ADB to Help Nauru Preserve and Grow Capital for Development through Nauru Trust Fund

News Release | 22 December 2008

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is providing a technical assistance grant that will help the Government of Nauru establish a Nauru Trust Fund to accumulate, preserve, grow, and mobilize capital for development. The grant will also help Nauru improve its public financial management systems.

The ADB technical assistance grant worth $225,000 is its first direct grant to Nauru since the island nation settled its debt arrears with the help of the Government of Australia.

"ADB has a good track record of helping governments establish trust funds in Pacific developing member countries such as Federated States of Micronesia, Republic of Marshall Islands, and Tuvalu," said Eugenue Zhukov, Regional Director of ADB's Sydney office. "The technical assistance will contribute to the Nauru Trust Fund, effectively supporting the government's fiscal policy, future public expenditures, and incentives for good practices."

The proposed Nauru Trust Fund will build on the success stories from other Pacific trust funds as well as the lessons learned from Nauru's failed Phosphate Royalties Trust Fund. The Nauru Trust Fund will also take into consideration good governance practices, and will also factor in domestic contributions from phosphate sales and surplus funds from fishing licensing agreements.

"It's important that the government and other key stakeholders in Nauru recognize that the trust fund as belonging to and benefiting the people of Nauru," said project team leader Rishi Adhar. "The Nauru Trust Fund will be a valuable resource for assisting Nauru in making ministries, public programs, and the policy process work well."

Nauru, located in the central Pacific just south of the equator, is one of the world's smallest countries with a population of about 9,000 people. It is one of the three great rock phosphate islands in the Pacific Ocean, but has a total land area of only 21 square kilometers. While Nauru's per capita gross domestic product was one of the highest in the world just a few decades ago, a decline in phosphate mining in the 1980s combined with poor management of the country's offshore assets and public expenditure have led to the dramatic decline of its economic position.

The Government's recent reform efforts on state-owned enterprises and utilities companies are yielding signs of success. Government wages have been cut to more affordable levels and the level of over-staffing in Government departments has been reduced.

Phosphate mining has restarted on a limited scale. At present, mining activities are still unable to generate the level of revenue needed to fund Nauru's public services. The country is still heavily reliant on foreign aid to finance its public services.