Politics
Young Nauruans Prepare to Fight for a Future
Anger over the waste of the phosphate millions
Nauru is at last about to slide off the end of its financal lifeline, according to a brigade of angry reformers. After 30 years of wild spending, waste, terrible management and being diddled by shoals of foreign sharks, the country is on the verge of losing the last of its solid assets, predict the authors of The Visionary. This is a publication brought out by a group of young worried businesspeople and civil servants.
They have formed Naoero Amo, a political party, Nauru¹s first. It intends to fight a general election next year with the aim of salvaging what remains of the 21 square kilometres country¹s near exhausted phosphate wealth by the total financial collapse of the country. Nauru's finances are a mystery even to the government, which probably doesn't really understand what is owed and what has been lost, according to a senior politician.
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According to the Asian Development Bank, in 2000 there was a budget deficit of over A$10 million, or around 18 percent of the Gross Domestic Product (GDP).
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The level of external government debt is estimated at A$280 million. External debt service totalled A$13.3 million in 2000, or around 13 percent of exports of goods and services. However, the government has big loans outstanding with government-owned corporations These also have significant levels of external debt, so the real foreign debt is far higher.
The Bank of Nauru is moribund. Nauruans avoid depositing money with it because they can't be sure of being able to withdraw it. In Nauru everyone wants payment up front, with cash.
Nauru's brigade of old politicians engage in rivalry for the president¹s office that cause frequent changes of government. Instability is partly the cause of the squandering of hundreds of millions. The old brigade is sensitive about foreign publicity given what they treat as the privacy of details of Nauru¹s financial affairs.
They don¹t like it. In August this caused the banning from Nauru of Mike Field, of French news agency AFP, who has written a lot of words about Nauru¹s condemnation by the OECD group of large economic powers as being the hotbed, with Russia and the Philippines, of massive money laundering deals by international crooks.
Now The Visionary is publishing juicy details of the imminent draining of the last of Nauru's investment wealth. This is happening as Nauru digs out the last few years' supply - perhaps four or five, depending on the mining rate - of the phosphate that has earned it hundreds of millions of dollars.
When phosphate runs out Nauru, as it now stands, will be left with little to live on except revenue from licences bought by foreign fishers of its 320,000 square kilometres, its own small fishing industry and perhaps from tourism if this at present non-existent industry can be got going.
After independence came from Australia in 1968 Nauru began investing heavily in properties overseas with the aim of being able to count on millions of dollars in annual investment earnings after phosphate mining ended around the end of the 20th century.
In 1991 foreign property assets were valued at A$1260 million. They peaked at a value of A$1700 million, a well informed source told Pacific Magazine. By 1996 the government's finances were in a "critical state", according to a former finance minister, Rueben Kun, due to spending.
The value of the assets portfolio was down by more than half, to A$423 million, due to borrowing and collateratisation of properties in Australia, the United States and elsewhere.
A 1993 list of assets held by the Nauru Phosphate Royalties Trust included:
-Australia: Nauru House in Melbourne; Islander¹s Place, Savoy Hotel, New
Zealand House in Sydney; Railway Square Hotel (Sydney);
-Fiji: Grand Pacific Hotel;
-India: Paradeep Phosphate;
-New Zealand: Auckland Sheraton Hotel; Roturua Sheraton Hotel;
-Philippines: Manila Pacific Star Hotel, Philippines Phosphate Fertilisers;
-United States: Pacific House (Washington); Singer Building development (665
acres) (Houston); Hillside property (600 acres) (Oregon);.
-Hawaii: Nauru Hotel;
-Guam: Pacific Star Hotel;
-United Kingdom: 3 Chesham Street, London;
-Samoa: Properties at Vaitele and Sogi.
According to The Visionary and information given to parliament, a loan of
A$155 million from the General Electric Capital Corporation in 1998 was
obtained basically to pay off other debts, including interest and for a
payoff to owners of mined land.
"If a loan is required to pay this, where is the real interest?" The Visionary comments. "Is there any real interest or is it only made to look that way with some fancy accounting work on paper?"
The loan was to pay off "critical debts" totalling A$37.5 million that if not met would have cost the loss of some important properties. It was also used to refinance loans of at least A$93 million.
According to The Visionary the five-year loan carried interest "certainly on the high side" for a loan of "this kind" and costing about A$12.8 million a year derived from income from five properties in Australia and two in the United States. A "success" fee paid to a loan broker cost more than A$1.1 million and legal fees, stamp duties and consultants fees cost more than A$1.7 million.
Last May, finance minister Ali Amwano said in a statement that General Electric Capital loan interest was being met, but Nauru had been unable to repay any principal.
A loan condition is that by January 7 next year the government needs to bring debt down to less than 75 percent of the total market value of the last properties.
"We have been told that the loan capital has not been reduced, so the only way that this requirement will be met is if the value of the properties has risen," The Visionary comments. It adds that the very buildings the loan had been obtained for to save would have to be sold to repay it."What is to happen with the properties at the completion of the five-year terms? The loan must be repaid on January 5, 2004. "There is still going to be a very large debt to General Electric Capital. If none of the principal has been reduced then Nauru is looking at a A$155 million debt to figure out how to pay. "This will need to be either re-financed with another loan or covered by selling the properties. How much money will be left for Nauru at the end of the day?"
Journalists who went to Nauru for the Pacific Islands Forum meeting in August were told by a senior government official that the government's difficulty in paying for the delivery of an urgently needed shipment of 500 tons of generating fuel was due to "cash flow" problems.
Cash flow problem was the explanation given for other difficulties, including frequent delays of pay for civil servants, zero maintenance for equipment, and debts ranging for money owed to the University of the South Pacific to international communications service costs.
The government relies heavily on earnings from each phosphate shipment, with all the cash from these being taken from the Nauru Phosphate Corporation leaving it with little or nothing for repairs and maintenance.
One source said frequent changes of government, about eight in the last three years, had caused a situation in which the present government probably didn¹t know what its debts were. Adding to the mystery of the state of Nauru¹s accounts is the fact that 11 reports that by law must be annually tabled in Parliament are all well overdue.
The Republic of Nauru Finance Corporation has not put in a report for eight years. "Is there something to hide or is this just plain incompetence?" The Visionary asks. "What of the fact that it is illegal not to comply with the relevant acts?"
Last presented reports include those of the Nauru Insurance Corporation (1994/1995), Bank of Nauru (1995/1996); Nauru Phosphate Corporation (1995/1996); Nauru Air Corporation (1995/1996), Public Service Report ( 1995/1996) and the Director of Audit¹s Report (1998/1999).
Where has all Nauru's money gone? Years of losses by Air Nauru certainly total a nine-digit figure. A report some years ago mentioned a A$50 million loss.
There was a bad investment in a big phosphate plant in India, shipping company and fishing boat flops, millions lost with a flopped London musical show Nauru was inveigled to invest in and $60 million swindled from the coffers by a Fiji-Indian conman working with a gambling-addicted Australian lawyer gaoled in Australia for seven years for his part in the fiddle. According to The Visionary investment losses may be as great as A$2100 million.
