Nauru

Location and People

Nauru is a small, oval-shaped island located in the central Pacific just south of the Equator and some 3,500 kilometers directly north of New Zealand. It is one of the three great phosphate rock islands in the Pacific Ocean, but has a total land area of only 21 square kilometers. Nauruans account for nearly 58% of the population of 13,048, while other Pacific islanders account for slightly more than a quarter of the total. The remainder of the population is split about evenly between people of Chinese and European extraction.

Historical Background

The mining of Nauru's phosphate deposits began in 1906 by a German-British consortium. In World War I Australian forces occupied the island. In 1942-45, Japan conquered Nauru. The 1946 UN trusteeship to Australia, Britain and New Zealand was administered by Australia. Nauru achieved independence in 1968.

Socio-Economic Conditions

The sandy beaches of Nauru rise to a reasonably fertile ring of soil containing coconut palms, pandanus trees, and indigenous hardwoods. Bananas, pineapples, and some vegetables are also grown there for household consumption. This ring surrounds a phosphate plateau in center of the island.

Phosphate production has historically been the only significant domestic economic activity in Nauru. Intensive phosphate mining since 1906 using strip-mining methods has left the central 90% of Nauru a wasteland that threatens the country’s limited remaining land resources. Phosphate deposits are mostly exhausted, and production was negligible in 2004.
 
The Nauru Phosphate Royalties Trust (NPRT) was built from phosphate royalties to generate income once mining ceased. However, the combined impact of years of excessive consumption, poor investment advice, and mismanagement culminated in early 2004 with the placement of the asset portfolio of NPRT into receivership.

In the absence of phosphate and trust fund revenues, the economy is reliant on income from licensing fishing in Nauru’s exclusive economic zone (EEZ), and foreign aid, mainly from Australia.

The demise of phosphate mining and the NPRT has necessitated fiscal reform and increased financial hardship for the population. Such hardship is widespread, since almost all Nauruans in formal employment are in the public sector. The social safety net of joint families and a close knit supportive culture is likely to continue to prevent abject poverty to emerge on the island.

While women play an important role in family matters, they have no representation in the Parliament. They are also grossly under represented at the higher levels of Government service and in the Nauru Phosphate Corporation, the next largest employer in Nauru. This is likely to continue while the social system continues to be led by a Council of Chiefs. However, increasing numbers of girls are enrolling in school, and women seem to be benefiting more from the education system.

Key Social and Poverty Indicators

Country Outlook

The Government recently signed two contracts with Australian and New Zealand private companies to recommence mining. Aid is expected to help finance essential reconstruction of ship moorings to support recommencement of mining.

Continued exploitation of phosphate deposits may offer some prospect of medium-term economic growth. The extraction of remaining reserves is however hampered by the deterioration of infrastructure and equipment.

Aid-funded rehabilitation of mined land could also generate economic activity at a relatively low level over the medium to long term. This will indirectly generate some government revenues, as will other aid-funded projects.

There is, however, no obvious alternative to phosphate mining as a means of creating gross domestic product (GDP). National income will be heavily reliant on external sources. Pelagic fish are abundant in Nauru’s EEZ, and revenues can be expected from fishing licenses issued to several deepwater fishing nations. But this is inherently volatile revenue that is difficult to predict.

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