VOLCANIC ASH
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By David Shapiro
The island Republic of Nauru's slide from abundant riches to near-destitution goes to show that there's nothing more heartbreaking than a fairy tale with an unhappy ending.
Hawaiian trusts sitting on big bankrolls, such as Kamehameha Schools and the Office of Hawaiian Affairs, should pay careful attention.
Nauru, located in the Western Pacific about 2,500 miles from Australia, is the smallest independent nation in the world at only eight square miles.
When I visited in 1980, it was one of the richest countries in the world per capita with 12,000 citizens enjoying annual incomes of $50,000, thanks to rich phosphate deposits from the droppings of passing frigate birds.
The calcified guano was sold for fertilizer at oil-like prices.
Now the phosphate is nearly mined out and global investments that were supposed to provide Nauruans a future have failed, leaving the tiny nation nearly broke.
Some fear that Nauru may resort to paying its bills by selling banking licenses and passports to terrorists and other criminal money-launderers.
This isn't how it was supposed to turn out for this charming speck of a country right out of a Peter Sellers movie.
The road circling Nauru is 12 miles long, and it takes 20 minutes to tour the island — unless a plane is landing, in which case traffic is stopped so the road can be incorporated into the runway.
The island has its own airline, Air Nauru, though the carrier has seen troubled times recently and has cut back operations to one Boeing 737.
When I flew from Guam to Nauru long ago, I was the only passenger along with three flight attendants, who chatted with excitement about the dance that night at the Menen Hotel.
They and other Nauruan people I met, who descend from Polynesians, Micronesians and Melanesians, had the friendly and trusting disposition of most Pacific Islanders.
Their houses were modest compared to Hawai'i, but every home seemed to have the latest stereo equipment blaring a radio station that combined deejay chatter in the indigenous language with music from Australia.
Nauru must import everything, including water.
Citizens knew the phosphate deposits to pay their expenses wouldn't last forever, so they set up a government trust to invest the phosphate wealth for a steady source of income after the mines were depleted.
But the trust was beset by mismanagement and corruption. Instead of investing in safe havens, money went into real estate all over the Pacific, including Honolulu, and speculative ventures around the world.
The Nauru trust has gone through $2 billion, by some estimates. The trust is in default on the nation's largest remaining asset, $200 million worth of Australian real estate, and refinancing to fend off bankruptcy is uncertain.
Nauru has been nearly a year behind in paying government workers, and is being kept afloat mostly by a $7 million annual payment from Australia to temporarily house some 250 Afghan asylum-seekers the Aussies don't want to deal with.
The sad story leaves an eerie feeling about what could have happened to Kamehameha Schools if the Internal Revenue Service, state attorney general and probate court hadn't stepped in to oust former trustees who had a taste for speculative deal-making.
Kamehameha Schools now seems far more prudent in its investment policies under a new board of trustees, but the trust is as secretive as ever, and the attorney general and probate court seem to have fallen back to their old hands-off monitoring.
If we ever doubt the importance of vigilance, we need only remember Nauru.
David Shapiro, a veteran Hawai'i journalist, can be reached by e-mail at dave@volcanicash.net.
