by Kambes
Are there any answers to Palau’s economic crisis?
President Johnson Toribiong in his communication with Speaker Noah Idechong on January 26 spells out the problem clearly, “I point out the obvious when I state that the economy that my administration and the Eighth Olbiil Era Kelulau have inherited is suffering mightily. Tourism is down by over ten percent. From all anecdotal accounts, sales are down at businesses throughout Palau. Businesses have closed and it is likely that more will be forced to do so in the future. Apartments and commercial buildings sit vacant with no prospects of occupancy in the near term. Jobs have been lost with little hope that new ones will be created to replace them.”
But with our economy sputtering in all sectors, what to do? President Toribiong while emphasizing the need to take immediate action to grow the private sector economy, seek as a solution the need to overhaul the FIB regulations with an eye toward attracting more foreign investors. But even if that is what is needed, its impact on the national coffers will be felt years away, and won’t even assuage the present dire economic condition the nation is facing.
Our president falls short of explaining what action is needed to mitigate our financial troubles in the immediate term. And hope for any leadership coming out of the newly installed 8th OEK evaporated when in their first act the HOD went to work ensuring their $50,000 salary remain. And the Senate wasted no time proposing to double the salary of the President to $100,000, increase by 55 percent VP’s salary to $70,000, and Ministers to earn $45,000, an increase of 50 percent.
Clearly, demonstrating that our leaders still haven’t not grasp the seriousness and understanding of harsh economic realities that is upon us.
So what can we do in the short term? Do we have a strategy? We know very well that we are not the only ones who have experienced the uncertainty of a declining economy. And we know throughout history that economies that survived, instituted tough austerity measures to contain runaway cost that is critical to economic stability, and prevent the ripple effect throughout the economy, hurting everyone in its wake.
However, as a young country managing our own economy with fewer resources, we have the advantage of learning from various measures other countries have employed to successfully ease the grim financial impact of a bad economy.
Perhaps, an example that we could learn from is Singapore’s Adjustable Wage System. The wage system in Singapore is fairly flexible, as it allows for wage reductions in difficult times, as recently as 1998, at the height of Asian financial crisis. The relatively short duration and milder effect on its economy was credited to the active management by the government. Singapore leaders decided to go forward with direct cost-cutting measures such as wage – cutting 10 percent across the board for all public and private sector employees’ government and operating cost reductions to cushion the impact of the crisis.
Perhaps, a small island nation with handful of people, fewer natural resources, non-existent export market could consider adopting such a guideline where the public and private sector could create a body similar to the National Wage Council in Singapore where comprehensive pay structure allows for more flexible wage cuts in bad times. Such a system could very well mean our economic survival in tough economic times.
If Singapore could reduce wages across the board by 10 percent then perhaps we could emulate such a formula to cut government cost by starting with wages of the high government officials. The last OEK with 25 members had a total yearly payroll of $1.25 million at $50,000 per annum. With Reapportionment Commission increasing the number to 29 members means an additional $200,000.
To cut cost and to show their solidarity with the people in this economic tough time, they could take the total payroll cost of the last OEK at $1.25 million and divide it among the 29 members saving the reported $200,000 additional salary, which our national treasury does not have. That would bring our OEK member salary to $43,103 or a decrease of 14 percent. Though the salary could still be adjusted lower it’s a decrease nonetheless.
Let’s take the 14 percent decrease in salary and apply the same formula for our Supreme Court Justices. Chief Justice Arthur Ngiraklsong at $90,000 would come down 77,000 and Associate Justices will go down from $78,000 to 67,000. Land Court Senior Judge would earn $56,000 down from $65,000.
Bureau Directors and Division Chiefs and those earning over $20,000 in the public sector could be adjusted down across the board at 14 percent. This will only be temporary measure but might be the difference of the economic survival of our island nation.
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The above article was published in Tia Belau on February 1 issue.
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