Governance Making Progress

NAURU: The country has seen wealth come and go. Phosphate mining ushered in great prosperity but as demand fell away 10 years ago, Nauru sank into debt. Finding its way back to economic stability will take time and determination but the Government of Nauru is showing it has what it takes. Over the past three years it has posted balanced budgets.

Policeman standing in a row With the help of an Australian finance team the Government of Nauru has moved steadily to implement key financial and governance reforms in debt management, business planning, public sector training and accounting.

And the reforms are working. In 2006-07, Nauru's budget was looking decidedly healthier. With support from donors like Australia, the reformist government led by Ludwig Scotty is starting to turn around Nauru's fortunes.

'When we came in, all the geese that lay golden eggs had gone so we had to start from scratch. We're still on the brink. Two steps forward and one step back. Life is still risky for us,' says the President of Nauru, Ludwig Scotty.

'But one of the first things we did as a government was cut the salaries of public servants and ministers right back across the board. We all received the same amount, including me. There was a lot of grumbling at first but everyone knew Nauru had lost its properties and its aircraft. We're now on a sliding salary scale.'

Australian in-line officials are working with the Government of Nauru, through AusAID, to help the country get on its feet again. Schools are being built and refurbished and there is less absenteeism. Health and pharmaceutical services are improving and power and fuel supplies are more reliable. 'Some people think it's not good to use people from outside, that we should maintain our independent sovereignty and do everything ourselves, but we need professional advisers. We set the policies and make decisions but we need independent, high quality advice.'

Nauru is no longer issuing investor passports, it has tightened up on banking operations and is off an international money laundering blacklist. Staff numbers in the public service and state-owned enterprises have been streamlined. Phosphate exports have recommenced on a small scale.

'We know what we must do to get the nation's finances in order,' says the Minister for Health, Kieren Keke. 'It's a matter of controlling expenditure, fixing up budgets and trying to generate revenue.' The trouble is Nauru's main revenue base is largely limited to issuing fishing licences. 'But we're now looking at alternative ways to raise funds, such as establishing commercial fisheries and introducing secondary phosphate mining. The market for phosphate is growing again and, while this method of secondary extraction is more complicated, the signs are that it very well may be an economic winner for us.'

With the help of the finance team from Australia and consultants provided by AusAID, Nauru is becoming once more fiscally fit. 'We're putting in place new financial systems in most state-owned enterprises,' says President Scotty. 'Accounts will be properly issued again. Part of the constitutional review process also looks at strengthening the independence of the Audit Office. We're looking at our expenditure, we're tightening our belts and we're making progress.'

Above: Police practise drill. It's all about discipline - from fiscal responsibility to maintaining law and order. Photo: Lorrie Graham

This and other stories can be found in AusAID's Focus Magazine

2007