Historians take much interest in the navigational routes of European explorers. One such mystery has created much speculation as to whether Spanish explorer Ruy López de Villalobos spotted the islands in 1543. No conclusive evidence exists but there are some who think he could have seen the tip of a southernmost island in the group.

Palau was one of the last of the South Sea islands to be discovered-not only due to a lack of navigation skill but because neighboring islands knew nothing about Melanesia. Palau had limited relations-mainly with Yap and Java.

Had it not have been for ship-wrecked islanders who accidentally took refuge in the Philippines, Europeans likely would not have found a route to Palau until much later.

English Captain Henry Wilson also shipwrecked off the island of Ulong in 1783. Wilson dubbed Palau the “Pelew Islands”.

In 1914, Japan invaded the islands, then formally took over under the Treaty of Versailles after the WWI German defeat. Over three decades, the Japanese enforced cultural change. Introduction of an exclusive market economy geared towards Japanese citizens temporarily revoked tribal ownership. Although some reparation was made, defeat did not restore complete order. U.S. intervention only served to widen the legal semantics needed to recover from such an event spanning three different countries with three different tongues.

Peleliu was the scene of a costly battle between American and Japanese forces in 1944, resulting in an Allied victory, though the cost in human terms was high for both sides. After WWII, the United Nations played a role in deciding the U.S. would administer Palau as part of the Trust Territory of the Pacific Islands.

After three decades as part of the UN Trust Territory of the Pacific under US administration, this westernmost cluster of the Caroline Islands opted for independence in 1978 rather than join the Federated States of Micronesia.

A Compact of Free Association with the US was approved in 1986, but not ratified until 1993.

It entered into force the following year, when the islands gained independence.

Source: CIA World Fact Book

Population: 20,842 (July 2007 est.)

---

Age structure: 0-14 years: 26% (male 2,796/female 2,633) 15-64 years: 69.2% (male 7,767/female 6,665) 65 years and over: 4.7% (male 465/female 516) (2007 est.)

---

Median age: total: 32 years male: 33 years female: 31 years (2007 est.)

---

Population growth rate: 1.233% (2007 est.)

---

Birth rate: 17.7 births/1,000 population (2007 est.)

---

Death rate: 6.77 deaths/1,000 population (2007 est.) Net migration rate: 1.39 migrant(s)/1,000 population (2007 est.)

---

Sex ratio: at birth: 1.06 male(s)/female under 15 years: 1.062 male(s)/female 15-64 years: 1.165 male(s)/female 65 years and over: 0.901 male(s)/female total population: 1.124 male(s)/female (2007 est.)

---

Infant mortality rate: total: 14.07 deaths/1,000 live births male: 15.78 deaths/1,000 live births female: 12.26 deaths/1,000 live births (2007 est.)

---

Life expectancy at birth: total population: 70.71 years male: 67.54 years female: 74.06 years (2007 est.)

---

Total fertility rate: 2.46 children born/woman (2007 est.)

---

HIV/AIDS - adult prevalence rate: NA

---

HIV/AIDS - people living with HIV/AIDS: NA

---

HIV/AIDS - deaths: NA

---

Nationality: noun: Palauan(s) adjective: Palauan

---

Ethnic groups: Palauan (Micronesian with Malayan and Melanesian admixtures) 69.9%, Filipino 15.3%, Chinese 4.9%, other Asian 2.4%, white 1.9%, Carolinian 1.4%, other Micronesian 1.1%, other or unspecified 3.2% (2000 census)

---

Religions: Roman Catholic 41.6%, Protestant 23.3%, Modekngei 8.8% (indigenous to Palau), Seventh-Day Adventist 5.3%, Jehovah's Witness 0.9%, Latter-Day Saints 0.6%, other 3.1%, unspecified or none 16.4% (2000 census)

---

Languages: Palauan 64.7% official in all islands except Sonsoral (Sonsoralese and English are official), Tobi (Tobi and English are official), and Angaur (Angaur, Japanese, and English are official), Filipino 13.5%, English 9.4%, Chinese 5.7%, Carolinian 1.5%, Japanese 1.5%, other Asian 2.3%, other languages 1.5% (2000 census)

---

Literacy: definition: age 15 and over can read and write total population: 92% male: 93% female: 90% (1980 est.)

The economy consists primarily of tourism, subsistence agriculture, and fishing. The government is the major employer of the work force, relying heavily on financial assistance from the US. Business and tourist arrivals numbered 63,000 in 2003. The population enjoys a per capita income roughly 50% higher than that of the Philippines and much of Micronesia. Long-run prospects for the key tourist sector have been greatly bolstered by the expansion of air travel in the Pacific, the rising prosperity of leading East Asian countries, and the willingness of foreigners to finance infrastructure development.

---

GDP (purchasing power parity): $124.5 million note: includes US subsidy (2004 est.)

---

GDP (official exchange rate): $145 million (2005)

---

GDP - real growth rate: 5.5% (2005 est.)

---

GDP - per capita (PPP): $7,600 (2005 est.)

---

GDP - composition by sector: agriculture: 6.2% industry: 12% services: 81.8% (2003)

---

Labor force: 9,777 (2005)

---

Labor force - by occupation: agriculture: 20% industry: NA% services: NA% (1990)

---

Unemployment rate: 4.2% (2005 est.)

---

Population below poverty line: NA%

---

Household income or consumption by percentage share: lowest 10%: NA% highest 10%: NA%

---

Inflation rate (consumer prices): 2.7% (2005 est.)

---

Budget: revenues: $72.07 million expenditures: $72.43 million; including capital expenditures of $12.98 million (FY04/05 est.)

---

Agriculture - products: coconuts, copra, cassava (tapioca), sweet potatoes; fish

---

Industries: tourism, craft items (from shell, wood, pearls), construction, garment making

---

Industrial production growth rate: NA%

---

Current account balance: $15.09 million (FY03/04)

---

Exports: $5.882 million f.o.b. (2004 est.)

---

Exports - commodities: shellfish, tuna, copra, garments

---

Exports - partners: US, Japan, Singapore (2006)

---

Imports: $107.3 million f.o.b. (2004 est.)

---

Imports - commodities: machinery and equipment, fuels, metals; foodstuffs

---

Imports - partners: US, Singapore, Japan, South Korea (2006)

---

Debt - external: $0 (FY99/00)

---

Economic aid - recipient: $19.6 million; note - the Compact of Free Association with the US, entered into after the end of the UN trusteeship on 1 October 1994, provides Palau with up to $700 million in US aid over 15 years in return for furnishing military facilities (2004)

---

Currency (code): US dollar (USD)

---

Exchange rates: the US dollar is used

---

Fiscal year: 1 October - 30 September