Published daily by the Lowy Institute

What’s next for Nauru?

The economic uncertainty that faces Nauru when offshore detention inevitably ceases again is another chapter in an unfolding experiment of statehood.

Nauru in 1999 (Photo: Getty Images/Planet Observer/Universal Images Group)
Nauru in 1999 (Photo: Getty Images/Planet Observer/Universal Images Group)
Published 28 Apr 2017   Follow @CaitStorr

Earlier this month President Baron Waqa of the Republic of Nauru visited Australia, the first state visit of a Nauruan president in twenty years.

According to Nauru's Government Information Office, the purpose of President Waqa's visit was to meet with Prime Minister Malcolm Turnbull to discuss the proposed transfer of asylum seekers from the Nauru Regional Processing Centre to the US, to meet with representatives of the Asian Development Bank (ADB), to conduct a tour of the Mount Majura Solar Farm outside of Canberra, and to meet with representatives of the Port of Brisbane.

According to The Guardian (a newspaper with which President Waqa holds no truck, after the release of the 'Nauru files' in August 2016) the purpose of the visit was to meet with ADB representatives about a proposed 'new' port for Nauru, although what is actually proposed is the redevelopment of the existing port at Aiwo.

Whatever the primary purpose of the visit, as Australia's offshore detention regime appears slowly but inexorably to be winding down, it's worth taking a moment to consider what a post-detention future might look like for Nauru. The short answer is that it looks just as precarious as the future Nauru has faced since gaining independence in 1968.

In January 2018, Nauru will celebrate its 50th anniversary as an independent state. The former Trust Territory of Nauru, administered by Australia under the oversight of the UN, became the Republic of Nauru in 1968. Nauru holds its independence dearly, as all states do. But for Nauru, the challenges of sovereignty have proven particularly fraught. In the 1960s, as now, the Nauruan case epitomised the tension between the principle of political self-determination that developed during the post-war decolonisation movements, and the brute logic of economic and environmental sustainability. In 1968, Nauru became the smallest state in the world (discounting the Vatican) by both population and physical area, and Australia handed back to the Nauruan people political and economic control of a small island devastated by six decades of aggressive phosphate mining.

Staring down the barrel of wholesale resettlement from the day of its birth, the economic path the Republic of Nauru has since beaten for itself has proven at turns ingenious and reckless. On the one hand, Nauru's quid pro quo leveraging of the system of international institutionalism to its economic advantage has proven oddly functional as a means of survival. Examples include its voting with Japan in the International Whaling Commission in exchange for Japanese aid in 2005, and its recognition in 2009 of the independence of Georgian provinces Abhkazia and South Ossetia in exchange for aid from the Russian Federation. On the other hand, the Republic continues to exploit the island's painfully finite natural resources for short-term economic gain in much the same way Australia did. With respect to its future, Nauru seems to have established a pattern of buying financial time on the one hand, and spending environmental time on the other.

In this context, the economic opportunity presented Nauru by the proposal to host an Australian asylum seeker detention centre was a no-brainer for the Nauruan government, a fact hardly lost on the Australian government. The question of whether Australia's use of Nauru and Papua New Guinea in its offshore detention regime constitutes exploitation of its former trust territories' socioeconomic disadvantage is a question that deserves more attention than it has attracted in the public debate over asylum seeker detention. What is clear, however, is that Nauru at least has become economically dependent on offshore detention since the policy was revived by the Gillard government in 2012. According to the ADB, direct payments to the Republic of Nauru under the offshore detention regime currently comprise an estimated 28% of Nauru's domestic revenue. The indirect revenue contribution generated by the Regional Processing Centre (RPC) in construction and services amounts to an estimated 15-20% more, meaning that a good half of Nauru's revenue currently depends on asylum seeker detention.

The influence of this renewed cash flow on Nauruan politics is obvious. Direct government revenue has more than quadrupled in the four years since the RPC re-opened – revenue was up from $20 million in 2010-11 to $115 million in 2015-16. The Waqa Government, elected in August 2013, has applied this renewed largesse to its own gain. As visa payments have rolled in, cash payouts to the Nauruan people have increased – so too have suspensions and condemnations of opposition MPs. The Nauruan judiciary, consisting of Australian judicial officers Peter Law and Geoffrey Eames, was routed in January 2014, and replaced with officers who have proven far more facilitative of government interests. The Waqa government has rejected criticisms as 'outlandish' accusations peddled by its political opponents. Yet the Australian government, in its silence on the exploitation of the RPC cash flow and expulsion of judicial officers, has laid itself open to the charge of tacitly supporting the abandonment of the rule of law (such as it was) in Nauru. Such acquiescence is not simply permissive on Australia's part. The interruption to judicial functioning on Nauru made it even more difficult for asylum seeker and liberty advocates to ventilate basic questions on the legality of offshore detention in the Nauruan jurisdiction. The Australian government cannot be unaware that its interest in staving off successful legal challenges to offshore detention is in conflict with its policy of supporting democratic institutions in the Pacific region.

What that half of Nauru's domestic revenue will be replaced with when the RPC eventually, inevitably, closes is an open question. Nauru has, of course, survived the withdrawal of asylum seeker detention revenue once before, and is hardly unversed in its unique brand of economic precarity. In its National Sustainable Development Strategy, released in 2005, Nauru identified rehabilitation of the island's central plateau, commercialisation of fish stocks, the establishment of a new national Trust Fund, and improved access for Nauruans to overseas labour markets as imperative to the island's economic future.

The turn from phosphate to fish has proven promising, at least economically. The Republic has expanded its commercial fishery licensing program over the last few years, and the commercialisation of fish stocks has proven a minor economic boom, more or less contemporaneous with that of the revived RPC. Nauru is situated in the migration paths of many Pacific fish species, including bluefin tuna, and its Exclusive Economic Zone (EEZ) straddles the heart of the Western Pacific. Revenue raised by issuing commercial fishing licenses now comprises around a third of the Republic's revenue base. Yet whether the commercial fishing Nauru is encouraging in its waters is environmentally sustainable beyond the short term remains painfully unclear. Nauru's Sustainable Development Strategy makes little reference to the difficulty of modelling sustainable take of migratory species, although the sub-regional Nauru Agreement concerning co-operation in the management of fisheries in the Western Pacific region provides some basis for co-ordinated policy in this regard. 

Similarly, the prospect of a new Trust Fund offers some economic hope, tempered with a healthy dose of caution. In 2014, a new Nauru Trust Fund was established with the support of the ADB, Australia and Taiwan, to seek to reserve some of the current windfall for Nauru's future. Management of the Fund is to be governed by an Advisory Committee comprising representatives of the Nauruan, Australian and Taiwanese governments. No withdrawals are permitted during the initial 'build-up' phase of twenty years, distribution of trust monies is restricted, and borrowing against the Fund is prohibited.

The strict provisions around the Trust Fund are designed to avert the disaster of corruption that befell its predecessor, the Nauru Phosphate Royalties Trust (NPRT). The fate of the NPRT is notorious. Since its establishment in the early 1920s, the Australian administration had paid a portion of royalties owed to Nauruan landowners directly into a Long Term Investment Fund. In addition to the paternalistic quarantining of income, phosphate royalties owed to Nauruans were grossly undervalued for over four decades. All royalties owed to Nauruan landowners by the British Phosphate Commission (a corporate entity representing the governments of UK, Australia and New Zealand) were calculated according to an arbitrary measure of Nauruan 'need' set by the Australian administration, rather than any reference to the world phosphate price. At the same time, Australia refused to entertain any notion of responsibility for rehabilitating the island's central plateau after half a century of aggressive mining, maintaining that the royalties quarantined in the NPRT were sufficient to meet future costs of rehabilitation.

The question of liability for rehabilitation remained unresolved at the time of the recognition of full Nauruan independence in 1968. In 1989, Nauru brought a case against Australia in the International Court of Justice. Although Australia continued to deny responsibility for rehabilitation of the island's devastated central plateau, the matter was settled in 1993. The Compact of Settlement provided that Australia would pay Nauru a total of $107 million, to be paid by Australia to Nauru in a series of upfront payments with the balance paid in $2.5 million annual indexed instalments over a twenty-year period. In a revealing indication of Australia's attitude toward the ICJ settlement, payments made in satisfaction of the Nauru Australia Compact of Settlement (NACOS) have been included in Australia's annual reports of development aid paid to Nauru. It is hard to dismiss as mere coincidence the fact that the Memorandum of Understanding that re-established the Nauruan RPC was signed in August 2012, the year before the final of the NACOS annual payments was due to be paid.  

There is no denying, however, that Nauru's management of both NACOS payments and NPRT funds has been reckless. It is a depressing fact that little to no progress has been made with respect to rehabilitation since the settlement of the ICJ case. The Nauru Rehabilitation Corporation, which received the bulk of NACOS funds, now performs more mining than rehabilitation. In 1990, when the ICJ case against Australia was underway, the NPRT had an estimated value of $1.5 billion. Upon entering receivership in 2004, its value was estimated at only $100 million. Precisely where that money went remains to some extent unclear due to the lack of transparency in NPRT accounting. Whether the new Nauru Trust Fund, with its stricter and more transparent terms, manages to avert the fate that befell its predecessor remains to be seen.

The economic uncertainty that faces Nauru when offshore detention inevitably ceases again is another chapter in the unfolding experiment of statehood that is the Republic of Nauru. Whatever happens next, it is certain that the Nauruan people maintain an unsinkable faith in their right to political independence, and fifty years on, continue to find unconventional ways to survive.

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