Chapter M: Major infectious diseases (134)

Jamaica
The Jamaican economy is heavily dependent on services, which
now account for more than 60% of GDP. The country continues to
derive most of its foreign exchange from tourism, remittances, and
bauxite/alumina. Remittances account for nearly 15% of GDP and
exports of bauxite and alumina make up about 10%. Tourism revenues
account for roughly 10% of GDP, and both arrivals and revenues grew
in 2010, up 4% and 6% respectively. The Economic growth faces many
challenges: high crime and corruption, large-scale unemployment and
underemployment, and a debt-to-GDP ratio of more than 120%.
Jamaica's onerous debt burden - the fourth highest per capita - is
the result of government bailouts to ailing sectors of the economy,
most notably to the financial sector in the mid-to-late 1990s. The
Government of Jamaica signed a $1.27 billion, 27-month Standby
Agreement with the International Monetary Fund for balance of
payment support in February 2010. Other multilaterals have also
provided millions of dollars in loans and grants. The government's
difficult fiscal position hinders spending on infrastructure and
social programs, particularly as job losses rise in a shrinking
economy. The GOLDING administration faces the difficult prospect of
having to achieve fiscal discipline in order to maintain debt
payments, while simultaneously attacking a serious and growing crime
problem that is hampering economic growth. High unemployment
exacerbates the crime problem, including gang violence that is
fueled by the drug trade.

Jan Mayen
Jan Mayen is a volcanic island with no exploitable natural
resources, although surrounding waters contain substantial fish
stocks and potential untapped petroleum resources. Economic activity
is limited to providing services for employees of Norway's radio and
meteorological stations on the island.

Japan
In the years following World War II, government-industry
cooperation, a strong work ethic, mastery of high technology, and a
comparatively small defense allocation (1% of GDP) helped Japan
develop a technologically advanced economy. Two notable
characteristics of the post-war economy were the close interlocking
structures of manufacturers, suppliers, and distributors, known as
keiretsu, and the guarantee of lifetime employment for a substantial
portion of the urban labor force. Both features are now eroding
under the dual pressures of global competition and domestic
demographic change. Japan's industrial sector is heavily dependent
on imported raw materials and fuels. A tiny agricultural sector is
highly subsidized and protected, with crop yields among the highest
in the world. Usually self sufficient in rice, Japan imports about
60% of its food on a caloric basis. Japan maintains one of the
world's largest fishing fleets and accounts for nearly 15% of the
global catch. For three decades, overall real economic growth had
been spectacular - a 10% average in the 1960s, a 5% average in the
1970s, and a 4% average in the 1980s. Growth slowed markedly in the
1990s, averaging just 1.7%, largely because of the after effects of
inefficient investment and an asset price bubble in the late 1980s
that required a protracted period of time for firms to reduce excess
debt, capital, and labor. The Japanese financial sector was not
heavily exposed to sub-prime mortgages or their derivative
instruments and weathered the initial effect of the recent global
credit crunch, but a sharp downturn in business investment and
global demand for Japan's exports in late 2008 pushed Japan further
into recession. Government stimulus spending helped the economy
recover in late 2009 and 2010, but Tokyo is warning that GDP growth
will slow in 2011. Prime Minister Kan's government has proposed
opening the agricultural and services sectors to greater foreign
competition and boosting exports through free-trade agreements, but
debate continues on restructuring the economy and funding new
stimulus programs in the face of a tight fiscal situation. Japan's
huge government debt, which is approaching 200 percent of GDP,
persistent deflation, and an aging and shrinking population are
major complications for the economy.

Jersey
Jersey's economy is based on international financial
services, agriculture, and tourism. In 2005 the finance sector
accounted for about 50% of the island's output. Potatoes,
cauliflower, tomatoes, and especially flowers are important export
crops, shipped mostly to the UK. The Jersey breed of dairy cattle is
known worldwide and represents an important export income earner.
Milk products go to the UK and other EU countries. Tourism accounts
for one-quarter of GDP. In recent years, the government has
encouraged light industry to locate in Jersey with the result that
an electronics industry has developed, displacing more traditional
industries. All raw material and energy requirements are imported as
well as a large share of Jersey's food needs. Light taxes and death
duties make the island a popular tax haven. Living standards come
close to those of the UK.

Jordan
Jordan's economy is among the smallest in the Middle East,
with insufficient supplies of water, oil, and other natural
resources, underlying the government's heavy reliance on foreign
assistance. Other economic challenges for the government include
chronic high rates of poverty, unemployment, inflation, and a large
budget deficit. Since assuming the throne in 1999, King ABDALLAH has
implemented significant economic reforms, such as opening the trade
regime, privatizing state-owned companies, and eliminating most fuel
subsidies, which in the past few years have spurred economic growth
by attracting foreign investment and creating some jobs. The global
economic slowdown, however, has depressed Jordan's GDP growth.
Export-oriented sectors such as manufacturing, mining, and the
transport of re-exports have been hit the hardest. The Government
approved two supplementary budgets in 2010, but sweeping tax cuts
planned for 2010 did not materialize because of Amman's need for
additional revenue to cover excess spending. The budget deficit is
likely to remain high, at 5-6% of GDP, and Amman likely will
continue to depend heavily on foreign assistance to finance the
deficit in 2011. Jordan's financial sector has been relatively
isolated from the international financial crisis because of its
limited exposure to overseas capital markets. Jordan is currently
exploring nuclear power generation to forestall energy shortfalls.

Kazakhstan
Kazakhstan, geographically the largest of the former
Soviet republics, excluding Russia, possesses enormous fossil fuel
reserves and plentiful supplies of other minerals and metals, such
as uranium, copper, and zinc. It also has a large agricultural
sector featuring livestock and grain. Kazakhstan's industrial sector
is primarily focused on the extraction and processing of these
natural resources. Kazakhstan enjoyed double-digit growth in 2000-01
and 8% or more per year in 2002-07 - thanks largely to its booming
energy sector but also to economic reform, good harvests, and
increased foreign investment; GDP growth slowed dramatically
following the near-collapse of the banking sector in late 2007 and
the declines in oil and metals prices associated with the global
economic downturn in 2008-09. Kazakhstan has embarked upon an
industrial policy designed to diversify the economy away from
overdependence on the oil sector as well expanding export markets
away from its historical reliance on Russia. Nevertheless, growth is
still driven by oil. The government has engaged in several disputes
with Western oil companies over the terms of production agreements,
most recently, with regard to the Kashagan project in 2007-08 and
the Karachaganak project in 2009.

Kenya
Although the regional hub for trade and finance in East
Africa, Kenya has been hampered by corruption and by reliance upon
several primary goods whose prices have remained low. In 1997, the
IMF suspended Kenya's Enhanced Structural Adjustment Program due to
the government's failure to maintain reforms and curb corruption.
The IMF, which had resumed loans in 2000 to help Kenya through a
drought, again halted lending in 2001 when the government failed to
institute several anticorruption measures. In the key December 2002
elections, Daniel Arap MOI's 24-year-old reign ended, and a new
opposition government took on the formidable economic problems
facing the nation. After some early progress in rooting out
corruption and encouraging donor support, the KIBAKI government was
rocked by high-level graft scandals in 2005 and 2006. In 2006, the
World Bank and IMF delayed loans pending action by the government on
corruption. The international financial institutions and donors have
since resumed lending, despite little action on the government's
part to deal with corruption. Post-election violence in early 2008,
coupled with the effects of the global financial crisis on
remittance and exports, reduced GDP growth to 1.7 in 2008, but the
economy rebounded in 2009-10.

Kiribati
A remote country of 33 scattered coral atolls, Kiribati has
few natural resources and is one of the least developed Pacific
Islands. Commercially viable phosphate deposits were exhausted at
the time of independence from the UK in 1979. Copra and fish now
represent the bulk of production and exports. The economy has
fluctuated widely in recent years. Economic development is
constrained by a shortage of skilled workers, weak infrastructure,
and remoteness from international markets. Tourism provides more
than one-fifth of GDP. Private sector initiatives and a financial
sector are in the early stages of development. Foreign financial aid
from the EU, UK, US, Japan, Australia, New Zealand, Canada, UN
agencies, and Taiwan accounts for 20-25% of GDP. Remittances from
seamen on merchant ships abroad account for more than $5 million
each year. Kiribati receives around $15 million annually for the
government budget from an Australian trust fund.

Korea, North
North Korea, one of the world's most centrally directed
and least open economies, faces chronic economic problems.
Industrial capital stock is nearly beyond repair as a result of
years of underinvestment and shortages of spare parts. Large-scale
military spending draws off resources needed for investment and
civilian consumption. Industrial and power output have declined in
parallel from pre-1990 levels. Severe flooding in the summer of 2007
aggravated chronic food shortages caused by on-going systemic
problems, including a lack of arable land, collective farming
practices, and persistent shortages of tractors and fuel.
Large-scale international food aid deliveries have allowed the
people of North Korea to escape widespread starvation since famine
threatened in 1995, but the population continues to suffer from
prolonged malnutrition and poor living conditions. Since 2002, the
government has allowed private "farmers' markets" to begin selling a
wider range of goods. It also permitted some private farming - on an
experimental basis - in an effort to boost agricultural output. In
October 2005, the government tried to reverse some of these policies
by forbidding private sales of grains and reinstituting a
centralized food rationing system. By December 2005, the government
terminated most international humanitarian assistance operations in
North Korea (calling instead for developmental assistance only) and
restricted the activities of remaining international and
non-governmental aid organizations. In mid-2008, North Korea began
receiving food aid under a US program to deliver 500,000 metric tons
of food via the World Food Program and US nongovernmental
organizations; but Pyongyang stopped accepting the aid in March
2009. In December 2009, North Korea carried out a redenomination of
its currency, capping the amount of North Korean won that could be
exchanged for the new notes, and limiting the exchange to a one-week
window. A concurrent crackdown on markets and foreign currency use
yielded severe shortages and inflation, forcing Pyongyang to ease
the restrictions by February 2010. Nevertheless, firm political
control remains the Communist government's overriding concern, which
likely will inhibit changes to North Korea's current economic system.

Korea, South
Since the 1960s, South Korea has achieved an incredible
record of growth and global integration to become a high-tech
industrialized economy. Four decades ago, GDP per capita was
comparable with levels in the poorer countries of Africa and Asia.
In 2004, South Korea joined the trillion dollar club of world
economies, and currently is among the world's 20 largest economies.
Initially, a system of close government and business ties, including
directed credit and import restrictions, made this success possible.
The government promoted the import of raw materials and technology
at the expense of consumer goods, and encouraged savings and
investment over consumption. The Asian financial crisis of 1997-98
exposed longstanding weaknesses in South Korea's development model
including high debt/equity ratios and massive short-term foreign
borrowing. GDP plunged by 6.9% in 1998, and then recovered by 9% in
1999-2000. Korea adopted numerous economic reforms following the
crisis, including greater openness to foreign investment and
imports. Growth moderated to about 4-5% annually between 2003 and
2007. With the global economic downturn in late 2008, South Korean
GDP growth slowed to 0.2% in 2009. In the third quarter of 2009, the
economy began to recover, in large part due to export growth, low
interest rates, and an expansionary fiscal policy, and growth
exceeded 6% in 2010. The South Korean economy's long term challenges
include a rapidly aging population, inflexible labor market, and
overdependence on manufacturing exports to drive economic growth.

Kosovo
Over the past few years Kosovo's economy has shown
significant progress in transitioning to a market-based system and
maintaining macroeconomic stability, but it is still highly
dependent on the international community and the diaspora for
financial and technical assistance. Remittances from the diaspora -
located mainly in Germany and Switzerland - are estimated to account
for about 14% of GDP, and donor-financed activities and aid for
another 7.5%. Kosovo's citizens are the poorest in Europe with an
average annual per capita income of only $2,500. Unemployment,
around 40% of the population, is a significant problem that
encourages outward migration and black market activity. Most of
Kosovo's population lives in rural towns outside of the capital,
Pristina. Inefficient, near-subsistence farming is common - the
result of small plots, limited mechanization, and lack of technical
expertise. With international assistance, Kosovo has been able to
privatize 50% of its state-owned enterprises (SOEs) by number, and
over 90% of SOEs by value. Minerals and metals - including lignite,
lead, zinc, nickel, chrome, aluminum, magnesium, and a wide variety
of construction materials - once formed the backbone of industry,
but output has declined because of ageing equipment and insufficient
investment. A limited and unreliable electricity supply due to
technical and financial problems is a major impediment to economic
development. Kosovo's Ministry of Energy and Mining has solicited
expressions of interest from private investors to develop a new
power plant in order to address Kosovo and the region's unmet and
growing demands for power. The official currency of Kosovo is the
euro, but the Serbian dinar is also used in Serb enclaves. Kosovo's
tie to the euro has helped keep core inflation low. Kosovo has one
of the most open economies in the region, and continues to work with
the international community on measures to improve the business
environment and attract foreign investment. Kosovo has kept the
government budget in balance as a result of efficient value added
tax (VAT) collection at the borders and inefficient budget
execution. In order to help integrate Kosovo into regional economic
structures, UNMIK signed (on behalf of Kosovo) its accession to the
Central Europe Free Trade Area (CEFTA) in 2006. However, Serbia and
Bosnia have refused to recognize Kosovo's customs stamp or extend
reduced tariff privileges for Kosovo products under CEFTA. In July
2008, Kosovo received pledges of $1.9 billion from 37 countries in
support of its reform priorities. In June 2009, Kosovo joined the
World Bank and International Monetary Fund, and Kosovo began
servicing its share of the former Yugoslavia's debt.

Kuwait
Kuwait has a geographically small, but wealthy, relatively
open economy with self-reported crude oil reserves of about 102
billion barrels - about 9% of world reserves. Petroleum accounts for
nearly half of GDP, 95% of export revenues, and 95% of government
income. Kuwaiti officials have committed to increasing oil
production to 4 million barrels per day by 2020. The rise in global
oil prices throughout 2010 is reviving government consumption and
economic growth as Kuwait experiences a 20% increase in government
budget revenue. Kuwait has done little to diversify its economy, in
part, because of this positive fiscal situation, and, in part, due
to the poor business climate and the acrimonious relationship
between the National Assembly and the executive branch, which has
stymied most movement on economic reforms. Nonetheless, the
government in May 2010 passed a privatization bill that allows the
government to sell assets to private investors, and in January
passed an economic development plan that pledges to spend up to $130
billion in five years to diversify the economy away from oil,
attract more investment, and boost private sector participation in
the economy. Increasing government expenditures by so large an
amount during the planned time frame may be difficult to accomplish.

Kyrgyzstan
Kyrgyzstan is a poor, mountainous country with a dominant
agricultural sector. Cotton, tobacco, wool, and meat are the main
agricultural products, although only tobacco and cotton are exported
in any quantity. Industrial exports include gold, mercury, uranium,
natural gas, and electricity. The economy depends heavily on gold
exports - mainly from output at the Kumtor gold mine. Following
independence, Kyrgyzstan was progressive in carrying out market
reforms, such as an improved regulatory system and land reform.
Kyrgyzstan was the first Commonwealth of Independent States (CIS)
country to be accepted into the World Trade Organization. Much of
the government's stock in enterprises has been sold. Drops in
production had been severe after the breakup of the Soviet Union in
December 1991, but by mid-1995, production began to recover and
exports began to increase. In 2005, the BAKIEV government and
international financial institutions initiated a comprehensive
medium-term poverty reduction and economic growth strategy. Bishkek
agreed to pursue much needed tax reform and, in 2006, became
eligible for the heavily indebted poor countries (HIPC) initiative.
The government made steady strides in controlling its substantial
fiscal deficit, nearly closing the gap between revenues and
expenditures in 2006, before boosting expenditures more than 20% in
2007-08. GDP grew about 8% annually in 2007-08, partly due to higher
gold prices internationally, but slowed to 2.3% in 2009. The
overthrow of President BAKIEV in April, 2010 and subsequent ethnic
clashes left hundreds dead and damaged infrastructure. Shrinking
trade and agricultural production, as well as political instability,
caused GDP to contract about 3.5% in 2010. The fiscal deficit
widened to 12% of GDP, reflecting significant increases in
crisis-related spending, including both rehabilitation of damaged
infrastructure and bank recapitalization. Progress in
reconstruction, fighting corruption, restructuring domestic
industry, and attracting foreign aid and investment are key to
future growth.

Laos
The government of Laos, one of the few remaining one-party
Communist states, began decentralizing control and encouraging
private enterprise in 1986. The results, starting from an extremely
low base, were striking - growth averaged 6% per year from 1988-2008
except during the short-lived drop caused by the Asian financial
crisis that began in 1997. Despite this high growth rate, Laos
remains a country with an underdeveloped infrastructure,
particularly in rural areas. It has a rudimentary, but improving,
road system, and limited external and internal telecommunications.
Electricity is available in urban areas and in many rural districts.
Subsistence agriculture, dominated by rice cultivation in lowland
areas, accounts for about 30% of GDP and provides 80% of total
employment. The government in FY08/09 received $560 million from
international donors. Economic growth has reduced official poverty
rates from 46% in 1992 to 26% in 2009. The economy has benefited
from high foreign investment in hydropower, mining, and
construction. Laos gained Normal Trade Relations status with the US
in 2004, and is taking steps required to join the World Trade
Organization, such as reforming import licensing. Related trade
policy reforms will improve the business environment. On the fiscal
side, Laos launched an effort to ensure the collection of taxes in
2009 as the global economic slowdown reduced revenues from mining
projects. Simplified investment procedures and expanded bank credits
for small farmers and small entrepreneurs will improve Lao's
economic prospects. The government appears committed to raising the
country's profile among investors. The World Bank has declared that
Laos's goal of graduating from the UN Development Program's list of
least-developed countries by 2020 is achievable. According Laotian
officials, the 7th Socio-Economic Development Plan for 2011-15 will
outline efforts to achieve Millennium Development Goals.

Latvia
Latvia's economy experienced GDP growth of more than 10% per
year during 2006-07 but entered a severe recession in 2008 as a
result of an unsustainable current account deficit and large debt
exposure amid the softening world economy. GDP plunged 18% in 2009 -
the three former Soviet Baltic republics had the world's worst
declines that year - and another 1.8% in 2010. The IMF, EU, and
other donors provided assistance to Latvia as part of an agreement
to defend the currency's peg to the euro and reduce the fiscal
deficit to about 5% of GDP over time. DOMBROVSKIS' government
enacted major speding cuts to reduce the fiscal deficit to 7.8% of
GDP in 2010, and plans to cut the deficit further in 2011. The
majority of companies, banks, and real estate have been privatized,
although the state still holds sizable stakes in a few large
enterprises. Latvia officially joined the World Trade Organization
in February 1999. EU membership, a top foreign policy goal, came in
May 2004.

Lebanon
Lebanon has a free-market economy and a strong laissez-faire
commercial tradition. The government does not restrict foreign
investment; however, the investment climate suffers from red tape,
corruption, arbitrary licensing decisions, high taxes, tariffs, and
fees, archaic legislation, and weak intellectual property rights.
The Lebanese economy is service-oriented; main growth sectors
include banking and tourism. The 1975-90 civil war seriously damaged
Lebanon's economic infrastructure, cut national output by half, and
all but ended Lebanon's position as a Middle Eastern entrepot and
banking hub. In the years since, Lebanon has rebuilt much of its
war-torn physical and financial infrastructure by borrowing heavily
- mostly from domestic banks. In an attempt to reduce the ballooning
national debt, the Rafiq HARIRI government in 2000 began an
austerity program, reining in government expenditures, increasing
revenue collection, and passing legislation to privatize state
enterprises, but economic and financial reform initiatives stalled
and public debt continued to grow despite receipt of more than $2
billion in bilateral assistance at the 2002 Paris II Donors
Conference. The Israeli-Hizballah conflict in July-August 2006
caused an estimated $3.6 billion in infrastructure damage, and
prompted international donors to pledge nearly $1 billion in
recovery and reconstruction assistance. Donors met again in January
2007 at the Paris III Donor Conference and pledged more than $7.5
billion to Lebanon for development projects and budget support,
conditioned on progress on Beirut's fiscal reform and privatization
program. An 18-month political stalemate and sporadic sectarian and
political violence hampered economic activity, particularly tourism,
retail sales, and investment, until the new government was formed in
July 2008. Political stability following the Doha Accord of May 2008
helped boost tourism and, together with a strong banking sector,
enabled real GDP growth of 7% per year in 2009-10 despite a slowdown
in the region.

Lesotho
Small, landlocked, and mountainous, Lesotho relies on
remittances from miners employed in South Africa, customs duties
from the Southern Africa Customs Union (SACU), and export revenue
for the majority of government revenue. However, the government has
recently strengthened its tax system to reduce dependency on customs
duties. Completion of a major hydropower facility in January 1998
permitted the sale of water to South Africa and generated royalties
for Lesotho. Lesotho produces about 90% of its own electrical power
needs. As the number of mineworkers has declined steadily over the
past several years, a small manufacturing base has developed based
on farm products that support the milling, canning, leather, and
jute industries, as well as an apparel-assembly sector. Despite
Lesotho's market-based economy being heavily tied to its neighbor
South Africa, the US is an important trade partner because of the
export sector's heavy dependence on apparel exports. Exports have
grown significantly because of the trade benefits contained in the
Africa Growth and Opportunity Act. The economy is still primarily
based on subsistence agriculture, especially livestock, although
drought has decreased agricultural activity. The extreme inequality
in the distribution of income remains a major drawback. Lesotho has
signed an Interim Poverty Reduction and Growth Facility with the
IMF. In July 2007, Lesotho signed a Millennium Challenge Account
Compact with the US worth $362.5 million. Economic growth dropped in
2009, due mainly to the effects of the global economic crisis as
demand for the country's exports declined and SACU revenue fell
precipitously when South Africa - the primary contributor to the
SACU revenue pool - went into recession, but growth returned to 3.5%
in 2010.

Liberia
Liberia is a low income country heavily reliant on foreign
assistance for revenue. Civil war and government mismanagement
destroyed much of Liberia's economy, especially the infrastructure
in and around the capital, Monrovia. Many businesses fled the
country, taking capital and expertise with them, but with the
conclusion of fighting and the installation of a
democratically-elected government in 2006, several have returned.
Liberia has the distinction of having the highest ratio of direct
foreign investment to GDP in the world. Richly endowed with water,
mineral resources, forests, and a climate favorable to agriculture,
Liberia had been a producer and exporter of basic products,
primarily raw timber and rubber and is reviving those sectors. Local
manufacturing, mainly foreign owned, had been small in scope.
President JOHNSON SIRLEAF, a Harvard-trained banker and
administrator, has taken steps to reduce corruption, build support
from international donors, and encourage private investment.
Embargos on timber and diamond exports have been lifted, opening new
sources of revenue for the government and Liberia shipped its first
major timber exports to Europe in 2010. The country reached its
Heavily Indebted Poor Countries initiative completion point in 2010
and nearly $5 billion of international debt was permanently
eliminated. This new status will enable Liberia to estabilish a
sovereign credit rating and issue bonds. Liberia's Paris Club
creditors agreed to cancel Liberia's debt as well. Rebuilding
infrastructure and raising incomes will depend on generous financial
and technical assistance from donor countries and foreign investment
in key sectors, such as infrastructure and power generation.

Libya
The Libyan economy depends primarily upon revenues from the
oil sector, which contribute about 95% of export earnings, 25% of
GDP, and 80% of government revenue. The weakness in world
hydrocarbon prices in 2009 reduced Libyan government tax income and
constrained economic growth. Substantial revenues from the energy
sector coupled with a small population give Libya one of the highest
per capita GDPs in Africa, but little of this income flows down to
the lower orders of society. Libyan officials in the past five years
have made progress on economic reforms as part of a broader campaign
to reintegrate the country into the international fold. This effort
picked up steam after UN sanctions were lifted in September 2003 and
as Libya announced in December 2003 that it would abandon programs
to build weapons of mass destruction. The process of lifting US
unilateral sanctions began in the spring of 2004; all sanctions were
removed by June 2006, helping Libya attract greater foreign direct
investment, especially in the energy sector. Libyan oil and gas
licensing rounds continue to draw high international interest; the
National Oil Corporation (NOC) set a goal of nearly doubling oil
production to 3 million bbl/day by 2012. In November 2009, the NOC
announced that that target may slip to as late as 2017. Libya faces
a long road ahead in liberalizing the socialist-oriented economy,
but initial steps - including applying for WTO membership, reducing
some subsidies, and announcing plans for privatization - are laying
the groundwork for a transition to a more market-based economy. The
non-oil manufacturing and construction sectors, which account for
more than 20% of GDP, have expanded from processing mostly
agricultural products to include the production of petrochemicals,
iron, steel, and aluminum. Climatic conditions and poor soils
severely limit agricultural output, and Libya imports about 75% of
its food. Libya's primary agricultural water source remains the
Great Manmade River Project, but significant resources are being
invested in desalinization research to meet growing water demands.

Liechtenstein
Despite its small size and limited natural resources,
Liechtenstein has developed into a prosperous, highly
industrialized, free-enterprise economy with a vital financial
service sector and the highest per capita income in the world. The
Liechtenstein economy is widely diversified with a large number of
small businesses. Low business taxes - the maximum tax rate is 20% -
and easy incorporation rules have induced many holding companies to
establish nominal offices in Liechtenstein providing 30% of state
revenues. The country participates in a customs union with
Switzerland and uses the Swiss franc as its national currency. It
imports more than 90% of its energy requirements. Liechtenstein has
been a member of the European Economic Area (an organization serving
as a bridge between the European Free Trade Association (EFTA) and
the EU) since May 1995. The government is working to harmonize its
economic policies with those of an integrated Europe. In 2008,
Liechtenstein came under renewed international pressure -
particularly from Germany - to improve transparency in its banking
and tax systems. In December 2008, Liechtenstein signed a Tax
Information Exchange Agreement with the US. Upon Liechtenstein's
conclusion of 12 bilateral information-sharing agreements, the OECD
in October 2009 removed the principality from its "grey list" of
countries that had yet to implement the organization's Model Tax
Convention.

Lithuania
Lithuania gained membership in the World Trade
Organization and joined the EU in May 2004. Despite Lithuania's EU
accession, Lithuania's trade with its Central and Eastern European
neighbors, and Russia in particular, accounts for a growing
percentage of total trade. Privatization of the large, state-owned
utilities is nearly complete. Foreign government and business
support have helped in the transition from the old command economy
to a market economy. Lithuania's economy grew on average 8% per year
for the four years prior to 2008 driven by exports and domestic
demand. However, GDP plunged nearly 15% in 2009 - during the 2008-09
crisis the three former Soviet Baltic republics had the world's
worst economic declines. In 2009, the government launched a
high-profile campaign, led by Prime Minister KUBILIUS, to attract
foreign investment and to develop export markets. The current
account deficit, which had risen to roughly 15% of GDP in 2007-08,
recovered to a surplus of 4% 2009 and 3.5% in 2010 in the wake of a
cutback in imports to almost half the 2008 level. Nevertheless,
economic growth was flat and unemployment continued upward to 16% in
2010.

Luxembourg
This small, stable, high-income economy - benefiting from
its proximity to France, Belgium, and Germany - has historically
featured solid growth, low inflation, and low unemployment. The
industrial sector, initially dominated by steel, has become
increasingly diversified to include chemicals, rubber, and other
products. Growth in the financial sector, which now accounts for
about 28% of GDP, has more than compensated for the decline in
steel. Most banks are foreign owned and have extensive foreign
dealings, but Luxembourg has lost some of its advantages as a tax
haven because of OECD and EU pressure. The economy depends on
foreign and cross-border workers for about 60% of its labor force.
Luxembourg, like all EU members, suffered from the global economic
crisis that began in late 2008, but unemployment has trended below
the EU average. Following strong expansion from 2004 to 2007,
Luxembourg's economy contracted and 3.4% in 2009, but rebounded 2.6%
in 2010. The country continues to enjoy an extraordinarily high
standard of living - GDP per capita ranks third in the world, after
Liechtenstein and Qatar, and is the highest in the EU. Turmoil in
the world financial markets and lower global demand during 2008-09
prompted the government to inject capital into the banking sector
and implement stimulus measures to boost the economy. Government
stimulus measures and support for the banking sector, however, led
to a 5% government budget deficit in 2009, however, the deficit was
cut below 3% in 2010.

Macau
Macau's economy slowed dramatically in 2009 as a result of the
global economic slowdown, but strong growth resumed in 2010, largely
on the back of strong tourism and gaming sectors. After opening up
its locally-controlled casino industry to foreign competition in
2001, the territory attracted tens of billions of dollars in foreign
investment, transforming Macau into one of the world's largest
gaming center. Macau's gaming and tourism businesses were fueled by
China's decision to relax travel restrictions on Chinese citizens
wishing to visit Macau. By 2006, Macau's gaming revenue surpassed
that of the Las Vegas strip, and gaming-related taxes accounted for
more than 70% of total government revenue. In 2008, Macau introduced
measures to cool the rapidly developing sector. This city of nearly
570,000 hosted more than 21 million visitors in 2009. Almost 51%
came from mainland China. Macau's traditional manufacturing industry
has virtually disappeared since the termination of the Multi-Fiber
Agreement in 2005. In 2009, total exports were less than US$1
billion, while gaming receipts were almost US$15 billion. By October
2010, gross gaming revenue had already reached US$19 billion for the
year. The Macau government plans to tighten control over the opening
of new casinos and strengthen supervision of local casino operations
in 2011 and has introduced measures to diversify the economy. The
Closer Economic Partnership Agreement (CEPA) between Macau and
mainland China that came into effect on 1 January 2004 offers
Macau-made products tariff-free access to the mainland;
nevertheless, China remains Macau's third largest goods export
market, behind Hong Kong and the United States. Macau's currency,
the Pataca, is closely tied to the Hong Kong dollar, which is also
freely accepted in the territory.

Macedonia
Having a small, open economy makes Macedonia vulnerable to
economic developments in Europe and dependent on regional
integration and progress toward EU membership for continued economic
growth. At independence in September 1991, Macedonia was the least
developed of the Yugoslav republics, producing a mere 5% of the
total federal output of goods and services. The collapse of
Yugoslavia ended transfer payments from the central government and
eliminated advantages from inclusion in a de facto free trade area.
An absence of infrastructure, UN sanctions on the downsized
Yugoslavia, and a Greek economic embargo over a dispute about the
country's constitutional name and flag hindered economic growth
until 1996. Since then, Macedonia has maintained macroeconomic
stability with low inflation, but it has so far lagged the region in
attracting foreign investment and creating jobs, despite making
extensive fiscal and business sector reforms. Official unemployment
remains high at 33%, but may be overstated based on the existence of
an extensive gray market, estimated to be more than 20% of GDP, that
is not captured by official statistics. In the wake of the global
economic downturn, Macedonia has experienced decreased foreign
direct investment, lowered credit, and a large trade deficit, but
the financial system remained sound. Macroeconomic stability was
maintained by a prudent monetary policy, which kept the domestic
currency at the pegged level against the euro, at the expense of
raising interest rates. As a result, GDP fell in 2009. but returned
to positive in 2010.

Madagascar
After discarding socialist economic policies in the
mid-1990s, Madagascar followed a World Bank- and IMF-led policy of
privatization and liberalization that has been undermined since the
start of the political crisis. This strategy placed the country on a
slow and steady growth path from an extremely low level.
Agriculture, including fishing and forestry, is a mainstay of the
economy, accounting for more than one-fourth of GDP and employing
80% of the population. Exports of apparel have boomed in recent
years primarily due to duty-free access to the US. However,
Madagascar's failure to comply with the requirements of the African
Growth and Opportunity Act (AGOA) led to the termination of the
country's duty-free access in January 2010. Deforestation and
erosion, aggravated by the use of firewood as the primary source of
fuel, are serious concerns. Former President RAVALOMANANA worked
aggressively to revive the economy following the 2002 political
crisis, which triggered a 12% drop in GDP that year. The current
political crisis which began in early 2009 has dealt additional
blows to the economy. Tourism dropped more than 50% in 2009,
compared with the previous year, and many investors are wary of
entering the uncertain investment environment.

Malawi
Landlocked Malawi ranks among the world's most densely
populated and least developed countries. The economy is
predominately agricultural with about 80% of the population living
in rural areas. Agriculture, which has benefited from fertilizer
subsidies since 2006, accounts for more than one-third of GDP and
90% of export revenues. The performance of the tobacco sector is key
to short-term growth as tobacco accounts for more than half of
exports. The economy depends on substantial inflows of economic
assistance from the IMF, the World Bank, and individual donor
nations. In 2006, Malawi was approved for relief under the Heavily
Indebted Poor Countries (HIPC) program. In December 2007, the US
granted Malawi eligibility status to receive financial support
within the Millennium Challenge Corporation (MCC) initiative. The
government faces many challenges including developing a market
economy, improving educational facilities, facing up to
environmental problems, dealing with the rapidly growing problem of
HIV/AIDS, and satisfying foreign donors that fiscal discipline is
being tightened. Since 2005 President MUTHARIKA'S government has
exhibited improved financial discipline under the guidance of
Finance Minister Goodall GONDWE and signed a three year Poverty
Reduction and Growth Facility worth $56 million with the IMF.
Improved relations with the IMF lead other international donors to
resume aid as well. The government has announced infrastructure
projects that could yield improvements, such as a new oil pipeline,
for better fuel access, and the potential for a waterway link
through Mozambican rivers to the ocean, for better transportation
options. Since 2009, however, Malawi experienced some setbacks,
including a general shortage of foreign exchange, which has damaged
its ability to pay for imports, and fuel shortages that hinder
transportation and productivity. Investment fell 23% in 2009. The
government has failed to address barriers to investment such as
unreliable power, water shortages, poor telecommunications
infrastructure, and the high costs of services.

Malaysia
Malaysia, a middle-income country, has transformed itself
since the 1970s from a producer of raw materials into an emerging
multi-sector economy. Under current Prime Minister NAJIB, Malaysia
is attempting to achieve high-income status by 2020 and to move
farther up the value-added production chain by attracting
investments in Islamic finance, high technology industries, medical
technology, and pharmaceuticals. The NAJIB administration also is
continuing efforts to boost domestic demand and to wean the economy
off of its dependence on exports. Nevertheless, exports -
particularly of electronics - remain a significant driver of the
economy. As an oil and gas exporter, Malaysia has profited from
higher world energy prices, although the rising cost of domestic
gasoline and diesel fuel, combined with strained government
finances, has forced Kuala Lumpur to reduce government subsidies.
The government is also trying to lessen its dependence on state oil
producer Petronas, which supplies at least 40% of government
revenue. The central bank maintains healthy foreign exchange
reserves and its well-developed regulatory regime has limited
Malaysia's exposure to riskier financial instruments and the global
financial crisis. Nevertheless, decreasing worldwide demand for
consumer goods hurt Malaysia's exports and economic growth in 2009,
although both showed signs of recovery in 2010. In order to attract
increased investment, NAJIB has also sought to revise the special
economic and social preferences accorded to ethnic Malays under the
New Economic Policy of 1970, but he has encountered significant
opposition, especially from Malay nationalists.

Maldives
Tourism, Maldives' largest economic activity, accounts for
28% of GDP and more than 60% of foreign exchange receipts. Over 90%
of government tax revenue comes from import duties and
tourism-related taxes. Fishing is the second leading sector.
Agriculture and manufacturing continue to play a lesser role in the
economy, constrained by the limited availability of cultivable land
and the shortage of domestic labor. Most staple foods must be
imported. The Maldivian Government implemented economic reforms,
beginning in 1989 that initially lifted import quotas, opened some
exports to the private sector, and liberalized regulations to allow
more foreign investment. Real GDP growth averaged over 7.5% per year
for more than a decade, and registered 18% in 2006, due to a rebound
in tourism and reconstruction following the tsunami of December
2004. GDP slowed in 2007-08, then contracted in 2009 due to the
global recession. Falling tourist arrivals and fish exports,
combined with high government spending on social needs, subsidies,
and civil servant salaries contributed to a balance of payments
crisis, which was eased with a December 2009, $79.3 million dollar
IMF standby agreement. Diversifying the economy beyond tourism and
fishing, reforming public finance, and increasing employment
opportunities are major challenges facing the government. Over the
longer term Maldivian authorities worry about the impact of erosion
and possible global warming on their low-lying country; 80% of the
area is 1 meter or less above sea level.

Mali
Among the 25 poorest countries in the world, Mali is a
landlocked country highly dependent on gold mining and agricultural
exports for revenue. The country's fiscal status fluctuates with
gold and agricultural commodity prices and the harvest. Mali remains
dependent on foreign aid. Economic activity is largely confined to
the riverine area irrigated by the Niger River and about 65% of its
land area is desert or semidesert. About 10% of the population is
nomadic and some 80% of the labor force is engaged in farming and
fishing. Industrial activity is concentrated on processing farm
commodities. The government has continued an IMF-recommended
structural adjustment program that has helped the economy grow,
diversify, and attract foreign investment. Mali is developing its
cotton and iron ore extraction industries to diversify its revenue
sources because gold production has started to fall. Mali has
invested in tourism but security issues are hurting the industry.
Mali's adherence to economic reform and the 50% devaluation of the
CFA franc in January 1994 have pushed up economic growth to a 5%
average in 1996-2010. Worker remittances and external trade routes
for the landlocked country have been jeopardized by continued unrest
in neighboring Cote d'Ivoire, however, Mali is building a road
network that will connect it to all adjacent countries and it has a
railway line to Senegal. In 2010, Mali experienced a regional
drought that hurt livestock and livelihoods.

Malta
Malta produces only about 20% of its food needs, has limited
fresh water supplies, and has few domestic energy sources. Malta's
geographic position between the EU and Africa makes it a target for
illegal immigration, which has strained Malta's political and
economic resources. Malta adopted the euro on 1 January 2008.
Malta's financial services industry has grown in recent years and in
2008-09 it escaped significant damage from the international
financial crisis, largely because the sector is centered on the
indigenous real estate market and is not highly leveraged. Locally,
the restricted damage from the financial crisis has been attributed
to the stability of the Maltese banking system and to its prudent
risk-management practices. The global economic downturn and high
electricity and water prices hurt Malta's real economy, which is
dependent on foreign trade, manufacturing - especially electronics
and pharmaceuticals - and tourism, but growth bounced back as the
global economy recovered in 2010. Following a 1.2% contraction in
2009, GDP grew 2% in 2010.

Marshall Islands
US Government assistance is the mainstay of this
tiny island economy. The Marshall Islands received more than $1
billion in aid from the US from 1986-2002. Agricultural production,
primarily subsistence, is concentrated on small farms; the most
important commercial crops are coconuts and breadfruit. Small-scale
industry is limited to handicrafts, tuna processing, and copra. The
tourist industry, now a small source of foreign exchange employing
less than 10% of the labor force, remains the best hope for future
added income. The islands have few natural resources, and imports
far exceed exports. Under the terms of the Amended Compact of Free
Association, the US will provide millions of dollars per year to the
Marshall Islands (RMI) through 2023, at which time a Trust Fund made
up of US and RMI contributions will begin perpetual annual payouts.
Government downsizing, drought, a drop in construction, the decline
in tourism, and less income from the renewal of fishing vessel
licenses have held GDP growth to an average of 1% over the past
decade.

Mauritania
Half the population still depends on agriculture and
livestock for a livelihood, even though many of the nomads and
subsistence farmers were forced into the cities by recurrent
droughts in the 1970s and 1980s. Mauritania has extensive deposits
of iron ore, which account for nearly 40% of total exports. The
nation's coastal waters are among the richest fishing areas in the
world but overexploitation by foreigners threatens this key source
of revenue. The country's first deepwater port opened near
Nouakchott in 1986. Before 2000, drought and economic mismanagement
resulted in a buildup of foreign debt. In February 2000, Mauritania
qualified for debt relief under the Heavily Indebted Poor Countries
(HIPC) initiative and nearly all of its foreign debt has since been
forgiven. A new investment code approved in December 2001 improved
the opportunities for direct foreign investment. Mauritania and the
IMF agreed to a three-year Poverty Reduction and Growth Facility
(PRGF) arrangement in 2006. Mauritania made satisfactory progress,
but the IMF, World Bank, and other international actors suspended
assistance and investment in Mauritania after the August 2008 coup.
Since the presidential election in July 2009, donors have resumed
assistance. Oil prospects, while initially promising, have largely
failed to materialize, and the government has placed a priority on
attracting private investment to spur economic growth. The
Government also emphasizes reduction of poverty, improvement of
health and education, and privatization of the economy.

Mauritius
Since independence in 1968, Mauritius has developed from a
low-income, agriculturally based economy to a middle-income
diversified economy with growing industrial, financial, and tourist
sectors. For most of the period, annual growth has been in the order
of 5% to 6%. This remarkable achievement has been reflected in more
equitable income distribution, increased life expectancy, lowered
infant mortality, and a much-improved infrastructure. The economy
rests on sugar, tourism, textiles and apparel, and financial
services, and is expanding into fish processing, information and
communications technology, and hospitality and property development.
Sugarcane is grown on about 90% of the cultivated land area and
accounts for 15% of export earnings. The government's development
strategy centers on creating vertical and horizontal clusters of
development in these sectors. Mauritius has attracted more than
32,000 offshore entities, many aimed at commerce in India, South
Africa, and China. Investment in the banking sector alone has
reached over $1 billion. Mauritius, with its strong textile sector,
has been well poised to take advantage of the Africa Growth and
Opportunity Act (AGOA). Mauritius' sound economic policies and
prudent banking practices helped to mitigate negative effects from
the global financial crisis in 2008-09. GDP grew 3.6% in 2010 and
the country continues to expand its trade and investment outreach
around the globe.

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

Mexico
Mexico has a free market economy in the trillion dollar
class. It contains a mixture of modern and outmoded industry and
agriculture, increasingly dominated by the private sector. Recent
administrations have expanded competition in seaports, railroads,
telecommunications, electricity generation, natural gas
distribution, and airports. Per capita income is roughly one-third
that of the US; income distribution remains highly unequal. Since
the implementation of the North American Free Trade Agreement
(NAFTA) in 1994, Mexico's share of US imports has increased from 7%
to 12%, and its share of Canadian imports has doubled to 5%. Mexico
has free trade agreements with over 50 countries including,
Guatemala, Honduras, El Salvador, the European Free Trade Area, and
Japan, putting more than 90% of trade under free trade agreements.
In 2007, during its first year in office, the Felipe CALDERON
administration was able to garner support from the opposition to
successfully pass pension and fiscal reforms. The administration
passed an energy reform measure in 2008, and another fiscal reform
in 2009. Mexico's GDP plunged 6.5% in 2009 as world demand for
exports dropped and asset prices tumbled, but GDP posted positive
growth of 5% in 2010, with export growth leading the way. The
administration continues to face many economic challenges, including
improving the public education system, upgrading infrastructure,
modernizing labor laws, and fostering private investment in the
energy sector. CALDERON has stated that his top economic priorities
remain reducing poverty and creating jobs.

Micronesia, Federated States of
Economic activity consists primarily
of subsistence farming and fishing. The islands have few mineral
deposits worth exploiting, except for high-grade phosphate. The
potential for a tourist industry exists, but the remote location, a
lack of adequate facilities, and limited air connections hinder
development. Under the original terms of the Compact of Free
Association, the US provided $1.3 billion in grant aid during the
period 1986-2001; the level of aid has been subsequently reduced.
The Amended Compact of Free Association with the US guarantees the
Federated States of Micronesia (FSM) millions of dollars in annual
aid through 2023, and establishes a Trust Fund into which the US and
the FSM make annual contributions in order to provide annual payouts
to the FSM in perpetuity after 2023. The country's medium-term
economic outlook appears fragile due not only to the reduction in US
assistance but also to the current slow growth of the private sector.

Moldova
Moldova remains one of the poorest countries in Europe
despite recent progress from its small economic base. It enjoys a
favorable climate and good farmland but has no major mineral
deposits. As a result, the economy depends heavily on agriculture,
featuring fruits, vegetables, wine, and tobacco. Moldova must import
almost all of its energy supplies. Moldova's dependence on Russian
energy was underscored at the end of 2005, when a Russian-owned
electrical station in Moldova's separatist Transnistria region cut
off power to Moldova and Russia's Gazprom cut off natural gas in
disputes over pricing. In January 2009, gas supplies were cut during
a dispute between Russia and Ukraine. Russia's decision to ban
Moldovan wine and agricultural products, coupled with its decision
to double the price Moldova paid for Russian natural gas, have hurt
growth. The onset of the global financial crisis and poor economic
conditions in Moldova's main foreign markets, caused GDP to fall
6.5% in 2009. Unemployment almost doubled and inflation disappeared
- at -0.1%, a record low. Moldova's IMF agreement expired in May
2009. In fall 2009, the IMF allocated $186 million to Moldova to
cover its immediate budgetary needs, and the government signed an
new agreement with the IMF in January 2010 for a program worth $574
million. In 2010, an upturn in the world economy boosted GDP growth
to 3.1% and inflation to 7.3%. Economic reforms have been slow
because of corruption and strong political forces backing government
controls. Nevertheless, the government's primary goal of EU
integration has resulted in some market-oriented progress. The
granting of EU trade preferences and increased exports to Russia
will encourage higher growth rates, but the agreements are unlikely
to serve as a panacea, given the extent to which export success
depends on higher quality standards and other factors. The economy
has made a modest recovery, but remains vulnerable to political
uncertainty, weak administrative capacity, vested bureaucratic
interests, higher fuel prices, poor agricultural weather, and the
skepticism of foreign investors as well as the presence of an
illegal separatist regime in Moldova's Transnistria region.

Monaco
Monaco, bordering France on the Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. The principality also is a major banking center and has
successfully sought to diversify into services and small,
high-value-added, nonpolluting industries. The state has no income
tax and low business taxes and thrives as a tax haven both for
individuals who have established residence and for foreign companies
that have set up businesses and offices. Monaco, however, is not a
tax-free shelter; it charges nearly 20% value-added tax, collects
stamp duties, and companies face a 33% tax on profits unless they
can show that three-quarters of profits are generated within the
principality. Monaco was formally removed from the OECD's "grey
list" of uncooperative tax jurisdictions in late 2009, but continues
to face international pressure to abandon its banking secrecy laws
and help combat tax evasion. The state retains monopolies in a
number of sectors, including tobacco, the telephone network, and the
postal service. Living standards are high, roughly comparable to
those in prosperous French metropolitan areas.