We're going to an island in the middle of nowhere.
- We're completely surrounded by the Pacific Ocean.
You can't see any land in any direction.
This is the country of Palau, a tiny group of islands in the Pacific Ocean.
Even though it's remote, the rest of the world has found its way here.
Palau shows how a connected world is putting extreme stress on small countries.
Tourists from China disturb Palau's environment.
Trash from across Asia pollutes its oceans.
We came to find out how this nation of just 20,000 people is standing up for itself,
even in the face of the world's superpowers.
I am Nikhil Sonnad. This is Quartz.
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This is a map of the Asia Pacific.
You probably can't see Palau.
You still can't.
There it is.
Being so small means Palau has to depend on outsiders.
- Palau is land-rich, but capital-poor.
Jackson Henry is a real estate developer in Palau.
He also used to be the ambassador to Taiwan.
- Without foreign investment, Palau would not enjoy the type of lifestyle that we are enjoying now.
Palau has been built with help from the outside.
The country only got high-speed internet by piggybacking onto a cable connecting the US and Southeast Asia.
The main sewer system was built with loans from the Asian Development Bank.
But when bigger countries help Palau, they usually want something in return.
The US built this road that circles the biggest island,
part of its deal to use Palau for naval operations.
Taiwan gives Palau $10 million every year,
hoping to keep it as one of its few remaining diplomatic allies.
The most important way Palau depends on other countries, though, is through tourism.
People come for the beaches, rock islands, and dive sites,
bringing in about 50% of the country's GDP.
That's not unique to Palau.
Many small economies are built on money from visitors.
- It's our bread and butter.
Tourism has made Palau what it is.
But the tourism industry wasn't prepared for what was coming:
China.
- We've had a lot of bubbles.
The Japanese bubble:
They came in with suitcases of money.
Taiwanese came after that, and the Koreans came after that.
Ngirai Tmetuchl is one of the chiefs of a local village.
- It's the Chinese now.
The difference is the Chinese were just a lot of numbers.
I mean, they came in, like, planeloads.
The number of visitors from China went from around 600 in 2008 to over 91,000 in 2015.
At first, that was great.
- We have a lot of shipwrecks around here.
And those are also nice diving.
Francis Toribiong is credited with building Palau's dive industry.
- Everybody went out and bought their boat, cars, hotels,
waiting for these Chinese people to show up.
The influx was great for the tourist economy.
Hotels were booked.
Restaurants were full.
And boat operators were busy.
Francis and his daughter even opened their own hostel.
For China, a country of 1.3 billion, 90,000 tourists may not be that big of a number.
But it's over four times the total population of Palau.
- As a small island, we kind of get nervous when there's a lot of people.
We feel like maybe the island will tilt.
The influx had real effects.
With the spike in demand, prices skyrocketed.
- Rents went up.
Food prices went up.
So it was great if you were the business owner.
But if you were the normal guy living in the village,
and then all of a sudden, now you can't afford a bag of rice.
That's not all.
The increase in visitors started to impact Palau's environment.
The country's unique jellyfish,
they're stingless so you can swim with them,
were dying off.
- This is Palau's greatest asset,
an the ocean territory the size of France.
It's decided to protect that, even if the economy takes a hit in the short-term.
In this case, that meant taking the unexpected step
of reducing the number of charter flights that bring Chinese tourists here.
From a 2015 peak of 91,000,
the number of Chinese visitors dropped to just 50,000 in 2018.
- You can only invite so many people into your house
without running out of food or running out of places to sleep.
This is Tommy Renengesau Jr., Palau's president.
His decision made life difficult for entrepreneurs like Francis;
The hostel he opened had to be shut down.
- Do you feel that you have to sometimes make a decision
between what's good for Palau's economy and what's good for its environment?
- We actually do not believe that you can separate the environment from the economy.
In fact, we believe that the environment is the economy, and the economy is the environment.
- We've got a pristine environment, and we want to keep it that way.
Ngirai says that if Palau wants to protect its environment while growing its economy,
the country needs to diversify.
- The tourists would come, most of the time they spend 99% of their time in the water,
and they leave.
They never get to interact with the people. They never get to see our culture.
Ngirai is working to show visitors more than just the beaches.
He's even turning his own village into a tourist site.
He renovated this traditional meeting house,
even installed new clean bathrooms.
When we visited, a group of young Chinese tourists were there, carted around in a stretch limo.
Palauans want tourism to look less like this,
and more like this.
- Bite it off, and you throw it into our composting.
This is lime. It's made out of coral.
And then you chew it.
Foreigners sitting with locals.
- I'm not very good at spitting, though.
Taking part in local customs.
- Put your phones down, and we don't do FaceTime in Palau. We do chat n' chew.
But in order to really thrive on its own, Palau is looking beyond tourism.
This is one of the first fish farms in Palau.
With ocean so plentiful, Palauans traditionally just caught a day's meal whenever they needed to.
But that approach can't keep pace with the growing demand for seafood from tourists.
The new farm already produces 150 pounds of fish per week.
- How can Palau's smallness be an advantage?
- We can make fast decisions.
We can cut the bureaucracy.
Jackson thinks the country should use that advantage to get into emerging industries,
like producing marijuana for export.
It might be crazy enough to work.
Weed grows well here,
and Palau doesn't have the regulatory barriers of large countries.
- Does it feel like as a small country with all of these very large neighbors
that it's difficult to say, "This is Palau. This is who we are."?
- We've been told who we are for so many years that some people think that we need to be told.
So I think it's about time that we told the world who we really are.
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