Executive Summary
Countries and islands along the Pacific coast face numerous challenges in the shipping industry due to social, technological, climatic, and economic factors. Significant factors affecting the industry include capacity constraints, the smallness of the islands, economic instability, distance from large markets, and effects of climate change. This paper focuses on the Nauru shipping line, a small island south of the Pacific Ocean. The island is the third smallest nation worldwide, and its shipping industry is at risk of declining due to economic instability and climate change affecting the surrounding waters. The research aims to address the key challenges facing the shipping industry in Nauru to assist the governments in creating decisions and measures for improving and managing the industry for a sustainable economy.
This research was conducted using the secondary research methodology. Data was collected from numerous pieces of literature regarding the island and challenges posing threats to the sustainability of the shipping industry. The research findings indicate that the Nauru island’s primary challenges in the shipping industry come from its remote geographical location, distance from major economies, economic strain, infrastructure, capacity constraints, and effects of climate change. The research concludes that Nauru Island needs external aid and regional support to reinstate the nation’s economy and shipping industry. Since the study involved obtaining evidence from secondary sources, further investigation is recommended using primary data.
Introduction
Throughout history, people living in the pacific islands have been great sea voyagers. Given the physical aspects of an island, the people had to embrace sailing and navigate the waters as a means of transport, socializing, trading, and exploring other lands. Residents of the Pacific coast became long-distance travelers before people living on the mainland started creating instruments for long-distance traveling. The primary mode of transport was the locally made ship that traveled for a million kilometers worldwide. Thus, the people had more trade routes and partners through exploration and voyaging across the continents.
Today, the oceanic voyages are still important, particularly in countries and islands along the pacific coast, such as Nauru Island. The region depends on shipping services for transport and trade in imports and exports. Shipping industries contribute significantly to a nation’s economy, given their ability to transport bulky and valuable industrial raw materials from place to place (Notteboom et al., 2022). Most cargo transports goods to the continents for international trade, while a few ships transport goods and people between the pacific islands. However, the profitability of maritime transport is unsustainable in coastal regions with challenges in their shipping industry, particularly the smaller islands. Nauru shipping line, a small island along the pacific coast, is among the most affected maritime industry due to environmental, technological, and economic factors. This paper highlights the challenges facing the Nauru shipping line, which represents the hardships affecting shipping in the small islands along the Pacific coast to enable their governments to make informed decisions and contain the deterioration of the industry.
Background
The Pacific islands have faced many challenges in their shipping industry over the years despite regional and international measures to counter the problems. Islands along the Pacific have distinct features which set them apart from other nations. The countries are known for occupying small areas, usually less than 10 square miles, with a smaller population of not more than 10 000 residents (Maclellan, 2018). The islands have scarce resources and are located far from major markets, making it challenging to access global markets.
Due to the remoteness, the region depends heavily on sea transport for navigation and trade with the mainland and other islands. Nauru island is among the smallest islands along the pacific coast, occupying an area of less than 8 square miles. The nation is the third smallest country worldwide, with approximately 10 800 citizens (Maclellan, 2020). The nearest island to Nauru is Banaba which is 360 km apart, and the nearest port is Tarawa, 700km away (Maclellan, 2020). The typically isolated and small population in Nauru makes it have a narrow economy with limited products, which must depend on maritime services to boost the economy (Antons et al., 2018). Therefore, the island needs a reliable, safe, and effective shipping industry to maintain trade and interaction and meet the health and nutrition demands of the citizens.
In the era of rapid globalization and advanced equipment in the transport sector, maritime transport also needs to improve with the dynamic developments. Nauru owns a small port on the island’s western side, and the government recently bought a shipping vessel, Micronesian Pride, to facilitate the transport and movement of goods (Maclellan, 2018). Despite having the shipping industry as the primary mode of transport, the industry faces many challenges making it unsustainable for the country and the shipping line. Shipping challenges affect the social and economic stability of Nauru island. The people depend on imports of raw resources such as salt and nourishing foods to survive (Maclellan, 2020; Liu et al., 2018). Nauru island has poor soils that do not support much agricultural production, forcing the residents to rely on imports from the mainland for healthy foods.
Challenges in shipping hinder the timely transport of the resources leading to health issues among the islanders. The prevalent illnesses are obesity and type 2 diabetes (Maclellan, 2020). Currently, Nauru Island holds the title for most obese cases due to malnutrition and eating canned foods because of economic issues and instability in the shipping services (Antons et al., 2018). At the same time, the shipping line is responsible for creating jobs to enhance and promote the island’s economy. Nauru’s citizens depend on working on ships as service men and tour guides to generate an income (Morris 2019). Ensuring the growth and survival of the island’s shipping transport is therefore crucial in maintaining economic stability for the development of the country. Thus, a decline in the industry affects the nation’s social and economic status, such as high unemployment rates, poverty, and poor health.
Since the colonial era, governments have tried to address the challenges affecting shipping on small islands. However, the solutions brought mixed results where smaller islands like Nauru could not benefit much. The Pacific islands once advocated for regional solutions such as pooling resources for sustainability and cost-sharing of the available resources (Antons et al., 2018). However, due to the vast proximity of the islands, the move was ineffective in smaller islands like Nauru, leading to more challenges as the industry depends on scarce resources to thrive. Given the current rise in fuel prices, the Naura shipping line will face difficulties soon if the government does not make informed decisions on the existing challenges. Likewise, the shipping company should find means of operating sustainably by overcoming the challenges and constraints which hinder profitable transactions in the region. Therefore, this paper focuses on identifying the primary challenges in small islands, emphasizing Nauru island to establish the areas that need urgent measures to ensure stability in the economic and social aspects of the island.
Methodology
This research was conducted using a desktop research methodology. The investigation design involves collecting data from secondary sources relevant to the topic under investigation (Snyder 2019). Since this investigation did not have funding allocations, the desktop research design is suitable because it is less costly than other methodologies. The methodology also allows the review of the wide expanse of literature relevant to the investigation, enabling the researcher to gain more knowledge on the topic (Snyder 2019). Finally, the research methodology is suitable because it is time-saving, leading to quick results and conclusions. Data were collected from online sources, academic journals and reports from organizational bodies, case studies on Nauru island, and published data from government literature. Compiling data from the different research papers enhances the generalization of information and draws conclusive remarks that can assist in mitigating the challenges in the pacific islands shipping industry. Information from online sources involved searching relevant and specific data using credible search engines like google.com and infoseek.go.com. Other online information was obtained through academic journals published online with authorization from the publisher.
Findings
Capacity Constraints
Pacific islands have faced challenges in the shipping industry throughout history due to their size and population constraints. Fusillo and Haralambides (2020) give substantial literature on how capacity constraints affect the shipping industry. Firstly, capacity constraints limit maximum benefits from the large market due to the transportation of small cargo compared to other countries with large cargo in the shipping industry (Fusillo and Haralambides 2020). Since the countries transport a small volume of goods, they are forced to use smaller vessels which is not economical given the financial dynamics. Secondly, the shipping line faces challenges in cargo volume where there is a relative imbalance between imports and exports (Fusillo and Haralambides 2020). Nauru’s declining phosphate mining sites pose a significant challenge in shipping due to a lack of outbound cargo. At the same time, minerals provided economic support to the government and other facilities like the shipping industry through employment and revenues Morris’ (2019). Thus, depletion of the rocks means economic instability, affecting all Nauru Island’s sectors, including the shipping industry.
Alternatively, the ships have low inbound cargo and little to no export cargo resulting in high freight rates in maritime transport. Studies by Morris (2019) show that the economic growth in Nauru is slowing down due to a reduction in exports. The main challenge from the low import and export of goods are reaching the viably sustainable threshold for shipping services. Since citizens depend on imported cargo for food, medical supplies, and other necessities, ships must traverse the oceans to obtain the resources regardless of the cargo’s capacity. Thus, the shipping industry faces a financial strain in ensuring compliance with freight rates and returning goods to sustain citizens’ needs.
Remoteness and Isolation from Major Economies
The geographical location of the Pacific islands poses a significant challenge in connectivity and interaction with major global markets. The shipping industry thrives from participating in trade with other nations by exchanging and transporting cargo across the pacific. However, the remoteness of pacific islands hinders reliable accessibility of significant markets due to low cargo volume and cost-effectiveness of transportation costs (Antons et al., 2019). Islands along the Pacific coast are remote and very far from major global markets, including European, Asian, and countries located along the Mediterranean. The smallest average distance between the pacific islands and the major markets is 11500km (Maclellan, 2020). The long distances to trading markets mean higher transport costs and maintenance teams on board (Fusillo and Haralambides 2020). The smallness of shipping vessels and cargo adds to the challenge of unsustainability due to the higher cost per twenty-foot equivalent unit (TEU).
At the same time, islands along the Pacific coast are not in line with the primary shipping routes which connect to global markets. The ships must rely on transshipment hub-and-spoke, which links them to global maritime routes. Connecting with other shipping lines was unreliable and irregular until recent development when prominent shipping lines such as Reef Shipping, Polynesian, and Neptune Pacific offered partnerships with the small companies like Nauru shipping Line from the pacific islands to facilitate trade (Antons et al., 2018). Nauru shipping lines connect with the global market using transshipment hubs in South Pacific or Micronesia, which offers an indirect interaction with significant trading regions.
Regional Authorities and Regulations
The remoteness, size, and insularity of Pacific islands affect the freight rates for imports. The nations must pay slightly higher freight costs for transport than other countries along the continental coast (Maclellan, 2018). As a remote and developing nation, Nauru’s economy and the high freight rates strain the shipping industry leading to irregular and fewer voyages weekly. Research findings by Koilo (2019) show that countries in the pacific islands must comply with the same regulations as mainland ports regarding the documentation of imports and exports. However, whereas in the mainland areas, the documentation process takes ten days or less, Pacific islands face delays in processing documents which can drag for more than twenty days. The delays could result from the distance and remoteness of the island’s geographical location. Regardless, it poses a challenge in delaying cargo transportation, affecting trade and timely delivery of imported products to the region.
Economic Constraints
Poverty
Poverty is a prevalent factor on Nauru island. Most Nauru citizens are poor people without a means of income generation, which is necessary to pay for shipment services (Maclellan, 2020). The people depend on mining and maritime activities to earn an income. However, the declining volume of phosphate rocks hinders mining activities and obstructs income generation leading to unemployment (Morris, 2019). The high dependence on imports and foreign aid led to a decline in agricultural production, leaving the islanders in the current situation of food scarcity and joblessness to earn a living. Only 46% of Nauru citizens live above the poverty line for basic needs (Maclellan, 2020). The remaining citizens, accounting for the major population, is below the poverty line and depend on foreign aid. The high poverty level limits domestic shipping services such as inter-island transportation since the people lack payment fees for the shipping services. Nauru shipping line is at risk of financial setbacks if the people do not find alternative means of income to support the shipping services at the domestic and international levels.
Fuel Costs
Pacific islands depend primarily on importing fuel resources. Importing fuel accounts for over 40% of Nauru’s foreign exchange earnings per year (Goundar et al., 2017). The global increase in oil prices has affected the price of shipping fuel, leading to high transportation costs. According to Weir (2018), the Nauru shipping line spends approximately 75% of the imported fuel on sea transport since ships are the primary mode of transport. The high fuel prices expose the island to financial strains leading to an increase in transport and maritime logistics, which affects the shipping industry. Most islands along the Pacific coast have adopted clean energy sources such as wind, biomass, and solar energy to fill the gap in petroleum products (Weir 2018). However, the economic status of Nauru limits the exploitation of clean energy due to insufficient resources to set up equipment for clean energy (Goundar et al., 2017). Additionally, poverty and lack of resources for conventional education have resulted in illiteracy and inadequate expertise to build structures for sustainable energy. Thus, the shipping industry suffers from financial strain due to the expensive fuel cost and unproductive voyages.
Market Trends and Competition
Shipping lines from the Pacific islands face challenges in adapting to market trends and structures on a global scale. The shipping industry is very concentrated, with prominent companies controlling the market trends (Ha and Seo 2017). Major companies have larger shipping vessels whose cargo capacity cannot compare to small shipping vessels, predominantly owned in island countries along the pacific coast. Pacific nations with large shipping vessels still carry relatively small shipments, which have a minor impact on the global markets (Fusillo and Haralambides 2020). Since major shipping companies control the market, it is hard for small island shipping lines to compete fairly in global trade. Apart from market trends, the more prominent companies influence the setting of freight rates unfavorable to shipping lines with small vessels and those with a less cargo volume.
Infrastructure
Poor infrastructure
Most ports in the pacific islands have outdated and poor infrastructure that compromises the functional effectiveness of the port’s activities. Some structural defects result from poor maintenance, while others are old and need reconstruction to perform the designated tasks. Notteboom et al. (2022) note that while major ports have limited infrastructure, smaller ports have even less infrastructure than other ports. Nauru island has a small port operating on the island’s western side (Maclellan, 2020). The port facilitates offloading and loading cargo and storing the shipping equipment necessary for effective operations in the port. However, the port is among the oldest, with outdated facilities built before containerization posing significant challenges in the operation of shipping services (Maclellan 2018). Initially built to shelter bulk cargo from destruction during lousy weather, the cargo shed has become an obstruction at the site. The sheds hinder the efficient movement of cargo and limit space for stacking shipments. Noticeably, Maclellan (2020) states that the wharves on Nauru’s small port are old and in bad shape, which require doubling to take the weight of a container. The wharf surfaces have potholes posing a problem in operating forklift trucks.
Consequently, the country faces a shortage of shipping vessels after losing most ships during the economic crisis. The decline in phosphate minerals significantly impacted the shipping industry, where the ships lost their main commodity for trade due to inadequate cargo for exportation (Liu et al., 2018). Most ship owners went into liquidation while other companies acquired other ships since the exports were not sustainable for cargo transport and trade (Maclellan 2018). Thus, the shipping industry at Nauru requires total reconstruction starting from purchasing ships. The Nauru shipping line was recently bought to rehabilitate the shipping industry (Maclellan 2018). However, the port is still tiny, with poor infrastructure to facilitate shipping services. The terminal design, layout, and deck loadings are not standard for shipping services such as storage and handling containers. The state of the infrastructure requires immediate reconstruction, which is costly considering the economic status of the country and the recent purchase of Micronesian Pride that took much of Nauru’s financial resources.
High Cost of Maintenance
Periodic maintenance is mandatory, and each port is responsible for the repair and maintenance of the port’s resources. Poor Pacific Island nations have challenges maintaining the ports due to costly expenses, which the countries may not afford due to inadequate financial resources (Notteboom 2022). Loading and offloading cargo at Nauru port were problematic due to poor infrastructure and equipment that is out of order leading to a low container handling efficiency (Maclellan 2020). At the same time, the port has inadequate facilities for lifting containers which poses a challenge to the effective operation of shipping services at the docks. Poor infrastructure causes delays in cargo handling, increasing the cost of imports and reduction in export costs (Liu et al., 2018). The substandard infrastructure results in higher shipping costs for the Nauru shipping line because it has a slower turnaround time than ships from other pacific islands. The trade imbalance leads to unsustainable competition in the market causing losses and financial strain in the industry.
Climate Change and Natural Hazards
Winds and Tropical Cyclones
Pacific islands are exposed to natural hazards resulting from the tectonic movements of the continents. Given the nature of the island’s location with a vast surrounding of oceanic waters, the region is prone to hurricanes, tsunamis, and strong winds, which cause severe waves and rainstorms unfavorable for water voyages. Pacific islands experience strong winds, sea surges, and tropical cyclones, especially during the wet season, which is problematic for safe sea navigation (Larkin et al., 2017). Besides navigation, strong winds are destructive, causing shipwrecks and destruction of port equipment and facilities. Although severe natural disasters such as tropical cyclones do not occur on Nauru island due to its proximity to the equator, evidence suggests that the region experiences strong winds and rainstorms that obstruct shipping services (Larkin et al., 2017). The region is predicted to have stronger winds with high speed and extreme rainfall due to climatic factors, which will compound the existing challenge of navigating during bad weather.
Coastal Flooding
The rise in sea level results from increased temperatures which cause the water surface to heat beyond the average temperatures. As an island with a low ground level, Nauru island is vulnerable to rising sea levels and tidal surges that cause coastal flooding. The rising sea level and unpredictable ocean current are catastrophic to pacific islands and the shipping industry. For instance, Powers et al. (2019) state that Nauru is at risk of destruction from tidal waves since its elevation is lower than the sea level. Nauru shipping line suffers directly from natural hazards when the events are extreme, destroying port facilities and shipping vessels (Maclellan 2020). The effects become long-term when the destruction demands frequent maintenance and emergency responses which cost substantial amounts. The indirect challenge includes canceling a voyage due to coastal flooding or strong currents that hinder navigation (Kanngieser 2018). Given the scarce shipping vessels on Nauru island, the shipping line cannot risk a shipwreck entering the high seas or during a stormy and windy period. Canceling a shipment affects the integrity of the shipping line and may incur losses for the company.
Discussion
The research aimed to identify and discuss the challenges facing the shipping industry in the Pacific islands, focusing on Nauru island. Their remote geographic locations are significant factors affecting the shipping industry along the Pacific Island. The geographical location of the Pacific islands makes transportation more costly since they are far apart regionally and very far from international markets. From the findings, distance determines freight rates, access to global markets, and trans-regional trade. Nauru shipping line is more affected by the smallness and capacity constraint of the island. According to Fusillo and Haralambides (2020), the vast distance to major markets poses challenges in high transportation costs and access to global markets, which is essential in trading and making profits. Although the ships can use transshipment hubs, directly interacting with the world’s significant economies opens more opportunities for trade and profitable businesses.
To compound the problem, the decline of Nauru’s phosphate mining industry has led to less outbound cargo than on other islands. Fewer exports than imports cause an imbalance in trade, affecting the shipping services. Given that Nauru island relies heavily on imports, including food, fuel, and health supplies, ships must travel to obtain the necessities regardless of less outbound cargo. Therefore, the shipping line incurs less or no profits from exports while they have to comply with the maritime authority’s freight rates and trade regulations.
Port infrastructure is very critical in the efficient operation of shipping activities. Ports require access to feasible roads connecting the port to the other island regions to transport cargo. Conversely, a port’s facilities determine the smoothness and efficiency of the shipping services. Nauru shipping line has problems operating smoothly due to poor infrastructure. According to Maclellan (2020), many ports on the pacific island were built in the colonial era and have not been modernized according to global trends. Lee (2021) states that Naurus’s infrastructure is broken and decaying, obstructing efficient operations of shipping services. Inland roads which connect transport activities to the port are impassable, creating challenges in the smooth movement of goods. Poor maintenance adds to the inadequacy of shipping facilities at the port, leading to persistent problems such as replacing worn-out equipment and incurring extra costs (Notteboom et al., 2022). Although the people attribute poor maintenance to inadequate resources, the government should find ways of ensuring proper care to prevent replacements in the already strained economy.
Today, the shipping industry is advancing from traditional to modern services that are more attractive to cargo and passenger transportation services. Major ports have separate compartments for cargo and passengers, enhancing the security and aesthetics of the services. Further, some ports have different terminals to cater for cargo offloading and passenger drop-off, leading to attractive ship transportation when traveling overseas (Liu et al., 2018). Given the evolution and modern developments, Pacific Island countries like Nauru are still far behind in achieving the settings of a modern port. As Maclellan (2020) implies, the port’s facilities require reconstruction and structuring according to modern standards, which may take a while due to inadequate finances. With the recent development in rehabilitating the shipping industry at Nauru, the port needs expansion to accommodate shipping vessels and equipment. Reconstruction demands maintenance to avoid rapid deterioration of the facilities. Nauru government must establish a sound budget to cater for rehabilitation, maintenance, and upgrading of the port facilities and equipment to enhance profitability and competitiveness in the shipping industry.
Climate change is a significant threat to many industries globally. The shipping industry has a higher vulnerability risk since climatic changes adversely affect water bodies. Most Pacific islands are affected by climate change due to their small sizes and environmental conditions. The implication of extreme weather conditions such as severe winds and a heavy downpour on the island is a rising sea level and flooding. Considering the size and elevation of Nauru island, floods can destroy the land and transport infrastructure, including the shipping facilities. If the weather conditions become extreme, as predicted in the findings, the Nauru shipping line is at risk of safe navigation and docking due to the weather’s destructiveness. Climate change has adverse effects on coastal lands, affecting transport infrastructure. For instance, rising sea levels and changes in wave currents can destroy port facilities and shipping vessels (Larkin et al., 2017). Frequent occurrences of natural hazards affect the daily operation of shipping services since they are usually unpredictable. Ultimately, the increasing effects of climate change could cause a lifetime challenge for the shipping industry if it affects the critical infrastructure.
The effect of climate change on water bodies causes temperature fluctuations in the water leading to alterations in the sea level and ocean currents. Studies on climatic change effects project that temperatures continuously rise at an average of 2.5 degrees Celsius annually, leading to further global warming and a rising sea level (Powers et al., 2019). Climate change does not affect the Pacific Island shipping industry alone. Major seaports are also affected by the temperature fluctuation and sea upsurge due to global warming. The phenomenon is adverse to Nauru island due to its small size and inadequate plans for disaster management in the shipping industry. For the Nauru shipping line to survive, the government must establish a disaster management plan to avoid destruction caused by natural hazards and climate change.
Conclusion and Recommendations
Pacific islands are characterized by remoteness and isolation, which sets them apart from the rest of the world. Nauru island’s shipping industry exemplifies the typical setup of most shipping industries along the pacific island. The island’s small size, vast distance from major economies, scarce resources, economic limitation, and capacity constraints poses significant challenges to its growth and development. The challenges range from infrastructural problems, unsustainable regional policies, regulations and freight rates, trade imbalances, and natural hazards such as rising sea levels which affect the shipping industry. The scarce resources base, high dependence on fuel imports and necessities, and reliance on external aid have made the island vulnerable to a financial crisis and socio-economic instability.
The island’s primary source of revenue was the shipping industry and mining phosphate fuels which have depleted over the years. Nauruan citizens are now poverty-stricken, compounding shipping challenges since they cannot afford shipping fees or payments for imported goods. The imbalance in inbound and outbound cargo cause trade imbalances in the Nauru shipping line, which is unsustainable for economic growth. The island’s size and proximity to the sea mean that all infrastructure is virtually built near the waters. The facilities and infrastructure are in poor condition hindering the efficient operation of shipping services. Consequently, the infrastructure is vulnerable to the effects of climate change, such as the rising sea level causing coastal flooding. Regardless of the many challenges, the shipping industry on Nauru island has a future if the country gains economic stability.
Recommendations
Considering the findings of this research, there is a need to address the challenges in Pacific island’s shipping industry at a regional, national and international level. Nauru’s government has a huge responsibility to establish a solid shipping industry by stabilizing the country’s economic status. Resuming mining activities of phosphate rocks can be a good start in generating revenue and promoting shipping services through exports. Since the land is agriculturally unproductive and depending on imports has become a burden, the people must find alternative foods from neighboring islands that are rich in nutrients to supplement their diet.
Although this study is based on numerous pieces of literature from credible sources regarding the challenges facing the shipping industry in the pacific islands, the findings heavily focus on the Nauru island’s shipping line. Thus, generalizing the findings may lead to inaccurate information, and further research is recommended before drawing conclusive remarks on other pacific islands. Due to the secondary research approach, this study needs further investigation through primary data collection and analysis. Future researchers may consider a case study or qualitative research to get in-depth information on the subject and cover more island nations along the pacific coast. The research will add to the literature regarding challenges facing the Pacific islands’ shipping industry, enabling the government and shipping companies to make informed choices according to current events.
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