GibraltarSelf-sufficient Gibraltar benefits from an extensiveshipping trade, offshore banking, and its position as aninternational conference center. The British military presence hasbeen sharply reduced and now contributes about 7% to the localeconomy, compared with 60% in 1984. The financial sector, tourism(almost 5 million visitors in 1998), shipping services fees, andduties on consumer goods also generate revenue. The financialsector, the shipping sector, and tourism each contribute 25%-30% ofGDP. Telecommunications accounts for another 10%. In recent years,Gibraltar has seen major structural change from a public to aprivate sector economy, but changes in government spending stillhave a major impact on the level of employment.
Glorioso Islandsno economic activity
GreeceGreece has a capitalist economy with the public sectoraccounting for about 40% of GDP and with per capita GDP at least 75%of the leading euro-zone economies. Tourism provides 15% of GDP.Immigrants make up nearly one-fifth of the work force, mainly inmenial jobs. Greece is a major beneficiary of EU aid, equal to about3.3% of annual GDP. The Greek economy grew by about 4.0% for thebetween 2003 and 2005, largely because of an investment boom andinfrastructure upgrades for the 2004 Athens Olympic Games. Economicgrowth slowed to about 3% in 2005. Greece has not met the EU'sGrowth and Stability Pact budget deficit criteria of 3% of GDP since2000. Public debt, inflation, and unemployment are above theeuro-zone average. To overcome these challenges, the GreekGovernment is expected to continue cutting government spending,reducing the size of the public sector, and reforming the labor andpension systems.
GreenlandThe economy remains critically dependent on exports offish and substantial support from the Danish Government, whichsupplies about half of government revenues. The public sector,including publicly-owned enterprises and the municipalities, playsthe dominant role in the economy. Despite several interestinghydrocarbon and mineral exploration activities, it will take anumber of years before production can materialize. Tourism is theonly sector offering any near-term potential, and even this islimited due to a short season and high costs.
GrenadaGrenada relies on tourism as its main source of foreignexchange, especially since the construction of an internationalairport in 1985. Strong performances in construction andmanufacturing, together with the development of an offshorefinancial industry, have also contributed to growth in nationaloutput.
GuadeloupeThis Caribbean economy depends on agriculture, tourism,light industry, and services. It also depends on France for largesubsidies and imports. Tourism is a key industry, with most touristsfrom the US; an increasingly large number of cruise ships visit theislands. The traditional sugarcane crop is slowly being replaced byother crops, such as bananas (which now supply about 50% of exportearnings), eggplant, and flowers. Other vegetables and root cropsare cultivated for local consumption, although Guadeloupe is stilldependent on imported food, mainly from France. Light industryfeatures sugar and rum production. Most manufactured goods and fuelare imported. Unemployment is especially high among the young.Hurricanes periodically devastate the economy.
GuamThe economy depends largely on US military spending andtourism. Total US grants, wage payments, and procurement outlaysamounted to $1.3 billion in 2004. Over the past 30 years, thetourist industry has grown to become the largest income sourcefollowing national defense. The Guam economy continues to experienceexpansion in both its tourism and military sectors.
GuatemalaGuatemala is the largest and most populous of the CentralAmerican countries with a GDP per capita roughly one-half that ofBrazil, Argentina, and Chile. The agricultural sector accounts forabout one-fourth of GDP, two-thirds of exports, and half of thelabor force. Coffee, sugar, and bananas are the main products. The1996 signing of peace accords, which ended 36 years of civil war,removed a major obstacle to foreign investment, but widespreadpolitical violence and corruption scandals continue to dampeninvestor confidence. The distribution of income remains highlyunequal with perhaps 75% of the population below the poverty line.Other ongoing challenges include increasing government revenues,negotiating further assistance from international donors, upgradingboth government and private financial operations, curtailing drugtrafficking, and narrowing the trade deficit.
GuernseyFinancial services - banking, fund management, insurance -account for about 55% of total income in this tiny, prosperousChannel Island economy. Tourism, manufacturing, and horticulture,mainly tomatoes and cut flowers, have been declining. Light tax anddeath duties make Guernsey a popular tax haven. The evolvingeconomic integration of the EU nations is changing the environmentunder which Guernsey operates.
GuineaGuinea possesses major mineral, hydropower, and agriculturalresources, yet remains an underdeveloped nation. The countrypossesses almost half of the world's bauxite reserves and is thesecond-largest bauxite producer. The mining sector accounted forover 70% of exports in 2004. Long-run improvements in governmentfiscal arrangements, literacy, and the legal framework are needed ifthe country is to move out of poverty. Fighting along the SierraLeonean and Liberian borders, as well as refugee movements, havecaused major economic disruptions, aggravating a loss in investorconfidence. Panic buying has created food shortages and inflationand caused riots in local markets. Guinea is not receivingmultilateral aid; the IMF and World Bank cut off most assistance in2003. Growth rose slightly in 2005, primarily due to increases inglobal demand and commodity prices on world markets.
Guinea-BissauOne of the 10 poorest countries in the world,Guinea-Bissau depends mainly on farming and fishing. Cashew cropshave increased remarkably in recent years, and the country now rankssixth in cashew production. Guinea-Bissau exports fish and seafoodalong with small amounts of peanuts, palm kernels, and timber. Riceis the major crop and staple food. However, intermittent fightingbetween Senegalese-backed government troops and a military juntadestroyed much of the country's infrastructure and caused widespreaddamage to the economy in 1998; the civil war led to a 28% drop inGDP that year, with partial recovery in 1999-2002. Before the war,trade reform and price liberalization were the most successful partof the country's structural adjustment program under IMFsponsorship. The tightening of monetary policy and the developmentof the private sector had also begun to reinvigorate the economy.Because of high costs, the development of petroleum, phosphate, andother mineral resources is not a near-term prospect. However,offshore oil prospecting has begun and could lead to much-neededrevenue in the long run. The inequality of income distribution isone of the most extreme in the world. The government andinternational donors continue to work out plans to forward economicdevelopment from a lamentably low base. In December 2003, the WorldBank, IMF, and UNDP were forced to step in to provide emergencybudgetary support in the amount of $107 million for 2004,representing over 80% of the total national budget. Government driftand indecision, however, have resulted in continued low growth in2002-05.
GuyanaThe Guyanese economy exhibited moderate economic growth in2001-02, based on expansion in the agricultural and mining sectors,a more favorable atmosphere for business initiatives, a morerealistic exchange rate, fairly low inflation, and the continuedsupport of international organizations. Growth slowed in 2003 andcame back gradually in 2004, buoyed largely by increased exportearnings; it slowed again in 2005. Chronic problems include ashortage of skilled labor and a deficient infrastructure. Thegovernment is juggling a sizable external debt against the urgentneed for expanded public investment. The bauxite mining sectorshould benefit in the near term from restructuring and partialprivatization. Export earnings from agriculture and mining havefallen sharply, while the import bill has risen, driven by higherenergy prices. Guyana's entrance into the Caricom Single Market andEconomy (CSME) in January 2006 might broaden the country's exportmarket, primarily in the raw materials sector.
HaitiIn this poorest country in the Western Hemisphere, 80% of thepopulation lives in abject poverty. Two-thirds of all Haitiansdepend on the agriculture sector, mainly small-scale subsistencefarming, and remain vulnerable to damage from frequent naturaldisasters, exacerbated by the country's widespread deforestation.The economy grew 1.5% in 2005, the highest growth rate since 1999.Haiti suffers from rampant inflation, a lack of investment, and asevere trade deficit. In early 2005, Haiti paid its arrears to theWorld Bank, paving the way for reengagement with the Bank. Thegovernment is reliant on formal international economic assistancefor fiscal sustainability. Remittances are the primary source offoreign exchange, equaling nearly a quarter of GDP in 2005.
Heard Island and McDonald IslandsNo indigenous economic activity,but the Australian Government allows limited fishing around theislands.
Holy See (Vatican City)This unique, noncommercial economy issupported financially by an annual contribution from Roman Catholicdioceses throughout the world (known as Peter's Pence); by the saleof postage stamps, coins, medals, and tourist mementos; by fees foradmission to museums; and by the sale of publications. Investmentsand real estate income also account for a sizable portion ofrevenue. The incomes and living standards of lay workers arecomparable to those of counterparts who work in the city of Rome.
HondurasHonduras, one of the poorest countries in the WesternHemisphere with an extraordinarily unequal distribution of incomeand massive unemployment, is banking on expanded trade under theUS-Central America Free Trade Agreement (CAFTA) and on debt reliefunder the Heavily Indebted Poor Countries (HIPC) initiative. Thecountry has met most of its macroeconomic targets, and began athree-year IMF Poverty Reduction and Growth Facility (PGRF) programin February 2004. Growth remains dependent on the economy of the US,its largest trading partner, on continued exports of non-traditionalagricultural products (such as melons, chiles, tilapia, and shrimp),and on reduction of the high crime rate.
Hong KongHong Kong has a free market, entrepot economy, highlydependent on international trade. Natural resources are limited, andfood and raw materials must be imported. Gross imports and exports(i.e., including reexports to and from third countries) each exceedGDP in dollar value. Even before Hong Kong reverted to Chineseadministration on 1 July 1997, it had extensive trade and investmentties with China. Hong Kong has been further integrating its economywith China because China's growing openness to the world economy hasmade manufacturing in China much more cost effective. Hong Kong'sreexport business to and from China is a major driver of growth. Percapita GDP is comparable to that of the four big economies ofWestern Europe. GDP growth averaged a strong 5% from 1989 to 2005,but Hong Kong suffered two recessions in the past eight yearsbecause of the Asian financial crisis in 1997-1998 and the globaldownturn in 2001-2002. Although the Severe Acute RespiratorySyndrome (SARS) outbreak in 2003 also battered Hong Kong's economy,a solid rise in exports, a boom in tourism from the mainland becauseof China's easing of travel restrictions, and a return of consumerconfidence resulted in the resumption of strong growth from late2003 through 2005.
Howland Islandno economic activity
HungaryHungary has made the transition from a centrally planned toa market economy, with a per capita income about 60% of the EU-25average. Hungary continues to demonstrate strong economic growth andacceded to the EU in May 2004. The private sector accounts for over80% of GDP. Foreign ownership of and investment in Hungarian firmsare widespread, with cumulative foreign direct investment totalingmore than $34 billion between 1990 and 2003. Several private sectoranalysts and sovereign ratings agencies have expressed concerns overHungary's unsustainable budget and current account deficits.Inflation has declined from 14% in 1998 to 3.5% in 2005.Unemployment in 2005 rose to 7.1%, its highest point since 1999;Hungary's labor force participation rate of 57% is one of the lowestin the Organization for Economic Cooperation and Development (OECD).Germany is by far Hungary's largest economic partner. Policychallenges include cutting the public sector deficit to 3% of GDP by2008, from about 6.1% in 2005, and orchestrating an orderly interestrate reduction without sparking capital outflows.
IcelandIceland's Scandinavian-type economy is basicallycapitalistic, yet with an extensive welfare system (includinggenerous housing subsidies), low unemployment, and remarkably evendistribution of income. In the absence of other natural resources(except for abundant geothermal power), the economy depends heavilyon the fishing industry, which provides 70% of export earnings andemploys 4% of the work force. The economy remains sensitive todeclining fish stocks as well as to fluctuations in world prices forits main exports: fish and fish products, aluminum, andferrosilicon. Government policies include reducing the currentaccount deficit, limiting foreign borrowing, containing inflation,revising agricultural and fishing policies, and diversifying theeconomy. The government remains opposed to EU membership, primarilybecause of Icelanders' concern about losing control over theirfishing resources. Iceland's economy has been diversifying intomanufacturing and service industries in the last decade, and newdevelopments in software production, biotechnology, and financialservices are taking place. The tourism sector is also expanding,with the recent trends in ecotourism and whale watching. Growth hadbeen remarkably steady in 1996-2001 at 3%-5%, but could not besustained in 2002 in an environment of global recession. Growthresumed in 2003, and estimates call for strong growth until 2007,slowly dropping until the end of the decade.
Iles Eparsesno economic activity
IndiaIndia's diverse economy encompasses traditional villagefarming, modern agriculture, handicrafts, a wide range of modernindustries, and a multitude of services. Services are the majorsource of economic growth, accounting for half of India's outputwith less than one quarter of its labor force. About three-fifths ofthe work-force is in agriculture, leading the UPA government toarticulate an economic reform program that includes developing basicinfrastructure to improve the lives of the rural poor and boosteconomic performance. Government controls on foreign trade andinvestment have been reduced in some areas, but high tariffs(averaging 20% on non-agricultural items in 2004) and limits onforeign direct investment are still in place. The government in 2005liberalized investment in the civil aviation, telecom, andconstruction sectors. Privatization of government-owned industriesessentially came to a halt in 2005, and continues to generatepolitical debate; continued social, political, and economicrigidities hold back needed initiatives. The economy has posted anaverage growth rate of more than 7% in the decade since 1994,reducing poverty by about 10 percentage points. India achieved 7.6%GDP growth in 2005, significantly expanding manufacturing. India iscapitalizing on its large numbers of well-educated people skilled inthe English language to become a major exporter of software servicesand software workers. Despite strong growth, the World Bank andothers worry about the combined state and federal budget deficit,running at approximately 9% of GDP; government borrowing has keptinterest rates high. Economic deregulation would help attractadditional foreign capital and lower interest rates. The huge andgrowing population is the fundamental social, economic, andenvironmental problem.
Indian OceanThe Indian Ocean provides major sea routes connectingthe Middle East, Africa, and East Asia with Europe and the Americas.It carries a particularly heavy traffic of petroleum and petroleumproducts from the oilfields of the Persian Gulf and Indonesia. Itsfish are of great and growing importance to the bordering countriesfor domestic consumption and export. Fishing fleets from Russia,Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainlyfor shrimp and tuna. Large reserves of hydrocarbons are being tappedin the offshore areas of Saudi Arabia, Iran, India, and westernAustralia. An estimated 40% of the world's offshore oil productioncomes from the Indian Ocean. Beach sands rich in heavy minerals andoffshore placer deposits are actively exploited by borderingcountries, particularly India, South Africa, Indonesia, Sri Lanka,and Thailand.
IndonesiaIndonesia, a vast polyglot nation, has struggled toovercome the Asian financial crisis, and still grapples with highunemployment, a fragile banking sector, endemic corruption,inadequate infrastructure, a poor investment climate, and unequalresource distribution among regions. Indonesia became a net oilimporter in 2004 because of declining production and lack of newexploration investment. In late December 2004, the Indian Oceantsunami took 131,000 lives with another 37,000 missing, left some570,000 displaced persons, and caused an estimated $4.5 billion indamages and losses. The cost of subsidizing domestic fuel placedincreasing strain on the budget in 2005, and combined withindecisive monetary policy, contributed to a run on the currency inAugust 2005, prompting the government to enact a 126% average fuelprice hike in October. The resulting inflation and interest ratehikes dampened growth prospects in 2006. However, in October 2006,Jakarta paid off its outstanding IMF debt, incurred during the1997-98 Asian financial crisis, four years ahead of schedule. Keysto future growth remain internal reform, building up the confidenceof international and domestic investors, and strong global economicgrowth.
IranIran's economy is marked by a bloated, inefficient statesector, over reliance on the oil sector, and statist policies thatcreate major distortions throughout. Most economic activity iscontrolled by the state. Private sector activity is typicallysmall-scale - workshops, farming, and services. President MahmudAHMADI-NEJAD has continued to follow the market reform plans offormer President RAFSANJANI, with limited progress. Relatively highoil prices in recent years have enabled Iran to amass some $40billion in foreign exchange reserves, but have not eased economichardships such as high unemployment and inflation. The proportion ofthe economy devoted to the development of weapons of massdestruction remains a contentious issue with leading Western nations.
IraqIraq's economy is dominated by the oil sector, which hastraditionally provided about 95% of foreign exchange earnings.Iraq's seizure of Kuwait in August 1990, subsequent internationaleconomic sanctions, and damage from military action by aninternational coalition beginning in January 1991 drasticallyreduced economic activity. Although government policies supportinglarge military and internal security forces and allocating resourcesto key supporters of the regime hurt the economy, implementation ofthe UN's oil-for-food program, which began in December 1996, helpedimprove conditions for the average Iraqi citizen. Iraq was allowedto export limited amounts of oil in exchange for food, medicine, andsome infrastructure spare parts. In December 1999, the UN SecurityCouncil authorized Iraq to export under the program as much oil asrequired to meet humanitarian needs. Per capita food importsincreased significantly, while medical supplies and health careservices steadily improved. Per capita output and living standardswere still well below the pre-1991 level, but any estimates have awide range of error. The military victory of the US-led coalition inMarch-April 2003 resulted in the shutdown of much of the centraleconomic administrative structure. Although a comparatively smallamount of capital plant was damaged during the hostilities, looting,insurgent attacks, and sabotage have undermined efforts to rebuildthe economy. Attacks on key economic facilities - especially oilpipelines and infrastructure - have prevented Iraq from reachingprojected export volumes, but total government revenues have beenhigher than anticipated due to high oil prices. Despite politicaluncertainty, Iraq has established the institutions needed toimplement economic policy, has successfully concluded a three-stagedebt reduction agreement with the Paris Club, and is working towarda Standby Arrangement with the IMF. The Standby Arrangement wouldclear the way for continued debt relief from the Paris Club.
IrelandIreland is a small, modern, trade-dependent economy withgrowth averaging a robust 7% in 1995-2004. Agriculture, once themost important sector, is now dwarfed by industry and services.Industry accounts for 46% of GDP, about 80% of exports, and 29% ofthe labor force. Although exports remain the primary engine forIreland's growth, the economy has also benefited from a rise inconsumer spending, construction, and business investment. Per capitaGDP is 10% above that of the four big European economies and thesecond highest in the EU behind Luxembourg. Over the past decade,the Irish Government has implemented a series of national economicprograms designed to curb price and wage inflation, reducegovernment spending, increase labor force skills, and promoteforeign investment. Ireland joined in circulating the euro on 1January 2002 along with 11 other EU nations.
Isle of ManOffshore banking, manufacturing, and tourism are keysectors of the economy. The government offers incentives tohigh-technology companies and financial institutions to locate onthe island; this has paid off in expanding employment opportunitiesin high-income industries. As a result, agriculture and fishing,once the mainstays of the economy, have declined in their shares ofGDP. Trade is mostly with the UK. The Isle of Man enjoys free accessto EU markets.
IsraelIsrael has a technologically advanced market economy withsubstantial government participation. It depends on imports of crudeoil, grains, raw materials, and military equipment. Despite limitednatural resources, Israel has intensively developed its agriculturaland industrial sectors over the past 20 years. Israel importssubstantial quantities of grain, but is largely self-sufficient inother agricultural products. Cut diamonds, high-technologyequipment, and agricultural products (fruits and vegetables) are theleading exports. Israel usually posts sizable current accountdeficits, which are covered by large transfer payments from abroadand by foreign loans. Roughly half of the government's external debtis owed to the US, which is its major source of economic andmilitary aid. The bitter Israeli-Palestinian conflict; difficultiesin the high-technology, construction, and tourist sectors; andfiscal austerity in the face of growing inflation led to smalldeclines in GDP in 2001 and 2002. The economy rebounded in 2003 and2004, growing at a 4% rate each year, as the government tightenedfiscal policy and implemented structural reforms to boostcompetition and efficiency in the markets. In 2005, rising consumerconfidence, tourism, and foreign direct investment - as well ashigher demand for Israeli exports - boosted GDP by 4.7%.
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. But the leadership faces a severe economic constraint:the budget deficit has breached the 3% EU ceiling. The economyexperienced almost no growth in 2005, and unemployment remained at ahigh level.
JamaicaThe Jamaican economy is heavily dependent on services, whichnow account for 60% of GDP. The country continues to derive most ofits foreign exchange from remittances, tourism, 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 2003-04, with brisk tourist seasons.But the economy faces serious long-term problems: high interestrates, increased foreign competition, exchange rate instability, asizable merchandise trade deficit, large-scale unemployment andunderemployment, and a growing stock of internal debt - the resultof government bailouts to ailing sectors of the economy, mostnotably the financial sector in the mid-1990s. The ratio of debt toGDP is 135%. Inflation, previously a bright spot, is expected toremain in the double digits. Uncertain economic conditions have ledto increased civil unrest, including gang violence fueled by thedrug trade. In 2004, the government faced the difficult prospect ofhaving to achieve fiscal discipline in order to maintain debtpayments while simultaneously attacking a serious and growing crimeproblem that is hampering economic growth. Attempts at deficitcontrol were derailed by Hurricane Ivan in September 2004, whichrequired substantial government spending to repair the damage.Despite the hurricane, tourism looks set to enjoy solid growth forthe foreseeable future.
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 the third-largest economy in the world after the US andChina, measured on a purchasing power parity (PPP) basis. Onenotable characteristic of the economy is how manufacturers,suppliers, and distributors work together 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. Japan's industrial sector isheavily dependent on imported raw materials and fuels. The tinyagricultural sector is highly subsidized and protected, with cropyields among the highest in the world. Usually self sufficient inrice, Japan must import about 60% of its food on a caloric basis.Japan maintains one of the world's largest fishing fleets andaccounts for nearly 15% of the global catch. For three decades,overall real economic growth had been spectacular - a 10% average inthe 1960s, a 5% average in the 1970s, and a 4% average in the 1980s.Growth slowed markedly in the 1990s, averaging just 1.7%, largelybecause of the after effects of overinvestment during the late 1980sand contractionary domestic policies intended to wring speculativeexcesses from the stock and real estate markets and to force arestructuring of the economy. From 2000 to 2003, government effortsto revive economic growth met with little success and were furtherhampered by the slowing of the US, European, and Asian economies. In2004 and 2005, growth improved and the lingering fears of deflationin prices and economic activity lessened. Japan's huge governmentdebt, which totals 170% of GDP, and the aging of the population aretwo major long-run problems. Some fear that a rise in taxes couldendanger the current economic recovery. Internal conflict over theproper way to reform the financial system will continue as JapanPost's banking, insurance, and delivery services undergoprivatization between 2007 and 2017.
Jarvis Islandno economic activity
JerseyJersey's economy is based on international financialservices, agriculture, and tourism. In 1996, the finance sectoraccounted for about 60% of the island's output. Potatoes,cauliflower, tomatoes, and especially flowers are important exportcrops, shipped mostly to the UK. The Jersey breed of dairy cattle isknown worldwide and represents an important export income earner.Milk products go to the UK and other EU countries. Tourism accountsfor 24% of GDP. In recent years, the government has encouraged lightindustry to locate in Jersey, with the result that an electronicsindustry has developed alongside the traditional manufacturing ofknitwear. All raw material and energy requirements are imported, aswell as a large share of Jersey's food needs. Light taxes and deathduties make the island a popular tax haven. Living standards comeclose to those of the UK.
Johnston Atollno economic activity
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 WTO (2000), a freetrade accord with the US (2001), and an association agreement withthe EU (2001). These measures have helped improve productivity andhave put Jordan on the foreign investment map. Jordan imported mostof its oil from Iraq, but the US-led war in Iraq in 2003 made Jordanmore dependent on oil from other Gulf nations, forcing the JordanianGovernment to raise retail petroleum product prices and the salestax base. Jordan's export market, which is heavily dependent onexports to Iraq, was also affected by the war but recovered quicklywhile contributing to the Iraq recovery effort. The main challengesfacing Jordan are reducing dependence on foreign grants, reducingthe budget deficit, and creating investment incentives to promotejob creation.
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 reservesand plentiful supplies of other minerals and metals. It also has alarge agricultural sector featuring livestock and grain.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 - 9% or more per year in2002-05 - thanks largely to its booming energy sector, but also toeconomic reform, good harvests, and foreign investment. The openingof the Caspian Consortium pipeline in 2001, from westernKazakhstan's Tengiz oilfield to the Black Sea, substantially raisedexport capacity. Kazakhstan also has begun work on an ambitiouscooperative construction effort with China to build an oil pipelinethat will extend from the country's Caspian coast eastward to theChinese border. The country has embarked upon an industrial policydesigned to diversify the economy away from overdependence on theoil sector by developing light industry. The policy aims to reducethe influence of foreign investment and foreign personnel. Thegovernment has engaged in several disputes with foreign oilcompanies over the terms of production agreements; tensionscontinue. Upward pressure on the local currency continued in 2005due to massive oil-related foreign-exchange inflows.
KenyaThe regional hub for trade and finance in East Africa, Kenyahas been hampered by corruption and by reliance upon several primarygoods whose prices have remained low. In 1997, the IMF suspendedKenya's Enhanced Structural Adjustment Program due to thegovernment's failure to maintain reforms and curb corruption. Asevere drought from 1999 to 2000 compounded Kenya's problems,causing water and energy rationing and reducing agricultural output.As a result, GDP contracted by 0.2% in 2000. The IMF, which hadresumed loans in 2000 to help Kenya through the drought, againhalted lending in 2001 when the government failed to instituteseveral anticorruption measures. Despite the return of strong rainsin 2001, weak commodity prices, endemic corruption, and lowinvestment limited Kenya's economic growth to 1.2%. Growth lagged at1.1% in 2002 because of erratic rains, low investor confidence,meager donor support, and political infighting up to the elections.In the key December 2002 elections, Daniel Arap MOI's 24-year-oldreign ended, and a new opposition government took on the formidableeconomic problems facing the nation. In 2003, progress was made inrooting out corruption and encouraging donor support. GDP grew morethan 5% in 2005.
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 about 20% of GDP. Remittances from seamen on merchantships abroad account for more than $5 million each year. Kiribatireceives around $15 million annually for the government budget froman Australian trust fund.
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 shortages of spare parts. Industrialand power output have declined in parallel. Despite an increasedharvest in 2005 because of more stable weather conditions,fertilizer assistance from South Korea, and an extraordinarymobilization of the population to help with agricultural production,the nation has suffered its 11th year of food shortages because ofon-going systemic problems, including a lack of arable land,collective farming practices, and chronic shortages of tractors andfuel. Massive international food aid deliveries have allowed thepeople of North Korea to escape mass starvation since faminethreatened in 1995, but the population continues to suffer fromprolonged malnutrition and poor living conditions. Large-scalemilitary spending eats up resources needed for investment andcivilian consumption. In 2004, the regime formalized an arrangementwhereby private "farmers markets" were allowed to begin selling awider range of goods. It also permitted some private farming on anexperimental basis in an effort to boost agricultural output. InOctober 2005, the regime reversed some of these policies byforbidding private sales of grains and reinstituting a centralizedfood rationing system. In December 2005, the regime confirmed thatit intended to carry out earlier threats to terminate allinternational humanitarian assistance operations in the DPRK(calling instead for developmental assistance only) and to restrictthe activities of international and non-governmental aidorganizations such as the World Food Program. Firm political controlremains the Communist government's overriding concern, which willlikely inhibit the loosening of economic regulations.
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 wascomparable with levels in the poorer countries of Africa and Asia.In 2004, South Korea joined the trillion dollar club of worldeconomies. Today its GDP per capita is equal to the lesser economiesof the EU. This success through the late 1980s was achieved by asystem of close government/business ties, including directed credit,import restrictions, sponsorship of specific industries, and astrong labor effort. The government promoted the import of rawmaterials and technology at the expense of consumer goods andencouraged savings and investment over consumption. The Asianfinancial crisis of 1997-99 exposed longstanding weaknesses in SouthKorea's development model, including high debt/equity ratios,massive foreign borrowing, and an undisciplined financial sector.GDP plunged by 6.9% in 1998, then recovered 9.5% in 1999 and 8.5% in2000. 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 7%, despiteanemic global growth. Between 2003 and 2005, growth moderated toabout 4%. A downturn in consumer spending was offset by rapid exportgrowth. In 2005, the government proposed labor reform legislationand a corporate pension scheme to help make the labor market moreflexible, and new real estate policies to cool property speculation.Moderate inflation, low unemployment, an export surplus, and fairlyequal distribution of income characterize this solid economy.
KuwaitKuwait is a small, rich, relatively open economy withself-reported crude oil reserves of about 96 billion barrels - 10%of world reserves. Petroleum accounts for nearly half of GDP, 95% ofexport revenues, and 80% of government income. Kuwait's climatelimits agricultural development. Consequently, with the exception offish, it depends almost wholly on food imports. About 75% of potablewater must be distilled or imported. Kuwait continues itsdiscussions with foreign oil companies to develop fields in thenorthern part of the country.
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, natural gas, and electricity. Kyrgyzstan has beenprogressive in carrying out market reforms, such as an improvedregulatory system and land reform. Kyrgyzstan was the first CIScountry to be accepted into the World Trade Organization. Much ofthe government's stock in enterprises has been sold. Drops inproduction had been severe after the breakup of the Soviet Union inDecember 1991, but by mid-1995, production began to recover andexports began to increase. Kyrgyzstan has distinguished itself byadopting relatively liberal economic policies. The drop in output atthe Kumtor gold mine sparked a 0.5% decline in GDP in 2002, but GDPgrowth bounced back in 2003-05. The government has made steadystrides in controlling its substantial fiscal deficit and reducedthe deficit to 1% of GDP in 2005. The government and internationalfinancial institutions have been engaged in a comprehensivemedium-term poverty reduction and economic growth strategy, and in2005 agreed to pursue much-needed tax reform. Progress fightingcorruption, further restructuring of domestic industry, and successin attracting foreign investment 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 6% in 1988-2004 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, though the government is sponsoring majorimprovements in the road system with possible support from Japan.Electricity is available in only a few urban areas. Subsistenceagriculture, dominated by rice, accounts for about half of GDP andprovides 80% of total employment. The economy will continue tobenefit from aid by the IMF and other international sources and fromnew foreign investment in food processing and mining. Constructionwill be another strong economic driver, especially as hydroelectricdam and road projects gain steam. In late 2004, Laos gained NormalTrade Relations status with the US, allowing Laos-based producers toface lower tariffs on exports. This new status may help spur growth.In addition, the European Union has agreed to provide $1 million tothe Lao Government for technical assistance in preparations for WTOmembership. If the avian flu worsens and spreads in the region,however, prospects for tourism could dim.
LatviaLatvia's transitional economy recovered from the 1998 Russianfinancial crisis, largely due to the government's budget stringencyand a gradual reorientation of exports toward EU countries,lessening Latvia's trade dependency on Russia. The majority ofcompanies, banks, and real estate have been privatized, although thestate still holds sizable stakes in a few large enterprises. Latviaofficially joined the World Trade Organization in February 1999. EUmembership, a top foreign policy goal, came in May 2004. The currentaccount deficit - 11.5% of GDP in 2005 - remains a major concern. Agrowing perception that many of Latvia's banks facilitate illicitactivity could damage the country's vibrant financial sector.
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. Inthe years since, Lebanon has rebuilt much of its war-torn physicaland financial infrastructure by borrowing heavily - mostly fromdomestic banks. In an attempt to reduce the ballooning nationaldebt, the Rafiq HARIRI government began an austerity program,reining in government expenditures, increasing revenue collection,and privatizing state enterprises. In November 2002, the governmentmet with international donors at the Paris II conference to seekbilateral assistance in restructuring its massive domestic debt atlower interest rates. Substantial receipts from donor nationsstabilized government finances in 2003, but did little to reduce thedebt, which stands at nearly 170% of GDP. In 2004 the HARIRIgovernment issued Eurobonds in an effort to manage maturing debt.The downturn in economic activity that followed the assassination ofRafiq al-HARIRI has eased, but has yet to be reversed. Tourismremains below the level of 2004. The new Prime Minister, FuadSINIORA, has pledged to push ahead with economic reform, includingprivatization and more efficient government. The Core Group ofnations has announced plans to hold a Donor's Conference in early2006 to assist the government of Lebanon in restructuring its debtand increasing foreign investment.
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. However, the government has recentlystrengthened its tax system to reduce dependency on customs duties.Completion of a major hydropower facility in January 1998 nowpermits the sale of water to South Africa, also generating royaltiesfor Lesotho. As the number of mineworkers has declined steadily overthe past several years, a small manufacturing base has developedbased on farm products that support the milling, canning, leather,and jute industries, as well as a rapidly expanding apparel-assemblysector. The latter has grown significantly, mainly due to Lesothoqualifying for the trade benefits contained in the Africa Growth andOpportunity Act. The economy is still primarily based on subsistenceagriculture, especially livestock, although drought has decreasedagricultural activity. The extreme inequality in the distribution ofincome remains a major drawback. Lesotho has signed an InterimPoverty Reduction and Growth Facility with the IMF.
LiberiaCivil war and government mismanagement have destroyed muchof Liberia's economy, especially the infrastructure in and aroundMonrovia, while continued international sanctions on diamonds andtimber exports will limit growth prospects for the foreseeablefuture. Many businessmen have fled the country, taking capital andexpertise with them. Some have returned, but many will not. Richlyendowed with water, mineral resources, forests, and a climatefavorable to agriculture, Liberia had been a producer and exporterof basic products - primarily raw timber and rubber. Localmanufacturing, mainly foreign owned, had been small in scope. Thedeparture of the former president, Charles TAYLOR, to Nigeria inAugust 2003, the establishment of the all-inclusive TransitionalGovernment, and the arrival of a UN mission have helped defuse thepolitical crisis, but have done little to encourage economicdevelopment. Wealthy international donors, who are ready to assistreconstruction efforts, are withholding funding until Liberia'sNational Assembly signs onto a Governance and Economic ManagementAction Plan (GEMAP). The Plan was created in October 2005 by theInternational Contact Group for Liberia to help ensure transparentrevenue collection and allocation - something that was lacking underthe Transitional Government and that has limited Liberia's economicrecovery. The reconstruction of infrastructure and the raising ofincomes in this ravaged economy will largely depend on generousfinancial support and technical assistance from donor countries.
LibyaThe Libyan economy depends primarily upon revenues from theoil sector, which contribute about 95% of export earnings, aboutone-quarter of GDP, and 60% of public sector wages. Substantialrevenues from the energy sector coupled with a small population giveLibya one of the highest per capita GDPs in Africa, but little ofthis income flows down to the lower orders of society. Libyanofficials in the past four 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 thatit would abandon programs to build weapons of mass destruction inDecember 2003. Almost all US unilateral sanctions against Libya wereremoved in April 2004, helping Libya attract more foreign directinvestment, mostly in the energy sector. Libya faces a long roadahead in liberalizing the socialist-oriented economy, but initialsteps - including applying for WTO membership, reducing somesubsidies, and announcing plans for privatization - are laying thegroundwork for a transition to a more market-based economy. Thenon-oil manufacturing and construction sectors, which account forabout 20% of GDP, have expanded from processing mostly agriculturalproducts to include the production of petrochemicals, iron, steel,and aluminum. Climatic conditions and poor soils severely limitagricultural output, and Libya 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 dropped from 11% in 2003 to about 8%in 2005. Growing domestic consumption and increased investment havefurthered recovery. Trade has been increasingly oriented toward theWest. Lithuania has gained membership in the World TradeOrganization and joined the EU in May 2004. Privatization of thelarge, state-owned utilities, particularly in the energy sector, isnearing completion. Overall, more than 80% of enterprises have beenprivatized. Foreign government and business support have helped inthe transition from the old command economy to a market economy.
LuxembourgThis stable, high-income economy - benefitting from itsproximity to France, Belgium, and Germany - 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 28% 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 cross-border workers for more than 30% of its labor force.Although Luxembourg, like all EU members, has suffered from theglobal economic slump, the country enjoys an extraordinarily highstandard of living - GDP per capita ranks first in the world.
MacauMacau's well-to-do economy has remained one of the most openin the world since its reversion to China in 1999. Apparel exportsand tourism are mainstays of the economy. Although the territory washit hard by the 1997-98 Asian financial crisis and the globaldownturn in 2001, its economy grew 10.1% in 2002, 14.2% in 2003, and28.6% in 2004. During the first three quarters of 2005, Macauregistered year-on-year GDP increases of 6.2%. A rapid rise in thenumber of mainland visitors because of China's easing of travelrestrictions, increased public works expenditures, and significantinvestment inflows associated with the liberalization of Macau'sgaming industry drove the four-year recovery. The budget alsoreturned to surplus since 2002 because of the surge in visitors fromChina and a hike in taxes on gambling profits, which generated about70% of government revenue. The three companies awarded gamblinglicenses have pledged to invest $2.2 billion in the territory, whichwill boost GDP growth. Much of Macau's textile industry may move tothe mainland as the Multi-Fiber Agreement is phased out. Theterritory may have to rely more on gambling and trade-relatedservices to generate growth. Two new casinos were opened by newforeign gambling licensees in 2004; development of newinfrastructure and facilities in preparation for Macau's hosting ofthe 2005 East Asian Games led the construction sector. The CloserEconomic Partnership Agreement (CEPA) between Macau and mainlandChina that came into effect on 1 January 2004 offers many Macau-madeproducts tariff-free access to the mainland, and the range ofproducts covered by CEPA was expanded on 1 January 2005.
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 central government andeliminated advantages from inclusion in a de facto free trade area.An absence of infrastructure, UN sanctions on the downsizedYugoslavia, one of its largest markets, and a Greek economic embargoover a dispute about the country's constitutional name and flaghindered economic growth until 1996. GDP subsequently rose each yearthrough 2000. However, the leadership's commitment to economicreform, free trade, and regional integration was undermined by theethnic Albanian insurgency of 2001. The economy shrank 4.5% becauseof decreased trade, intermittent border closures, increased deficitspending on security needs, and investor uncertainty. Growth barelyrecovered in 2002 to 0.9%, then rose by 3.4% in 2003, 4.1% in 2004,and 3.7% in 2005. Macedonia has maintained macroeconomic stabilitywith low inflation, but it has lagged the region in attractingforeign investment and job growth has been anemic. Macedonia has anextensive grey market, estimated to be more than 20 percent of GDP,that falls outside official statistics.
MadagascarHaving discarded past socialist economic policies,Madagascar has since the mid 1990s followed a World Bank- andIMF-led policy of privatization and liberalization. This strategyplaced the country on a slow and steady growth path from anextremely low level. Agriculture, including fishing and forestry, isa mainstay of the economy, accounting for more than one-fourth ofGDP and employing 80% 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 36% of GDP and 80% of export revenues in 2005. Theperformance of the tobacco sector is key to short-term growth astobacco accounts for over 60% of exports. The economy depends onsubstantial inflows of economic assistance from the IMF, the WorldBank, and individual donor nations. In late 2000, Malawi wasapproved for relief under the Heavily Indebted Poor Countries (HIPC)program. The government faces strong challenges, includingdeveloping a market economy, improving educational facilities,facing up to environmental problems, dealing with the rapidlygrowing problem of HIV/AIDS, and satisfying foreign donors thatfiscal discipline is being tightened. In 2005, President MUTHARIKAchampioned an anticorruption campaign. Malawi's recent fiscal policyperformance has been very strong, but a serious drought in 2005 and2006 will heighten pressure on the government to increase spending.
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% because of an estimated 11% contraction in exports,but a substantial 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 fromSevere Acute Respiratory Syndrome (SARS) and the Iraq War led tocaution in the business community. Growth topped 7% in 2004 and 5%in 2005. As an oil and gas exporter, Malaysia has profited fromhigher world energy prices, although the cost of governmentsubsidies for domestic gasoline and diesel fuel has risen and offsetsome of the benefit. Malaysia "unpegged" the ringgit from the USdollar in 2005, but so far there has been little movement in theexchange rate. Healthy foreign exchange reserves, low inflation, anda small external debt are all strengths that make it unlikely thatMalaysia will experience a financial crisis over the near termsimilar to the one in 1997. The economy remains dependent oncontinued growth in the US, China, and Japan - top exportdestinations and key sources of foreign investment.
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. Inlate December 2004, a major tsunami left more than 100 dead, 12,000displaced, and property damage exceeding $300 million. Over the pastdecade, real GDP growth averaged over 7.5% per year. As a result ofthe tsunami, the GDP contracted by about 5.5% in 2005.
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 CFA franc in January 1994 have pushed up economicgrowth to a sturdy 5% average in 1996-2005. Worker remittances andexternal trade routes for the landlocked country have beenjeopardized by continued 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 fewdomestic energy sources. The economy is dependent on foreign trade,manufacturing (especially electronics and textiles), and tourism.Continued sluggishness in the European economy is holding backexports, tourism, and overall growth.
Marshall IslandsUS Government assistance is the mainstay of thistiny island economy. Agricultural production, primarily subsistence,is concentrated on small farms; the most important commercial cropsare coconuts and breadfruit. Small-scale industry is limited tohandicrafts, tuna processing, and copra. The tourist industry, now asmall source of foreign exchange employing less than 10% of thelabor force, remains the best hope for future added income. Theislands have few natural resources, and imports far exceed exports.Under the terms of the Amended Compact of Free Association, the USwill provide millions of dollars per year to the Marshall Islands(RMI) through 2023, at which time a Trust Fund made up of US and RMIcontributions will begin perpetual annual payouts. 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 whichnow stands at more than three times the level of annual exports. 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. A new investment code approvedin December 2001 improved the opportunities for direct foreigninvestment. Ongoing negotiations with the IMF involve problems ofeconomic reforms and fiscal discipline. In 2001, exploratory oilwells in tracts 80 km offshore indicated potential extraction atcurrent world oil prices. Mauritania has an estimated 1 billionbarrels of proved reserves. Substantial oil production and exportsare scheduled to begin in early 2006 and may average 75,000 barrelsper day for that year. Meantime the government emphasizes reductionof poverty, improvement of health and education, and promotingprivatization 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 FOX administration iscognizant of the need to upgrade infrastructure, modernize the taxsystem and labor laws, and allow private investment in the energysector, but has been unable to win the support of the opposition-ledCongress. The next government that takes office in December 2006will confront the same challenges of boosting economic growth,improving Mexico's international competitiveness, and reducingpoverty.