Tuvalu - Domestic policy

Governing a tiny island nation with limited economic resources presents particular challenges. A key issue is the attempt to reduce dependence on foreign aid. In 2000, Tuvalu began leasing its Internet domain name ".tv." This would bring US $50 million dollars to the government of Tuvalu over 12 years. Tuvalu received US $20 million in early 2000 representing licensing fees earned during 1999, a windfall amounting to US $2,272 for each citizen of Tuvalu, a nation where the per capita GDP was closer to US $1000. The newly wealthy country announced plans to use some of the "dot tv" money to improve medical services, transportation and educational facilities across its nine islands; other reports cited that the money would be put in a trust for the people of Tuvalu.

The ADB warned Tuvalu that its years of budget surpluses caused by the leasing of the dot-tv Internet name might be breeding complacency. When Tuvalu responded to the unexpected wealth by raising government expenditures 20% in 2001 to cover doubling senate salaries, the ADB urged Tuvalu to have its ministries watch their expenditures and protect the nation's trust fund.

The success of the Tuvalu Trust Fund is critical to the country's future survival. The government has explored other ways to increase revenue, including offering passports for sale (mainly to affluent Chinese), a practice engaged in by several other Pacific Island nations. Selling special issues of stamps has been a source of income for the country for some time.

In his 2003 budget address, Sopoanga indicated the economic future for Tuvalu might be bleaker than expected. He predicted the long-term potential benefit from the "dot tv" domain name was diminishing, and the global economic downturn was adversely affecting the Tuvalu Trust Fund. The revenue from fishing and telecommunications licenses had also dropped. Balancing this less than promising news was an agreement between Tuvalu and the European Union (EU) to help raise living and educational standards on the outer islands. The EU committed 3.3 million euros for projects on education, water, and the environment in 2003.

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