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

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 periodic drought. Cotton is the main cash
crop and the government has joined with three other cotton producing
countries in the region - Mali, Niger, and Chad - 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. Burkina Faso is eligible for a Millenium Challenge
Account grant, which would increase investment in the country's
human capital.

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liberalization measures were rescinded. Lacking monetary or fiscal
stability, 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 2006, 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. Burundi grew about 5 percent
in 2006. Delayed disbursements of funds from the World Bank may add
to budget pressures in 2007. Burundi will continue to remain heavily
dependent on aid from bilateral and multilateral donors.

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.
Better-than-expected garment sector performance led to about 6%
growth per year in 2005-06. 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 per
year beginning in 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. Mining also is attracting
significant investor interest, particularly in the northeastern
parts of the country. The long-term development of the economy
remains a daunting challenge. The Cambodian government is working
with bilateral and multilateral donors, including the World Bank and
IMF, to address the country's many pressing needs. 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 less than 21 years old. The population
lacks education and productive skills, particularly in the
poverty-ridden countryside, which suffers from an almost total lack
of basic infrastructure.

Cameroon
Because of its modest 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 a
significant 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 about 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 food production 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. Cape Verde has been exploring
European Union membership in recent years.

Cayman Islands
With no direct taxation, the islands are a thriving
offshore financial center. More than 68,000 companies were
registered in the Cayman Islands as of 2003, including almost 500
banks, 800 insurers, and 5000 mutual funds. 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 2.1 million in 2003, with
about half 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 more than 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. 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 about 5% per year in 2004-06,
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 has exhibited a downward trend over the
past year, but remains fairly 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 6 1/2-year
high, as of December 2006, and added investment in the mining sector
will boost GDP in 2007.

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, including the sale of equity in China's
largest state banks to foreign investors and refinements in foreign
exchange and bond markets in 2005. 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 2006 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 130 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. In 2006 China had the
largest current account surplus - nearly $180 billion - in the
world. More power generating capacity came on line in 2006 as large
scale investments were completed. Thirteen years in construction at
a cost of $24 billion, the immense Three Gorges Dam across the
Yangtze River was essentially completed in 2006 and will
revolutionize electrification and flood control in the area. The
11th Five-Year Program (2006-10), approved by the National People's
Congress in March 2006, 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 experienced positive growth over the
past three years despite a serious armed conflict. The economy
continues to improve in part because of austere government budgets,
focused efforts to reduce public debt levels, an export-oriented
growth strategy, an improved security situation in the country, and
high commodity prices. Ongoing economic problems facing President
URIBE range from reforming the pension system to reducing high
unemployment, and to achieving congressional passage of a fiscal
transfers reform. New exploration is needed to offset declining oil
production. International and domestic financial analysts note with
concern the growing central government deficit, which hovers at 5%
of GDP. However, the government's economic policy and democratic
security strategy have engendered a growing sense of confidence in
the economy, particularly within the business sector.

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 2003-06,
although an uncertain legal framework, corruption, and a lack of
openness in government policy continues to hamper growth. In
2005-06, 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. In March
2006, the World Bank and the International Monetary Fund (IMF)
approved Heavily Indebted Poor Countries (HIPC) treatment for Congo.

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. 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 rising import prices, labor market rigidities,
and fiscal deficits. The country also needs to reform its tax system
and its pattern of public expenditure. The current administration
has made it a priority to pass the necessary reforms to implement
the US-Central American Free Trade Agreement (CAFTA). CAFTA
implementation would result in 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, foreign divestment and civil war. Political
turmoil has continued to damage the economy since 2004, with a
rising risk premium associated with doing business in the country,
foreign investment shriveling, transportation costs increasing,
French businesses fleeing, 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, but the government will probably 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 more than 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 17%, 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. In 2006, high
metals prices continued to boost Cuban earnings from nickel and
cobalt production. Havana continued to invest in the country's
energy sector to mitigate electrical blackouts that have plagued the
country since 2004.

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
planned to provide around $700 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
The Danish economy is undergoing strong expansion fueled by
private consumption growth, low unemployment, rising real wages, and
a strong increase in house prices. 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 continued through 2006. 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. Tourism has increased as the
government seeks 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 2004-06. 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, high
unemployment and inflation remain important challenges. 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. 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 about 5%
per year in 2005-06. 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
10% of GDP each year - 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, has strenthened an
already positive export trend. The trade deficit has been offset by
annual remittances from Salvadorans living abroad - equivalent to
more than 15% of GDP - 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. The current government has pursued economic
diversification, with some success in promoting textile production,
international port services, and tourism. It is committed to opening
the economy to trade and investment, and has embarked on a wave of
privatizations extending to telecom, electricity distribution,
banking, and pension funds.

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 2006, led by oil. Equatorial Guinea now has the
third highest per capita income in the world, after Luxembourg and
Bermuda.

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 2002-06. 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 helped agricultural and GDP growth recover in 2004-06.

Europa Island
no economic activity

European Union
Internally, 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 among member
states (from $8,000 to $61,000) and historic national animosities,
the European Union 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 and
2007, the EU admitted 10 and two countries, respectively, that are,
in general, less advanced technologically and economically than the
other 15. Twelve established EU member states introduced the euro as
their common currency on 1 January 1999, but the UK, Sweden, and
Denmark chose not to participate. Of the 12 most recent member
states, only Slovenia has adopted the euro (1 January 2007); the
remaining eleven are legally required to adopt the currency upon
meeting EU's fiscal and monetary convergence criteria.

Falkland Islands (Islas Malvinas)
The economy was formerly based on
agriculture, mainly sheep farming, but today fishing contributes the
bulk of economic activity. In 1987 the government began selling
fishing licenses to foreign trawlers operating within the Falkland
Islands' exclusive fishing zone. These license fees total more than
$40 million per year, which goes to support the island's health,
education, and welfare system. Squid accounts for 75% of the fish
taken. Dairy farming supports domestic consumption; crops furnish
winter fodder. Exports feature shipments of high-grade wool to the
UK and the sale of postage stamps and coins. The islands are now
self-financing except for defense. The British Geological Survey
announced a 200-mile oil exploration zone around the islands in
1993, and early seismic surveys suggest substantial reserves capable
of producing 500,000 barrels per day; to date, no exploitable site
has been identified. An agreement between Argentina and the UK in
1995 seeks to defuse licensing and sovereignty conflicts that would
dampen foreign interest in exploiting potential oil reserves.
Tourism, especially eco-tourism, is increasing rapidly, with about
30,000 visitors in 2001. Another large source of income is interest
paid on money the government has in the bank. The British military
presence also provides a sizeable economic boost.

Faroe Islands
The Faroese economy has had a strong performance since
1994, mostly as a result of increasing fish landings and high and
stable export prices. Unemployment is minimal and there are signs of
labor shortages in several sectors. The positive economic
development has helped the Faroese Home Rule Government produce
increasing budget surpluses, which in turn have helped reduce the
large public debt, most of it owed to Denmark. However, the total
dependence on fishing makes the Faroese economy extremely
vulnerable, and the present fishing efforts appear in excess of what
is a sustainable level of fishing in the long term. Oil finds close
to the Faroese area give hope for deposits in the immediate Faroese
area, which may eventually lay the basis for a more diversified
economy and thus lessen dependence on Danish economic assistance.
Aided by a substantial annual subsidy (about 15% of GDP) from
Denmark, the Faroese have a standard of living not far below the
Danes and other Scandinavians.

Fiji
Fiji, endowed with forest, mineral, and fish resources, is one
of the most developed of the Pacific island economies, though still
with a large subsistence sector. Sugar exports, remittances from
Fijians working abroad, and a growing tourist industry - with
300,000 to 400,000 tourists annually - are the major sources of
foreign exchange. Fiji's sugar has special access to European Union
markets, but will be harmed by the EU's decision to cut sugar
subsidies. Sugar processing makes up one-third of industrial
activity but is not efficient. Fiji's tourism industry was damaged
by the 2006 coup and is facing an uncertain recovery time. Long-term
problems include low investment, uncertain land ownership rights,
and the government's ability to manage its budget. Overseas
remittances from Fijians working in Kuwait and Iraq have increased
significantly.

Finland
Finland has a highly industrialized, largely free-market
economy with per capita output roughly that of the UK, France,
Germany, and Italy. Its key economic sector is manufacturing -
principally the wood, metals, engineering, telecommunications, and
electronics industries. Trade is important; exports equal two-fifths
of GDP. Finland excels in high-tech exports, e.g., mobile phones.
Except for timber and several minerals, Finland depends on imports
of raw materials, energy, and some components for manufactured
goods. Because of the climate, agricultural development is limited
to maintaining self-sufficiency in basic products. Forestry, an
important export earner, provides a secondary occupation for the
rural population. High unemployment remains a persistent problem.

France
France is in the midst of transition from a well-to-do modern
economy that has featured extensive government ownership and
intervention to one that relies more on market mechanisms. The
government has partially or fully privatized many large companies,
banks, and insurers. It retains controlling stakes in several
leading firms, including Air France, France Telecom, Renault, and
Thales, and is dominant in some sectors, particularly power, public
transport, and defense industries. The telecommunications sector is
gradually being opened to competition. France's leaders remain
committed to a capitalism in which they maintain social equity by
means of laws, tax policies, and social spending that reduce income
disparity and the impact of free markets on public health and
welfare. The government in 2006 focused on introducing measures that
attempt to boost employment through increased labor market
flexibility; however, the population has remained opposed to labor
reforms, hampering the government's ability to revitalize the
economy. The tax burden remains one of the highest in Europe (nearly
50% of GDP in 2005). The lingering economic slowdown and inflexible
budget items probably pushed the budget deficit above the eurozone's
3%-of-GDP limit in 2006; unemployment hovers near 9%.

French Polynesia
Since 1962, when France stationed military
personnel in the region, French Polynesia has changed from a
subsistence agricultural economy to one in which a high proportion
of the work force is either employed by the military or supports the
tourist industry. With the halt of French nuclear testing in 1996,
the military contribution to the economy fell sharply. Tourism
accounts for about one-fourth of GDP and is a primary source of hard
currency earnings. Other sources of income are pearl farming and
deep-sea commercial fishing. The small manufacturing sector
primarily processes agricultural products. The territory benefits
substantially from development agreements with France aimed
principally at creating new businesses and strengthening social
services.

French Southern and Antarctic Lands
Economic activity is limited to
servicing meteorological and geophysical research stations and
French and other fishing fleets. The fish catches landed on Iles
Kerguelen by foreign ships are exported to France and Reunion.

Gabon
Gabon enjoys a per capita income four times that of most of
sub-Saharan African nations. This has supported a sharp decline in
extreme poverty; yet, because of high income inequality, a large
proportion of the population remains poor. Gabon depended on timber
and manganese until oil was discovered offshore in the early 1970s.
The oil sector now accounts for 50% of GDP. Gabon continues to face
fluctuating prices for its oil, timber, and manganese exports.
Despite the abundance of natural wealth, poor fiscal management
hobbles the economy. Devaluation of its currency by 50% in January
1994 sparked a one-time inflationary surge, to 35%; the rate dropped
to 6% in 1996. The IMF provided a one-year standby arrangement in
1994-95, a three-year Enhanced Financing Facility (EFF) at near
commercial rates beginning in late 1995, and stand-by credit of $119
million in October 2000. Those agreements mandated progress in
privatization and fiscal discipline. France provided additional
financial support in January 1997 after Gabon met IMF targets for
mid-1996. In 1997, an IMF mission to Gabon criticized the government
for overspending on off-budget items, overborrowing from the central
bank, and slipping on its schedule for privatization and
administrative reform. The rebound of oil prices in 1999-2000 helped
growth, but drops in production hampered Gabon from fully realizing
potential gains. In December 2000, Gabon signed a new agreement with
the Paris Club to reschedule its official debt. A follow-up
bilateral repayment agreement with the US was signed in December
2001. Gabon signed a 14-month Stand-By Arrangement with the IMF in
May 2004, and received Paris Club debt rescheduling later that year.
Short-term progress depends on an upbeat world economy and fiscal
and other adjustments in line with IMF policies.

Gambia, The
The Gambia has no confirmed mineral or natural resource
deposits and has a limited agricultural base. About 75% of the
population depends on crops and livestock for its livelihood.
Small-scale manufacturing activity features the processing of
peanuts, fish, and hides. Reexport trade normally constitutes a
major segment of economic activity, but a 1999 government-imposed
preshipment inspection plan, and instability of the Gambian dalasi
(currency) have drawn some of the reexport trade away from The
Gambia. The Gambia's natural beauty and proximity to Europe has made
it one of the larger markets for tourism in West Africa. The
government's 1998 seizure of the private peanut firm Alimenta
eliminated the largest purchaser of Gambian groundnuts. Despite an
announced program to begin privatizing key parastatals, no plans
have been made public that would indicate that the government
intends to follow through on its promises. Unemployment and
underemployment rates remain extremely high; short-run economic
progress depends on sustained bilateral and multilateral aid, on
responsible government economic management, on continued technical
assistance from the IMF and bilateral donors, and on expected growth
in the construction sector.

Gaza Strip
High population density, limited land access, and strict
internal and external security controls have kept economic
conditions in the Gaza Strip - the smaller of the two areas under
the Palestinian Authority (PA)- even more degraded than in the West
Bank. The beginning of the second intifadah in September 2000
sparked an economic downturn, largely the result of Israeli closure
policies; these policies, which were imposed to address security
concerns in Israel, disrupted labor and trade access to and from the
Gaza Strip. In 2001, and even more severely in 2003, Israeli
military measures in PA areas resulted in the destruction of
capital, the disruption of administrative structures, and widespread
business closures. The Israeli withdrawal from the Gaza Strip in
September 2005 offered some medium-term opportunities for economic
growth, which have not yet been realized due to Israeli military
activities in the Gaza Strip in 2006, continued crossings closures,
and the international community's financial embargo of the PA after
HAMAS took office in March 2006.