In the South Pacific, Tiny Palau Becomes World's Latest Nation

FOR most countries, World War II ended in 1945.

For the country of Palau it ended just this October when the island became independent.

Last week, the world's newest country - and one of the smallest - became the 185th nation to join the United Nations. In an interview during his visit to the UN, Palau's President, Kuniwo Nakamura, calls the country's independence ``symbolic'' of the ending of World War II.

For the past 49 years, Palau was a trust territory administered by the United States. Mr. Nakamura says ``the war never really ended until the trusteeship was terminated.'' The UN set up 11 trusteeships after the war to administer islands that the Japanese had occupied. Palau was the last to choose independence.

As part of its termination agreement with the US, Palau will receive $500 million over 15 years. It has already received $66 million for an investment trust fund and a one-time payment of $190 million, primarily for infrastructure development.

As part of the agreement, the US will build up to 53 miles of roads. The country, composed of two hundred islands, is also expanding its electrical grid to a remote and less inhabited island, Babelthuap. Nakamura says this will relieve congestion in Koror, the capital.

Palau's agreement with the US is similar to one signed by the Federated States of Micronesia (FSM), a neighboring country and former UN trusteeship. However, many of the funds given to FSM have been wasted on factories that have never opened and schemes that failed. Nakamura says the experience of FSM indicates ``you have to be a little more cautious,'' putting the funds in ``investment securities and investment stocks.''

Nakamura says one of the first investments the country plans to make is in improving its electric power production. The country had borrowed $32.8 million from an international banking consortium in the early 1980s to build a power station that never operated. Palau later defaulted on the loan.

The resulting litigation has been settled and Nakamura now says, ``We shall never default again - we will always live up to our commitments.''

Palau also plans to improve its air service, essential if the country is to continue to attract tourists. Over the next two to three years, Palau plans to lengthen its runway to accept larger planes, such as DC-10s. It also intends to improve its airport terminal.

The improvements come at a time when tourism is booming, driven largely by the island's proximity to Asia. Ten years ago, only 1,000 tourists a year landed on Palau. Now, the island expects 50,000 to 60,000. About 50 percent come from Japan.

The biggest tourist attraction is the country's clear waters, where divers can enjoy the ``Rock Islands,'' considered one of the world's most spectacular dives.

Nakamura says the country wants to concentrate on ecotourism since the country has a very sensitive marine ecosystem. ``If we destroy our environment we don't have any potential. We don't have any tourism any more,'' he explains.