cost to;
resolve insolvency

38. Opportunities
Tonga
Increase
Scheduled flights & cruise ships
Re-forecast
Daily regulatory reforms
Women in business
Palau
Diversify Tourism – niche & high
end markets – USA & Asia
Expansion into new markets;
•Aquaculture
•Film, Television, and
Commercial Productions
• “light” Manufacturing
Commercial partnerships
Ngardmau Free Trade Zone
Marine Research Activities
Cultured pearl production
Common
Regional intergration
Access – new markets
Niche markets

39. Threats
Tonga
Political instability
High level -national external debt
Palau
Health Epidemic (SARS)
Over-fishing
Sand & coral dredging
Common
Urban over-population
Global economic crisis
Increase price – fuel &
imported food
Climate change – natural disasters
Growing NCDs

40. Comparative
Palau vs Tonga

41. DEVELOPMENT AID AT A
GLANCE
Source: ODA Report 2014

42. How Tonga and comparator economies rank on the ease of doing business

43. 2014 Comparative Analysis on Ease of Doing Business for Palau and Tonga
Starting a business
0
50
100
150
200
Dealing with Constructive Permits
Getting Electricity
Registering Property
Getting Credit
Protecting Investors
Resolving Insolvency
Paying Taxes
Enforcing Contracts
Trading Across Borders
Tonga 2015 Palau 2015
Data Source: World Bank “Doing Business 2015

44. Conclusion
Good investment climate;
•Political stability
•Regulation
•Tax incentives
• Finance
• Infrastructure & labour
• Strong trade agreements
Diversify & develop niche markets:
• Tourism
• Agriculture
Reforms Reforms
Regional Co-operation
• Pooling resources
• Mentoring
• Sharing of knowledge

45. Recommendations
Palau Tonga
Encourage Foreign Investment
Replace current regulatory
approach with a registration
process, and monitoring system.
Limit restrictions to competition
& joint ventures.
Modify labor permit procedures
for foreign workers.
Common
Regional Co-operation
•Pooling resources
•Mentoring
•Sharing of knowledge
M & E - current strengths to
maintain / improve standards
Capitalise on opportunities
Threats
•M & E
•Implement procedure –
address

46. Recommendations
Palau Tonga
Trading Across Borders
Reduce & streamline customs
procedures
Online customs payments &
procedures
Invest - port equipment
& infrastructure
Enforcing contracts
Maintain specialized
commercial court or division
Introduce case management
systems & e-filing
Common
Insolvency;
•streamlining insolvency
proceedings
•establishing effective
reorganization proceedings
Promoting public & private
sector partnership:
 appropriate incentives
Streamlining;
•rules
•regulations

47. Recommendations
Palau Tonga
Starting a business
•Reduce minimal capital required
•Create single online interface
facilitate / satisfy requirements
Getting electricity
•Streamlining approval processes
•Regulating the electrical
profession
•Reduce security deposits
Common

48. Recommendations
Palau Tonga
Protecting investors
•Implement policies & procedures –
corporate transparency
•Monitor, evaluate & enforce
procedures
Paying taxes
•Simplify tax compliance
•Introduce electronic filing &
payments
Common

49. References
•http://www.visit-palau.com/
•http://spto.org/your-images/image?view=image&format=raw&type=orig&id=628
•http://upload.wikimedia.org/wikipedia/commons/7/73/Badrulchau_Stone_Monoliths_3.JPG
•http://spto.org/
•http://www.thekingdomoftonga.com/
•https://pbs.twimg.com/profile_images/807993180/MYR-029f_Postcards_v32.jpg
•http://www.visit-palau.de/files/palau-children_gdeichmann_copyright.jpg
•http://upload.wikimedia.org/wikipedia/commons/8/8f/Capitol,_Melekeok,_Palau.jpg
•http://media-cache-ec0.pinimg.com/736x/db/c2/8d/dbc28d100dd897de7da7c238b881caf2.jpg
•http://upload.wikimedia.org/wikipedia/commons/8/86/Japan_Palau_Friendship_Bridge.jpg
•http://media-cdn.tripadvisor.com/media/photo-s/04/3c/00/81/palau-plantation-resort.jpg
•http://1.bp.blogspot.com/-gpvzRZgZRCQ/T4zK0YzhiGI/AAAAAAAAW4M/ny5AZzjNwVo/s1600/psct.jpg
•http://www.bing.com/images/search?q=construction+in+tonga&qs=n&form=QBIR&pq=construction+in+tonga&sc=0-0&sp=-1&sk=#a
•http://www.nzkanivapacific.co.nz/wp-content/uploads/2013/10/Tonga-Parliament-1.jpg
•http://www.tongadailynews.to/wp-content/uploads/2014/09/children.jpg
•http://cleantechnica.com/files/2012/02/tonga-nau.jpg
•http://en.wikipedia.org/wiki/Politics_of_Tonga
•http://palaugov.org/about-palau/
•http://www.suddefrance-developpement.com/en/country-profiles/palau/investing-3.html
•http://en.wikipedia.org/wiki/Foreign_relations_of_Palau
•http://freedomhouse.org/report/freedom-press-2014/press-freedom-rankings#.VE2IjOfOQvs
•http://data.worldbank.org/indicator/NY.GDP.MKTP.CD/countries
•http://hdr.undp.org/en/countries/profiles/PLW
•http://www.deloitte.com/assets/Dcom-Guam/Local%20Assets/Documents/Micronesia%20Investment%20Guide_WEB.PDF
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•http://hdr.undp.org/en/data
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•http://www.encyclopedia.com/topic/Palau.aspx
•http://www.minimum-wage.org/international/en/Palau/
•http://palaugov.org/crime-and-offenses/
•http://www.islandsbusiness.com/2013/11/technology/palau-takes-fisheries-surveillance-to-new-heights/
•http://www.everyculture.com/No-Sa/Palau.html
•International Business Publications, USA, 2013, “Palau Business Law Handbook. Volume 1, Strategic and Practical
• Information.”
•The World Bank, “Doing Business 2014. Economy Profile: Palau.”
•International Monetary Fund, “IMF Country Report No. 12/54”.
•http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/11/01/000333037_20111101004947/Rendered/PDF/646710PGD0P1260Official0Use0Only090.pdf
•http://www.tax-news.com/news/VAT_Planned_In_Palau_Tax_Reform_Bill____64628.html
•https://www.imf.org/external/np/ms/2013/032513.htm
•http://www.spc.int/prism/tonga/index.php?option=com_content&view=article&id=100&Itemid=311
•http://www.mctl.gov.to/wp-content/uploads/2014/08/FINAL-Investment-Incentive-Bulletin_6-Aug-2014_ENGLISH3.pdf
•http://www.indexmundi.com/g/r.aspx?c=tn&v=74
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•http://www.oecd.org/dac/stats/documentupload/6.%20Oceania-%20Development%20Aid%20at%20a%20Glance%202014.pdf

50. Acknowledgements
 Our Lord God Almighty
 Professor James McMaster, Professor Management Studies
 Mr Meli Cavu, ONOC Medical Commission Liaison
 Mr Jason Nolan, Chairman Palau Medical Commisson
 Our families

51. Mesulang! Malo au pito!