Economy of Tuvalu

From Wikipedia, the free encyclopedia
Jump to: navigation, search
This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (September 2011)
This article has no lead section. Please help by adding an introductory section to this article. For more information, see the layout guide, and Wikipedia's lead section guidelines. (September 2011)
Flag of Tuvalu

Lat. and Long. 8°19′S 179°08′E / 8.31°S 179.13°E / -8.31; 179.13 (Funafuti)

Main article: Tuvalu

Tuvalu is a Polynesian island nation located in the Pacific Ocean, midway between Hawaii and Australia.[1] 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 licenses (primarily paid under the South Pacific Tuna Treaty);[2] 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).[3]

Contents

[edit] Natural Resources

Subsistence farming of copra and fishing remain the primary economic activities, particularly off the capital island of Funafuti. There is no apparent large income disparity among the residents, although virtually the only jobs in the islands that pay a steady wage or salary are with the government, which make up about two thirds of those in formal employment. About 15% of adult males work as seamen on foreign flagged merchant ships.[4] Population growth on the outer islands, the limits as to available land and the lack of employment opportunities, results in a flow of people from the outer islands to to the capital in Funafuti with further pressure to migrate to Australia or New Zealand. There is high youth unemployment and few new jobs being created. Given the absence of natural resources (apart from tuna in the territorial waters, and the constrains imposed on the Tuvaluan economy by its remoteness and lack of economies of scale, practical policies are needed for improvements to the livelihoods of the growing numbers of young Tuvaluans who aspire to a more affluent lifestyle than older generations.

Tuvalu comprises four reef islands and five true atolls that result in a contiguous zone: 24 nmi (44 km) exclusive economic zone: 200 nmi (370 km) territorial sea: 12 nmi (22 km)[4] Its nearest neighbours are Kiribati, Nauru, Samoa and Fiji. The population of 10,472 makes Tuvalu the third-least populous sovereign state in the world; as compared to its immediate neighbours, it has a larger population than Nauru, but is smaller than Kiribati which has a permanent population of just over 100,000 (2011).[5] In terms of physical land size, at just 26 square kilometres (10 sq mi) Tuvalu is the fourth smallest country in the world; as compared to its immediate neighbours, Tuvalu is larger than Nauru, which is 21 km2 (8.1 sq mi), and smaller than Kiribati, which is comprised of groups of atolls dispersed over 3.5 million square kilometres, (1,351,000 square miles) of the Pacific Ocean.

Tuvalu is considered a safe country of unspoiled natural beauty and friendly people. However, due to its remoteness, the cost of travelling to the island and limited air traffic to the country, limited numbers of tourists visit each year. The majority of visitors to Tuvalu are government officials, aid workers, NGO officials or consultants.[6]

[edit] Island economy

Tuvaluans are primarily involved in traditional agriculture and fishing. About 500 Tuvalu men are employed abroad at any given time as sailors, primarily on German-owned ships. Another 300 sailors are in Tuvalu on leave between rigorous, 12-plus-month cruises. 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 which trains young Tuvaluans so they can work aboard foreign vessels.[7]

From 1996 to 2002, Tuvalu was one of the best performing Pacific Island economies and achieved an average real gross domestic product (GDP) growth rate of 5.6 per cent per annum. Since 2002 economic growth has slowed as Tuvalu was exposed to rapid rises in world prices fuel and food with the level of inflation peaking at 13.4% in 2008,[8] and falling to -1¾% in November 2010.[9] The International Monetary Fund 2010 Report on Tuvalu describes the economy as contracted over recent years, with real GDP growth of: 7.0 (2008), -1.7 (2009), 0.2 (2010), 0.0 (2011 est.).[9]

However due to the acute level of geographic, macroeconomic and financial isolation, scale of area, population infrastucture and agriculture, climate change, oil dependency, contracting GDP and economic dependency many sources in this decade view Tuvalu as an extremely vulnerable economy.[10]

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.[11] In terms of GNI the nation compares, adequately with other pacific SID states such as Kiribati ($2,010) and the Marshall Islands ($3,640). Fishing licensing agreements with Taiwan, Japan, Korea, New Zealand and the United States generating an income of A$9 million in 2009.[12] [13] However 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 The Tuvalu Trust Fund (TTF) (value $77 million, 2006 est), with a strong reliance on the importation of food (imports $15.5 million 2007 est.[14]

The country is also imported fuel dependent with gas prices quoted at $12/gal (2009). Although listed by the UN as a Lower Middle Income LDC, it scores very high in terms of EVI (Economic Vulnerability Index) with a rating of 79.7 out of 100 in 2009 leading to the UN to state, Tuvalu as the most ‘economically vulnerable country in the world’. Due to the factors addressed earlier, Tuvalu yields a limited revenue from exports.[15] Figures in 2007, estimated a Tuvalu export value of $100,410 derived from Copra and miscellaneous items such as stamps. [16] The Tuvaluan economy therefore relies heavily on it's fishing income, with 42 % of the Tuvaluan population involved in Fishing activity at various levels. UN Data calculated a gross value of fisheries at 43 773 582 USD (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 fleets which in 2008 comprised of 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 40,924370 (USD, 2009 est) or 93.5% of gross value, although Tuvalu retains a sizeable share in income via licensing. The fishing in the 900 000 sq km of water area mainly consists of Skipjack Tuna, Yellowfin Tuna and Bigeye Tuna.

The public sector enterprises are the National Bank of Tuvalu, Development Bank of Tuvalu, Tuvalu Electricity Corporation, Tuvalu Telecommunications Corporation, National Fishing Company of Tuvalu, Philatelic Bureau, Tuvalu Marine Training Institute and Vaiaku Lagi Hotel.[9] Tuvaluan radio services are operated by the Tuvalu Media Corporation. The Tuvalu National Provident Fund 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.[9]

See also: Aquaculture in Tuvalu

[edit] Development of Economic and Social Policy

Te Kakeega II is the statement of the national strategy for the sustainable development of Tuvalu, with economic and social goals intended to be achieved in the period 2005 to 2015.[17] After consultations on each islands the National Summit on Sustainable Development (NSSD), was held at the Tausoalima Falekaupule in Funafuti from 28 June to 9 July 2004.[18] The meeting resulted in the Malefatuga Declaration,[19] which is the foundation of Te Kakeega II.[17] The follow-up document, the 2008 Kakeega Matrix Returns, “contained all the known aid projects, programmes, development initiatives and ideas adopted by the donors and the two successive Tuvalu governments (2004-2006 and 2006 to present)”.[20]

[edit] The Tuvalu Trust Fund and international aid

The Tuvalu Trust Fund (TTF) was established in 1987 by the United Kingdom, Australia, New Zealand.[3] The TTF, a prudently managed overseas investment fund, has contributed roughly 11% of the annual government budget each year since 1990. With a capital value of about 2.5 times GDP, the TTF provides an important cushion for Tuvalu's volatile income sources from fishing and royalties from the sale of the dot-TV domain. With an initial capital of about A$27 million at independence, it now totals about A$100 million.[9] [8] [21]

Australia and New Zealand continue to contribute capital to the Tuvalu Trust Fund and provide other forms of development assistance.[3] [22] The US government is also a major revenue source for Tuvalu, with 1999 payments from the South Pacific Tuna Treaty (SPTT) at about $9 million, a total which is expected to rise annually. The SPTT entered into force in 1988 with the current SPTT agreement expiring on June 14, 2013.[2]

Financial support to Tuvalu is also provide by Japan, South Korea and the European Union.[23] [24] [25]

Tuvalu joined the Asian Development Bank (ADB) in 1993. To improve aid effectiveness, the government of Tuvalu, ADB, AusAID, and NZAID signed the Development Partners Declaration (DPD) in 2009. The DPD is designed to improve aid effectiveness, both in the implementation of specific projects and in assisting the Tuvaluan government achieve performance benchmark indicators.[26] [9]

In 1999 the ADB and the government of Tuvalu set up the Falekaupule Trust Fund, which is intended to improve services on the outer islands. The island councils - composed of traditional leaders - are responsible for managing their own finances from a budget allocated from the Tuvaluan government from the Falekaupule Trust Fund.[26] Under the Falekaupule Act, Falekaupule means “traditional assembly in each island...composed in accordance with the Aganu of each island”. Aganu means traditional custom and culture.[17] The initial capital of Falekaupule Trust Fund was A$12m and at the end of 2009 the market value of the Falekaupule Trust Fund was approximately A$25 million.[8]

Tuvalu became a member of the International Monetary Fund (IMF) in July 2010.[27]

Tuvalu participates in the Enhanced Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries (EIF), which was established in October 1997 under the auspices of the World Trade Organisation.[28] [29]

[edit] Government revenue

Government revenues largely come from sales of stamps and coins, fishing licenses, income from the TTF, and from the lease of its highly fortuitous .tv Internet Top Level Domain (TLD). In 1998, Tuvalu began deriving revenue from use of its area code for "900" lines and from the sale of its ".tv" Internet domain name.[30] Domain name income paid most of the cost of paving the streets of Funafuti and installing street lighting in mid-2002.

The Asian Development Bank described the Global Economic Crisis (GEC) as impacting on Tuvalu through: “(i) lower demand for Tuvalu seafarers and, therefore, falling remittances; (ii) volatile exchange rate movements affecting the value of remittances, revenues from fishing license fees, and food prices; and (iii) lower market value of the Tuvalu Trust Fund (TTF), which at the end of May 2010 was about 12% below the maintained value. Thus, as a direct result of the GEC, no distribution was made from the fund to the budget for 2010 and further distributions are unlikely while there is uncertainty in international financial markets.”[31]

The IMF 2010 Country Report describes economic activity in Tuvalu as dampened by lower offshore earnings, with “[t]he economy is expected to have almost no growth in 2010, and growth is projected to be zero or even turn negative in 2011, led by lower government spending, and remain low over the medium term.”[9]

[edit] GDP and other economic performance indicators

The Australian dollar (A$) is the currency of Tuvalu.

 This article incorporates public domain material from websites or documents of the CIA World Factbook.

Further information sourced from: "Tuvalu: 2010 Article IV Consultation-Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Tuvalu". International Monetary Fund Country Report No. 11/46. 8 February 2011. https://www.imf.org/external/pubs/cat/longres.aspx?sk=24632.0. Retrieved 4 September 2011. 

GDP: purchasing power parity $36 million (2010 est.)[4]

GDP: official exchange rate $32 million (2010 est.)[4]

GDP - real growth rate: -1.7% (2009); 0.2% (2010 est.) 0% (2011 proj.)[9]

GDP - per capita: $2,447 (2009)[9]

GDP – composition by sector: (2002)[4]

[32]GNI - GNI per capita: $4,760 (current US$ 2010)

Agriculture: 16.6%

Industry: 27.2%

Services: 56.2%

Inflation rate (consumer prices): -1¾% (November 2010)[9]


Total population: 10,544 (July 2011 est.)[4]

Labor force - by occupation: people make a living mainly through exploitation of the sea, reefs, and atolls and from wages sent home by those working abroad in Australia and New Zealand and sailors working of merchant ships.

Labour force: 3,615 (2004 est.)[4]

Unemployment rate: 16.3% (2004)[9]

See also: Tuvalu Overseas Seamen's Union

Budget:
(millions) Total revenues and grants: A$24.6 million (2010 budget); A$424.0 (2010 est.)[9]

Total expenditures: A$32.6 million (2010 budget); A$34.0 (2010 est.)[9]


Government finance:
(in percentage of GDP)

Revenue and grants: 89.8% (2009); 69.0% (2010 est.)[9]

Current Revenue: 59.4% (2009) 49.3% (2010 est.)[9]

Grants: 30.4% (2009); 19.7% (2010 est.)[9]

Expenditure and net lending: 93.5% (2009); 97.75% (2010 est.)[9]

Current expenditure: 78.0% (2009); 84.3% (2010 est.)[9]

Capital Expenditure and net lending: 15.5% (2009); 13.5% (2010 est.)[9]

Overall balance: -3.7% (2009); 28.7% (2010 est.)[9]


Electricity - production: 3 GWh (1995)

Electricity - consumption: 3 GWh (1995)


Industries: fishing, tourism, copra

Agriculture - products: coconuts; fish

Exports: $1 million (f.o.b., 2004)

Exports - commodities: copra, fish

Exports - partners: Germany 56.8%, Fiji 14.4%, Italy 10.9%, UK 7.7%, Poland 4.9% (2004)

Imports: $12.91 million (c.i.f., 2005)

Imports - commodities: food, animals, mineral fuels, machinery, manufactured goods

Imports - partners: Fiji 50.2%, Japan 18.1%, Australia 9.6%, China 8%, New Zealand 5.5% (2004)


Economic aid - recipient: $30.4 (2009); $19.7 million (2010 est.) [9] note - major donors are Australia, New Zealand, European Union, Japan, and the US


Currency: 1 Tuvaluan dollar ($T) or 1 Australian dollar (A$) = 100 cents

Exchange rates: Tuvaluan dollars or Australian dollars per US dollar - 1.0902 (2010), 1.2822 (2009), 1.2137 (2007), 1.3285 (2006) [4]

Fiscal year: calendar year

[edit] Footnotes

  1. ^ "Maps of Tuvalu". http://www.tuvaluislands.com/maps/maps.html. 
  2. ^ a b "South Pacific Tuna Treaty (SPTT)". 1988. http://www.fpir.noaa.gov/IFD/ifd_sptt.html. Retrieved 2010-09-01. 
  3. ^ a b c "New Zealand Ministry of Foreign Affairs and Trade: Aid Program (Tuvalu)". http://www.mfat.govt.nz/Countries/Pacific/Tuvalu.php. Retrieved 2010-09-01. 
  4. ^ a b c d e f g h "The World Factbook (CIA)". https://www.cia.gov/library/publications/the-world-factbook/geos/tv.html. Retrieved 1 Sept. 2011. 
  5. ^ "Kiribati: 2011 Article IV Consultation-Staff Report, Informational Annexes, Debt Sustainability Analysis, Public Information Notice on the Executive Board Discussion, and Statement by the Executive Director for Kiribati". International Monetary Fund Country Report No. 11/113. 24 May 2011. https://www.imf.org/external/pubs/cat/longres.aspx?sk=24871.0. Retrieved 4 Oct. 2011. 
  6. ^ SBS World Guide, Sixteenth Edition. Australia: Hardie Grant. 2008. pp. 747. ISBN 978-1-74066-648-0. 
  7. ^ "Asian Development Bank (Tuvalu)". http://www.adb.org/countries/highlights/TUV.asp. Retrieved 2010-09-01. 
  8. ^ a b c "New Zealand Ministry of Foreign Affairs and Trade (MFAT)". http://www.mfat.govt.nz/Countries/Pacific/Tuvalu.php. Retrieved 2010-09-01. 
  9. ^ a b c d e f g h i j k l m n o p q r s t u "Tuvalu: 2010 Article IV Consultation-Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Tuvalu". International Monetary Fund Country Report No. 11/46. 8 February 2011. https://www.imf.org/external/pubs/cat/longres.aspx?sk=24632.0. Retrieved 4 September 2011. 
  10. ^ "TUVALU: ECONOMIC OVERVIEW AND MAJOR CHALLENGES". UN. http://www.un.org/en/development/desa/policy/cdp/ldc/profile/plen4c_cdp2009.pdf. Retrieved 20 December 2011. 
  11. ^ "TUVALU: ECONOMIC OVERVIEW AND MAJOR CHALLENGES". UN. http://www.un.org/en/development/desa/policy/cdp/ldc/profile/plen4c_cdp2009.pdf. Retrieved 20 December 2011. 
  12. ^ "Tuvalu". New Zealand Ministry of Foreign Affairs & Trade. http://www.mfat.govt.nz/Countries/Pacific/Tuvalu.php. Retrieved 22 December 2011. 
  13. ^ "Doing Business in Tuvalu". Pacific Islands Trade and Investment Commission, Sydney Creating Opportunities Between Australia and the Pacific. http://www.pitic.org.au/pdfs/bigs/tuvalu.pdf. Retrieved 21 December 2011. 
  14. ^ "Data, Tuvalu". The World Bank. http://data.worldbank.org/country/tuvalu. Retrieved 19 December 2011. 
  15. ^ "October 31, 2011Bureau of East Asian and Pacific Affairs Background Note: Tuvalu". U.S.Department of State. http://www.state.gov/r/pa/ei/bgn/16479.htm. Retrieved 23 December 2011. 
  16. ^ "NATIONAL FISHERY SECTOR OVERVIEW". Food and Agriculture Organization of the United Nations. ftp://ftp.fao.org/FI/DOCUMENT/fcp/en/FI_CP_TV.pdf. Retrieved 23 December 2011. 
  17. ^ a b c "Te Kakeega II - National Strategies for Sustainable Development 2005-2015". Government of Tuvalu. 2005. http://www.sprep.org/att/IRC/eCOPIES/Countries/Tuvalu/42.pdf. Retrieved 14 Oct. 2011. 
  18. ^ Tausoalima means “hand of friendship” and Falekaupule, means traditional island meeting hall.
  19. ^ Malefatuga is the area bounded by the Funafuti lagoon foreshore and the Fetu Ao Lima Church (“Morning Star”), where the Tausoalima is located. The old meaning of malefatuga is “challenge”, the place where conflicts were resolved. Its modern usage is “place of identity and confidence, where good deeds are recorded”.
  20. ^ Te Kakeega o Tuvalu II: Kakeega Matrix Returns, (June 2008) prepared for the Donor Round Table Meeting in Suva in June 2008.
  21. ^ "Nimmo Bell (Tuvalu Trust Fund)". http://www.nimmo-bell.co.nz/trusts.asp. Retrieved 2011-09-01. 
  22. ^ "Australian Government: AusAID (Tuvalu)". http://www.ausaid.gov.au/country/country.cfm?CountryId=22. Retrieved 2011-09-01. 
  23. ^ "European Commission launches new wave of development strategies with 13 Pacific Island States (IP/07/1552)". Brussels, 18 October 2007. http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/1552&format=HTML&aged=0&language=EN&guiLanguage=en. Retrieved 2010-09-02. 
  24. ^ "Tuvalu". Delegation of the European Union. http://www.delfji.ec.europa.eu/en/achievements/tuvalu.htm. Retrieved 24 Oct. 2011. 
  25. ^ "FAO & EU Partnership (Tuvalu)". Food and Agricultural Organisation of the United Nations. http://www.fao.org/europeanunion/funding/country/eu_tuv/en/. Retrieved 24 Oct. 2011. 
  26. ^ a b "31538: Island Development Program". Asian Development Bank. 1999. http://www.adb.org/projects/project.asp?id=31538&p=tuvproj. Retrieved 4 September 2011. 
  27. ^ "Tuvalu Joins the IMF as 187th Member". International Monetary Fund Press Release No. 10/256. 24 June 2010. https://www.imf.org/external/np/sec/pr/2010/pr10256.htm. Retrieved 4 September 2011. 
  28. ^ Daniel Gay, editor. Tuvalu Diagnostic Trade Integration Study - 2010 Report. Suva, Fiji: UNDP Multi Country Office. ISBN 978-982-304-036-3. http://www.enhancedif.org/documents/DTIS%20english%20documents/english/Tuvalu%20DTIS%20Report%202010.pdf. 
  29. ^ "Tuvalu - Draft Country Review Paper, Implementation in Asia and the Pacific of the Brussels Programme of Action for the Least Developed Countries for the Decade 2001-2010: progress made, obstacles encountered and the way forward". The United Nations. 8 January 2010. https://www.un.org/wcm/webdav/site/ldc/shared/Tuvalu.pdf. Retrieved 24 Oct. 2011. 
  30. ^ ".TV is Turned On… Again.". Daily Domain. 4 May 2007. http://www.dailydomainer.com/2007154-tv-is-turned-on-again.html. Retrieved 24 June 2010. 
  31. ^ "Tuvalu: Country Operations Business Plan (2012-2014)". Asian Development Bank. April 2011. http://beta.adb.org/documents/tuvalu-country-operations-business-plan-2012-2014. Retrieved 4 September 2011. 
  32. ^ "Data, Tuvalu". The World Bank. http://data.worldbank.org/country/tuvalu. Retrieved 19 December 2011. 
Retrieved from "http://en.wikipedia.org/w/index.php?title=Economy_of_Tuvalu&oldid=476096617"
Personal tools
Namespaces
Variants
Actions
Navigation
Interaction
Toolbox
Print/export
Languages