Economy of Nauru
Encyclopedia
Revenues of Nauru
have traditionally come from exports of phosphate rock. Primary phosphate reserves were exhausted, and mining ceased, but in 2006-07, mining of a deeper layer of "secondary phosphate" began. It is hoped that this economic activity might lift Nauru
from the bottom rung of global GDP per capita. The only other major source of government revenue is sale of fishing rights in Nauru's territorial waters.
Though for a time phosphates gave Nauruans one of the highest per capita incomes in the world, few other resources exist with most necessities being imported, including some fresh water from Australia
.
The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. In anticipation of the exhaustion of Nauru's phosphate deposits, substantial amounts of phosphate income were invested in trust funds to help cushion the transition and provide for Nauru's economic future. The government borrowed heavily from the trusts to finance fiscal deficits. To cut costs, the government froze wages, reduced over-staffed public service departments, and closed some overseas consulates. In recent years Nauru encouraged the registration of offshore bank
s and corporations. Tens of billions of dollars were channeled through their accounts, until international pressure saw Nauru crack down on money laundering
. Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely.
Aid flows, chiefly from Australia
, Taiwan
and New Zealand
, keep the Nauruan economy afloat.
Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely. According to the U.S. State Department, Nauru’s GDP volume was US$1 million in 2004. Nauru receives about US$20 million foreign aid a year from Australia.
Nauru needs to import almost all basic and capital goods, including food, water, fuel, and manufactured goods, with Australia and New Zealand as its major import sources. In 2004 Nauru’s imports totaled about US$19.8 million.
", came to an end in 2007, prompting Nauruan concerns about the future of the island's revenue. Australia has also sent financial experts to Nauru to help the tiny nation overcome its economic problems. However, serious questions remain about the long-term viability of Nauru’s economy, with uncertainties about the rehabilitation of mined land and the replacement of income from phosphates.
In 2008, talks began between Australia and Nauru regarding the future of the former's economic development aid to the latter. Nauruan Foreign and Finance Minister Dr. Kieren Keke
stated that his country did not want aid handouts. One possible solution currently being explored would be for Australia to assist Nauru in setting up a "boat repair industry" for regional fishing vessels.
The fiscal year runs from July 1 to June 30.
Nauru
Nauru , officially the Republic of Nauru and formerly known as Pleasant Island, is an island country in Micronesia in the South Pacific. Its nearest neighbour is Banaba Island in Kiribati, to the east. Nauru is the world's smallest republic, covering just...
have traditionally come from exports of phosphate rock. Primary phosphate reserves were exhausted, and mining ceased, but in 2006-07, mining of a deeper layer of "secondary phosphate" began. It is hoped that this economic activity might lift Nauru
Nauru
Nauru , officially the Republic of Nauru and formerly known as Pleasant Island, is an island country in Micronesia in the South Pacific. Its nearest neighbour is Banaba Island in Kiribati, to the east. Nauru is the world's smallest republic, covering just...
from the bottom rung of global GDP per capita. The only other major source of government revenue is sale of fishing rights in Nauru's territorial waters.
Though for a time phosphates gave Nauruans one of the highest per capita incomes in the world, few other resources exist with most necessities being imported, including some fresh water from Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
.
The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. In anticipation of the exhaustion of Nauru's phosphate deposits, substantial amounts of phosphate income were invested in trust funds to help cushion the transition and provide for Nauru's economic future. The government borrowed heavily from the trusts to finance fiscal deficits. To cut costs, the government froze wages, reduced over-staffed public service departments, and closed some overseas consulates. In recent years Nauru encouraged the registration of offshore bank
Offshore bank
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...
s and corporations. Tens of billions of dollars were channeled through their accounts, until international pressure saw Nauru crack down on money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
. Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely.
Aid flows, chiefly from Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
and New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
, keep the Nauruan economy afloat.
Economic performance
In the years after independence in 1968, Nauru possessed the highest GDP per capita in the world due to its rich phosphate deposits. In anticipation of the exhaustion of its phosphate deposits, substantial amounts of the income from phosphates were invested in trust funds aimed to help cushion the transition and provide for Nauru’s economic future. However, because of heavy spending from the trust funds, including some wasteful foreign investment activities, the government is now facing virtual bankruptcy. To cut costs the government has called for a freeze on wages, a reduction of over-staffed public service departments, privatization of numerous government agencies, and closure of some overseas consulates. Economic uncertainty caused by financial mismanagement and corruption, combined with shortages of basic goods, has resulted in some domestic unrest. In 2004 Nauru was faced with chaos amid political strife and the collapse of the island’s telecommunications system. Moreover, the deterioration of housing and hospitals has continued.Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru's GDP varying widely. According to the U.S. State Department, Nauru’s GDP volume was US$1 million in 2004. Nauru receives about US$20 million foreign aid a year from Australia.
Balance of payments
Phosphate is Nauru’s only product for export, although the government also receives relatively significant foreign exchange income from licencing its rich skipjack tuna fishing grounds to foreign fishing vessels, which land an annual average of 50,000 tonnes of Nauru zone-caught tuna overseas. In 2004 income from phosphate export was US$640,000, with Australia, New Zealand and Japan serving as the country's major export markets. In the same year the Nauru government budget shows that income from licencing foreign fishing vessels was over US$3,000,000.Nauru needs to import almost all basic and capital goods, including food, water, fuel, and manufactured goods, with Australia and New Zealand as its major import sources. In 2004 Nauru’s imports totaled about US$19.8 million.
Regional situation
Currently, Nauru is heavily dependent on Australia as its major source of financial support. In 2001 Nauru signed an agreement with Australia to accommodate asylum seekers (mostly from Iraq and Afghanistan) on the island, in return for millions of dollars in aid. This agreement, referred to as the "Pacific SolutionPacific Solution
The Pacific Solution was the name given to the Australian government policy of transporting asylum seekers to detention camps on small island nations in the Pacific Ocean, rather than allowing them to land on the Australian mainland...
", came to an end in 2007, prompting Nauruan concerns about the future of the island's revenue. Australia has also sent financial experts to Nauru to help the tiny nation overcome its economic problems. However, serious questions remain about the long-term viability of Nauru’s economy, with uncertainties about the rehabilitation of mined land and the replacement of income from phosphates.
In 2008, talks began between Australia and Nauru regarding the future of the former's economic development aid to the latter. Nauruan Foreign and Finance Minister Dr. Kieren Keke
Kieren Keke
Kieren Aedogan Ankwong Keke is a Nauruan politician and medical doctor. He is currently the Minister of Foreign Affairs and has previously been speaker of the Nauruan Parliament.-Background:...
stated that his country did not want aid handouts. One possible solution currently being explored would be for Australia to assist Nauru in setting up a "boat repair industry" for regional fishing vessels.
Taxation
There is no tax on income in Nauru. Taxes include the Airport Departure tax and the bed tax at the Meneñ Hotel. The 2007-08 Budget saw the increase of existing excises on cigarettes and duty on imports. A tax on sugary foods was also introduced, chiefly to help combat Nauru's diabetes epidemic.Economic statistics
- GDPGross domestic productGross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
: purchasing power parityPurchasing power parityIn economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
- US$60 million (2001 est.) - GDP per capita: purchasing power parityPurchasing power parityIn economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
- US$5,000 (2001 est.) - InflationInflationIn economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
rate (consumer prices): -3.6% (1993) - Budget: revenues: US$23.4 million; expenditures: US$64.8 million (1995/96)
- External debtExternal debtExternal debt is that part of the total debt in a country that is owed to creditors outside the country. The debtors can be the government, corporations or private households. The debt includes money owed to private commercial banks, other governments, or international financial institutions such...
: US$33.3 million - Economic aidAidIn international relations, aid is a voluntary transfer of resources from one country to another, given at least partly with the objective of benefiting the recipient country....
- receives around US$2.25 million from AustraliaAustraliaAustralia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
(1996/97 est.) - CurrencyCurrencyIn economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
: Australian dollarAustralian dollarThe Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...
The fiscal year runs from July 1 to June 30.
Employment
- Labour force are mainly employed in mining phosphatePhosphateA phosphate, an inorganic chemical, is a salt of phosphoric acid. In organic chemistry, a phosphate, or organophosphate, is an ester of phosphoric acid. Organic phosphates are important in biochemistry and biogeochemistry or ecology. Inorganic phosphates are mined to obtain phosphorus for use in...
s, public administrationPublic administrationPublic Administration houses the implementation of government policy and an academic discipline that studies this implementation and that prepares civil servants for this work. As a "field of inquiry with a diverse scope" its "fundamental goal.....
by RONPhos, educationEducationEducation in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...
and transportTransportTransport or transportation is the movement of people, cattle, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline, and space. The field can be divided into infrastructure, vehicles, and operations... - UnemploymentUnemploymentUnemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
rate is close to 90%. In February 2008, foreign affairs minister Dr. Kieren KekeKieren KekeKieren Aedogan Ankwong Keke is a Nauruan politician and medical doctor. He is currently the Minister of Foreign Affairs and has previously been speaker of the Nauruan Parliament.-Background:...
stated: "We have got a major unemployment crisis in front of us." - Main industries are phosphate miningMiningMining is the extraction of valuable minerals or other geological materials from the earth, from an ore body, vein or seam. The term also includes the removal of soil. Materials recovered by mining include base metals, precious metals, iron, uranium, coal, diamonds, limestone, oil shale, rock...
, offshore banking, coconutCoconutThe coconut palm, Cocos nucifera, is a member of the family Arecaceae . It is the only accepted species in the genus Cocos. The term coconut can refer to the entire coconut palm, the seed, or the fruit, which is not a botanical nut. The spelling cocoanut is an old-fashioned form of the word...
products - ElectricityElectricityElectricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
production (fossil fuels) and consumption are around 30 GWh (2000) - AgricultureAgricultureAgriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
is not a major employer, coconuts are the main produce
Trade
- Exports - valued at US$25.3 million (1991), mainly phosphates, main partners are New ZealandNew ZealandNew Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
, AustraliaAustraliaAustralia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, South KoreaSouth KoreaThe Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, US (2000) - Imports - valued at US$21.1 million (1991), mainly food, fuel, manufactures, building materials, machinery, main partners are AustraliaAustraliaAustralia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, USAUnited StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
, UKUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, IndonesiaIndonesiaIndonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
, IndiaIndiaIndia , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
See also
- Phosphate mining in NauruPhosphate mining in NauruThe economy of Nauru has been almost wholly dependent on phosphate, which has led to environmental catastrophe on the island, with 80% of the nation’s surface having been strip-mined...
- Nauru Phosphate CorporationNauru Phosphate CorporationThe Nauru Phosphate Corporation was a government-owned company controlling phosphate mining in Nauru, now known as the Republic of Nauru Phosphate, or RONPhos.-Failed investments:...
- Nauru Phosphate Royalties TrustNauru Phosphate Royalties TrustThe Nauru Phosphate Royalties Trust was a sovereign wealth fund developed by the government of the Republic of Nauru in which the government invested money from the state owned mining company, Nauru Phosphate Corporation...
- Tourism in NauruTourism in NauruThe Republic of Nauru is a small, isolated Western Pacific island nation, lacking many of the tourist facilities of some of its larger neighbors, such as Fiji, the Cook Islands, or even New Caledonia...
External links
- "Nauru seeks to regain lost fortunes", Nick Squires, BBCBBCThe British Broadcasting Corporation is a British public service broadcaster. Its headquarters is at Broadcasting House in the City of Westminster, London. It is the largest broadcaster in the world, with about 23,000 staff...
, March 15, 2008 - "Nauru's riches to rags decline", Dan Nolan, Al JazeeraAl JazeeraAl Jazeera is an independent broadcaster owned by the state of Qatar through the Qatar Media Corporation and headquartered in Doha, Qatar...
, March 17, 2008