‘Though much of the blame for Nauru’s woes lies squarely at the door of its leaders and their mindless profligacy, corruption, incompetence and mismanagement, Australia cannot absolve itself of a major chunk of it...'


No country in modern history has seen a more rapid and unfortunate transition from riches to rags than Nauru. Not until very long ago—up until the 1990s—it was bracketed with the likes of the United States of America, Japan and Germany matching their per capita incomes and standard of living.

Its small population of just about 10,000 was among the wealthiest in the world. But in less than a decade, it has hobbled from one crisis to another and found itself on the verge of ruin. Today, it is in the midst of yet another crisis with almost no source of revenue except foreign aid to pay its bills.

Nauru’s wealth came from phosphate deposits formed by bird droppings over centuries. Mining companies from the United Kingdom, Australia and New Zealand have mined these deposits since the early 1900s. The companies paid Nauru royalties for the phosphate they shipped out.

Well aware that it was a non-renewable and finite resource, the state prudently set up the Nauru Phosphate Royalties Trust in 1968 to manage the growing fund making investments on behalf of Nauruans.

Political interference, mismanagement and vested interests quickly saw these investments turn bad when the country most needed them. The phosphate earnings began rapidly evaporating in the 1990s and a decade later, mining had all but ground to a halt.

Nauru sought compensation for ecological degradation and took the United Kingdom, Australia and New Zealand governments to the International Court of Justice at The Hague in the early nineties. The countries settled the claim out of court and jointly contributed to the payout.

Nauru’s long tryst with a series of disasters had merely begun. Soon afterwards, it tried to emulate the success of offshore financial centres elsewhere in the world. These plans failed to take off satisfactorily as such centres came under increased scrutiny over allegations of international money-laundering.

With the result, Nauru was one of four Pacific Islands states with which American banks banned transactions in 1999 after hundreds of offshore entities were found registered to a single mailbox in the country.

A few years later, the country lost the last of its major phosphate investments when its government defaulted on an A$236 million loan to an American financier and had its properties seized.

The Australian government’s offer to Nauru in 2001 to set up an offshore processing centre there for refugees who landed on Australian shores was taken up with great alacrity as the Nauru government was broke and this sounded like a great opportunity to shore up its revenues.

Until the Kevin Rudd’s government came into power recently, most of what Nauru earned came from Australia by way of compensation for babysitting the refugees. The detention centre employed about 100 people on whose jobs depended nearly a tenth of the island nation’s 10,000 population. 

The Rudd administration’s decision following through on its election promise to scrap the Howard Government’s ‘Pacific Solution’—and therefore the detention centre as part of it—is the latest crisis to hit Nauru. The closure of the centre last month has put all those 100 people out of work. 

This crisis comes on top of a string of others to a country that is completely dependent on imports. Until recently, it even imported drinking water. It now has reverse osmosis and desalination plants but their operations are constricted by the shortage of electricity because of low fuel reserves.

Power supply in Nauru is rationed and its distribution is rotated around the island in blocks of six hours. In late 2006, the Japanese government bailed Nauru out with a grant of US$850,000 to help it pay its fuel bills that account for a steep 50 percent of its total budget.

Though much of the blame for Nauru’s woes lies squarely at the doors of its leaders and their mindless profligacy, corruption, incompetence and mismanagement, Australia cannot absolve itself of a major chunk of it—for it was Australian interests, both business and political, that have been linked with Nauru’s affairs more than any other country.

If the four-party, out of court settlement of a few years ago put an end to the mining and ecological issues financially, the moral responsibility for permanently destroying large swathes of scarce land on the tiny speck in the ocean that is Nauru cannot simply be wished away.

Again, when it proved convenient, Australia did not think twice before making the offer to set up the halfway house for refugees—clearly taking advantage of Nauru’s deep financial distress. It had no choice but to accept the offer even in the face of criticism from across the globe.

Australia’s latest decision to formally wind up the detention centre at the end of this month has plunged Nauru into deep financial penury once again.

Its foreign minister Kieren Keke has asked Australia to set up training facilities on the island to train its citizens so that they may be gainfully employed. Australia is yet to respond to this appeal.

But there seems to be some action now. After 10 years of delays, Australian companies announced last month they would now begin the process of rehabilitating the mined out interior of the tiny Micronesian island nation.

Heavy mining left Nauru’s landscape severely scarred and closely resembling the lunar surface—it has been often referred to as Nauru’s moonscape.

And even if it is not a completely altruistic act—the Australian companies will mine any residual phosphate they come across as they go about rehabilitating the pockmarked moonscape—it is a step in the right direction.

But clearly, much more needs to be done. The Pacific islands countries, including Australia and New Zealand, must work out ways of engaging with Nauru in rehabilitating not just its mined out interior but also ensuring its economic wellbeing as well with initiatives that will make the island nation self sufficient once again and restore at least some of the lost glory of what was once called the ‘Pleasant Island’.