Chapter CXIII: Section 3: , Taipei, Taiwan, telephone: 886 (2) 2162-2000, FAX (44)

Philippines
The Philippines was less severely affected by the Asian
financial crisis of 1998 than its neighbors, aided in part by its
high level of annual remittances 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 about 5% between 2002
and 2005 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
the alleviation of poverty 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 this situation 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 have at times
expressed concern about the Philippines' ability to service the
debt, though central bank reserves appear adequate and large
remittance inflows appear stable. The implementation of the expanded
Value Added Tax (VAT) in November 2005 boosted confidence in the
government's fiscal capacity and helped to strengthen the peso,
which gained 5.7 percent year-on-year, making it East Asia's best
performing currency in 2005. Investors and credit rating
institutions will continue to look for effective implementation of
the new VAT and continued improvement in the government's overall
fiscal capacity in the coming year.

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 small 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 the unemployment rate -
currently the highest in the EU. 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 previous Socialist-led government
introduced a package of social and administrative spending cuts to
reduce public spending by about $17 billion through 2007, but full
implementation of the plan was trumped by election-year politics in
2005. The right-wing Law and Justice party won parliamentary
elections in September, and Lech KACZYNSKI won the presidential
election in October 2005, running on a state-interventionist fiscal
and monetary platform. 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 $23.2 billion in EU
funds, available through 2006. Farmers have already begun to reap
the rewards of membership via booming exports, 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 2001-05. 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 2004. Growth fell off in 2001-03, largely due to
the slowdown in the US economy, and has recovered in 2004-2005.

Qatar
Oil and gas account for more than 60% 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 25 trillion
cubic meters, more than 5% of the world total and third largest in
the world. Qatar has permitted substantial foreign investment in the
development of its gas fields during the last decade and is expected
to become the world's top liquefied natural gas (LNG) exporter by
2007. 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 illustrated 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 GDP 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. IMF concerns
about Romania's tax policy and budget deficit led to a breakdown of
this agreement in 2005. In the past, the IMF has criticized the
government's fiscal, wage, and monetary policies. Meanwhile,
macroeconomic gains have only recently started to spur creation of a
middle class and address Romania's widespread poverty, while
corruption and red tape continue to handicap the business
environment. Romanian government confidence in continuing
disinflation was underscored by its currency revaluation in 2005,
making 10,000 "old" lei equal 1 "new" leu.

Russia
Russia ended 2005 with its seventh straight year of growth,
averaging 6.4% 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%. During this time, poverty has declined steadily and the
middle class has continued to expand. Russia has also improved its
international financial position since the 1998 financial crisis,
with its foreign debt declining from 90% of GDP to around 31%.
Strong oil export earnings have allowed Russia to increase its
foreign reserves from only $12 billion to some $180 billion at
yearend 2005. 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 to 5.9% for 2005
while inflation remains high. 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 and the acquisition of the
company by a state owned firm, 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. State control has increased in the past year with a number
of large acquisitions. Most fundamentally, Russia has made little
progress in building the rule of law, the bedrock of a modern market
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 and is 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. 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 obtained IMF-World Bank Heavily Indebted
Poor Country (HIPC) initiative debt relief in 2005. 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 2006, 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; about 40,000 tourist
visited Nevis during the 2003-2004 season. Additional tourist
facilities, including a second cruise ship pier, hotels, and golf
courses are under construction.

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 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, while at the same
time 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, and is expected to benefit from an additional round of HIPC
debt relief in early 2006, to help bring down the country's $300
million debt burden. In August 2005, Sao Tome signed on to a new
3-year IMF Poverty Reduction and Growth Facility (PRGF) program
worth $4.3 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, which are being jointly developed in a
60-40 split with Nigeria. The first production licenses were sold in
2004, though a dispute over licensing with Nigeria delayed Sao
Tome's receipt of more than $20 million in signing bonuses for
almost a year. Real GDP growth reached 6% in 2004, and also probably
in 2005, as a result of increases in public expenditures and
oil-related capital investment.

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 5.5 million foreign workers play an
important role in the Saudi economy, particularly, in the oil and
service sectors. The government is encouraging private sector growth
to lessen the kingdom's dependence on oil and increase employment
opportunities for the swelling Saudi population. The government has
begun to permit private sector and foreign investor participation in
the power generation and telecom sectors. As part of its effort to
attract foreign investment and diversify the economy, Saudi Arabia
acceded to the WTO in 2005 after many years of negotiations. With
high oil revenues enabling the government to post large budget
surpluses, Riyadh has been able to substantially boost spending on
job training and education, infrastructure development, and
government salaries.

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 over 5% annually during
1995-2004. 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.
However, Senegal still relies heavily upon outside donor assistance.
Under the IMF's Highly Indebted Poor Countries (HIPC) debt relief
program, Senegal will benefit from eradication of two-thirds of its
bilateral, multilateral, and private-sector debt.

Serbia
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 a 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. In November
2001, the Paris Club agreed to reschedule the country's $4.5 billion
public debt and wrote off 66% of the debt. In July 2004, the London
Club of private creditors forgave $1.7 billion of debt, just over
half the total owed. Belgrade has made only minimal progress in
restructuring and privatizing its holdings in major sectors of the
economy, including energy and telecommunications. It has made
halting progress towards EU membership and is currently pursuing a
Stabilization and Association Agreement with Brussels. Serbia is
also pursuing membership in the World Trade Organization.
Unemployment remains an ongoing political and economic problem. The
Republic of Montenegro severed its economy from Serbia during the
MILOSEVIC era; therefore, the formal separation of Serbia and
Montenegro in June 2006 had little real impact on either economy.
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 EU
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 Kosovo's political and legal relationships has created
uncertainty over property rights and hindered the privatization of
state-owned assets in Kosovo. Most of Kosovo's population lives in
rural towns outside of the largest city, Pristina. Inefficient,
near-subsistence farming is common.
note: economic data for Serbia currently reflects information for
the former Serbia and Montenegro, unless otherwise noted; data for
Serbia alone will be added when available

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.
Sharp drops 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.
Growth turned negative again in 2005. 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. Alluvial diamond mining remains the major source of
hard currency earnings, accounting for nearly half of Sierra Leone's
exports. 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. The IMF has completed a Poverty
Reduction and Growth Facility program that helped stabilize economic
growth and reduce inflation. A recent increase in political
stability has led to a revival of economic activity, such as the
rehabilitation of bauxite mining.

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 four
largest 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 (SARS) 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% - by far the economy's best performance
since 2000 - but growth slowed to 5.7% in 2005.

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. Foreign investment in the automotive sector has
been strong. Slovakia's economic growth exceeded expectations in
2001-05, despite the general European slowdown. Unemployment, at an
unacceptable 18% in 2003-04, dropped to 16.4% in 2005, but remains
the economy's Achilles heel. Slovakia joined the EU on 1 May 2004.

Slovenia
With its small transition economy and population of
approximately two million, Slovenia is a model of economic success
and stability for its neighbors in the former Yugoslavia. The
country, which joined the EU in 2004, has excellent infrastructure,
a well-educated work force, and an excellent central location. It
enjoys a GDP per capita substantially higher than any 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. Slovenia plans to adopt the euro
by 2007 and has met the EU's Maastricht criteria for inflation.
Despite its economic success, Slovenia faces growing challenges.
Much of the economy remains in state hands and foreign direct
investment (FDI) in Slovenia is one of the lowest in the EU on a per
capita basis. Taxes are relatively high, the labor market is often
seen as inflexible, and legacy industries are losing sales to more
competitive firms in China, India, and elsewhere. The current
center-right government, elected in October 2004, has pledged to
accelerate privatization of a number of large state holdings and is
interested in increasing FDI in Slovenia. In late 2005, the
government's new Committee for Economic Reforms was elevated to
cabinet-level status. The Committee's program includes plans for
lowering the tax burden, privatizing state-controlled firms,
improving the flexibility of the labor market, and increasing the
government's efficiency.

Solomon Islands
The bulk of the population depends on agriculture,
fishing, and forestry for at least part of its 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 ban on Somali livestock, due to
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.
Somalia's arrears to the IMF continued to grow in 2005. Statistics
on Somalia's GDP, growth, per capita income, and inflation should be
viewed skeptically. In late December 2004, a major tsunami caused an
estimated 150 deaths and resulted in destruction of property 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 2003-04 landed 136,262 metric tons, of
which 87% (118,166 tons) was krill and 8% (11,182 tons) Patagonian
toothfish, compared to 142,555 tons in 2002-03 of which 83% (117,728
tons) was krill and 12% (16,479 tons) Patagonian toothfish
(estimated fishing from the area covered by the Convention of the
Conservation of Antarctic Marine Living Resources (CCAMLR), which
extends slightly beyond the Southern Ocean area). 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 2004-05 Antarctic summer 28,202 tourists, most of them
seaborne (approximately 97%), visited the Southern Ocean and
Antarctica, compared to 14,762 in 1999-2000.

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 10.1%. Growth of 2.5% in 2003, 2.6% in 2004, and
3.4% in 2005 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 about 5.5% in the 1990s, but 2001 saw the first
contraction in the country's history, by 1.4%, due to a combination
of power shortages, severe budgetary problems, the global slowdown,
and continuing civil strife. Growth recovered to 5% between 2002 and
2005. 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 8.6% in 2004.
Agricultural 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 - resulting from 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 mining industry, which
accounts for more than a third of GDP and subjects government
revenues to mineral price volatility. 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. 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,
in his first term, implemented an austerity program, raised taxes,
and attempted to control spending. Economic policies are likely to
remain the same during VENETIAAN's second term. 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,
Mearsk, and Occidental.

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 two-thirds 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 2004-05 because of
drought, and nearly two-fifths of the adult population has been
infected by HIV/AIDS.

Sweden
Aided by peace and neutrality for the whole of the 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
of 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 and
2005. Presumably because of generous sick-leave benefits, Swedish
workers report in sick more often than other Europeans. In 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 safehaven 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 2004-05. Even so, unemployment has remained at less than
half the EU average.

Syria
The Syrian Government estimates the economy grew by 4.5
percent in real terms in 2005, led by the petroleum and agricultural
sectors, which together account for about half of GDP. Economic
performance and the exchange rate on the informal market were hit by
international political developments following the assassination in
February of former Lebanese Prime Minister Rafiq al-HARIRI and the
specter of international sanctions. Higher crude oil prices
countered declining oil production and exports and helped to narrow
the budget deficit and widen the current account surplus. 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,
increasing pressure on water supplies caused by rapid population
growth, industrial expansion, and 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 and, in 2005, Taiwan's third-largest source of imports after
Japan and the US. Taiwan has benefited from cross-Strait economic
integration and a sharp increase in world demand to achieve
substantial growth in its export sector and a seven-year-high real
GDP growth of 6.1% in 2004. However, excess inventory, higher
international oil prices, and rising interest rates dampened
consumption in developed markets, and GDP growth dropped to 3.8% in
2005. The service sector, which accounts for 69% of Taiwan's GDP,
has continued to expand, while unemployment and inflation rates have
declined.

Tajikistan
Tajikistan has one of the lowest per capita GDPs among
the 15 former Soviet republics. Only 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 64% of its
people continue to live in abject poverty, Tajikistan has
experienced steady economic growth since 1997, but experienced a
slight drop in its growth rate to 8% in 2005 from 10.6% in 2004.
Continued privatization of medium and large state-owned enterprises
would 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 a $250 million write-off of
Tajikistan's $300 million debt to Russia. Tajikistan ranks third in
the world in terms of water resources per head. A proposed
investment to finish the hydropower dams Rogun and Sangtuda would
substantially add to electricity production. If finished, Rogun will
be the world's tallest dam.

Tanzania
Tanzania is one of the poorest countries in the world. The
economy depends heavily on agriculture, which accounts for almost
half of GDP, provides 85% of exports, and employs 80% of the work
force. Topography and climatic conditions, however, limit cultivated
crops to only 4% of the land area. Industry traditionally featured
the processing of agricultural products and light consumer goods.
The World Bank, the International Monetary Fund, and bilateral
donors have provided funds to rehabilitate Tanzania's out-of-date
economic infrastructure and to alleviate poverty. Long-term growth
through 2005 featured a pickup in industrial production and a
substantial increase in output of minerals, led by gold. Recent
banking reforms have helped increase private-sector growth and
investment. Continued donor assistance and solid macroeconomic
policies supported real GDP growth of more than 6% in 2005.

Thailand
With a well-developed infrastructure, a free-enterprise
economy, and pro-investment policies, Thailand appears to have fully
recovered from the 1997-98 Asian Financial Crisis. The country was
one of East Asia's best performers in 2002-04. Boosted by increased
consumption and strong export growth, the Thai economy grew 6.9% in
2003 and 6.1% in 2004 despite a sluggish global economy. Bangkok has
pursued preferential trade agreements with a variety of partners in
an effort to boost exports and to maintain high growth. In 2004,
Thailand and the US began negotiations on a Free Trade Agreement. In
late December 2004, a major tsunami took 8,500 lives in Thailand and
caused massive destruction of property in the southern provinces of
Krabi, Phangnga, and Phuket. Growth slowed to 4.4% in 2005. The
downturn can be attributed to high oil prices, weaker demand from
Western markets, severe drought in rural regions, tsunami-related
declines in tourism, and lower consumer confidence. Moreover, the
THAKSIN administration's expansionist economic policies, including
plans for multi-billion-dollar mega-projects in infrastructure and
social development, has raised concerns about fiscal discipline and
the health of financial institutions. On the positive side, the Thai
economy performed well beginning in the third quarter of 2005.
Export-oriented manufacturing - in particular automobile production
- and farm output are driving these gains. In 2006, the economy
should benefit from an influx of investment and a revived tourism
sector; however, a possible avian flu epidemic could significantly
harm economic prospects throughout the region.

Togo
This small, sub-Saharan economy is heavily dependent on both
commercial and subsistence agriculture, which provides employment
for 65% of the labor force. Some basic foodstuffs must still be
imported. Cocoa, coffee, and cotton generate about 40% of export
earnings, with cotton being the most important cash crop. Togo is
the world's fourth-largest producer of phosphate. The government's
decade-long effort, supported by the World Bank and the IMF, to
implement economic reform measures, encourage foreign investment,
and bring revenues in line with expenditures has moved slowly.
Progress depends on follow-through on privatization, increased
openness in government financial operations, progress toward
legislative elections, and continued support from foreign donors.
Togo is working with donors to write a PRGF that could eventually
lead to a debt reduction plan.

Tokelau
Tokelau's small size (three villages), isolation, and lack
of resources greatly restrain economic development and confine
agriculture to the subsistence level. The people rely heavily on aid
from New Zealand - about $4 million annually - to maintain public
services, with annual aid being substantially greater than GDP. The
principal sources of revenue come from sales of copra, postage
stamps, souvenir coins, and handicrafts. Money is also remitted to
families from relatives in New Zealand.

Tonga
Tonga, a small, open, South Pacific island economy, has a
narrow export base in agricultural goods. Squash, coconuts, bananas,
and vanilla beans are the main crops, and agricultural exports make
up two-thirds of total exports. The country must import a high
proportion of its food, mainly from New Zealand. The country remains
dependent on external aid and remittances from Tongan communities
overseas to offset its trade deficit. Tourism is the second-largest
source of hard currency earnings following remittances. The
government is emphasizing the development of the private sector,
especially the encouragement of investment, and is committing
increased funds for health and education. Tonga has a reasonably
sound basic infrastructure and well-developed social services. High
unemployment among the young, a continuing upturn in inflation,
pressures for democratic reform, and rising civil service
expenditures are major issues facing the government.

Trinidad and Tobago
Trinidad and Tobago, the leading Caribbean
producer of oil and gas, has earned a reputation as an excellent
investment site for international businesses. Tourism is a growing
sector, although not proportionately as important as in many other
Caribbean islands. The economy benefits from low inflation and a
growing trade surplus. Prospects for growth in 2006 are good as
prices for oil, petrochemicals, and liquefied natural gas are
expected to remain high, and foreign direct investment continues to
grow to support expanded capacity in the energy sector. The
government is coping with a rise in violent crime.

Tromelin Island
no economic activity

Tunisia
Tunisia has a diverse economy, with important agricultural,
mining, energy, tourism, and manufacturing sectors. Governmental
control of economic affairs while still heavy has gradually lessened
over the past decade with increasing privatization, simplification
of the tax structure, and a prudent approach to debt. Progressive
social policies also have helped raise living conditions in Tunisia
relative to the region. Real growth slowed to a 15-year low of 1.9%
in 2002 because of agricultural drought and lackluster tourism.
Better rains in 2003 through 2005, however, helped push GDP growth
to about 5% for these years. Tourism also recovered after the end of
combat operations in Iraq. Tunisia is gradually removing barriers to
trade with the EU. Broader privatization, further liberalization of
the investment code to increase foreign investment, improvements in
government efficiency, and reduction of the trade deficit are among
the challenges ahead.

Turkey
Turkey's dynamic economy is a complex mix of modern industry
and commerce along with a traditional agriculture sector that still
accounts for more than 35% of employment. It has a strong and
rapidly growing private sector, yet the state still plays a major
role in basic industry, banking, transport, and communication. The
largest industrial sector is textiles and clothing, which accounts
for one-third of industrial employment; it faces stiff competition
in international markets with the end of the global quota system.
However, other sectors, notably the automotive and electronics
industries, are rising in importance within Turkey's export mix.
Real GNP growth has exceeded 6% in many years, but this strong
expansion has been interrupted by sharp declines in output in 1994,
1999, and 2001. The economy is turning around with the
implementation of economic reforms, and 2004 GDP growth reached 9%.
Inflation fell to 7.7% in 2005 - a 30-year low. Despite the strong
economic gains in 2002-05, which were largely due to renewed
investor interest in emerging markets, IMF backing, and tighter
fiscal policy, the economy is still burdened by a high current
account deficit and high debt. The public sector fiscal deficit
exceeds 6% of GDP - due in large part to high interest payments,
which accounted for about 37% of central government spending in
2004. Prior to 2005, foreign direct investment (FDI) in Turkey
averaged less than $1 billion annually, but further economic and
judicial reforms and prospective EU membership are expected to boost
FDI. Privatization sales are currently approaching $21 billion.

Turkmenistan
Turkmenistan is a largely desert country with intensive
agriculture in irrigated oases and large gas and oil resources.
One-half of its irrigated land is planted in cotton; formerly it was
the world's tenth-largest producer. Poor harvests in recent years
have led to an almost 50% decline in cotton exports. With an
authoritarian ex-Communist regime in power and a tribally based
social structure, Turkmenistan has taken a cautious approach to
economic reform, hoping to use gas and cotton sales to sustain its
inefficient economy. Privatization goals remain limited. In
1998-2005, Turkmenistan suffered from the continued lack of adequate
export routes for natural gas and from obligations on extensive
short-term external debt. At the same time, however, total exports
rose by 20% to 30% per year in 2003-2005, largely because of higher
international oil and gas prices. In 2005, Ashgabat sought to raise
natural gas export prices to its main customers, Russia and Ukraine,
from $44 per thousand cubic meters (tcm) to $66 per tcm. Overall
prospects in the near future are discouraging because of widespread
internal poverty, the burden of foreign debt, the government's
irrational use of oil and gas revenues, and its unwillingness to
adopt market-oriented reforms. Turkmenistan's economic statistics
are state secrets, and GDP and other figures are subject to wide
margins of error. In particular, the rate of GDP growth is uncertain.

Turks and Caicos Islands
The Turks and Caicos economy is based on
tourism, fishing, and offshore financial services. Most capital
goods and food for domestic consumption are imported. The US is the
leading source of tourists, accounting for more than half of the
annual 93,000 visitors in the late 1990s. Major sources of
government revenue also include fees from offshore financial
activities and customs receipts.

Tuvalu
Tuvalu consists of a densely populated, scattered group of
nine coral atolls with poor soil. The country has no known mineral
resources and few exports. Subsistence farming and fishing are the
primary economic activities. Fewer than 1,000 tourists, on average,
visit Tuvalu annually. Government revenues largely come from the
sale of stamps and coins and remittances from seamen on merchant
ships abroad. About 1,000 Tuvaluans are being repatriated from
Nauru, with the decline of phosphate resources there. Substantial
income is received annually from an international trust fund
established in 1987 by Australia, NZ, and the UK and supported also
by Japan and South Korea. Thanks to wise investments and
conservative withdrawals, this fund has grown from an initial $17
million to over $35 million in 1999. The US Government is also a
major revenue source for Tuvalu because of payments from a 1988
treaty on fisheries. In an effort to reduce its dependence on
foreign aid, the government is pursuing public sector reforms,
including privatization of some government functions and personnel
cuts of up to 7%. Tuvalu derives around $1.5 million per year from
the lease of its ".tv" Internet domain name. With merchandise
exports only a fraction of merchandise imports, continued reliance
must be placed on fishing and telecommunications license fees,
remittances from overseas workers, official transfers, and income
from overseas investments.