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

Bhutan
The economy, one of the world's smallest and least developed,
is based on agriculture and forestry, which provide the main
livelihood for more than 90% of the population. Agriculture consists
largely of subsistence farming and animal husbandry. Rugged
mountains dominate the terrain and make the building of roads and
other infrastructure difficult and expensive. The economy is closely
aligned with India's through strong trade and monetary links and
dependence on India's financial assistance. The industrial sector is
technologically backward, with most production of the cottage
industry type. Most development projects, such as road construction,
rely on Indian migrant labor. Bhutan's hydropower potential and its
attraction for tourists are key resources. Model education, social,
and environment programs are underway with support from multilateral
development organizations. Each economic program takes into account
the government's desire to protect the country's environment and
cultural traditions. For example, the government, in its cautious
expansion of the tourist sector, encourages visits by upscale,
environmentally conscientious tourists. Detailed controls and
uncertain policies in areas like industrial licensing, trade, labor,
and finance continue to hamper foreign investment.

Bolivia
Bolivia, long one of the poorest and least developed Latin
American countries, reformed its economy after suffering a
disastrous economic crisis in the early 1980s. The reforms spurred
real GDP growth, which averaged 4% in the 1990s, and poverty rates
fell. Economic growth, however, lagged again beginning in 1999
because of a global slowdown and homegrown factors such as political
turmoil, civil unrest, and soaring fiscal deficits, all of which
hurt investor confidence. In 2003, violent protests against the
pro-foreign investment economic policies of President SANCHEZ DE
LOZADA led to his resignation and the cancellation of plans to
export Bolivia's newly discovered natural gas reserves to large
northern hemisphere markets. In 2005, the government passed a
controversial natural gas law that imposes on the oil and gas firms
significantly higher taxes as well as new contracts that give the
state control of their operations. Bolivian officials are in the
process of implementing the law; meanwhile, foreign investors have
stopped investing and have taken the first legal steps to secure
their investments. Real GDP growth in 2003-05 - helped by increased
demand for natural gas in neighboring Brazil - was positive, but
still below the levels seen during the 1990s. Bolivia's fiscal
position has improved in recent years, but the country remains
dependent on foreign aid from multilateral lenders and foreign
governments to meet budget shortfalls. In 2005, the G8 announced a
$2 billion debt-forgiveness plan over the next few decades that
should help reduce some fiscal pressures on the government in the
near term.

Bosnia and Herzegovina
Bosnia and Herzegovina ranked next to
Macedonia as the poorest republic in the old Yugoslav federation.
Although agriculture is almost all in private hands, farms are small
and inefficient, and the republic traditionally is a net importer of
food. Industry remains greatly overstaffed, a holdover from the
socialist economic structure of Yugoslavia. TITO had pushed the
development of military industries in the republic with the result
that Bosnia was saddled with a host of industrial firms with little
commercial potential. The interethnic warfare in Bosnia caused
production to plummet by 80% from 1992 to 1995 and unemployment to
soar. With an uneasy peace in place, output recovered in 1996-99 at
high percentage rates from a low base; but output growth slowed in
2000-02. Part of the lag in output was made up in 2003-05.
National-level statistics are limited and do not capture the large
share of black market activity. The konvertibilna marka (convertible
mark or BAM)- the national currency introduced in 1998 - is pegged
to the euro, and confidence in the currency and the banking sector
has increased. Implementation of privatization, however, has been
slow, and local entities only reluctantly support national-level
institutions. Banking reform accelerated in 2001 as all the
Communist-era payments bureaus were shut down; foreign banks,
primarily from Western Europe, now control most of the banking
sector. A sizeable current account deficit and high unemployment
rate remain the two most serious economic problems. The country
receives substantial amounts of reconstruction assistance and
humanitarian aid from the international community but will have to
prepare for an era of declining assistance.

Botswana
Botswana has maintained one of the world's highest economic
growth rates since independence in 1966. Through fiscal discipline
and sound management, Botswana has transformed itself from one of
the poorest countries in the world to a middle-income country with a
per capita GDP of $10,000 in 2005. Two major investment services
rank Botswana as the best credit risk in Africa. Diamond mining has
fueled much of the expansion and currently accounts for more than
one-third of GDP and for 70-80% of export earnings. Tourism,
financial services, subsistence farming, and cattle raising are
other key sectors. On the downside, the government must deal with
high rates of unemployment and poverty. Unemployment officially is
23.8%, but unofficial estimates place it closer to 40%. HIV/AIDS
infection rates are the second highest in the world and threaten
Botswana's impressive economic gains. An expected leveling off in
diamond mining production overshadows long-term prospects.

Bouvet Island
no economic activity; declared a nature reserve

Brazil
Characterized by large and well-developed agricultural,
mining, manufacturing, and service sectors, Brazil's economy
outweighs that of all other South American countries and is
expanding its presence in world markets. From 2001-03 real wages
fell and Brazil's economy grew, on average only 2.2% per year, as
the country absorbed a series of domestic and international economic
shocks. That Brazil absorbed these shocks without financial collapse
is a tribute to the resiliency of the Brazilian economy and the
economic program put in place by former President CARDOSO and
strengthened by President LULA DA SILVA. In 2004, Brazil enjoyed
more robust growth that yielded increases in employment and real
wages. The three pillars of the economic program are a floating
exchange rate, an inflation-targeting regime, and tight fiscal
policy, all reinforced by a series of IMF programs. The currency
depreciated sharply in 2001 and 2002, which contributed to a
dramatic current account adjustment; in 2003 to 2005, Brazil ran
record trade surpluses and recorded its first current account
surpluses since 1992. Productivity gains - particularly in
agriculture - also contributed to the surge in exports, and Brazil
in 2005 surpassed the previous year's record export level. While
economic management has been good, there remain important economic
vulnerabilities. The most significant are debt-related: the
government's largely domestic debt increased steadily from 1994 to
2003 - straining government finances - before falling as a
percentage of GDP in 2005, while Brazil's foreign debt (a mix of
private and public debt) is large in relation to Brazil's small (but
growing) export base. Another challenge is maintaining economic
growth over a period of time to generate employment and make the
government debt burden more manageable.

British Indian Ocean Territory
All economic activity is concentrated
on the largest island of Diego Garcia, where joint UK-US defense
facilities are located. Construction projects and various services
needed to support the military installations are done by military
and contract employees from the UK, Mauritius, the Philippines, and
the US. There are no industrial or agricultural activities on the
islands. When the Ilois return, they plan to reestablish sugarcane
production and fishing. The country makes money by selling fishing
licenses and postage stamps.

British Virgin Islands
The economy, one of the most stable and
prosperous in the Caribbean, is highly dependent on tourism,
generating an estimated 45% of the national income. An estimated
350,000 tourists, mainly from the US, visited the islands in 1998.
Tourism suffered in 2002 because of the lackluster US economy. In
the mid-1980s, the government began offering offshore registration
to companies wishing to incorporate in the islands, and
incorporation fees now generate substantial revenues. Roughly
400,000 companies were on the offshore registry by yearend 2000. The
adoption of a comprehensive insurance law in late 1994, which
provides a blanket of confidentiality with regulated statutory
gateways for investigation of criminal offenses, made the British
Virgin Islands even more attractive to international business.
Livestock raising is the most important agricultural activity; poor
soils limit the islands' ability to meet domestic food requirements.
Because of traditionally close links with the US Virgin Islands, the
British Virgin Islands has used the US dollar as its currency since
1959.

Brunei
This small, well-to-do economy encompasses a mixture of
foreign and domestic entrepreneurship, government regulation,
welfare measures, and village tradition. Crude oil and natural gas
production account for nearly half of GDP and more than 90% of
government revenues. Per capita GDP is far above most other Third
World countries, and substantial income from overseas investment
supplements income from domestic production. The government provides
for all medical services and free education through the university
level and subsidizes rice and housing. Brunei's leaders are
concerned that steadily increased integration in the world economy
will undermine internal social cohesion, although it became a more
prominent player by serving as chairman for the 2000 APEC (Asian
Pacific Economic Cooperation) forum. Plans for the future include
upgrading the labor force, reducing unemployment, strengthening the
banking and tourist sectors, and, in general, further widening the
economic base beyond oil and gas.

Bulgaria
Bulgaria, a former communist country soon to enter the
European Union, has experienced macroeconomic stability and strong
growth since a major economic downturn in 1996 led to the fall of
the then socialist government. As a result, the government became
committed to economic reform and responsible fiscal planning.
Minerals, including coal, copper, and zinc, play an important role
in industry. In 1997, macroeconomic stability was reinforced by the
imposition of a fixed exchange rate of the lev against the German
D-mark - the currency is now fixed against the euro - and the
negotiation of an IMF standby agreement. Low inflation and steady
progress on structural reforms improved the business environment;
Bulgaria has averaged 4% growth since 2000 and has begun to attract
significant amounts of foreign direct investment. Corruption in the
public administration, a weak judiciary, and the presence of
organized crime remain the largest challenges for Bulgaria.

Burkina Faso
One of the poorest countries in the world, landlocked
Burkina Faso has few natural resources and a weak industrial base.
About 90% of the population is engaged in subsistence agriculture,
which is vulnerable to harsh climatic conditions. Cotton is the key
crop and the government has joined with other cotton producing
countries in the region to lobby for improved access to Western
markets. GDP growth has largely been driven by increases in world
cotton prices. Industry remains dominated by unprofitable
government-controlled corporations. Following the CFA franc currency
devaluation in January 1994, the government updated its development
program in conjunction with international agencies; exports and
economic growth have increased. The government devolved
macroeconomic policy and inflation targeting to the West African
regional central bank (BCEAO), but maintains control over fiscal and
microeconomic policies, including implementing reforms to encourage
private investment. The bitter internal crisis in neighboring Cote
d'Ivoire continues to hurt trade and industrial prospects and
deepens the need for international assistance.

Burma
Burma, a resource-rich country, suffers from pervasive
government controls, inefficient economic policies, and rural
poverty. The junta took steps in the early 1990s to liberalize the
economy after decades of failure under the "Burmese Way to
Socialism," but those efforts stalled, and some of the
liberalization measures were rescinded. Burma does not have monetary
or fiscal stability, so the economy suffers from serious
macroeconomic imbalances - including inflation, multiple official
exchange rates that overvalue the Burmese kyat, and a distorted
interest rate regime. Most overseas development assistance ceased
after the junta began to suppress the democracy movement in 1988 and
subsequently refused to honor the results of the 1990 legislative
elections. In response to the government of Burma's attack in May
2003 on AUNG SAN SUU KYI and her convoy, the US imposed new economic
sanctions against Burma - including a ban on imports of Burmese
products and a ban on provision of financial services by US persons.
A poor investment climate further slowed the inflow of foreign
exchange. The most productive sectors will continue to be in
extractive industries, especially oil and gas, mining, and timber.
Other areas, such as manufacturing and services, are struggling with
inadequate infrastructure, unpredictable import/export policies,
deteriorating health and education systems, and corruption. A major
banking crisis in 2003 shuttered the country's 20 private banks and
disrupted the economy. As of December 2005, the largest private
banks operate under tight restrictions limiting the private sector's
access to formal credit. Official statistics are inaccurate.
Published statistics on foreign trade are greatly understated
because of the size of the black market and unofficial border trade
- often estimated to be as large as the official economy. Burma's
trade with Thailand, China, and India is rising. Though the Burmese
government has good economic relations with its neighbors, better
investment and business climates and an improved political situation
are needed to promote foreign investment, exports, and tourism.

Burundi
Burundi is a landlocked, resource-poor country with an
underdeveloped manufacturing sector. The economy is predominantly
agricultural with more than 90% of the population dependent on
subsistence agriculture. Economic growth depends on coffee and tea
exports, which account for 90% of foreign exchange earnings. The
ability to pay for imports, therefore, rests primarily on weather
conditions and international coffee and tea prices. The Tutsi
minority, 14% of the population, dominates the government and the
coffee trade at the expense of the Hutu majority, 85% of the
population. An ethnic-based war that lasted for over a decade
resulted in more than 200,000 deaths, forced more than 48,000
refugees into Tanzania, and displaced 140,000 others internally.
Only one in two children go to school, and approximately one in 10
adults has HIV/AIDS. Food, medicine, and electricity remain in short
supply. Political stability and the end of the civil war have
improved aid flows and economic activity has increased, but
underlying weaknesses - a high poverty rate, poor education rates, a
weak legal system, and low administrative capacity - risk
undermining planned economic reforms.

Cambodia
In 1999, the first full year of peace in 30 years, the
government made progress on economic reforms. The US and Cambodia
signed a Bilateral Textile Agreement, which gave Cambodia a
guaranteed quota of US textile imports and established a bonus for
improving working conditions and enforcing Cambodian labor laws and
international labor standards in the industry. From 2001 to 2004,
the economy grew at an average rate of 6.4%, driven largely by an
expansion in the garment sector and tourism. With the January 2005
expiration of a WTO Agreement on Textiles and Clothing,
Cambodia-based textile producers were forced to compete directly
with lower-priced producing countries such as China and India.
Although initial 2005 GDP growth estimates were less than 3%,
better-than-expected garment sector performance led the IMF to
forecast 6% growth in 2005. Faced with the possibility that its
vibrant garment industry, with more than 200,000 jobs, could be in
serious danger, the Cambodian government has committed itself to a
policy of continued support for high labor standards in an attempt
to maintain favor with buyers. The tourism industry continues to
grow rapidly, with foreign visitors surpassing 1 million for the
year by September 2005. In 2005, exploitable oil and natural gas
deposits were found beneath Cambodia's territorial waters,
representing a new revenue stream for the government once commercial
extraction begins in the coming years. The long-term development of
the economy remains a daunting challenge. The Cambodian government
continues to work with bilateral and multilateral donors, including
the World Bank and IMF, to address the country's many pressing
needs. In December 2004, official donors pledged $504 million in aid
for 2005 on the condition that the Cambodian government implement
steps to reduce corruption. The major economic challenge for
Cambodia over the next decade will be fashioning an economic
environment in which the private sector can create enough jobs to
handle Cambodia's demographic imbalance. More than 50% of the
population is 20 years or younger. The population lacks education
and productive skills, particularly in the poverty-ridden
countryside, which suffers from an almost total lack of basic
infrastructure. Fully 75% of the population remains engaged in
subsistence farming.

Cameroon
Because of its oil resources and favorable agricultural
conditions, Cameroon has one of the best-endowed primary commodity
economies in sub-Saharan Africa. Still, it faces many of the serious
problems facing other underdeveloped countries, such as a top-heavy
civil service and a generally unfavorable climate for business
enterprise. Since 1990, the government has embarked on various IMF
and World Bank programs designed to spur business investment,
increase efficiency in agriculture, improve trade, and recapitalize
the nation's banks. In June 2000, the government completed an
IMF-sponsored, three-year structural adjustment program; however,
the IMF is pressing for more reforms, including increased budget
transparency, privatization, and poverty reduction programs.
International oil and cocoa prices have considerable impact on the
economy.

Canada
As an affluent, high-tech industrial society in the trillion
dollar class, Canada resembles the US in its market-oriented
economic system, pattern of production, and affluent living
standards. Since World War II, the impressive growth of the
manufacturing, mining, and service sectors has transformed the
nation from a largely rural economy into one primarily industrial
and urban. The 1989 US-Canada Free Trade Agreement (FTA) and the
1994 North American Free Trade Agreement (NAFTA) (which includes
Mexico) touched off a dramatic increase in trade and economic
integration with the US. Given its great natural resources, skilled
labor force, and modern capital plant, Canada enjoys solid economic
prospects. Top-notch fiscal management has produced consecutive
balanced budgets since 1997, although public debate continues over
how to manage the rising cost of the publicly funded healthcare
system. Exports account for roughly a third of GDP. Canada enjoys a
substantial trade surplus with its principal trading partner, the
US, which absorbs more than 85% of Canadian exports. Canada is the
US' largest foreign supplier of energy, including oil, gas, uranium,
and electric power.

Cape Verde
This island economy suffers from a poor natural resource
base, including serious water shortages exacerbated by cycles of
long-term drought. The economy is service-oriented, with commerce,
transport, tourism, and public services accounting for 66% of GDP.
Although nearly 70% of the population lives in rural areas, the
share of agriculture in GDP in 2004 was only 12%, of which fishing
accounted for 1.5%. About 82% of food must be imported. The fishing
potential, mostly lobster and tuna, is not fully exploited. Cape
Verde annually runs a high trade deficit, financed by foreign aid
and remittances from emigrants; remittances supplement GDP by more
than 20%. Economic reforms are aimed at developing the private
sector and attracting foreign investment to diversify the economy.
Future prospects depend heavily on the maintenance of aid flows, the
encouragement of tourism, remittances, and the momentum of the
government's development program.

Cayman Islands
With no direct taxation, the islands are a thriving
offshore financial center. More than 40,000 companies were
registered in the Cayman Islands as of 1998, including almost 600
banks and trust companies; banking assets exceed $500 billion. A
stock exchange was opened in 1997. Tourism is also a mainstay,
accounting for about 70% of GDP and 75% of foreign currency
earnings. The tourist industry is aimed at the luxury market and
caters mainly to visitors from North America. Total tourist arrivals
exceeded 1.2 million in 1997, with 600,000 from the US. About 90% of
the islands' food and consumer goods must be imported. The
Caymanians enjoy one of the highest outputs per capita and one of
the highest standards of living in the world.

Central African Republic
Subsistence agriculture, together with
forestry, remains the backbone of the economy of the Central African
Republic (CAR), with more than 70% of the population living in
outlying areas. The agricultural sector generates half of GDP.
Timber has accounted for about 16% of export earnings and the
diamond industry, for 40%. Important constraints to economic
development include the CAR's landlocked position, a poor
transportation system, a largely unskilled work force, and a legacy
of misdirected macroeconomic policies. Factional fighting between
the government and its opponents remains a drag on economic
revitalization, with GDP growth at only 0.5% in 2004 and 2.5% in
2005. Distribution of income is extraordinarily unequal. Grants from
France and the international community can only partially meet
humanitarian needs.

Chad
Chad's primarily agricultural economy will continue to be
boosted by major foreign direct investment projects in the oil
sector that began in 2000. Over 80% of Chad's population relies on
subsistence farming and livestock raising for its livelihood. Chad's
economy has long been handicapped by its landlocked position, high
energy costs, and a history of instability. Chad relies on foreign
assistance and foreign capital for most public and private sector
investment projects. A consortium led by two US companies has been
investing $3.7 billion to develop oil reserves - estimated at 1
billion barrels - in southern Chad. The nation's total oil reserves
has been estimated to be 2 billion barrels. Oil production came on
stream in late 2003. Chad began to export oil in 2004. Cotton,
cattle, and gum arabic provide the bulk of Chad's non-oil export
earnings.

Chile
Chile has a market-oriented economy characterized by a high
level of foreign trade. During the early 1990s, Chile's reputation
as a role model for economic reform was strengthened when the
democratic government of Patricio AYLWIN - which took over from the
military in 1990 - deepened the economic reform initiated by the
military government. Growth in real GDP averaged 8% during 1991-97,
but fell to half that level in 1998 because of tight monetary
policies implemented to keep the current account deficit in check
and because of lower export earnings - the latter a product of the
global financial crisis. A severe drought exacerbated the recession
in 1999, reducing crop yields and causing hydroelectric shortfalls
and electricity rationing, and Chile experienced negative economic
growth for the first time in more than 15 years. Despite the effects
of the recession, Chile maintained its reputation for strong
financial institutions and sound policy that have given it the
strongest sovereign bond rating in South America. By the end of
1999, exports and economic activity had begun to recover, and growth
rebounded to 4.2% in 2000. Growth fell back to 3.1% in 2001 and 2.1%
in 2002, largely due to lackluster global growth and the devaluation
of the Argentine peso. Chile's economy began a slow recovery in
2003, growing 3.2%, and accelerated to 6.1% in 2004-05, while Chile
maintained a low rate of inflation. GDP growth benefited from high
copper prices, solid export earnings (particularly forestry,
fishing, and mining), and stepped-up foreign direct investment.
Unemployment, however, remains stubbornly high. Chile deepened its
longstanding commitment to trade liberalization with the signing of
a free trade agreement with the US, which took effect on 1 January
2004. Chile signed a free trade agreement with China in November
2005, and it already has several trade deals signed with other
nations and blocs, including the European Union, Mercosur, South
Korea, and Mexico. Record-high copper prices helped to strengthen
the peso to a 5½-year high, as of December 2005, and will boost GDP
in 2006.

China
China's economy during the last quarter century has changed
from a centrally planned system that was largely closed to
international trade to a more market-oriented economy that has a
rapidly growing private sector and is a major player in the global
economy. Reforms started in the late 1970s with the phasing out of
collectivized agriculture, and expanded to include the gradual
liberalization of prices, fiscal decentralization, increased
autonomy for state enterprises, the foundation of a diversified
banking system, the development of stock markets, the rapid growth
of the non-state sector, and the opening to foreign trade and
investment. China has generally implemented reforms in a gradualist
or piecemeal fashion. The process continues with key moves in 2005
including the sale of equity in China's largest state banks to
foreign investors and refinements in foreign exchange and bond
markets. The restructuring of the economy and resulting efficiency
gains have contributed to a more than tenfold increase in GDP since
1978. Measured on a purchasing power parity (PPP) basis, China in
2005 stood as the second-largest economy in the world after the US,
although in per capita terms the country is still lower
middle-income and 150 million Chinese fall below international
poverty lines. Economic development has generally been more rapid in
coastal provinces than in the interior, and there are large
disparities in per capita income between regions. The government has
struggled to: (a) sustain adequate job growth for tens of millions
of workers laid off from state-owned enterprises, migrants, and new
entrants to the work force; (b) reduce corruption and other economic
crimes; and (c) contain environmental damage and social strife
related to the economy's rapid transformation. From 100 to 150
million surplus rural workers are adrift between the villages and
the cities, many subsisting through part-time, low-paying jobs. One
demographic consequence of the "one child" policy is that China is
now one of the most rapidly aging countries in the world. Another
long-term threat to growth is the deterioration in the environment -
notably air pollution, soil erosion, and the steady fall of the
water table, especially in the north. China continues to lose arable
land because of erosion and economic development. China has
benefited from a huge expansion in computer Internet use, with more
than 100 million users at the end of 2005. Foreign investment
remains a strong element in China's remarkable expansion in world
trade and has been an important factor in the growth of urban jobs.
In July 2005, China revalued its currency by 2.1% against the US
dollar and moved to an exchange rate system that references a basket
of currencies. Reports of shortages of electric power in the summer
of 2005 in southern China receded by September-October and did not
have a substantial impact on China's economy. More power generating
capacity is scheduled to come on line in 2006 as large scale
investments are completed. Thirteen years in construction at a cost
of $24 billion, the immense Three Gorges Dam across the Yangtze
River will be essentially completed in 2006 and will revolutionize
electrification and flood control in the area. The Central Committee
of the Chinese Communist Party in October 2005 approved the draft
11th Five-Year Plan and the National People's Congress is expected
to give final approval in March 2006. The plan calls for a 20%
reduction in energy consumption per unit of GDP by 2010 and an
estimated 45% increase in GDP by 2010. The plan states that
conserving resources and protecting the environment are basic goals,
but it lacks details on the policies and reforms necessary to
achieve these goals.

Christmas Island
Phosphate mining had been the only significant
economic activity, but in December 1987 the Australian Government
closed the mine. In 1991, the mine was reopened. With the support of
the government, a $34 million casino opened in 1993. The casino
closed in 1998. The Australian Government in 2001 agreed to support
the creation of a commercial space-launching site on the island,
projected to begin operations in the near future.

Clipperton Island
Although 115 species of fish have been identified
in the territorial waters of Clipperton Island, the only economic
activity is tuna fishing.

Cocos (Keeling) Islands
Grown throughout the islands, coconuts are
the sole cash crop. Small local gardens and fishing contribute to
the food supply, but additional food and most other necessities must
be imported from Australia. There is a small tourist industry.

Colombia
Colombia's economy has been on a recovery trend during the
past two years despite a serious armed conflict. The economy
continues to improve thanks to austere government budgets, focused
efforts to reduce public debt levels, an export-oriented growth
strategy, and an improved security situation in the country. Ongoing
economic problems facing President URIBE range from reforming the
pension system to reducing high unemployment. New exploration is
needed to offset declining oil production. On the positive side,
several international financial institutions have praised the
economic reforms introduced by URIBE, which succeeded in reducing
the public-sector deficit below 1.5% of GDP. The government's
economic policy and democratic security strategy have engendered a
growing sense of confidence in the economy, particularly within the
business sector. Coffee prices have recovered from previous lows as
the Colombian coffee industry pursues greater market shares in
developed countries such as the United States.

Comoros
One of the world's poorest countries, Comoros is made up of
three islands that have inadequate transportation links, a young and
rapidly increasing population, and few natural resources. The low
educational level of the labor force contributes to a subsistence
level of economic activity, high unemployment, and a heavy
dependence on foreign grants and technical assistance. Agriculture,
including fishing, hunting, and forestry, contributes 40% to GDP,
employs 80% of the labor force, and provides most of the exports.
The country is not self-sufficient in food production; rice, the
main staple, accounts for the bulk of imports. The government -
which is hampered by internal political disputes - is struggling to
upgrade education and technical training, privatize commercial and
industrial enterprises, improve health services, diversify exports,
promote tourism, and reduce the high population growth rate.
Increased foreign support is essential if the goal of 4% annual GDP
growth is to be met. Remittances from 150,000 Comorans abroad help
supplement GDP.

Congo, Democratic Republic of the
The economy of the Democratic
Republic of the Congo - a nation endowed with vast potential wealth
- has declined drastically since the mid-1980s. The war, which began
in August 1998, dramatically reduced national output and government
revenue, increased external debt, and resulted in the deaths of
perhaps 3.5 million people from violence, famine, and disease.
Foreign businesses curtailed operations due to uncertainty about the
outcome of the conflict, lack of infrastructure, and the difficult
operating environment. Conditions improved in late 2002 with the
withdrawal of a large portion of the invading foreign troops. The
transitional government has reopened relations with international
financial institutions and international donors, and President
KABILA has begun implementing reforms. Much economic activity lies
outside the GDP data. Economic stability improved in 2003-05,
although an uncertain legal framework, corruption, and a lack of
openness in government policy continues to hamper growth. In 2005,
renewed activity in the mining sector, the source of most exports,
boosted Kinshasa's fiscal position and GDP growth. Business and
economic prospects are expected to improve once a new government is
installed after elections.

Congo, Republic of the
The economy is a mixture of village
agriculture and handicrafts, an industrial sector based largely on
oil, support services, and a government characterized by budget
problems and overstaffing. Oil has supplanted forestry as the
mainstay of the economy, providing a major share of government
revenues and exports. In the early 1980s, rapidly rising oil
revenues enabled the government to finance large-scale development
projects with GDP growth averaging 5% annually, one of the highest
rates in Africa. The government has mortgaged a substantial portion
of its oil earnings through oil-backed loans that have contributed
to a growing debt burden and chronic revenue shortfalls. Economic
reform efforts have been undertaken with the support of
international organizations, notably the World Bank and the IMF.
However, the reform program came to a halt in June 1997 when civil
war erupted. Denis SASSOU-NGUESSO, who returned to power when the
war ended in October 1997, publicly expressed interest in moving
forward on economic reforms and privatization and in renewing
cooperation with international financial institutions. Economic
progress was badly hurt by slumping oil prices and the resumption of
armed conflict in December 1998, which worsened the republic's
budget deficit. The current administration presides over an uneasy
internal peace and faces difficult economic challenges of
stimulating recovery and reducing poverty. Recovery of oil prices
has boosted the economy's GDP and near-term prospects. The Republic
of Congo may be eligible for an IMF-World Bank heavily indebted poor
countries (HIPC) initiative in early 2006, provided it meets the
strict fiscal and monetary targets set out for it under a new
three-year Poverty Reduction and Growth Facility (PRGF) with the IMF.

Cook Islands
Like many other South Pacific island nations, the Cook
Islands' economic development is hindered by the isolation of the
country from foreign markets, the limited size of domestic markets,
lack of natural resources, periodic devastation from natural
disasters, and inadequate infrastructure. Agriculture, employing
about 70% of the working population, provides the economic base with
major exports made up of copra and citrus fruit. Black pearls are
the Cook Island's leading export. Manufacturing activities are
limited to fruit processing, clothing, and handicrafts. Trade
deficits are offset by remittances from emigrants and by foreign
aid, overwhelmingly from New Zealand. In the 1980s and 1990s, the
country lived beyond its means, maintaining a bloated public service
and accumulating a large foreign debt. Subsequent reforms, including
the sale of state assets, the strengthening of economic management,
the encouragement of tourism, and a debt restructuring agreement,
have rekindled investment and growth.

Coral Sea Islands
no economic activity

Costa Rica
Costa Rica's basically stable economy depends on tourism,
agriculture, and electronics exports. Poverty has been substantially
reduced over the past 15 years, and a strong social safety net has
been put into place. Foreign investors remain attracted by the
country's political stability and high education levels, and tourism
continues to bring in foreign exchange. Low prices for coffee and
bananas have hurt the agricultural sector. The government continues
to grapple with its large internal and external deficits and sizable
internal debt. The reduction of inflation remains a difficult
problem because of rises in the price of imports, labor market
rigidities, and fiscal deficits. The country also needs to reform
its tax system and its pattern of public expenditure. Costa Rica is
the only signatory to the US-Central American Free Trade Agreement
(CAFTA) that has not ratified it. CAFTA implementation would result
in economic reforms and an improved investment climate.

Cote d'Ivoire
Cote d'Ivoire is among the world's largest producers
and exporters of coffee, cocoa beans, and palm oil. Consequently,
the economy is highly sensitive to fluctuations in international
prices for these products and weather conditions. Despite government
attempts to diversify the economy, it is still heavily dependent on
agriculture and related activities, engaging roughly 68% of the
population. Growth was negative in 2000-03 because of the difficulty
of meeting the conditions of international donors, continued low
prices of key exports, and severe civil war. In November 2004, the
situation deteriorated when President GBAGBO's troops attacked and
killed nine French peacekeeping forces, and the UN imposed an arms
embargo. Political turmoil damaged the economy in 2005, with fear
among Ivorians spreading, foreign investment shriveling, French
businesses and expats fleeing, travel within the country falling,
and criminal elements that traffic in weapons and diamonds gaining
ground. The government will continue to survive financially off of
the sale of cocoa, which represents 90% of foreign exchange
earnings. Though the 2005 harvest was largely unaffected by past
fighting, the government will likely lose between 10% and 20% of its
cocoa harvest to northern rebels, who smuggle the cocoa they control
to neighboring countries where cocoa prices are higher. The
government remains hopeful that ongoing exploration of Cote
d'Ivoire's offshore oil reserves will result in significant
production that could boost daily crude output from roughly 33,000
barrels per day (b/d) to over 200,000 b/d by the end of the decade.

Croatia
Before the dissolution of Yugoslavia, the Republic of
Croatia, after Slovenia, was the most prosperous and industrialized
area with a per capita output perhaps one-third above the Yugoslav
average. The economy emerged from a mild recession in 2000 with
tourism, banking, and public investments leading the way.
Unemployment remains high, at about 18%, with structural factors
slowing its decline. While macroeconomic stabilization has largely
been achieved, structural reforms lag because of deep resistance on
the part of the public and lack of strong support from politicians.
Growth, while impressive at about 3% to 4% for the last several
years, has been stimulated, in part, through high fiscal deficits
and rapid credit growth. The EU accession process should accelerate
fiscal and structural reform.

Cuba
The government continues to balance the need for economic
loosening against a desire for firm political control. It has rolled
back limited reforms undertaken in the 1990s to increase enterprise
efficiency and alleviate serious shortages of food, consumer goods,
and services. The average Cuban's standard of living remains at a
lower level than before the downturn of the 1990s, which was caused
by the loss of Soviet aid and domestic inefficiencies. The
government in 2005 strengthened its controls over dollars coming
into the economy from tourism, remittances, and trade. External
financing has helped growth in the mining, oil, construction, and
tourism sectors.

Cyprus
The Republic of Cyprus has a market economy dominated by the
service sector, which accounts for 76% of GDP. Tourism and financial
services are the most important sectors; erratic growth rates over
the past decade reflect the economy's reliance on tourism, which
often fluctuates with political instability in the region and
economic conditions in Western Europe. Nevertheless, the economy
grew a healthy 3.7% per year in 2004 and 2005, well above the EU
average. Cyprus joined the European Exchange Rate Mechanism (ERM2)
in May 2005. The government has initiated an aggressive austerity
program, which has cut the budget deficit to below 3% but continued
fiscal discipline is necessary if Cyprus is to meet its goal of
adopting the euro on 1 January 2008. As in the area administered by
Turkish Cypriots, water shortages are a perennial problem; a few
desalination plants are now on line. After 10 years of drought, the
country received substantial rainfall from 2001-03 alleviating
immediate concerns. The Turkish Cypriot economy has roughly
one-third of the per capita GDP of the south, and economic growth
tends to be volatile, given north Cyprus's relative isolation,
bloated public sector, reliance on the Turkish lira, and small
market size. The Turkish Cypriot economy grew 15.4% in 2004, fueled
by growth in the construction and education sectors, as well as
increased employment of Turkish Cypriots in the Republic of Cyprus.
The Turkish Cypriots are heavily dependent on transfers from the
Turkish Government. Under the 2003-06 economic protocol, Ankara
plans to provide around $550 million to the "TRNC." Agriculture and
services, together, employ more than half of the work force.

Czech Republic
The Czech Republic is one of the most stable and
prosperous of the post-Communist states of Central and Eastern
Europe. Growth in 2000-05 was supported by exports to the EU,
primarily to Germany, and a strong recovery of foreign and domestic
investment. Domestic demand is playing an ever more important role
in underpinning growth as interest rates drop and the availability
of credit cards and mortgages increases. The current account deficit
has declined to around 3% of GDP as demand for Czech products in the
European Union has increased. Inflation is under control. Recent
accession to the EU gives further impetus and direction to
structural reform. In early 2004 the government passed increases in
the Value Added Tax (VAT) and tightened eligibility for social
benefits with the intention to bring the public finance gap down to
4% of GDP by 2006, but more difficult pension and healthcare reforms
will have to wait until after the next elections. Privatization of
the state-owned telecommunications firm Cesky Telecom took place in
2005. Intensified restructuring among large enterprises,
improvements in the financial sector, and effective use of available
EU funds should strengthen output growth.

Denmark
This thoroughly modern market economy features high-tech
agriculture, up-to-date small-scale and corporate industry,
extensive government welfare measures, comfortable living standards,
a stable currency, and high dependence on foreign trade. Denmark is
a net exporter of food and energy and enjoys a comfortable balance
of payments surplus. Government objectives include streamlining the
bureaucracy and further privatization of state assets. The
government has been successful in meeting, and even exceeding, the
economic convergence criteria for participating in the third phase
(a common European currency) of the European Economic and Monetary
Union (EMU), but Denmark has decided not to join 12 other EU members
in the euro. Nonetheless, the Danish krone remains pegged to the
euro. Economic growth gained momentum in 2004 and the upturn
accelerated through 2005. Because of high GDP per capita, welfare
benefits, a low Gini index, and political stability, the Danish
people enjoy living standards topped by no other nation. A major
long-term issue will be the sharp decline in the ratio of workers to
retirees.

Dhekelia
Economic activity is limited to providing services to the
military and their families located in Dhekelia. All food and
manufactured goods must be imported.

Djibouti
The economy is based on service activities connected with
the country's strategic location and status as a free trade zone in
northeast Africa. Two-thirds of the inhabitants live in the capital
city; the remainder are mostly nomadic herders. Scanty rainfall
limits crop production to fruits and vegetables, and most food must
be imported. Djibouti provides services as both a transit port for
the region and an international transshipment and refueling center.
Djibouti has few natural resources and little industry. The nation
is, therefore, heavily dependent on foreign assistance to help
support its balance of payments and to finance development projects.
An unemployment rate of at least 50% continues to be a major
problem. While inflation is not a concern, due to the fixed tie of
the Djiboutian franc to the US dollar, the artificially high value
of the Djiboutian franc adversely affects Djibouti's balance of
payments. Per capita consumption dropped an estimated 35% over the
last seven years because of recession, civil war, and a high
population growth rate (including immigrants and refugees). Faced
with a multitude of economic difficulties, the government has fallen
in arrears on long-term external debt and has been struggling to
meet the stipulations of foreign aid donors.

Dominica
The Dominican economy depends on agriculture, primarily
bananas, and remains highly vulnerable to climatic conditions and
international economic developments. Production of bananas dropped
precipitously in 2003, a major reason for the 1% decline in GDP.
Tourism increased in 2003 as the government sought to promote
Dominica as an "ecotourism" destination. Development of the tourism
industry remains difficult, however, because of the rugged
coastline, lack of beaches, and the absence of an international
airport. The government began a comprehensive restructuring of the
economy in 2003 - including elimination of price controls,
privatization of the state banana company, and tax increases - to
address Dominica's economic crisis and to meet IMF targets. In order
to diversify the island's production base, the government is
attempting to develop an offshore financial sector and is planning
to construct an oil refinery on the eastern part of the island.

Dominican Republic
The Dominican Republic is a Caribbean
representative democracy that enjoyed strong GDP growth until 2003.
Although the country has long been viewed primarily as an exporter
of sugar, coffee, and tobacco, in recent years the service sector
has overtaken agriculture as the economy's largest employer due to
growth in tourism and free trade zones. Growth turned negative in
2003 with reduced tourism, a major bank fraud, and limited growth in
the US economy (the source of about 80% of export revenues), but
recovered in 2004 and 2005. With the help of strict fiscal targets
agreed in the 2004 renegotiation of an IMF standby loan, President
FERNANDEZ has stabilized the country's financial situation. Although
the economy continues to grow at a respectable rate, unemployment
remains an important challenge. The country suffers from marked
income inequality; the poorest half of the population receives less
than one-fifth of GNP, while the richest 10% enjoys nearly 40% of
national income. The Dominican Republic's development prospects
improved with the ratification of the Central America-Dominican
Republic Free Trade Agreement (CAFTA-DR) in September 2005.

East Timor
In late 1999, about 70% of the economic infrastructure of
East Timor was laid waste by Indonesian troops and anti-independence
militias, and 300,000 people fled westward. Over the next three
years, however, a massive international program, manned by 5,000
peacekeepers (8,000 at peak) and 1,300 police officers, led to
substantial reconstruction in both urban and rural areas. By the end
of 2005, all refugees either returned or resettled in Indonesia.
Non-petroleum GDP growth was held back in 2003 by extensive drought
and the gradual winding down of the international presence but
recovered somewhat in 2004. The country faces great challenges in
continuing the rebuilding of infrastructure, strengthening the
infant civil administration, and generating jobs for young people
entering the work force. The development of oil and gas resources in
nearby waters has begun to supplement government revenues ahead of
schedule and above expectations - the result of high petroleum
prices - but the technology-intensive industry does little to create
jobs for the unemployed, because there are no production facilities
in Timor and the gas is piped to Australia. The parliament in June
2005 unanimously approved the creation of a Petroleum Fund to serve
as a repository for all petroleum revenues and preserve the value of
East Timor's petroleum wealth for future generations.

Ecuador
Ecuador has substantial petroleum resources, which have
accounted for 40% of the country's export earnings and one-third of
central government budget revenues in recent years. Consequently,
fluctuations in world market prices can have a substantial domestic
impact. In the late 1990s, Ecuador suffered its worst economic
crisis, with natural disasters and sharp declines in world petroleum
prices driving Ecuador's economy into free fall in 1999. Real GDP
contracted by more than 6%, with poverty worsening significantly.
The banking system also collapsed, and Ecuador defaulted on its
external debt later that year. The currency depreciated by some 70%
in 1999, and, on the brink of hyperinflation, the MAHAUD government
announced it would dollarize the economy. A coup, however, ousted
MAHAUD from office in January 2000, and after a short-lived junta
failed to garner military support, Vice President Gustavo NOBOA took
over the presidency. In March 2000, Congress approved a series of
structural reforms that also provided the framework for the adoption
of the US dollar as legal tender. Dollarization stabilized the
economy, and growth returned to its pre-crisis levels in the years
that followed. Under the administration of Lucio GUTIERREZ - January
2003 to April 2005 - Ecuador benefited from higher world petroleum
prices. However, the government under Alfredo PALACIO has reversed
economic reforms that reduced Ecuador's vulnerability to petroleum
price swings and financial crises, allowing the central government
greater access to oil windfalls and disbursing surplus retirement
funds.

Egypt
Occupying the northeast corner of the African continent, Egypt
is bisected by the highly fertile Nile valley, where most economic
activity takes place. In the last 30 years, the government has
reformed the highly centralized economy it inherited from President
NASSER. In 2005, Prime Minister Ahmed NAZIF reduced personal and
corporate tax rates, reduced energy subsidies, and privatized
several enterprises. The stock market boomed, and GDP grew nearly
5%. Despite these achievements, the government has failed to raise
living standards for the average Egyptian, and has had to continue
providing subsidies for basic necessities. The subsidies have
contributed to a growing budget deficit - more than 8% of GDP in
2005 - and represent a significant drain on the economy. Foreign
direct investment remains low. To achieve higher GDP growth the
NAZIF government will need to continue its aggressive pursuit of
reform, especially in the energy sector. Egypt's export sectors -
particularly natural gas - have bright prospects.

El Salvador
The smallest country in Central America, El Salvador has
the third largest economy, but growth has been minimal in recent
years. Hoping to stimulate the sluggish economy, the government is
striving to open new export markets, encourage foreign investment,
and modernize the tax and healthcare systems. Implementation in 2006
of the Central America-Dominican Republic Free Trade Agreement,
which El Salvador was the first to ratify, is viewed as a key policy
to help achieve these objectives. The trade deficit has been offset
by annual remittances from Salvadorans living abroad - 16.6% of GDP
in 2005 - and external aid. With the adoption of the US dollar as
its currency in 2001, El Salvador has lost control over monetary
policy and must concentrate on maintaining a disciplined fiscal
policy.

Equatorial Guinea
The discovery and exploitation of large oil
reserves have contributed to dramatic economic growth in recent
years. Forestry, farming, and fishing are also major components of
GDP. Subsistence farming predominates. Although pre-independence
Equatorial Guinea counted on cocoa production for hard currency
earnings, the neglect of the rural economy under successive regimes
has diminished potential for agriculture-led growth (the government
has stated its intention to reinvest some oil revenue into
agriculture). A number of aid programs sponsored by the World Bank
and the IMF have been cut off since 1993, because of corruption and
mismanagement. No longer eligible for concessional financing because
of large oil revenues, the government has been trying to agree on a
"shadow" fiscal management program with the World Bank and IMF.
Businesses, for the most part, are owned by government officials and
their family members. Undeveloped natural resources include
titanium, iron ore, manganese, uranium, and alluvial gold. Growth
remained strong in 2005, led by oil. Equatorial Guinea now has the
second highest per capita income in the world, after Luxembourg.

Eritrea
Since independence from Ethiopia in 1993, Eritrea has faced
the economic problems of a small, desperately poor country. Like the
economies of many African nations, the economy is largely based on
subsistence agriculture, with 80% of the population involved in
farming and herding. The Ethiopian-Eritrea war in 1998-2000 severely
hurt Eritrea's economy. GDP growth fell to zero in 1999 and to
-12.1% in 2000. The May 2000 Ethiopian offensive into northern
Eritrea caused some $600 million in property damage and loss,
including losses of $225 million in livestock and 55,000 homes. The
attack prevented planting of crops in Eritrea's most productive
region, causing food production to drop by 62%. Even during the war,
Eritrea developed its transportation infrastructure, asphalting new
roads, improving its ports, and repairing war-damaged roads and
bridges. Since the war ended, the government has maintained a firm
grip on the economy, expanding the use of the military and
party-owned businesses to complete Eritrea's development agenda.
Erratic rainfall and the delayed demobilization of agriculturalists
from the military kept cereal production well below normal, holding
down growth in 2002-05. Eritrea's economic future depends upon its
ability to master social problems such as illiteracy, unemployment,
and low skills, as well as the willingness to open its economy to
private enterprise so that the diaspora's money and expertise can
foster economic growth.

Estonia
Estonia, as a new member of the World Trade Organization and
the European Union, has transitioned effectively to a modern market
economy with strong ties to the West, including the pegging of its
currency to the euro. The economy benefits from strong electronics
and telecommunications sectors and is greatly influenced by
developments in Finland, Sweden, and Germany, three major trading
partners. The current account deficit remains high; however, the
state budget is essentially in balance, and public debt is low.

Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, accounting for half of GDP, 60% of exports, and 80% of
total employment. The agricultural sector suffers from frequent
drought and poor cultivation practices. Coffee is critical to the
Ethiopian economy with exports of some $156 million in 2002, but
historically low prices have seen many farmers switching to qat to
supplement income. The war with Eritrea in 1998-2000 and recurrent
drought have buffeted the economy, in particular coffee production.
In November 2001, Ethiopia qualified for debt relief from the Highly
Indebted Poor Countries (HIPC) initiative, and in December 2005 the
International Monetary Fund voted to forgive Ethiopia's debt to the
body. Under Ethiopia's land tenure system, the government owns all
land and provides long-term leases to the tenants; the system
continues to hamper growth in the industrial sector as entrepreneurs
are unable to use land as collateral for loans. Drought struck again
late in 2002, leading to a 2% decline in GDP in 2003. Normal weather
patterns late in 2003 helped agricultural and GDP growth recover in
2004-05.

Europa Island
no economic activity

European Union
Domestically, the European Union attempts to lower
trade barriers, adopt a common currency, and move toward convergence
of living standards. Internationally, the EU aims to bolster
Europe's trade position and its political and economic power.
Because of the great differences in per capita income (from $15,000
to $56,000) and historic national animosities, the European
Community faces difficulties in devising and enforcing common
policies. For example, since 2003 Germany and France have flouted
the member states' treaty obligation to prevent their national
budgets from running more than a 3% deficit. In 2004, the EU
admitted 10 central and eastern European countries that are, in
general, less advanced technologically and economically than the
other 15. Twelve EU member states introduced the euro as their
common currency on 1 January 1999, but the UK, Sweden, and Denmark
do not participate. The 10 new member states may choose to adopt the
euro when they meet the EU's fiscal and monetary criteria and the
other euro states so agree.