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From Riches to Rags What Are Nauru’s Options and How Can Australia Help?

Helen Hughes
18 August 2004 | IA50
From Riches to Rags What Are Nauru’s Options and How Can Australia Help?

Thirty years after enjoying the world’s second highest per capita GDP after Saudi Arabia, 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. Nauru’s misfortunes have been primarily brought about by a disregard for basic economics and by inappropriate political institutions and policies, but it has also been the victim of predators that prey on the Pacific.

In the light of its history, what are Nauru’s options? It can continue, with modifications, along its past and current course, or it can fundamentally reform its society and economy. If Nauru does not reform, its population will continue to increase from its present 11,000, crowding its 21sq km island, and its people will become sicker and poorer. Pity and blackmail may squeeze out enough aid to enable Nauruans to eke out an existence. If Nauru reforms, it can become modestly prosperous, recover its health and self-respect, and explore long-term options.

Immediate essential reforms are:

  • Reshaping public finances by ascertaining its assets, paying off all legal debts and dividing remaining funds among Nauruan families to re-establish private property rights. Phosphate and other revenues should in future be paid to private individuals. Public expenditures should henceforth be funded by income tax. This would flush out private fortunes. Commercial operators should be sought to tender for air transport and other services, including banking.
  • Downsizing parliament, commensurately with Nauru’s population, into a pro bono local government council, with a rotating chairman and shrinking the paid public service to a small skilled core, with volunteers taking over many present paid functions and a new emphasis on health and education.
  • Withdrawing from all international organisations except the Pacific Islands Forum and the South Pacific Community.

If Nauru takes these steps, it will not need aid. It will have a base for exploring longer term options of association with another Pacific country, or wait the long time it is likely to take until more Pacific islands are ready for federalism.

Australia has given aid to Nauru to enable it to find solutions to its problems. If Nauru reforms, it will not need further aid. If it does not reform, aid will be wasted.

Pacific islanders, including Nauruans, are welcome to apply to Australia’s non-discriminatory immigration programme. Australia would also, no doubt, be open to negotiations for a form of association with a reformed Nauru if the latter wished to pursue such an option. Association could range from arrangements for Australia representing 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.

Helen Hughes is a Senior Fellow at The Centre for Independent Studies, and Emeritus Professor with The Australian National University (ANU). Professor Hughes, then a Fellow at the ANU, on a pro bono basis negotiated the world price for Nauru’s phosphate in 1963 and helped to mount the constitutional team that enabled Nauru to become an independent republic in 1968 and to nationalise its phosphate mine. She assisted in early financial and business planning (including the building of Nauru House) and in finding Philip Shrapnel & Co, leading Sydney consultants, to take over financial and business planning for Nauru on a commercial basis.


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