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 Jamaican economy is heavily dependent on services, whichnow account for 70% of GDP. The country continues to derive most ofits foreign exchange from tourism, remittances, and bauxite/alumina.The global economic slowdown, particularly after the terroristattacks in the US on 11 September 2001, stunted economic growth; theeconomy rebounded moderately in 2003, with one of the best touristseasons on record. But the economy faces serious long-term problems:high interest rates; increased foreign competition; a pressured,sometimes sliding, exchange rate; a sizable merchandise tradedeficit; large-scale unemployment; and a growing internal debt, theresult of government bailouts to ailing sectors of the economy. Theratio of debt to GDP is close to 150%. Inflation, previously abright spot, is expected to remain in the double digits. Depressedeconomic conditions have led to increased civil unrest, includinggang violence fueled by the drug trade. In 2004, the governmentfaces the difficult prospect of having to achieve fiscal disciplinein order to maintain debt payments while simultaneously attacking aserious and growing crime problem that is hampering economic growth.
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 on theisland.
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 theafter effects 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 totals morethan 150% of GDP, and the ageing of the population are two majorlong-run problems. Robotics constitutes a key long-term economicstrength with Japan possessing 410,000 of the world's 720,000"working robots." Internal conflict over the proper way to reformthe 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 substantial headway withprivatization. The government also has liberalized the trade regimesufficiently to secure Jordan's membership in the WTrO (2000), afree trade accord with the US (2000), and an association agreementwith the EU (2001). These measures have helped improve productivityand have 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 (worth $300-$600 million a year). SeveralGulf nations have provided temporary aid to compensate for the lossof this oil; when this foreign aid expires, the Jordanian governmenthas pledged to raise retail petroleum product prices and the salestax base. Other ongoing challenges include fiscal adjustment toreduce the budget deficit, broader investment incentives to promotejob-creating ventures, and the encouragement of tourism.
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.
KenyaThe regional hub for trade and finance in East Africa, Kenyahas been hampered by corruption, notably in the judicial system, andby reliance upon several primary goods whose prices have remainedlow. In 1997, the IMF suspended Kenya's Enhanced StructuralAdjustment Program due to the government's failure to maintainreforms and curb corruption. A severe drought from 1999 to 2000compounded Kenya's problems, causing water and energy rationing andreducing agricultural output. As a result, GDP contracted by 0.2% in2000. The IMF, which had resumed loans in 2000 to help Kenya throughthe drought, again halted lending in 2001 when the government failedto institute several anticorruption measures. Despite the return ofstrong rains in 2001, weak commodity prices, endemic corruption, andlow investment limited Kenya's economic growth to 1.2%. Growthlagged at 1.1% in 2002 because of erratic rains, low investorconfidence, meager donor support, and political infighting up to theelections. In the key 27 December 2002 elections, Daniel Arap MOI's24-year-old reign ended, and a new opposition government took on theformidable economic problems facing the nation. In 2003, progresswas made in rooting out corruption, and encouraging donor support,with GDP growth edging up to 1.7%.
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 equals 25%-50% of GDP. Remittances from workers abroad accountfor 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, and chronic shortagesof fertilizer and fuel. Massive international food aid deliverieshave allowed the regime to escape mass starvation since 1995-96, butthe population remains the victim of prolonged malnutrition anddeteriorating living conditions. Large-scale military spending eatsup resources needed for investment and civilian consumption. In2003, heightened political tensions with key donor countries andgeneral donor fatigue threatened the flow of desperately needed foodaid and fuel aid as well. Black market prices continued to risefollowing the increase in official prices and wages in the summer of2002, leaving some vulnerable groups, such as the elderly andunemployed, less able to buy goods. The regime, however, relaxedrestrictions on farmers' market activities in spring 2003, leadingto an expansion of market activity.
Korea, SouthSince the early 1960s, South Korea has achieved anincredible record of growth and integration into the high-techmodern world economy. Four decades ago GDP per capita was comparablewith levels in the poorer countries of Africa and Asia. Today itsGDP per capita is 18 times North Korea's and equal to the lessereconomies of the European Union. This success through the late 1980swas achieved by a system of close government/business ties,including directed credit, import restrictions, sponsorship ofspecific industries, and a strong labor effort. The governmentpromoted the import of raw materials and technology at the expenseof consumer goods and encouraged savings and investment overconsumption. The Asian financial crisis of 1997-99 exposedlongstanding weaknesses in South Korea's development model,including high debt/equity ratios, massive foreign borrowing, and anundisciplined financial sector. Growth plunged to a negative 6.6% in1998, then strongly recovered to 10.8% in 1999 and 9.2% in 2000.Growth fell back to 3.3% in 2001 because of the slowing globaleconomy, falling exports, and the perception that much-neededcorporate and financial reforms had stalled. Led by consumerspending and exports, growth in 2002 was an impressive 6.2%, despiteanemic global growth, followed by moderate 2.8% growth in 2003. In2003 the National Assembly approved legislation reducing the six-daywork week to five days.
KuwaitKuwait is a small, rich, relatively open economy with provedcrude oil reserves of about 98 billion barrels - 10% of worldreserves. Petroleum accounts for nearly half of GDP, 95% of exportrevenues, and 80% of government income. Kuwait's climate limitsagricultural development. Consequently, with the exception of fish,it depends almost wholly on food imports. About 75% of potable watermust be distilled or imported. Kuwait continues its discussions withforeign oil companies to develop fields in the northern part of thecountry.
KyrgyzstanKyrgyzstan is a poor, mountainous country with apredominantly agricultural economy. Cotton, tobacco, wool, and meatare the main agricultural products, although only tobacco and cottonare exported in any quantity. Industrial exports include gold,mercury, uranium, and natural gas and electricity. Kyrgyzstan hasbeen fairly progressive in carrying out market reforms, such as animproved regulatory system and land reform. Kyrgyzstan was the firstCIS country to be accepted into the World Trade Organization. Withfits and starts, inflation has been lowered to an estimated 7% in2001, 2.1% in 2002, and 4.0% in 2003. Much of the government's stockin enterprises has been sold. Drops in production had been severeafter the breakup of the Soviet Union in December 1991, but bymid-1995 production began to recover and exports began to increase.Kyrgyzstan has distinguished itself by adopting relatively liberaleconomic policies. The drop in output at the Kumtor gold minesparked a 0.5% decline in GDP in 2002, but GDP growth bounced backto 6% in 2003. The government has made steady strides in controllingits substantial fiscal deficit and aims to reduce the deficit to 4.4percent of GDP in 2004. The government and the internationalfinancial institutions have been engaged in a comprehensivemedium-term poverty reduction and economic growth strategy. Furtherrestructuring of domestic industry and success in attracting foreigninvestment are keys to future growth.
LaosThe government of Laos - one of the few remaining officialCommunist states - began decentralizing control and encouragingprivate enterprise in 1986. The results, starting from an extremelylow base, were striking - growth averaged 7% in 1988-2001 exceptduring the short-lived drop caused by the Asian financial crisisbeginning in 1997. Despite this high growth rate, Laos remains acountry with a primitive infrastructure; it has no railroads, arudimentary road system, and limited external and internaltelecommunications. Electricity is available in only a few urbanareas. Subsistence agriculture accounts for half of GDP and provides80% of total employment. The economy will continue to benefit fromaid from the IMF and other international sources and from newforeign investment in food processing and mining.
LatviaLatvia's transitional economy recovered from the 1998 Russianfinancial crisis, largely due to the SKELE government's budgetstringency and a gradual reorientation of exports toward EUcountries, lessening Latvia's trade dependency on Russia. Themajority of companies, banks, and real estate have been privatized,although the state still holds sizable stakes in a few largeenterprises. Latvia officially joined the World Trade Organizationin February 1999. Preparing for EU membership continues as a topforeign policy goal. The current account and internal governmentdeficits remain major concerns, but the government's efforts toincrease efficiency in revenue collection may lessen the budgetdeficit.
LebanonThe 1975-91 civil war seriously damaged Lebanon's economicinfrastructure, cut national output by half, and all but endedLebanon's position as a Middle Eastern entrepot and banking hub.Peace enabled the central government to restore control in Beirut,begin collecting taxes, and regain access to key port and governmentfacilities. Economic recovery was helped by a financially soundbanking system and resilient small- and medium-scale manufacturers.Family remittances, banking services, manufactured and farm exports,and international aid provided the main sources of foreign exchange.Lebanon's economy made impressive gains since the launch in 1993 of"Horizon 2000," the government's $20 billion reconstruction program.Real GDP grew 8% in 1994, 7% in 1995, 4% in 1996 and in 1997, butslowed to 1.2% in 1998, -1.6% in 1999, -0.6% in 2000, 0.8% in 2001,1.5% in 2002, and 3% in 2003. During the 1990s, annual inflationfell to almost 0% from more than 100%. Lebanon has rebuilt much ofits war-torn physical and financial infrastructure. The governmentnonetheless faces serious challenges in the economic arena. It hasfunded reconstruction by borrowing heavily - mostly from domesticbanks. In order to reduce the ballooning national debt, there-installed HARIRI government began an economic austerity programto rein in government expenditures, increase revenue collection, andprivatize state enterprises. The HARIRI government met withinternational donors at the Paris II conference in November 2002 toseek bilateral assistance restructuring its domestic debt at lowerrates of interest. While privatization of state-owned enterpriseshad not occurred by the end of 2003, massive receipts from donornations stabilized government finances in 2002-04.
LesothoSmall, landlocked, and mountainous, Lesotho relies onremittances from miners employed in South Africa and customs dutiesfrom the Southern Africa Customs Union for the majority ofgovernment revenue, but the government has strengthened its taxsystem to reduce dependency on customs duties. Completion of a majorhydropower facility in January 1998 now permits the sale of water toSouth Africa, also generating royalties for Lesotho. As the numberof mineworkers has declined steadily over the past several years, asmall manufacturing base has developed based on farm products thatsupport the milling, canning, leather, and jute industries and arapidly growing apparel-assembly sector. The economy is stillprimarily based on subsistence agriculture, especially livestock,although drought has decreased agricultural activity. The extremeinequality in the distribution of income remains a major drawback.Lesotho has signed an Interim Poverty Reduction and Growth Facilitywith the IMF.
LiberiaCivil war and misgovernment have destroyed much of Liberia'seconomy, especially the infrastructure in and around Monrovia. Manybusinessmen have fled the country, taking capital and expertise withthem. Some have returned, many will not. Richly endowed with water,mineral resources, forests, and a climate favorable to agriculture,Liberia had been a producer and exporter of basic products -primarily raw timber and rubber. Local manufacturing, mainly foreignowned, had been small in scope. The departure of the formerpresident, Charles TAYLOR, to Nigeria in August 2003, theestablishment of the all-inclusive National Transition Government ofLiberia (NTGL), and the arrival of a UN mission are all encouragingsigns that the political crisis is coming to an end. The restorationof infrastructure and the raising of incomes in this ravaged economydepend on the implementation of sound macro- and micro-economicpolicies, including the encouragement of foreign investment, andgenerous support from donor countries.
LibyaThe Libyan economy depends primarily upon revenues from theoil sector, which contribute practically all export earnings andabout one-quarter of GDP. These oil revenues and a small populationgive Libya one of the highest per capita GDPs in Africa, but littleof this income flows down to the lower orders of society. Libyanofficials in the past three years have made progress on economicreforms as part of a broader campaign to reintegrate the countryinto the international fold. This effort picked up steam after UNsanctions were lifted in September 2003 and as Libya announced inDecember 2003 that it would abandon programs to build weapons ofmass destruction. Libya faces a long road ahead in liberalizing thesocialist-oriented economy, but initial steps - including applyingfor WTO membership, reducing some subsidies, and announcing plansfor privatization - are laying the groundwork for a transition to amore market-based economy. The non-oil manufacturing andconstruction sectors, which account for about 20% of GDP, haveexpanded from processing mostly agricultural products to include theproduction of petrochemicals, iron, steel, and aluminum. Climaticconditions and poor soils severely limit agricultural output, andLibya imports about 75% of its food.
LiechtensteinDespite its small size and limited natural resources,Liechtenstein has developed into a prosperous, highlyindustrialized, free-enterprise economy with a vital financialservice sector and living standards on a par with its large Europeanneighbors. The Liechtenstein economy is widely diversified with alarge number of small businesses. Low business taxes - the maximumtax rate is 20% - and easy incorporation rules have induced manyholding or so-called letter box companies to establish nominaloffices in Liechtenstein, providing 30% of state revenues. Thecountry participates in a customs union with Switzerland and usesthe Swiss franc as its national currency. It imports more than 90%of its energy requirements. Liechtenstein has been a member of theEuropean Economic Area (an organization serving as a bridge betweenthe European Free Trade Association (EFTA) and the EU) since May1995. The government is working to harmonize its economic policieswith those of an integrated Europe.
LithuaniaLithuania, the Baltic state that has conducted the mosttrade with Russia, has slowly rebounded from the 1998 Russianfinancial crisis. Unemployment remains high, still 10.7% in 2003,but is improving. Growing domestic consumption and increasedinvestment have furthered recovery. Trade has been increasinglyoriented toward the West. Lithuania has gained membership in theWorld Trade Organization and has moved ahead with plans to join theEU. Privatization of the large, state-owned utilities, particularlyin the energy sector, is nearing completion. Overall, more than 80%of enterprises have been privatized. Foreign government and businesssupport have helped in the transition from the old command economyto a market economy.
LuxembourgThis stable, high-income economy features solid growth,low inflation, and low unemployment. The industrial sector,initially dominated by steel, has become increasingly diversified toinclude chemicals, rubber, and other products. Growth in thefinancial sector, which now accounts for about 22% of GDP, has morethan compensated for the decline in steel. Most banks areforeign-owned and have extensive foreign dealings. Agriculture isbased on small family-owned farms. The economy depends on foreignand trans-border workers for more than 30% of its labor force.Although Luxembourg, like all EU members, has suffered from theglobal economic slump, the country has maintained a fairly stronggrowth rate and enjoys an extraordinarily high standard of living.
MacauMacau's well-to-do economy has remained one of the most openin the world since its reversion to China in 1999. The territory'snet exports of goods and services account for roughly 41% of GDPwith tourism and apparel exports as the mainstays. Although theterritory was hit hard by the 1998 Asian financial crisis and theglobal downturn in 2001, its economy grew 9.5% in 2002. A rapid risein the number of mainland visitors because of China's easing ofrestrictions on travel drove the recovery. The budget also returnedto surplus in 2002 because of the surge in visitors from China and ahike in taxes on gambling profits, which generated about 70% ofgovernment revenue. The liberalization of Macao's gambling monopolycontributes to GDP growth, as the three companies awarded gamblinglicenses have pledged to invest $2.2 billion in the territory. Muchof Macau's textile industry may move to the mainland as theMulti-Fiber Agreement is phased out. The territory may have to relymore on gambling and trade-related services to generate growth. Thegovernment estimated GDP growth at 4% in 2003 with the drop in largemeasure due to concerns over the Severe Acute Respiratory Syndrome(SARS), but private sector analysts think the figure may have beenhigher because of the continuing boom in tourism.
MacedoniaAt independence in September 1991, Macedonia was the leastdeveloped of the Yugoslav republics, producing a mere 5% of thetotal federal output of goods and services. The collapse ofYugoslavia ended transfer payments from the center and eliminatedadvantages from inclusion in a de facto free trade area. An absenceof infrastructure, UN sanctions on Yugoslavia, one of its largestmarkets, and a Greek economic embargo over a dispute about thecountry's constitutional name and flag hindered economic growthuntil 1996. GDP subsequently rose each year through 2000. However,the leadership's commitment to economic reform, free trade, andregional integration was undermined by the ethnic Albanianinsurgency of 2001. The economy shrank 4.5% because of decreasedtrade, intermittent border closures, increased deficit spending onsecurity needs, and investor uncertainty. Growth barely recovered in2002 to 0.9%, then rose to 2.8% in 2003. Unemployment at one-thirdof the workforce remains the most critical economic problem. Thegray economy is estimated at around 40% of GDP. Politically, thecountry is more stable than in 2002.
MadagascarHaving discarded past socialist economic policies,Madagascar has since the mid 1990s followed a World Bank and IMF ledpolicy of privatization and liberalization. This strategy has placedthe country on a slow and steady growth path from an extremely lowlevel. Agriculture, including fishing and forestry, is a mainstay ofthe economy, accounting for more than one-fourth of GDP andemploying four-fifths of the population. Exports of apparel haveboomed in recent years primarily due to duty-free access to theUnited States. Deforestation and erosion, aggravated by the use offirewood as the primary source of fuel are serious concerns.President RAVALOMANANA has worked aggressively to revive the economyfollowing the 2002 political crisis, which triggered a 12% drop inGDP that year. Poverty reduction and combating corruption will bethe centerpieces of economic policy for the next few years.
MalawiLandlocked Malawi ranks among the world's least developedcountries. The economy is predominately agricultural, with about 90%of the population living in rural areas. Agriculture accounted fornearly 40% of GDP and 88% of export revenues in 2001. The economydepends on substantial inflows of economic assistance from the IMF,the World Bank, and individual donor nations. In late 2000, Malawiwas approved for relief under the Heavily Indebted Poor Countries(HIPC) program. In November 2002 the World Bank approved a $50million drought recovery package, which is to be used for faminerelief. The government faces strong challenges, e.g., to fullydevelop a market economy, to improve educational facilities, to faceup to environmental problems, to deal with the rapidly growingproblem of HIV/AIDS, and to satisfy foreign donors that fiscaldiscipline is being tightened. The performance of the tobacco sectoris key to short-term growth as tobacco accounts for over 50% ofexports.
MalaysiaMalaysia, a middle-income country, transformed itself from1971 through the late 1990s from a producer of raw materials into anemerging multi-sector economy. Growth was almost exclusively drivenby exports - particularly of electronics. As a result Malaysia washard hit by the global economic downturn and the slump in theinformation technology (IT) sector in 2001 and 2002. GDP in 2001grew only 0.5% due to an estimated 11% contraction in exports, but asubstantial fiscal stimulus package equal to US $1.9 billionmitigated the worst of the recession and the economy rebounded in2002 with a 4.1% increase. The economy grew 4.9% in 2003,notwithstanding a difficult first half, when external pressures fromSARS and the Iraq War led to caution in the business community.Healthy foreign exchange reserves and a relatively small externaldebt make it unlikely that Malaysia will experience a crisis similarto the one in 1997, but the economy remains vulnerable to a moreprotracted slowdown in Japan and the US, top export destinations andkey sources of foreign investment. The Malaysian ringgit is peggedto the dollar, and the Japanese central bank continues to interveneand prop up the yen against the dollar.
MaldivesTourism, Maldives' largest industry, accounts for 20% ofGDP and more than 60% of the Maldives' foreign exchange receipts.Over 90% of government tax revenue comes from import duties andtourism-related taxes. Fishing is a second leading sector. TheMaldivian Government began an economic reform program in 1989initially by lifting import quotas and opening some exports to theprivate sector. Subsequently, it has liberalized regulations toallow more foreign investment. Agriculture and manufacturingcontinue to play a lesser role in the economy, constrained by thelimited availability of cultivable land and the shortage of domesticlabor. Most staple foods must be imported. Industry, which consistsmainly of garment production, boat building, and handicrafts,accounts for about 18% of GDP. Maldivian authorities worry about theimpact of erosion and possible global warming on their low-lyingcountry; 80% of the area is one meter or less above sea level.
MaliMali is among the poorest countries in the world, with 65% ofits land area desert or semidesert and with a highly unequaldistribution of income. Economic activity is largely confined to theriverine area irrigated by the Niger. About 10% of the population isnomadic and some 80% of the labor force is engaged in farming andfishing. Industrial activity is concentrated on processing farmcommodities. Mali is heavily dependent on foreign aid and vulnerableto fluctuations in world prices for cotton, its main export, alongwith gold. The government has continued its successfulimplementation of an IMF-recommended structural adjustment programthat is helping the economy grow, diversify, and attract foreigninvestment. Mali's adherence to economic reform and the 50%devaluation of the African franc in January 1994 have pushed upeconomic growth to a sturdy 5% average in 1996-2002. Workerremittances and external trade routes have been jeopardized bycontinued unrest in neighboring Cote d'Ivoire.
MaltaMajor resources are limestone, a favorable geographiclocation, and a productive labor force. Malta produces only about20% of its food needs, has limited fresh water supplies, and has nodomestic energy sources. The economy is dependent on foreign trade,manufacturing (especially electronics and textiles), and tourism.Malta is privatizing state-controlled firms and liberalizing marketsin order to prepare for membership in the European Union. The islandremains divided politically, however, over the question of joiningthe EU. Continued sluggishness in the global economy is holding backexports, tourism, and overall growth.
Man, Isle ofOffshore banking, manufacturing, and tourism are keysectors of the economy. The government's policy of offeringincentives to high-technology companies and financial institutionsto locate on the island has paid off in expanding employmentopportunities in high-income industries. As a result, agricultureand fishing, once the mainstays of the economy, have declined intheir shares of GDP. Trade is mostly with the UK. The Isle of Manenjoys free access to EU markets.
Marshall IslandsUS Government assistance is the mainstay of thistiny island economy. Agricultural production is primarilysubsistence and is concentrated on small farms; the most importantcommercial crops are coconuts and breadfruit. Small-scale industryis limited to handicrafts, tuna processing, and copra. The touristindustry, now a small source of foreign exchange employing less than10% of the labor force, remains the best hope for future addedincome. The islands have few natural resources, and imports farexceed exports. Under the terms of the Compact of Free Association,the US has provided more than $1 billion in aid since 1986.Negotiations have continued for an extended agreement. Governmentdownsizing, drought, a drop in construction, the decline in tourismand foreign investment due to the Asian financial difficulties, andless income from the renewal of fishing vessel licenses have heldGDP growth to an average of 1% over the past decade.
MartiniqueThe economy is based on sugarcane, bananas, tourism, andlight industry. Agriculture accounts for about 6% of GDP and thesmall industrial sector for 11%. Sugar production has declined, withmost of the sugarcane now used for the production of rum. Bananaexports are increasing, going mostly to France. The bulk of meat,vegetable, and grain requirements must be imported, contributing toa chronic trade deficit that requires large annual transfers of aidfrom France. Tourism, which employs more than 11,000 people, hasbecome more important than agricultural exports as a source offoreign exchange.
MauritaniaHalf the population still depends on agriculture andlivestock for a livelihood, even though many of the nomads andsubsistence farmers were forced into the cities by recurrentdroughts in the 1970s and 1980s. Mauritania has extensive depositsof iron ore, which account for nearly 40% of total exports. Thedecline in world demand for this ore, however, has led to cutbacksin production. The nation's coastal waters are among the richestfishing areas in the world, but overexploitation by foreignersthreatens this key source of revenue. The country's first deepwaterport opened near Nouakchott in 1986. In the past, drought andeconomic mismanagement resulted in a buildup of foreign debt. InFebruary 2000, Mauritania qualified for debt relief under theHeavily Indebted Poor Countries (HIPC) initiative and in December2001 received strong support from donor and lending countries at atriennial Consultative Group review. In 2001, exploratory oil wellsin tracts 80 km offshore indicated potential extraction at currentworld oil prices. A new investment code approved in December 2001improved the opportunities for direct foreign investment. Ongoingnegotiations with the IMF involve problems of economic reforms andfiscal discipline. Substantial oil production and exports probablywill not begin until 2005. Meantime the government emphasizesreduction of poverty, improvement of health and education, andpromoting privatization of the economy.
MauritiusSince independence in 1968, Mauritius has developed from alow-income, agriculturally based economy to a middle-incomediversified economy with growing industrial, financial, and touristsectors. For most of the period, annual growth has been in the orderof 5% to 6%. This remarkable achievement has been reflected in moreequitable income distribution, increased life expectancy, loweredinfant mortality, and a much-improved infrastructure. Sugarcane isgrown on about 90% of the cultivated land area and accounts for 25%of export earnings. The government's development strategy centers onexpanding local financial institutions and building a domesticinformation telecommunications industry. Mauritius has attractedmore than 9,000 offshore entities, many aimed at commerce in Indiaand South Africa, and investment in the banking sector alone hasreached over $1 billion. Mauritius, with its strong textile sectorand responsible fiscal management, has been well poised to takeadvantage of the Africa Growth and Opportunity Act (AGOA).
MayotteEconomic activity is based primarily on the agriculturalsector, including fishing and livestock raising. Mayotte is notself-sufficient and must import a large portion of its foodrequirements, mainly from France. The economy and future developmentof the island are heavily dependent on French financial assistance,an important supplement to GDP. Mayotte's remote location is anobstacle to the development of tourism.
MexicoMexico has a free market economy with a mixture of modern andoutmoded industry and agriculture, increasingly dominated by theprivate sector. Recent administrations have expanded competition inseaports, railroads, telecommunications, electricity generation,natural gas distribution, and airports. Per capita income isone-fourth that of the US; income distribution remains highlyunequal. Trade with the US and Canada has tripled since theimplementation of NAFTA in 1994. Real GDP growth was a weak -0.3% in2001, 0.9% in 2002, and 1.2% in 2003, with the US slowdown theprincipal cause. Mexico implemented free trade agreements withGuatemala, Honduras, El Salvador, and the European Free Trade Areain 2001, putting more than 90% of trade under free trade agreements.The government is cognizant of the need to upgrade infrastructure,modernize the tax system and labor laws, and provide incentives toinvest in the energy sector, but progress is slow.
Micronesia, Federated States ofEconomic activity consists primarilyof subsistence farming and fishing. The islands have few mineraldeposits worth exploiting, except for high-grade phosphate. Thepotential for a tourist industry exists, but the remote location, alack of adequate facilities, and limited air connections hinderdevelopment. In November 2002, the country experienced a furtherreduction in future revenues from the Compact of Free Association -the agreement with the US in which Micronesia received $1.3 billionin financial and technical assistance over a 15-year period until2001. The country's medium-term economic outlook appears fragile duenot only to the reduction in US assistance but also to the slowgrowth of the private sector. Geographical isolation and a poorlydeveloped infrastructure remain major impediments to long-termgrowth.
Midway IslandsThe economy is based on providing support servicesfor the national wildlife refuge activities located on the islands.All food and manufactured goods must be imported.
MoldovaMoldova remains the poorest country in Europe despite recentprogress from its small economic base. It enjoys a favorable climateand good farmland but has no major mineral deposits. As a result,the economy depends heavily on agriculture, featuring fruits,vegetables, wine, and tobacco. Moldova must import almost all of itsenergy supplies from Russia. Energy shortages contributed to sharpproduction declines after the breakup of the Soviet Union in 1991.As part of an ambitious reform effort, Moldova introduced aconvertible currency, freed prices, stopped issuing preferentialcredits to state enterprises, backed steady land privatization,removed export controls, and freed interest rates. The governmententered into agreements with the World Bank and the IMF to promotegrowth and reduce poverty. The economy returned to positive growth,of 2.1% in 2000, 6.1% in 2001, 7.2% in 2002, and 6.3% in 2003.Further reforms will come slowly because of strong political forcesbacking government controls. The economy remains vulnerable tohigher fuel prices, poor agricultural weather, and the skepticism offoreign investors.
MonacoMonaco, bordering France on the Mediterranean coast, is apopular resort, attracting tourists to its casino and pleasantclimate. In 2001, a major construction project extended the pierused by cruise ships in the main harbor. The principality hassuccessfully sought to diversify into services and small,high-value-added, nonpolluting industries. The state has no incometax and low business taxes and thrives as a tax haven both forindividuals who have established residence and for foreign companiesthat have set up businesses and offices. The state retainsmonopolies in a number of sectors, including tobacco, the telephonenetwork, and the postal service. Living standards are high, roughlycomparable to those in prosperous French metropolitan areas. Monacodoes not publish national income figures; the estimates below areextremely rough.
MongoliaEconomic activity traditionally has been based onagriculture and breeding of livestock. Mongolia also has extensivemineral deposits; copper, coal, molybdenum, tin, tungsten, and goldaccount for a large part of industrial production. Sovietassistance, at its height one-third of GDP, disappeared almostovernight in 1990-91 at the time of the dismantlement of the USSR.Mongolia was driven into deep recession, prolonged by the MongolianPeople's Revolutionary Party's (MPRP) reluctance to undertakeserious economic reform. The Democratic Union Coalition (DUC)government embraced free-market economics, eased price controls,liberalized domestic and international trade, and attempted torestructure the banking system and the energy sector. Major domesticprivatization programs were undertaken, as well as the fostering offoreign investment through international tender of the oildistribution company, a leading cashmere company, and banks. Reformwas held back by the ex-Communist MPRP opposition and by thepolitical instability brought about through four successivegovernments under the DUC. Economic growth picked up in 1997-99after stalling in 1996 due to a series of natural disasters anddeclines in world prices of copper and cashmere. In August andSeptember 1999, the economy suffered from a temporary Russian ban onexports of oil and oil products, and Mongolia remains vulnerable inthis sector. Mongolia joined the World Trade Organization (WTrO) in1997. The international donor community pledged over $300 millionper year at the Consultative Group Meeting, held in Ulaanbaatar inJune 1999. The MPRP government, elected in July 2000, was anxious toimprove the investment climate; it also had to deal with a heavyburden of external debt. Falling prices for Mongolia's mainlyprimary sector exports, widespread opposition to privatization, andadverse effects of weather on agriculture in early 2000 and 2001restrained real GDP growth. Despite drought problems in 2002, GDProse 4.0%, followed by a solid 5.0% increase in 2003. The firstapplications under the land privatization law have been marked by anumber of disputes over particular sites. Russia claims Mongoliaowes it $11 billion from the Soviet period; any settlement couldsubstantially increase Mongolia's foreign debt burden.
MontserratSevere volcanic activity, which began in July 1995, hasput a damper on this small, open economy. A catastrophic eruption inJune 1997 closed the airports and seaports, causing further economicand social dislocation. Two-thirds of the 12,000 inhabitants fledthe island. Some began to return in 1998, but lack of housinglimited the number. The agriculture sector continued to be affectedby the lack of suitable land for farming and the destruction ofcrops. Prospects for the economy depend largely on developments inrelation to the volcano and on public sector construction activity.The UK has launched a three-year $122.8 million aid program to helpreconstruct the economy. Half of the island is expected to remainuninhabitable for another decade.
MoroccoMorocco faces the problems typical of developing countries -restraining government spending, reducing constraints on privateactivity and foreign trade, and achieving sustainable economicgrowth. Despite structural adjustment programs supported by the IMF,the World Bank, and the Paris Club, the dirham is only fullyconvertible for current account transactions. Reforms of thefinancial sector are being contemplated. Droughts depressed activityin the key agricultural sector and contributed to a stagnant economyin 2002. Morocco reported large foreign exchange inflows from thesale of a mobile telephone license, and partial privatization of thestate-owned telecommunications company and the state tobaccocompany. Favorable rainfall in 2003 led to a growth of 6%.Formidable long-term challenges include: preparing the economy forfreer trade with the EU and US, improving education, and attractingforeign investment to boost living standards and job prospects forMorocco's youth.
MozambiqueAt independence in 1975, Mozambique was one of theworld's poorest countries. Socialist mismanagement and a brutalcivil war from 1977-92 exacerbated the situation. In 1987, thegovernment embarked on a series of macroeconomic reforms designed tostabilize the economy. These steps, combined with donor assistanceand with political stability since the multi-party elections in1994, have led to dramatic improvements in the country's growthrate. Inflation was reduced to single digits during the late 1990salthough it returned to double digits in 2000-03. Fiscal reforms,including the introduction of a value-added tax and reform of thecustoms service, have improved the government's revenue collectionabilities. In spite of these gains, Mozambique remains dependentupon foreign assistance for much of its annual budget, and themajority of the population remains below the poverty line.Subsistence agriculture continues to employ the vast majority of thecountry's workforce. A substantial trade imbalance persists althoughthe opening of the MOZAL aluminum smelter, the country's largestforeign investment project to date has increased export earnings.Additional investment projects in titanium extraction and processingand garment manufacturing should further close the import/exportgap. Mozambique's once substantial foreign debt has been reducedthrough forgiveness and rescheduling under the IMF's HeavilyIndebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and isnow at a manageable level.
NamibiaThe economy is heavily dependent on the extraction andprocessing of minerals for export. Mining accounts for 20% of GDP.Rich alluvial diamond deposits make Namibia a primary source forgem-quality diamonds. Namibia is the fourth-largest exporter ofnonfuel minerals in Africa, the world's fifth-largest producer ofuranium, and the producer of large quantities of lead, zinc, tin,silver, and tungsten. The mining sector employs only about 3% of thepopulation while about half of the population depends on subsistenceagriculture for its livelihood. Namibia normally imports about 50%of its cereal requirements; in drought years food shortages are amajor problem in rural areas. A high per capita GDP, relative to theregion, hides the great inequality of income distribution; nearlyone-third of Namibians had annual incomes of less than $1,400 inconstant 1994 dollars, according to a 1993 study. The Namibianeconomy is closely linked to South Africa with the Namibian dollarpegged to the South African rand. Privatization of severalenterprises in coming years may stimulate long-run foreigninvestment. Mining of zinc, copper, and silver and increased fishproduction led growth in 2003.
NauruRevenues of this tiny island have traditionally come fromexports of phosphates, but reserves are now depleted. Few otherresources exist with most necessities being imported, mainly fromAustralia, its former occupier and later major source of support.The rehabilitation of mined land and the replacement of income fromphosphates are serious long-term problems. In anticipation of theexhaustion of Nauru's phosphate deposits, substantial amounts ofphosphate income have been invested in trust funds to help cushionthe transition and provide for Nauru's economic future. As a resultof heavy spending from the trust funds, the government faces virtualbankruptcy. To cut costs the government has called for a freeze onwages, a reduction of over-staffed public service departments,privatization of numerous government agencies, and closure of someoverseas consulates. In recent years Nauru has encouraged theregistration of offshore banks and corporations. In 2004 thedeterioration in housing, hospitals, and other capital plantcontinued, and the cost to Australia of keeping the government andeconomy afloat has substantially mounted. Few comprehensivestatistics on the Nauru economy exist, with estimates of Nauru's GDPvarying widely.
Navassa IslandSubsistence fishing and commercial trawlingactivities within refuge waters.
NepalNepal is among the poorest and least developed countries inthe world with 42% of its population living below the poverty line.Agriculture is the mainstay of the economy, providing a livelihoodfor over 80% of the population and accounting for 40% of GDP.Industrial activity mainly involves the processing of agriculturalproduce including jute, sugarcane, tobacco, and grain. Securityconcerns in the wake of the Maoist conflict and the 11 September2001 terrorist attacks in the US have led to a decrease in tourism,a key source of foreign exchange. Nepal has considerable scope forexploiting its potential in hydropower and tourism, areas of recentforeign investment interest. Prospects for foreign trade orinvestment in other sectors will remain poor, however, because ofthe small size of the economy, its technological backwardness, itsremoteness, its landlocked geographic location, its civil strife,and its susceptibility to natural disaster. The internationalcommunity's role of funding more than 60% of Nepal's developmentbudget and more than 28% of total budgetary expenditures will likelycontinue as a major ingredient of growth.
NetherlandsThe Netherlands has a prosperous and open economy, whichdepends heavily on foreign trade. The economy is noted for stableindustrial relations, moderate unemployment and inflation, a sizablecurrent account surplus, and an important role as a Europeantransportation hub. Industrial activity is predominantly in foodprocessing, chemicals, petroleum refining, and electrical machinery.A highly mechanized agricultural sector employs no more than 4% ofthe labor force but provides large surpluses for the food-processingindustry and for exports. The Netherlands, along with 11 of its EUpartners, began circulating the euro currency on 1 January 2002. Thecountry continues to be one of the leading European nations forattracting foreign direct investment. Economic growth slowedconsiderably in 2001-03, as part of the global economic slowdown,but for the four years before that, annual growth averaged nearly4%, well above the EU average. The government is wrestling with adeteriorating budget position, and is moving toward the EU 3% of GDPbudget deficit limit.
Netherlands AntillesTourism, petroleum refining, and offshorefinance are the mainstays of this small economy, which is closelytied to the outside world. Although GDP has declined or grownslightly in each of the past seven years, the islands enjoy a highper capita income and a well-developed infrastructure compared withother countries in the region. Almost all consumer and capital goodsare imported, the US and Mexico being the major suppliers. Poorsoils and inadequate water supplies hamper the development ofagriculture. Budgetary problems hamper reform of the health andpension systems of an aging population.
New CaledoniaNew Caledonia has about 25% of the world's knownnickel resources. Only a small amount of the land is suitable forcultivation, and food accounts for about 20% of imports. In additionto nickel, substantial financial support from France - equal to morethan one-fourth of GDP - and tourism are keys to the health of theeconomy. Substantial new investment in the nickel industry, combinedwith the recovery of global nickel prices, brightens the economicoutlook for the next several years.
New ZealandOver the past 20 years the government has transformedNew Zealand from an agrarian economy dependent on concessionaryBritish market access to a more industrialized, free market economythat can compete globally. This dynamic growth has boosted realincomes (but left behind many at the bottom of the ladder),broadened and deepened the technological capabilities of theindustrial sector, and contained inflationary pressures. Per capitaincome has been rising and is now 80% of the level of the fourlargest EU economies. New Zealand is heavily dependent on trade -particularly in agricultural products - to drive growth, and it hasbeen affected by the global economic slowdown and the slump incommodity prices. Thus far the economy has been resilient, andgrowth should continue at the same level in 2004. Expenditures onhealth, education, and pensions will increase proportionately.
NicaraguaNicaragua, one of the hemisphere's poorest countries,faces low per capita income, massive unemployment, and huge externaldebt. Distribution of income is one of the most unequal on theglobe. While the country has made progress toward macroeconomicstability over the past few years, GDP annual growth of 1.5% - 2.5%has been far too low to meet the country's need. Nicaragua willcontinue to be dependent on international aid and debt relief underthe Heavily Indebted Poor Countries (HIPC) initiative. Nicaragua hasundertaken significant economic reforms that are expected to helpthe country qualify for more than $4 billion in debt relief underHIPC in early 2004. Donors have made aid conditional on the opennessof government financial operation, poverty alleviation, and humanrights. A three-year poverty reduction and growth plan, agreed towith the IMF in December 2002, guides economic policy.
NigerNiger is a poor, landlocked Sub-Saharan nation, whose economycenters on subsistence agriculture, animal husbandry, and reexporttrade, and increasingly less on uranium, because of declining worlddemand. The 50% devaluation of the West African franc in January1994 boosted exports of livestock, cowpeas, onions, and the productsof Niger's small cotton industry. The government relies on bilateraland multilateral aid - which was suspended following the April 1999coup d'etat - for operating expenses and public investment. In2000-01, the World Bank approved a structural adjustment loan of$105 million to help support fiscal reforms. However, reforms couldprove difficult given the government's bleak financial situation.The IMF approved a $73 million poverty reduction and growth facilityfor Niger in 2000 and announced $115 million in debt relief underthe Heavily Indebted Poor Countries (HIPC) initiative. Furtherdisbursements of aid occurred in 2002. Future growth may besustained by exploitation of oil, gold, coal, and other mineralresources.
NigeriaOil-rich Nigeria, long hobbled by political instability,corruption, inadequate infrastructure, and poor macroeconomicmanagement, is undertaking some reforms under the new civilianadministration. Nigeria's former military rulers failed to diversifythe economy away from overdependence on the capital-intensive oilsector, which provides 20% of GDP, 95% of foreign exchange earnings,and about 65% of budgetary revenues. The largely subsistenceagricultural sector has failed to keep up with rapid populationgrowth - Nigeria is Africa's most populous country - and thecountry, once a large net exporter of food, now must import food.Following the signing of an IMF stand-by agreement in August 2000,Nigeria received a debt-restructuring deal from the Paris Club and a$1 billion credit from the IMF, both contingent on economic reforms.Nigeria pulled out of its IMF program in April 2002, after failingto meet spending and exchange rate targets, making it ineligible foradditional debt forgiveness from the Paris Club. The government haslacked the political will to implement the market-oriented reformsurged by the IMF, such as to modernize the banking system, to curbinflation by blocking excessive wage demands, and to resolveregional disputes over the distribution of earnings from the oilindustry. During 2003, however, the government deregulated fuelprices and announced the privatization of the country's four oilrefineries. GDP growth probably will rise marginally in 2004, led byoil and natural gas exports.
NiueThe economy suffers from the typical Pacific island problems ofgeographic isolation, few resources, and a small population.Government expenditures regularly exceed revenues, and the shortfallis made up by critically needed grants from New Zealand that areused to pay wages to public employees. Niue has cut governmentexpenditures by reducing the public service by almost half. Theagricultural sector consists mainly of subsistence gardening,although some cash crops are grown for export. Industry consistsprimarily of small factories to process passion fruit, lime oil,honey, and coconut cream. The sale of postage stamps to foreigncollectors is an important source of revenue. The island in recentyears has suffered a serious loss of population because of migrationof Niueans to New Zealand. Efforts to increase GDP include thepromotion of tourism and a financial services industry, althoughPremier LAKATANI announced in February 2002 that Niue will shut downthe offshore banking industry. Economic aid from New Zealand in 2002was about $2.6 million.
Norfolk IslandTourism, the primary economic activity, has steadilyincreased over the years and has brought a level of prosperityunusual among inhabitants of the Pacific islands. The agriculturalsector has become self-sufficient in the production of beef,poultry, and eggs.
Northern Mariana IslandsThe economy benefits substantially fromfinancial assistance from the US. The rate of funding has declinedas locally generated government revenues have grown. The key touristindustry employs about 50% of the work force and accounts forroughly one-fourth of GDP. Japanese tourists predominate. Annualtourist entries have exceeded one-half million in recent years, butfinancial difficulties in Japan have caused a temporary slowdown.The agricultural sector is made up of cattle ranches and small farmsproducing coconuts, breadfruit, tomatoes, and melons. Garmentproduction is by far the most important industry with employment of17,500 mostly Chinese workers and sizable shipments to the US underduty and quota exemptions.
NorwayThe Norwegian economy is a prosperous bastion of welfarecapitalism, featuring a combination of free market activity andgovernment intervention. The government controls key areas, such asthe vital petroleum sector (through large-scale state enterprises).The country is richly endowed with natural resources - petroleum,hydropower, fish, forests, and minerals - and is highly dependent onits oil production and international oil prices, with oil and gasaccounting for one-third of exports. Only Saudi Arabia and Russiaexport more oil than Norway. Norway opted to stay out of the EUduring a referendum in November 1994. The government has moved aheadwith privatization. With arguably the highest quality of lifeworldwide, Norwegians still worry about that time in the next twodecades when the oil and gas begin to run out. Accordingly, Norwayhas been saving its oil-boosted budget surpluses in a GovernmentPetroleum Fund, which is invested abroad and now is valued at morethan $43 billion. GDP growth was a lackluster 1% in 2002 and 0.5% in2003 against the background of a faltering European economy.
OmanOman is a small, well-off middle Eastern economy with large oiland gas resources, a substantial trade surplus, and low inflation.The government is moving ahead with privatization of its utilities,the development of a body of commercial law to facilitate foreigninvestment, and increased budgetary outlays. Oman continues toliberalize its markets and joined the World Trade Organization (WTO)in November 2000. In order to reduce unemployment and limitdependence on foreign countries, the government is encouraging thereplacement of expatriate workers with local people, i.e., theprocess of Omanization. Training in information technology, businessmanagement, and English support this objective. Industrialdevelopment plans focus on gas resources.
Pacific OceanThe Pacific Ocean is a major contributor to the worldeconomy and particularly to those nations its waters directly touch.It provides low-cost sea transportation between East and West,extensive fishing grounds, offshore oil and gas fields, minerals,and sand and gravel for the construction industry. In 1996, over 60%of the world's fish catch came from the Pacific Ocean. Exploitationof offshore oil and gas reserves is playing an ever-increasing rolein the energy supplies of the US, Australia, NZ, China, and Peru.The high cost of recovering offshore oil and gas, combined with thewide swings in world prices for oil since 1985, has led tofluctuations in new drillings.
PakistanPakistan, an impoverished and underdeveloped country, hassuffered from decades of internal political disputes, low levels offoreign investment, and a costly, ongoing confrontation withneighboring India. However, IMF-approved government policies,bolstered by generous foreign assistance and renewed access toglobal markets since late 2001, have generated solid macroeconomicrecovery the last two years. The government has made substantialinroads in macroeconomic reform since 2000, although progress onmore politically sensitive reforms has slowed. For example, in thethird and final year of its $1.3 billion IMF Poverty Reduction andGrowth Facility, Islamabad has continued to require waivers forenergy sector reforms. While long-term prospects remain uncertain,given Pakistan's low level of development, medium-term prospects forjob creation and poverty reduction are the best in nearly a decade.Islamabad has raised development spending from about 2% of GDP inthe 1990s to 4% in 2003, a necessary step towards reversing thebroad underdevelopment of its social sector. GDP growth is heavilydependent on rain-fed crops, and last year's end to a four-yeardrought should support moderate agricultural growth for the next fewyears. Foreign exchange reserves continued to reach new levels in2003, supported by robust export growth and steady workerremittances.
PalauThe economy consists primarily of tourism, subsistenceagriculture and fishing. The government is the major employer of thework force, relying heavily on financial assistance from the US.Business and tourist arrivals numbered 50,000 in FY00/01. Thepopulation enjoys a per capita income twice that of the Philippinesand much of Micronesia. Long-run prospects for the key touristsector have been greatly bolstered by the expansion of air travel inthe Pacific, the rising prosperity of leading East Asian countries,and the willingness of foreigners to finance infrastructuredevelopment.
Palmyra Atollno economic activity
PanamaPanama's dollarised economy rests primarily on awell-developed services sector that accounts for three-fourths ofGDP. Services include operating the Panama Canal, banking, the ColonFree Zone, insurance, container ports, flagship registry, andtourism. A slump in Colon Free Zone and agricultural exports, theglobal slowdown, and the withdrawal of US military forces held backeconomic growth in 2000-03. The government has been backing publicworks programs, tax reforms, new regional trade agreements, anddevelopment of tourism in order to stimulate growth. Unemploymentremains at an unacceptably high level.
Papua New GuineaPapua New Guinea is richly endowed with naturalresources, but exploitation has been hampered by rugged terrain andthe high cost of developing infrastructure. Agriculture provides asubsistence livelihood for 85% of the population. Mineral deposits,including oil, copper, and gold, account for 72% of export earnings.The economy has faltered over the past four years. Former PrimeMinister Mekere MORAUTA had tried to restore integrity to stateinstitutions, to stabilize the kina, restore stability to thenational budget, to privatize public enterprises where appropriate,and to ensure ongoing peace on Bougainville. The government has hadconsiderable success in attracting international support,specifically gaining the backing of the IMF and the World Bank insecuring development assistance loans. Challenges face PrimeMinister Michael SOMARE, including curbing inflation, gainingfurther investor confidence, continuing efforts to privatizegovernment assets, maintaining the support of members of Parliament,and balancing relations with Australia, the former colonial ruler.
Paracel IslandsChina announced plans in 1997 to open the islandsfor tourism.
ParaguayParaguay has a market economy marked by a large informalsector. The informal sector features both reexport of importedconsumer goods to neighboring countries as well as the activities ofthousands of microenterprises and urban street vendors. Because ofthe importance of the informal sector, accurate economic measuresare difficult to obtain. A large percentage of the populationderives their living from agricultural activity, often on asubsistence basis. The formal economy grew by an average of about 3%annually in 1995-97; but GDP declined slightly in 1998, 1999, and2000, rose slightly in 2001, only to fall again in 2002. On a percapita basis, real income has stagnated at 1980 levels. Mostobservers attribute Paraguay's poor economic performance topolitical uncertainty, corruption, lack of progress on structuralreform, substantial internal and external debt, and deficientinfrastructure.