The Pacific island of Nauru announced yesterday that it would end detention of asylum seekers and process the outstanding refugee claims of some 600 people held in the Australian immigration camp within a week.

The decision, however, is unlikely to boost volunteers for the controversial Cambodia resettlement program, a Cambodian government official and Australian refugee activist said yesterday.

Nauru’s Regional Processing Centre (RPC) – set up under Canberra’s hard-line, offshore-processing policy to hold asylum seekers caught trying to enter Australia via boat – will become an “open centre”, according to Nauru’s justice minister, David Adeang.

As part of this, Nauru will process, within a week, outstanding refugee claims for those living in the centre, some 600 people, who will now be able to roam around the tiny island.

“The start of detention-free processing is a landmark day for Nauru and represents an even more compassionate program, which was always the intention of our government,” Adeang said.

Those deemed refugees are not permitted to resettle in Australia but can return home, stay on Nauru or resettle in the Kingdom under a heavily criticised A$40 million ($28.3 million) deal signed by Phnom Penh and Canberra last year.

However, so far, only four have agreed, arriving in June. Since then, one of the group, a Rohingya man, has asked to return to Myanmar. An additional two volunteers, both Rohingya, are currently being screened, after being visited by Cambodian officials last month.

Speaking yesterday, Interior Ministry spokesman General Khieu Sopheak said that he did not expect the low take-up rate to change, citing the recent decision of four refugees to withdraw their requests to move to Cambodia.

“From this experience, I think the volunteers for Cambodia will not be increasing,” Sopheak said.

“But we will still implement and observe the MoU that has been signed with the Australian government on the basis of voluntary resettlement.”

Ian Rintoul, spokesman for the Refugee Action Coalition, said the end of detention could see “even fewer” people interested in Cambodia.

“For some people who were in detention, accepting Cambodia was a way of getting a refugee visa,” Rintoul said.

“But now all will have their determinations . . . Of course, Nauru could try and offer those with negative decisions the chance to go to Cambodia – to try keep the deal alive – but that will be more transparent now.”

Adeang said Australia was assisting the transition to an open centre, including providing more police support and suitable health care for the asylum seekers.

Under the plan, the number of community liaison officers will be increased from 135 to 320 to help asylum seekers, who come from countries including Iran and Sri Lanka, settle in the country of 10,000.

Australian Immigration Minister Peter Dutton welcomed the news and said Canberra was committed to the regional processing arrangements.

However, refugee advocates, who allege that abuses, including rape, have occurred on the island, said the change was an 11th-hour move that coincided with an Australian court case this week challenging the legality of Canberra’s policy.