Freedom in the World
In September 2010, Palau signed a new financial agreement with the United States, guaranteeing the transfer of more than $200 million in assistance through 2024 under the bilateral Compact Agreement.
The United States administered Palau, consisting of eight main islands and more than 250 smaller islands, as a UN Trust Territory from 1947 until 1981, when it became a self-governing territory. Palau gained full independence in 1994 under a Compact of Free Association with the United States, which stipulated that the United States would grant Palau $442 million in economic aid between 1994 and 2009; allow Palauan citizens to reside, work, and study in the United States and its territories; give Palauans access to various federal government programs; and defend Palau in exchange for U.S. military access to the archipelago until 2044.
Palau is an electoral democracy. The 2008 presidential and parliamentary elections were considered free and fair. The bicameral legislature, the Olbiil Era Kelulau, consists of the 9-member Senate and the 16-member House of Delegates. Legislators are elected to four-year terms by popular vote, as are the president and vice president. The president may serve only two consecutive terms. The country is organized into 16 states; each is headed by a governor, and each has a seat in the House of Delegates. Every state is also allowed to formulate its own constitutional convention and elect a legislature and head of state.