The government is the major employer of the work force, relying heavily on financial assistance from the United States.

Long-term prospects for the tourist sector have been greatly bolstered by the expansion of air travel in the Pacific and the rising prosperity of leading East Asian countries.

Tourism earned $67 million in foreign exchange for Palau in 1996, (which is 1,000 dollars per person) accounting for roughly half of GDP.

The service sector dominates the Palauan economy, contributing more than 80% of GDP and employing three-quarters of the work force.

Gazetteer – Patents Archived 2018-09-26 at the Wayback Machine The main economic challenge confronting Palau is to ensure the long-term viability of its economy by reducing its reliance on foreign assistance.

Palau has created a trust fund to be drawn upon after the cessation of Compact grants, the value of which had grown to $140 million by the beginning of 2009.

The island took a huge hit during the COVID-19 pandemic with global travel restrictions putting tourism to a halt.

Dominant industries include tourism, craft items (from shell, wood, pearls), construction, and garment making.

Note: the Compact of Free Association with the U.S., entered into after the end of the UN trusteeship on 1 October 1994, provides Palau with up to $700 million in U.S. aid over 15 years in return for furnishing military facilities.