Opinion & Commentary
Only harsh medicine can save Nauru
Nauru is an isolated 21 sq km Pacific island, more than 3,500 kms from Brisbane. In 1963, while still administered by Australia, it gained the world price for its phosphate, giving it one of the highest per capita incomes in the world. Consumption on the island boomed. Many teenagers went to boarding school and on to tertiary education in Australia. Between Independence in 1968 and 2001, phosphate exports amounted to $3.6 billion. It was known that the phosphate would be mined out at the turn of the century, but mining and maintaining services on the island only cost half of this sum, making nearly $2 billion available for investment to secure the future. Sensibly invested, this should have given each Nauruan family $4 million by 2004. Instead, Nauru is on the verge of insolvency. Its 11,000 people’s lives are marred by diabetes, heart disease and alcoholism. Population growth has crowded the island. Some power brokers have accumulated great wealth, but most Nauruans are now finding it difficult to put food on the table.
The principal reason for Nauru’s progress from riches to rags is clear. The colonial practice of placing the bulk of earnings in communal trusts led to poor investments, waste and theft on a grand scale. If the phosphate income had been distributed to individual families, some may have been wasted, but much would have been saved and invested.
A few courageous leaders are now looking for solutions to Nauru’s problems, but incredibly, the Parliamentary majority that is responsible for losing Nauru’s fortune is even now trying to get its hands on the $30 to $80 million of assets that may remain. It wants to ‘refinance’ Nauru’s debt rather than selling assets, paying off creditors, and distributing the funds left to individual families.
Nauru could become modestly viable if it replaced its ridiculous parliament (with one member for every 300 voters) by a pro bono local government council with a rotating chairperson, cut the more than 1,000 public servants to a small number of police, teachers and tradesmen headed by a professional manager, and abandoned the 18 international organisations (including the UN where Nauru has a New York office) for membership of the Pacific Forum.
The centre of Nauru, where the marine phosphate was embedded in coral pinnacles, was always barren. It could become a tourist attraction together with reef diving. Gardens, pigs and fish could contribute to food supplies. Fishing licenses from the 320 km marine zone provides some income. There are other income earning possibilities. But all income should be distributed to individuals and communal expenditures should be funded by income taxes, notably from those who have accumulated fortunes from the mismanagement of public funds.
Many Nauruans have emigrated to Australia, New Zealand and Fiji. Others will no doubt continue to do so. Australia’s immigration policy continues to welcome Pacific islanders, but Australia cannot afford to create a ghetto of immigrants who do not meet its immigration criteria and cannot discriminate in favour of one group of Pacific Islanders over others.
Australia has provided Nauru with bridging finance and staff to enable it to sort itself out. But Australia cannot help if Nauru, in the absence of an informed debate about its future, persists in ignoring sensible advice and continues to pursue the policies that have led to its ruin. Using remaining assets to refinance debt for which there is no feasible future income to cover service costs can only again enrich the old power brokers and dubious financiers. They consider that when all of Nauru’s wealth is spent, Australian taxpayers will support them in the manner to which they have become accustomed. The majority of Nauruans would not see a cent now or later.
The time has come to call a halt. With the best of intentions, public servants do not have the skills to untangle Nauru’s financial situation. Specialist bankruptcy accountants are needed to dig out the information on Nauru’s finances as they had to for Enron and HIH. As in the latters’ histories, unaccounted debts may yet surface. Nauruans need to know their real financial situation and their options. Australia should make it clear that unless such an effort is put in place immediately, publicly and transparently, there is nothing we can do to help.
Emeritus Professor Hughes on a pro bono basis negotiated the world price for Nauru phosphate in 1968. She is a Senior Fellow at the Centre for Independent Studies, Sydney. Her paper From Riches to Rags: What Are Nauru’s Options and What Can Australia Do To Help? is available on www.cis.org.au.
