Pacific Islanders to Vote Tuesday on Self-Government : Palau--Big Dreams Hide Big Problems

There is a scale model here of what some people hope will become the capital city of independent Palau.

It is in an impressive glass case, with buttons that light up to identify the National Government Building, the Civic Center, the industrial area, the amusement center, the sewage treatment plant and the residence of the paramount high chief.

None of these exist. Except for the two-story “state building,” where the model has been set up, Malakal has only three tiny stores, two churches, 50 houses, a 10-room hotel that is still under construction but already sinking into a mangrove swamp, and two miles of paved, two-lane highway.

Almost no one uses that road. There are only three vehicles on the island. But the highway was built anyway, two years ago, at a cost of $5.5 million. It begins in the middle of nowhere and goes nowhere.

Citizens Optimistic Anyway

Still, the people of Palau--which consists of roughly 200 islands in the western Carolines, about 600 miles east of the Philippines--look with confidence to the future, as represented by their scale model.

For 40 years, Palau has been part of the U.S. Trust Territory of the Pacific Islands, and on Tuesday, it is to decide in a referendum whether to become self-governing.

The islanders seem to think that financing the future will be no problem. Asked about it recently, a resident of the town of Malakal who was sitting outside the state building took a moment from his marijuana and his science fiction novel and explained his optimism:

“Credit, man. You Americans will pay for it--just like always.”

Indeed, millions of dollars in U.S. funds are being spent, not only on Malakal but throughout Palau, to build highways and other public works.

Already a Debtor

The Palauan government is deep in debt. Every year, local officials add to what ranks, in per-capita terms, among the largest budget deficits in the world.

Palau is broke. It has spent tens of millions of dollars it will not have for decades, even if the people choose self-government and get the U.S. aid they hope for. Palau has defaulted on international loans, and it is on the point of laying off 35% of its government employees--a fifth of the work force--because it cannot afford to pay them.

Aside from tourism, the only real industry that has developed in the decades of American tutelage is the production of wooden “story boards” that depict ancient legends. These are hand-carved by inmates of the national prison.

Palau’s other significant export is marijuana. Although it is illegal here, the local attorney general’s office conceded that at least 300 pounds of marijuana leave here every week.

End of an Era

Palau is the last chapter in America’s trusteeship over 2,000 islands scattered across 3 million square miles of the Pacific--including the Carolines, the Marshalls and the Marianas--all inherited after World War II.

All but Palau have resolved their future. Guam, in the Marianas, has become a permanent and progressive U.S. territory. Other islands in the Marianas group have become a commonwealth; the Marshalls, a republic; the eastern Carolines, the Federated States of Micronesia--all of them in “free association” with the United States. This means that they control their own affairs except in matters of defense, which continues to be Washington’s responsibility.

Officials in Washington have been hoping desperately that, after years of negotiations, Palau and its 13,000 inhabitants will join the other islands in association with the United States. But like so many other things in Palau, the process has not been smooth.

Limited Nuclear Controls

Last year, U.S. and Palauan officials largely resolved what had been a major obstacle to the approval of the independence pact for the islands. The draft constitution provided for a nuclear-free zone that probably would have ruled out the presence of any American military bases, so the two sides agreed to prohibit the storage, testing and dumping of nuclear weapons and waste on Palau but permit nuclear-powered ships to call here.

Now, the nuclear-free zone is seen as an issue mostly by about half a dozen international groups that turn up from time to time in Koror, Palau’s principal city.

“Few people here are really concerned about that anymore--it’s just the outsiders,” Palau’s pro-American president, Lazarus Salii. said the other day in an interview.

“Three thousand Palauans live on Guam, where the Americans have a lot of silos and warheads, and they don’t care. Palau is part of this planet, and this stuff is all around us.”

Not Quite of This World

Many visitors would argue that although Palau is situated on this planet, it has very little in common with the rest of it.

Despite the trappings of government created in 1979, with the permission and supervision of the U.S. Department of the Interior and the State Department, which have overseen the Trust Territories since 1946, day-to-day decisions are made by traditional clan chiefs. There are 16 states, each run by an unelected governor who serves by divine right as the direct descendant of an ancient clan chief.

The states are equally divided between two kingdoms that have been at odds for more than 1,000 years, and therein lies Palau’s most difficult problem.

One kingdom, which includes Koror, the present capital, is ruled by the Ibedul; the other, which includes Malakal, which some say will be the future capital, is ruled by the Reklai. Since about the 8th Century, the Ibedul and the Reklai have fought over everything.

“Everything in Palau’s society is based on competition,” President Salii said.

“Society, culture--everything is divided into east against west, north against south.”

Salii is neither Ibedul nor Reklai but chief of a minor clan. He was elected in 1985.

According to Palau’s attorney general, Russell Weller, the competition has caused irrational development and a financial crisis that is “easily the worst in the Pacific region.”

In the last seven years--since the Palauans, for the most part, took over their own affairs--they have gone into debt by at least $50 million, despite a grant of $10 million a year from the United States. The grant accounts for more than 60% of Palau’s revenues; the rest comes from tourist and business taxes.

Clearly, the future depends on the outcome of Tuesday’s referendum. In four previous votes on the question of self-government, a majority has voted for approval, but 75% of the ballots is required and the closest proponents have come is 72%.

No one knows what will happen if this referendum again fails to decide the issue--as is widely expected.

“They’ll probably just hold another one,” said Samuel McPhetres, director of archives of the Trust Territory. “What everybody keeps forgetting is that the system somehow keeps on working. The situation is bad--it’s grim, no doubt, but the fact is, life just goes on here.”

Times staff writer Mark Fineman was recently on assignment in Palau.