Opinion & Commentary
Sick phosphate island in need of a remedy
Nauru is a 21 sq kms island near the equator, more than 3,000 kms from Brisbane. Its population, now 11,000, had the second highest per capita income in 1975 after Saudi Arabia. Five years after receiving the world price for phosphate in 1963, Nauruans were worth about $500,000 per man, woman and child. Between 1968 and 2001 Nauru exported phosphate worth $3.6 billion from the marine phosphate embedded among coral pinnacles that formed the barren centre of the island. Assuming costs of production of 30 per cent and another 20 per cent on running the island, the remaining $1.8 billion conservatively invested could have created assets of some $4 million today for each Nauruan family.
Instead, Nauru is on the verge of insolvency, has appalling health problems and was declared one of the first “rogue” states under the United States Patriot Act because of the “indiscriminate” sale of Nauruan passports. Some Nauruans, however, have accumulated considerable private fortunes.
Australia gave Nauru over $100 million in 1992 to compensate it for selling phosphate below world market prices to 1963. In 2001 when Nauru began to experience cash flow problems, Australia rescued it by placing asylum seekers on the island in the “Pacific solution”. In March 2004 Australia gave Nauru $22.5 million for a two year period to enable it to sort its long-term options. Nauru has also applied for aid to the United States, China, Taiwan and the OECD.
Should working people in Australia be putting their hands in their pockets to pay taxes for aid for Nauru? Nauru disregarded the prudent financial advice that would have enabled it to live in comfort from its investments. Beguiled by promises of vast profits, it invested its Trust Funds imprudently, lost $40 to $80 million a year on its uneconomic, badly managed airline and wasted millions on extravagant travel. Its 18 member Parliament, with one member for each 300 voters (compared to 100,000 in Australia) and a six member Cabinet, is far beyond the needs of a community of 11,000 people, that is, of a small country town in Australia. The number of public servants peaked at 1,600. Failures to submit statutory reports to Parliament make analysing Nauru’s economy very difficult.
Nauru has to take responsibility for its past 30 years, but the predators that cruise the Pacific are also to blame. In addition, ‘developers’ in Victoria, Guam, Manila and the United States sold Nauru real estate properties at inflated prices. International agency staff talked Nauru into joining 18 international organisations, including the United Nations. Nauru thus has a vote equal to that of China or the United States. These organisations send truckloads of printed material to Nauru daily.
Back of the envelope calculations suggest that Nauru may have a net worth of perhaps $30 million when all its assets are sold and its debts settled. What are now Nauru’s options?
If Nauru continues with present policies, it will become poverty-stricken, with overwhelming health problems. A growing population will crowd the island. Pity and blackmail can elicit some aid, but, without reforms, aid will be wasted.
Nauru urgently needs the following reforms to gain a decent standard of living and self-respect.
- The reshaping of public finances by ascertaining assets and settling debts and distributing any residual money among Nauruan families to re-establish the individual property rights that are traditional to the island. Future revenues should be paid to individuals and income taxes should fund public expenditures to flush out private fortunes. Commercial operators should be sought for air transport and other services.
- The downsizing of parliament to a pro bono local government council commensurate to the size of the population with a rotating chair. Downsizing the public service to a small skilled force, with many current functions being taken over by volunteers. Given the arrears in wages, many public servants are already working without pay.
- Withdrawing from all international organisations except the Pacific Forum and perhaps the South Pacific Community.
The attempt to shift the Nauru population to Curtis or Frazer Islands—a mass migration—failed in the 1950s and is not likely to succeed now. But Nauruans have been emigrating to New Zealand, Fiji and Australia. Emigration to Australia remains an option for Nauruans willing to apply to Australia’s non discriminatory immigration program.
Australia would also, no doubt, be open to negotiations for a form of association with a reformed Nauru. Association could range from arrangements for Australia to represent Nauru diplomatically to integration as an Australian territory if Nauruans were prepared to give up sovereignty over their island in return for full citizenship rights.
Professor Hughes negotiated the world phosphate price for Nauru in 1963 on a pro bono basis. She is an Emeritus Professor of the Australian National University and a Senior Fellow at The Centre for Independent Studies. Her report, From Riches to Rags: What Are Nauru’s Options? And How Can Australia Help?, can be found at www.cis.org.au
