Chapter C: Front Matter (100)

Macau
Macau's economy four years after reversion to China remains
one of the most open in the world. The territory's net exports of
goods and services account for 39% of GDP with tourism and apparel
exports as the mainstays. Although the territory was hit hard by the
1998 Asian financial crisis and the global downturn in 2001, its
economy grew an estimated 9.5% in 2002. A rapid rise in the number
of mainland visitors because of China's easing of restrictions on
travel drove the recovery. The budget also returned to surplus in
2002 because of the surge in visitors from China and a hike in taxes
on gambling profits, which generated about 63% of government
revenue. The liberalization of Macao's gambling monopoly may
contribute to GDP growth, as the three companies awarded gambling
licenses have pledged to invest $2.2 billion - roughly 33% of GDP -
in the territory. Much of Macau's textile industry may move to the
mainland as the Multi-Fiber Agreement is phased out. The territory
may have to rely more on gambling and trade-related services to
generate growth. Growth fell to 4% in 2003, according to early
government forecasts, with the drop in large measure due to concerns
over the Severe Acute Respiratory Syndrome (SARS).

Macedonia, The Former Yugoslav Republic of
At independence in
November 1991, Macedonia was the least developed of the Yugoslav
republics, producing a mere 5% of the total federal output of goods
and services. The collapse of Yugoslavia ended transfer payments
from the center and eliminated advantages from inclusion in a de
facto free trade area. An absence of infrastructure, UN sanctions on
Yugoslavia, one of its largest markets, and a Greek economic embargo
over a dispute about the country's constitutional name and flag
hindered economic growth until 1996. GDP subsequently rose each year
through 2000. However, the leadership's commitment to economic
reform, free trade, and regional integration was undermined by the
ethnic Albanian insurgency of 2001. The economy shrank 4.5% because
of decreased trade, intermittent border closures, increased deficit
spending on security needs, and investor uncertainty. Growth barely
recovered in 2002 to 0.3%, then rose to 2.8% in 2003. Unemployment
at one-third of the workforce remains the most critical economic
problem. But even this issue is overshadowed by the fragile
political situation.

Madagascar
Having discarded past socialist economic policies,
Madagascar has since the mid 1990s followed a World Bank and IMF led
policy of privatization and liberalization, which has placed the
country on a slow and steady growth path. Agriculture, including
fishing and forestry, is a mainstay of the economy, accounting for
one-fourth of GDP and employing four-fifths of the population.
Export earnings primarily are earned in the small industrial sector,
which features textile manufacturing and agriculture processing.
Deforestation and erosion, aggravated by the use of firewood as the
primary source of fuel are serious concerns. The separatist
political crisis of 2002 undermined macroeconomic stability, with
the estimated drop in output being subject to a wide margin of
error. Poverty reduction will be the centerpiece of economic policy
for the next few years.

Malawi
Landlocked Malawi ranks among the world's least developed
countries. The economy is predominately agricultural, with about 90%
of the population living in rural areas. Agriculture accounted for
nearly 40% of GDP and 88% of export revenues in 2001. The economy
depends on substantial inflows of economic assistance from the IMF,
the World Bank, and individual donor nations. In late 2000, Malawi
was approved for relief under the Heavily Indebted Poor Countries
(HIPC) program. In November 2002 the World Bank approved a $50
million drought recovery package, which is to be used for famine
relief. The government faces strong challenges, e.g., to fully
develop a market economy, to improve educational facilities, to face
up to environmental problems, to deal with the rapidly growing
problem of HIV/AIDS, and to satisfy foreign donors that fiscal
discipline is being tightened. The performance of the tobacco sector
is key to short-term growth as tobacco accounts for over 50% of
exports.

Malaysia
Malaysia, a middle-income country, transformed itself from
1971 through the late 1990s from a producer of raw materials into an
emerging multi-sector economy. Growth was almost exclusively driven
by exports - particularly of electronics - and, as a result Malaysia
was hard hit by the global economic downturn and the slump in the
Information Technology (IT) sector in 2001. GDP in 2001 grew only
0.5% due to an estimated 11% contraction in exports, but a
substantial fiscal stimulus package mitigated the worst of the
recession and the economy rebounded in 2002. Healthy foreign
exchange reserves and relatively small external debt make it
unlikely that Malaysia will experience a crisis similar to the one
in 1997, but the economy remains vulnerable to a more protracted
slowdown in Japan and the US, top export destinations and key
sources of foreign investment.

Maldives
Tourism, Maldives largest industry, accounts for 20% of GDP
and more than 60% of the Maldives' foreign exchange receipts. Over
90% of government tax revenue comes from import duties and
tourism-related taxes. Almost 400,000 tourists visited the islands
in 1998. Fishing is a second leading sector. The Maldivian
Government began an economic reform program in 1989 initially by
lifting import quotas and opening some exports to the private
sector. Subsequently, it has liberalized regulations to allow more
foreign investment. Agriculture and manufacturing continue to play a
lesser role in the economy, constrained by the limited availability
of cultivable land and the shortage of domestic labor. Most staple
foods must be imported. Industry, which consists mainly of garment
production, boat building, and handicrafts, accounts for about 18%
of GDP. Maldivian authorities worry about the impact of erosion and
possible global warming on their low-lying country; 80% of the area
is one meter or less above sea level.

Mali
Mali is among the poorest countries in the world, with 65% of
its land area desert or semidesert and with a highly unequal
distribution of income. Economic activity is largely confined to the
riverine area irrigated by the Niger. About 10% of the population is
nomadic and some 80% of the labor force is engaged in farming and
fishing. Industrial activity is concentrated on processing farm
commodities. Mali is heavily dependent on foreign aid and vulnerable
to fluctuations in world prices for cotton, its main export, along
with gold. The government has continued its successful
implementation of an IMF-recommended structural adjustment program
that is helping the economy grow, diversify, and attract foreign
investment. Mali's adherence to economic reform and the 50%
devaluation of the African franc in January 1994 have pushed up
economic growth to a sturdy 5% average in 1996-2002. Worker
remittances and external trade routes have been jeopardized by
continued unrest in neighboring Cote d'Ivoire.

Malta
Major resources are limestone, a favorable geographic
location, and a productive labor force. Malta produces only about
20% of its food needs, has limited fresh water supplies, and has no
domestic energy sources. The economy is dependent on foreign trade,
manufacturing (especially electronics and textiles), and tourism.
Malta is privatizing state-controlled firms and liberalizing markets
in order to prepare for membership in the European Union. The island
remains divided politically, however, over the question of joining
the EU. Continued sluggishness in the global economy is holding back
exports, tourism, and overall growth.

Man, Isle of
Offshore banking, manufacturing, and tourism are key
sectors of the economy. The government's policy of offering
incentives to high-technology companies and financial institutions
to locate on the island has paid off in expanding employment
opportunities in high-income industries. As a result, agriculture
and fishing, once the mainstays of the economy, have declined in
their shares of GDP. Trade is mostly with the UK. The Isle of Man
enjoys free access to EU markets.

Marshall Islands
US Government assistance is the mainstay of this
tiny island economy. Agricultural production is primarily
subsistence and is concentrated on small farms; the most important
commercial crops are coconuts and breadfruit. Small-scale industry
is limited to handicrafts, tuna processing, and copra. The tourist
industry, now a small source of foreign exchange employing less than
10% of the labor force, remains the best hope for future added
income. The islands have few natural resources, and imports far
exceed exports. Under the terms of the Compact of Free Association,
the US has provided more than $1 billion in aid since 1986.
Negotiations have continued for an extended agreement. Government
downsizing, drought, a drop in construction, the decline in tourism
and foreign investment due to the Asian financial difficulties, and
less income from the renewal of fishing vessel licenses have held
GDP growth to an average of 1% over the past decade.

Martinique
The economy is based on sugarcane, bananas, tourism, and
light industry. Agriculture accounts for about 6% of GDP and the
small industrial sector for 11%. Sugar production has declined, with
most of the sugarcane now used for the production of rum. Banana
exports are increasing, going mostly to France. The bulk of meat,
vegetable, and grain requirements must be imported, contributing to
a chronic trade deficit that requires large annual transfers of aid
from France. Tourism, which employs more than 11,000 people, has
become more important than agricultural exports as a source of
foreign exchange.

Mauritania
Half the population still depends on agriculture and
livestock for a livelihood, even though many of the nomads and
subsistence farmers were forced into the cities by recurrent
droughts in the 1970s and 1980s. Mauritania has extensive deposits
of iron ore, which account for nearly 40% of total exports. The
decline in world demand for this ore, however, has led to cutbacks
in production. The nation's coastal waters are among the richest
fishing areas in the world, but overexploitation by foreigners
threatens this key source of revenue. The country's first deepwater
port opened near Nouakchott in 1986. In the past, drought and
economic mismanagement resulted in a buildup of foreign debt. In
February 2000, Mauritania qualified for debt relief under the
Heavily Indebted Poor Countries (HIPC) initiative and in December
2001 received strong support from donor and lending countries at a
triennial Consultative Group review. In 2001, exploratory oil wells
in tracts 80 km offshore indicated potential extraction at current
world oil prices. A new investment code approved in December 2001
improved the opportunities for direct foreign investment. Ongoing
negotiations with the IMF involve problems of economic reforms and
fiscal discipline. Substantial oil production and exports probably
will not begin until 2005.

Mauritius
Since independence in 1968, Mauritius has developed from a
low-income, agriculturally based economy to a middle-income
diversified economy with growing industrial, financial, and tourist
sectors. For most of the period, annual growth has been in the order
of 5% to 6%. This remarkable achievement has been reflected in more
equitable income distribution, increased life expectancy, lowered
infant mortality, and a much-improved infrastructure. Sugarcane is
grown on about 90% of the cultivated land area and accounts for 25%
of export earnings. The government's development strategy centers on
foreign investment. Mauritius has attracted more than 9,000 offshore
entities, many aimed at commerce in India and South Africa, and
investment in the banking sector alone has reached over $1 billion.
Mauritius, with its strong textile sector and responsible fiscal
management, has been well poised to take advantage of the Africa
Growth and Opportunity Act (AGOA). The government is encouraging
foreign investment in the information technology field.

Mayotte
Economic activity is based primarily on the agricultural
sector, including fishing and livestock raising. Mayotte is not
self-sufficient and must import a large portion of its food
requirements, mainly from France. The economy and future development
of the island are heavily dependent on French financial assistance,
an important supplement to GDP. Mayotte's remote location is an
obstacle to the development of tourism.

Mexico
Mexico has a free market economy with a mixture of modern and
outmoded industry and agriculture, increasingly dominated by the
private sector. Recent administrations have expanded competition in
seaports, railroads, telecommunications, electricity, natural gas
distribution, and airports. Income distribution remains highly
unequal. Trade with the US and Canada has tripled since the
implementation of NAFTA in 1994. Following 6.9% growth in 2000, real
GDP fell 0.3% in 2001, recovering to only a plus 1% in 2002, with
the US slowdown the principal cause. Mexico implemented free trade
agreements with Guatemala, Honduras, El Salvador, and the European
Free Trade Area in 2001, putting more than 90% of trade under free
trade agreements. Foreign direct investment reached $25 billion in
2001, of which $12.5 billion came from the purchase of Mexico's
second-largest bank, Banamex, by Citigroup.

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. In November 2002, the country experienced a further
reduction in future revenues from the Compact of Free Association -
the agreement with the US in which Micronesia received $1.3 billion
in financial and technical assistance over a 15-year period until
2001. The country's medium-term economic outlook appears fragile due
not only to the reduction in US assistance but also to the slow
growth of the private sector. Geographical isolation and a poorly
developed infrastructure remain major impediments to long-term
growth.

Midway Islands
The economy is based on providing support services
for the national wildlife refuge activities located on the islands.
All food and manufactured goods must be imported.

Moldova
Moldova remains a very poor country despite recent progress
from its small economic base. It enjoys a favorable climate and good
farmland but has no major mineral deposits. As a result, the economy
depends heavily on agriculture, featuring fruits, vegetables, wine,
and tobacco. Moldova must import all of its supplies of oil, coal,
and natural gas, largely from Russia. Energy shortages contributed
to sharp production declines after the breakup of the Soviet Union
in 1991. As part of an ambitious reform effort, Moldova introduced a
convertible currency, freed all prices, stopped issuing preferential
credits to state enterprises, backed steady land privatization,
removed export controls, and freed interest rates. The government
entered into agreements with the World Bank and the IMF to promote
growth and reduce poverty. The economy returned to positive growth,
of 2.1% in 2000, 6.1% in 2001, 7.2% in 2002, and 5.3% in 2003.
Further reforms will come slowly because of strong political forces
backing government controls. The economy remains vulnerable to
higher fuel prices, poor agricultural weather, and the skepticism of
foreign investors.

Monaco
Monaco, situated on the French Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. In 2001, a major new construction project will extend the
pier used by cruise ships in the main harbor. The principality has
successfully sought to diversify into services and small,
high-value-added, nonpolluting industries. The state has no income
tax and low business taxes and thrives as a tax haven both for
individuals who have established residence and for foreign companies
that have set up businesses and offices. The state retains
monopolies in a number of sectors, including tobacco, the telephone
network, and the postal service. Living standards are high, roughly
comparable to those in prosperous French metropolitan areas. Monaco
does not publish national income figures; the estimates below are
extremely rough.

Mongolia
Economic activity traditionally has been based on
agriculture and breeding of livestock. Mongolia also has extensive
mineral deposits; copper, coal, molybdenum, tin, tungsten, and gold
account for a large part of industrial production. Soviet
assistance, at its height one-third of GDP, disappeared almost
overnight in 1990-1991 at the time of the dismantlement of the USSR.
Mongolia was driven into deep recession, prolonged by the Mongolian
People's Revolutionary Party's (MPRP) reluctance to undertake
serious economic reform. The Democratic Coalition (DC) government
embraced free-market economics, eased price controls, liberalized
domestic and international trade, and attempted to restructure the
banking system and the energy sector. Major domestic privatization
programs were undertaken, as well as the fostering of foreign
investment through international tender of the oil distribution
company, a leading cashmere company, and banks. Reform was held back
by the ex-Communist MPRP opposition and by the political instability
brought about through four successive governments under the DC.
Economic growth picked up in 1997-1999 after stalling in 1996 due to
a series of natural disasters and declines in world prices of copper
and cashmere. In August and September 1999, the economy suffered
from a temporary Russian ban on exports of oil and oil products, and
Mongolia remains vulnerable in this sector. Mongolia joined the
World Trade Organization (WTrO) in 1997. The international donor
community pledged over $300 million per year at the Consultative
Group Meeting, held in Ulaanbaatar in June 1999. The MPRP
government, elected in July 2000, is anxious to improve the
investment climate; it must also deal with a heavy burden of
external debt. Falling prices for Mongolia's mainly primary sector
exports, widespread opposition to privatization, and adverse effects
of weather on agriculture in early 2000 and 2001 restrained real GDP
growth in 2000-2001. Despite drought problems in 2002, GDP rose
4.0%, followed by a solid 5.0% increase in 2003. The first
applications under the land privatization law have been marked by a
number of disputes over particular sites. Russia claims Mongolia
owes it $11 billion from the old Soviet period; any settlement could
substantially increase Mongolia's foreign debt burden.

Montserrat
Severe volcanic activity, which began in July 1995, has
put a damper on this small, open economy. A catastrophic eruption in
June 1997 closed the airports and seaports, causing further economic
and social dislocation. Two-thirds of the 12,000 inhabitants fled
the island. Some began to return in 1998, but lack of housing
limited the number. The agriculture sector continued to be affected
by the lack of suitable land for farming and the destruction of
crops. Prospects for the economy depend largely on developments in
relation to the volcano and on public sector construction activity.
The UK has launched a three-year $122.8 million aid program to help
reconstruct the economy. Half of the island is expected to remain
uninhabitable for another decade.

Morocco
Morocco faces the problems typical of developing countries -
restraining government spending, reducing constraints on private
activity and foreign trade, and achieving sustainable economic
growth. Following structural adjustment programs supported by the
IMF, World Bank, and the Paris Club, the dirham is now fully
convertible for current account transactions, and reforms of the
financial sector have been implemented. Droughts depressed activity
in the key agricultural sector and contributed to a stagnant economy
in 1999 and 2000. During that time, however, Morocco reported large
foreign exchange inflows from the sale of a mobile telephone license
and partial privatization of the state-owned telecommunications
company. Favorable rainfall in 2001 led to a growth of 6.5%. Good
harvest conditions continued to support GDP growth in 2002.
Formidable long-term challenges include: servicing the external
debt; modernizing the industrial sector; preparing the economy for
freer trade with the EU and US; and improving education and
attracting foreign investment to boost living standards and job
prospects for Morocco's youth.

Mozambique
At independence in 1975, Mozambique was one of the
world's poorest countries. Socialist mismanagement and a brutal
civil war from 1977-92 exacerbated the situation. In 1987, the
government embarked on a series of macroeconomic reforms designed to
stabilize the economy. These steps, combined with donor assistance
and with political stability since the multi-party elections in
1994, have led to dramatic improvements in the country's growth
rate. Inflation was brought to single digits during the late 1990s
although it returned to double digits in 2000-02. Fiscal reforms,
including the introduction of a value-added tax and reform of the
customs service, have improved the government's revenue collection
abilities. In spite of these gains, Mozambique remains dependent
upon foreign assistance for much of its annual budget, and the
majority of the population remains below the poverty line.
Subsistence agriculture continues to employ the vast majority of the
country's workforce. A substantial trade imbalance persists although
the opening of the MOZAL aluminum smelter, the country's largest
foreign investment project to date has increased export earnings.
Additional investment projects in titanium extraction and processing
and garment manufacturing should further close the import/export
gap. Mozambique's once substantial foreign debt has been reduced
through forgiveness and rescheduling under the IMF's Heavily
Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is
now at a manageable level.

Namibia
The economy is heavily dependent on the extraction and
processing of minerals for export. Mining accounts for 20% of GDP.
Rich alluvial diamond deposits make Namibia a primary source for
gem-quality diamonds. Namibia is the fourth-largest exporter of
nonfuel minerals in Africa, the world's fifth-largest producer of
uranium, and the producer of large quantities of lead, zinc, tin,
silver, and tungsten. The mining sector employs only about 3% of the
population while about half of the population depends on subsistence
agriculture for its livelihood. Namibia normally imports about 50%
of its cereal requirements; in drought years food shortages are a
major problem in rural areas. A high per capita GDP, relative to the
region, hides the great inequality of income distribution; nearly
one-third of Namibians had annual incomes of less than $1400 in
constant 1994 dollars, according to a 1993 study. The Namibian
economy is closely linked to South Africa with the Namibian dollar
pegged to the South African rand. Privatization of several
enterprises in coming years may stimulate long-run foreign
investment.

Nauru
Revenues of this tiny island have come from exports of
phosphates, but reserves are expected to be exhausted within a few
years. Phosphate production has declined since 1989, as demand has
fallen in traditional markets and as the marginal cost of extracting
the remaining phosphate increases, making it less internationally
competitive. While phosphates have given Nauruans one of the highest
per capita incomes in the Third World, few other resources exist
with most necessities being imported, including fresh water from
Australia. The rehabilitation of mined land and the replacement of
income from phosphates are serious long-term problems. In
anticipation of the exhaustion of Nauru's phosphate deposits,
substantial amounts of phosphate income have been invested in trust
funds to help cushion the transition and provide for Nauru's
economic future. The government has been borrowing heavily from the
trusts to finance fiscal deficits. To cut costs the government has
called for a freeze on wages, a reduction of over-staffed public
service departments, privatization of numerous government agencies,
and closure of some overseas consulates. In recent years Nauru has
encouraged the registration of offshore banks and corporations. Tens
of billions of dollars have been channeled through their accounts.
Few comprehensive statistics on the Nauru economy exist, with
estimates of Nauru's GDP varying widely.

Navassa Island
no economic activity

Nepal
Nepal is among the poorest and least developed countries in
the world with 42% of its population living below the poverty line.
Agriculture is the mainstay of the economy, providing a livelihood
for over 80% of the population and accounting for 40% of GDP.
Industrial activity mainly involves the processing of agricultural
produce including jute, sugarcane, tobacco, and grain. Textile and
carpet production, accounting for about 80% of foreign exchange
earnings in recent years, contracted in 2001-02 due to the overall
slowdown in the world economy and pressures by Maoist insurgents on
factory owners and workers. Security concerns in the wake of the
Maoist conflict and the September 11, 2001 terrorist attacks in the
US have led to a decrease in tourism, another key source of foreign
exchange. Since 1991, the government has been moving forward with
economic reforms, e.g., by reducing business licenses and
registration requirements to simplify investment procedures,
reducing subsidies, privatizing state industries, and laying off
civil servants. Nepal has considerable scope for exploiting its
potential in hydropower and tourism, areas of recent foreign
investment interest. Prospects for foreign trade or investment in
other sectors will remain poor, however, because of the small size
of the economy, its technological backwardness, its remoteness, its
landlocked geographic location, and its susceptibility to natural
disaster. The international community's role of funding more than
60% of Nepal's development budget and more than 28% of total
budgetary expenditures will likely continue as a major ingredient of
growth.

Netherlands
The Netherlands is a prosperous and open economy
depending heavily on foreign trade. The economy is noted for stable
industrial relations, moderate unemployment and inflation, a sizable
current account surplus, and an important role as a European
transportation hub. Industrial activity is predominantly in food
processing, chemicals, petroleum refining, and electrical machinery.
A highly mechanized agricultural sector employs no more than 4% of
the labor force but provides large surpluses for the food-processing
industry and for exports. The Netherlands, along with 11 of its EU
partners, began circulating the euro currency on 1 January 2002. The
country continues to be one of the leading European nations for
attracting foreign direct investment. Economic growth slowed
considerably in 2001-03, as part of the global economic slowdown,
but for the four years before that, annual growth averaged nearly
4%, well above the EU average. The government is wrestling with a
deteriorating budget position, and is moving toward the EU 3% limit.

Netherlands Antilles
Tourism, petroleum refining, and offshore
finance are the mainstays of this small economy, which is closely
tied to the outside world. Although GDP has declined or remained
even in each of the past six years, the islands enjoy a high per
capita income and a well-developed infrastructure compared with
other countries in the region. Almost all consumer and capital goods
are imported, the US and Mexico being the major suppliers. Poor
soils and inadequate water supplies hamper the development of
agriculture.

New Caledonia
New Caledonia has about 25% of the world's known
nickel resources. Only a small amount of the land is suitable for
cultivation, and food accounts for about 20% of imports. In addition
to nickel, substantial financial support from France - equal to more
than one-fourth of GDP - and tourism are keys to the health of the
economy. Substantial new investment in the nickel industry, combined
with the recovery of global nickel prices, brightens the economic
outlook for the next several years.

New Zealand
Since 1984 the government has accomplished major
economic restructuring, transforming New Zealand from an agrarian
economy dependent on concessionary British market access to a more
industrialized, free market economy that can compete globally. This
dynamic growth has boosted real incomes (but left behind many at the
bottom of the ladder), broadened and deepened the technological
capabilities of the industrial sector, and contained inflationary
pressures. While per capita incomes have been rising, however, they
remain below the level of the four largest EU economies, and there
is some government concern that New Zealand is not closing the gap.
New Zealand is heavily dependent on trade - particularly in
agricultural products - to drive growth, and it has been affected by
the global economic slowdown and the slump in commodity prices. Thus
far the New Zealand economy has been relatively resilient, although
growth may slow to 2.5% in 2003.

Nicaragua
Nicaragua, one of the hemisphere's poorest countries,
faces low per capita income, flagging socio-economic indicators, and
huge external debt. Distribution of income is one of the most
unequal on the globe. While the country has made progress toward
macroeconomic stability over the past few years, a banking crisis
and scandal has shaken the economy. Nicaragua will continue to be
dependent on international aid and debt relief under the Heavily
Indebted Poor Countries (HIPC) initiative. Donors have made aid
conditional on the openness of government financial operation,
poverty alleviation, and human rights. Nicaragua met the conditions
for additional debt service relief in December 2000. Growth should
move up moderately in 2003 because of increased private investment
and exports.

Niger
Niger is a poor, landlocked Sub-Saharan nation, whose economy
centers on subsistence agriculture, animal husbandry, and reexport
trade, and increasingly less on uranium, because of declining world
demand. The 50% devaluation of the West African franc in January
1994 boosted exports of livestock, cowpeas, onions, and the products
of Niger's small cotton industry. The government relies on bilateral
and multilateral aid - which was suspended following the April 1999
coup d'etat - for operating expenses and public investment. In
2000-01, the World Bank approved a structural adjustment loan of
$105 million to help support fiscal reforms. However, reforms could
prove difficult given the government's bleak financial situation.
The IMF approved a $73 million poverty reduction and growth facility
for Niger in 2000 and announced $115 million in debt relief under
the Heavily Indebted Poor Countries (HIPC) initiative. Further
disbursements of aid occurred in 2002. Future growth may be
sustained by exploitation of oil, gold, coal, and other mineral
resources.

Nigeria
The oil-rich Nigerian economy, long hobbled by political
instability, corruption, and poor macroeconomic management, is
undergoing substantial reform under the new civilian administration.
Nigeria's former military rulers failed to diversify the economy
away from overdependence on the capital-intensive oil sector, which
provides 20% of GDP, 95% of foreign exchange earnings, and about 65%
of budgetary revenues. The largely subsistence agricultural sector
has failed to keep up with rapid population growth, and Nigeria,
once a large net exporter of food, now must import food. Following
the signing of an IMF stand-by agreement in August 2000, Nigeria
received a debt-restructuring deal from the Paris Club and a $1
billion credit from the IMF, both contingent on economic reforms.
The agreement was allowed to expire by the IMF in November 2001,
however, and Nigeria apparently received much less multilateral
assistance than expected in 2002. Nonetheless, increases in foreign
oil investment and oil production kept growth at 3% in 2002. The
government lacks the strength to implement the market-oriented
reforms urged by the IMF, such as modernization of the banking
system; to curb inflation by blocking excessive wage demands; and to
resolve regional disputes over the distribution of earnings from the
oil industry. When the uncertainties in the global economy are added
in, estimates of Nigeria's prospects for 2003 must have a wide
margin of error.

Niue
The economy suffers from the typical Pacific island problems of
geographic isolation, few resources, and a small population.
Government expenditures regularly exceed revenues, and the shortfall
is made up by critically needed grants from New Zealand that are
used to pay wages to public employees. Niue has cut government
expenditures by reducing the public service by almost half. The
agricultural sector consists mainly of subsistence gardening,
although some cash crops are grown for export. Industry consists
primarily of small factories to process passion fruit, lime oil,
honey, and coconut cream. The sale of postage stamps to foreign
collectors is an important source of revenue. The island in recent
years has suffered a serious loss of population because of migration
of Niueans to New Zealand. Efforts to increase GDP include the
promotion of tourism and a financial services industry, although
Premier LAKATANI announced in February 2002 that Niue will shut down
the offshore banking industry. Economic aid from New Zealand in 2002
was about $2.6 million.

Norfolk Island
Tourism, the primary economic activity, has steadily
increased over the years and has brought a level of prosperity
unusual among inhabitants of the Pacific islands. The agricultural
sector has become self-sufficient in the production of beef,
poultry, and eggs.

Northern Mariana Islands
The economy benefits substantially from
financial assistance from the US. The rate of funding has declined
as locally generated government revenues have grown. The key tourist
industry employs about 50% of the work force and accounts for
roughly one-fourth of GDP. Japanese tourists predominate. Annual
tourist entries have exceeded one-half million in recent years, but
financial difficulties in Japan have caused a temporary slowdown.
The agricultural sector is made up of cattle ranches and small farms
producing coconuts, breadfruit, tomatoes, and melons. Garment
production is by far the most important industry with employment of
17,500 mostly Chinese workers and sizable shipments to the US under
duty and quota exemptions.

Norway
The Norwegian economy is a prosperous bastion of welfare
capitalism, featuring a combination of free market activity and
government intervention. The government controls key areas, such as
the vital petroleum sector (through large-scale state enterprises).
The country is richly endowed with natural resources - petroleum,
hydropower, fish, forests, and minerals - and is highly dependent on
its oil production and international oil prices; in 1999, oil and
gas accounted for 35% of exports. Only Saudi Arabia and Russia
export more oil than Norway. Norway opted to stay out of the EU
during a referendum in November 1994. The government has moved ahead
with privatization. With arguably the highest quality of life
worldwide, Norwegians still worry about that time in the next two
decades when the oil and gas begin to run out. Accordingly, Norway
has been saving its oil-boosted budget surpluses in a Government
Petroleum Fund, which is invested abroad and now is valued at more
than $43 billion. GDP growth was a lackluster 1% in 2002 and 2003
against the background of a faltering European economy.

Oman
Oman's economic performance improved significantly in 2000 due
largely to the upturn in oil prices. The government is moving ahead
with privatization of its utilities, the development of a body of
commercial law to facilitate foreign investment, and increased
budgetary outlays. Oman continues to liberalize its markets and
joined the World Trade Organization (WTrO) in November 2000. GDP
growth improved in 2001 despite the global slowdown and then fell
back to 2.2% in 2002. In order to reduce unemployment, the
government is trying to replace expatriate workers with local
workers. Another government objective is the development of the
nation's gas resources.

Pacific Ocean
The Pacific Ocean is a major contributor to the world
economy and particularly to those nations its waters directly touch.
It provides low-cost sea transportation between East and West,
extensive fishing grounds, offshore oil and gas fields, minerals,
and sand and gravel for the construction industry. In 1996, over 60%
of the world's fish catch came from the Pacific Ocean. Exploitation
of offshore oil and gas reserves is playing an ever-increasing role
in the energy supplies of US, Australia, NZ, China, and Peru. The
high cost of recovering offshore oil and gas, combined with the wide
swings in world prices for oil since 1985, has slowed but not
stopped new drillings.

Pakistan
Pakistan, an impoverished and underdeveloped country,
suffers from internal political disputes, low levels of foreign
investment, and a costly, ongoing confrontation with neighboring
India. Pakistan's economic prospects, although still marred by poor
human development indicators, continued to improve in 2002 following
unprecedented inflows of foreign assistance beginning in 2001.
Foreign exchange reserves have grown to record levels, supported
largely by fast growth in recorded worker remittances. Trade levels
rebounded after a sharp decline in late 2001. The government has
made significant inroads in macroeconomic reform since 2000, but
progress is beginning to slow. Although it is in the second year of
its $1.3 billion IMF Poverty Reduction and Growth Facility,
Islamabad continues to require waivers for politically difficult
reforms. Long-term prospects remain uncertain as development
spending remains low, regional tensions remain high, and political
tensions weaken Pakistan's commitment to lender-recommended economic
reforms. GDP growth will continue to hinge on crop performance;
dependence on foreign oil leaves the import bill vulnerable to
fluctuating oil prices; and efforts to open and modernize the
economy remain uneven.

Palau
The economy consists primarily of tourism, subsistence
agriculture and fishing. The government is the major employer of the
work force, relying heavily on financial assistance from the US.
Business and tourist arrivals numbered 50,000 in FY00/01. The
population enjoys a per capita income twice that of the Philippines
and much of Micronesia. Long-run prospects for the key tourist
sector have been greatly bolstered by the expansion of air travel in
the Pacific, the rising prosperity of leading East Asian countries,
and the willingness of foreigners to finance infrastructure
development.

Palmyra Atoll
no economic activity

Panama
Panama's economy is based primarily on a well-developed
services sector that accounts for three-fourths of GDP. Services
include operating the Panama Canal, banking, the Colon Free Zone,
insurance, container ports, flagship registry, and tourism. A slump
in Colon Free Zone and agricultural exports, the global slowdown,
and the withdrawal of US military forces held back economic growth
in 2000-02. The government has been backing public works programs,
tax reforms, new regional trade agreements, and development of
tourism in order to stimulate growth.

Papua New Guinea
Papua New Guinea is richly endowed with natural
resources, but exploitation has been hampered by rugged terrain and
the high cost of developing infrastructure. Agriculture provides a
subsistence livelihood for 85% of the population. Mineral deposits,
including oil, copper, and gold, account for 72% of export earnings.
The economy has faltered over the past three years but will probably
improve slightly in 2003. Former Prime Minister Mekere MORAUTA had
tried to restore integrity to state institutions, stabilize the
kina, restore stability to the national budget, privatize public
enterprises where appropriate, and ensure ongoing peace on
Bougainville. The government has had considerable success in
attracting international support, specifically gaining the backing
of the IMF and the World Bank in securing development assistance
loans. Significant challenges face Prime Minister Michael SOMARE,
including gaining further investor confidence, continuing efforts to
privatize government assets, and maintaining the support of members
of Parliament.

Paracel Islands
China announced plans in 1997 to open the islands
for tourism.

Paraguay
Paraguay has a market economy marked by a large informal
sector. The informal sector features both reexport of imported
consumer goods to neighboring countries as well as the activities of
thousands of microenterprises and urban street vendors. Because of
the importance of the informal sector, accurate economic measures
are difficult to obtain. A large percentage of the population
derives their living from agricultural activity, often on a
subsistence basis. The formal economy grew by an average of about 3%
annually in 1995-97; but GDP declined slightly in 1998, 1999, and
2000, rose slightly in 2001, only to fall again in 2002. On a per
capita basis, real income has stagnated at 1980 levels. Most
observers attribute Paraguay's poor economic performance to
political uncertainty, corruption, lack of progress on structural
reform, substantial internal and external debt, and deficient
infrastructure.

Peru
Thanks to foreign investment and the cooperation between the
government and the IMF and World Bank, growth was strong in 1994-97
and inflation was brought under control. In 1998, El Nino's impact
on agriculture, the financial crisis in Asia, and instability in
Brazilian markets undercut growth. The following year was again lean
year for Peru, with the aftermath of El Nino and the Asian financial
crisis working its way through the economy. Political instability
resulting from the presidential election and FUJIMORI's subsequent
departure from office limited growth in 2000. The downturn in the
global economy further curtailed growth in 2001. President TOLEDO,
who assumed the presidency in July 2001, has been working to
reinvigorate the economy and reduce unemployment. Economic growth in
2002 is estimated at 4.8%, led by construction in the retail and gas
sectors.

Philippines
In 1998, the Philippine economy - a mixture of
agriculture, light industry, and supporting services - deteriorated
as a result of spillover from the Asian financial crisis and poor
weather conditions. Growth fell to 0.6% in 1998 from 5% in 1997, but
recovered to about 3.3% in 1999, 4.5% in 2000, and 4.5% in 2001. In
2002, the Philippines recorded GDP growth of 4.4% but also incurred
a record budget deficit. As a result, the Philippines is burdened
with a public sector debt equal to more than 100% of GDP. Growth
eased to 3.8% in 2003. The government has promised economic reforms
including going forward with privatization, reforming the tax
system, and promoting additional trade integration within its
region. Considerable drive is required to update the educational
system and the road network.

Pitcairn Islands
The inhabitants of this tiny isolated economy exist
on fishing, subsistence farming, handicrafts, and postage stamps.
The fertile soil of the valleys produces a wide variety of fruits
and vegetables, including citrus, sugarcane, watermelons, bananas,
yams, and beans. Bartering is an important part of the economy. The
major sources of revenue are the sale of postage stamps to
collectors and the sale of handicrafts to passing ships.

Poland
Poland has steadfastly pursued a policy of economic
liberalization throughout the 1990s and today stands out as a
success story among transition economies. Even so, much remains to
be done. The privatization of small and medium state-owned companies
and a liberal law on establishing new firms has encouraged the
development of the private business sector, but legal and
bureaucratic obstacles alongside persistent corruption are hampering
its further development. Poland's agricultural sector remains
handicapped by structural problems, surplus labor, inefficient small
farms, and lack of investment. Restructuring and privatization of
"sensitive sectors" (e.g., coal, steel, railroads, and energy),
while recently initiated, have stalled due to a lack of political
will on the part of the government. Structural reforms in health
care, education, the pension system, and state administration have
resulted in larger than expected fiscal pressures. Further progress
in public finance depends mainly on privatization of Poland's
remaining state sector, the reduction of state employment, and an
overhaul of the tax code to incorporate the growing gray economy and
farmers most of whom pay no tax. The government's determination to
enter the EU has shaped most aspects of its economic policy and new
legislation; in June 2003, 77% of the voters approved membership,
now scheduled for May 2004. Improving Poland's export
competitiveness and containing the internal budget deficit are top
priorities. Due to political uncertainty, the zloty has recently
depreciated in relation to the euro and the dollar while currencies
of the other euro-zone aspirants have been appreciating. GDP per
capita equals that of the 3 Baltic states.

Portugal
Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past decade, successive governments have privatized many
state-controlled firms and liberalized key areas of the economy,
including the financial and telecommunications sectors. The country
qualified for the European Monetary Union (EMU) in 1998 and began
circulating the euro on 1 January 2002 along with 11 other EU member
economies. Economic growth has been above the EU average for much of
the past decade, but fell back in 2001-03. GDP per capita stands at
70% of that of the leading EU economies. A poor educational system,
in particular, has been an obstacle to greater productivity and
growth. Portugal has been increasingly overshadowed by lower-cost
producers in Central Europe and Asia as a target for foreign direct
investment. The coalition government faces tough choices in its
attempts to boost Portugal's economic competitiveness and to keep
the budget deficit within the 3% EU ceiling.

Puerto Rico
Puerto Rico has one of the most dynamic economies in the
Caribbean region. A diverse industrial sector has far surpassed
agriculture as the primary locus of economic activity and income.
Encouraged by duty-free access to the US and by tax incentives, US
firms have invested heavily in Puerto Rico since the 1950s. US
minimum wage laws apply. Sugar production has lost out to dairy
production and other livestock products as the main source of income
in the agricultural sector. Tourism has traditionally been an
important source of income, with estimated arrivals of nearly 5
million tourists in 1999. Growth fell off in 2001-02, largely due to
the slowdown in the US economy.

Qatar
Oil and gas account for more than 55% of GDP, roughly 85% of
export earnings, and 70% of government revenues. Oil and gas have
given Qatar a per capita GDP comparable to that of the leading West
European industrial countries. Proved oil reserves of 14.5 billion
barrels should ensure continued output at current levels for 23
years. Production and export of natural gas are becoming
increasingly important to the economy. Qatar's proved reserves of
natural gas exceed 17.9 trillion cubic meters, more than 5% of the
world total and third largest in the world. Long-term goals feature
the development of offshore natural gas reserves. Since 2000, Qatar
has consistently posted trade surpluses largely because of high oil
prices and increased natural gas exports, and Qatar's economy is
expected to receive an added boost as it begins to increase liquid
natural gas exports.

Reunion
The economy has traditionally been based on agriculture, but
services now dominate. Sugarcane has been the primary crop for more
than a century, and in some years it accounts for 85% of exports.
The government has been pushing the development of a tourist
industry to relieve high unemployment, which amounts to one-third of
the labor force. The gap in Reunion between the well-off and the
poor is extraordinary and accounts for the persistent social
tensions. The white and Indian communities are substantially better
off than other segments of the population, often approaching
European standards, whereas minority groups suffer the poverty and
unemployment typical of the poorer nations of the African continent.
The outbreak of severe rioting in February 1991 illustrates the
seriousness of socioeconomic tensions. The economic well-being of
Reunion depends heavily on continued financial assistance from
France.

Romania
Romania began the transition from Communism in 1989 with a
largely obsolete industrial base and a pattern of output unsuited to
the country's needs. The country emerged in 2000 from a punishing
three-year recession thanks to strong demand in EU export markets.
Despite the global slowdown in 2001-02, strong domestic activity in
construction, agriculture, and consumption have kept growth above
4%. An IMF Standby Agreement, signed in 2001, has been accompanied
by slow but palpable gains in privatization, deficit reduction, and
the curbing of inflation. Nonetheless, recent macroeconomic gains
have done little to address Romania's widespread poverty, while
corruption and red tape hinder foreign investment.

Russia
A decade after the implosion of the Soviet Union in December
1991, Russia is still struggling to establish a modern market
economy and achieve strong economic growth. In contrast to its
trading partners in Central Europe - which were able within 3 to 5
years to overcome the initial production declines that accompanied
the launch of market reforms - Russia saw its economy contract for
five years, as the executive and legislature dithered over the
implementation of many of the basic foundations of a market economy.
Russia achieved a slight recovery in 1997, but the government's
stubborn budget deficits and the country's poor business climate
made it vulnerable when the global financial crisis swept through in
1998. The crisis culminated in the August depreciation of the ruble,
a debt default by the government, and a sharp deterioration in
living standards for most of the population. The economy
subsequently has rebounded, growing by an average of more than 6%
annually in 1999-2002 on the back of higher oil prices and the 60%
depreciation of the ruble in 1998. These GDP numbers, along with a
renewed government effort to advance lagging structural reforms,
have raised business and investor confidence over Russia's prospects
in its second decade of transition. Yet serious problems persist.
Oil, natural gas, metals, and timber account for more than 80% of
exports, leaving the country vulnerable to swings in world prices.
Russia's industrial base is increasingly dilapidated and must be
replaced or modernized if the country is to maintain vigorous
economic growth. Other problems include a weak banking system, a
poor business climate that discourages both domestic and foreign
investors, corruption, local and regional government intervention in
the courts, and widespread lack of trust in institutions. In 2003
President PUTIN further tightened his control over the "oligarchs,"
especially in the realm of political expression.

Rwanda
Rwanda is a poor rural country with about 90% of the
population engaged in (mainly subsistence) agriculture. It is the
most densely populated country in Africa; landlocked with few
natural resources and minimal industry. Primary foreign exchange
earners are coffee and tea. The 1994 genocide decimated Rwanda's
fragile economic base, severely impoverished the population,
particularly women, and eroded the country's ability to attract
private and external investment. However, Rwanda has made
substantial progress in stabilizing and rehabilitating its economy
to pre-1994 levels, although poverty levels are higher now. GDP has
rebounded, and inflation has been curbed. Export earnings, however,
have been hindered by low beverage prices, depriving the country of
much needed hard currency. Attempts to diversify into
non-traditional agriculture exports such as flowers and vegetables
have been stymied by a lack of adequate transportation
infrastructure. Despite Rwanda's fertile ecosystem, food production
often does not keep pace with population growth, requiring food to
be imported. Rwanda continues to receive substantial amounts of aid
money and was approved for IMF-World Bank Heavily Indebted Poor
Country (HIPC) initiative debt relief in late 2000. But Kigali's
high defense expenditures cause tension between the government and
international donors and lending agencies.

Saint Helena
The economy depends largely on financial assistance
from the UK, which amounted to about $5 million in 1997 or almost
one-half of annual budgetary revenues. The local population earns
income from fishing, the raising of livestock, and sales of
handicrafts. Because there are few jobs, 25% of the work force has
left to seek employment on Ascension Island, on the Falklands, and
in the UK.

Saint Kitts and Nevis
Sugar was the traditional mainstay of the
Saint Kitts economy until the 1970s. Although the crop still
dominates the agricultural sector, activities such as tourism,
export-oriented manufacturing, and offshore banking have assumed
larger roles in the economy. As tourism revenues are now the chief
source of the islands' foreign exchange, a decline in stopover
tourist arrivals following the September 11, 2001 terrorist attacks
has eroded government finances. The opening of a 1,000+ bed Marriott
hotel in February 2003 is expected to bring in much-needed revenue.

Saint Lucia
The recent changes in the EU import preference regime
and the increased competition from Latin American bananas have made
economic diversification increasingly important in Saint Lucia. The
island nation has been able to attract foreign business and
investment, especially in its offshore banking and tourism
industries. The manufacturing sector is the most diverse in the
Eastern Caribbean area, and the government is trying to revitalize
the banana industry. Economic fundamentals remain solid.

Saint Pierre and Miquelon
The inhabitants have traditionally earned
their livelihood by fishing and by servicing fishing fleets
operating off the coast of Newfoundland. The economy has been
declining, however, because of disputes with Canada over fishing
quotas and a steady decline in the number of ships stopping at Saint
Pierre. In 1992, an arbitration panel awarded the islands an
exclusive economic zone of 12,348 sq km to settle a longstanding
territorial dispute with Canada, although it represents only 25% of
what France had sought. The islands are heavily subsidized by France
to the great betterment of living standards. The government hopes an
expansion of tourism will boost economic prospects. Recent test
drilling for oil may pave the way for development of the energy
sector.

Saint Vincent and the Grenadines
Bananas and other agricultural
products remain the staple of this lower-middle income country's
economy. Although tourism and other services have been growing
moderately in recent years, the government has been ineffective at
introducing new industries. Unemployment remains high, and economic
growth hinges upon seasonal variations in the agricultural and
tourism sectors. Tropical storms wiped out substantial portions of
crops in 1994, 1995, and 2002, and tourism in the Eastern Caribbean
has suffered low arrivals following 11 September 2001. Saint Vincent
is home to a small offshore banking sector, but its restrictive
secrecy laws have come under international review. As of June 2001,
it remained on the Financial Action Task Force's list of
noncooperative jurisdictions. Saint Vincent is also the largest
producer of marijuana in the Eastern Caribbean and is increasingly
being used as a transshipment point for illegal narcotics from South
America.

Samoa
The economy of Samoa has traditionally been dependent on
development aid, family remittances from overseas, and agriculture
and fishing. The country is vulnerable to devastating storms.
Agriculture employs two-thirds of the labor force, and furnishes 90%
of exports, featuring coconut cream, coconut oil, and copra. The
manufacturing sector mainly processes agricultural products. The
decline of fish stocks in the area is a continuing problem. Tourism
is an expanding sector, accounting for 25% of GDP; about 88,000
tourists visited the islands in 2001. The Samoan Government has
called for deregulation of the financial sector, encouragement of
investment, and continued fiscal discipline, meantime protecting the
environment. Observers point to the flexibility of the labor market
as a basic strength for future economic advances. Foreign reserves
are in a relatively healthy state, the external debt is stable, and
inflation is low.

San Marino
The tourist sector contributes over 50% of GDP. In 2000
more than 3 million tourists visited San Marino. The key industries
are banking, wearing apparel, electronics, and ceramics. Main
agricultural products are wine and cheeses. The per capita level of
output and standard of living are comparable to those of the most
prosperous regions of Italy, which supplies much of its food.