Tuvalu - Economic development

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Development aid, which rose rapidly during the 1960s, peaked at independence in 1979, when the United Kingdom undertook to provide £6 million. The Tuvalu Trust Fund (TTF) was established in 1987 with A $27 million. The Fund receives contributions from Australia, New Zealand, the UK, Japan, Korea, and Tuvalu itself. The net income is paid to the Tuvalu government annually. As of September 2002, the Fund amounted to A $76.7 million. In 1990, the government discovered a very profitable, if variable, source of income in leasing its internet domain address, .tv, to a California company, Idealab, and then retaining a 20% share in .tv Corporation that was established to market the suffix. Besides direct lease payments and dividends from its operations, the country stands to gain profits from other enterprises in which the corporation invests. The corporation, .tv, owns a major share, for instance, of Air Fiji which has exclusive rights on flights to Tuvalu. Unlike the prudently managed TTF, however, income from .tv Corp. is highly variable, presenting potential problems for rational budgeting. In 2001, revenue from the lease arrangement was A $1.6 million while it had been A $14.5 million in 2000, and a $10 million installment is expected in 2002. Due mainly to income received by from Tuvalu fishermen working for non-Tuvalu operations, the country GNP's is considerably higher than its GDP. Fishing licenses are a major source of government revenue, amounting to A $6.1 million in 2001.

In 2002, the government announced the Island Development Program (IDP) designed to reduce the disparity between household income on the main island, Funafuti, and the outer islands, and thereby slow the migration to the capital city. The program centers around the creation of a trust fund, the Falekanpule Trust Fund (FTF), modeled on the successful TFF. The FTF was capitalized at $8.2 million contributed by the government and donor countries (principally New Zealand and Australia). Four types of policies are to be followed to achieve IDP goals: 1) decentralization of administration; 2) improvement of public service delivery; 3) promotion of small business development, and 4) a sustained augmentation of money available for the IDP through the prudent management of the FTF. In the first distribution of earnings from the FTF, the island councils were each given $318,000 for development projects, and $104,000 was allocated to a buffer account.

All development efforts in Tuvalu are overshadowed by the real possibility that an increase in global warming that ends up raising normal sea level could mean the disappearance altogether of the nine low-lying coral islands that constitutes the country. The government has consequently pushed hard on two fronts: urging industrialized countries to ratify and adhere to the Kyoto Protocol on limiting greenhouse gasses, and, in other countries, particularly, Australia, to have a plan for accepting displaced Tuvalese.

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