Cook IslandsLike many other South Pacific island nations, the CookIslands' economic development is hindered by the isolation of thecountry from foreign markets, the limited size of domestic markets,lack of natural resources, periodic devastation from naturaldisasters, and inadequate infrastructure. Agriculture provides theeconomic base with major exports made up of copra and citrus fruit.Manufacturing activities are limited to fruit processing, clothing,and handicrafts. Trade deficits are offset by remittances fromemigrants and by foreign aid, overwhelmingly from New Zealand. Inthe 1980s and 1990s, the country lived beyond its means, maintaininga bloated public service and accumulating a large foreign debt.Subsequent reforms, including the sale of state assets, thestrengthening of economic management, the encouragement of tourism,and a debt restructuring agreement, have rekindled investment andgrowth.
Coral Sea Islandsno economic activity
Costa RicaCosta Rica's basically stable economy depends on tourism,agriculture, and electronics exports. Poverty has been substantiallyreduced over the past 15 years, and a strong social safety net hasbeen put into place. At the same time, distribution of incomeremains severely unequal. Foreign investors remain attracted by thecountry's political stability and high education levels, and tourismcontinues to bring in foreign exchange. However, traditional exportsectors have not kept pace. Low coffee prices and an overabundanceof bananas have hurt the agricultural sector. The governmentcontinues to grapple with its large deficit and massive internaldebt, with the need to modernize the state-owned electricity andtelecommunications sector, and with the problem of bringing downinflation.
Cote d'IvoireCote d'Ivoire is among the world's largest producersand exporters of coffee, cocoa beans, and palm oil. Consequently,the economy is highly sensitive to fluctuations in internationalprices for these products and to weather conditions. Despitegovernment attempts to diversify the economy, it is still largelydependent on agriculture and related activities, which engageroughly 68% of the population. After several years of laggingperformance, the Ivorian economy began a comeback in 1994, due tothe 50% devaluation of the CFA franc and improved prices for cocoaand coffee, growth in nontraditional primary exports such aspineapples and rubber, limited trade and banking liberalization,offshore oil and gas discoveries, and generous external financingand debt rescheduling by multilateral lenders and France. Moreover,government adherence to donor-mandated reforms led to a jump ingrowth to 5% annually during 1996-99. Growth was negative in 2000-02because of the difficulty of meeting the conditions of internationaldonors, continued low prices of key exports, and severe civil warfighting.
CroatiaBefore the dissolution of Yugoslavia, the Republic ofCroatia, after Slovenia, was the most prosperous and industrializedarea, with a per capita output perhaps one-third above the Yugoslavaverage. The economy emerged from its mild recession in 2000 withtourism the main factor, but massive structural unemployment remainsa key negative element. The government's failure to press theeconomic reforms needed to spur growth is largely the result ofcoalition politics and public resistance, particularly from thetrade unions. Opponents fear reforms would cut jobs, wages, andsocial benefits. The government has a heavy backload of civil cases,many involving tenure land. The country is likely to experience onlymoderate growth without disciplined fiscal and structural reform.
CubaThe government continues to balance the need for economicloosening against a desire for firm political control. It hasundertaken limited reforms in recent years to increase enterpriseefficiency and alleviate serious shortages of food, consumer goods,and services but is unlikely to implement extensive changes. A majorfeature of the economy is the dichotomy between relatively efficientexport enclaves and inefficient domestic sectors. The averageCuban's standard of living remains at a lower level than before thesevere economic depression of the early 1990s, which was caused bythe loss of Soviet aid and domestic inefficiencies. High oil importprices, recessions in key export markets, damage from HurricanesIsidore and Lili, and the tourist slump after 11 September 2001hampered growth in 2002.
CyprusThe Greek Cypriot economy is prosperous but highlysusceptible to external shocks. Erratic growth rates over the pastdecade reflect the economy's vulnerability to swings in touristarrivals, caused by political instability in the region andfluctuations in economic conditions in Western Europe. Economicpolicy is focused on meeting the criteria for admission to the EU.As in the Turkish sector, water shortages are a perennial problem; afew desalination plants are now online. The Turkish Cypriot economyhas roughly one-third of the per capita GDP of the south. Because itis recognized only by Turkey, it has had much difficulty arrangingforeign financing and investment. It remains heavily dependent onagriculture and government service, which together employ about halfof the work force. To compensate for the economy's weakness, Turkeyprovides grants and loans to support economic development. Ankaraprovided $200 million in 2002 and pledged $450 million for the2003-05 period. Future events throughout the island will be highlyinfluenced by the outcome of negotiations on the UN-sponsoredagreement to unite the Greek and Turkish areas and by thearrangements under which the island joins the EU.
Czech RepublicOne of the most stable and prosperous of thepost-Communist states, the Czech Republic has been recovering fromrecession since mid-1999. Growth in 2000-03 was supported by exportsto the EU, primarily to Germany, and a near doubling of foreigndirect investment. Domestic demand is playing an ever more importantrole in underpinning growth as interest rates drop and theavailability of credit cards and mortgages increases. High currentaccount deficits - averaging around 5% of GDP in the last severalyears - could be a persistent problem. Inflation is under control.The EU put the Czech Republic just behind Poland and Hungary inpreparations for accession, which will give further impetus anddirection to structural reform. Moves to complete banking,telecommunications, and energy privatization will encourageadditional foreign investment, while intensified restructuring amonglarge enterprises and banks and improvements in the financial sectorshould strengthen output growth. But revival in the Europeaneconomies remains essential to stepped-up growth.
DenmarkThis thoroughly modern market economy features high-techagriculture, up-to-date small-scale and corporate industry,extensive government welfare measures, comfortable living standards,a stable currency, and high dependence on foreign trade. Denmark isa net exporter of food and energy and enjoys a comfortable balanceof payments surplus. Government objectives include streamlining thebureaucracy and further privatization of state assets. Thegovernment has been successful in meeting, and even exceeding, theeconomic convergence criteria for participating in the third phase(a common European currency) of the European Economic and MonetaryUnion (EMU), but Denmark has decided not to join the 12 other EUmembers in the euro; even so, the Danish Krone remains pegged to theeuro. Given the sluggish state of the European economy, growth in2003 was a mere 1.1%.
DjiboutiThe economy is based on service activities connected withthe country's strategic location and status as a free trade zone innortheast Africa. Two-thirds of the inhabitants live in the capitalcity, the remainder being mostly nomadic herders. Scanty rainfalllimits crop production to fruits and vegetables, and most food mustbe imported. Djibouti provides services as both a transit port forthe region and an international transshipment and refueling center.It has few natural resources and little industry. The nation is,therefore, heavily dependent on foreign assistance to help supportits balance of payments and to finance development projects. Anunemployment rate of 50% continues to be a major problem. Inflationis not a concern, however, because of the fixed tie of the franc tothe US dollar. Per capita consumption dropped an estimated 35% overthe last seven years because of recession, civil war, and a highpopulation growth rate (including immigrants and refugees). Facedwith a multitude of economic difficulties, the government has fallenin arrears on long-term external debt and has been struggling tomeet the stipulations of foreign aid donors. Another factor limitinggrowth is the negative impact on port activity now that Ethiopia hasmore trade route options.
DominicaThe Dominican economy depends on agriculture, primarilybananas, and remains highly vulnerable to climatic conditions andinternational economic developments. Hurricane Luis devastated thecountry's banana crop in 1995 after tropical storms wiped out aquarter of the 1994 crop. The economy subsequently has been fueledby increases in construction, soap production, and tourist arrivals.Development of the tourism industry remains difficult however,because of the rugged coastline, lack of beaches, and the absence ofan international airport. Economic growth is sluggish, andunemployment is greater than 20%. The government has been attemptingto develop an offshore financial sector in order to diversify theisland's production base.
Dominican RepublicThe Dominican Republic's economy experienceddramatic growth over the last decade, even though the economy washit hard by Hurricane Georges in 1998. Although the country has longbeen viewed primarily as an exporter of sugar, coffee, and tobacco,in recent years the service sector has overtaken agriculture as theeconomy's largest employer, due to growth in tourism and free tradezones. The country suffers from marked income inequality; thepoorest half of the population receives less than one-fifth of GNP,while the richest 10% enjoy nearly 40% of national income. Growthprobably will slow in 2003 with reduced tourism and expected lowgrowth in the US economy, the source of 87% of export revenues.
East TimorIn late 1999, about 70% of the economic infrastructure ofEast Timor was laid waste by Indonesian troops and anti-independencemilitias, and 260,000 people fled westward. Over the next threeyears, however, a massive international program, manned by 5,000peacekeepers (8,000 at peak) and 1,300 police officers, led tosubstantial reconstruction in both urban and rural areas. Bymid-2002, all but about 50,000 of the refugees had returned. Thecountry faces great challenges in continuing the rebuilding ofinfrastructure and the strengthening of the infant civiladministration. One promising long-term project is the planneddevelopment of oil resources in nearby waters.
EcuadorEcuador has substantial oil resources and rich agriculturalareas. Because the country exports primary products such as oil,bananas, and shrimp, fluctuations in world market prices can have asubstantial domestic impact. Ecuador joined the World TradeOrganization (WTrO) in 1996, but has failed to comply with many ofits accession commitments. The aftermath of El Nino and depressedoil market of 1997-98 drove Ecuador's economy into a free-fall in1999. The beginning of 1999 saw the banking sector collapse, whichhelped precipitate an unprecedented default on external loans laterthat year. Continued economic instability drove a 70% depreciationof the currency throughout 1999, which forced a desperate governmentto "dollarize" the currency regime in 2000. The move stabilized thecurrency, but did not stave off the ouster of the government.Gustavo NOBOA, who assumed the presidency in January 2000, hasmanaged to pass substantial economic reforms and mend relations withinternational financial institutions. Ecuador completed its firststandby agreement since 1986 when the IMF Board approved a 10December 2001 disbursement of $96 million, the final installment ofa $300 million standby credit agreement. In February 2003, newlyinstalled president Lucio GUTIERREZ faced a budget gap and massiveforeign debt. He has pledged to use oil revenues to pay off debt andis seeking additional IMF support.
EgyptEgypt improved its macroeconomic performance throughout mostof the last decade by following IMF advice on fiscal, monetary, andstructural reform policies. As a result, Egypt managed to tameinflation, slash budget deficits, and attract more foreigninvestment. In the past four years, however, the pace of reform hasslackened, and excessive spending on national infrastructureprojects has widened budget deficits again. Lower foreign exchangeearnings since 1998 resulted in pressure on the Egyptian pound andperiodic dollar shortages. Monetary pressures have increased since11 September 2001 because of declines in tourism and Suez Canaltolls, and Egypt has devalued the pound several times in the pastyear. The development of a gas export market is a major bright spotfor future growth prospects. In the short term, regional tensionswill continue to affect tourism and hold back prospects for economicexpansion.
El SalvadorIn recent years, this Central American economy has beensuffering from a weak tax collection system, factory closings, theaftermaths of Hurricane Mitch of 1998 and the devastatingearthquakes of early 2001, and weak world coffee prices. On thebright side, inflation has fallen to single digit levels, and totalexports have grown substantially. The trade deficit has been offsetby annual remittances of almost $2 billion from Salvadorans livingabroad and by external aid. The US dollar is now the legal tender.Because competitor countries have fluctuating exchange rates, ElSalvador must face the challenge of raising productivity andlowering costs.
Equatorial GuineaThe discovery and exploitation of large oilreserves have contributed to dramatic economic growth in recentyears. Forestry, farming, and fishing are also major components ofGDP. Subsistence farming predominates. Although pre-independenceEquatorial Guinea counted on cocoa production for hard currencyearnings, the neglect of the rural economy under successive regimeshas diminished potential for agriculture-led growth (the governmenthas stated its intention to reinvest some oil revenue intoagriculture). A number of aid programs sponsored by the World Bankand the IMF have been cut off since 1993 because of corruption andmismanagement. No longer eligible for concessional financing becauseof large oil revenues, the government has been unsuccessfully tryingto agree on a "shadow" fiscal management program with the World Bankand IMF. Businesses, for the most part, are owned by governmentofficials and their family members. Undeveloped natural resourcesinclude titanium, iron ore, manganese, uranium, and alluvial gold.Growth will remain strong in 2003, led by oil.
EritreaSince independence from Ethiopia on 24 May 1993, Eritrea hasfaced the economic problems of a small, desperately poor country.Like the economies of many African nations, the economy is largelybased on subsistence agriculture, with 80% of the populationinvolved in farming and herding. The Ethiopian-Eritrea war in1998-2000 severely hurt Eritrea's economy. GDP growth fell to zeroin 1999 and to -1% in 2000. The May 2000 Ethiopian offensive intonorthern Eritrea caused some $600 million in property damage andloss, including losses of $225 million in livestock and 55,000homes. The attack prevented planting of crops in Eritrea's mostproductive region, causing food production to drop by 62%. Evenduring the war, Eritrea developed its transportation infrastructure,asphalting new roads, improving its ports, and repairing war damagedroads and bridges. Since the war ended, the government hasmaintained a firm grip on the economy, expanding the use of themilitary and party-owned businesses to complete Eritrea'sdevelopment agenda. Erratic rainfall and the delayed demobilizationof agriculturalists from the military kept cereal production wellbelow normal, holding down growth in 2002. Eritrea's economic futuredepends upon its ability to master social problems such asilliteracy, unemployment, and low skills, and to open its economy toprivate enterprise so the diaspora's money and expertise can fostereconomic growth.
EstoniaEstonia, as a new member of the World Trade Organization, issteadily moving toward a modern market economy with increasing tiesto the West, including the pegging of its currency to the euro. Theeconomy benefits from strong electronics and telecoms sectors. Amajor goal is accession to the EU, possibly by 2004. The economy isgreatly influenced by developments in Finland, Sweden, and Germany,three major trading partners. The high current account deficitremains a concern.
EthiopiaEthiopia's poverty-stricken economy is based onagriculture, which accounts for half of GDP, 85% of exports, and 80%of total employment. The agricultural sector suffers from frequentdrought and poor cultivation practices. Coffee is critical to theEthiopian economy with exports of some $270 million in 2000/01, buthistorically low prices have seen many farmers switching to qat tosupplement their income. The war with Eritrea in 1999-2000 andrecurrent drought have buffeted the economy, in particular coffeeproduction. In November 2001 Ethiopia qualified for debt relief fromthe Highly Indebted Poor Countries (HIPC) initiative. UnderEthiopia's land tenure system, the government owns all land andprovides long-term leases to the tenants; the system continues tohamper growth in the industrial sector as entrepreneurs are unableto use land as collateral for loans. Strong growth in 2002 resultedfrom good rainfall early in the year, the cessation of hostilities,and renewed foreign aid and debt relief. But drought struck againlate in 2002, and the World Food Program (WFP) estimates 14 millionEthiopians need food immediately to survive into 2003. Thegovernment estimates than annual growth of 7% is needed to reducepoverty, yet the maintenance of 5% in 2003 will be quite difficult(one estimate is for 1.5% growth).
Europa Islandno economic activity
Falkland Islands (Islas Malvinas) The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987 the government began selling fishing licenses to foreign trawlers operating within the Falklands exclusive fishing zone. These license fees total more than $40 million per year, which goes to support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defense. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.
Faroe IslandsThe Faroese economy has had a strong performance since1994, mostly as a result of increasing fish landings and high andstable export prices. Unemployment is falling and there are signs oflabor shortages in several sectors. The positive economicdevelopment has helped the Faroese Home Rule Government produceincreasing budget surpluses, which in turn help to reduce the largepublic debt, most of it owed to Denmark. However, the totaldependence on fishing makes the Faroese economy extremelyvulnerable, and the present fishing efforts appear in excess of whatis a sustainable level of fishing in the long term. Oil finds closeto the Faroese area give hope for deposits in the immediate Faroesearea, which may eventually lay the basis for a more diversifiedeconomy and thus lessen dependence on Danish economic assistance.Aided by a substantial annual subsidy (15% of GDP) from Denmark, theFaroese have a standard of living not far below the Danes and otherScandinavians.
FijiFiji, endowed with forest, mineral, and fish resources, is oneof the most developed of the Pacific island economies, though stillwith a large subsistence sector. Sugar exports and a growing touristindustry - with 300,000 to 400,000 tourists annually - are the majorsources of foreign exchange. Sugar processing makes up one-third ofindustrial activity. Long-term problems include low investment,uncertain land ownership rights, and the government's ability tomanage its budget.
FinlandFinland has a highly industrialized, largely free-marketeconomy, with per capita output roughly that of the UK, France,Germany, and Italy. Its key economic sector is manufacturing -principally the wood, metals, engineering, telecommunications, andelectronics industries. Trade is important, with exports equalingalmost one-third of GDP. Except for timber and several minerals,Finland depends on imports of raw materials, energy, and somecomponents for manufactured goods. Because of the climate,agricultural development is limited to maintaining self-sufficiencyin basic products. Forestry, an important export earner, provides asecondary occupation for the rural population. Rapidly increasingintegration with Western Europe - Finland was one of the 11countries joining the European Economic and Monetary Union (EMU) on1 January 1999 - will dominate the economic picture over the nextseveral years. Growth in 2003 was held back by the global slowdownbut will pick up in 2004 provided the world economy suffers nofurther blows.
FranceFrance is in the midst of transition, from a well-to-domodern economy that has featured extensive government ownership andintervention to one that relies more on market mechanisms. TheSocialist-led government has partially or fully privatized manylarge companies, banks, and insurers, but still retains controllingstakes in several leading firms, including Air France, FranceTelecom, Renault, and Thales, and remains dominant in some sectors,particularly power, public transport, and defense industries. Thetelecommunications sector is gradually being opened to competition.France's leaders remain committed to a capitalism in which theymaintain social equity by means of laws, tax policies, and socialspending that reduce income disparity and the impact of free marketson public health and welfare. The current government has loweredincome taxes and introduced measures to boost employment. At the endof 2002 the government was focusing on the problems of the high costof labor and labor market inflexibility resulting from the 35-hourworkweek and restrictions on lay-offs. The government was alsopushing for pension reforms and simplification of administrativeprocedures. The tax burden remains one of the highest in Europe. Thecurrent economic slowdown and inflexible budget items have pushedthe deficit above the EU's 3% debt limit. Business investmentremains listless because of low rates of capital utilization, highdebt, and the steep cost of capital.
French GuianaThe economy is tied closely to the larger Frencheconomy through subsidies and imports. Besides the French spacecenter at Kourou (which accounts for 25% of GDP), fishing andforestry are the most important economic activities. Forest andwoodland cover 90% of the country. The large reserves of tropicalhardwoods, not fully exploited, support an expanding sawmillindustry that provides sawn logs for export. Cultivation of crops islimited to the coastal area, where the population is largelyconcentrated; rice and manioc are the major crops. French Guiana isheavily dependent on imports of food and energy. Unemployment is aserious problem, particularly among younger workers.
French PolynesiaSince 1962, when France stationed militarypersonnel in the region, French Polynesia has changed from asubsistence agricultural economy to one in which a high proportionof the work force is either employed by the military or supports thetourist industry. With the halt of French nuclear testing in 1996,the military contribution to the economy fell sharply. Tourismaccounts for about one-fourth of GDP and is a primary source of hardcurrency earnings. Other sources of income are pearl farming anddeep-sea commercial fishing. The small manufacturing sectorprimarily processes agricultural products. The territory benefitssubstantially from development agreements with France aimedprincipally at creating new businesses and strengthening socialservices.
French Southern and Antarctic LandsEconomic activity is limited toservicing meteorological and geophysical research stations andFrench and other fishing fleets. The fish catches landed on IlesKerguelen by foreign ships are exported to France and Reunion.
GabonGabon enjoys a per capita income four times that of mostnations of sub-Saharan Africa. This has supported a sharp decline inextreme poverty; yet because of high income inequality a largeproportion of the population remains poor. Gabon depended on timberand manganese until oil was discovered offshore in the early 1970s.The oil sector now accounts for 50% of GDP. Gabon continues to facefluctuating prices for its oil, timber, and manganese exports.Despite the abundance of natural wealth, poor fiscal managementhobbles the economy. Devaluation of its Francophone currency by 50%on 12 January 1994 sparked a one-time inflationary surge, to 35%;the rate dropped to 6% in 1996. The IMF provided a one-year standbyarrangement in 1994-95, a three-year Enhanced Financing Facility(EFF) at near commercial rates beginning in late 1995, and stand-bycredit of $119 million in October 2000. Those agreements mandateprogress in privatization and fiscal discipline. France providedadditional financial support in January 1997 after Gabon had met IMFtargets for mid-1996. In 1997, an IMF mission to Gabon criticizedthe government for overspending on off-budget items, overborrowingfrom the central bank, and slipping on its schedule forprivatization and administrative reform. The rebound of oil pricesin 1999-2000 helped growth, but drops in production hampered Gabonfrom fully realizing potential gains. In December 2000, Gabon signeda new agreement with the Paris Club to reschedule its official debt.A follow-up bilateral repayment agreement with the US was signed inDecember 2001. Short-term progress depends on an upbeat worldeconomy and fiscal and other adjustments in line with IMF policies.
Gambia, TheThe Gambia has no important mineral or other naturalresources and has a limited agricultural base. About 75% of thepopulation depends on crops and livestock for its livelihood.Small-scale manufacturing activity features the processing ofpeanuts, fish, and hides. Reexport trade normally constitutes amajor segment of economic activity, but a 1999 government-imposedpreshipment inspection plan, and instability of the Gambian dalasi(currency) have drawn some of the reexport trade away from TheGambia. The government's 1998 seizure of the private peanut firmAlimenta eliminated the largest purchaser of Gambian groundnuts; thefollowing two marketing seasons have seen substantially lower pricesand sales. A decline in tourism in 2000 has also held back growth.Unemployment and underemployment rates are extremely high. Shortruneconomic progress remains highly dependent on sustained bilateraland multilateral aid, on responsible government economic managementas forwarded by IMF technical help and advice, and on expectedgrowth in the construction sector.
Gaza StripEconomic output in the Gaza Strip - under theresponsibility of the Palestinian Authority since the CairoAgreement of May 1994 - declined by about one-third between 1992 and1996. The downturn was largely the result of Israeli closurepolicies - the imposition of generalized border closures in responseto security incidents in Israel - which disrupted previouslyestablished labor and commodity market relationships between Israeland the WBGS (West Bank and Gaza Strip). The most serious negativesocial effect of this downturn was the emergence of highunemployment; unemployment in the WBGS during the 1980s wasgenerally under 5%; by 1995 it had risen to over 20%. Israel's useof comprehensive closures decreased during the next few years and,in 1998, Israel implemented new policies to reduce the impact ofclosures and other security procedures on the movement ofPalestinian goods and labor. These changes fueled an almostthree-year-long economic recovery in the West Bank and Gaza Strip;real GDP grew by 5% in 1998 and 6% in 1999. Recovery was upended inthe last quarter of 2000 with the outbreak of violence, triggeringtight Israeli closures of Palestinian self-rule areas and a severedisruption of trade and labor movements. In 2001, and even moreseverely in 2002, Israeli military measures in Palestinian Authorityareas resulted in the destruction of capital plant andadministrative structure, widespread business closures, and a sharpdrop in GDP. Another major loss has been the decline in incomeearned by Palestinian workers in Israel. International aid of $2billion in 2001-02 to the Gaza Strip and West Bank have preventedthe complete collapse of the economy.
GeorgiaGeorgia's main economic activities include the cultivationof agricultural products such as citrus fruits, tea, hazelnuts, andgrapes; mining of manganese and copper; and output of a smallindustrial sector producing alcoholic and nonalcoholic beverages,metals, machinery, and chemicals. The country imports the bulk ofits energy needs, including natural gas and oil products. Its onlysizable internal energy resource is hydropower. Despite the severedamage the economy has suffered due to civil strife, Georgia, withthe help of the IMF and World Bank, has made substantial economicgains since 1995, achieving positive GDP growth and curtailinginflation. However, the Georgian Government suffers from limitedresources due to a chronic failure to collect tax revenues. Georgiaalso suffers from energy shortages; it privatized the T'bilisidistribution network in 1998, but collection rates are low, makingthe venture unprofitable. The country is pinning its hopes forlong-term growth on its role as a transit state for pipelines andtrade. The start of construction on the Baku-T'bilisi-Ceyhan oilpipeline and the Baku-T'bilisi-Erzerum gas pipeline will bringmuch-needed investment and job opportunities.
GermanyGermany's affluent and technologically powerful economy hasturned in a weak performance throughout much of the 1990s and early2000s. The modernization and integration of the eastern Germaneconomy continues to be a costly long-term problem, with annualtransfers from west to east amounting to roughly $70 billion.Germany's ageing population, combined with high unemployment, haspushed social security outlays to a level exceeding contributionsfrom workers. Structural rigidities in the labor market - includingstrict regulations on laying off workers and the setting of wages ona national basis - have made unemployment a chronic problem. Growthin 2002 and 2003 fell short of 1%. Corporate restructuring andgrowing capital markets are setting the foundations that could allowGermany to meet the long-term challenges of European economicintegration and globalization, particularly if labor marketrigidities are further addressed. In the short run, however, thefall in government revenues and the rise in expenditures have raisedthe deficit above the EU's 3% debt limit.
GhanaWell endowed with natural resources, Ghana has roughly twicethe per capita output of the poorer countries in West Africa. Evenso, Ghana remains heavily dependent on international financial andtechnical assistance. Gold, timber, and cocoa production are majorsources of foreign exchange. The domestic economy continues torevolve around subsistence agriculture, which accounts for 36% ofGDP and employs 60% of the work force, mainly small landholders.Ghana opted for debt relief under the Heavily Indebted Poor Country(HIPC) program in 2002. Policy priorities include tighter monetaryand fiscal policies, accelerated privatization, and improvement ofsocial services.
GibraltarGibraltar benefits from an extensive shipping trade,offshore banking, and its position as an international conferencecenter. The British military presence has been sharply reduced andnow contributes about 7% to the local economy, compared with 60% in1984. The financial sector, tourism (almost 5 million visitors in1998), shipping services fees, and duties on consumer goods alsogenerate revenue. The financial sector, the shipping sector, andtourism each contribute 25%-30% of GDP. Telecommunications accountsfor another 10%. In recent years, Gibraltar has seen majorstructural change from a public to a private sector economy, butchanges in government spending still have a major impact on thelevel of employment.
Glorioso Islandsno economic activity
GreeceGreece has a mixed capitalist economy with the public sectoraccounting for half of GDP and with per capita GDP 70% of theleading euro-zone economies. Tourism provides 15% of GDP. Immigrantsmake up nearly one-fifth of the work force, mainly in menial jobs.Greece is a major beneficiary of EU aid, equal to about 3.3% of GDP.The economy has improved steadily with economic growth averaging 4%since 1997, exceeding EU growth by more than 1 percentage point.Remaining challenges include the reduction of the public debt,inflation, and unemployment; and further restructuring of theeconomy, including privatizing several state enterprises,undertaking pension and other reforms, and minimizing bureaucraticinefficiencies. The Olympic Games will be held in Athens in mid-2004.
GreenlandThe economy remains critically dependent on exports offish and substantial support from the Danish Government, whichsupplies about half of government revenues. The public sector,including publicly owned enterprises and the municipalities, playsthe dominant role in the economy. Despite several interestinghydrocarbon and minerals exploration activities, it will takeseveral years before production can materialize. Tourism is the onlysector offering any near-term potential, and even this is limiteddue to a short season and high costs.
GrenadaGrenada relies on tourism as its main source of foreignexchange, especially since the construction of an internationalairport in 1985. Strong performances in construction andmanufacturing, together with the development of an offshorefinancial industry, have also contributed to growth in nationaloutput.
GuadeloupeThe Caribbean economy depends on agriculture, tourism,light industry, and services. It also depends on France for largesubsidies and imports. Tourism is a key industry, with most touristsfrom the US; an increasingly large number of cruise ships visit theislands. The traditional sugarcane crop is slowly being replaced byother crops, such as bananas (which now supply about 50% of exportearnings), eggplant, and flowers. Other vegetables and root cropsare cultivated for local consumption, although Guadeloupe is stilldependent on imported food, mainly from France. Light industryfeatures sugar and rum production. Most manufactured goods and fuelare imported. Unemployment is especially high among the young.Hurricanes periodically devastate the economy.
GuamThe economy depends on US military spending, tourism, and theexport of fish and handicrafts. Total US grants, wage payments, andprocurement outlays amounted to $1 billion in 1998. Over the past 20years, the tourist industry has grown rapidly, creating aconstruction boom for new hotels and the expansion of older ones.More than 1 million tourists visit Guam each year. The industry hasrecently suffered setbacks because of the continuing Japaneseslowdown; the Japanese normally make up almost 90% of the tourists.Most food and industrial goods are imported. Guam faces the problemof building up the civilian economic sector to offset the impact ofmilitary downsizing.
GuatemalaThe agricultural sector accounts for about one-fourth ofGDP, two-thirds of exports, and half of the labor force. Coffee,sugar, and bananas are the main products. Former President ARZU(1996-2000) worked to implement a program of economic liberalizationand political modernization. President PORTILLO has continued theliberalization program but with more sporadic results. The 1996signing of the peace accords, which ended 36 years of civil war,removed a major obstacle to foreign investment, but numerouscorruption scandals associated with the PORTILLO administration havedampened investor confidence. The distribution of income remainshighly unequal, with perhaps 75% of the population below the povertyline. Ongoing challenges include increasing the government revenues,negotiating further assistance from international donors, upgradingboth government and private financial operations, and narrowing thetrade deficit. A free trade agreement between the US and CentralAmerican countries promises greater access to US and neighboringmarkets.
GuernseyFinancial services - banking, fund management, insurance,etc. - account for about 55% of total income in this tiny ChannelIsland economy. Tourism, manufacturing, and horticulture, mainlytomatoes and cut flowers, have been declining. Light tax and deathduties make Guernsey a popular tax haven. The evolving economicintegration of the EU nations is changing the rules of the gameunder which Guernsey operates.
GuineaGuinea possesses major mineral, hydropower, and agriculturalresources, yet remains an underdeveloped nation. The countrypossesses over 30% of the world's bauxite reserves and is thesecond-largest bauxite producer. The mining sector accounted forabout 75% of exports in 1999. Long-run improvements in governmentfiscal arrangements, literacy, and the legal framework are needed ifthe country is to move out of poverty. The government madeencouraging progress in budget management in 1997-99, and reformprogress was praised in the World Bank/IMF October 2000 assessment.However, fighting along the Sierra Leonean and Liberian borders hascaused major economic disruptions. In addition to direct defensecosts, the violence has led to a sharp decline in investorconfidence. Foreign mining companies have reduced expatriate staff,while panic buying has created food shortages and inflation in localmarkets. Multilateral aid - including Heavily Indebted PoorCountries (HIPC) debt relief - and single digit inflation permittedmoderate 3.7% growth in 2002. Growth should strengthen in 2003because of a slowly improving security situation and increasedinvestor confidence.
Guinea-BissauOne of the 10 poorest countries in the world,Guinea-Bissau depends mainly on farming and fishing. Cashew cropshave increased remarkably in recent years, and the country now rankssixth in cashew production. Guinea-Bissau exports fish and seafoodalong with small amounts of peanuts, palm kernels, and timber. Riceis the major crop and staple food. However, intermittent fightingbetween Senegalese-backed government troops and a military juntadestroyed much of the country's infrastructure and caused widespreaddamage to the economy in 1998; the civil war led to a 28% drop inGDP that year, with partial recovery in 1999-2002. Before the war,trade reform and price liberalization were the most successful partof the country's structural adjustment program under IMFsponsorship. The tightening of monetary policy and the developmentof the private sector had also begun to reinvigorate the economy.Because of high costs, the development of petroleum, phosphate, andother mineral resources is not a near-term prospect. However,unexploited offshore oil reserves could provide much-needed revenuein the long run. The inequality of income distribution is one of themost extreme in the world. The government and international donorscontinue to work out plans to forward economic development from alamentably low base. Government drift and indecision, however, haveresulted in low growth in 2002 and dim prospects for 2003.
GuyanaThe Guyanese economy has exhibited moderate economic growthin 2001-02, based on expansion in the agricultural and miningsectors, a more favorable atmosphere for business initiatives, amore realistic exchange rate, fairly low inflation, and thecontinued support of international organizations. Chronic problemsinclude a shortage of skilled labor and a deficient infrastructure.The government is juggling a sizable external debt against theurgent need for expanded public investment. The bauxite miningsector should benefit in the near term by restructuring and partialprivatization.
HaitiAbout 80% of the population lives in abject poverty. Nearly70% of all Haitians depend on the agriculture sector, which consistsmainly of small-scale subsistence farming and employs abouttwo-thirds of the economically active work force. Followinglegislative elections in May 2000, fraught with irregularities,international donors - including the US and EU - suspended almostall aid to Haiti. The economy shrank an estimated 1.2% in 2001 andan estimated 0.9% in 2002. The contraction will likely intensify in2003 unless a political agreement with donors is reached on economicpolicy. Suspended aid and loan disbursements totaled more than $500million at the start of 2003.
Heard Island and McDonald IslandsNo indigenous economic activity,but the Australian Government allows limited fishing around theislands.
Holy See (Vatican City)This unique, noncommercial economy issupported financially by an annual tax on Roman Catholic diocesesthroughout the world, as well as by special collections (known asPeter's Pence); the sale of postage stamps, coins, medals, andtourist mementos; fees for admission to museums; and the sale ofpublications. Investments and real estate income also account for asizable portion of revenue. The incomes and living standards of layworkers are comparable to those of counterparts who work in the cityof Rome.
HondurasHonduras, one of the poorest countries in the WesternHemisphere with an extraordinarily unequal distribution of income,is banking on expanded trade privileges under the Enhanced CaribbeanBasin Initiative and on debt relief under the Heavily Indebted PoorCountries (HIPC) initiative. While the country has met most of itsmacroeconomic targets, it failed to meet the IMF's goals toliberalize its energy and telecommunications sectors. Growth remainsdependent on the status of the US economy, its major tradingpartner, on commodity prices, particularly coffee, and on reductionof the high crime rate.
Hong KongHong Kong has a free market economy highly dependent oninternational trade. Natural resources are limited, and food and rawmaterials must be imported. Imports and exports, includingreexports, each exceed GDP in dollar value. Even before Hong Kongreverted to Chinese administration on 1 July 1997 it had extensivetrade and investment ties with China. Hong Kong has been furtherintegrating its economy with China because China's growing opennessto the world economy has increased competitive pressure on HongKong's service industries, and Hong Kong's re-export business fromChina is a major driver of growth. Per capita GDP compares with thelevel in the four big economies of Western Europe. GDP growthaveraged a strong 5% in 1989-1997, but Hong Kong suffered tworecessions in the past 6 years because of the Asian financial crisisin 1998 and the global downturn of 2001-2002. The Severe AcuteRespiratory Syndrome (SARS) outbreak has also battered Hong Kong'seconomy but the resumption of strong growth began in 2003.
Howland Islandno economic activity
HungaryHungary has made the transition from a centrally planned toa market economy, with a per capita income one-half that of the BigFour European nations. Hungary continues to demonstrate strongeconomic growth and to work toward accession to the European Unionin May 2004. The private sector accounts for over 80% of GDP.Foreign ownership of and investment in Hungarian firms arewidespread, with cumulative foreign direct investment totaling morethan $23 billion since 1989. Hungarian sovereign debt was upgradedin 2000 to the second-highest rating among all the Central Europeantransition economies. Inflation has declined substantially, from 14%in 1998 to 4.7% in 2003; unemployment has persisted around the 6%level. Germany is by far Hungary's largest economic partner.Short-term issues include the reduction of the public sector deficitto 3% in 2004 and avoiding unjustified increases in wages.
IcelandIceland's Scandinavian-type economy is basicallycapitalistic, yet with an extensive welfare system (includinggenerous housing subsidies), low unemployment, and remarkably evendistribution of income. In the absence of other natural resources(except for abundant hydrothermal and geothermal power), the economydepends heavily on the fishing industry, which provides 70% ofexport earnings and employs 12% of the work force. The economyremains sensitive to declining fish stocks as well as tofluctuations in world prices for its main exports: fish and fishproducts, aluminum, and ferrosilicon. Government policies includereducing the budget and current account deficits, limiting foreignborrowing, containing inflation, revising agricultural and fishingpolicies, diversifying the economy, and privatizing state-ownedindustries. The government remains opposed to EU membership,primarily because of Icelanders' concern about losing control overtheir fishing resources. Iceland's economy has been diversifyinginto manufacturing and service industries in the last decade, andnew developments in software production, biotechnology, andfinancial services are taking place. The tourism sector is alsoexpanding, with the recent trends in ecotourism and whale watching.Growth had been remarkably steady in 1996-2001 at 3%-5%, but couldnot be sustained in 2002 in an environment of global recession.Growth resumed in 2003, and inflation dropped back from 5% to 2%.
IndiaIndia's economy encompasses traditional village farming,modern agriculture, handicrafts, a wide range of modern industries,and a multitude of support services. Overpopulation severelyhandicaps the economy and about a quarter of the population is toopoor to be able to afford an adequate diet. Government controls havebeen reduced on imports and foreign investment, and privatization ofdomestic output has proceeded slowly. The economy has posted anexcellent average growth rate of 6% since 1990, reducing poverty byabout 10 percentage points. India has large numbers of well-educatedpeople skilled in the English language; India is a major exporter ofsoftware services and software workers; the information technologysector leads the strong growth pattern. The World Bank and othersworry about the continuing public-sector budget deficit, running atapproximately 10% of GDP in 1997-2002. In 2003 the state-ownedIndian Bank substantially reduced non-performing loans, attractednew customers, and turned a profit. Deep-rooted problems remain,notably conflicts among political and cultural groups.
Indian OceanThe Indian Ocean provides major sea routes connectingthe Middle East, Africa, and East Asia with Europe and the Americas.It carries a particularly heavy traffic of petroleum and petroleumproducts from the oilfields of the Persian Gulf and Indonesia. Itsfish are of great and growing importance to the bordering countriesfor domestic consumption and export. Fishing fleets from Russia,Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainlyfor shrimp and tuna. Large reserves of hydrocarbons are being tappedin the offshore areas of Saudi Arabia, Iran, India, and westernAustralia. An estimated 40% of the world's offshore oil productioncomes from the Indian Ocean. Beach sands rich in heavy minerals andoffshore placer deposits are actively exploited by borderingcountries, particularly India, South Africa, Indonesia, Sri Lanka,and Thailand.
IndonesiaIndonesia, a vast polyglot nation, faces severe economicdevelopment problems stemming from secessionist movements and thelow level of security in the regions; the lack of reliable legalrecourse in contract disputes; corruption; weaknesses in the bankingsystem; and strained relations with the IMF. Investor confidencewill remain low and few new jobs will be created under thesecircumstances. In November 2001, Indonesia agreed with the IMF on aseries of economic reforms in 2002, thus enabling further IMFdisbursements. Negotiations with the IMF and bilateral donorscontinued in 2002. Keys to future growth remain internal reform, thebuild-up of the confidence of international donors and investors,and a strong comeback in the global economy.
IranIran's economy is a mixture of central planning, stateownership of oil and other large enterprises, village agriculture,and small-scale private trading and service ventures. PresidentKHATAMI has continued to follow the market reform plans of formerPresident RAFSANJANI and has indicated that he will pursuediversification of Iran's oil-reliant economy although he has madelittle progress toward that goal. Relatively high oil prices inrecent years have enabled Iran to amass some $15 billion in foreignexchange reserves, but have not solved Iran's structural economicproblems, including high unemployment and inflation.
IraqIraq's economy is dominated by the oil sector, which hastraditionally provided about 95% of foreign exchange earnings. Inthe 1980s financial problems caused by massive expenditures in theeight-year war with Iran and damage to oil export facilities by Iranled the government to implement austerity measures, borrow heavily,and later reschedule foreign debt payments; Iraq suffered economiclosses from the war of at least $100 billion. After hostilitiesended in 1988, oil exports gradually increased with the constructionof new pipelines and restoration of damaged facilities. Iraq'sseizure of Kuwait in August 1990, subsequent international economicsanctions, and damage from military action by an internationalcoalition beginning in January 1991 drastically reduced economicactivity. Although government policies supporting large military andinternal security forces and allocating resources to key supportersof the regime have hurt the economy, implementation of the UN'soil-for-food program beginning in December 1996 helped improveconditions for the average Iraqi citizen. Iraq was allowed to exportlimited amounts of oil in exchange for food, medicine, and someinfrastructure spare parts. In December 1999 the UN Security Councilauthorized Iraq to export under the program as much oil as requiredto meet humanitarian needs. Oil exports have recently been more thanthree-quarters prewar level. However, 28% of Iraq's export revenuesunder the program have been deducted to meet UN Compensation Fundand UN administrative expenses. The drop in GDP in 2001-02 waslargely the result of the global economic slowdown and lower oilprices. Per capita food imports increased significantly, whilemedical supplies and health care services steadily improved. Percapita output and living standards were still well below the prewarlevel, but any estimates have a wide range of error. The militaryvictory of the US-led coalition in March-April 2003 resulted in theshutdown of much of the central economic administrative structureand the loss of a comparatively small amount of capital plant.
IrelandIreland is a small, modern, trade-dependent economy withgrowth averaging a robust 8% in 1995-2002. The global slowdown,especially in the information technology sector, pressed growth downto 2.7% in 2003. Agriculture, once the most important sector, is nowdwarfed by industry and services. Industry accounts for 46% of GDPand about 80% of exports and employs 28% of the labor force.Although exports remain the primary engine for Ireland's growth, theeconomy has also benefited from a rise in consumer spending,construction, and business investment. Per capita GDP is 10% abovethat of the four big European economies. Over the past decade, theIrish Government has implemented a series of national economicprograms designed to curb inflation, reduce government spending,increase labor force skills, and promote foreign investment. Irelandjoined in launching the euro currency system in January 1999 alongwith 10 other EU nations.
IsraelIsrael has a technologically advanced market economy withsubstantial government participation. It depends on imports of crudeoil, grains, raw materials, and military equipment. Despite limitednatural resources, Israel has intensively developed its agriculturaland industrial sectors over the past 20 years. Israel importssignificant quantities of grain but is largely self-sufficient inother agricultural products. Cut diamonds, high-technologyequipment, and agricultural products (fruits and vegetables) are theleading exports. Israel usually posts sizable current accountdeficits, which are covered by large transfer payments from abroadand by foreign loans. Roughly half of the government's external debtis owed to the US, which is its major source of economic andmilitary aid. The influx of Jewish immigrants from the former USSRduring the period 1989-99, coupled with the opening of new marketsat the end of the Cold War, energized Israel's economy, which grewrapidly in the early 1990s; growth began moderating in 1996 when thegovernment imposed tighter fiscal and monetary policies and theimmigration bonus petered out. Growth was a strong 7.2% in 2000, butthe bitter Israeli-Palestinian conflict, difficulties in thehigh-technology, construction, and tourist sectors, and fiscalausterity in the face of growing inflation led to small declines inGDP in 2001 and 2002.
ItalyItaly has a diversified industrial economy with roughly thesame total and per capita output as France and the UK. Thiscapitalistic economy remains divided into a developed industrialnorth, dominated by private companies, and a less developed,welfare-dependent agricultural south, with 20% unemployment. Mostraw materials needed by industry and more than 75% of energyrequirements are imported. Over the past decade, Italy has pursued atight fiscal policy in order to meet the requirements of theEconomic and Monetary Unions and has benefited from lower interestand inflation rates. The current government has enacted numerousshort-term reforms aimed at improving competitiveness and long-termgrowth. Italy has moved slowly, however, on implementing neededstructural reforms, such as lightening the high tax burden andoverhauling Italy's rigid labor market and over-generous pensionsystem, because of the current economic slowdown and opposition fromlabor unions.
JamaicaThe economy, which depends heavily on tourism and bauxite,has been stagnant since 1995. After five years of recession, theeconomy inched ahead, by 0.8% in 2000, 1.7% in 2001, and 0.8% in2002; the global economic slowdown, particularly in the UnitedStates after the 11 September 2001 terrorist attacks, has stuntedthe economic recovery. Serious problems include: high interestrates; increased foreign competition; a pressured, sometimessliding, exchange rate; a widening merchandise trade deficit; and agrowing internal debt, the result of government bailouts to variousailing sectors of the economy, particularly the financial sector.Depressed economic conditions have led to increased civil unrest,including serious violent crime. Jamaica's medium-term prospectswill depend upon encouraging investment and tourism, maintaining acompetitive exchange rate, selling off reacquired firms, andimplementing proper fiscal and monetary policies.
Jan MayenJan Mayen is a volcanic island with no exploitable naturalresources. Economic activity is limited to providing services foremployees of Norway's radio and meteorological stations located onthe island.
JapanGovernment-industry cooperation, a strong work ethic, masteryof high technology, and a comparatively small defense allocation (1%of GDP) helped Japan advance with extraordinary rapidity to the rankof second-most-technologically-powerful economy in the world afterthe US and third-largest economy after the US and China. One notablecharacteristic of the economy is the working together ofmanufacturers, suppliers, and distributors in closely-knit groupscalled keiretsu. A second basic feature has been the guarantee oflifetime employment for a substantial portion of the urban laborforce. Both features are now eroding. Industry, the most importantsector of the economy, is heavily dependent on imported rawmaterials and fuels. The much smaller agricultural sector is highlysubsidized and protected, with crop yields among the highest in theworld. Usually self-sufficient in rice, Japan must import about 50%of its requirements of other grain and fodder crops. Japan maintainsone of the world's largest fishing fleets and accounts for nearly15% of the global catch. For three decades overall real economicgrowth had been spectacular: a 10% average in the 1960s, a 5%average in the 1970s, and a 4% average in the 1980s. Growth slowedmarkedly in the 1990s, averaging just 1.7%, largely because of theaftereffects of overinvestment during the late 1980s andcontractionary domestic policies intended to wring speculativeexcesses from the stock and real estate markets. Government effortsto revive economic growth have met with little success and werefurther hampered in 2000-2003 by the slowing of the US, European,and Asian economies. Japan's huge government debt, which isapproaching 150% of GDP, and the ageing of the population are twomajor long-run problems. Robotics constitutes a key long-termeconomic strength with Japan possessing 410,000 of the world's720,000 "working robots." Internal conflict over the proper way toreform the ailing banking system continues.
Jarvis Islandno economic activity
JerseyThe economy is based largely on international financialservices, agriculture, and tourism. Potatoes, cauliflower, tomatoes,and especially flowers are important export crops, shipped mostly tothe UK. The Jersey breed of dairy cattle is known worldwide andrepresents an important export income earner. Milk products go tothe UK and other EU countries. In 1996 the finance sector accountedfor about 60% of the island's output. Tourism, another mainstay ofthe economy, accounts for 24% of GDP. In recent years, thegovernment has encouraged light industry to locate in Jersey, withthe result that an electronics industry has developed alongside thetraditional manufacturing of knitwear. All raw material and energyrequirements are imported, as well as a large share of Jersey's foodneeds. Light taxes and death duties make the island a popular taxhaven.
Johnston AtollEconomic activity is limited to providing services toUS military personnel and contractors located on the island. Allfood and manufactured goods must be imported.
JordanJordan is a small Arab country with inadequate supplies ofwater and other natural resources such as oil. Debt, poverty, andunemployment are fundamental problems, but King ABDALLAH sinceassuming the throne in 1999 has undertaken some broad economicreforms in a long-term effort to improve living standards. Amman inthe past three years has worked closely with the IMF, practicedcareful monetary policy, and made significant headway withprivatization. The government also has liberalized the trade regimesufficiently to secure Jordan's membership in the WTrO (2000), afree trade accord with US (2000), and an association agreement withthe EU (2001). These measures have helped improve productivity andhave put Jordan on the foreign investment map. The US-led war inIraq in 2003 dealt an economic blow to Jordan, which was dependenton Iraq for discounted oil. It remains unclear how Jordan willfinance energy imports in the absence of such a deal. Other ongoingchallenges include fiscal adjustment to reduce the budget deficitand broader investment incentives to promote job-creating ventures.
Juan de Nova IslandUp to 12,000 tons of guano are mined per year.
KazakhstanKazakhstan, the largest of the former Soviet republics interritory, excluding Russia, possesses enormous fossil fuel reservesas well as plentiful supplies of other minerals and metals. It alsois a large agricultural - livestock and grain - producer.Kazakhstan's industrial sector rests on the extraction andprocessing of these natural resources and also on a growingmachine-building sector specializing in construction equipment,tractors, agricultural machinery, and some defense items. Thebreakup of the USSR in December 1991 and the collapse in demand forKazakhstan's traditional heavy industry products resulted in ashort-term contraction of the economy, with the steepest annualdecline occurring in 1994. In 1995-97, the pace of the governmentprogram of economic reform and privatization quickened, resulting ina substantial shifting of assets into the private sector. Kazakhstanenjoyed double-digit growth in 2000-01 - and a solid 9.5% in 2002 -thanks largely to its booming energy sector, but also to economicreform, good harvests, and foreign investment. The opening of theCaspian Consortium pipeline in 2001, from western Kazakhstan'sTengiz oilfield to the Black Sea, substantially raised exportcapacity. The country has embarked upon an industrial policydesigned to diversify the economy away from overdependence on theoil sector, by developing light industry. Additionally, the policyaims to reduce the influence of foreign investment and foreignpersonnel; the government has engaged in several disputes withforeign oil companies over the terms of production agreements, andtensions continue.
KenyaKenya, the regional hub for trade and finance in East Africa,is hampered by corruption and reliance upon several primary goodswhose prices remain low. Following strong economic growth in 1995and 1996, Kenya's economy has stagnated, with GDP growth failing tokeep up with the rate of population growth. In 1997, the IMFsuspended Kenya's Enhanced Structural Adjustment Program due to thegovernment's failure to maintain reforms and curb corruption. Asevere drought from 1999 to 2000 compounded Kenya's problems,causing water and energy rationing and reducing agricultural output.As a result, GDP contracted by 0.3% in 2000. The IMF, which hadresumed loans in 2000 to help Kenya through the drought, againhalted lending in 2001 when the government failed to instituteseveral anticorruption measures. Despite the return of strong rainsin 2001, weak commodity prices, endemic corruption, and lowinvestment limited Kenya's economic growth to 1%. Growth fell below1% in 2002 because of erratic rains, low investor confidence, meagerdonor support, and political infighting up to the elections. In thekey December 27, 2002 elections, Daniel Arap MOI's 24-year-old reignended, and a new opposition government took on the formidableeconomic problems facing the nation. Substantial donor support androoting out corruption are essential to making Kenya realize itssubstantial economic potential.
Kingman Reefno economic activity
KiribatiA remote country of 33 scattered coral atolls, Kiribati hasfew natural resources. Commercially viable phosphate deposits wereexhausted at the time of independence from the UK in 1979. Copra andfish now represent the bulk of production and exports. The economyhas fluctuated widely in recent years. Economic development isconstrained by a shortage of skilled workers, weak infrastructure,and remoteness from international markets. Tourism provides morethan one-fifth of GDP. The financial sector is at an early stage ofdevelopment as is the expansion of private sector initiatives.Foreign financial aid from UK, Japan, Australia, New Zealand, andChina is a critical supplement to GDP, equal to 25%-50% of GDP inrecent years. Remittances from workers abroad account for more than$5 million each year.
Korea, NorthNorth Korea, one of the world's most centrally plannedand isolated economies, faces desperate economic conditions.Industrial capital stock is nearly beyond repair as a result ofyears of underinvestment and spare parts shortages. Industrial andpower output have declined in parallel. The nation has suffered itstenth year of food shortages because of a lack of arable land;collective farming; weather-related problems, including majordrought in 2000; and chronic shortages of fertilizer and fuel.Massive international food aid deliveries have allowed the regime toescape mass starvation since 1995-96, but the population remains thevictim of prolonged malnutrition and deteriorating livingconditions. Large-scale military spending eats up resources neededfor investment and civilian consumption. Recently, the regime hasplaced emphasis on earning hard currency, developing informationtechnology, addressing power shortages, and attracting foreign aid,but in no way at the expense of relinquishing central control overkey national assets or undergoing widespread market-orientedreforms. In 2003, heightened political tensions with key donorcountries and general donor fatigue have held down the flow ofdesperately needed food aid and have threatened fuel aid as well.