Nauru Phosphate Royalties Trust
Encyclopedia
The Nauru Phosphate Royalties Trust (NPRT) 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
. This money was then re-invested in a real estate portfolio, among other things, to provide the government with a reliable national income following the depletion of minable phosphate
s on the island. Although at one time successful, mismanagement and corruption later essentially bankrupted the fund, thus virtually bankrupting the entire Republic.
Responsibility for the Trust rests with the Ministry for the Nauru Phosphate Royalties Trust, a Cabinet
position. At present, the office is exercised by President
Marcus Stephen
himself..
The mines brought considerable wealth to the tiny island of Nauru, with the industry bringing in around AU$100-120 million annually. Annual government expenditures amounted to around AU$30 million, thus giving the republic around AU$80 million per annum. This surplus was then added to the trust.
Eventually, more than AU$200 million was borrowed. In order to consolidate this debt and pay interest, the government took out an AU$240 million loan from General Electrics Capital Division, which was levied against the nation's international real estate portfolio.
.
offered a cautious note:
The problem of Nauru presents a paradox. The striking contrast is between a superficially happy state of affairs and an uncertain and indeed alarming future... But this picture of peace and well-being and security is deceptive. Indeed it is a false paradise. For these gentle people are dominated by the knowledge that the present happy state of affairs cannot continue.
Sovereign wealth fund
A sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Some of them have grabbed attention making bad investments in several Wall Street financial...
developed by the government of the Republic of Nauru in which the government invested money from the state owned mining company, Nauru Phosphate Corporation
Nauru Phosphate Corporation
The 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:...
. This money was then re-invested in a real estate portfolio, among other things, to provide the government with a reliable national income following the depletion of minable phosphate
Phosphate
A 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 on the island. Although at one time successful, mismanagement and corruption later essentially bankrupted the fund, thus virtually bankrupting the entire Republic.
Responsibility for the Trust rests with the Ministry for the Nauru Phosphate Royalties Trust, a Cabinet
Cabinet of Nauru
The Cabinet of Nauru is the cabinet of the government of the Republic of Nauru.The Constitution of Nauru specifies that the Cabinet is composed of the President and of four or five members of Parliament appointed to Cabinet positions by the President.The Cabinet is "collectively responsible to...
position. At present, the office is exercised by President
President of Nauru
The President of Nauru is elected by Parliament from amongst its members. He is both the head of state and head of government of Nauru. Nauru's unicameral Parliament has 18 members, with an electoral term of 3 years. Political parties only play a minor role in Nauru politics, and there has often...
Marcus Stephen
Marcus Stephen
Marcus Stephen was President of the Republic of Nauru from December 2007 to November 2011. In addition to the presidency, he held the offices of Minister for Home Affairs, Minister for the Nauru Phosphate Royalties Trust, Minister for Police, Prisons, & Emergency Services, and Minister for Public...
himself..
Beginnings
In 1970, the newly independent government of Nauru purchased the mining rights to the islands lucrative phosphate mines from their previous colonial ruler, Australia, for AU$21 million.The mines brought considerable wealth to the tiny island of Nauru, with the industry bringing in around AU$100-120 million annually. Annual government expenditures amounted to around AU$30 million, thus giving the republic around AU$80 million per annum. This surplus was then added to the trust.
The prime years
At the peak of the trust's wealth, the NPRT had investments totaling AU$1 billion. These investments included properties in Australia, the Philippines, Guam, and the USA. A partial list of international investments includes:- Fiji: The 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
- Australia: Nauru HouseNauru HouseNauru House is a landmark 52-story building located in the Melbourne CBD. The building was designed by architectural firm Perrott Lyon Timlock & Kesa-History:...
(Melbourne) -- (this development was known as the "jewel in the crown" of Nauru's overseas properties)
Mismanagement
The great wealth of the tiny pacific island led it to be nicknamed the "Kuwait of the Pacific". With this great wealth, citizens and government officials flaunted it, believing it to be an endless supply. This led to high external representation and excessive official overseas travel (that included golf in the Bahamas) which blew out budgets year after year so that the government began to borrow money to supplement its huge spending. The public service had over 1,500 employees (in a country with a population less than 10,000) and the government ran deficits of AU$10 million in the 1990s.Eventually, more than AU$200 million was borrowed. In order to consolidate this debt and pay interest, the government took out an AU$240 million loan from General Electrics Capital Division, which was levied against the nation's international real estate portfolio.
Downfall
The virtual end of mining on Nauru paired with running budget deficits made it very difficult for Nauru to pay its debts. International creditors were not receiving payments, then seizing rights to Nauru's entire real estate portfolio, and even seizing the sole aircraft of Air NauruAir Nauru
Our Airline is the national airline of the Republic of Nauru. It operates scheduled international services to other Pacific islands and Australia. Its main base is Nauru International Airport...
.
"The paradox"
In 1962, well before Nauru took over the phosphate industry and achieved independence, the United NationsUnited Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
offered a cautious note:
The problem of Nauru presents a paradox. The striking contrast is between a superficially happy state of affairs and an uncertain and indeed alarming future... But this picture of peace and well-being and security is deceptive. Indeed it is a false paradise. For these gentle people are dominated by the knowledge that the present happy state of affairs cannot continue.
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...
- Economy of NauruEconomy of NauruRevenues 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...
- 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:...
- Republic of Nauru
- Tuvalu Trust FundTuvalu Trust FundThe Tuvalu Trust Fund is an international sovereign wealth fund developed by Tuvalu, a small, central Pacific island nation, as a supplement to cover shortfalls in the national budget.-Establishment:...
Further reading
- United Nations (1962) Visiting Mission to the Trust Territories of Nauru and New Guinea. (New York, U.N.)