The Endowment That Never Filled

The Phoenix Islands are eight atolls and low reef islands scattered across the middle of the Pacific, and almost nobody lives on them. Kanton has a couple of dozen people, a lagoon deep enough that Pan American once put flying boats down in it, and the concrete of an American tracking station. The other seven have nobody at all. Britain tried to settle three of them between 1938 and 1963, moving Gilbertese families onto Manra, Orona and Nikumaroro to relieve crowding in the southern islands; drought beat the scheme and the settlers were moved on to the Solomons. What the group has instead of people is water — 408,250 square kilometres of it, an area slightly smaller than California, which Kiribati announced in 2006 and gazetted at that full extent in 2008 as the Phoenix Islands Protected Area.

It was the largest marine protected area on earth when it was declared and the largest World Heritage site when UNESCO inscribed it in 2010. From 1 January 2015 the whole of it was closed to commercial fishing. On 1 January 2022 it opened again, by decision of the cabinet in Tarawa, and most of the reporting treated that as a country going back on its word. The case the government actually made was narrower and more interesting, and it was not really about fish. It was about who had undertaken to pay for the closure, and what happens when they do not.

What Kiribati has to sell

Kiribati is 811 square kilometres of land inside an exclusive economic zone of about 3.4 million — a ratio of sea to ground more extreme than any other state manages. Almost none of that land grows anything worth exporting. What the water does is sit under the western Pacific warm pool, which is where most of the world's skipjack tuna lives, and skipjack is what goes into a tin. Since 1982 Kiribati has been one of the eight Parties to the Nauru Agreement — with the Federated States of Micronesia, the Marshall Islands, Nauru, Palau, Papua New Guinea, Solomon Islands and Tuvalu — a bloc whose combined waters supply something like a quarter of the world's tuna and around half the global skipjack catch. At the end of 2007 the group stopped selling access by the boat and started selling it by the day. The Vessel Day Scheme caps the total number of purse-seine fishing days permitted across all eight members' waters, allocates them between the members and lets them be traded. A benchmark minimum price was agreed at US$5,000 a day in 2012 and raised to US$8,000 from 2015; days have changed hands well above that since. Combined access revenue across the eight rose from something under a hundred million dollars a year to around half a billion inside a decade. For Kiribati, which has the largest zone in the group, licence money is not a contribution to the budget. In 2015 — an El Niño year, when the warm pool and the skipjack with it shift east into Kiribati's water — the take ran far past anything the treasury had forecast, in an economy whose entire measured output is a few hundred million dollars a year.

A reverse fishing licence

The reserve was designed with that arithmetic in front of it. Closing close to twelve per cent of the zone meant surrendering the licence revenue attributable to that water, and nobody in Tarawa pretended otherwise. The answer was the PIPA Conservation Trust, incorporated in Kiribati in 2009 with Conservation International and the New England Aquarium alongside the government: an endowment whose income would compensate the state for the fishing it was not doing and pay for running the area. The phrase used at the time was a reverse fishing licence — the world paying Kiribati not to fish, on the reasoning that an intact tuna nursery is worth more to everyone than the catch is to one country. It was an original piece of financial design and it is still taught as a model. It did not raise the money. The trust was capitalised with a few million dollars against a target an order of magnitude larger, and the income it produced was never within reach of the revenue the closure gave up.

Kiribati has run a sovereign endowment since 1956. It knows exactly what one costs to capitalise and how long it takes to matter — which is why a few million dollars raised for the Phoenix Islands never read, in Tarawa, as a serious offer.

The fund the phosphate left

The Revenue Equalisation Reserve Fund was established in 1956 by the colonial administration of the Gilbert and Ellice Islands, and it was funded by rock. Banaba, in the far west of the country, sat on one of the richest phosphate deposits in the Pacific; it was mined from 1900, latterly by the British Phosphate Commissioners on behalf of Britain, Australia and New Zealand, and roughly nine-tenths of the island's surface was carried away to fertilise farmland in three other countries. The Banabans were moved to Rabi Island in Fiji, which had been bought in 1942 out of their own royalty account, and the first of them arrived in December 1945; their descendants are still there under a separate council. The mining stopped in 1979, the year Kiribati became independent. What the colonial government had done, unusually for the period, was set part of the royalty stream aside rather than spend it, and the new state kept the fund instead of dismantling it. Seventy years on the RERF is worth well over a billion Australian dollars, several times the country's annual output — three years younger than Kuwait's fund and three decades older than Norway's. It has been drawn on hard, and for long stretches it lost ground per head against a growing population, but it survived, which is more than can be said for the trust Nauru built out of the same kind of rock.

Why closing the box did not close the fishery

The Vessel Day Scheme does not licence areas. It licences days, and the number of days is capped across the members' waters as a whole. Closing 408,250 square kilometres in the middle of Kiribati's zone therefore removed no days from the market; it relocated them. The same vessels bought the same days and spent them elsewhere in the same country's water, and skipjack, which crosses the whole ocean, went with them. That was the government's technical argument for reopening and it is a strong one about tuna: a cap on effort is what limits a catch, and a line on a chart mostly moves it. The argument is weaker about everything else in the group. The reefs around Kanton and Orona do not move, nor do the seamounts and the seabird colonies, nor the coral that bleached badly in 2002 and 2003 and then recovered in a way that made these islands a reference site for scientists studying what recovery looks like. None of that is protected by a cap on fishing days — and none of it is directly threatened by a purse seiner either, which is the part of the row where both sides spent several years arguing past one another.

What reopening cost

The cabinet announced the decision in November 2021 and it took effect on 1 January 2022, the government citing revenue lost during two years in which Kiribati had sealed its borders almost completely against covid, and the plain fact that the compensation had not arrived. The site remains on the World Heritage List; the committee asked for reports and the argument continues. In several capitals the decision was read as a favour to China's distant-water fleet, Kiribati having switched recognition from Taipei to Beijing in September 2019, and the two facts were placed side by side constantly. Placing them side by side is not evidence, and a state of about a hundred and twenty thousand people attracts that treatment whenever it does something a larger one dislikes. The more useful reading is the one Kiribati has been making since 2006 and has never withdrawn: it is willing to close its ocean, it has done it once at real cost, and it will do it again on terms that are funded rather than pledged. A country that has run an endowment since 1956 knows the difference between capital and an announcement, and it was never going to mistake one for the other twice.