Nauru reaps rewards from high phosphate prices

Updated September 4, 2008 16:03:25

Nauru is again starting to reap economic rewards from phosphate. Phosphate mining once brought in around 100-million dollars a year to Nauru. Naureans became the second wealthiest people per head in the world but mismanagement, trickery, corruption and waste bankrupted the nation. In the past 12 months, the world food crisis and growing demand for fertilizer have driven up phosphate prices dramatically.

Presenter: Jemima Garrett
Speakers: Kieran Keke, Nauru's Finance Minister

KEKE: When we first came to government several years ago, the phosphate industry on Nauru basically collapsed to a total stop. We spent about 18 months and a considerable amount of effort in accessing whether it was viable to be recommenced. At that time, trials showed that there was 20 to 30 years worth of additional secondary phosphate reserves, in addition to the remaining one or two years of primary reserves. So on the basis of that, we reinvested in the phosphate industry and commenced mining again probably about 18 months ago.

There was a couple of problems at that start up phase, which put us back about six or nine months, but phosphate mining on Nauru has been really going consistently since last year and has been in full production for most of this year.

GARRETT: Now you have seen a tripling of the phosphate prices in the last 12 months. What is that mean for the Nauru economy and for the Nauru Government budget?

KEKE: Our expectation in recommencing mining was largely that it would provide employment for the 20 or 30 years, and provide a trickle or a contribution to government revenue streams, as well as provide something to the landowners and the land beneficiaries, the trust beneficiaries over that period.

In the last 12 months, the world phosphate prices have tripled and we've been able to benefit from that and so it's dramatically changed the results that were anticipated and large results, large returns are coming in that weren't predicted and this is obviously going to benefit our landowners directly through the royalty system that they receive, as well as enable us to rebuild the trust funds that we need to rebuild for our future, as well as providing additional dividends to government revenues that weren't earlier expected.

GARRETT: Nauru has been through some very lean times. Do you think people will handle this new influx of money well?

KEKE: That's one of the fears of our government is that we've gone through the last decade of extreme economic crisis and our people have had to live through some very tough times, with very little, or no cash or disposal income available to them for quite an extended period.

Our fear is that or the question is have our people and has our government learned from the mistakes of the past, and we want to ensure through providing education that our people will use the additional or the unexpected revenues that will be coming over the next few years to plan for their future, to invest for their future, provide for their housing and their education.

GARRETT: And looking forward, what prospects are there for the phosphate price into the future?

KEKE: I guess it's a matter of speculation, but the trend remains and the rising one. We're following the world trends closely, and continuously working on ways that we can maximise returns for Nauru. And it's a combination also of ensuring that we are maximising the returns from phosphate whilst the prices are favourable to us, but at the same time, ensuring that we are investing that additional dividend and saving for the future. Phosphate won't last forever. The high prices won't last forever. They will come down again. All these things go in cycles, so we need to make the most of the times when they are higher than they are lower.