Palau's China dilemma

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MARCO WERMAN: East of the Philippines is the island nation of Palau. Palau is one of the 23 countries that recognize Taiwan rather than the People's Republic of China. That's a sore point with China. Even though relations between Taiwan and China are relatively good right now, China still views Taiwan as a renegade province that must reunite with the Mainland. Taiwan sees itself as an independent entity, one that maintains embassies in countries like Palau.

The World's Mary Kay Magistad recently visited Palau and sent this report.

MARY KAY MAGISTAD: Palau punches above its weight when it comes to pulling in international aid for its 20,000 natives. There's the 800 million dollars it's received in U.S. aid over the past 15 years, plus a U.S. agreement to come to Palau's defense if it's ever attacked. And Palau also gets generous aid from Taiwan. When you drive over the crest of a hill on Palau's biggest island, you see a surreal sight � Palau's capitol building complex, a 50 million dollar replica of the capitol in Washington. It was funded in large part by loans and grants from Taiwan.

JOHNSON TORIBIONG: The dome, supposed to symbolize democracy.

MAGISTAD: Johnson Toribiong is Palau's President, and a former ambassador to Taiwan. He says the elaborate capitol building wasn't his idea, but democracy is a value Palau shares with Taiwan. That's one reason the Palau government decided a decade ago to shift diplomatic recognition from the People's Republic of China, to Taiwan. That, and the money.

TORIBIONG: A lot of money. I'm not privileged to disclose the amount, but a lot of money.

MAGISTAD: Enough to build roads, bridges, a museum, solar power facilities, an incinerator, and help with improving agricultural production. Taiwan has long rewarded allies with such generous aid, as a sign to the world that it's a sovereign entity, separate from Communist-party run China. The relationship between the two has evolved over time. Taiwan, or the Republic of China, started out in 1949 as the government in exile of [PH] Chen Ky-Shuk, still claiming to be the rightful government of all of China. In the 1950's, mainland China bombed it and tried to take it back. Now, Taiwan's government simply claims to govern part of a divided China, but still a sovereign entity. Taiwan's ambassador to Palau, [PH] Megi Tien, says having separate diplomatic relations is one of several ways to show that sovereignty.

[PH] MEGI TIEN: And the ROC still have our legitimate elected government, have our defined territory, have our own people, and have conducted diplomatic relations and have our own national defense force. That meets with all the definition of being a state, a sovereign state.

MAGISTAD: China has tried hard to limit Taiwan's diplomatic space. [PH] Megi Tien says improved relations over the past couple of years have at least eased the tug-of-war for allies, a costly game of incentives and payoffs that won Taiwan three new diplomatic allies over the past decade, and lost at nine. Tien says Taiwan would like to end this game.

TIEN: For example, you are mainland China, you have 170 allies, okay. And we have 23, okay. That is stop tug-of-war.

MAGISTAD: That's assuming mainland China is willing to allow Taiwan to have any diplomatic recognition, which it is not � not in the long term. It has tried to woo Taiwan's allies. And Palauan President Johnson Toribiong says Palau can't ignore the wealth and power of the People's Republic of China forever.

TORIBIONG: However, I think for Palau to shift from the Republic of Taiwan to the People's Republic of China at this time would hurt Palau's image and credibility. So we have to stick it out and prove that we are not a flip-flop country, until there's a good reason to justify shifting relations.

MAGISTAD: For now, Palau benefits from having both mainland Chinese and Taiwanese tourists coming to check out Palau's stellar diving. There are also hotels run both by Taiwanese and by mainland Chinese. But a new hotel being built with Chinese money, recently suspended construction after Palau, over China's objections, agreed to take weaker Muslims from China who'd been wrongly imprisoned in Guantanamo. Palau's House Speaker, Noah Idechong, says this is evidence of why Palau is right to stick with its current alliances and not be too quick to embrace China. He points out that Taiwan and Palau have common values, values that China's government doesn't share.

NOAH IDECHONG: I feel it would be overwhelm if we join China, that is very heavy handed, in my mind, when dealing with human rights issues, environment, and controlling their people.

MAGISTAD: For now, the view that Palau is best to stick with its current friends is still winning out. But Idechong admits that business people here are increasingly asking, �Why throw in our lot with the small fish when we could go for the big one?� Idechong thinks the big fish could sink Palau's boat. Then again, he says, this is a democracy. His is just one opinion, and as China's clout in the region grows, anything could happen. For The World, I'm Mary Kay Magistad, Palau.