Palau
Palau exhibits conservation-as-strategy: 20%+ protected areas enable premium ecotourism driving 9.5% projected growth in FY2025, subsidized by US Compact of Free Association.
Palau is conservation-as-economic-strategy taken to its logical extreme: a nation of 17,700 people that designated over 20% of its marine and terrestrial areas as protected zones, then monetized that preservation through premium ecotourism. The economy grew 6.6% in FY2024 and is projected to accelerate to 9.5% in FY2025, driven by 50,899 international visitors in the first three quarters of 2025—up from 41,525 the previous year. Services contribute over 80% of GDP and employ three-quarters of the workforce.
The Compact of Free Association with the United States, renewed May 2023 and approved by Congress March 2024, provides the metabolic subsidy that enables this specialization. US grants created a 4.1% budget surplus by fiscal year end. Palauans can live and work in the United States, creating the safety valve that prevents population pressure from degrading the islands' carrying capacity. The arrangement mirrors biological mutualism: the US gains Pacific strategic positioning; Palau gains fiscal stability and market access.
Tourism source diversification reduced single-market risk. China led with 16,757 arrivals in 2025 (up 22%), followed by Taiwan (10,316, up 12%), Japan (4,961, up 18%), and the US/Canada (8,478, up 8%). Australian visitors nearly doubled to 1,998 after new direct flights launched November 2024. Palau's challenge is metabolic balance: growth must not exceed environmental carrying capacity, or the pristine reefs and marine ecosystems that attract visitors will degrade. The country explicitly prioritizes 'community-based tourism' and 'protecting marine ecosystems'—using ecological principles to govern economic development.