Chapter CVI: Section 3: , Taipei, Taiwan, telephone: 886 (2) 2162-2000, FAX (41)

New Zealand
Over the past 20 years the government has transformed
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. Per capita
income has risen for six consecutive years and is now more than
$23,000 in purchasing power parity terms. New Zealand is heavily
dependent on trade - particularly in agricultural products - to
drive growth. Exports are equal to about 20% of GDP. Thus far the
economy has been resilient, and the Labor Government promises that
expenditures on health, education, and pensions will increase
proportionately to output.

Nicaragua
Nicaragua, one of the hemisphere's poorest countries,
faces low per capita income, massive unemployment, 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, GDP annual growth has been far
too low to meet the country's needs. As a result of successful
performance under its International Monetary Fund policy program and
other efforts, Nicaragua qualified in early 2004 for some $4 billion
in foreign debt reduction under the Heavily Indebted Poor Countries
(HIPC) initiative. Even after this reduction, however, the
government continues to bear a significant foreign and domestic debt
burden. If ratified, the US-Central America Free Trade Agreement
(CAFTA) will provide an opportunity for Nicaragua to attract
investment, create jobs, and deepen economic development. While
President BOLANOS enjoys the support of the international financial
bodies, his internal political base is meager.

Niger
Niger is one of the poorest countries in the world, a
landlocked Sub-Saharan nation, whose economy centers on subsistence
crops, livestock, and some of the world's largest uranium deposits.
Drought cycles, desertification, a 3.3% population growth rate, and
the drop in world demand for uranium have undercut the economy.
Niger shares a common currency, the CFA franc, and a common central
bank, the Central Bank of West African States (BCEAO), with seven
other members of the West African Monetary Union. In December 2000,
Niger qualified for enhanced debt relief under the International
Monetary Fund program for Highly Indebted Poor Countries (HIPC) and
concluded an agreement with the Fund on a Poverty Reduction and
Growth Facility (PRGF). Debt relief provided under the enhanced HIPC
initiative significantly reduces Niger's annual debt service
obligations, freeing funds for expenditures on basic health care,
primary education, HIV/AIDS prevention, rural infrastructure, and
other programs geared at poverty reduction. Nearly half of the
government's budget is derived from foreign donor resources. Future
growth may be sustained by exploitation of oil, gold, coal, and
other mineral resources.

Nigeria
Oil-rich Nigeria, long hobbled by political instability,
corruption, inadequate infrastructure, and poor macroeconomic
management, is undertaking some reforms 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 - Nigeria is Africa's most populous country - and the
country, once a large net exporter of food, now must import food.
Following the signing of an IMF stand-by agreement in August 2000,
Nigeria received a debt-restructuring deal from the Paris Club and a
$1 billion credit from the IMF, both contingent on economic reforms.
Nigeria pulled out of its IMF program in April 2002, after failing
to meet spending and exchange rate targets, making it ineligible for
additional debt forgiveness from the Paris Club. In the last year
the government has begun showing the political will to implement the
market-oriented reforms urged by the IMF, such as to modernize 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. During 2003 the government began
deregulating fuel prices, announced the privatization of the
country's four oil refineries, and instituted the National Economic
Empowerment Development Strategy, a domestically designed and run
program modeled on the IMF's Poverty Reduction and Growth Facility
for fiscal and monetary management. GDP rose strongly in 2004.

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
former 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. Niue suffered a devastating
hurricane in January 2004, which decimated nascent economic
programs. While in the process of rebuilding, Niue has been
dependent on foreign aid.

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, with oil and gas
accounting for one-third 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; nonetheless, it contributes
sizably to the EU budget. 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 will 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 $150
billion. After lackluster growth of 1% in 2002 and 0.5% in 2003, GDP
growth picked up to 3.3% in 2004.

Oman
Oman is a middle-income economy in the Middle East with notable
oil and gas resources, a substantial trade surplus, and low
inflation. The government is privatizing its utilities and
diversifying its economy to attract foreign investment. Oman
continues to liberalize its markets and joined the World Trade
Organization (WTO) in November 2000. To reduce unemployment and
limit dependence on foreign countries, the government is encouraging
the replacement of expatriate workers with local people, i.e.,
Omanization. Training in information technology, business
management, and English support this objective. Industrial
development plans focus on gas resources, metal manufacturing,
petrochemicals, and international transshipment ports.

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 the 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 led to
fluctuations in new drillings.

Pakistan
Pakistan, an impoverished and underdeveloped country, has
suffered from decades of internal political disputes, low levels of
foreign investment, and a costly, ongoing confrontation with
neighboring India. However, IMF-approved government policies,
bolstered by generous foreign assistance and renewed access to
global markets since 2001, have generated solid macroeconomic
recovery the last three years. The government has made substantial
macroeconomic reforms since 2000, although progress on more
politically sensitive reforms has slowed. For example, in the third
and final year of its $1.3 billion IMF Poverty Reduction and Growth
Facility, Islamabad has continued to require waivers for energy
sector reforms. While long-term prospects remain uncertain, given
Pakistan's low level of development, medium-term prospects for job
creation and poverty reduction are the best in nearly a decade.
Islamabad has raised development spending from about 2% of GDP in
the 1990s to 4% in 2003, a necessary step towards reversing the
broad underdevelopment of its social sector. GDP growth, spurred by
double-digit gains in industrial production over the past year, has
become less dependent on agriculture. Foreign exchange reserves
continued to reach new levels in 2004, supported by robust export
growth and steady worker remittances.

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 63,000 in 2003. 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 dollarised economy rests primarily on a
well-developed services sector that accounts for four-fifths 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 2000-03; growth picked up in 2004 led by
export-oriented services and a construction boom stimulated by tax
incentives. The government has been backing tax reforms, reform of
the social security program, new regional trade agreements, and
development of tourism. Unemployment remains high.

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 improved over the past two years, following a
prolonged period of instability. Former Prime Minister Mekere
MORAUTA had tried to restore integrity to state institutions, to
stabilize the kina, restore stability to the national budget, to
privatize public enterprises where appropriate, and to ensure
ongoing peace on Bougainville. Australia annually supplies $240
million in aid, which accounts for 20% of the national budget.
Challenges face Prime Minister Michael SOMARE, including gaining
further investor confidence, continuing efforts to privatize
government assets, maintaining the support of members of Parliament,
and balancing relations with Australia, the former colonial ruler.

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

Paraguay
Landlocked Paraguay has a market economy marked by a large
informal sector. This 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 averaged near-zero growth in 1998-2001 and
contracted by 2.3 percent in 2002, in response to regional contagion
and an outbreak of hoof-and-mouth desease. 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. Aided by a
firmer exchange rate and perhaps a greater confidence in the
economic policy of the Duarte FRUTOS administration, the economy
rebounded in 2003 and 2004, posting modest growth each year.

Peru
Peru's economy reflects its varied geography - an arid coastal
region, the Andes further inland, and tropical lands bordering
Colombia and Brazil. Abundant mineral resources are found in the
mountainous areas, and Peru's coastal waters provide excellent
fishing grounds. However, overdependence on minerals and metals
subjects the economy to fluctuations in world prices, and a lack of
infrastructure deters trade and investment. After several years of
inconsistent economic performance, the Peruvian economy grew by an
average 4 percent per year during the period 2002-2004, with a
stable exchange rate and low inflation. Risk premiums on Peruvian
bonds on secondary markets reached historically low levels in late
2004, reflecting investor optimism regarding the government's
prudent fiscal policies and openness to trade and investment.
Despite the strong macroeconomic performance, the TOLEDO
administration remained unpopular in 2004, and unemployment and
poverty have stayed persistently high.

Philippines
The Philippines was less severely affected by the Asian
financial crisis of 1998 than its neighbors, aided in part by annual
remittances of $7-8 billion from overseas workers and no sustained
runup in asset prices or foreign borrowing prior to the crisis. From
a 0.6% decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in
2000, but slowed to 3.2% in 2001 in the context of a global economic
slowdown, an export slump, and political and security concerns. GDP
growth accelerated to 4.3% in 2002, 4.7% in 2003, and about 6% in
2004, reflecting the continued resilience of the service sector, and
improved exports and agricultural output. Nonetheless, it will take
a higher, sustained growth path to make appreciable progress in
poverty alleviation given the Philippines' high annual population
growth rate and unequal distribution of income. The Philippines also
faces higher oil prices, higher interest rates on its dollar
borrowings, and higher inflation. Fiscal constraints limit Manila's
ability to finance infrastructure and social spending. The
Philippines' consistently large budget deficit has produced a high
debt level and has forced Manila to spend a large portion of the
national government budget on debt service. Large, unprofitable
public enterprises, especially in the energy sector, contribute to
the government's debt because of slow progress on privatization.
Credit rating agencies are increasingly concerned about the
Philippines' ability to sustain the debt; legislative progress on
new revenue measures will weigh heavily on credit rating decisions.

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. In October
2004, more than one-quarter of Pitcairn's labor force was arrested,
putting the economy in a bind, since their services were required as
lighter crew to load or unload 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, especially in bringing down unemployment. The privatization
of small and medium-sized 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 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. 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 reducing losses in
Polish state enterprises, restraining entitlements, and overhauling
the tax code to incorporate the growing gray economy and farmers,
most of whom pay no tax. The government has introduced a package of
social and administrative spending cuts to reduce public spending by
about $17 billion through 2007. Additional reductions are under
discussion in the legislature but could be trumped by election-year
politics in 2005. Poland joined the EU in May 2004, and surging
exports to the EU contributed to Poland's strong growth in 2004,
though its competitiveness could be threatened by the zloty's
appreciation. GDP per capita roughly equals that of the three Baltic
states. Poland stands to benefit from nearly $13.5 billion in EU
funds, available through 2006. Farmers have already begun to reap
the rewards of membership via higher food prices and EU agricultural
subsidies.

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 had been above the EU average for much of
the past decade, but fell back in 2001-04. GDP per capita stands at
two-thirds that of the Big Four 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 government faces tough choices in its
attempts to boost Portugal's economic competitiveness while keeping
the budget deficit within the eurozone's 3%-of-GDP 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 2001-03, largely due to
the slowdown in the US economy, and has recovered in 2004.

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 about 80% of that of the leading West
European industrial countries. Proved oil reserves of 16 billion
barrels should ensure continued output at current levels for 23
years. Qatar's proved reserves of natural gas exceed 14 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 to offset the ultimate decline in oil
production. In recent years, Qatar has consistently posted trade
surpluses largely because of high oil prices and increased natural
gas exports, becoming one of the world's fastest growing and highest
per-capita income countries.

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. The IMF Board approved Romania's
completion of the standby agreement in October 2003, the first time
Romania has successfully concluded an IMF agreement since the 1989
revolution. In July 2004, the executive board of the IMF approved a
24-month standby agreement for $367 million. The Romanian
authorities do not intend to draw on this agreement, however,
viewing it simply as a precaution. Meanwhile, recent macroeconomic
gains have done little to address Romania's widespread poverty,
while corruption and red tape continue to handicap the business
environment.

Russia
Russia ended 2004 with its sixth straight year of growth,
averaging 6.5% annually since the financial crisis of 1998. Although
high oil prices and a relatively cheap ruble are important drivers
of this economic rebound, since 2000 investment and consumer-driven
demand have played a noticeably increasing role. Real fixed capital
investments have averaged gains greater than 10% over the last five
years, and real personal incomes have realized average increases
over 12%. Russia has also improved its international financial
position since the 1998 financial crisis, with its foreign debt
declining from 90% of GDP to around 28%. Strong oil export earnings
have allowed Russia to increase its foreign reserves from only $12
billion to some $120 billion at yearend 2004. These achievements,
along with a renewed government effort to advance structural
reforms, have raised business and investor confidence in Russia's
economic prospects. Nevertheless, serious problems persist. Economic
growth slowed down in the second half of 2004 and the Russian
government forecasts growth of only 4.5% to 6.2% for 2005. Oil,
natural gas, metals, and timber account for more than 80% of
exports, leaving the country vulnerable to swings in world prices.
Russia's manufacturing base is dilapidated and must be replaced or
modernized if the country is to achieve broad-based economic growth.
Other problems include a weak banking system, a poor business
climate that discourages both domestic and foreign investors,
corruption, and widespread lack of trust in institutions. In
addition, a string of investigations launched against a major
Russian oil company, culminating with the arrest of its CEO in the
fall of 2003, have raised concerns by some observers that President
PUTIN is granting more influence to forces within his government
that desire to reassert state control over the economy.

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. Despite Rwanda's fertile ecosystem, food
production often does not keep pace with population growth,
requiring food imports. Rwanda continues to receive substantial aid
money and was approved for IMF-World Bank Heavily Indebted Poor
Country (HIPC) initiative debt relief in late 2000. Kigali's high
defense expenditures have caused tension between the government and
international donors and lending agencies. An energy shortage and
instability in neighboring states may slow growth in 2005, while the
lack of adequate transportation linkages to other countries
continues to handicap export growth.

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, raising 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. Tourism revenues are now the chief
source of the islands' foreign exchange. The opening of a 470-room
resort in February 2003 was expected to bring in much-needed revenue.

Saint Lucia
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, even though
unemployment needs to be cut.

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
Economic growth in this
lower-middle-income country 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 and has moved to adopt international regulatory standards.
Saint Vincent is also a large producer of marijuana and is 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, 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. One factory in the Foreign
Trade Zone employs 3,000 people to make automobile electrical
harnesses for an assembly plant in Australia. 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.

Sao Tome and Principe
This small poor island economy has become
increasingly dependent on cocoa since independence in 1975. Cocoa
production has substantially declined in recent years because of
drought and mismanagement, but strengthening prices helped boost
export earnings in 2003. Sao Tome has to import all fuels, most
manufactured goods, consumer goods, and a substantial amount of
food. Over the years, it has had difficulty servicing its external
debt and has relied heavily on concessional aid and debt
rescheduling. Sao Tome benefited from $200 million in debt relief in
December 2000 under the Highly Indebted Poor Countries (HIPC)
program, but lacking a formal poverty reduction program with the
IMF, it has not benefited from subsequent HIPC debt reductions. Sao
Tome's external debt stands at over $300 million. Considerable
potential exists for development of a tourist industry, and the
government has taken steps to expand facilities in recent years. The
government also has attempted to reduce price controls and
subsidies. Sao Tome is optimistic about the development of petroleum
resources in its territorial waters in the oil-rich Gulf of Guinea.
The first production license was sold to a consortium led by
US-based oil firms. Much of the 2005 budget is dependent upon the
sale of additional production licenses.

Saudi Arabia
This is an oil-based economy with strong government
controls over major economic activities. Saudi Arabia possesses 25%
of the world's proven petroleum reserves, ranks as the largest
exporter of petroleum, and plays a leading role in OPEC. The
petroleum sector accounts for roughly 75% of budget revenues, 45% of
GDP, and 90% of export earnings. About 40% of GDP comes from the
private sector. Roughly five and a half million foreign workers play
an important role in the Saudi economy, for example, in the oil and
service sectors. The government in 1999 announced plans to begin
privatizing the electricity companies, which follows the ongoing
privatization of the telecommunications company. The government is
encouraging private sector growth to lessen the kingdom's dependence
on oil and increase employment opportunities for the swelling Saudi
population. Priorities for government spending in the short term
include additional funds for education and for the water and sewage
systems. Economic reforms proceed cautiously because of deep-rooted
political and social conservatism.

Senegal
In January 1994, Senegal undertook a bold and ambitious
economic reform program with the support of the international donor
community. This reform began with a 50% devaluation of Senegal's
currency, the CFA franc, which was linked at a fixed rate to the
French franc. Government price controls and subsidies have been
steadily dismantled. After seeing its economy contract by 2.1% in
1993, Senegal made an important turnaround, thanks to the reform
program, with real growth in GDP averaging 5% annually during
1995-2003. Annual inflation had been pushed down to the low single
digits. As a member of the West African Economic and Monetary Union
(WAEMU), Senegal is working toward greater regional integration with
a unified external tariff and a more stable monetary policy. Senegal
still relies heavily upon outside donor assistance, however. Under
the IMF's Highly Indebted Poor Countries debt relief program,
Senegal will benefit from eradication of two-thirds of its
bilateral, multilateral, and private sector debt.

Serbia and Montenegro
MILOSEVIC-era mismanagement of the economy, an
extended period of economic sanctions, and the damage to
Yugoslavia's infrastructure and industry during the NATO airstrikes
in 1999 left the economy only half the size it was in 1990. After
the ousting of former Federal Yugoslav President MILOSEVIC in
October 2000, the Democratic Opposition of Serbia (DOS) coalition
government implemented stabilization measures and embarked on an
aggressive market reform program. After renewing its membership in
the IMF in December 2000, a down-sized Yugoslavia continued to
reintegrate into the international community by rejoining the World
Bank (IBRD) and the European Bank for Reconstruction and Development
(EBRD). A World Bank-European Commission sponsored Donors'
Conference held in June 2001 raised $1.3 billion for economic
restructuring. An agreement rescheduling the country's $4.5 billion
Paris Club government debts was concluded in November 2001 - it
wrote off 66% of the debt - and the London Club of private creditors
forgave $1.7 billion of debt, just over half the total owed, in July
2004. The smaller republic of Montenegro severed its economy from
federal control and from Serbia during the MILOSEVIC era and
continues to maintain its own central bank, uses the euro instead of
the Yugoslav dinar as official currency, collects customs tariffs,
and manages its own budget. Kosovo's economy continues to transition
to a market-based system, and is largely dependent on the
international community and the diaspora for financial and technical
assistance. The euro and the Yugoslav dinar are both accepted
currencies in Kosovo. While maintaining ultimate oversight, UNMIK
continues to work with the European Union and Kosovo's local
provisional government to accelerate economic growth, lower
unemployment, and attract foreign investment to help Kosovo
integrate into regional economic structures. The complexity of
Serbia and Montenegro political relationships, slow progress in
privatization, legal uncertainty over property rights, scarcity of
foreign-investment and a substantial foreign trade deficit are
holding back the economy. Arrangements with the IMF, especially
requirements for fiscal discipline, are an important element in
policy formation. Severe unemployment remains a key political
economic problem for this entire region.

Seychelles
Since independence in 1976, per capita output in this
Indian Ocean archipelago has expanded to roughly seven times the old
near-subsistence level. Growth has been led by the tourist sector,
which employs about 30% of the labor force and provides more than
70% of hard currency earnings, and by tuna fishing. In recent years
the government has encouraged foreign investment in order to upgrade
hotels and other services. At the same time, the government has
moved to reduce the dependence on tourism by promoting the
development of farming, fishing, and small-scale manufacturing. A
sharp drop illustrated the vulnerability of the tourist sector in
1991-92 due largely to the Gulf war, and once again following the 11
September 2001 terrorist attacks on the US. Growth slowed in
1998-2002, and fell in 2003, due to sluggish tourist and tuna
sectors, but resumed in 2004, erasing a persistent budget deficit.
Tight controls on exchange rates and the scarcity of foreign
exchange have impaired short-term economic prospects. The black
market value of the Seychelles rupee is half the official exchange
rate; without a devaluation of the currency the tourist sector may
remain sluggish as vacationers seek cheaper destinations such as
Comoros, Mauritius, and Madagascar.

Sierra Leone
Sierra Leone is an extremely poor African nation with
tremendous inequality in income distribution. While it possesses
substantial mineral, agricultural, and fishery resources, its
economic and social infrastructure is not well developed, and
serious social disorders continue to hamper economic development.
About two-thirds of the working-age population engages in
subsistence agriculture. Manufacturing consists mainly of the
processing of raw materials and of light manufacturing for the
domestic market. Plans to reopen bauxite and rutile mines shut down
during an 11 year civil war have not been implemented due to lack of
foreign investment. Alluvial diamond mining remains the major source
of hard currency earnings. The fate of the economy depends upon the
maintenance of domestic peace and the continued receipt of
substantial aid from abroad, which is essential to offset the severe
trade imbalance and supplement government revenues. International
financial institutions contributed over $600 million in development
aid and budgetary support in 2003.

Singapore
Singapore, a highly developed and successful free market
economy, enjoys a remarkably open and corruption-free environment,
stable prices, and a per capita GDP equal to that of the Big 4 West
European countries. The economy depends heavily on exports,
particularly in electronics and manufacturing. It was hard hit in
2001-03 by the global recession, by the slump in the technology
sector, and by an outbreak of Severe Acute Respiratory Syndrome in
2003, which curbed tourism and consumer spending. The government
hopes to establish a new growth path that will be less vulnerable to
the external business cycle and will continue efforts to establish
Singapore as Southeast Asia's financial and high-tech hub. Fiscal
stimulus, low interest rates, a surge in exports, and internal
flexibility led to vigorous growth in 2004, with real GDP rising by
8 percent, by far the economy's best performance since 2000.

Slovakia
Slovakia has mastered much of the difficult transition from
a centrally planned economy to a modern market economy. The DZURINDA
government made excellent progress during 2001-04 in macroeconomic
stabilization and structural reform. Major privatizations are nearly
complete, the banking sector is almost completely in foreign hands,
and the government has helped facilitate a foreign investment boom
with business-friendly policies, such as labor market liberalization
and a 19% flat tax. Slovakia's economic growth exceeded expectations
in 2001-04, despite the general European slowdown. Unemployment, at
an unacceptable 15% in 2003-04, remains the economy's Achilles heel.
Slovakia joined the EU on 1 May 2004.

Slovenia
Slovenia, with its historical ties to Western Europe,
enjoys a GDP per capita substantially higher than that of the other
transitioning economies of Central Europe. In March 2004, Slovenia
became the first transition country to graduate from borrower status
to donor partner at the World Bank. Privatization of the economy
proceeded at an accelerated pace in 2002-04. Despite lackluster
performance in Europe in 2001-04, Slovenia maintained moderate
growth. Structural reforms to improve the business environment have
allowed for greater foreign participation in Slovenia's economy and
have helped to lower unemployment. Further measures to curb
inflation are still needed. Corruption and the high degree of
coordination between government, business, and central bank policy
were issues of concern in the run-up to Slovenia's 1 May 2004
accession to the European Union. In mid-2004 Slovenia agreed to
adopt the euro by 2007 and, therefore, must keep its debt levels,
budget deficits, interest rates, and inflation levels within the
EU's Maastrict criteria.

Solomon Islands
The bulk of the population depends on agriculture,
fishing, and forestry for at least part of their livelihood. Most
manufactured goods and petroleum products must be imported. The
islands are rich in undeveloped mineral resources such as lead,
zinc, nickel, and gold. Prior to the arrival of the Regional
Assistance Mission to the Solomon Islands (RAMSI), severe ethnic
violence, the closing of key businesses, and an empty government
treasury culminated in economic collapse. RAMSI has enabled a return
to law and order, a new period of economic stability, and modest
growth as the economy rebuilds.

Somalia
Somalia's economic fortunes are driven by its deep political
divisions. The northwestern area has declared its independence as
the "Republic of Somaliland"; the northeastern region of Puntland is
a semi-autonomous state; and the remaining southern portion is
riddled with the struggles of rival factions. Economic life
continues, in part because much activity is local and relatively
easily protected. Agriculture is the most important sector, with
livestock normally accounting for about 40% of GDP and about 65% of
export earnings, but Saudi Arabia's recent ban on Somali livestock,
because of Rift Valley Fever concerns, has severely hampered the
sector. Nomads and semi-nomads, who are dependent upon livestock for
their livelihood, make up a large portion of the population.
Livestock, hides, fish, charcoal, and bananas are Somalia's
principal exports, while sugar, sorghum, corn, qat, and machined
goods are the principal imports. Somalia's small industrial sector,
based on the processing of agricultural products, has largely been
looted and sold as scrap metal. Despite the seeming anarchy,
Somalia's service sector has managed to survive and grow.
Telecommunication firms provide wireless services in most major
cities and offer the lowest international call rates on the
continent. In the absence of a formal banking sector, money exchange
services have sprouted throughout the country, handling between $500
million and $1 billion in remittances annually. Mogadishu's main
market offers a variety of goods from food to the newest electronic
gadgets. Hotels continue to operate, and militias provide security.
The ongoing civil disturbances and clan rivalries, however, have
interfered with any broad-based economic development and
international aid arrangements. In 2004 Somalia's overdue financial
obligations to the IMF continued to grow. Statistics on Somalia's
GDP, growth, per capita income, and inflation should be viewed
skeptically. In late December 2004, a major tsunami took an
estimated 150 lives and caused destruction of properity in coastal
areas.

South Africa
South Africa is a middle-income, emerging market with
an abundant supply of natural resources; well-developed financial,
legal, communications, energy, and transport sectors; a stock
exchange that ranks among the 10 largest in the world; and a modern
infrastructure supporting an efficient distribution of goods to
major urban centers throughout the region. However, growth has not
been strong enough to lower South Africa's high unemployment rate;
and daunting economic problems remain from the apartheid era,
especially poverty and lack of economic empowerment among the
disadvantaged groups. South African economic policy is fiscally
conservative, but pragmatic, focusing on targeting inflation and
liberalizing trade as means to increase job growth and household
income.

South Georgia and the South Sandwich Islands
Some fishing takes
place in adjacent waters. There is a potential source of income from
harvesting finfish and krill. The islands receive income from
postage stamps produced in the UK, sale of fishing licenses, and
harbor and landing fees from tourist vessels. Tourism from
specialized cruise ships is increasing rapidly.

Southern Ocean
Fisheries in 2000-01 (1 July to 30 June) landed
112,934 metric tons, of which 87% was krill and 11% Patagonian
toothfish. International agreements were adopted in late 1999 to
reduce illegal, unreported, and unregulated fishing, which in the
2000-01 season landed, by one estimate, 8,376 metric tons of
Patagonian and antarctic toothfish. In the 2000-01 antarctic summer
12,248 tourists, most of them seaborne, visited the Southern Ocean
and Antarctica, compared to 14,762 the previous year.

Spain
The Spanish economy boomed from 1986 to 1990, averaging five
percent annual growth. After a European-wide recession in the early
1990s, the Spanish economy resumed moderate growth starting in 1994.
Spain's mixed capitalist economy supports a GDP that on a per capita
basis is 80% that of the four leading West European economies. The
center-right government of former President AZNAR successfully
worked to gain admission to the first group of countries launching
the European single currency (the euro) on 1 January 1999. The AZNAR
administration continued to advocate liberalization, privatization,
and deregulation of the economy and introduced some tax reforms to
that end. Unemployment fell steadily under the AZNAR administration
but remains high at 10.4%. Growth of 2.5% in 2003 and 2.6% in 2004
was satisfactory given the background of a faltering European
economy. The socialist president, RODRIGUEZ ZAPATERO, has initiated
economic and social reforms that are generally popular among the
masses of people but that are anathema to religious and other
conservative elements. Adjusting to the monetary and other economic
policies of an integrated Europe, reducing unemployment, and
absorbing widespread social changes will pose challenges to Spain
over the next few years.

Spratly Islands
Economic activity is limited to commercial fishing.
The proximity to nearby oil- and gas-producing sedimentary basins
suggests the potential for oil and gas deposits, but the region is
largely unexplored; there are no reliable estimates of potential
reserves; commercial exploitation has yet to be developed.

Sri Lanka
In 1977, Colombo abandoned statist economic policies and
its import substitution trade policy for market-oriented policies
and export-oriented trade. Sri Lanka's most dynamic sectors now are
food processing, textiles and apparel, food and beverages,
telecommunications, and insurance and banking. In 2003, plantation
crops made up only 15% of exports (compared with 93% in 1970), while
textiles and garments accounted for 63%. GDP grew at an average
annual rate of 5.5% in the early 1990s until a drought and a
deteriorating security situation lowered growth to 3.8% in 1996. The
economy rebounded in 1997-2000 with average growth of 5.3%, but 2001
saw the first contraction in the country's history, -1.4%, due to a
combination of power shortages, severe budgetary problems, the
global slowdown, and continuing civil strife. Growth recovered to
4.0% in 2002 and to 5.2% in both 2003 and 2004. About 800,000 Sri
Lankans work abroad, 90% in the Middle East. They send home about $1
billion a year. The struggle by the Tamil Tigers of the north and
east for a largely independent homeland continues to cast a shadow
over the economy. In late December 2004, a major tsunami took about
31,000 lives, left more than 6,300 missing and 443,000 displaced,
and destroyed an estimated $1.5 billion worth of property.

Sudan
Sudan has turned around a struggling economy with sound
economic policies and infrastructure investments, but it still faces
formidable economic problems, starting from its low level of per
capita output. From 1997 to date, Sudan has been implementing IMF
macroeconomic reforms. In 1999, Sudan began exporting crude oil and
in the last quarter of 1999 recorded its first trade surplus, which,
along with monetary policy, has stabilized the exchange rate.
Increased oil production, revived light industry, and expanded
export processing zones helped sustain GDP growth at 6.4% in 2004.
Agriculture production remains Sudan's most important sector,
employing 80% of the work force, contributing 39% of GDP, and
accounting for most of GDP growth, but most farms remain rain-fed
and susceptible to drought. Chronic instability - including the
long-standing civil war between the Muslim north and the
Christian/pagan south, adverse weather, and weak world agricultural
prices - ensure that much of the population will remain at or below
the poverty line for years.

Suriname
The economy is dominated by the alumina industry, which
accounts for more than 15% of GDP and 70% of export earnings.
Suriname's economic prospects for the medium term will depend on
continued commitment to responsible monetary and fiscal policies and
to the introduction of structural reforms to liberalize markets and
promote competition. The government of Ronald VENETIAAN has begun an
austerity program, raised taxes, and attempted to control spending.
While - in 2002 - President VENETIAAN agreed to a large pay raise
for civil servants, threatening his earlier gains in stabilizing the
economy, he has not repeated this promise in the run-up to the May
2005 elections. The Dutch Government has agreed to restart the aid
flow, which will allow Suriname to access international development
financing, but plans to phase out funds over the next five years.
The short-term economic outlook depends on the government's ability
to control inflation and on the development of projects in the
bauxite and gold mining sectors. Prospects for local onshore oil
production are good, as a drilling program is underway. Offshore oil
drilling was given a boost in 2004 when the State Oil Company
(Staatsolie) signed exploration agreements with Repsol and Mearsk.

Svalbard
Coal mining is the major economic activity on Svalbard. The
treaty of 9 February 1920 gives the 41 signatories equal rights to
exploit mineral deposits, subject to Norwegian regulation. Although
US, UK, Dutch, and Swedish coal companies have mined in the past,
the only companies still mining are Norwegian and Russian. The
settlements on Svalbard are essentially company towns. The Norwegian
state-owned coal company employs nearly 60% of the Norwegian
population on the island, runs many of the local services, and
provides most of the local infrastructure. There is also some
hunting of seal, reindeer, and fox.

Swaziland
In this small, landlocked economy, subsistence agriculture
occupies more than 80% of the population. The manufacturing sector
has diversified since the mid-1980s. Sugar and wood pulp remain
important foreign exchange earners. Mining has declined in
importance in recent years with only coal and quarry stone mines
remaining active. Surrounded by South Africa, except for a short
border with Mozambique, Swaziland is heavily dependent on South
Africa from which it receives about nine-tenths of its imports and
to which it sends nearly three-quarters of its exports. Customs
duties from the Southern African Customs Union and worker
remittances from South Africa substantially supplement domestically
earned income. The government is trying to improve the atmosphere
for foreign investment. Overgrazing, soil depletion, drought, and
sometimes floods persist as problems for the future. More than
one-fourth of the population needed emergency food aid in 2004
because of drought, and more than one-third of the adult population
was infected by HIV/AIDS.

Sweden
Aided by peace and neutrality for the whole 20th century,
Sweden has achieved an enviable standard of living under a mixed
system of high-tech capitalism and extensive welfare benefits. It
has a modern distribution system, excellent internal and external
communications, and a skilled labor force. Timber, hydropower, and
iron ore constitute the resource base of an economy heavily oriented
toward foreign trade. Privately owned firms account for about 90% of
industrial output, of which the engineering sector accounts for 50%
of output and exports. Agriculture accounts for only 2% of GDP and
2% of the jobs. The government's commitment to fiscal discipline
resulted in a substantial budgetary surplus in 2001, which was cut
by more than half in 2002, due to the global economic slowdown,
declining revenue, and increased spending. The Swedish central bank
(the Riksbank) focuses on price stability with its inflation target
of 2%. Growth remained sluggish in 2003, but picked up in 2004.
Presumably because of generous sicktime benefits, Swedish workers
report in sick more often than other Europeans. On 14 September
2003, Swedish voters turned down entry into the euro system,
concerned about the impact on democracy and sovereignty.

Switzerland
Switzerland is a peaceful, prosperous, and stable modern
market economy with low unemployment, a highly skilled labor force,
and a per capita GDP larger than that of the big Western European
economies. The Swiss in recent years have brought their economic
practices largely into conformity with the EU's to enhance their
international competitiveness. Switzerland remains a safe haven for
investors, because it has maintained a degree of bank secrecy and
has kept up the franc's long-term external value. Reflecting the
anemic economic conditions of Europe, GDP growth dropped in 2001 to
about 0.8%, to 0.2% in 2002, and to -0.3% in 2003, with a small rise
to 1.8% in 2004. Even so, unemployment has remained at less than
half the EU average.

Syria
Real GDP growth rose to 2.3 percent in 2004, a slight increase
from 2003 when the predominantly statist economy suffered from
disruptions caused by the war in Iraq and other developments in the
region. Annual real GDP growth has averaged 2.3 percent for the last
seven years. The Government of Syria has implemented modest economic
reforms in the last few years, including cutting interest rates,
opening private banks, consolidating some of the multiple exchange
rates, and raising prices on some subsidized foodstuffs.
Nevertheless, the economy remains highly controlled by the
government. Long run economic constraints include declining oil
production and exports and pressure on water supplies caused by
rapid population growth, industrial expansion, and increased water
pollution.

Taiwan
Taiwan has a dynamic capitalist economy with gradually
decreasing guidance of investment and foreign trade by government
authorities. In keeping with this trend, some large government-owned
banks and industrial firms are being privatized. Exports have
provided the primary impetus for industrialization. The trade
surplus is substantial, and foreign reserves are the world's third
largest. Agriculture contributes less than 2% to GDP, down from 32%
in 1952. Taiwan is a major investor throughout Southeast Asia. China
has overtaken the US to become Taiwan's largest export market.
Because of its conservative financial approach and its
entrepreneurial strengths, Taiwan suffered little compared with many
of its neighbors from the Asian financial crisis in 1998. The global
economic downturn, combined with problems in policy coordination by
the administration and bad debts in the banking system, pushed
Taiwan into recession in 2001, the first year of negative growth
ever recorded. Unemployment also reached record levels. Output
recovered moderately in 2002 in the face of continued global
slowdown, fragile consumer confidence, and bad bank loans; and the
essentially vibrant economy pushed ahead in 2003-04. Growing
economic ties with China are a dominant long-term factor, e.g.,
exports to China of parts and equipment for the assembly of goods
for export to developed countries.

Tajikistan
Tajikistan has one of the lowest per capita GDPs among
the 15 former Soviet republics. Only 5% to 6% of the land area is
arable. Cotton is the most important crop. Mineral resources, varied
but limited in amount, include silver, gold, uranium, and tungsten.
Industry consists only of a large aluminum plant, hydropower
facilities, and small obsolete factories mostly in light industry
and food processing. The civil war (1992-97) severely damaged the
already weak economic infrastructure and caused a sharp decline in
industrial and agricultural production. Even though 60% of its
people continue to live in abject poverty, Tajikistan has
experienced steady economic growth since 1997. Continued
privatization of medium and large state-owned enterprises will
further increase productivity. Tajikistan's economic situation,
however, remains fragile due to uneven implementation of structural
reforms, weak governance, widespread unemployment, and the external
debt burden. A debt restructuring agreement was reached with Russia
in December 2002, including an interest rate of 4%, a 3-year grace
period, and a US $49.8 million credit to the Central Bank of
Tajikistan.