Palau: birthplace of two important milestones

Alfred Sasako
The northern Pacific Islands nation of Palau may be the last to join the Pacific Islands Forum family, but it has truly earned its place and standing in the regional community.

In May, Koror, its capital, became the birthplace of two important milestones in the region’s lucrative fisheries industry.

First, members of the Parties to the Nauru Agreement [PNA], took the bull by the horn so to speak, by adopting a tough conservation and management regime aimed at protecting the region’s highly priced bigeye and yellowfin tuna stocks, endangered by over-fishing. [See separate story].

The second, a loan agreement and a Memorandum of Understanding [MOU] between the Honiara-based Pacific Islands Forum Fisheries Agency [FFA] and the fisheries arm of the Japanese Government, Overseas Fisheries Co-operation Foundation [OFCF] was signed.

It was the first by a regional organisation. The “loan” provides FFA access to some USD800,000 a year in additional revenue, funds it will use to support the work it does in its 17 member states over the next 10 years.

Under the arrangement, OFCF will provide up to 10 billion yen [about US$96 million] in a form of a loan to FFA over the next 10 years. Here's how it will work:

OFCF will have the right of pledge with the ¥10 billion to be deposited in the Bank of Tokyo-Mitshubishi UFG Ltd.

The Bank of Tokyo-Mitshibishi will have custody of the funds. The Japanese Government Bonds (JBG) will be purchased through the Mitshubishi UFJ Securities Company Ltd.

Interest earned from the JGBs will be paid into the Promotion Fund.

At current exchange rates, it is estimated that the JGBs will yield a return of between US$800,000 and US$1 million a year.

Officials on both sides are hopeful that come September, FFA will have received the first interest payment on the new line of funding.It will be the first payment if the bond stocks were purchased this month.

If for some reasons this is delayed, and the bond purchase was made in June, the first payment of interest yield will be in the Promotion Fund Account by December this year.

Japanese officials were hopeful to complete all the remaining formalities so that the bond shares could be purchased this month.

Whatever way it is looked at, in journalism jargon, the loan arrangement was a scoop, a coup for the FFA’s Tanielu Su’a and his executive team.

Never before has any regional organisation been able to pull such a haul.

By successfully arranging the loan, FFA has become the first regional organisation to open a window to horizons of new funding opportunities in a new partnership with a developed, Pacific-rim nation.

In a way, the Palau milestones have the resemblance of a natural birth: doctor and midwifery nurses working together in ensuring a perfect birth and a healthy future for mother and child.

In the case of the “double births” at the Palau Cultural Centre, Koror, it was the Forum Fisheries Committee [FFC] and FFA that have spent the last 12 months poring over hundreds of pages of documents on the loan proposal.

Their joint search for a risk-free arrangement involved consulting the former founding father of the Solomon Islands Central Bank, Tony Hughes.

Hughes’ assessment was just what the doctor ordered.

“There is no significant credit or investment risk attached to the capital sum which forms the source of funds, either for OFCF or FFA.

"If OFCF or the Japanese government-or FFA-for any reason were to cancel the arrangement, OFCF/JG have full control of the capital sum held in BoT-Mitsubishi UFJ. FFA has only to cancel or find other funding for its PF activities, not for the capital sum, which is covered by the pledged JGBs”.

Initially, Australia and New Zealand expressed strong reservations about the “loan”.

Paramount in their minds, perhaps, is whether Tokyo’s offer has something to do with Japan’s controversial whaling research programme, vehemently opposed by Canberra and Wellington.

Several meetings later, Australia and New Zealand appeared to have relented.

The 67th meeting of the FFC recommended the proposal, which the two-day meeting of the 4th Forum Fisheries Meeting, held in Koror on May 19-20, subsequently endorsed.

And so on the morning of May 20, FFA Director-General, Tanielu Su’a and the President of OFCF Japan, Michio Shimada, signed the deal in a brief ceremony held in the east room of the Palau Cultural Centre, a building constructed on a grant from Taiwan.

At the signing, Su’a, thanked officials and ministers for approving the scheme, saying it marked the beginning of a historic relationship between a regional organisation and Japan.

“I want to also thank the Overseas Fisheries Co-operation Foundation (OFCF) of Japan for this generous assistance,” Su’a said.

OFCF also issued a brief statement.

It quoted its President, Shimada, as saying he was pleased the waiting was over and the way had been cleared for the Promotion Fund to operate.

“Through the Promotion Fund, OFCF Japan will extend a loan to FFA whereby 100 million yen will be generated each year for the next 10 years. 

“This fund will be used for the development of fisheries in the FFA Pacific Islands members,” he said.

“I hope the Promotion Fund will contribute to the sustainable use of fisheries resources and that the fishing industry in each FFA Member will develop stably,” he said.

“While it has taken a long time, I am pleased that we can sign the agreement in this beautiful country of Palau in the presence of the distinguished ministers of FFA Members, in particular in the presence of Minister Fritz Koshiba whom I deeply respect,” Shimada said.

Koshiba is Palau’s Minister for Resources and Development.

In his remarks at the official opening of the 4th Forum Fisheries Ministerial Meeting, Palau’s Vice-President, Elias Camsek Chin said the Promotion Fund would help fund relevant regional projects such as Vessels Monitoring System [VMS] training, legislative drafting, capacity building and in various aspects of fisheries conservation and management programmes.

While the concept to allow a regional organisation to access such a facility may be new, the idea was contained in the Leaders’ Declaration, known as the Okinawa Partnership, issued after the Japan-Pacific Islands Summit in Okinawa in May 2006.

At that meeting, Japan’s then Prime Minister Koizumi announced the availability of US$450 million for development assistance to the Pacific Islands Countries.

The package was designed to foster “a more robust and prosperous Pacific region”.

He complimented the Pacific Plan as “a manifestation of a process owned by PIF members, and expressed his strong expectation that PIF members will take appropriate steps to implement regional initiatives at the national level”.

Whatever critics or supporters say, the loan arrangement with OFCF—skilfully negotiated by FFA—appears to have opened a new frontier on raising offshore loans.