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Nauru was one of three countries threatened with limited economic sanctions by the Organization for Economic Cooperation and Development (OECD) in June as part of a revised blacklist of countries deemed to be havens for moneylaundering. President Bernard Dowiyogo was forced from office on March 29 in a political crisis over the alleged involvement of a Russian organized crime syndicate in Nauru's financial activities, and was replaced by former President Rene Harris. In September, Nauru agreed to accept around 800 mainly Afghan refugees from Australia while their applications were being processed, in return for a payment of $20 million, and in December was asked by Australia to accept up to 400 more. The tiny Pacific island has enormous international debts and faces imminent bankruptcy.
Nauru, an eight-square-mile island 1,600 miles northeast of New Zealand in the west-central Pacific, became a German protectorate in the 1880s. Following World War I, Australia administered the island under a League of Nations mandate. The Japanese occupied Nauru during World War II, shipping 1,200 Nauru islanders to the island of Truk to work as forced laborers. In 1947, Nauru was made a United Nations Trust Territory under Australian administration. Greater autonomy was granted in 1966 with the election of a parliament, which was responsible for all matters except defense, foreign affairs, and the local phosphate industry. The country achieved full independence in 1968, and Hammer DeRoburt, who had been head chief of Nauru since 1956, became the first president in May 1968. Intense personal rivalries in the tiny, faction-ridden parliament have resulted in chronic political instability, with nine changes of government in the last five years.
As veteran politicians, Dowiyogo and Harris have continued to trade power over the past several years. In July 2000, Dowiyogo won back the presidency from Harris in a close run in the 18-member parliament. In March 2001, after a parliamentary no-confidence vote held in his absence during a debate on Nauru's tax haven links to a Russian organized crime syndicate, Dowiyogo was ousted and Harris was elected once again by a vote of 9-6.
Phosphate mining gave Nauru a high per capita income, but 90 years of phosphate mining has left 80 percent of the land uninhabitable. In 1989, Nauru sued Australia in the International Court of Justice for additional royalties for mining done during the trusteeship period. Australia agreed to pay $70.4 million over 20 years in an out-of-court settlement reached in 1993. Phosphate reserves are likely to become exhausted by 2005. Future generations will draw income from the government's Nauru Phosphate Royalties Trust, but the trust has lost millions of dollars through failed investments, speculation in the Tokyo stock market, and international financial scams.
The government has carried out fiscal austerity programs, which have drastically reduced budgets, and has been compelled to develop alternative industries, one of which is to make Nauru into an offshore banking center. Lack of legal controls, however, has invited the inflow of money (an estimated $70 billion) from questionable sources for money-laundering purposes. At the end of 1999, an OECD-sponsored financial action task force had put Nauru and other countries on a blacklist. The Nauruan government refused to answer to these accusations until four U.S. banks imposed a ban on U.S. dollar trade with the island in January 2000. In exchange for a lifting of the ban, the government agreed to institute new banking laws and conduct closer monitoring of banking activities. In August 2001, parliament passed legislation establishing a regulatory body to supervise offshore banking. Nevertheless, the task force deemed the measure to be insufficient, and when Nauru failed to meet a November 30 deadline to make "appropriate amendments" to the legislation, it was threatened with economic sanctions.
Citizens of Nauru can change their government democratically. Voting by secret ballot is compulsory for all citizens over the age of 20. The 1968 republican constitution provides for an 18-member parliament, representing 14 constituencies, directly elected for a three-year term. Parliament elects the president, who serves as head of state and head of government, from among its members. The elected Nauru Island Council serves as the local government and provides public services. All changes in government have occurred peacefully and in accordance with the constitution, and multiple candidates competed in recent parliamentary elections. There have been ad hoc political parties since independence, but politics is generally based on personal loyalties and occasionally on issue-based coalitions.
The judiciary is independent, and the right to public trial is upheld. Many cases are settled out of court through traditional mediation procedures. The police force of less than 100 members is under civilian control. Some foreign workers have alleged that they receive inferior police protection compared with Nauruan citizens.
The government respects freedom of speech and the press. There is no regular independent news publication, but the government puts out the Nauru Bulletin, a weekly newspaper. The state owns Radio Nauru, which carries Radio Australia and BBC broadcasts, as well as the local Nauru TV. In May 2000, police raided Nauru TV and confiscated a videotape of a parliamentary vote. In August, the government banned Agence France-Presse reporter Michael Field from entering Nauru to cover an annual summit meeting of the Pacific Islands Forum. Although no reason was given for the ban, Field had been regularly covering Nauru's involvement with money-laundering issues. Four pro-independence activists from Irian Jaya were also banned from attending the meeting.
Freedom of religion is respected in law and in practice. Freedom of assembly and association is respected. Workers have the constitutional right to form independent unions, but successive governments have generally discouraged labor organizing and no trade unions have formed. The private sector employs only one percent of all salaried workers. There is no legal basis for collective bargaining or holding strikes, and these activities rarely occur in practice.
Citizens enjoy freedom of domestic and foreign travel. Foreign workers must apply to their employers for permission to leave the country during the period of their employment contracts. Those who leave without permission are likely to lose their jobs. A law requiring foreign workers who are fired to leave the country within 60 days has created serious hardship for many foreign workers. Women legally possess the same rights as men, but they continue to face discrimination in education and employment. They are also underrepresented in government and politics; there are no female members of parliament.