Initially inhabited by Micronesian and Polynesian peoples, Nauru was annexed by Germany in the late 19th century, and became a mandate territory administered by Australia, New Zealand, and the United Kingdom following World War I. The island was occupied by Japan during World War II, and after the war entered into trusteeship again. Nauru achieved independence in 1968.

Nauru is a phosphate rock island, and its primary economic activity since 1907 has been the export of phosphate mined from the island.  With the exhaustion of phosphate reserves, its environment severely degraded by mining, and the trust established to manage the island's wealth significantly reduced in value, the government of Nauru has resorted to unusual measures to obtain income. In the 1990s, Nauru briefly became a tax haven and money laundering centre; since 2001 it has accepted aid from the Australian government; in exchange for this aid, Nauru houses an 'offshore' detention centre that holds and processes asylum seekers trying to enter Australia.

History

Nauru was first settled by Micronesian and Polynesian peoples at least 3,000 years ago. There were traditionally 12 clans or tribes on Nauru, which are represented in the 12-pointed star in the nation's flag. The Nauruan people called their island "Naoero"; the word "Nauru" was later created from "Naoero" so that English speakers could easily pronounce the name. Nauruans traced their descent on the female side. Naurans subsisted on coconut and pandanus fruit, and caught juvenile ibija fish, acclimated them to fresh water conditions and raised them in Buada Lagoon, providing an additional reliable source of food. Traditionally, only men were permitted to fish on the reef, and did so from canoes or by using trained man-of-war hawks.

British Captain John Fearn, a whale hunter, became the first Westerner to visit the island in 1798, and named it Pleasant Island. From around the 1830s, Nauruans had contact with Europeans from whaling ships and traders who replenished their supplies at the island. Around this time, beachcombers and deserters began to live on the island. The islanders traded food for alcoholic toddy and firearms; the firearms were used during the 10-year war which began in 1878 and resulted in a reduction of the population from 1400 to 900 persons. The island was annexed by Germany in 1888 and incorporated into Germany's Marshall Islands Protectorate; they called the island Nawodo or Onawero. The arrival of the Germans ended the war; social changes brought about by the war established Kings as rulers of the island, the most widely known being King Auweyida. Christian missionaries from the Gilbert Islands also arrived at the island in 1888.

Phosphate was discovered on the island in 1900 by prospector Albert Ellis and the Pacific Phosphate Company started to exploit the reserves in 1906 by agreement with Germany; they exported their first shipment in 1907. Following the outbreak of World War I, the island was captured by Australian forces in 1914. After the war, the League of Nations gave the UK a trustee mandate over the territory, which it agreed to share with Australian and New Zealand in 1923. The three governments signed a Nauru Island Agreement in 1919, creating a board known as the British Phosphate Commission (BPC), which took over the rights to phosphate mining.

During World War II Nauru was occupied by Japan from August 1942. The Japanese-built airfield on the island was bombed in March 1943, preventing food supplies from reaching the island. The Japanese deported 1,200 Nauruans to work as labourers in the Chuuk islands, where 463 died. The island was liberated on September 13, 1945 when the Australian warship HMAS Diamantina approached the island and Japanese forces surrendered. Arrangements were made by the BPC to repatriate Nauruans from Chuuk, and they were returned to Nauru by the BPC ship Trienza in January 1946. In 1947, a trusteeship was approved by the United Nations, and Australia, NZ and the UK again became trustees of the island. Nauru became self-governing in January 1966, and following a two-year constitutional convention, became independent in 1968, led by founding president Hammer DeRoburt. In 1967, the people of Nauru purchased the assets of the British Phosphate Commissioners, and in June 1970, control passed to the locally owned Nauru Phosphate Corporation. Income from the exploitation of phosphate gave Nauruans one of the highest living standards in the Pacific.

In 1989 the country took legal action against Australia in the International Court of Justice over Australia's actions during its administration of Nauru, in particular, Australia's failure to remedy the environmental damage caused by phosphate mining. The action led to a sizeable out-of-court settlement to rehabilitate the mined-out areas of Nauru. Diminishing phosphate reserves has led to economic decline in Nauru, which has brought increasing political instability since the mid-1980s. Nauru had 17 changes of administration between 1989 and 2003. Between 1999 and 2003, a series of no-confidence votes and elections resulted in two people, René Harris and Bernard Dowiyogo, leading the country for alternating periods. Dowiyogo died in office in March 2003 and Ludwig Scotty was elected President. Scotty was re-elected to serve a full term in October 2004.

In recent times, a significant proportion of the country's income has come in the form of aid from Australia. In 2001, the MV Tampa, a ship which had rescued 460 refugees (from various countries including Afghanistan) from a stranded 20-metre (65 ft) boat and was seeking to dock in Australia, was diverted to Nauru as part of the Pacific Solution. Nauru continues to operate the Nauru detention centre in exchange for Australian aid. However, as of November 2005, Australian media reported that only two asylum seekers remained on Nauru.

Politics

Nauru is a republic with a parliamentary system of government. The president is both the head of state and of government. An 18-member unicameral parliament is elected every three years. The parliament elects a president from its members, who appoints a cabinet of five to six members. Nauru does not have a formal structure for political parties; candidates typically stand as independents. 15 of the 18 members of the current parliament are independents, and alliances within the government are often formed on the basis of extended family ties.[11] Three parties that have been active in Nauruan politics are the Democratic Party, Nauru First and the Centre Party.

Since 1992, local government has been the responsibility of the Nauru Island Council (NIC). The NIC has limited powers and functions as an advisor to the national government on local matters. The role of the NIC is to concentrate its efforts on local activities relevant to Nauruans. An elected member of the Nauru Island Council cannot simultaneously be a member of parliament.  Land tenure in Nauru is unusual: all Naurans have certain rights to all land on the island, which is owned by individuals and family groups; government and corporate entities do not own land and must enter into a lease arrangement with the landowners to use land. Non-Nauruans cannot own lands.

Nauru has a complex legal system. The Supreme Court, headed by the Chief Justice, is paramount on constitutional issues. Other cases can be appealed to the two-judge Appellate Court. Parliament cannot overturn court decisions, but Appellate Court rulings can be appealed to the High Court of Australia; in practice, this rarely happens. Lower courts consist of the District Court and the Family Court, both of which are headed by a Resident Magistrate, who also is the Registrar of the Supreme Court. Finally, there also are two quasi-courts: the Public Service Appeal Board and the Police Appeal Board, both of which are presided over by the Chief Justice.

Nauru has no armed forces; under an informal agreement, defence is the responsibility of Australia. There is a small police force under civilian control.

Economy

Nauru's economy depends almost entirely on declining phosphate deposits; there are few other resources, and most necessities are imported. Small-scale mining is still conducted by the NPC. The government places a percentage of the NPC's earnings in the Nauru Phosphate Royalties Trust. The Trust manages long-term investments, intended to support the citizens once the phosphate reserves have been exhausted. However, a history of bad investments, financial mismanagement, overspending and corruption has reduced the Trust's fixed and current assets. For example, Nauru House in Melbourne was sold in 2004 to finance debts and Air Nauru's last Boeing 737-400 was repossessed in December 2005. The value of the Trust is estimated to have shrunk from A$1,300 million in 1991 to A$138 million in 2002. Nauru currently lacks money to perform many of the basic functions of government, the national Bank of Nauru is insolvent, and GDP per capita has fallen to US$5,000 per annum.

There are no personal taxes in Nauru, and the government employs 95% of those Nauruans who work; unemployment is estimated to be 90%. The Asian Development Bank notes that although the administration has a strong public mandate to implement economic reforms, in the absence of an alternative to phosphate mining, the medium-term outlook is for continued dependence on external assistance. The sale of deep-sea fishing rights may generate some revenue. Tourism is not a major contributor to the economy, because there are few facilities for tourists; the Menen Hotel and OD-N-Aiwo Hotel are the only hotels on the island.

In the 1990s, Nauru became a tax haven and offered passports to foreign nationals for a fee. It became a favourite spot for the dirty money of the Russian mafia. A no-questions-asked policy enabled an estimated US$70bn dollars of assets belonging to Russian gangsters to be funnelled to Nauru. The inter-governmental Financial Action Task Force on Money Laundering (FATF) then identified Nauru as one of 15 "non-cooperative" countries in its fight against money laundering. Under pressure from FATF, Nauru introduced anti-avoidance legislation in 2003, following which foreign hot money flowed out of the country. In October 2005, this legislation—and its effective enforcement—led the FATF to lift the non-cooperative designation.

Demographics

Of the island's 13,048 residents, 58% are Nauruan, 26% other Pacific Islanders, 8% Chinese and 8% Europeans.The official language of Nauru is Nauruan, a distinct Pacific island language. English is widely spoken and is the language of government and commerce.

The main religion practised on the island is Christianity (two-thirds Protestant, one-third Roman Catholic). The Constitution provides for freedom of religion; however, the government restricts this right in some circumstances, and has restricted the practice of religion by the Church of Jesus Christ of Latter-day Saints and members of Jehovah's Witnesses, most of whom are foreign workers employed by the Nauru Phosphate Corporation.

An increased standard of living since independence has had some negative effects on the population. Nauruans are among the most obese people in the world, with 90% of adults overweight. Nauru has the world's highest level of type 2 diabetes, with more than 40% of the population affected. Other significant diet-related problems on Nauru include renal failure and heart disease. Life expectancy has fallen to 58.0 years for males and 65.0 years for females.

Literacy on the island is 97%, education is compulsory for children from six to 15 years of age (Years 1–10), and two non-compulsory years are taught (Years 11 and 12). There is a campus of the University of the South Pacific on the island; before the campus was built, students travelled to Australia for their university education.