Prime Minister Toaripi Lauti noted at the time of independence (1979) that all Tuvalu has is sun and a portion of the Pacific. Economic life is simple, but there is no extreme poverty. Subsistence is based on intensive use of limited resources, namely coconuts and fish; copra is the only cash crop. The islands are too small and too remote for development of a tourist industry. In 2002, there were fewer than 1000 visitors, most attached to international aid delegations. Its vulnerability to external shocks includes the real possibility that the nine low-lying coral islands that constitute the country could disappear beneath a rising ocean level as one of the effects of global warming. Already, thousands in this rather densely populated country have been displaced by ocean swamping parts of the land.
In the meantime, the economy has been kept afloat by two more fortunate developments: the success of the Tuvalu Trust Fund (TTF) and proceeds from the sale of Tuvalu's internet address, ".tv." The Trust Fund was set up in 1987 with A $27 million derived from contributions from Tuvalu, Australia (the largest donor at A $8 million), New Zealand, and the United Kingdom, with smaller grants from Japan and South Korea. Helped by occasional lump sum contributions from Australia, and modest withdrawals by Tuvalu, the TTF had grown to A $37 million by 1999 and an expected A $76.7 million by September 2002. The government derives about one-fourth of its revenues from returns on Trust Fund investments. More unique are the profits the government has been able to derive from its internet domain name. In 1990, the government leased the right to the suffix .tv to Idealab, a California company, for A $90 million over 12 years, retaining a 20% share in the .tv Corporation. Some of the funds generated have been put in other investments and some have been used for infrastructure projects like airport development, electrification, and the construction of roads, office buildings and hospitals. The corporation .tv became a major shareholder in Air Fiji, which has exclusive flying rights to Tuvalu. In January 2002 .tv Corp. became a wholly owned subsidiary of VeriSign Corp., which bought it for $45 million in an agreement by which Tuvalu maintains control of the management of its domain name. Returns from .tv Corp. have been highly variable— A $14.5 million in 2002, but only A $1.6 million in 2001; an expected installment of A $10 million in 2002, but much less in 2003—presenting challenges for prudent budgeting.
The United Nations ranks Tuvalu among the least-developed countries.