[FOUNTAIN]Spendthrift island is isolated

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[FOUNTAIN]Spendthrift island is isolated

The Organization for Economic Cooperation and Development last week named seven tax havens that are unwilling to cooperate on improved financial transparency.

They are the classified "laggards," which denied the organization's requests to cooperate in the exchange of legal and tax information to prevent global tax evasion and money laundering.

Those on the list were: Andorra, Liechtenstein and Monaco, small countries in Europe, Liberia in Africa, and Nauru, Vanuatu and the Marshall Islands, island countries in the Pacific Ocean.

If the seven countries refuse to cooperate after one year, the organization is planning intensive sanctions, such as banning its member countries from trading or making financial transactions with them.

Nauru is the most intriguing country of the seven. Nauru, 21 square kilometers in area, is smaller than Jongno-gu, Seoul. This nation of 12,000 people once was one of the richest countries in the world, boasting ample reserves of phosphate ore, which is an essential ingredient in making fertilizer.

Nauru was introduced to the world in 1798 by British sailors. The country was annexed by Germany in 1888 and thereafter ruled by various foreign powers until 1968 when it achieved independence. During the colonial era, Germany, Japan, the United Kingdom and Australia plundered 40 million metric tons out of the total 60 million metric tons of phosphate ore deposits in Nauru. Nauru still would have been prosperous if the remainder of the phosphate had been well managed. In 1981, when the export of phosphate peaked, Nauru's gross domestic product amounted to $123 million, and its per capita income stood at $17,000, one of the world's highest. There were no taxes; social services were free.

The good days did not last long. Fraud and failed investments shrank the country's external assets to $100 million recently from $1 billion in the early 1990s. The country ended up a tax haven. In Nauru, there are as many as 400 paper banks whose licenses were approved by the government for a payment of $25,000. If you pay money, the country will grant you citizenship. In 1998, about $70 billion suspected of belonging to the Russian mafia vanished after passing through Nauru.

Nauru is in a dire situation. Electricity and water are limited, oil supplies inconsistent. Phosphate mining destroyed much of the island's natural environment, and tourists have turned their backs.

Nauru, which means "happy island" in the local tongue, is not happy anymore.

The writer is a JoongAng Ilbo editorial writer.

by Sohn Byung-soo

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