Chapter LXIX: Section 3: , telephone 886 (2) 2709-2000, FAX 886 (2) 2702-7675, (4)

Guadeloupe:
The economy depends on agriculture, tourism, light
industry, and services. It also depends on France for large
subsidies and imports. Tourism is a key industry, with most tourists
from the US; an increasingly large number of cruise ships visit the
islands. The traditional sugarcane crop is slowly being replaced by
other crops, such as bananas (which now supply about 50% of export
earnings), eggplant, and flowers. Other vegetables and root crops
are cultivated for local consumption, although Guadeloupe is still
dependent on imported food, mainly from France. Light industry
features sugar and rum production. Most manufactured goods and fuel
are imported. Unemployment is especially high among the young.
Hurricanes periodically devastate the economy.

Guam:
The economy depends on US military spending, tourism, and the
export of fish and handicrafts. Total US grants, wage payments, and
procurement outlays amounted to $1 billion in 1998. Over the past 20
years, the tourist industry has grown rapidly, creating a
construction boom for new hotels and the expansion of older ones.
More than 1 million tourists visit Guam each year. The industry has
recently suffered setbacks because of the continuing Japanese
slowdown; the Japanese normally make up almost 90% of the tourists.
Most food and industrial goods are imported. Guam faces the problem
of building up the civilian economic sector to offset the impact of
military downsizing.

Guatemala:
The agricultural sector accounts for about one-fourth of
GDP, two-thirds of exports, and half of the labor force. Coffee,
sugar, and bananas are the main products. Former President ARZU
(1996-2000) worked to implement a program of economic liberalization
and political modernization. The 1996 signing of the peace accords,
which ended 36 years of civil war, removed a major obstacle to
foreign investment. In 1998, Hurricane Mitch caused relatively
little damage to Guatemala compared to its neighbors. Ongoing
challenges include increasing government revenues, negotiating
further assistance from international donors, and increasing the
efficiency and openness of both government and private financial
operations. Despite low international prices for Guatemala's main
commodities, the economy grew by 3% in 2000 and is forecast to grow
by 4% in 2001. Guatemala, along with Honduras and El Salvador,
recently concluded a free trade agreement with Mexico and has moved
to protect international property rights. However, the PORTILLO
administration has undertaken a review of privatizations under the
previous administration, thereby creating some uncertainty among
investors.

Guernsey:
Financial services - banking, fund management, insurance,
etc. - account for about 55% of total income in this tiny Channel
Island economy. Tourism, manufacturing, and horticulture, mainly
tomatoes and cut flowers, have been declining. Light tax and death
duties make Guernsey a popular tax haven. The evolving economic
integration of the EU nations is changing the rules of the game
under which Guernsey operates.

Guinea:
Guinea possesses major mineral, hydropower, and agricultural
resources, yet remains a poor underdeveloped nation. The country
possesses over 30% of the world's bauxite reserves and is the second
largest bauxite producer. The mining sector accounted for about 75%
of exports in 1999. Long-run improvements in government fiscal
arrangements, literacy, and the legal framework are needed if the
country is to move out of poverty. The government made encouraging
progress in budget management in 1997-99, and reform progress was
praised in the World Bank/IMF October 2000 assessment. However,
escalating fighting along the Sierra Leonean and Liberian borders
will cause major economic disruptions. In addition to direct defense
costs, the violence has led to a sharp decline in investor
confidence. Foreign mining companies have reduced expatriate staff,
while panic buying has created food shortages and inflation in local
markets. Real GDP growth is expected to fall to 2% in 2001.

Guinea-Bissau:
One of the 20 poorest countries in the world,
Guinea-Bissau depends mainly on farming and fishing. Cashew crops
have increased remarkably in recent years, and the country now ranks
sixth in cashew production. Guinea-Bissau exports fish and seafood
along with small amounts of peanuts, palm kernels, and timber. Rice
is the major crop and staple food. However, intermittent fighting
between Senegalese-backed government troops and a military junta
destroyed much of the country's infrastructure and caused widespread
damage to the economy in 1998; the civil war led to a 28% drop in
GDP that year, with partial recovery in 1999-2000. Before the war,
trade reform and price liberalization were the most successful part
of the country's structural adjustment program under IMF
sponsorship. The tightening of monetary policy and the development
of the private sector had also begun to reinvigorate the economy.
Because of high costs, the development of petroleum, phosphate, and
other mineral resources is not a near-term prospect. However,
unexploited offshore oil reserves could provide much-needed revenue
in the long run.

Guyana:
Severe drought and political turmoil contributed to Guyana's
negative growth of -1.8% for 1998 following six straight years of
growth of 5% or better. Growth came back to a positive 1.8% in 1999
and 3% in 2000. Underlying growth factors have included expansion in
the key agricultural and mining sectors, a more favorable atmosphere
for business initiative, a more realistic exchange rate, a moderate
inflation rate, and continued support by international
organizations. President JAGDEO, the former finance minister, is
taking steps to reform the economy, including drafting an investment
code and restructuring the inefficient and unresponsive public
sector. Problems include a shortage of skilled labor and a deficient
infrastructure. The government must persist in efforts to manage its
sizable external debt and attract new investment.

Haiti:
About 80% of the population lives in abject poverty. Nearly
70% of all Haitians depend on the agriculture sector, which consists
mainly of small-scale subsistence farming and employs about
two-thirds of the economically active work force. The country has
experienced little job creation since the former President PREVAL
took office in February 1996, although the informal economy is
growing. Following legislative elections in May 2000, fraught with
irregularities, international donors - including the US and EU -
suspended almost all aid to Haiti. This destabilized the Haitian
currency, the gourde, and, combined with a 40% fuel price hike in
September, caused widespread price increases. Prices appear to have
leveled off in January 2001.

Heard Island and McDonald Islands:
no economic activity

Holy See (Vatican City):
This unique, noncommercial economy is
supported financially by contributions (known as Peter's Pence) from
Roman Catholics throughout the world, the sale of postage stamps and
tourist mementos, fees for admission to museums, and the sale of
publications. The incomes and living standards of lay workers are
comparable to, or somewhat better than, those of counterparts who
work in the city of Rome.

Honduras:
Honduras, one of the poorest countries in the Western
Hemisphere, is banking on expanded trade privileges under the
Enhanced Caribbean Basin Initiative and on debt relief under the
Heavily Indebted Poor Countries (HIPC) initiative. While
reconstruction from 1998's Hurricane Mitch is at an advanced stage,
and the country has met most of its macroeconomic targets, it failed
to meet the IMF's goals to liberalize its energy and
telecommunications sectors. Economic growth has rebounded nicely
since the hurricane and should continue in 2001.

Hong Kong:
Hong Kong has a bustling free market economy highly
dependent on international trade. Natural resources are limited, and
food and raw materials must be imported. Indeed, imports and
exports, including reexports, each exceed GDP in dollar value. Even
before Hong Kong reverted to Chinese administration on 1 July 1997
it had extensive trade and investment ties with China. Per capita
GDP compares with the level in the four big countries of Western
Europe. GDP growth averaged a strong 5% in 1989-97. The widespread
Asian economic difficulties in 1998 hit this trade-dependent economy
quite hard, with GDP down 5%. The economy is undergoing a rapid
recovery, with growth of 10% in 2000 to be followed by projected
growth of 5% in 2001.

Howland Island:
no economic activity

Hungary:
Hungary continues to demonstrate strong economic growth and
to work toward accession to the European Union. The private sector
accounts for over 80% of GDP. Foreign ownership of and investment in
Hungarian firms is widespread, with cumulative foreign direct
investment totaling $23 billion by 2000. Hungarian sovereign debt
was upgraded in 2000 to the second-highest rating among all the
Central European transition economies. Inflation - a top economic
concern in 2000 - is still high at almost 10%, pushed upward by
higher world oil and gas and domestic food prices. Economic reform
measures such as health care reform, tax reform, and local
government financing have not yet been addressed by the ORBAN
government.

Iceland:
Iceland's Scandinavian-type economy is basically
capitalistic, yet with an extensive welfare system, low
unemployment, and remarkably even distribution of income. In the
absence of other natural resources (except for abundant hydrothermal
and geothermal power), the economy depends heavily on the fishing
industry, which provides 70% of export earnings and employs 12% of
the work force. The economy remains sensitive to declining fish
stocks as well as to drops in world prices for its main exports:
fish and fish products, aluminum, and ferrosilicon. The center-right
government plans to continue its policies of reducing the budget and
current account deficits, limiting foreign borrowing, containing
inflation, revising agricultural and fishing policies, diversifying
the economy, and privatizing state-owned industries. The government
remains opposed to EU membership, primarily because of Icelanders'
concern about losing control over their fishing resources. Iceland's
economy has been diversifying into manufacturing and service
industries in the last decade, and new developments in software
production, biotechnology, and financial services are taking place.
The tourism sector is also expanding, with the recent trends in
ecotourism and whale watching. Growth has been remarkably steady
over the past five years at 4%-5%.

India:
India's economy encompasses traditional village farming,
modern agriculture, handicrafts, a wide range of modern industries,
and a multitude of support services. More than a third of the
population is too poor to be able to afford an adequate diet.
India's international payments position remained strong in 2000 with
adequate foreign exchange reserves, moderately depreciating nominal
exchange rates, and booming exports of software services. Growth in
manufacturing output slowed, and electricity shortages continue in
many regions.

Indian Ocean:
The Indian Ocean provides major sea routes connecting
the Middle East, Africa, and East Asia with Europe and the Americas.
It carries a particularly heavy traffic of petroleum and petroleum
products from the oilfields of the Persian Gulf and Indonesia. Its
fish are of great and growing importance to the bordering countries
for domestic consumption and export. Fishing fleets from Russia,
Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainly
for shrimp and tuna. Large reserves of hydrocarbons are being tapped
in the offshore areas of Saudi Arabia, Iran, India, and western
Australia. An estimated 40% of the world's offshore oil production
comes from the Indian Ocean. Beach sands rich in heavy minerals and
offshore placer deposits are actively exploited by bordering
countries, particularly India, South Africa, Indonesia, Sri Lanka,
and Thailand.

Indonesia:
Indonesia, a vast polyglot nation, faces severe economic
problems, stemming from secessionist movements and the low level of
security in the regions, the lack of reliable legal recourse in
contract disputes, corruption, weaknesses in the banking system, and
strained relations with the IMF. Investor confidence will remain low
and few new jobs will be created under these circumstances. Growth
of 4.8% in 2000 is not sustainable, being attributable to favorable
short-term factors, including high world oil prices, a surge in
nonoil exports, and increased domestic demand for consumer durables.

Iran:
Iran's economy is a mixture of central planning, state
ownership of oil and other large enterprises, village agriculture,
and small-scale private trading and service ventures. President
KHATAMI has continued to follow the market reform plans of former
President RAFSANJANI and has indicated that he will pursue
diversification of Iran's oil-reliant economy although he has made
little progress toward that goal. The strong oil market in 1996
helped ease financial pressures on Iran and allowed for Tehran's
timely debt service payments. Iran's financial situation tightened
in 1997 and deteriorated further in 1998 because of lower oil
prices. The subsequent zoom in oil prices in 1999-2000 afforded Iran
fiscal breathing room but does not solve Iran's structural economic
problems, including the encouragement of foreign investment.

Iraq:
Iraq's economy is dominated by the oil sector, which has
traditionally provided about 95% of foreign exchange earnings. In
the 1980s, financial problems caused by massive expenditures in the
eight-year war with Iran and damage to oil export facilities by Iran
led the government to implement austerity measures, borrow heavily,
and later reschedule foreign debt payments; Iraq suffered economic
losses of at least $100 billion from the war. After the end of
hostilities in 1988, oil exports gradually increased with the
construction of new pipelines and restoration of damaged facilities.
Iraq's seizure of Kuwait in August 1990, subsequent international
economic sanctions, and damage from military action by an
international coalition beginning in January 1991 drastically
reduced economic activity. Although government policies supporting
large military and internal security forces and allocating resources
to key supporters of the regime have hurt the economy,
implementation of the UN's oil-for-food program in December 1996 has
helped improve conditions for the average Iraqi citizen. For the
first six, six-month phases of the program, Iraq was allowed to
export limited amounts of oil in exchange for food, medicine, and
some infrastructure spare parts. In December 1999, the UN Security
Council authorized Iraq to export under the program as much oil as
required to meet humanitarian needs. Oil exports are now more than
three-quarters their prewar level. Per capita food imports have
increased significantly, while medical supplies and health care
services are steadily improving. Per capita output and living
standards are still well below the prewar level, but any estimates
have a wide range of error.

Ireland:
Ireland is a small, modern, trade-dependent economy with
growth averaging a robust 9% in 1995-2000. Agriculture, once the
most important sector, is now dwarfed by industry, which accounts
for 38% of GDP and about 80% of exports and employs 28% of the labor
force. Although exports remain the primary engine for Ireland's
robust growth, the economy is also benefiting from a rise in
consumer spending and recovery in both construction and business
investment. Over the past decade, the Irish government has
implemented a series of national economic programs designed to curb
inflation, reduce government spending, increase labor force skills,
and promote foreign investment. Ireland joined in launching the euro
currency system in January 1999 along with 10 other EU nations. The
Irish economy is in danger of overheating, with the tight labor
market driving up wage demands and inflation.

Israel:
Israel has a technologically advanced market economy with
substantial government participation. It depends on imports of crude
oil, grains, raw materials, and military equipment. Despite limited
natural resources, Israel has intensively developed its agricultural
and industrial sectors over the past 20 years. Israel is largely
self-sufficient in food production except for grains. Cuts diamonds,
high-technology equipment, and agricultural products (fruits and
vegetables) are the leading exports. Israel usually posts sizable
current account deficits, which are covered by large transfer
payments from abroad and by foreign loans. Roughly half of the
government's external debt is owed to the US, which is its major
source of economic and military aid. The influx of Jewish immigrants
from the former USSR topped 750,000 during the period 1989-99,
bringing the population of Israel from the former Soviet Union to 1
million, one-sixth of the total population, and adding scientific
and professional expertise of substantial value for the economy's
future. The influx, coupled with the opening of new markets at the
end of the Cold War, energized Israel's economy, which grew rapidly
in the early 1990s. But growth began moderating in 1996 when the
government imposed tighter fiscal and monetary policies and the
immigration bonus petered out. Growth was a strong 5.9% in 2000. But
the outbreak of Palestinian unrest in late September and the
collapse of the BARAK Government - coupled with a cooling off in the
high-technology and tourist sectors - undercut the boom and
foreshadows a slowdown to 2%-3% in 2001.

Italy:
Italy has a diversified industrial economy with roughly the
same total and per capita output as France and the UK. This
capitalistic economy remains divided into a developed industrial
north, dominated by private companies, and a less developed
agricultural south, with more than 20% unemployment. Most raw
materials needed by industry and more than 75% of energy
requirements are imported. Since 1992, Italy has adopted budgets
compliant with the requirements of the European Monetary Union
(EMU); wage moderation agreements by representatives of government,
labor, and employers have helped to bring Italy's inflation into
conformity with EMU requirements. Italy's economic performance,
however, has lagged behind that of its EU partners and it must work
to stimulate employment, promote labor flexibility, reform its
expensive pension system, and tackle the informal economy.

Jamaica:
Key sectors in this island economy are bauxite (alumina and
bauxite account for more than half of exports) and tourism. Since
assuming office in 1992, Prime Minister PATTERSON has eliminated
most price controls, streamlined tax schedules, and privatized
government enterprises. Continued tight monetary and fiscal policies
have helped slow inflation - although inflationary pressures are
mounting - and stabilize the exchange rate, but have resulted in the
slowdown of economic growth (moving from 1.5% in 1992 to 0.5% in
1995). In 1996, GDP showed negative growth (-1.4%) and remained
negative through 1999. Serious problems include: high interest
rates; increased foreign competition; the weak financial condition
of business in general resulting in receiverships or closures and
downsizings of companies; the shift in investment portfolios to
non-productive, short-term high yield instruments; a pressured,
sometimes sliding, exchange rate; a widening merchandise trade
deficit; and a growing internal debt for government bailouts to
various ailing sectors of the economy, particularly the financial
sector. Depressed economic conditions in 1999-2000 led to increased
civil unrest, including a mounting crime rate. Jamaica's medium-term
prospects will depend upon encouraging investment in the productive
sectors, maintaining a competitive exchange rate, stabilizing the
labor environment, selling off reacquired firms, and implementing
proper fiscal and monetary policies.

Jan Mayen:
Jan Mayen is a volcanic island with no exploitable
natural resources. Economic activity is limited to providing
services for employees of Norway's radio and meteorological stations
located on the island.

Japan:
Government-industry cooperation, a strong work ethic, mastery
of high technology, and a comparatively small defense allocation (1%
of GDP) have helped Japan advance with extraordinary rapidity to the
rank of second most technologically powerful economy in the world
after the US and third largest economy in the world after the US and
China. One notable characteristic of the economy is the working
together of manufacturers, suppliers, and distributors in
closely-knit groups called keiretsu. A second basic feature has been
the guarantee of lifetime employment for a substantial portion of
the urban labor force. Both features are now eroding. Industry, the
most important sector of the economy, is heavily dependent on
imported raw materials and fuels. The much smaller agricultural
sector is highly subsidized and protected, with crop yields among
the highest in the world. Usually self-sufficient in rice, Japan
must import about 50% of its requirements of other grain and fodder
crops. 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 largely because of the
aftereffects of overinvestment during the late 1980s and
contractionary domestic policies intended to wring speculative
excesses from the stock and real estate markets. Government efforts
to revive economic growth have met little success and were further
hampered in late 2000 by the slowing of the US and Asian economies.
The crowding of habitable land area and the aging of the population
are two major long-run problems. Robotics constitutes a key
long-term economic strength, with Japan possessing 410,000 of the
world's 720,000 "working robots".

Jarvis Island:
no economic activity

Jersey:
The economy is based largely on international financial
services, agriculture, and tourism. 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. In 1996 the finance sector accounted
for about 60% of the island's output. Tourism, another mainstay of
the economy, accounts for 24% of GDP. In recent years, the
government has encouraged light industry to locate in Jersey, with
the result that an electronics industry has developed alongside the
traditional manufacturing of knitwear. 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.

Johnston Atoll:
Economic activity is limited to providing services
to US military personnel and contractors located on the island. All
food and manufactured goods must be imported.

Jordan:
Jordan is a small Arab country with inadequate supplies of
water and other natural resources such as oil. The Persian Gulf
crisis, which began in August 1990, aggravated Jordan's already
serious economic problems, forcing the government to stop most debt
payments and suspend rescheduling negotiations. Aid from Gulf Arab
states, worker remittances, and trade revenues contracted. Refugees
flooded the country, producing serious balance-of-payments problems,
stunting GDP growth, and straining government resources. The economy
rebounded in 1992, largely due to the influx of capital repatriated
by workers returning from the Gulf. After averaging 9% in 1992-95,
GDP growth averaged only 1.5% during 1996-99. In an attempt to spur
growth, King ABDALLAH has undertaken limited economic reform,
including partial privatization of some state-owned enterprises and
Jordan's entry in January 2000 into the World Trade Organization
(WTrO). Debt, poverty, and unemployment are fundamental ongoing
economic problems.

Juan de Nova Island:
Up to 12,000 tons of guano are mined per year.

Kazakhstan:
Kazakhstan, the second largest of the former Soviet
republics in territory, possesses enormous fossil fuel reserves as
well as plentiful supplies of other minerals and metals. It also is
a large agricultural - livestock and grain - producer. Kazakhstan's
industrial sector rests on the extraction and processing of these
natural resources and also on a growing machine-building sector
specializing in construction equipment, tractors, agricultural
machinery, and some defense items. The breakup of the USSR in
December 1991 and the collapse of demand for Kazakhstan's
traditional heavy industry products resulted in a short-term
contraction of the economy, with the steepest annual decline
occurring in 1994. In 1995-97, the pace of the government program of
economic reform and privatization quickened, resulting in a
substantial shifting of assets into the private sector. The Caspian
Pipeline Consortium agreement to build a new pipeline from western
Kazakhstan's Tengiz oil field to the Black Sea increases prospects
for substantially larger oil exports in several years. Kazakhstan's
economy again turned downward in 1998 with a 2% decline in GDP due
to slumping oil prices and the August financial crisis in Russia.
The recovery of international oil prices in 1999, combined with a
well-timed tenge devaluation and a bumper grain harvest, pulled the
economy out of recession in 2000. Astana has embarked upon an
industrial policy designed to diversify the economy away from
overdependence on the oil sector by developing light industry.

Kenya:
Kenya is well placed to serve as an engine of growth in East
Africa, but its economy has been stagnating because of poor
management and uneven commitment to reform. In 1993, the government
of Kenya implemented a program of economic liberalization and reform
that included the removal of import licensing, price controls, and
foreign exchange controls. With the support of the World Bank, IMF,
and other donors, the reforms led to a brief turnaround in economic
performance following a period of negative growth in the early
1990s. Kenya's real GDP grew 5% in 1995 and 4% in 1996, and
inflation remained under control. Growth slowed after 1997,
averaging only 1.5% in 1997-2000. In 1997, political violence
damaged the tourist industry, and Kenya's Enhanced Structural
Adjustment Program lapsed due to the government's failure to
maintain reform or address public sector corruption. Severe drought
in 1999 and 2000 caused water and energy rationing and reduced
agricultural sector productivity. A new economic team was put in
place in 1999 to revitalize the reform effort, strengthen the civil
service, and curb corruption. The IMF and World Bank renewed their
support to Kenya in mid-2000, but a number of setbacks to the
economic reform program in late 2000 have renewed donor and private
sector concern about the government's commitment to sound
governance. Long-term barriers to development include electricity
shortages, inefficient government dominance of key sectors, endemic
corruption, and high population growth.

Kingman Reef:
no economic activity

Kiribati:
A remote country of 33 scattered coral atolls, Kiribati
has few national resources. 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. The financial sector is at an
early stage of development as is the expansion of private sector
initiatives. Foreign financial aid, largely from the UK and Japan,
is a critical supplement to GDP, equal to 25%-50% of GDP in recent
years. Remittances from workers abroad account for more than $5
million each year. Performance in 2000 fell short of the 2.5% growth
in 1999, which benefited from increased copra production and
exceptionally large revenues from fishing licenses.

Korea, North:
North Korea, one of the world's most centrally planned
and isolated economies, faces desperate economic conditions.
Industrial capital stock is nearly beyond repair as a result of
years of underinvestment and spare parts shortages. The nation faces
its seventh year of food shortages because of weather-related
problems, including major drought in 2000, and chronic shortages of
fertilizer and fuel. Massive international food aid deliveries have
allowed the regime to escape the major consequence of spreading
economic failure, such as mass starvation, but the population
remains vulnerable to prolonged malnutrition and deteriorating
living conditions. Large-scale military spending eats up resources
needed for expanding investment and consumption goods. In 2000, the
regime placed emphasis on expanding foreign trade links, embracing
modern technology, and attracting foreign investment, but in no way
at the expense of relinquishing central control over key national
assets or undergoing market-oriented reforms.

Korea, South:
As one of the Four Dragons of East Asia, South Korea
has achieved an incredible record of growth. Three decades ago GDP
per capita was comparable with levels in the poorer countries of
Africa and Asia. Today its GDP per capita is seven times India's, 16
times North Korea's, and comparable to the lesser economies of the
European Union. This success through the late 1980s was achieved by
a system of close government/business ties, including directed
credit, import restrictions, sponsorship of specific industries, and
a strong labor effort. 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 1997-99 exposed certain longstanding weaknesses
in South Korea's development model, including high debt/equity
ratios, massive foreign borrowing, and an undisciplined financial
sector. By 1999 GDP growth had recovered, reversing the substantial
decline of 1998. Seoul has pressed the country's largest business
groups to restructure and to strengthen their financial base. Growth
in 2001 likely will be a more sustainable rate of 5%.

Kuwait:
Kuwait is a small, relatively open economy with proved crude
oil reserves of about 94 billion barrels - 10% of world reserves.
Petroleum accounts for nearly half of GDP, 90% of export revenues,
and 75% of government income. Kuwait's climate limits agricultural
development. Consequently, with the exception of fish, it depends
almost wholly on food imports. About 75% of potable water must be
distilled or imported. Higher oil prices put the FY99/00 budget into
a $2 billion surplus. The FY00/01 budget covers only nine months
because of a change in the fiscal year. The budget for FY01/02,
which begins 1 April, contains higher expenditures for salaries,
construction, and other general categories. Kuwait continues its
discussions with foreign oil companies to develop fields in the
northern part of the country.

Kyrgyzstan:
Kyrgyzstan is a small, poor, mountainous country with a
predominantly agricultural economy. Cotton, wool, and meat are the
main agricultural products and exports. Industrial exports include
gold, mercury, uranium, and electricity. Kyrgyzstan has been one of
the most progressive countries of the former Soviet Union in
carrying out market reforms. Following a successful stabilization
program, which lowered inflation from 88% in 1994 to 15% for 1997,
attention is turning toward stimulating growth. Much of the
government's stock in enterprises has been sold. Drops in production
had been severe since the breakup of the Soviet Union in December
1991, but by mid-1995 production began to recover and exports began
to increase. Pensioners, unemployed workers, and government workers
with salary arrears continue to suffer. Foreign assistance played a
substantial role in the country's economic turnaround in 1996-97.
Growth was held down to 2.1% in 1998 largely because of the
spillover from Russia's economic difficulties, but moved ahead to
3.6% in 1999 and an estimated 5.7% in 2000. The government has
adopted a series of measures to combat such persistent problems as
excessive external debt, inflation, and inadequate revenue
collection.

Laos:
The government of Laos - one of the few remaining official
communist states - began decentralizing control and encouraging
private enterprise in 1986. The results, starting from an extremely
low base, were striking - growth averaged 7% during 1988-97. Reform
efforts subsequently slowed, and GDP growth dropped an average of 3
percentage points. Because Laos depends heavily on its trade with
Thailand, it was damaged by the regional financial crisis beginning
in 1997. Government mismanagement deepened the crisis, and from June
1997 to June 1999 the Lao kip lost 87% of its value. Laos' foreign
exchange problems peaked in September 1999 when the kip fell from
3,500 kip to the dollar to 9,000 kip to the dollar in a matter of
weeks. Now that the currency has stabilized, however, the government
seems content to let the current situation persist, despite limited
government revenue and foreign exchange reserves. A landlocked
country with a primitive infrastructure, Laos has no railroads, a
rudimentary road system, and limited external and internal
telecommunications. Electricity is available in only a few urban
areas. Subsistence agriculture accounts for half of GDP and provides
80% of total employment. For the foreseeable future the economy will
continue to depend on aid from the IMF and other international
sources; Japan is currently the largest bilateral aid donor; aid
from the former USSR/Eastern Europe has been cut sharply.

Latvia:
In 2000, Latvia's transitional economy recovered from the
1998 Russian financial crisis, largely due to the SKELE government's
budget stringency and a gradual reorientation of exports toward EU
countries, lessening Latvia's trade dependency on Russia. Latvia
officially joined the World Trade Organization in February 1999 -
the first Baltic state to join - and was invited at the Helsinki EU
Summit in December 1999 to begin accession talks in early 2000.
Unemployment fell to 7.8% in 2000, down from 9.6% in 1999, and 9.2%
in 1998. Privatization of large state-owned utilities and the
shipping industry faced more delays in 2000, and political
instability will continue to delay completion of the privatization
process over the next year. Latvia projects 6% GDP growth, 2.5%-3.0%
inflation, and a 1.7% fiscal deficit in 2001. Preparing for EU
membership over the next few years remains a top foreign policy goal.

Lebanon:
The 1975-91 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.
Peace enabled the central government to restore control in Beirut,
begin collecting taxes, and regain access to key port and government
facilities. Economic recovery was helped by a financially sound
banking system and resilient small- and medium-scale manufacturers.
Family remittances, banking services, manufactured and farm exports,
and international aid provided the main sources of foreign exchange.
Lebanon's economy has made impressive gains since the launch in 1993
of "Horizon 2000," the government's $20 billion reconstruction
program. Real GDP grew 8% in 1994, 7% in 1995, 4% per year in 1996
and 1997 but slowed to 2% in 1998, -1% in 1999, and 1% in 2000.
Annual inflation fell during the course of the 1990s from more than
100% to 0%, and foreign exchange reserves jumped from $1.4 billion
to more than $6 billion. Burgeoning capital inflows have generated
foreign payments surpluses, and the Lebanese pound has remained very
stable for the past two years. Lebanon has rebuilt much of its
war-torn physical and financial infrastructure. Solidere, a
$2-billion firm, has managed the reconstruction of Beirut's central
business district; the stock market reopened in January 1996; and
international banks and insurance companies are returning. The
government nonetheless faces serious challenges in the economic
arena. It has funded reconstruction by tapping foreign exchange
reserves and by borrowing heavily - mostly from domestic banks. The
newly re-installed HARIRI government's announced policies fail to
address the ever-increasing budgetary deficits and national debt
burden. The gap between rich and poor has widened in the 1990s,
resulting in grassroots dissatisfaction over the skewed distribution
of the reconstruction's benefits.

Lesotho:
Small, landlocked, and mountainous, Lesotho's primary
natural resource is water. Its economy is based on subsistence
agriculture, livestock, and remittances from miners employed in
South Africa. The number of such mineworkers has declined steadily
over the past several years. A small manufacturing base depends
largely on farm products that support the milling, canning, leather,
and jute industries. Agricultural products are exported primarily to
South Africa. Proceeds from membership in a common customs union
with South Africa form the majority of government revenue. Although
drought has decreased agricultural activity over the past few years,
completion of a major hydropower facility in January 1998 now
permits the sale of water to South Africa, generating royalties for
Lesotho. The pace of substantial privatization has increased in
recent years. In December 1999, the government embarked on a
nine-month IMF staff-monitored program aimed at structural
adjustment and stabilization of macroeconomic fundamentals. The
government is in the process of applying for a three-year successor
program with the IMF under its Poverty Reduction and Growth Facility.

Liberia:
A civil war in 1989-96 destroyed much of Liberia's economy,
especially the infrastructure in and around Monrovia. Many
businessmen fled the country, taking capital and expertise with
them. Some returned during 1997. Many will not return. Richly
endowed with water, mineral resources, forests, and a climate
favorable to agriculture, Liberia had been a producer and exporter
of basic products, while local manufacturing, mainly foreign owned,
had been small in scope. The democratically elected government,
installed in August 1997, inherited massive international debts and
currently relies on revenues from its maritime registry to provide
the bulk of its foreign exchange earnings. The restoration of the
infrastructure and the raising of incomes in this ravaged economy
depend on the implementation of sound macro- and micro-economic
policies of the new government, including the encouragement of
foreign investment. Recent growth has been from a low base, and
continued growth will require major policy successes.

Libya:
The socialist-oriented economy depends primarily upon
revenues from the oil sector, which contributes practically all
export earnings and about one-quarter of GDP. These oil revenues and
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. In this statist society, import restrictions and
inefficient resource allocations have led to periodic shortages of
basic goods and foodstuffs. The nonoil manufacturing and
construction sectors, which account for about 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 requirements. Higher oil prices
in 1999 and 2000 led to an increase in export revenues, which
improved macroeconomic balances and helped to stimulate the economy.
Following the suspension of UN sanctions in 1999, Libya has been
trying to increase its attractiveness to foreign investors, and
several foreign companies have visited in search of contracts.

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 living standards on a par with the urban areas of
its large European neighbors. Low business taxes - the maximum tax
rate is 18% - and easy incorporation rules have induced 73,700
holding or so-called letter box 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
European Free Trade Association (EFTA) and EU) since May 1995. The
government is working to harmonize its economic policies with those
of an integrated Europe.

Lithuania:
Lithuania, the Baltic state that has conducted the most
trade with Russia, has been slowly rebounding from the 1998 Russian
financial crisis. High unemployment and weak consumption have held
back recovery. GDP growth for 2000 - estimated at 2.9% - fell behind
that of Estonia and Latvia, and unemployment is estimated at 10.8%,
the country's highest since regaining independence in 1990. For
2001, Lithuanians forecast 3.2% growth, 1.8% inflation, and a fiscal
deficit of 3.3%. In early 2001, the Lithuanian Government announced
that it will repeg its currency, the litas, to the euro (the litas
is currently pegged to the dollar) some time in 2002. Lithuania must
ratify 25 agreements along with other legal documents and
obligations by 1 May 2001 before gaining World Trade Organization
membership. Lithuania was invited to the Helsinki summit in December
1999 and began EU accession talks in early 2000. Privatization of
the large, state-owned utilities, particularly in the energy sector,
remains a key challenge for 2001.

Luxembourg:
The stable, high-income economy features 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 has more than compensated for the decline in steel.
Services, especially banking, account for a substantial proportion
of the economy. Agriculture is based on small family-owned farms.
The economy depends on foreign and trans-border workers for 30% of
its labor force. Luxembourg has a custom union with Belgium and the
Netherlands, and, as a member of the EU, enjoys the advantages of
the open European market. It joined with 10 other EU members to
launch the euro on 1 January 1999.

Macau:
The economy is based largely on tourism (including gambling)
and textile and fireworks manufacturing. Efforts to diversify have
spawned other small industries - toys, artificial flowers, and
electronics. The tourist sector has accounted for roughly 25% of
GDP, and the clothing industry has provided about three-fourths of
export earnings; the gambling industry probably represents over 40%
of GDP. More than 8 million tourists visited Macau in 2000. Macau
depends on China for most of its food, fresh water, and energy
imports. Japan and Hong Kong are the main suppliers of raw materials
and capital goods. Output dropped 5% in 1998 and 3% in 1999, with a
small 2% gain in 2000. Macau reverted to Chinese administration on
20 December 1999. Gang violence, a dark spot in the economy,
probably will be reduced in 2000-01 to the advantage of the tourism
sector.

Macedonia, The Former Yugoslav Republic of:
At independence in
November 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 center and eliminated advantages from inclusion in a de
facto free trade area. An absence of infrastructure, UN sanctions on
its largest market Yugoslavia, and a Greek economic embargo hindered
economic growth until 1996. GDP has subsequently increased each
year, rising by 5% in 2000. Successful privatization in 2000 boosted
the country's reserves to over $700 million. Also, the leadership
demonstrated a continuing commitment to economic reform, free trade,
and regional integration. Inflation jumped to 11% in 2000, largely
due to higher oil prices.

Madagascar:
Madagascar faces problems of chronic malnutrition,
underfunded health and education facilities, a roughly 3% annual
population growth rate, and severe loss of forest cover, accompanied
by erosion. Agriculture, including fishing and forestry, is the
mainstay of the economy, accounting for 30% of GDP and contributing
more than 70% to export earnings. Industry features textile
manufacturing and the processing of agricultural products. Growth in
output in 1992-97 averaged less than the growth rate of the
population. Growth has been held back by antigovernment strikes and
demonstrations, a decline in world coffee prices, and the erratic
commitment of the government to economic reform. The extent of
government reforms, outside financial aid, and foreign investment
will be key determinants of future growth. For 2001, growth should
again be about 5%.

Malawi:
Landlocked Malawi ranks among the world's least developed
countries. The economy is predominately agricultural, with about 90%
of the population living in rural areas. Agriculture accounts for
37% of GDP and 85% of export revenues. The economy depends on
substantial inflows of economic assistance from the IMF, the World
Bank, and individual donor nations. In late 2000, Malawi was
approved for relief under the Heavily Indebted Poor Countries (HIPC)
program. The government faces strong challenges, e.g., to fully
develop a market economy, to improve educational facilities, to face
up to environmental problems, and to deal with the rapidly growing
problem of HIV/AIDS.

Malaysia:
GDP grew at 8.6% in 2000, mainly on the strength of
double-digit export growth and continued government fiscal stimulus.
As an oil exporter, Malaysia also benefited from higher petroleum
prices. Higher export revenues allowed the country to register a
current account surplus, but foreign exchange reserves have been
declining - from a peak of $34.5 billion in April 2000 to $29.7
billion by December - as foreign investors pulled money out of the
country. Despite this development, Kuala Lumpur is unlikely to
abandon its currency peg soon. An economic slowdown in key Western
markets, especially the United States, and lower world demand for
electronics products will slow GDP growth to 3%-6% in 2001,
according to private forecasters. Over the longer term, Malaysia's
failure to make substantial progress on key reforms of the corporate
and financial sectors clouds prospects for sustained growth and the
return of critical foreign investment.

Maldives:
Tourism, Maldives largest industry, accounts for 20% of
GDP and more than 60% of the Maldives' foreign exchange receipts.
Over 90% of government tax revenue comes from import duties and
tourism-related taxes. Almost 400,000 tourists visited the islands
in 1998. Fishing is a second leading sector. The Maldivian
Government began an economic reform program in 1989 initially by
lifting import quotas and opening some exports to the private
sector. Subsequently, it has liberalized regulations to allow more
foreign investment. Agriculture and manufacturing continue to play a
minor role in the economy, constrained by the limited availability
of cultivable land and the shortage of domestic labor. Most staple
foods must be imported. Industry, which consists mainly of garment
production, boat building, and handicrafts, accounts for about 18%
of GDP. Maldivian authorities worry about the impact of erosion and
possible global warming on their low-lying country; 80% of the area
is one meter or less above sea level.

Mali:
Mali is among the poorest countries in the world, with 65% of
its land area desert or semidesert. Economic activity is largely
confined to the riverine area irrigated by the Niger. 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. Mali is heavily dependent on foreign
aid and vulnerable to fluctuations in world prices for cotton, its
main export. In 1997, the government continued its successful
implementation of an IMF-recommended structural adjustment program
that is helping the economy grow, diversify, and attract foreign
investment. Mali's adherence to economic reform and the 50%
devaluation of the African franc in January 1994 have pushed up
economic growth to a sturdy 5% average in 1996-2000. Growth should
remain around 5% in 2001-02, and inflation should stay less than 2%.

Malta:
Major resources are limestone, a favorable geographic
location, and a productive labor force. Malta produces only about
20% of its food needs, has limited freshwater supplies, and has no
domestic energy sources. The economy is dependent on foreign trade,
manufacturing (especially electronics and textiles), and tourism.
Malta is privatizing state-controlled firms and liberalizing markets
in order to prepare for membership in the European Union. However,
the island is divided politically over the question of joining the
EU. The sizable budget deficit remains a key concern.

Man, Isle of:
Offshore banking, manufacturing, and tourism are key
sectors of the economy. The government's policy of offering
incentives to high-technology companies and financial institutions
to locate on the island has paid off in expanding employment
opportunities in high-income industries. As a result, agriculture
and fishing, once the mainstays of the economy, have declined in
their shares of GDP. Banking and other services now contribute 42%
to GDP. Trade is mostly with the UK. The Isle of Man enjoys free
access to EU markets.

Marshall Islands:
US Government assistance is the mainstay of this
tiny island economy. Agricultural production is concentrated on
small farms, and the most important commercial crops are coconuts,
tomatoes, melons, and breadfruit. Small-scale industry is limited to
handicrafts, fish 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 Compact of Free Association, the US provides
roughly $65 million in annual aid. Negotiations were underway in
1999 for an extended agreement. Government downsizing, drought, a
drop in construction, and the decline in tourism and foreign
investment due to the Asian financial difficulties caused GDP to
fall in 1996-98.

Martinique:
The economy is based on sugarcane, bananas, tourism, and
light industry. Agriculture accounts for about 6% of GDP and the
small industrial sector for 11%. Sugar production has declined, with
most of the sugarcane now used for the production of rum. Banana
exports are increasing, going mostly to France. The bulk of meat,
vegetable, and grain requirements must be imported, contributing to
a chronic trade deficit that requires large annual transfers of aid
from France. Tourism has become more important than agricultural
exports as a source of foreign exchange. The majority of the work
force is employed in the service sector and in administration.

Mauritania:
A majority of the population still depends on
agriculture and livestock for a livelihood, even though most of the
nomads and many 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 half of total exports. The
decline in world demand for this ore, however, has led to cutbacks
in production. 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. In the past, drought and
economic mismanagement have resulted in a buildup of foreign debt.
In March 1999, the government signed an agreement with a joint World
Bank-IMF mission on a $54 million enhanced structural adjustment
facility (ESAF). Mauritania withdrew its membership in the Economic
Community of West African States (ECOWAS) in 2000. Privatization and
debt relief are in full swing, and the rate of economic growth
appears to be accelerating, especially in the construction,
telecommunication, and information sectors. Diamonds and petroleum
are beginning to be explored and exploited.

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
increased life expectancy, lowered infant mortality, and a
much-improved infrastructure. Sugarcane is grown on about 90% of the
cultivated land area and accounts for 25% of export earnings. The
government's development strategy centers on foreign investment.
Mauritius has attracted more than 9,000 offshore entities, many
aimed at commerce in India and South Africa, and investment in the
banking sector alone has reached over $1 billion. Economic
performance since 1991 has continued strong with solid growth and
low unemployment.

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 with a mixture of modern
and outmoded industry and agriculture, increasingly dominated by the
private sector. The number of state-owned enterprises in Mexico has
fallen from more than 1,000 in 1982 to fewer than 200 in 2000. The
ZEDILLO administration privatized and expanded competition in
seaports, railroads, telecommunications, electricity, natural gas
distribution, and airports. A strong export sector helped to cushion
the economy's decline in 1995 and led the recovery in 1996-2000.
Private consumption became the leading driver of growth in 2000,
accompanied by increased employment and higher real wages. Mexico
still needs to overcome many structural problems as it strives to
modernize its economy and raise living standards. Income
distribution is very unequal, with the top 20% of income earners
accounting for 55% of income. Trade with the US and Canada has
tripled since NAFTA was implemented in 1994. Mexico completed free
trade agreements with the EU, Israel, El Salvador, Honduras, and
Guatemala in 2000, and is pursuing additional trade agreements with
countries in Latin America and Asia to lessen its dependence on the
US.

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 remoteness of
the location and a lack of adequate facilities hinder development.
In 1996, the country experienced a 20% reduction in revenues from
the Compact of Free Association - the agreement between the US and
Micronesia in which Micronesia receives $1.3 billion in financial
and technical assistance over a 15-year period until 2001 - as a
result of the second step-down under the agreement. Since these
revenues accounted for 57% of consolidated government revenues,
reduced Compact funding resulted in a severe depression. While
Micronesia's economy appears to have bottomed out in 1999, the
country's medium-term economic outlook remains fragile due to likely
further reductions in external grants made under the US Compact
funding. Geographical isolation and a poorly developed
infrastructure remain major impediments to long-term growth.

Midway Islands:
The economy is based on providing support services
for the national wildlife refuge activities located on the islands.
All food and manufactured goods must be imported.

Moldova:
Moldova 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 all of its supplies of oil, coal, and
natural gas, largely from Russia. Energy shortages contributed to
sharp production declines after the breakup of the Soviet Union in
1991. As part of an ambitious reform effort, Moldova introduced a
convertible currency, freed all prices, stopped issuing preferential
credits to state enterprises, backed steady land privatization,
removed export controls, and freed interest rates. Yet these efforts
could not offset the impact of political and economic difficulties,
both internal and regional. In 1998, the economic troubles of
Russia, by far Moldova's leading trade partner, were a major cause
of the 8.6% drop in GDP. In 1999, GDP fell again, by 4.4%, the fifth
drop in the past seven years; exports were down, and energy supplies
continued to be erratic. GDP declined slightly in 2000, with a
serious drought hurting agriculture. Growth should turn positive in
2001.

Monaco:
Monaco, situated on the French Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. The Principality 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. 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. Monaco does not publish national income figures; the
estimates below are extremely rough.