Tuvalu

Tuvalu is composed of nine low-lying coral atolls in the Central Pacific Ocean with a total land area of 26 square kilometers and an Exclusive Economic Zone of 0.9 million square kilometers of ocean. The nine islands are scattered, with the northernmost island more than 550 kilometers from the southernmost. The total population is about 9,000, a third of whom live on the capital island, Funafuti. The principal natural economic resources are coconut trees and fish.

Over the period 1986-89, the performance of Tuvalu's economy fluctuated considerably. Real GDP growth was 3 percent in 1987 and 14 percent in 1988, but it declined 13 percent in 1989. In 1990, GDP grew by an estimated 4 percent. With a population growth rate of 1.5 percent per annum, real per capita GDP in 1989 was lower than in 1986. In 1989. Tuvalu experienced an international trade deficit equal to approximately two-thirds of its GDP. This deficit was financed mainly by international aid and remittances from expatriate workers. In 1989, fuel imports were approximately 16 percent of total imports, but they amounted to more than 400 percent of total exports.

Tuvalu's economy is supported by the Tuvalu Trust Fund, established in 1987 with grant aid totaling A$25 million; currently, the Fund's offshore investments are valued at A$35 million. Withdrawal of monies from this Fund is restricted by its charter, which requires that the Fund's value be maintained in real terms.

Some fundamental constraints on Tuvalu's economy are the limited natural resources and the distances between the islands as well as between them and the major international markets. In addition, in recent years. Tuvalu has been able to use only about 50 percent of the foreign aid offered for capital investment projects because of a lack of skilled management and implementation capacity and cash-flow difficulties arising from the requirement of some donors that the government provide initial project finance and then seek reimbursement from the donors.

In the medium term, Tuvalu's prospects for economic growth will depend on the future of copra production and revenue from fishing, including licensing income from international fishing companies. Assuming sound management of the limited resources, a practical investment program, and technical assistance in selected areas, overall economic growth of 3 to 5 percent per year is possible.

Imported petroleum products provide all of the commercial energy consumed in Tuvalu. About half of the automotive diesel oil (ADO) is used to generate electricity, but the remainder of the petroleum products are consumed directly in transportation, fisheries, or household use (cooking and lighting). On the outer islands, most of the energy consumption is based on traditional biomass products, but, as the main text of this paper documents (e.g., chapter 2), the use of solar energy for lighting is increasing.

The management of the energy sector centers around the Office of the Prime Minister (OPM) and the Ministry of Finance, Commerce, and Public Corporations. Within OPM, in the Department of Foreign Affairs and Economic Planning, there is a an Energy Planner, currently a member of the U.S. Peace Corps, who is the focal point for energy planning, evaluation, and coordination Electricity generation and distribution on the main island of Funafuti is under the Tuvalu Electricity Corporation (TEC), incorporated in December 1990. Before the incorporation, this agency was known as the Tuvalu Electricity Authority (TEA) and was a division of the Ministry of Works and Communications.