Economy of Tuvalu

Tuvalu is a Polynesian island nation located in the Pacific Ocean, midway between Hawaii and Australia. The economy of Tuvalu is constrained by its remoteness and lack of economies of scale. Government revenues largely come from the lease of its highly fortuitous .tv Top Level Domain (TLD); sales of stamps and coins; fishing licences (primarily paid under the South Pacific Tuna Treaty); direct grants from international donors (government donors as well as from the Asian Development Bank); and income from the Tuvalu Trust Fund (established in 1987 by the United Kingdom, Australia, New Zealand).

The Tuvalu Trust Fund was established for the intended purpose of helping to supplement national deficits, underpin economic development, and help the nation achieve greater financial autonomy. The Trust Fund, has contributed roughly (A$79 million) 15% of the annual government budget each year since 1990. With a capital value of about 2.5 times GDP, the Trust Fund provides an important cushion for Tuvalu's volatile income sources from fishing and royalties from the sale of the .tv domain.

World Bank Statistics outline that in 2010 Tuvalu produced a bottom-tier ranking Gross Domestic Product of $31,350,804 and Gross National Income of $4,760. In terms of GNI the nation compares, adequately with other Pacific SIDS states such as Kiribati ($2,010) and the Marshall Islands ($3,640). Fishing licensing agreements with Taiwan, Japan, South Korea, New Zealand and the United States generating an income of A$9 million in 2009. In 2013 revenue from fishing licenses doubled in 2013 and now totales more than 45% of GDP.

A large proportion of national income is obtained through the employment of 15% of adult male Tuvaluans, overseas in the maritime industry. The value of these remittances was valued at A$4 million (est. 2006) and on average accounts for 10% of GDP. A UN Report makes reference to the fact that these revenue streams are vulnerable to macroeconomic change while the national budget remains heavily subsidised through international aid and funding schemes such as the Tuvalu Trust Fund (TTF) with a strong reliance on the importation of food (imports $15.5 million 2007 est).

On 5 August 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Tuvalu, and assessed the economy of Tuvalu: “A slow recovery is underway in Tuvalu, but there are important risks. GDP grew in 2011 for the first time since the global financial crisis, led by the private retail sector and education spending. We expect growth to rise slowly”.

Tuvaluans are primarily involved in traditional agriculture and fishing. Job opportunities also exist as observers on tuna boats where the role is to monitor compliance with the boat's tuna fishing licence.

The Tuvaluan economy therefore relies heavily on its fishing income, with 42% of the Tuvaluan population involved in fishing activity at various levels. UN Data calculated a gross value of fisheries at US$43,773,582 (2007 est), which accounted for the output of coastal commercial fishing, coastal subsistence fishing, locally based offshore fishing, foreign-based offshore fishing, freshwater fishing and aquaculture. In recent years all of the income has been generated through the listed activities in Tuvalu waters, rather than through exports direct from Tuvalu. The activities of international fishing vessels, which in 2008 comprised 42 longline fishing vessels, 3 pole/line vessels and 126 purse seiners, far outweigh domestic activity, with a production volume of 35,541 tonnes worth US$40,924,370 (2009 est) or 93.5% of gross value, although Tuvalu retains a sizeable share in income via licensing. The fishing in the 900,000 km2 of water area mainly consists of Skipjack Tuna, Yellowfin Tuna and Bigeye Tuna.

Tuvalu men are employed abroad working on container ships, primarily on German-owned ships. Remittances from seafarers is a major source of income for families in the country. In 2002, the Asian Development Bank approved an assistance package to upgrade the Tuvalu Maritime Training Institute (TMTI) which trains young Tuvaluans so they can work aboard foreign vessels.[ This project was completed in 2011.The Global Economic Crisis (GEC) that began in 2007 has impacted on global export-import activities and the demand for shipping, which reduced the need for seafarers from Tuvalu.

The public sector enterprises are the National Bank of Tuvalu, Development Bank of Tuvalu, Tuvalu Electricity Corporation, Tuvalu Telecommunications Corporation, Tuvalu Philatelic Bureau, Tuvalu Maritime Training Institute and Vaiaku Lagi Hotel.

Banking services are provided by the National Bank of Tuvalu.

The Tuvalu Media Department of the Government of Tuvalu operates one station on the AM frequencies under the title of Radio Tuvalu. Fenui – news from Tuvalu is a free digital publication of the Tuvalu Media Department that is emailed to subscribers and operates a Facebook page, which publishes news about government activities and news about Tuvaluan events, such as a special edition covering the results of the 2015 general election.

The Tuvalu National Provident Fund (TNPF) and the Copra Trading Co-operative (CTC) are owned by the members of each organisation. The TNPF provides its members with loans, for which each member’s account is used as collateral. The Tuvalu Cooperative Society is the main wholesaler and retailer in Tuvalu.