Nauru is an island nation found in Micronesia, one of the subregions of Oceania. The country occupies an area of 8.1 square miles which is currently the third smallest state following the Vatican City and Monaco. It is the smallest state in the South Pacific Ocean. Nauru has a population of 11,347 people. In 2017, Nauru GDP on purchasing power parity was $160 million and per capita GDP on purchasing power parity of $12,052. Some of the leading industries in Nauru include phosphate mining, coconut products, and offshore banking. The economy of the island nation of Nauru is dominated by mining of phosphate and internet banking services which is also an emerging sector in the country. Due to the country's small size and limited natural resources, agriculture contributes an extremely small part of the country's economy, and therefore the country is not self-sufficient in food. Although the nation is an island, it has no fishing industry.
The agriculture industry accounts for a small portion of the GDP and 2010, fisheries, forestry, and agriculture, in general, accounted for 6% of the GDP, while in 1995 agriculture was accounting for 5% of the GDP. Widespread mining in the country has left only 20% of the land suitable for agricultural practices. Besides, the country experiences frequent droughts and native agricultural knowledge has also been lost. The country's agricultural industry is limited and there are no formal commercial agricultural undertakings other than subsistence farming. Only food crops, mainly coconut trees, are primarily cultivated in individual farms in area surrounding the small island lake of Buada lagoon. Another major problem facing agriculture in the country includes the underfunding and the little formal training of agriculture. Other agricultural crops grown in small farms include sugarcane and there are also farmers who keep pigs and chicken mainly for domestic consumption. According to FAO, the availability of water is also one of the critical limiting factors for agriculture growth and as a result, the country imports most of its food items from other countries.
Mining of phosphate in Nauru has dominated the country's economy since it was discovered in the 20th century. The largest mines of phosphate are found in the central part of the island, in the region known as Topside. Since the 1920s, until the country gained its independence in 1968, Nauru was an administrative region of Australia and the mining of phosphate in the country was operated and owned by the British Phosphate Commission (BPC). After independence, the country established the Nauru Phosphate Corporation which took over the mining of the mineral in the island. Nauru had the largest phosphate deposits in the world and the country exports most of its phosphate to South Korea, New Zealand, Australia, Japan, and Indonesia among other countries. The country's primary phosphate deposits were depleted in 2006 and mining ceased the same year. However, deep layer mining of the secondary phosphate resumed the following year and they are expected to be exhausted in the next 30 years. Phosphate mining in the country has had a huge environmental impact leaving about 80% of Nauru's land area destroyed and unsuitable for any other activity, even for residential development.
Tourism in Nauru is extremely small because it does not have many tourist attractions compared to its neighboring Pacific Island nations. The country is remote and is relatively expensive to access. Similarly, tourist facilities are limited. Nauru only has two hotels and it has no resorts. However, the government is trying to develop the tourism industry to diversify its economy which has been relying on phosphate for a long time. Some of the leisure activities include deep sea fishing that is offered by different local businesses which are privately owned and boats are available for charter. Wreck diving and scuba diving are not available because the equipment is not easily obtainable in Nauru.
The island nation of Nauru has well-developed internet-based banking which has attracted more than 400 registered banks. The banking industry in Nauru is characterized by lack of taxes and banking secrecy which has attracted numerous banks. The cost of establishing a bank in the country is about $5,680 and registration and renewal fees of about $4,980 every year. Nauru has been accused, particularly by the government of Russia, to have accepted more than $70 billion in deposits from criminal organizations such as the Russian Mafia. The United States has also accused Nauru of laundering money which was illegally obtained. Typically the money is transferred through the Nauru Banks. The United States at one time threatened to abolish the right of Nauru to trade in US dollars, but in 1999 Nauru committed to cleaning up its banking industry.
Challenges Facing Nauru
Some of the greatest challenges facing the island nation of Nauru is rehabilitating extensively damaged landscape as a result of the mining of phosphate and trying to diversify the economy to replace the income generated from phosphate mining. When the government anticipated depletion of phosphate deposits, it invested in trust funds hoping to cushion the country in the transition period and to provide economic future to the country. It is estimated that the country invested in the fund about $100 million to $800 million. Most of the assets are in stocks and real estate as well as bonds in the overseas countries particularly in Australia, Fiji, and Hawaii. However, there have been numerous allegations of corruption and mismanagement of the trust fund. In 1989, Nauru took a case to the International Court of Justice against Australia for failing to take any remedial actions against environmental damage as a result of phosphate mining. A settlement was finally reached out-of-court for Australia to rehabilitate some of the areas in Nauru.