Kava basics missing

Once a lucrative export crop in the Pacific, kava has declined over the years.

By Dionisia Tabureguci

THE EXPLOSION of the kava exporting industry in the Pacific in the late 1990s in now looking more and more like a one-off stroke of luck for some stakeholders. Efforts may be on going in trying to persuade the Europeans to lift their ban on kava but there are scattered opinions of the success of even reviving that market.

Samoa, Tonga, Vanuatu and Fiji used to supply grounded kava to countries in Europe that produced kava-containing herbal drugs, sold then for stress relief. In a short while, it had become a bit of a wonder drug until the Germans linked kava to liver damage and banned it in 2001. How it swiftly truncated the soaring kava exporting business in the region is no longer a mystery but reviving the European market is an issue way down the line, said one Vanuatu exporter. Pacific countries exporting kava have much basic work to do.

ANZ’s new Pacific chief confident in regional economies

“We have made much progress but progress to us here at ANZ is not just how many accounts we have opened nor how much people have saved with us. It is more a question about how we are contributing, how we are helping to unlock the potential in rural areas of the Pacific and whether we are making a real difference to the lives of the people we provide bank accounts and other services to.” 

- Mike Guerin, new managing director of ANZ's Pacific operation.


by Dionisia Tabureguci

PACIFIC island countries are going to see more of the Australia and New Zealand Banking Group as it continues to make its presence felt in the region.

The new managing director of its Pacific operations Mike Guerin said the bank has a number of plans geared towards extending its reach in the region further than the 10 countries that it operates in. 

“I believe ANZ can contribute to the local economies by providing international expertise and knowledge transfer, building local employment opportunities and international career options for Pacific islanders and by ensuring ANZ maintains and grows points of representation throughout the Pacific,” said Guerin in an interview with Islands Business Magazine.

Rick Hou sure of Solomon Islands economy

by Dionisia Tabureguci
photo of Rick Hou supplied by Central Bank of Solomon Islands


WHEN the century turned in 2000, so did the social and political matrix of a few countries in the Pacific islands. While nations like Samoa and Cook Islands were earnestly mending the nets of their economies to better their prospects, others like Fiji, Papua New Guinea and Solomon Islands were going the other way. In particular, the meltdown of Solomon Islands towards the end of the 1990s is well documented as being linked to land-related tension between native Guadalcanal islanders and neighbouring Malaitans.
The reign of the Isatabu Freedom Movement, a group that comprised Guadalcanal islanders, saw the attacks and subsequent displacement of Malaitan settlers on Guadalcanal, finally erupting into a takeover of Honiara and Bartholomew Ulufa’alu’s government in 2000 by armed militants that belonged to the Malaita Eagle Force.
Continued standoffs resulted in the occupation of Solomon Islands by the Australian-led Regional Assistance Mission to the Solomon Islands (RAMSI) in 2003. Law and order were gradually restored and economic rebuilding began.
In those trying times, one institution that held fast to its mandate was the Central Bank of the Solomon Islands. With governor Rick Hou at the helm, the country’s economy began a slow but steady climb back to normalcy. In April this year, Solomon Islands held its first national elections since the ethnic tension.
However, the newly elected government and its prime minister drew a violent public outcry after being accused of corrupt collaboration with Asian businesspeople.
Rioters burned and looted Chinatown, a commercial section in the capital Honiara run by Asian businesspeople. While this did put a dent to progress made in rebuilding the economy, Hou remained optimistic that the country will not suffer. In an interview with ISLANDS BUSINESS Magazine, he spoke of an economy that is faced with other major challenges.


INTERVIEW

IB: You were optimistic about the Solomon Island economy before the April riot. Do you still feel that way?

Hou: Oh yes. I am still optimistic. Last year, the economy turned a 5 percent growth and our forecast this year is 6 percent. Given the persistence of the trend that we saw happening most of last year, indications are that the trend will continue so we will keep our growth forecast for this year and last year. We will not review them.


IB: So the April riot is not going to be affecting the economy so much. How is that?

Hou: Our assessment is that there is not a lot of impact in the short term. We looked at the government revenue side and felt there would not be a lot of impact there. I guess the areas where we will have negative impact are in security, property rights and investment confidence. The riot came at a very bad time when we were trying very hard to rebuild confidence and it is not a good thing to happen at a time when we are doing this. So I think we will have to work very hard again to convince not only our own people here but also most overseas investors to invest.


IB: What then has been the driver of Solomon Island’s economic growth?

Hou: Last year, the main drivers of the economy were construction, utilities and distribution or wholesale activities. That one has dramatically gone up.


IB: Is this because of RAMSI?

Hou: I think so. But generally, the economy is picking up, especially the construction sector. There’s a lot of construction going on…roads, bridges, buildings. But along with that, consumption has also gone up really dramatically.


IB: RAMSI, we have been told, will extend its stay in the Solomon Islands. How do you see that in relation to the country trying to put forth a good image for investment?

Hou: You ask the ordinary man on the street about the presence of RAMSI and they will tell you that, yes, we need RAMSI. I guess the feeling of normal Solomon Islanders here is that our institutions are still fragile and there is still a need to get on top of the issue of law and order. Our government departments need to be sorted out. So there is a lot of need for institutional building, training, skills upgrade…these are all happening at this time and I think it is not going to be a short-term thing.
I also believe that these are areas where RAMSI’s input should be - in building our confidence in our institutions and that our own people can manage them, for example, the government department, finance. I guess it is in the rebuilding process where we will need RAMSI to help us in. So I think the extension of RAMSI will be positive there. But I think what RAMSI should be careful of is giving an impression that it can fix everything because it cannot.


IB: You were saying that there is a need for rebuilding and strengthening institutions. What is the situation right now?

Hou: Yes, there is that great need. Look at our police force for instance. It was badly affected during the ethnic tension. We had officers who were taking sides and as a result, the integrity of the police force was badly affected by the ethnic tension. We are now in the process of re-recruiting and retraining and in the process, we hope that the confidence that the public has in the police force will return. At the moment, it is still doubtful. So our police force is one institution that needs to be upgraded in terms of the confidence that people have in it, that it can really enforce the law. Other institutions like government departments; well, some of them are doing very well because of RAMSI’s presence in them, for example the Ministry of Finance and Treasury. They have people in there who are looking after things, for example, in treasury, things are now under control as far as government finance goes. Now they are going to have local counterparts to understudy the overseas RAMSI officials that are occupying positions there. Good things are also already happening in the judiciary. Much improvement is needed in other areas like the utilities. Our electricity and water supplies are very weak at the moment. Also in the areas of good governance, we are very weak here in the Solomon Islands so we need to revamp the governance aspect of our all institutions, whether in government, semi-government or those in the private sector.


IB: And then there is the issue of corruption…

Hou: Yes, there is a fair bit of that still happening and this is because of the absence of governance principles, rules and regulations. Some people tend to interpret rules and regulations according to how it is convenient for them and in some institutions, the checks and balances are still not there. One of the things that people have been urging RAMSI and government to do is to bring to account any corruption cases. There are a lot of speculations and allegations going on but nothing has really come to the front to prove that corruption has taken place. People have been terminated and sacked as a result of allegations for corruption and in the last government, ministers were sacked left right and centre but I don’t think there has been any case where the court has sent people to jail for their involvement in corruption.


IB: You were talking about the problems of over-logging. How much of a threat is that to your economy in your effort to gain from your natural resources?

Hou: I have three concerns when it comes to logging. The first concern is that of the environmental damage that logging is causing to our country. I am not sure about the management practices that logging operators apply in the forests. I can only see it in my own local area where – I mean I know very little about forest management - but all I know is that rivers are not flowing and what you have in the lagoon is mud and that’s all I see. So definitely, some environmental concern is there. The other concern I have is: what will happen when we run out of trees? According to the forestry experts at the Forestry department, we will run out of trees in six years’ time if we keep cutting at the rate we are cutting. Six years is not a long time and that is where my third concern is, when we will be looking for something to fill this gap.
Sadly for us, logging has now become the mainstay in terms of foreign exchange and in terms of our exports as it accounts for almost 60 percent of our exports. In terms of our exports, logs is one of our few exports and it account for more than 50 percent of our exports. It is also an important government revenue – it accounts for more than 30 percent of government revenue so it is a very important commodity at the moment. My concern is: what will happen in six years’ time?
The third concern that I have is really a question that I have been raising for a number of years that I just have this gut feeling that the local economy is not getting maximum benefits out of logs. Yes I mentioned that it is the leading export earner for us but it could be more. I am not sure about the prices that we are getting out of our logs because we do have very valuable trees here. I am not sure about the value we are getting for our exports and the value we are getting in terms of our import duties because for a number of years, these logging activities have enjoyed a lot of exemptions. I am also overly concerned about the resource owners. I am not sure whether they are getting any benefits out of this. I have my doubts.


IB: So this is mostly the private companies who are here to do logging?

Hou: At first it used to be foreign companies who come in here to do logging. The license allowed you to do logging and give you a quota, which allows you to log a certain cubic meter of logs. In the last few years, the government had moderated that project. What it did was gave resource owners the license and, in theory, these resource owners and landowners would own and run the logging operation. However, things did not happen that way. The thing that is happening now is the landowner or the license holder, usually goes out in search for a foreign company to operate the logging operations. And there’s very little government involvement in the negotiation process. And this is where I see the landowners losing. For example where I come from, some of the landowners are getting SB$40 (US$5.20 per cubic meter) and I am not sure if the landowners know exactly that they are getting the wrong end of the stick.


IB: Isn’t there a mechanism or process in place that will take care of the marketing of this commodity?

Hou: There have been suggestions and discussions and proposals on this but unfortunately the way the whole process has been managed is so murky and disorganised that everyone is doing their own thing. And as long as you can get a license, a concession and landowner agreement, you go ahead and log. At the end of the day, I think the landowners are the ones who are losing out the most.


IB: Solomon Island’s foreign reserves situation looks attractive with an average seven months import cover, mostly from aid monies as you’ve mentioned. Would you expect this situation to continue in the immediate future?

Hou: Solomon Island’s external reserves position has been relatively high since 2004. In fact, over the last 18 months, the foreign reserves represent an average of six months of import cover. This is quite an achievement given that the Solomon Island’s external reserves have, historically speaking, been always below three months of import cover. So for the moment, our external position could not be better. We are very mindful however, that much of this was derived from donor assistance and other RAMSI related activities in the Solomon islands. However, since last year, we have seen some improvement in long-term sustainable sources of foreign exchange, for example in exports and foreign direct investment. I believe the favourable situation would continue for some time yet. Much of the economic reforms and physical infrastructure rehabilitation work has barely started and hence with government commitment and donor assistance, it should still continue for the foreseeable future. These reforms and the rehabilitation process will take time and commitment, but when pursued consistently, economic activity is expected to pick up further.


IB: Inflation is at around 10 percent. Could the economy sustain such high rates and what is being done to mitigate inflationary pressures?

Hou: Historically, double-digit inflation is not new to the Solomon Islands. However in the last two years, it has been maintained in single digits. More recent numbers released by the Statistics department show inflation has declined to 8.5 percent by the end of 2005. This is within the central bank’s policy objective, which is to keep inflation below 10 percent per annum. Prolonged inflation of over 10 percent would pose a threat to economic growth. Current monetary conditions however pose potential risks to this policy objective. The banking system is highly liquid and the government has built substantial deposits with the banking system. Higher oil prices, accelerated lending by commercial banks, a draw down of government balances and the RAMSI spending could all add to inflationary pressures. In a small open economy like the Solomon Islands, price stability is vulnerable to all these movements. The previous government had acted sensibly and responsibly to help ease this pressure and the new government should do the same. The central bank is poised to take appropriate action to lessen any inflationary pressure by mopping up excess liquidity to influence domestic credit growth. We may also use administrative measures where necessary and of course, use moral suasion. We do however encourage financial institutions to provide greater access to financial services in the rural areas.


IB: What about exports, how is that faring?

Hou: Solomon Island’s export base is very narrow and is mainly in raw materials. Production levels of our main commodities – round logs, fish, copra and cocoa – have rebounded since the restoration of law and order. Log production has been running at record high, although unsustainable, levels. Production levels in other commodities are already close to pre-crisis levels. There is still capacity to increase production and to broaden the economic base. The Oil Palm project, which has been taken over by a PNG-based investor, is expected to start production this year. Given the high level of interest in this commodity, it may in future become a major source of employment, foreign exchange and general economic activity for the Solomons. In the mineral sector, although its production schedule has been pushed back by about a year, plans to restart the Gold Ridge mine is already a source of confidence building.


IB: What is your view on the progress of the global economy and how Solomon Island’s economy can benefit from it?

Hou: The positive growth indications in the global economy are encouraging as it will be helpful to us. More particularly in Japan and some of the Asian countries, which are important destinations for our exports, we are hopeful that these positive trends will continue. However, the consistent rise in oil prices will seriously undermine these hopes. For Solomon Islands, oil accounts for about 40 percent of our total imports and is an important component in local production. The increasing oil price therefore poses potential risks to this positive outlook. And for a small open economy like Solomon Islands, we are extremely vulnerable.

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NOTE: This is the original transcript of a Rick Hou interview, published in the Islands Business Magazine as: Interview: Rick Hou, GOVERNOR OF THE CENTRAL BANK OF SOLOMON ISLANDS, pp 34,35, September 2006 edition.

Islands Business is the flagship publication of Islands Business International.
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UNESCAP forecast "robust" growth for Pacific

UNESCAP launches 2007 flagship publication


By Dionisia Tabureguci

IN the face of an expected slowing of US economy in 2007 nudging Asia into what has been described as “uncertain times”, Pacific Island economies are forecast to experience “robust growth”, according to the 2007 Economic and Social Survey of Asia and the Pacific, the flagship publication of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).
In a worldwide launch of the survey report, titled: Surging Ahead in Uncertain Times, UNESCAP executive secretary Kim Hak-Su said although Asia and Pacific nations were rapidly emerging as engines of global growth, there were key questions.
“What will drive our growth if the U.S economy slows down in 2007? Ten years after the Asian economic crisis, is the region once again becoming more vulnerable to shocks? Has the region learnt to live with high oil prices? What kinds of opportunity and challenges does China present to trading nations in Asia and the Pacific? How do central Asian countries cope with the appreciation of their currencies in the face of rising oil prices?”
While indeed growth will be robust for PICs in 2007, they lag behind their Asian peers, most of whom have long instituted economic and structural reforms and policies on good governance, transparency and accountability.
The report estimates Pacific’s average growth at 3.7 percent in 2007, on par with last year’s 3.8 percent. Although considered robust by UNESCAP, the growth is not enough to push forward the standard of living of Pacific islanders.
“Much higher levels of economic growth are required if Pacific island countries are to raise their living standards significantly in the face of rapid population growth,” said Herve Beaver, head of UNESCAP Pacific Operations Centre.
“For the future, there remain many big challenges that Pacific islands have to meet. The poor investment climate in many Pacific island countries is depriving them of much needed investment to sustain higher economic growth. Limited scope for export diversification and poor infrastructure continues to be a problem in many countries,” Beaver said.
The report identified internal challenges faced by PICs as poor investment climate, maintaining political stability, limited scope for export diversification and poor infrastructure.
External challenges, of which PICs had little control, were noted as being geographical isolation, trade liberalization and higher oil prices.
The prevailing high oil prices, although expected to ease in 2007 as global economy slows, has posed and will continue to pose considerable challenges for policymakers in Pacific island countries, with only PNG expected to benefit from the windfall, it being the sole producer and refiner of oil in the Pacific region.
“For other Pacific island countries, high oil prices have reduced their terms of trade and led to the deterioration of their trade balances and current accounts. The 250 percent rise in the price of West Texas Intermediate petroleum has translated into sharply higher import bills and to higher costs for businesses and consumers, thereby reducing incomes and stoking inflationary pressures. And the cost of international air travel is rising just as tourism was beginning to improve in several Pacific countries,” the report said.
The report noted that PICs had implemented various policy measures in order to manage shocks from this cost but for most, the option of exploring and developing alternative renewable energy sources is the only logical one to take in order to ensure sustainable and less costly energy supply in the long term.
In terms of social challenges, the report identified the rapid rate of urbanization and subsequent rise in unemployment due to lack of economic activities as root cause of what has been perceived as increasing urban poverty in the region.
To manage this, the report suggested that PICs developing countries “develop a clearer vision of how they want their urban development to go in the future, how they might get there and who will be responsible for the different tasks.”
“Policies aimed at poverty reduction could first aim at rehabilitating those in dire danger of losing their lives due to extreme poverty – and second at providing sustainable income generating opportunities,” it said.
In a special study it also carried out as part of this report, UNESCAP research showed that the Asia-Pacific region loses US$42 to US$47 billion a year due to restrictions on women’s access to education and another US$16 to US$30 billion a year because of gender gaps in education.
It is not clear how much of these figures may be attributed to the Pacific because of lack of reliable statistics.


NOTE: This article was published in the Islands Business Magazine (www.islandsbusiness.com) as article titled: ROBUST GROWTH FOR THE ISLANDS, p.52, May 2007 edition.

Reviving JCC will depend on island nations: Urwin

The elusive United States/Pacific Island Nations Joint Commercial Commission

By Dionisia Tabureguci

REVIVING the United States/Pacific Island Nations Joint Commercial Commission (JCC) is something that Pacific Island Countries (PICs) may want to see happen but instead of trying to lobby for support from the US, it has been suggested that they first try to help themselves.
Pacific Islands Forum Secretariat (PIFS) Secretary-General Greg Urwin told Islands Business last month that the JCC will feature on the agenda of the 2007 Pacific Islands Conference of Leaders, scheduled to be held in Washington D.C this month.
Attention on it will focus on a list of suggestions from PIFS on market mechanisms.
“As you know, the JCC has not done much benefit to the parties involved. The US is telling us not to invent new arrangements but to make use of what is already in place. But we will be taking to the US a list of suggestions on market mechanisms,” Urwin said.
The JCC was proposed by US President George Bush Snr at the United States-Pacific Islands Summit held in October 1990 at the East-West Centre in Hawaii.
The MOU to establish it was signed on January 12, 1993 by the United States and the then 13 independent Pacific nations.
Although not strictly a trade arrangement, the JCC is the closest that PICs have come to collectively having any form of market access mechanism with the US.
The MOU, according to a speech delivered in Fiji in 2005 by former US ambassador to the Pacific, David Lyons, contained eight specific functions that relate to trade and investment, all of which were open to discussion within the JCC context.
“Included among them were provisions for information exchanges, dialogue mechanisms, education programs, private-sector development, and monitoring program effectiveness,” Lyons had said.
However, past efforts to make the JCC work for the islands have not quite amounted to substantial progress, and as time passed, the idea had slid to and from the backburner as Forum member countries shifted efforts to pitching either for their own relationships with the US or other group access frameworks.
In his 2005 speech though, Lyons had pointed to the JCC as the Pacific’s best hope in getting somewhere with the US and that any effort to try for a duplication here of something that the US already has with groups of countries in other regions is likely to be wasted.
JCC, he had said, was the Pacific’s best bet and that there were elements to it that merited more Pacific attention to get it up and running.
“One enormously valuable aspect of the JCC is that it very nearly approximates a TIFA, or Trade and Investment Framework Agreement. TIFAs are not well known but they are de factor precursors for Free Trade Agreements or FTAs. One U.S expert told me last year that the U.S will not negotiate an FTA with a country with which we do not already have a TIFA. He also said that the 1993 JCC agreement is 90% of the way to a 21st century TIFA,” Lyons had said. “Now I am not saying that the U.S will jump from the JCC to an FTA – we won’t. What I am saying is that a near-TIFA is a very good thing, one not to be ignored.”
Despite the as-yet non-alignment of PICs to the JCC and what it has to offer, past efforts to use it to facilitate trade and investment have resulted in the establishment of a JCC secretariat based at the East-West Centre in Hawaii, the yearly meetings of PICs leaders and US government officials in an event called the Pacific Island Conference of Leaders and a promising document after this annual event in May 2005. Titled: “Draft Proposal on ways to reinvigorate the U.S/Pacific Island Nations Joint Commercial Commission”, this attachment to that meeting’s summary record reaffirmed the U.S stand that the JCC MOU would be the best platform “for any future approach to Washington, DC regarding market access and closer economic relationships at the regional level.”
“In addition, for positive momentum to be re-established by the JCC, whatever activities are undertaken should be concrete (i.e., practical and clear), achievable (i.e., limited in scale), and mutually beneficial to the PINS (Pacific Island Nations) and the U.S. We all understand that the real challenge to trade and investment agreements of all kinds, irrespective of good intentions, boils down to this question: ‘is it translatable into sustained doable action at the national political and economic levels?”
It was further recommended that PICs consider “an incremental, doable, and more focused approach to Washington, DC, using the trade and investment promotion mandate of the JCC as the primary vehicle for developing mutually beneficial economic and specific commercial projects under the JCC arrangement.”
As once described by Scott Kroeker, JCC official at the East-West Centre, on this revival effort to this magazine: “the objective is to find some small but symbolic victories that the JCC can point to in an effort to build momentum and support from all fronts.”
Two important suggestions that came out of this revival roadmap were:
• The identification, by both sides, of a limited range of goods and services that give specific focus to the JCC, and
• The identification of specific measures and actions that will create and facilitate trade and investment in the specific areas identified
It was also mooted that a closer working relationship be developed between PIFS and the JCC Secretariat and as a result, PIFS was unofficially tasked with the role of getting the island countries to come up with a list of products and services that could be developed and positioned into US market using JCC.
Not much progress however has been achieved where this is concerned.
“Island countries have been less enthusiastic in coming up with a list of products,” said Urwin. “As you can see today (at launch of the 2007 UNESCAP report in Fiji) it is up PICs to develop themselves and create products.”
A flurry of economic assessment reports released by donor agencies recently showed the need for PICs to be more proactive and efficient in dealing with challenges in their economic, social and governance system.
Urwin said taking care of these issues and challenges would then create conducive environment for investment in potential sectors out which new products and services may emerge and which could then be marketed to the US.
He said another issue that PIFS will be talking to US about at the 2007 PICL is the possibility of having Forum member countries gain access, as a collective body, to the US Millennium Challenge Account, an account set up by the US in 2002 to help developing countries but on conditions that they “root out corruption, respect human rights, and adhere to the rule of law, among other things.”


NOTE: This article was published in the Islands Business Magazine (www.islandsbusiness.com) as article titled: MILLENNIUM ACCOUNT TO FEATURE IN US/PACIFIC MEET, p.35, May 2007 edition.

Nauruans close to new Constitution

PHOTO CAPTION: front - Mrs Ruby Thoma, Chairperson, Nauru Constitutional Review Commission;
back row from left to right: Dr Guy Powles, Commissioner; Mr Winnie Tsitsi, Assistant to
Commission; Mr Leo Keke, Commissioner.

PHOTO SUPPLIED BY: Katy Le Roy, legal adviser to the Commission and UNDP consultant.

Amendments to address accountability

By Dionisia Tabureguci

THE people of Nauru are in sight of an amended Constitution, one that promises to be more responsive to their needs, safeguard their resources and financial welfare and oblige public office holders to be more accountable and transparent.
In what has been described as an “important milestone for Nauru and its people and a great opportunity for Nauru to strengthen its Constitution in a democratic manner”, Nauruans went to the polls last month to elect 18 people to serve on a 36-member Constitutional Convention. Nauru’s Parliamentary Standing Committee on Constitutional Review (CRC) will appoint the other 18 members.
The task of this Convention will be to debate the findings and recommendations of the island country’s Independent Commission on Constitutional Review, a three-member team appointed last year by the CRC to undertake an independent assessment of Nauru’s 39-year-old Constitution. The Commission was also tasked to make recommendations based on public views that had resulted from last year’s call for public submissions.
“The Convention will start deliberations on Monday 23 April and will sit for approximately six weeks, to debate the recommendations contained in the Commission’s Report,” Commission’s legal adviser and constitutional lawyer Katy Le Roy said.
The Independent Commission was chaired by Ruby Thoma, historically Nauru’s only woman Parliamentarian, while other Commissioners included Nauru lawyer Leo Keke and Pacific constitutional law specialist Dr Guy Powles.
Upon the release in late March of the Commission’s report, Thoma said the Commission was of the belief that it had been able to come up with recommendations for amendment “that address the concerns of the people of Nauru about past abuse of public funds and lack of government accountability” and that if adopted, the changes would “result in a significant improvement in the way the institutions of government operate.”
“The Commission has examined all the views that were expressed at the forty public consultation meetings held last year and all the written submissions received by the Commission. The clear message from the public is that they have lost trust in their public institutions and they expect much greater accountability. The recommendations that we have made reflect that and suggest a way forward,” Thoma said.
Nauruans called for a constitution review in 2004 amid increasing public concerns about the way the Rene Harris government was using public funds.
This led to public outrage and massive protests on the island, led by the then opposition members of Parliament who are now incumbent members of the Ludwig Scotty Government.
“When we took over in 2004, there was basically no financial system in place, the Treasury had not produced accounts for years and the public had no knowledge of where the money had all gone. It was extremely alarming,” said David Adeang, Nauru’s Minister for Finance and Foreign Affairs.
Dr Kieren Keke, Nauru’s Minister for Health, Sports and Transport and who introduced the Bill that created the Standing Committee to review the Constitution in 2004, said: “the people of Nauru had repeatedly called for a review of the Constitution and the government has responded.”
Present day Nauru and its group of revolutionary leaders emerged from a recent history peppered with doubtful dealings by the previous government, which had seen the near collapse of the island country’s Phosphate Royalties Trust (NPRT), stripped it of a number of prime assets and drove the national state of affairs to the edge. Where Nauruans were once the world’s richest people by per capita basis, the rationalisation by the Scotty government in 2004 saw Nauru’s public servants, including President Scotty, receiving standard wages of A$140 a fortnight.
Now on a much firmer keel and well into the high seas of its economic and structural reforms as set out by the Scotty government’s 20 year National Sustainable Development Strategy, Nauru plans to set sail back to the waters of prosperity guided by an amended Constitution.
The formation of the Constitution Convention is a part of phase four of Nauru’s six-phased review process.
Any decision made by the Convention will be submitted to Parliament at around June.

RECOMMENDATIONS
Among recommendations in the Independent Review Commission’s report and which will be debated by the Convention are:
• that Nauru should have a popularly elected President, rather than a President elected by Parliament,
• that the Speaker should be someone who is not a member of Parliament, to avoid deadlocks that have plagued Nauru
in the past,
• the abolition of appeals to the High Court of Australia and the provision for an appellate division of the Supreme Court of Nauru,
• the establishment of a Public Service Commission,
• that the Director of Audit be made an independent officer of Parliament
• a number of amendments to the finance provisions of the Constitution including strict requirements to account for all public revenue and expenditure
• the introduction of a leadership code and office of ombudsman


NOTE: This article was published in the Islands Business Magazine (www.islandsbusiness.com) as article titled: NEW CONSTITUTION TO ADDRESS ACCOUNTABILITY, p.31, May 2007 edition.

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