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.
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-fifths 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, and Guatemala sincethen has pursued important reforms and macroeconomic stabilization.The distribution of income remains highly unequal with about 75% ofthe population below the poverty line. Other ongoing challengesinclude increasing government revenues, negotiating furtherassistance from international donors, upgrading both government andprivate financial operations, curtailing drug trafficking, andnarrowing the trade deficit. Remittances from a large expatriatecommunity that moved to the United States during the war have becomean important source of foreign exchange.
GuernseyFinancial services - banking, fund management, insurance -account for about 23% of employment and 32% of total income in thistiny, prosperous Channel Island economy. Tourism, manufacturing, andhorticulture, mainly tomatoes and cut flowers, have been declining.Financial services, construction, retail, and the public sector havebeen growing. Light tax and death duties make Guernsey a popular taxhaven. The evolving economic integration of the EU nations ischanging the environment under 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 accounts for over70% of exports. Long-run improvements in government fiscalarrangements, literacy, and the legal framework are needed if thecountry is to move out of poverty. Fighting along the Sierra Leoneanand Liberian borders, as well as refugee movements, have causedmajor economic disruptions, aggravating a loss in investorconfidence. Panic buying has created food shortages and inflationand caused riots in local markets. Guinea is trying to reengage withthe IMF and World Bank, which cut off most assistance in 2003.Growth rose slightly in 2006, primarily due to increases in globaldemand and commodity prices on world markets, but the standard ofliving fell. The Guinea franc depreciated sharply as the prices forbasic necessities like food and fuel rose beyond the reach of mostGuineans. Dissatisfaction with economic conditions promptednationwide strikes in February and June 2006.
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 in2002-06.
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. 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 InterAmerican DevelopmentBank in November 2006 canceled Guyana's nearly $400 million debtwith the Bank. The bauxite mining sector should benefit in the nearterm from restructuring and partial privatization. Export earningsfrom agriculture and mining have fallen sharply, while the importbill has risen, driven by higher energy prices. Guyana's entranceinto the Caricom Single Market and Economy (CSME) in January 2006will broaden the country's export market, primarily in the rawmaterials sector.
HaitiHaiti is the poorest country in the Western Hemisphere, with80% of the population living under the poverty line and 54% inabject poverty. Two-thirds of all Haitians depend on the agriculturesector, mainly small-scale subsistence farming, and remainvulnerable to damage from frequent natural disasters, exacerbated bythe country's widespread deforestation. A macroeconomic programdeveloped in 2005 with the help of the International Monetary Fundhelped the economy grow 1.8% in 2006, the highest growth rate since1999. Haiti suffers from higher inflation than similar low-incomecountries, a lack of investment, and a severe trade deficit. In2005, Haiti paid its arrears to the World Bank, paving the way forreengagement with the Bank. The government relies on formalinternational economic assistance for fiscal sustainability. In2006, Haiti held a successful donors conference in which the totalaid pledged exceeded Haiti's request. Remittances are the primarysource of foreign exchange, equaling nearly a quarter of GDP.
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, the second poorest country in Central America andone of the poorest countries in the Western Hemisphere, with anextraordinarily unequal distribution of income and massiveunemployment, is banking on expanded trade under the US-CentralAmerica Free Trade Agreement (CAFTA) and on debt relief under theHeavily Indebted Poor Countries (HIPC) initiative. The country hasmet most of its macroeconomic targets, and began a three-year IMFPoverty Reduction and Growth Facility (PGRF) program in February2004. The economy relies heavily on a narrow range of exports,notably bananas and coffee, making it vulnerable to naturaldisasters and shifts in commodity prices, but in recent years hasexperienced a rapid rise in exports of light manufacturers. Growthremains dependent on the economy of the US, its largest tradingpartner, and on reduction of the high crime rate, as a means ofattracting and maintaining investment.
Hong KongHong Kong has a free market economy highly dependent oninternational trade. The territory has become more closely linked tomainland China over the past few years. Even before Hong Kongreverted to Chinese administration on 1 July 1997, it had extensivetrade and investment ties with China. Hong Kong's service industryover the past decade has grown rapidly as its manufacturing industryhas moved to the mainland. Hong Kong also has stepped up its effortsto gain approval to offer more mainland financial services in a bidto remain competitive with China's growing financial centers. HongKong's natural resources are limited, and food and raw materialsmust be imported. Gross imports and exports (i.e., includingreexports to and from third countries) each exceed GDP in dollarvalue. Per capita GDP exceeds that of the four big economies ofWestern Europe. GDP growth averaged a strong 5% from 1989 to 2006,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 2006. Moreover, several large initial public offeringsof Chinese companies on the Hong Kong stock exchange since late 2005have helped to boost Hong Kong's status as a financial hub and havecontributed to the improved performance of the market in late 2006.
Howland Islandno economic activity
HungaryHungary has made the transition from a centrally planned toa market economy, with a per capita income nearly two-thirds that ofthe EU-25 average. Hungary continues to demonstrate strong economicgrowth and acceded to the EU in May 2004. The private sectoraccounts for over 80% of GDP. Foreign ownership of and investment inHungarian firms are widespread, with cumulative foreign directinvestment totaling more than $60 billion since 1989. Hungariansovereign debt was upgraded in 2000 - together with the CzechRepublic, Hungary holds the highest rating among the CentralEuropean transition economies. Rating agencies, however, haveexpressed concerns over Hungary's fiscal and current accountdeficits. Inflation has declined from 14% in 1998 to 3.7% in 2006.Unemployment has persisted above 6%. Hungary's labor forceparticipation rate of 57% is one of the lowest in the Organizationfor Economic Cooperation and Development (OECD). Germany is by farHungary's largest economic partner. Policy challenges includecutting the public sector deficit to 3% of GDP by 2008, from about6.5% in 2006, and orchestrating an orderly interest rate reductionwithout 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 nearly 60% of exportearnings and employs 6% of the work force. The economy remainssensitive to declining fish stocks as well as to fluctuations inworld prices for its main exports: fish and fish products, aluminum,and ferrosilicon. 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. Since 2000growth has varied from a -1% in 2002 to 8% in 2004.
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 more than half of India'soutput with less than one quarter of its labor force. Aboutthree-fifths of the work force is in agriculture, leading the UPAgovernment to articulate an economic reform program that includesdeveloping basic infrastructure to improve the lives of the ruralpoor and boost economic performance. The government has reducedcontrols on foreign trade and investment. Tariffs averaged 12.5% onnon-agricultural items in 2006. Higher limits on foreign directinvestment were permitted in a few key sectors, such astelecommunications. However, tariff spikes in sensitive categories,including agriculture, and incremental progress on economic reformsstill hinder foreign access to India's vast and growing market.Privatization of government-owned industries remained stalled in2006, and continues to generate political debate; populist pressurefrom within the UPA government and from its Left Front alliescontinues to restrain needed initiatives. The economy has posted anaverage growth rate of more than 7% in the decade since 1996,reducing poverty by about 10 percentage points. India achieved 8.5%GDP growth in 2006, 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. Economic expansion has helped New Delhicontinue to make progress in reducing its federal fiscal deficit.However, strong growth - more than 8 percent growth in each of thelast three years - combined with easy consumer credit and a realestate boom is fueling inflation concerns. The huge and growingpopulation is the fundamental social, economic, and environmentalproblem.
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 highpoverty and unemployment, inadequate infrastructure, endemiccorruption, a fragile banking sector, a poor investment climate, andunequal resource distribution among regions. The country continuesthe slow work of rebuilding from the devastating December 2004tsunami and from an earthquake in central Java in May 2006 thatcaused over $3 billion in damage and losses. Declining oilproduction and lack of new exploration investment turned Indonesiainto a net oil importer in 2004. The cost of subsidizing domesticfuel placed increasing strain on the budget in 2005, and combinedwith indecisive monetary policy, contributed to a run on thecurrency in August, prompting the government to enact a 126% averagefuel price hike in October. The resulting inflation and interestrate hikes dampened growth through mid-2006, while large increasesin rice prices pushed millions more people under the nationalpoverty line. Economic reformers introduced three policy packages in2006 to improve the investment climate, infrastructure, and thefinancial sector, but translating them into reality has not beeneasy. Keys to future growth remain internal reform, building up theconfidence of international and domestic investors, and strongglobal economic growth.
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 nearly $60billion 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. The military victory of theUS-led coalition in March-April 2003 resulted in the shutdown ofmuch of the central economic administrative structure. Although acomparatively small amount of capital plant was damaged during thehostilities, looting, insurgent attacks, and sabotage haveundermined efforts to rebuild the economy. Attacks on key economicfacilities - especially oil pipelines and infrastructure - haveprevented Iraq from reaching projected export volumes, but totalgovernment revenues have been higher than anticipated due to highoil prices. Despite political uncertainty, Iraq is making someprogress in building the institutions needed to implement economicpolicy and has concluded a debt reduction agreement with the ParisClub and a Standby Arrangement with the IMF. Iraq's economicprospects will depend on the government's ability to controlinflation, to implement structural reforms such as bankrestructuring, and to develop the private sector.
IrelandIreland is a small, modern, trade-dependent economy withgrowth averaging 6% in 1995-2006. Agriculture, once the mostimportant sector, is now dwarfed by industry and services. Industryaccounts for 46% of GDP, about 80% of exports, and 29% of the laborforce. Although exports remain the primary engine for Ireland'sgrowth, the economy has also benefited from a rise in consumerspending, construction, and business investment. Per capita GDP is10% above that of the four big European economies and the secondhighest in the EU behind Luxembourg. Over the past decade, the IrishGovernment has implemented a series of national economic programsdesigned to curb price and wage inflation, reduce governmentspending, increase labor force skills, and promote foreigninvestment. Ireland joined in circulating the euro on 1 January 2002along 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. The Isle of Man also attracts online gambling sites and thefilm industry. Trade is mostly with the UK. The Isle of Man enjoysfree access to EU markets.
IsraelIsrael has a technologically advanced market economy withsubstantial, though diminishing, government participation. Itdepends on imports of crude oil, grains, raw materials, and militaryequipment. Despite limited natural resources, Israel has intensivelydeveloped its agricultural and industrial sectors over the past 20years. Israel imports substantial quantities of grain, but islargely self-sufficient in other agricultural products. Cutdiamonds, high-technology equipment, and agricultural products(fruits and vegetables) are the leading exports. Israel usuallyposts sizable trade deficits, which are covered by large transferpayments from abroad and by foreign loans. Roughly half of thegovernment's external debt is owed to the US, which is its majorsource of economic and military aid. The bitter Israeli-Palestinianconflict; difficulties in the high-technology, construction, andtourist sectors; and fiscal austerity in the face of growinginflation led to small declines in GDP in 2001 and 2002. The economyrebounded in 2003-05, growing at a 4% rate each year, as thegovernment tightened fiscal policy and implemented structuralreforms to boost competition and efficiency in the markets. Theconflict with Lebanon in summer 2006 dampened slightly GDP growthestimates for the year, but continuing strong foreign investment,tax revenue, and private consumption levels helped the economyrecover quickly.
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 low growth in 2006, and unemployment remained at a highlevel.
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.Jamaica's economy, already saddled with a record of relatively lowgrowth, was hit hard by Hurricane Ivan in late 2004, and is making agradual recovery. But the economy faces serious long-term problems:high interest rates, increased foreign competition, exchange rateinstability, a sizable merchandise trade deficit, large-scaleunemployment and underemployment, and a high debt burden - theresult of government bailouts to ailing sectors of the economy, mostnotably the financial sector in the mid-1990s. Following a strategybegun in 2004, Jamaica has reduced its public debt to 130% of GDP.Inflation has declined to 9%. Uncertain economic conditions have ledto increased civil unrest, including gang violence fueled by thedrug trade. The government faces the difficult prospect of having toachieve fiscal discipline in order to maintain debt payments whilesimultaneously attacking a serious and growing crime problem that ishampering economic growth.
Jan MayenJan Mayen is a volcanic island with no exploitable naturalresources. Economic activity is limited to providing services foremployees of Norway's radio and meteorological stations on theisland.
JapanGovernment-industry cooperation, a strong work ethic, masteryof high technology, and a comparatively small defense allocation (1%of GDP) helped Japan advance with extraordinary rapidity to the rankof second most technologically powerful economy in the world afterthe US and 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. In2004-06, growth improved and the lingering fears of deflation inprices and economic activity lessened. Japan's huge government debt,which totals 175% of GDP, and the aging of the population are twomajor 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 2005 the finance sectoraccounted for about 50% 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 one-quarter of GDP. In recent years, the government hasencouraged light industry to locate in Jersey, with the result thatan electronics industry has developed alongside the traditionalmanufacturing of knitwear. All raw material and energy requirementsare imported, as well as a large share of Jersey's food needs. Lighttaxes and death duties make the island a popular tax haven. Livingstandards come close to those of the UK.
Johnston Atollno economic activity
JordanJordan is a small Arab country with insufficient supplies ofwater, oil, and other natural resources. 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. SinceJordan's graduation from its most recent IMF program in 2002, Ammanhas continued to follow IMF guidelines, practicing careful monetarypolicy, and making substantial headway with privatization. Thegovernment also has liberalized the trade regime sufficiently tosecure Jordan's membership in the WTO (2000), a free trade accordwith the US (2001), and an association agreement with the EU (2001).These measures have helped improve productivity and have put Jordanon the foreign investment map. Jordan imported most of its oil fromIraq, but the US-led war in Iraq in 2003 made Jordan more dependenton oil from other Gulf nations, and has forced 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 - 8% or more per year in2002-06 - 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 in 2006 completed the Atasu-Alashankouportion of an oil pipeline to China that is planned to extend fromthe country's Caspian coast eastward to the Chinese border in futureconstruction. 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 2006due 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. Since then,however, the KIBAKI government has been rocked by high-level graftscandals. The World Bank suspended aid for most of 2006, and the IMFhas delayed loans pending further action by the government oncorruption. The scandals have not seemed to affect growth, with GDPgrowing more than 5% in 2006.
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 more than 10% of GDP. Remittances from seamen onmerchant ships abroad account for more than $5 million each year.Kiribati receives around $15 million annually for the governmentbudget from an 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. Due in part to severesummer flooding followed by dry weather conditions in the fall of2006, the nation has suffered its 12th year of food shortagesbecause of on-going systemic problems, including a lack of arableland, collective farming practices, and chronic shortages oftractors and fuel. Massive international food aid deliveries haveallowed the people of North Korea to escape mass starvation sincefamine threatened in 1995, but the population continues to sufferfrom prolonged 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. By December 2005, the regime terminated mostinternational humanitarian assistance operations in the DPRK(calling instead for developmental assistance only) and restrictedthe activities of remaining 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 1960s, South Korea has achieved an incrediblerecord of growth and integration into the high-tech modern worldeconomy. Four decades ago, GDP per capita was comparable with levelsin the poorer countries of Africa and Asia. In 2004, South Koreajoined the trillion dollar club of world economies. Today its GDPper capita is equal to the lesser economies of the EU. This successwas achieved by a system of close government/business ties,including directed credit, import restrictions, sponsorship ofspecific industries, and a strong labor effort. The governmentpromoted the import of raw materials and technology at the expenseof consumer goods and encouraged savings and investment overconsumption. The Asian financial crisis of 1997-99 exposedlongstanding weaknesses in South Korea's development model,including high debt/equity ratios, massive foreign borrowing, and anundisciplined financial sector. GDP plunged by 6.9% in 1998, thenrecovered 9.5% in 1999 and 8.5% in 2000. Growth fell back to 3.3% in2001 because of the slowing global economy, falling exports, and theperception that much-needed corporate and financial reforms hadstalled. Led by consumer spending and exports, growth in 2002 was animpressive 7%, despite anemic global growth. Between 2003 and 2006,growth moderated to about 4-5%. A downturn in consumer spending wasoffset by rapid export growth. Moderate inflation, low unemployment,an export surplus, and fairly equal distribution of incomecharacterize 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. High oil prices in recent years havehelped build Kuwait's budget and trade surpluses and foreignreserves. As a result of this positive fiscal situation, the needfor economic reforms is less urgent and the government has notearnestly pushed through new initiatives.
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. Followingindependence Kyrgyzstan was progressive in carrying out marketreforms, such as an improved regulatory system and land reform, butpolitical instability during 2005-06 has undercut the investmentclimate. Kyrgyzstan was the first CIS country to be accepted intothe World Trade Organization. Much of the government's stock inenterprises has been sold. Drops in production had been severe afterthe breakup of the Soviet Union in December 1991, but by mid-1995,production began to recover and exports began to increase. Theeconomy is heavily weighted toward gold export and a drop in outputat the main Kumtor gold mine sparked a 0.5% decline in GDP in 2002,but GDP growth bounced back the following year. In 2005 Kyrgyzstanagain experienced a decline in GDP, this time 0.6%. The governmenthas made steady strides in controlling its substantial fiscaldeficit, virtually balancing revenues and expenditures in 2006. Thegovernment and international financial institutions have beenengaged in a comprehensive medium-term poverty reduction andeconomic growth strategy; in 2005 Bishkek agreed to pursuemuch-needed tax reform and in 2006 became eligible for the heavilyindebted poor countries (HIPC) initiative. 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% per year in 1988-2006except during the short-lived drop caused by the Asian financialcrisis beginning in 1997. Despite this high growth rate, Laosremains a country with a primitive infrastructure. It has norailroads, a rudimentary road system, and limited external andinternal telecommunications, though the government is sponsoringmajor improvements in the road system with possible support fromJapan. Electricity is available in only a few urban areas.Subsistence agriculture, dominated by rice, accounts for about halfof GDP and provides 80% of total employment. The economy willcontinue to benefit from aid by the IMF and other internationalsources and from new foreign investment in hydropower and mining.Construction will be another strong economic driver, especially ashydroelectric dam and road projects gain steam. Several policychanges since 2004 may help spur growth. In late 2004, Laos gainedNormal Trade Relations status with the US, allowing Laos-basedproducers to benefit from lower tariffs on exports. Laos is takingsteps to join the World Trade Organization in the next few years;the resulting trade policy reforms will improve the businessenvironment. On the fiscal side, a value-added tax (VAT) regime,slated to begin in 2008, will streamline the government'sinefficient tax system.
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 - 15.7% of GDP in 2006 - remains a major concern.The 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, but economic and financial reforminitiatives stalled and public debt continued to grow despitereceipt of more than $2 billion in bilateral assistance at the ParisII Donors Conference. The Israeli-Hizballah conflict caused anestimated $3.6 billion in infrastructure damage in July and August2006, and internal Lebanese political tension continues to hampereconomic activity.
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. 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.President JOHNSON SIRLEAF, a Harvard-trained economist, has takensteps to reduce corruption, build support from international donors,and encourage private investment. An embargo on timber exports hasbeen lifted, opening a source of revenue for the government, butdiamonds remain under UN sanctions. The reconstruction ofinfrastructure and the raising of incomes in this ravaged economywill largely depend on generous financial support and technicalassistance 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 inDecember 2003 that it would abandon programs to build weapons ofmass destruction. Almost all US unilateral sanctions against Libyawere removed in April 2004, helping Libya attract more foreigndirect investment, mostly in the energy sector. Libyan oil and gaslicensing rounds continue to draw high international interest. Libyafaces a long road ahead in liberalizing the socialist-orientedeconomy, but initial steps - including applying for WTO membership,reducing some subsidies, and announcing plans for privatization -are laying the groundwork for a transition to a more market-basedeconomy. The non-oil manufacturing and construction sectors, whichaccount for more than 20% of GDP, have expanded from processingmostly agricultural products to include the production ofpetrochemicals, iron, steel, and aluminum. Climatic conditions andpoor soils severely limit agricultural output, and Libya importsabout 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 4.5% in2006. 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 about 60% of its labor force. AlthoughLuxembourg, like all EU members, has suffered from the globaleconomic slump, the country enjoys an extraordinarily high standardof 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 before slowing to 6.7% in 2005. The economic boom waspowered by gambling, tourism, and the construction necessary tosupport such endeavours. China's decision to ease travelrestrictions led to a rapid rise in the number of mainland visitors.The opening of Macau's gaming industry to foreign access in 2001spurred an increase in public works expenditures. The budget alsoreturned to surplus in 2002 because of the surge in visitors fromChina and a hike in taxes on gambling profits, which generated about70% of government revenue. Much of Macau's textile industry may moveto the mainland due to the termination in 2005 of the Multi-FiberAgreement, which provided a near guarantee of export markets,leaving the territory more dependant on gambling and trade-relatedservices to generate growth. The Closer Economic PartnershipAgreement (CEPA) between Macau and mainland China that came intoeffect on 1 January 2004 offers many Macau-made products tariff-freeaccess to the mainland. The range of products covered by CEPA wasexpanded 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, and a Greek economic embargo over a dispute about thecountry's constitutional name and flag hindered economic growthuntil 1996. GDP subsequently rose each year through 2000. However,the leadership's commitment to economic reform, free trade, andregional integration was undermined by the ethnic Albanianinsurgency of 2001. The economy shrank 4.5% because of decreasedtrade, intermittent border closures, increased deficit spending onsecurity needs, and investor uncertainty. Growth barely recovered in2002 to 0.9%, then averaged 4% per year during 2003-06. Macedoniahas maintained macroeconomic stability with low inflation, but ithas lagged the region in attracting foreign investment and jobgrowth has been anemic. Macedonia has an extensive grey market,estimated to be more than 20 percent of GDP, that falls outsideofficial 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 heightened 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%per year in 2005-06. As an oil and gas exporter, Malaysia hasprofited from higher world energy prices, although the rising costof domestic gasoline and diesel fuel forced Kuala Lumpur to reducegovernment subsidies, contributing to higher inflation. Malaysia"unpegged" the ringgit from the US dollar in 2005 and the currencyappreciated 6% against the dollar in 2006. Healthy foreign exchangereserves and a small external debt greatly reduce the risk 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 28% 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 the second leading sector.Agriculture and manufacturing continue to play a lesser role in theeconomy, constrained by the limited availability of cultivable landand the shortage of domestic labor. Most staple foods must beimported. Industry, which consists mainly of garment production,boat building, and handicrafts, accounts for about 7% of GDP. 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. Real GDP growth averaged over 7.5%per year for more than a decade. In late December 2004, a majortsunami left more than 100 dead, 12,000 displaced, and propertydamage exceeding $300 million. As a result of the tsunami, the GDPcontracted by about 3.6% in 2005. A rebound in tourism, post-tsunamireconstruction, and development of new resorts helped boost GDP bynearly 18 percent in 2006. The trade deficit has expanded sharply asa result of high oil prices and imports of construction material.Diversifying beyond tourism and fishing is the major challengefacing the government. Over the longer term Maldivian authoritiesworry about the impact of erosion and possible global warming ontheir low-lying country; 80% of the area is one meter or less abovesea level.
MaliMali is among the poorest countries in the world, with 65% ofits land area desert or semidesert and with a highly unequaldistribution of income. Economic activity is largely confined to theriverine area irrigated by the Niger. About 10% of the population isnomadic and some 80% of the labor force is engaged in farming andfishing. Industrial activity is concentrated on processing farmcommodities. Mali is heavily dependent on foreign aid and vulnerableto fluctuations in world prices for cotton, its main export, alongwith gold. The government has continued its successfulimplementation of an IMF-recommended structural adjustment programthat is helping the economy grow, diversify, and attract foreigninvestment. Mali's adherence to economic reform and the 50%devaluation of the CFA franc in January 1994 have pushed up economicgrowth to a sturdy 5% average in 1996-2006. 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 tourism,and less income from the renewal of fishing vessel licenses haveheld GDP growth to an average of 1% over the past decade.
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. Thenation's coastal waters are among the richest fishing areas in theworld, but overexploitation by foreigners threatens this key sourceof revenue. The country's first deepwater port opened nearNouakchott in 1986. In the past, drought and economic mismanagementresulted in a buildup of foreign debt which now stands at more thanthree times the level of annual exports. In February 2000,Mauritania qualified for debt relief under the Heavily Indebted PoorCountries (HIPC) initiative and in December 2001 received strongsupport from donor and lending countries at a triennial ConsultativeGroup review. 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. In 2001, exploratory oil wells in tracts 80 kmoffshore indicated potential extraction at current world oil prices.Mauritania has an estimated 1 billion barrels of proved reserves.Substantial oil production and exports began in early 2006 andaveraged 75,000 barrels per day for the year. Meantime thegovernment emphasizes reduction of poverty, improvement of healthand education, and promoting 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 new Felipe CALDERONadministration that took office in December 2006 faces many of thesame challenges that former President FOX tried to tackle, includingthe need to upgrade infrastructure, modernize the tax system andlabor laws, and allow private investment in the energy sector.CALDERON has stated that his top priorities include reducing povertyand creating jobs. The success of his economic agenda will depend onhis ability to garner support from the opposition.
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.
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. Moldova's dependence on Russianenergy was underscored at the end of 2005, when a Russian-ownedelectrical station in Moldova's separatist Transnistria region cutoff power to Moldova and Russia's Gazprom cut off natural gas toMoldova in disputes over pricing. The economy achieved six percentor more GDP growth every year from 2000-2005, though this was basedlargely on consumption fueled by remittances received from Moldovansworking abroad. Russia's decision to ban Moldovan wine andagricultural products, coupled with its decision to double the priceMoldova paid for Russian natural gas, slowed GDP growth in 2006 andgreatly exacerbated Moldova's economic troubles. Economic reformshave been slow because of corruption and strong political forcesbacking government controls; nevertheless, the government's primarygoal of EU integration has resulted in some market-orientedprogress. The economy remains vulnerable to higher fuel prices, pooragricultural weather, and the skepticism of foreign investors. Also,the presence of an illegal separatist regime in Moldova'sTransnistria region continues to be a drag on the Moldovan economy.
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.