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 2006. 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 sector,has been well poised to take advantage of the Africa Growth andOpportunity 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 that recently entered thetrillion dollar class. It contains a mixture of modern and outmodedindustry and agriculture, increasingly dominated by the privatesector. 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. Mexico has 12 free trade agreementswith over 40 countries including, Guatemala, Honduras, El Salvador,the European Free Trade Area, and Japan, putting more than 90% oftrade under free trade agreements. The government is cognizant ofthe need to upgrade infrastructure, modernize the tax system andlabor laws, and provide incentives to invest in the energy sector,but progress is slow.
Micronesia, Federated States of Economic activity consists primarily of subsistence farming and fishing. The islands have few mineral deposits worth exploiting, except for high-grade phosphate. The potential for a tourist industry exists, but the remote location, a lack of adequate facilities, and limited air connections hinder development. The Amended Compact of Free Association with the US guarantees the Federated States of Micronesia (FSM) millions of dollars in annual aid through 2023, and establishes a Trust Fund into which the US and the FSM make annual contributions in order to provide annual payouts to the FSM in perpetuity after 2023. The country's medium-term economic outlook appears fragile due not only to the reduction in US assistance but also to the slow growth of the private sector. Geographical isolation and a poorly developed infrastructure remain major impediments to long-term growth.
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 one of the poorest countries in Europedespite recent progress from its small economic base. It enjoys afavorable climate and good farmland but has no major mineraldeposits. As a result, the economy depends heavily on agriculture,featuring fruits, vegetables, wine, and tobacco. Moldova must importalmost all of its energy supplies from Russia. Energy shortagescontributed to sharp production declines after the breakup of theSoviet Union in December 1991. As part of an ambitious reform effortafter independence, Moldova introduced a convertible currency, freedprices, stopped issuing preferential credits to state enterprises,backed steady land privatization, removed export controls, and freedinterest rates. The government entered into agreements with theWorld Bank and the IMF to promote growth and reduce poverty. Theeconomy returned to positive growth of 2.1% in 2000, 6.1% in 2001,7.2% in 2002, 6.3% in 2003, and 6.8% in 2004. Further reforms willcome slowly because of strong political forces backing governmentcontrols. The economy remains vulnerable to higher fuel prices, pooragricultural weather, and the skepticism of foreign 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 in Mongolia has traditionally been basedon herding and agriculture. Mongolia has extensive mineral deposits;copper, coal, molybdenum, tin, tungsten and gold account for a largepart of industrial production. Soviet assistance, at its heightone-third of GDP, disappeared almost overnight in 1990 and 1991 atthe time of the dismantlement of the USSR. The following decade sawMongolia endure both deep recession due to political inaction andnatural disasters, as well as economic growth due to reformembracing free-market economics and extensive privatization of theformerly state-run economy. Severe winters and summer droughts in2000, 2001, and 2002 resulted in massive livestock die-off and zeroor negative GDP growth. This was compounded by falling prices forMongolia's primary sector exports and widespread opposition toprivatization. Growth improved from 2002 at 4% to 2003 at 5%, duelargely to high copper prices and new gold production, with thegovernment claiming a 10.6% growth rate for 2004 that isunconfirmed. Mongolia's economy continues to be heavily impacted byits neighbors. For example, Mongolia purchases 80% of its petroleumproducts and a substantial amount of electric power from Russia,leaving it vulnerable to price increases. China is Mongolia's chiefexport partner and a main source of the "shadow" or "grey" economy.The World Bank and other international financial institutionsestimate the grey economy to be at least equal to that of theofficial economy. The actual size of this grey - largely cash -economy is difficult to calculate since the money does not passthrough the hands of tax authorities or the banking sector.Remittances from Mongolians working abroad both legally andillegally constitute a sizeable portion. Money laundering is growingas an accompanying concern. Mongolia settled its $11 billion debtwith Russia at the end of 2003 on very favorable terms. Mongolia,which joined the World Trade Organization in 1997, seeks to expandits participation and integration into Asian regional economic andtrade regimes.
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 problems typical for developing countries:restraining government spending, reducing constraints on privateactivity and foreign trade, and achieving sustainable growth.Despite structural adjustment programs supported by the IMF, theWorld Bank, and the Paris Club, the dirham is only fully convertiblefor current account transactions. In 2004 Moroccan authoritiesinstituted measures to boost foreign direct investment and trade bysigning a free trade agreement with the US and selling governmentshares in the state telecommunications company and in the largeststate-owned bank. Favorable rainfall over the past two years hasboosted agricultural output and GDP growth passed 4% in 2004. In2005 the budget deficit is expected to rise sharply - from 1.9% ofGDP in 2004 - because of substantial increases in wages and oilsubsidies. Long-term challenges include preparing the economy forfreer trade with the US and European Union, improving education andjob prospects for Morocco's youth, and raising living standards.
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 2003-04.
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 40% 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 have led to a decreasein tourism, a key source of foreign exchange. Nepal has considerablescope for exploiting its potential in hydropower and tourism, areasof recent foreign investment interest. Prospects for foreign tradeor investment 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.
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 2001-04, as part of the global economic slowdown,but for the four years before that, annual growth averaged nearly4%, well above the EU average.
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 eight 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 risen for six consecutive years and is now more than$23,000 in purchasing power parity terms. New Zealand is heavilydependent on trade - particularly in agricultural products - todrive growth. Exports are equal to about 20% of GDP. Thus far theeconomy has been resilient, and the Labor Government promises thatexpenditures on health, education, and pensions will increaseproportionately to output.
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 has been fartoo low to meet the country's needs. As a result of successfulperformance under its International Monetary Fund policy program andother efforts, Nicaragua qualified in early 2004 for some $4 billionin foreign debt reduction under the Heavily Indebted Poor Countries(HIPC) initiative. Even after this reduction, however, thegovernment continues to bear a significant foreign and domestic debtburden. If ratified, the US-Central America Free Trade Agreement(CAFTA) will provide an opportunity for Nicaragua to attractinvestment, create jobs, and deepen economic development. WhilePresident BOLANOS enjoys the support of the international financialbodies, his internal political base is meager.
NigerNiger is one of the poorest countries in the world, alandlocked Sub-Saharan nation, whose economy centers on subsistencecrops, livestock, and some of the world's largest uranium deposits.Drought cycles, desertification, a 3.3% population growth rate, andthe drop in world demand for uranium have undercut the economy.Niger shares a common currency, the CFA franc, and a common centralbank, the Central Bank of West African States (BCEAO), with sevenother members of the West African Monetary Union. In December 2000,Niger qualified for enhanced debt relief under the InternationalMonetary Fund program for Highly Indebted Poor Countries (HIPC) andconcluded an agreement with the Fund on a Poverty Reduction andGrowth Facility (PRGF). Debt relief provided under the enhanced HIPCinitiative significantly reduces Niger's annual debt serviceobligations, freeing funds for expenditures on basic health care,primary education, HIV/AIDS prevention, rural infrastructure, andother programs geared at poverty reduction. Nearly half of thegovernment's budget is derived from foreign donor resources. Futuregrowth may be sustained by exploitation of oil, gold, coal, andother mineral resources.
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. In the last yearthe government has begun showing the political will to implement themarket-oriented reforms urged by the IMF, such as to modernize thebanking system, to curb inflation by blocking excessive wagedemands, and to resolve regional disputes over the distribution ofearnings from the oil industry. During 2003 the government beganderegulating fuel prices, announced the privatization of thecountry's four oil refineries, and instituted the National EconomicEmpowerment Development Strategy, a domestically designed and runprogram modeled on the IMF's Poverty Reduction and Growth Facilityfor fiscal and monetary management. GDP rose strongly in 2004.
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, althoughformer Premier LAKATANI announced in February 2002 that Niue willshut down the offshore banking industry. Economic aid from NewZealand in 2002 was about $2.6 million. Niue suffered a devastatinghurricane in January 2004, which decimated nascent economicprograms. While in the process of rebuilding, Niue has beendependent on foreign aid.
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; nonetheless, it contributessizably to the EU budget. The government has moved ahead withprivatization. With arguably the highest quality of life worldwide,Norwegians still worry about that time in the next two decades whenthe oil and gas will begin to run out. Accordingly, Norway has beensaving its oil-boosted budget surpluses in a Government PetroleumFund, which is invested abroad and now is valued at more than $150billion. After lackluster growth of 1% in 2002 and 0.5% in 2003, GDPgrowth picked up to 3.3% in 2004.
OmanOman is a middle-income economy in the Middle East with notableoil and gas resources, a substantial trade surplus, and lowinflation. The government is privatizing its utilities anddiversifying its economy to attract foreign investment. Omancontinues to liberalize its markets and joined the World TradeOrganization (WTO) in November 2000. To reduce unemployment andlimit dependence on foreign countries, the government is encouragingthe replacement of expatriate workers with local people, i.e.,Omanization. Training in information technology, businessmanagement, and English support this objective. Industrialdevelopment plans focus on gas resources, metal manufacturing,petrochemicals, and international transshipment ports.
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 2001, have generated solid macroeconomicrecovery the last three years. The government has made substantialmacroeconomic reforms since 2000, although progress on morepolitically sensitive reforms has slowed. For example, in the thirdand final year of its $1.3 billion IMF Poverty Reduction and GrowthFacility, Islamabad has continued to require waivers for energysector reforms. While long-term prospects remain uncertain, givenPakistan's low level of development, medium-term prospects for jobcreation 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, spurred bydouble-digit gains in industrial production over the past year, hasbecome less dependent on agriculture. Foreign exchange reservescontinued to reach new levels in 2004, supported by robust exportgrowth and steady worker remittances.
PalauThe economy consists primarily of tourism, subsistenceagriculture, and fishing. The government is the major employer ofthe work force, relying heavily on financial assistance from the US.Business and tourist arrivals numbered 63,000 in 2003. 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 four-fifths of GDP.Services include operating the Panama Canal, banking, the Colon FreeZone, insurance, container ports, flagship registry, and tourism. Aslump in Colon Free Zone and agricultural exports, the globalslowdown, and the withdrawal of US military forces held backeconomic growth in 2000-03; growth picked up in 2004 led byexport-oriented services and a construction boom stimulated by taxincentives. The government has been backing tax reforms, reform ofthe social security program, new regional trade agreements, anddevelopment of tourism. Unemployment remains high.
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 improved over the past two years, following aprolonged period of instability. Former Prime Minister MekereMORAUTA had tried to restore integrity to state institutions, tostabilize the kina, restore stability to the national budget, toprivatize public enterprises where appropriate, and to ensureongoing peace on Bougainville. Australia annually supplies $240million in aid, which accounts for 20% of the national budget.Challenges face Prime Minister Michael SOMARE, including 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.
ParaguayLandlocked Paraguay has a market economy marked by a largeinformal sector. This 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 averaged near-zero growth in 1998-2001 andcontracted by 2.3 percent in 2002, in response to regional contagionand an outbreak of hoof-and-mouth desease. On a per capita basis,real income has stagnated at 1980 levels. Most observers attributeParaguay's poor economic performance to political uncertainty,corruption, lack of progress on structural reform, substantialinternal and external debt, and deficient infrastructure. Aided by afirmer exchange rate and perhaps a greater confidence in theeconomic policy of the Duarte FRUTOS administration, the economyrebounded in 2003 and 2004, posting modest growth each year.
PeruPeru's economy reflects its varied geography - an arid coastalregion, the Andes further inland, and tropical lands borderingColombia and Brazil. Abundant mineral resources are found in themountainous areas, and Peru's coastal waters provide excellentfishing grounds. However, overdependence on minerals and metalssubjects the economy to fluctuations in world prices, and a lack ofinfrastructure deters trade and investment. After several years ofinconsistent economic performance, the Peruvian economy grew by anaverage 4 percent per year during the period 2002-2004, with astable exchange rate and low inflation. Risk premiums on Peruvianbonds on secondary markets reached historically low levels in late2004, reflecting investor optimism regarding the government'sprudent fiscal policies and openness to trade and investment.Despite the strong macroeconomic performance, the TOLEDOadministration remained unpopular in 2004, and unemployment andpoverty have stayed persistently high.
PhilippinesThe Philippines was less severely affected by the Asianfinancial crisis of 1998 than its neighbors, aided in part by annualremittances of $7-8 billion from overseas workers and no sustainedrunup in asset prices or foreign borrowing prior to the crisis. Froma 0.6% decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in2000, but slowed to 3.2% in 2001 in the context of a global economicslowdown, an export slump, and political and security concerns. GDPgrowth accelerated to 4.3% in 2002, 4.7% in 2003, and about 6% in2004, reflecting the continued resilience of the service sector, andimproved exports and agricultural output. Nonetheless, it will takea higher, sustained growth path to make appreciable progress inpoverty alleviation given the Philippines' high annual populationgrowth rate and unequal distribution of income. The Philippines alsofaces higher oil prices, higher interest rates on its dollarborrowings, and higher inflation. Fiscal constraints limit Manila'sability to finance infrastructure and social spending. ThePhilippines' consistently large budget deficit has produced a highdebt level and has forced Manila to spend a large portion of thenational government budget on debt service. Large, unprofitablepublic enterprises, especially in the energy sector, contribute tothe government's debt because of slow progress on privatization.Credit rating agencies are increasingly concerned about thePhilippines' ability to sustain the debt; legislative progress onnew revenue measures will weigh heavily on credit rating decisions.
Pitcairn IslandsThe inhabitants of this tiny isolated economy existon fishing, subsistence farming, handicrafts, and postage stamps.The fertile soil of the valleys produces a wide variety of fruitsand vegetables, including citrus, sugarcane, watermelons, bananas,yams, and beans. Bartering is an important part of the economy. Themajor sources of revenue are the sale of postage stamps tocollectors and the sale of handicrafts to passing ships. In October2004, more than one-quarter of Pitcairn's labor force was arrested,putting the economy in a bind, since their services were required aslighter crew to load or unload passing ships.
PolandPoland has steadfastly pursued a policy of economicliberalization throughout the 1990s and today stands out as asuccess story among transition economies. Even so, much remains tobe done, especially in bringing down unemployment. The privatizationof small and medium-sized state-owned companies and a liberal law onestablishing new firms has encouraged the development of the privatebusiness sector, but legal and bureaucratic obstacles alongsidepersistent corruption are hampering its further development.Poland's agricultural sector remains handicapped by surplus labor,inefficient small farms, and lack of investment. Restructuring andprivatization of "sensitive sectors" (e.g., coal, steel, railroads,and energy), while recently initiated, have stalled. Reforms inhealth care, education, the pension system, and state administrationhave resulted in larger-than-expected fiscal pressures. Furtherprogress in public finance depends mainly on reducing losses inPolish state enterprises, restraining entitlements, and overhaulingthe tax code to incorporate the growing gray economy and farmers,most of whom pay no tax. The government has introduced a package ofsocial and administrative spending cuts to reduce public spending byabout $17 billion through 2007. Additional reductions are underdiscussion in the legislature but could be trumped by election-yearpolitics in 2005. Poland joined the EU in May 2004, and surgingexports to the EU contributed to Poland's strong growth in 2004,though its competitiveness could be threatened by the zloty'sappreciation. GDP per capita roughly equals that of the three Balticstates. Poland stands to benefit from nearly $13.5 billion in EUfunds, available through 2006. Farmers have already begun to reapthe rewards of membership via higher food prices and EU agriculturalsubsidies.
PortugalPortugal has become a diversified and increasinglyservice-based economy since joining the European Community in 1986.Over the past decade, successive governments have privatized manystate-controlled firms and liberalized key areas of the economy,including the financial and telecommunications sectors. The countryqualified for the European Monetary Union (EMU) in 1998 and begancirculating the euro on 1 January 2002 along with 11 other EU membereconomies. Economic growth had been above the EU average for much ofthe past decade, but fell back in 2001-04. GDP per capita stands attwo-thirds that of the Big Four EU economies. A poor educationalsystem, in particular, has been an obstacle to greater productivityand growth. Portugal has been increasingly overshadowed bylower-cost producers in Central Europe and Asia as a target forforeign direct investment. The government faces tough choices in itsattempts to boost Portugal's economic competitiveness while keepingthe budget deficit within the eurozone's 3%-of-GDP ceiling.
Puerto RicoPuerto Rico has one of the most dynamic economies in theCaribbean region. A diverse industrial sector has far surpassedagriculture as the primary locus of economic activity and income.Encouraged by duty-free access to the US and by tax incentives, USfirms have invested heavily in Puerto Rico since the 1950s. USminimum wage laws apply. Sugar production has lost out to dairyproduction and other livestock products as the main source of incomein the agricultural sector. Tourism has traditionally been animportant source of income, with estimated arrivals of nearly 5million tourists in 1999. Growth fell off in 2001-03, largely due tothe slowdown in the US economy, and has recovered in 2004.
QatarOil and gas account for more than 55% of GDP, roughly 85% ofexport earnings, and 70% of government revenues. Oil and gas havegiven Qatar a per capita GDP about 80% of that of the leading WestEuropean industrial countries. Proved oil reserves of 16 billionbarrels should ensure continued output at current levels for 23years. Qatar's proved reserves of natural gas exceed 14 trillioncubic meters, more than 5% of the world total and third largest inthe world. Long-term goals feature the development of offshorenatural gas reserves to offset the ultimate decline in oilproduction. In recent years, Qatar has consistently posted tradesurpluses largely because of high oil prices and increased naturalgas exports, becoming one of the world's fastest growing and highestper-capita income countries.
ReunionThe economy has traditionally been based on agriculture, butservices now dominate. Sugarcane has been the primary crop for morethan a century, and in some years it accounts for 85% of exports.The government has been pushing the development of a touristindustry to relieve high unemployment, which amounts to one-third ofthe labor force. The gap in Reunion between the well-off and thepoor is extraordinary and accounts for the persistent socialtensions. The white and Indian communities are substantially betteroff than other segments of the population, often approachingEuropean standards, whereas minority groups suffer the poverty andunemployment typical of the poorer nations of the African continent.The outbreak of severe rioting in February 1991 illustrates theseriousness of socioeconomic tensions. The economic well-being ofReunion depends heavily on continued financial assistance fromFrance.
RomaniaRomania began the transition from Communism in 1989 with alargely obsolete industrial base and a pattern of output unsuited tothe country's needs. The country emerged in 2000 from a punishingthree-year recession thanks to strong demand in EU export markets.Despite the global slowdown in 2001-02, strong domestic activity inconstruction, agriculture, and consumption have kept growth above4%. An IMF standby agreement, signed in 2001, has been accompaniedby slow but palpable gains in privatization, deficit reduction, andthe curbing of inflation. The IMF Board approved Romania'scompletion of the standby agreement in October 2003, the first timeRomania has successfully concluded an IMF agreement since the 1989revolution. In July 2004, the executive board of the IMF approved a24-month standby agreement for $367 million. The Romanianauthorities do not intend to draw on this agreement, however,viewing it simply as a precaution. Meanwhile, recent macroeconomicgains have done little to address Romania's widespread poverty,while corruption and red tape continue to handicap the businessenvironment.
RussiaRussia ended 2004 with its sixth straight year of growth,averaging 6.5% annually since the financial crisis of 1998. Althoughhigh oil prices and a relatively cheap ruble are important driversof this economic rebound, since 2000 investment and consumer-drivendemand have played a noticeably increasing role. Real fixed capitalinvestments have averaged gains greater than 10% over the last fiveyears, and real personal incomes have realized average increasesover 12%. Russia has also improved its international financialposition since the 1998 financial crisis, with its foreign debtdeclining from 90% of GDP to around 28%. Strong oil export earningshave allowed Russia to increase its foreign reserves from only $12billion to some $120 billion at yearend 2004. These achievements,along with a renewed government effort to advance structuralreforms, have raised business and investor confidence in Russia'seconomic prospects. Nevertheless, serious problems persist. Economicgrowth slowed down in the second half of 2004 and the Russiangovernment forecasts growth of only 4.5% to 6.2% for 2005. Oil,natural gas, metals, and timber account for more than 80% ofexports, leaving the country vulnerable to swings in world prices.Russia's manufacturing base is dilapidated and must be replaced ormodernized if the country is to achieve broad-based economic growth.Other problems include a weak banking system, a poor businessclimate that discourages both domestic and foreign investors,corruption, and widespread lack of trust in institutions. Inaddition, a string of investigations launched against a majorRussian oil company, culminating with the arrest of its CEO in thefall of 2003, have raised concerns by some observers that PresidentPUTIN is granting more influence to forces within his governmentthat desire to reassert state control over the economy.
RwandaRwanda is a poor rural country with about 90% of thepopulation engaged in (mainly subsistence) agriculture. It is themost densely populated country in Africa; landlocked with fewnatural resources and minimal industry. Primary foreign exchangeearners are coffee and tea. The 1994 genocide decimated Rwanda'sfragile economic base, severely impoverished the population,particularly women, and eroded the country's ability to attractprivate and external investment. However, Rwanda has madesubstantial progress in stabilizing and rehabilitating its economyto pre-1994 levels, although poverty levels are higher now. GDP hasrebounded and inflation has been curbed. Export earnings, however,have been hindered by low beverage prices, depriving the country ofmuch needed hard currency. Despite Rwanda's fertile ecosystem, foodproduction often does not keep pace with population growth,requiring food imports. Rwanda continues to receive substantial aidmoney and was approved for IMF-World Bank Heavily Indebted PoorCountry (HIPC) initiative debt relief in late 2000. Kigali's highdefense expenditures have caused tension between the government andinternational donors and lending agencies. An energy shortage andinstability in neighboring states may slow growth in 2005, while thelack of adequate transportation linkages to other countriescontinues to handicap export growth.
Saint HelenaThe economy depends largely on financial assistancefrom the UK, which amounted to about $5 million in 1997 or almostone-half of annual budgetary revenues. The local population earnsincome from fishing, raising livestock, and sales of handicrafts.Because there are few jobs, 25% of the work force has left to seekemployment on Ascension Island, on the Falklands, and in the UK.
Saint Kitts and NevisSugar was the traditional mainstay of theSaint Kitts economy until the 1970s. Although the crop stilldominates the agricultural sector, activities such as tourism,export-oriented manufacturing, and offshore banking have assumedlarger roles in the economy. Tourism revenues are now the chiefsource of the islands' foreign exchange. The opening of a 470-roomresort in February 2003 was expected to bring in much-needed revenue.
Saint LuciaChanges in the EU import preference regime and theincreased competition from Latin American bananas have made economicdiversification increasingly important in Saint Lucia. The islandnation has been able to attract foreign business and investment,especially in its offshore banking and tourism industries. Themanufacturing sector is the most diverse in the Eastern Caribbeanarea, and the government is trying to revitalize the bananaindustry. Economic fundamentals remain solid, even thoughunemployment needs to be cut.
Saint Pierre and MiquelonThe inhabitants have traditionally earnedtheir livelihood by fishing and by servicing fishing fleetsoperating off the coast of Newfoundland. The economy has beendeclining, however, because of disputes with Canada over fishingquotas and a steady decline in the number of ships stopping at SaintPierre. In 1992, an arbitration panel awarded the islands anexclusive economic zone of 12,348 sq km to settle a longstandingterritorial dispute with Canada, although it represents only 25% ofwhat France had sought. The islands are heavily subsidized by Franceto the great betterment of living standards. The government hopes anexpansion of tourism will boost economic prospects. Recent testdrilling for oil may pave the way for development of the energysector.
Saint Vincent and the GrenadinesEconomic growth in thislower-middle-income country hinges upon seasonal variations in theagricultural and tourism sectors. Tropical storms wiped outsubstantial portions of crops in 1994, 1995, and 2002, and tourismin the Eastern Caribbean has suffered low arrivals following 11September 2001. Saint Vincent is home to a small offshore bankingsector and has moved to adopt international regulatory standards.Saint Vincent is also a large producer of marijuana and is beingused as a transshipment point for illegal narcotics from SouthAmerica.
SamoaThe economy of Samoa has traditionally been dependent ondevelopment aid, family remittances from overseas, agriculture, andfishing. The country is vulnerable to devastating storms.Agriculture employs two-thirds of the labor force, and furnishes 90%of exports, featuring coconut cream, coconut oil, and copra. Themanufacturing sector mainly processes agricultural products. Thedecline of fish stocks in the area is a continuing problem. Tourismis an expanding sector, accounting for 25% of GDP; about 88,000tourists visited the islands in 2001. One factory in the ForeignTrade Zone employs 3,000 people to make automobile electricalharnesses for an assembly plant in Australia. The Samoan Governmenthas called for deregulation of the financial sector, encouragementof investment, and continued fiscal discipline, meantime protectingthe environment. Observers point to the flexibility of the labormarket as a basic strength for future economic advances. Foreignreserves are in a relatively healthy state, the external debt isstable, and inflation is low.
San MarinoThe tourist sector contributes over 50% of GDP. In 2000more than 3 million tourists visited San Marino. The key industriesare banking, wearing apparel, electronics, and ceramics. Mainagricultural products are wine and cheeses. The per capita level ofoutput and standard of living are comparable to those of the mostprosperous regions of Italy, which supplies much of its food.
Sao Tome and PrincipeThis small poor island economy has becomeincreasingly dependent on cocoa since independence in 1975. Cocoaproduction has substantially declined in recent years because ofdrought and mismanagement, but strengthening prices helped boostexport earnings in 2003. Sao Tome has to import all fuels, mostmanufactured goods, consumer goods, and a substantial amount offood. Over the years, it has had difficulty servicing its externaldebt and has relied heavily on concessional aid and debtrescheduling. Sao Tome benefited from $200 million in debt relief inDecember 2000 under the Highly Indebted Poor Countries (HIPC)program, but lacking a formal poverty reduction program with theIMF, it has not benefited from subsequent HIPC debt reductions. SaoTome's external debt stands at over $300 million. Considerablepotential exists for development of a tourist industry, and thegovernment has taken steps to expand facilities in recent years. Thegovernment also has attempted to reduce price controls andsubsidies. Sao Tome is optimistic about the development of petroleumresources in its territorial waters in the oil-rich Gulf of Guinea.The first production license was sold to a consortium led byUS-based oil firms. Much of the 2005 budget is dependent upon thesale of additional production licenses.
Saudi ArabiaThis is an oil-based economy with strong governmentcontrols over major economic activities. Saudi Arabia possesses 25%of the world's proven petroleum reserves, ranks as the largestexporter of petroleum, and plays a leading role in OPEC. Thepetroleum sector accounts for roughly 75% of budget revenues, 45% ofGDP, and 90% of export earnings. About 40% of GDP comes from theprivate sector. Roughly five and a half million foreign workers playan important role in the Saudi economy, for example, in the oil andservice sectors. The government in 1999 announced plans to beginprivatizing the electricity companies, which follows the ongoingprivatization of the telecommunications company. The government isencouraging private sector growth to lessen the kingdom's dependenceon oil and increase employment opportunities for the swelling Saudipopulation. Priorities for government spending in the short terminclude additional funds for education and for the water and sewagesystems. Economic reforms proceed cautiously because of deep-rootedpolitical and social conservatism.
SenegalIn January 1994, Senegal undertook a bold and ambitiouseconomic reform program with the support of the international donorcommunity. This reform began with a 50% devaluation of Senegal'scurrency, the CFA franc, which was linked at a fixed rate to theFrench franc. Government price controls and subsidies have beensteadily dismantled. After seeing its economy contract by 2.1% in1993, Senegal made an important turnaround, thanks to the reformprogram, with real growth in GDP averaging 5% annually during1995-2003. Annual inflation had been pushed down to the low singledigits. As a member of the West African Economic and Monetary Union(WAEMU), Senegal is working toward greater regional integration witha unified external tariff and a more stable monetary policy. Senegalstill relies heavily upon outside donor assistance, however. Underthe IMF's Highly Indebted Poor Countries debt relief program,Senegal will benefit from eradication of two-thirds of itsbilateral, multilateral, and private sector debt.
Serbia and MontenegroMILOSEVIC-era mismanagement of the economy, anextended period of economic sanctions, and the damage toYugoslavia's infrastructure and industry during the NATO airstrikesin 1999 left the economy only half the size it was in 1990. Afterthe ousting of former Federal Yugoslav President MILOSEVIC inOctober 2000, the Democratic Opposition of Serbia (DOS) coalitiongovernment implemented stabilization measures and embarked on anaggressive market reform program. After renewing its membership inthe IMF in December 2000, a down-sized Yugoslavia continued toreintegrate into the international community by rejoining the WorldBank (IBRD) and the European Bank for Reconstruction and Development(EBRD). A World Bank-European Commission sponsored Donors'Conference held in June 2001 raised $1.3 billion for economicrestructuring. An agreement rescheduling the country's $4.5 billionParis Club government debts was concluded in November 2001 - itwrote off 66% of the debt - and the London Club of private creditorsforgave $1.7 billion of debt, just over half the total owed, in July2004. The smaller republic of Montenegro severed its economy fromfederal control and from Serbia during the MILOSEVIC era andcontinues to maintain its own central bank, uses the euro instead ofthe Yugoslav dinar as official currency, collects customs tariffs,and manages its own budget. Kosovo's economy continues to transitionto a market-based system, and is largely dependent on theinternational community and the diaspora for financial and technicalassistance. The euro and the Yugoslav dinar are both acceptedcurrencies in Kosovo. While maintaining ultimate oversight, UNMIKcontinues to work with the European Union and Kosovo's localprovisional government to accelerate economic growth, lowerunemployment, and attract foreign investment to help Kosovointegrate into regional economic structures. The complexity ofSerbia and Montenegro political relationships, slow progress inprivatization, legal uncertainty over property rights, scarcity offoreign-investment and a substantial foreign trade deficit areholding back the economy. Arrangements with the IMF, especiallyrequirements for fiscal discipline, are an important element inpolicy formation. Severe unemployment remains a key politicaleconomic problem for this entire region.
SeychellesSince independence in 1976, per capita output in thisIndian Ocean archipelago has expanded to roughly seven times the oldnear-subsistence level. Growth has been led by the tourist sector,which employs about 30% of the labor force and provides more than70% of hard currency earnings, and by tuna fishing. In recent yearsthe government has encouraged foreign investment in order to upgradehotels and other services. At the same time, the government hasmoved to reduce the dependence on tourism by promoting thedevelopment of farming, fishing, and small-scale manufacturing. Asharp drop illustrated the vulnerability of the tourist sector in1991-92 due largely to the Gulf war, and once again following the 11September 2001 terrorist attacks on the US. Growth slowed in1998-2002, and fell in 2003, due to sluggish tourist and tunasectors, but resumed in 2004, erasing a persistent budget deficit.Tight controls on exchange rates and the scarcity of foreignexchange have impaired short-term economic prospects. The blackmarket value of the Seychelles rupee is half the official exchangerate; without a devaluation of the currency the tourist sector mayremain sluggish as vacationers seek cheaper destinations such asComoros, Mauritius, and Madagascar.
Sierra LeoneSierra Leone is an extremely poor African nation withtremendous inequality in income distribution. While it possessessubstantial mineral, agricultural, and fishery resources, itseconomic and social infrastructure is not well developed, andserious social disorders continue to hamper economic development.About two-thirds of the working-age population engages insubsistence agriculture. Manufacturing consists mainly of theprocessing of raw materials and of light manufacturing for thedomestic market. Plans to reopen bauxite and rutile mines shut downduring an 11 year civil war have not been implemented due to lack offoreign investment. Alluvial diamond mining remains the major sourceof hard currency earnings. The fate of the economy depends upon themaintenance of domestic peace and the continued receipt ofsubstantial aid from abroad, which is essential to offset the severetrade imbalance and supplement government revenues. Internationalfinancial institutions contributed over $600 million in developmentaid and budgetary support in 2003.
SingaporeSingapore, a highly developed and successful free marketeconomy, enjoys a remarkably open and corruption-free environment,stable prices, and a per capita GDP equal to that of the Big 4 WestEuropean countries. The economy depends heavily on exports,particularly in electronics and manufacturing. It was hard hit in2001-03 by the global recession, by the slump in the technologysector, and by an outbreak of Severe Acute Respiratory Syndrome in2003, which curbed tourism and consumer spending. The governmenthopes to establish a new growth path that will be less vulnerable tothe external business cycle and will continue efforts to establishSingapore as Southeast Asia's financial and high-tech hub. Fiscalstimulus, low interest rates, a surge in exports, and internalflexibility led to vigorous growth in 2004, with real GDP rising by8 percent, by far the economy's best performance since 2000.
SlovakiaSlovakia has mastered much of the difficult transition froma centrally planned economy to a modern market economy. The DZURINDAgovernment made excellent progress during 2001-04 in macroeconomicstabilization and structural reform. Major privatizations are nearlycomplete, the banking sector is almost completely in foreign hands,and the government has helped facilitate a foreign investment boomwith business-friendly policies, such as labor market liberalizationand a 19% flat tax. Slovakia's economic growth exceeded expectationsin 2001-04, despite the general European slowdown. Unemployment, atan unacceptable 15% in 2003-04, remains the economy's Achilles heel.Slovakia joined the EU on 1 May 2004.
SloveniaSlovenia, with its historical ties to Western Europe,enjoys a GDP per capita substantially higher than that of the othertransitioning economies of Central Europe. In March 2004, Sloveniabecame the first transition country to graduate from borrower statusto donor partner at the World Bank. Privatization of the economyproceeded at an accelerated pace in 2002-04. Despite lacklusterperformance in Europe in 2001-04, Slovenia maintained moderategrowth. Structural reforms to improve the business environment haveallowed for greater foreign participation in Slovenia's economy andhave helped to lower unemployment. Further measures to curbinflation are still needed. Corruption and the high degree ofcoordination between government, business, and central bank policywere issues of concern in the run-up to Slovenia's 1 May 2004accession to the European Union. In mid-2004 Slovenia agreed toadopt the euro by 2007 and, therefore, must keep its debt levels,budget deficits, interest rates, and inflation levels within theEU's Maastrict criteria.
Solomon IslandsThe bulk of the population depends on agriculture,fishing, and forestry for at least part of their livelihood. Mostmanufactured goods and petroleum products must be imported. Theislands are rich in undeveloped mineral resources such as lead,zinc, nickel, and gold. Prior to the arrival of the RegionalAssistance Mission to the Solomon Islands (RAMSI), severe ethnicviolence, the closing of key businesses, and an empty governmenttreasury culminated in economic collapse. RAMSI has enabled a returnto law and order, a new period of economic stability, and modestgrowth as the economy rebuilds.
SomaliaSomalia's economic fortunes are driven by its deep politicaldivisions. The northwestern area has declared its independence asthe "Republic of Somaliland"; the northeastern region of Puntland isa semi-autonomous state; and the remaining southern portion isriddled with the struggles of rival factions. Economic lifecontinues, in part because much activity is local and relativelyeasily protected. Agriculture is the most important sector, withlivestock normally accounting for about 40% of GDP and about 65% ofexport earnings, but Saudi Arabia's recent ban on Somali livestock,because of Rift Valley Fever concerns, has severely hampered thesector. Nomads and semi-nomads, who are dependent upon livestock fortheir livelihood, make up a large portion of the population.Livestock, hides, fish, charcoal, and bananas are Somalia'sprincipal exports, while sugar, sorghum, corn, qat, and machinedgoods are the principal imports. Somalia's small industrial sector,based on the processing of agricultural products, has largely beenlooted and sold as scrap metal. Despite the seeming anarchy,Somalia's service sector has managed to survive and grow.Telecommunication firms provide wireless services in most majorcities and offer the lowest international call rates on thecontinent. In the absence of a formal banking sector, money exchangeservices have sprouted throughout the country, handling between $500million and $1 billion in remittances annually. Mogadishu's mainmarket offers a variety of goods from food to the newest electronicgadgets. Hotels continue to operate, and militias provide security.The ongoing civil disturbances and clan rivalries, however, haveinterfered with any broad-based economic development andinternational aid arrangements. In 2004 Somalia's overdue financialobligations to the IMF continued to grow. Statistics on Somalia'sGDP, growth, per capita income, and inflation should be viewedskeptically. In late December 2004, a major tsunami took anestimated 150 lives and caused destruction of properity in coastalareas.
South AfricaSouth Africa is a middle-income, emerging market withan abundant supply of natural resources; well-developed financial,legal, communications, energy, and transport sectors; a stockexchange that ranks among the 10 largest in the world; and a moderninfrastructure supporting an efficient distribution of goods tomajor urban centers throughout the region. However, growth has notbeen strong enough to lower South Africa's high unemployment rate;and daunting economic problems remain from the apartheid era,especially poverty and lack of economic empowerment among thedisadvantaged groups. South African economic policy is fiscallyconservative, but pragmatic, focusing on targeting inflation andliberalizing trade as means to increase job growth and householdincome.
South Georgia and the South Sandwich IslandsSome fishing takesplace in adjacent waters. There is a potential source of income fromharvesting finfish and krill. The islands receive income frompostage stamps produced in the UK, sale of fishing licenses, andharbor and landing fees from tourist vessels. Tourism fromspecialized cruise ships is increasing rapidly.
Southern OceanFisheries in 2000-01 (1 July to 30 June) landed112,934 metric tons, of which 87% was krill and 11% Patagoniantoothfish. International agreements were adopted in late 1999 toreduce illegal, unreported, and unregulated fishing, which in the2000-01 season landed, by one estimate, 8,376 metric tons ofPatagonian and antarctic toothfish. In the 2000-01 antarctic summer12,248 tourists, most of them seaborne, visited the Southern Oceanand Antarctica, compared to 14,762 the previous year.
SpainThe Spanish economy boomed from 1986 to 1990, averaging fivepercent annual growth. After a European-wide recession in the early1990s, the Spanish economy resumed moderate growth starting in 1994.Spain's mixed capitalist economy supports a GDP that on a per capitabasis is 80% that of the four leading West European economies. Thecenter-right government of former President AZNAR successfullyworked to gain admission to the first group of countries launchingthe European single currency (the euro) on 1 January 1999. The AZNARadministration continued to advocate liberalization, privatization,and deregulation of the economy and introduced some tax reforms tothat end. Unemployment fell steadily under the AZNAR administrationbut remains high at 10.4%. Growth of 2.5% in 2003 and 2.6% in 2004was satisfactory given the background of a faltering Europeaneconomy. The socialist president, RODRIGUEZ ZAPATERO, has initiatedeconomic and social reforms that are generally popular among themasses of people but that are anathema to religious and otherconservative elements. Adjusting to the monetary and other economicpolicies of an integrated Europe, reducing unemployment, andabsorbing widespread social changes will pose challenges to Spainover the next few years.