Introduction

This Factsheet outlines the current progress in advancing Sustainable Public Procurement (SusPP) in Palau based on a desk review. The review applies an analytical framework of six Pillars (or "building blocks") of SusPP systems.

The Framework is designed to make clear that countries do not need to follow a linear step-by-step path to build effective GPP systems. Rather it is important to examine local contexts and prioritize the Pillars with the most potential in the country. No matter where a country starts, a balanced approach to implementation calls for progress on all Pillars to some degree.

This Factsheet is organized as follows:

• "Country Overview" section with executive summary, indicative maturity rating, key achievements, potential pathways forward and timeline of key events related to advancing sustainable public procurement.
• "State of Play & Forward Looking Analysis" section that summarizes the research findings from the desk review for each Pillar theme.
• "Key Stakeholders Driving the Agenda" explores opportunities for ADB teams to open discussions with country counterparts and add value to the work of partners.

The Factsheet is intended to be a living document to promote knowledge sharing and support training activities at ADB. It will be revised and improved as new information is uncovered and advances are made. If you have new information, please contact ychu@adb.org.

Palau has made significant development progress over the 25 years since its independence, rising from a low-income country in 1994 to an upper middle-income country in 2023. The Government of Palau is fully committed to the 2030 Agenda for Sustainable Development and completed its 1st Voluntary National Review (VNR) on the SDGs in 2019. The VNR demonstrated the significant progress made and has informed an update to the country’s new vision for sustainable development going forward.

While the country lacks a comprehensive legal and policy framework on Sustainable Public Procurement, practices are already underway through Executive Orders issued by the President. Two EOs have been issued banning the use of single-use plastics in government offices and requiring the purchase of pelagic, rather than reef, fish at government events. This “start” to SusPP makes clear how such procurement practices can contribute to the nation’s priority goals, by setting mandatory sustainability criteria that contribute to goals set in the tourism and fisheries sectors - sectors of critical importance to the Palauan economy.

Sustainable procurements can be expanded in the country to meet other national priorities, including the need to encourage more fresh local foods and healthier diets. With the country dependent on food imports that are generally high in fats and salts, procurement can help bolster local food production especially through women-owned businesses. Procurement practices that prioritized waste reduction and improved recycling towards a circular economy aligns with the country’s goals for a “Pristine Paradise Palau” tourism brand.

>> Visual snapshot of Sustainable Procurement Maturity Level

Maturity Level:

Very Early Stage

E-procurement Portal: https://www.palaugov.pw/rfp-bids/

Key Achievements

• Executive Orders ban single use plastics at government offices, and require purchase of pelagic fish in government events, as start to SusPP practices
  
• National priority set to shift to healthier diets and promote local food production, especially from women-owned businesses
  
• Significant policy framework established to promote energy efficiency, including in government buildings and increase renewable energy generation
  
• Rainwater harvesting and water efficiency promoted in all new and existing buildings
  
• Infrastructure Plan requires screening of investments to ensure achievement of the nation’s environmental preservation and private sector development goals
  
• Business support, financing and certification programs underway in key market sectors, with interested business associations
  

Ongoing Activities

• National building code under development with energy efficiency and green building criteria
  
• Project launched to develop eco-friendly public transport system and sustainable marine transportation
  

Potential Pathways Forward

• Issue Executive Orders to require purchasing of local food, produce and beverages from local farmers and food producers
  
• Update Procurement Law to explicitly encourage sustainable public procurement and set out
  
• Develop more detailed sustainability criteria, guidelines and tools
  
• Support procurement professionalization training, including on sustainable public procurement
  
• Explore potential to integrating monitoring systems to track procurement, including sustainability criteria
  

>> Timeline of Implementation of Sustainable Procurement Activities

2017

2023

2015

2019

Nationally Determined Contribution sets renewable energy generation and energy efficiency targets

Agricultural policy sets target for local food production to meet 80% of food requirements by 2025

Palau Responsible Tourism Policy Framework kickstarts shift to high-value tourism model

1st Voluntary National Review on the SDGs - Pathway to 2030 sets new vision for sustainable development

Business support program from the ILO launched with module on “Green Your Business”

Pillar 1: Government Vision & Awareness of SusPP

Governments that establish a clear policy vision on SusPP can accelerate the shift from procurement as an adminstrative to strategic function, making clear how SusPP can deliver on important national social and environmental goals.

The Government of Palau has not adopted a policy to advance Sustainable Public Procurement in the country. However, SusPP aligns with several national laws and policies and can contribute to achieving national goals.

The Constitution of Palau sets the state responsibility to take positive action to achieve national objectives of conservation of a beautiful, healthful and resourceful natural environment and promotion of the national economy [Article VI]. The Palau Development Plan (PDP) 2023-2026 was passed in November 2022, however a copy was not found in this desk review for examination. The PDP builds on the country’s 1st Voluntary National Review on the SDGs - Pathway to 2030, released in 2019.

While overall greenhouse gas (GHG) emissions emitted by the country are low, per capita emissions are relatively high at 12.3 metric tons of CO2 per citizen (Pathway to 2030 p. 38). Energy is the sector of focus for climate mitigation actions, given that it accounts for 84-96% of overall emissions. The 2015 Nationally Determined Contribution sets goals of 22% emissions reductions in the energy sector by 2025 (compared to 2005) including through action to achieve 45% renewable energy in the electricity grid and 35% energy efficiency improvements by 2025. Priority actions include energy audits for all government buildings, adoption of a Energy Star appliance standard and instituting a building code (NDC p. 4). In 2022, the Government

commissioned the International Renewable Energy Agency (IRENA) to design pathways to 100% renewable energy by 2050 (Renewable Energy Roadmap 2022-2050).

The Government has set targets and priority actions in other key sectors, including:

• Food: The 2015 Policy to Achieving Resilient Agriculture and Aquaculture in Palau sets a target for local food production to meet 80% of food requirements by 2025. In 2019, only 14% of food expenditures in the country were spent on locally produced food (Pathway to 2030 p. 10). Achieving this target can create co-benefits in women’s empowerment as a project is underway to support women food producers and businesses with the Palau Organic Growers Association (Pathway to 2030 p. 29).
  
• Tourism: The Palau Responsible Tourism Policy Framework 2017-2021 focused on shifting away from low-end mass market packaged tours to a high-value model delivering a Pristine Paradise Palau brand experience.
  
• Water: The Government encourages rainwater harvesting and storage in all new constructions (Pathway to 2030).
  
• Transport: A new fleet of sustainable marine transport is being piloted powered by a combination of wind, solar and coconut oil. A more sustainable land transport system is also envisioned, through a transition to electric vehicles, improved public transportation system and promotion of zero emission transport such as walking and biking (Palau Climate Change Policy, 2015).
  
• Infrastructure: The Palau National Infrastructure Plan 2021-2030 emphasizes the need for infrastructure investments that serve the nation’s goals on preservation of the natural environment.
  

The Government has started to promote sustainable procurement through mandatory requirements. Single-use plastics are banned for use by the Executive Branch of Government and pelagic fish must be served (rather than reef fish) at Executive Branch functions (Pathway to 2030 p. 36). The Government also recognizes that it needs to lead by example in adopting the 3-R principle of reduce, reuse and recycle.

Pillar 2: Legal & Regulatory Framework

Procurement law reform can be key to clear obstacles to implementation by establishing "value for money", not "lowest price", as a core procurement objective, and authorizing procurement approaches suited to SusPP.

Public Procurement in Palau is regulated by the Procurement Law and Regulations (RPPL 3-54). A core procurement objective is to provide for increased economy and maximize the purchasing value of public funds - a concept similar to “value for money”. The Procurement Law contains several provisions that can support procurements designed to achieve environmental and social goals, including provisions to:

• Avoid purchasing unnecessary or duplicative items [Article 613]
  
• Conduct an analysis of lease vs. purchase alternative to determine which would be the most economic and practical procurement [Article 613]
  
• Apply a local price preference of 25% for bids submitted by an entity wholly owned by a person or persons of Palauan citizenship for contracts valued at less than $100,000 [Articles 624(d), 615(l)]
  
• Limit small purchases under $2,000 to local vendors
  
• Award bids on the basis of lowest responsive and responsible bidder (not just lowest price).
  

For grants received from the United States Government, procurements must also comply with U.S. procurement rules, which opens the door for sustainable procurement pilots in US-funded projects.

Pillar 3: Institutions & Capacity

The public procurement system in Palau is centralized under the Ministry of Finance. The Procurement Law designates three Procurement Officers within different ministries: [Article 608]:

• the Director of the Bureau of Public Works is responsible for procurement of construction, architectural and engineering;
  
• the Director of the Bureau of Public Service System is responsible for procurement of professional contractual services
  
• the Chief of Property and Supply within the Ministry of Finance is responsible for all other proccurements.
  

Other ministries are responsible for specialized procurements, including the Ministry of Health who is responsible for procurement of medical supplies and the House of Delegates and Senate who manage their own procurements.

The Attorney General is responsible for ensuring that all procurements confirm with the Procurement Law. The Public Auditor may audit any public procurement transaction. Purchases by each state government shall be managed by a person designed by each state governor. Semi-autonomous agencies can pass their own procurement policies as long as they are equally or more stringent than the Procurement Law and Regulations.

Each State is responsible for the administration of its own procurements, ensuring that practices adhere to the Procurement Law and Regulations.

No interministerial body has been assigned responsibility to coordinate activities across government on sustainable public procurement. The Government has created eight SDG thematic working groups including one on “Sustainable Communities and Inclusive Economic Growth” (Pathway to 2030 p. 6). The topic of SusPP could be introduced within the framework of this working group.

The country benefits from a strong civil society sector engaged in sustainable development issues. The Belau Association of NGOs (BANGO) was created in 2018 as a national coordinating body for civil society, non-government, and community-based organizations in Palau. BANGO participated in the 1st Voluntary National Review on the SDGs participating in all Working Groups in close collaboration with the SDG coordinating unit and the Office of the President.

Pillar 4: Market Practices

Market dialogue throughout the procurement process helps procuring entities to choose realistic sustainability criteria and ensure suppliers succeed in delivering on sustainability commitments over the contract duration.

Green business practices are growing across key market sectors in Palau including tourism, subsistence agriculture and fishing. The Palau Small Business Development Center (SBDC) is the official public body in charge of private sector development, part of the Palau Ministry of Public Infrastructure, Industries and Commerce (MPIIC)

The International Labour Organization (ILO) launched a “Start and Improve your Business” (SIYB) Initiative that trained six master trainers in July 2023. This Training is complemented by modules on “Digitalise Your Business” and “Green Your Business”.

The Green Pledge is an official sustainable business certification program launched by the Bureau of Tourism. It recognizes tourism businesses committed to promoting sustainability. More than 30 businesses had signed up as of July 2023.

A local solar company, Palau Solar Corporation, has partnered with the National Development Bank of Palau to install solar panels across the country.

Pillar 5: Procurement Operations

Various tools and procurement approaches can be employed to help procurers more easily identify environmentally friendly goods and services and attract a competitive market response.

A National Building Code has been under development in Palau that will integrate energy efficiency and green building criteria. However, no details on the status of this work was found in this desk review.

A Project for Establishing an Eco-Friendly Transportation System was launched in June 2023 with the support of the Japan International Cooperation Agency (JICA). The Project aims to put in place an efficient public transport system consisting of an eco-friendly bus service.

The Government also plans to promote sustainable marine transportation through the use of sail-powered marine vessels with backup solar and coconut oil power generation. To start, ten vessels are envisioned to be deployed in Palau for use in transportation, tourism, fishing, research and surveillance (Pathway to 2030 p. 39). A $50 million grant from the Green Climate Fund was requested to finance 50 ocean-going vessels in a joint venture with the Federated States of Micronesia, the Republic of the Marshall Islands, the Republic of Kiribati and the Republic of Nauru.

Pillar 6: Monitoring & Impact Measurement

Monitoring systems are essential to gather the information needed to keep SusPP implementation on course and communicate on the benefits achieved for the country.

The Procurement Law [Article 611] requires government agencies to submit procurement data to the Procurement Officer, who reports statistical summaries to the Chief of Finance, Budget Officer, Public Auditor and National Planner. However, no monitoring system is in place to track sustainable public procurement.

Projects Supported by ADB

ADB is focusing its assistance in Palau on improving public sector performance and promoting private sector development to reinvigorate the tourism sector. ADB will complement this assistance with financing for key infrastructure investments that deliver inclusive economic and social benefits. The bank will continue to encourage Palau’s involvement in regional cooperation programs, particularly in expanding access to renewable energy resources, improving energy efficiency, and responding to the impacts of climate change.

Other Initiatives supported by National/International Agencies

A Project for Establishing an Eco-Friendly Transportation System was launched in June 2023 with the support of the Japan International Cooperation Agency (JICA). The Project aims to put in place an efficient public transport system

consisting of an eco-friendly bus service.

References

ADB, 2023. Asian Development Bank and Palau: Factsheet.

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