Chapter CI: Front Matter (101)

Sao Tome and Principe
This small poor island economy has become
increasingly dependent on cocoa since independence 28 years ago.
Cocoa production has substantially declined in recent years because
of drought and mismanagement, but strengthening prices brighten
prospects for 2003. Sao Tome has to import all fuels, most
manufactured goods, consumer goods, and a substantial amount of
food. Over the years, it has been unable to service its external
debt and has had to depend on concessional aid and debt
rescheduling. Sao Tome benefited from $200 million in debt relief in
December 2000 under the Highly Indebted Poor Countries (HIPC)
program. Sao Tome's success in implementing structural reforms has
been rewarded by international donors, who pledged increased
assistance in 2001. Considerable potential exists for development of
a tourist industry, and the government has taken steps to expand
facilities in recent years. The government also has attempted to
reduce price controls and subsidies. Sao Tome is optimistic that
substantial petroleum discoveries are forthcoming in its territorial
waters in the oil-rich waters of the Gulf of Guinea; production
could begin as early as 2004.

Saudi Arabia
This is an oil-based economy with strong government
controls over major economic activities. Saudi Arabia has the
largest reserves of petroleum in the world (26% of the proved
reserves), ranks as the largest exporter of petroleum, and plays a
leading role in OPEC. The petroleum sector accounts for roughly 75%
of budget revenues, 45% of GDP, and 90% of export earnings. About
25% of GDP comes from the private sector. Roughly 4 million foreign
workers play an important role in the Saudi economy, for example, in
the oil and service sectors. The government in 1999 announced plans
to begin privatizing the electricity companies, which follows the
ongoing privatization of the telecommunications company. The
government is supporting private sector growth to lessen the
kingdom's dependence on oil and increase employment opportunities
for the swelling Saudi population. Priorities for government
spending in the short term include additional funds for the water
and sewage systems and for education. Water shortages and rapid
population growth constrain the government's efforts to increase
self-sufficiency in agricultural products.

Senegal
In January 1994, Senegal undertook a bold and ambitious
economic reform program with the support of the international donor
community. This reform began with a 50% devaluation of Senegal's
currency, the CFA franc, which was linked at a fixed rate to the
French franc. Government price controls and subsidies have been
steadily dismantled. After seeing its economy contract by 2.1% in
1993, Senegal made an important turnaround, thanks to the reform
program, with real growth in GDP averaging 5% annually during
1995-2002. Annual inflation had been pushed down to less than 1%,
but rose to an estimated 3.3% in 2001 and 3.0% in 2002. Investment
rose steadily from 13.8% of GDP in 1993 to 16.5% in 1997. As a
member of the West African Economic and Monetary Union (WAEMU),
Senegal is working toward greater regional integration with a
unified external tariff. Senegal also realized full Internet
connectivity in 1996, creating a miniboom in information
technology-based services. Private activity now accounts for 82% of
GDP. In 2003, GDP will probably again grow at about 5%. On the
negative side, Senegal faces deep-seated urban problems of chronic
unemployment, trade union militancy, juvenile delinquency, and drug
addiction.

Serbia and Montenegro
MILOSEVIC-era mismanagement of the economy, an
extended period of economic sanctions, and the damage to
Yugoslavia's infrastructure and industry during the war in Kosovo
have left the economy only half the size it was in 1990. Since the
ousting of former Federal Yugoslav President MILOSEVIC in October
2000, the Democratic Opposition of Serbia (DOS) coalition government
has implemented stabilization measures and embarked on an aggressive
market reform program. After renewing its membership in the IMF in
December 2000, Yugoslavia continued to reintegrate into the
international community by rejoining the World Bank (IBRD) and the
European Bank for Reconstruction and Development (EBRD). A World
Bank-European Commission sponsored Donors' Conference held in June
2001 raised $1.3 billion for economic restructuring. An agreement
rescheduling the country's $4.5 billion Paris Club government debts
was concluded in November 2001; it will write off 66% of the debt; a
similar debt relief agreement on its $2.8 billion London Club
commercial debt is still pending. The smaller republic of Montenegro
severed its economy from federal control and from Serbia during the
MILOSEVIC era and continues to maintain its own central bank, uses
the euro instead of the Yugoslav dinar as official currency,
collects customs tariffs, and manages its own budget. Kosovo, while
technically still part of the Federal Republic of Yugoslavia (now
Serbia and Montenegro) according to United Nations Security Council
Resolution 1244, is moving toward local autonomy under United
Nations Interim Administration Mission in Kosovo (UNMIK) and is
dependent on the international community for financial and technical
assistance. The euro and the Yugoslav dinar are official currencies,
and UNMIK collects taxes and manages the budget. The complexity of
Serbia and Montenegro political relationships, slow progress in
privatization, and stagnation in the European economy are holding
back the economy. Arrangements with the IMF, especially requirements
for fiscal discipline, are an important element in policy formation.
Severe unemployment remains a key political economic problem.

Seychelles
Since independence in 1976, per capita output in this
Indian Ocean archipelago has expanded to roughly seven times the old
near-subsistence level. Growth has been led by the tourist sector,
which employs about 30% of the labor force and provides more than
70% of hard currency earnings, and by tuna fishing. In recent years
the government has encouraged foreign investment in order to upgrade
hotels and other services. At the same time, the government has
moved to reduce the dependence on tourism by promoting the
development of farming, fishing, and small-scale manufacturing. A
sharp drop illustrated the vulnerability of the tourist sector in
1991-92 due largely to the Gulf war, and once again following the 11
September 2001 terrorist attacks on the US. Other issues facing the
government are the curbing of the budget deficit, including the
containment of social welfare costs, and further privatization of
public enterprises. Growth slowed in 1998-2002, due to sluggish
tourist and tuna sectors. Also, tight controls on exchange rates and
the scarcity of foreign exchange have impaired short-term economic
prospects. The black market value of the Seychelles rupee is half
the official exchange rate; without a devaluation of the currency
the tourist sector should remain sluggish as vacationers seek
cheaper destinations such as Comoros, Mauritius, and Madagascar.

Sierra Leone
Sierra Leone is an extremely poor African nation with
tremendous inequality in income distribution. It does have
substantial mineral, agricultural, and fishery resources. However,
the economic and social infrastructure is not well developed, and
serious social disorders continue to hamper economic development,
following a 11-year civil war. About two-thirds of the working-age
population engages in subsistence agriculture. Manufacturing
consists mainly of the processing of raw materials and of light
manufacturing for the domestic market. Plans continue to reopen
bauxite and rutile mines shut down during the conflict. The major
source of hard currency consists of the mining of diamonds. The fate
of the economy depends upon the maintenance of domestic peace and
the continued receipt of substantial aid from abroad, which is
essential to offset the severe trade imbalance and to supplement
government revenues.

Singapore
Singapore, a highly developed and successful free market
economy, enjoys a remarkably open and corruption-free environment,
stable prices, and one of the highest per capita GDPs in the world.
The economy depends heavily on exports, particularly in electronics
and manufacturing. It was hard hit in 2001-2002 by the global
recession and the slump in the technology sector. The government
hopes to establish a new growth path that will be less vulnerable to
the external business cycle than the current export-led model but is
unlikely to abandon efforts to establish Singapore as Southeast
Asia's financial and high-tech hub.

Slovakia
Slovakia has mastered much of the difficult transition from
a centrally planned economy to a modern market economy. The DZURINDA
government has made excellent progress in 2001-03 in macroeconomic
stabilization and structural reform. Major privatizations are nearly
complete, the banking sector is almost completely in foreign hands,
and foreign investment has picked up. Slovakia's economy exceeded
expectations in 2001-03, despite the general European slowdown.
Unemployment, at an unacceptable 15% in 2003, remains the economy's
Achilles heel. The government faces other strong challenges in 2004,
especially the cutting of budget and current account deficits, the
containment of inflation, and the strengthening of the health care
system.

Slovenia
Slovenia, with its historical ties to Western Europe,
enjoys a GDP per capita substantially higher than that of the other
transitioning economies of Central Europe. Privatization of the
economy proceeded at an accelerated pace in 2002-3, and the budget
deficit dropped from 3.0% of GDP in 2002 to 1.9% in 2003. Despite
the economic slowdown in Europe in 2001-03, Slovenia maintained 3%
growth. Structural reforms to improve the business environment allow
for greater foreign participation in Slovenia's economy and help to
lower unemployment. Further measures to curb inflation are also
needed. Corruption and the high degree of coordination between
government, business, and central bank policy are issues of concern
in the run-up to Slovenia's scheduled 1 May 2004 accession to the
European Union.

Solomon Islands
The bulk of the population depends on agriculture,
fishing, and forestry for at least part of their livelihood. Most
manufactured goods and petroleum products must be imported. The
islands are rich in undeveloped mineral resources such as lead,
zinc, nickel, and gold. However, severe ethnic violence, the closing
of key business enterprises, and an empty government treasury have
led to serious economic disarray, indeed near collapse. Tanker
deliveries of crucial fuel supplies (including those for electrical
generation) have become sporadic due to the government's inability
to pay and attacks against ships. Telecommunications are threatened
by the nonpayment of bills and by the lack of technical and
maintenance staff many of whom have left the country.

Somalia
Somalia's economic fortunes are being driven by its deep
political divisions. The northern area has declared its independence
as "Somaliland"; the central area, Puntland, is a self-declared
autonomous state; and the remaining southern portion is riddled with
the struggles of rival factions. Economic life continues, in part
because much activity is local and relatively easily protected.
Agriculture is the most important sector, with livestock normally
accounting for about 40% of GDP and about 65% of export earnings,
but Saudi Arabia's recent ban on Somali livestock, because of Rift
Valley Fever concerns, has severely hampered the sector. Nomads and
semi-nomads, who are dependent upon livestock for their livelihood,
make up a large portion of the population. Livestock, hides, fish,
charcoal, and bananas are Somalia's principal exports, while sugar,
sorghum, corn, qat, and machined goods are the principal imports.
Somalia's small industrial sector, based on the processing of
agricultural products, has largely been looted and sold as scrap
metal. Despite the seeming anarchy, Somalia's service sector has
managed to survive and grow. Telecommunication firms provide
wireless services in most major cities and offer the lowest
international call rates on the continent. In the absence of a
formal banking sector, money exchange services have sprouted
throughout the country, handling between $200 million and $500
million in remittances annually. Mogadishu's main market offers a
variety of goods from food to the newest electronic gadgets. Hotels
continue to operate, and security is provided by militias. The
ongoing civil disturbances and clan rivalries, however, have
interfered with any broad-based economic development and
international aid arrangements. In 2002 Somalia's overdue financial
obligations to the IMF continued to grow.

South Africa
South Africa is a middle-income, emerging market with
an abundant supply of natural resources; well-developed financial,
legal, communications, energy, and transport sectors; a stock
exchange that ranks among the 10 largest in the world; and a modern
infrastructure supporting an efficient distribution of goods to
major urban centers throughout the region. However, growth has not
been strong enough to lower South Africa's high unemployment rate;
and daunting economic problems remain from the apartheid era,
especially poverty and lack of economic empowerment among the
disadvantaged groups. High crime and HIV/AIDS infection rates also
deter investment. South African economic policy is fiscally
conservative, but pragmatic, focusing on targeting inflation and
liberalizing trade as means to increase job growth and household
income.

South Georgia and the South Sandwich Islands
Some fishing takes
place in adjacent waters. There is a potential source of income from
harvesting finfish and krill. The islands receive income from
postage stamps produced in the UK, sale of fishing licenses, and
harbor and landing fees from tourist vessels. Tourism from
specialized cruise ships is increasing rapidly.

Southern Ocean
Fisheries in 2000-01 (1 July to 30 June) landed
112,934 metric tons, of which 87% was krill and 11% Patagonian
toothfish. International agreements were adopted in late 1999 to
reduce illegal, unreported, and unregulated fishing, which in the
2000-01 season landed, by one estimate, 8,376 metric tons of
Patagonian and antarctic toothfish. In the 2000-01 antarctic summer
12,248 tourists, most of them seaborne, visited the Southern Ocean
and Antarctica, compared to 14,762 the previous year.

Spain
Spain's mixed capitalist economy supports a GDP that on a per
capita basis is 80% that of the four leading West European
economies. Its center-right government successfully worked to gain
admission to the first group of countries launching the European
single currency (the euro) on 1 January 1999. The AZNAR
administration has continued to advocate liberalization,
privatization, and deregulation of the economy and has introduced
some tax reforms to that end. Unemployment has been steadily falling
under the AZNAR administration but remains high at 11.7%. The
government intends to make further progress in changing labor laws
and reforming pension schemes, which are key to the sustainability
of both Spain's internal economic advances and its competitiveness
in a single currency area. A general strike in mid-2002 reduced
cooperation between labor and government. Growth of 2.4% in 2003 was
satisfactory given the background of a faltering European economy.
Adjusting to the monetary and other economic policies of an
integrated Europe - and reducing unemployment - will pose challenges
to Spain over the next few years.

Spratly Islands
Economic activity is limited to commercial fishing.
The proximity to nearby oil- and gas-producing sedimentary basins
suggests the potential for oil and gas deposits, but the region is
largely unexplored, and there are no reliable estimates of potential
reserves; commercial exploitation has yet to be developed.

Sri Lanka
In 1977, Colombo abandoned statist economic policies and
its import substitution trade policy for market-oriented policies
and export-oriented trade. Sri Lanka's most dynamic sectors now are
food processing, textiles and apparel, food and beverages,
telecommunications, and insurance and banking. By 1996 plantation
crops made up only 20% of exports (compared with 93% in 1970), while
textiles and garments accounted for 63%. GDP grew at an average
annual rate of 5.5% in the early 1990s until a drought and a
deteriorating security situation lowered growth to 3.8% in 1996. The
economy rebounded in 1997-2000 with average growth of 5.3%, but 2001
saw the first contraction in the country's history, -1.4%, due to a
combination of power shortages, severe budgetary problems, the
global slowdown, and continuing civil strife. Growth recovered to
3.2% in 2002. About 800,000 Sri Lankans work abroad, 90% in the
Middle East. They send home about $1 billion a year.

Sudan
Sudan has turned around a struggling economy with sound
economic policies and infrastructure investments, but it still faces
formidable economic problems, notably the low level of per capita
output. From 1997 to date, Sudan has been implementing IMF
macroeconomic reforms. In 1999 Sudan began exporting crude oil and
in the last quarter of 1999 recorded its first trade surplus, which,
along with monetary policy, has stabilized the exchange rate.
Increased oil production, revived light industry, and expanded
export processing zones helped maintain GDP growth at 5.1% in 2002.
Agriculture production remains Sudan's most important sector,
employing 80% of the work force and contributing 43% of GDP, but
most farms remain rain-fed and susceptible to drought. Chronic
domestic instability, lagging reforms, adverse weather, and weak
world agricultural prices - but, above all, the low starting point -
ensure that much of the population will remain at or below the
poverty line for years.

Suriname
The economy is dominated by the bauxite industry, which
accounts for more than 15% of GDP and 70% of export earnings.
Suriname's economic prospects for the medium term will depend on
renewed commitment to responsible monetary and fiscal policies and
to the introduction of structural reforms to liberalize markets and
promote competition. The government of Ronald VENETIAAN has begun an
austerity program, raised taxes, and attempted to control spending.
However, in 2002, President VENETIAAN agreed to a large pay raise
for civil servants, which threatens his earlier gains in stabilizing
the economy. The Dutch Government has agreed to restart the aid
flow, which will allow Suriname to access international development
financing. The short-term economic outlook depends on the
government's ability to control inflation and on the development of
projects in the bauxite and gold mining sectors.

Svalbard
Coal mining is the major economic activity on Svalbard. The
treaty of 9 February 1920 gives the 41 signatories equal rights to
exploit mineral deposits, subject to Norwegian regulation. Although
US, UK, Dutch, and Swedish coal companies have mined in the past,
the only companies still mining are Norwegian and Russian. The
settlements on Svalbard are essentially company towns. The Norwegian
state-owned coal company employs nearly 60% of the Norwegian
population on the island, runs many of the local services, and
provides most of the local infrastructure. There is also some
trapping of seal, polar bear, fox, and walrus.

Swaziland
In this small, landlocked economy, subsistence agriculture
occupies more than 80% of the population. The manufacturing sector
has diversified since the mid-1980s. Sugar and wood pulp remain
important foreign exchange earners. Mining has declined in
importance in recent years with only coal and quarry stone mines
remaining active. Surrounded by South Africa, except for a short
border with Mozambique, Swaziland is heavily dependent on South
Africa from which it receives nine-tenths of its imports and to
which it sends more than two-thirds of its exports. Customs duties
from the Southern African Customs Union and worker remittances from
South Africa substantially supplement domestically earned income.
The government is trying to improve the atmosphere for foreign
investment. Overgrazing, soil depletion, drought, and sometimes
floods persist as problems for the future. More than one-fourth of
the population needed emergency food aid in 2002 because of drought,
and more than one-third of the adult population was infected by
HIV/AIDS.

Sweden
Aided by peace and neutrality for the whole 20th century,
Sweden has achieved an enviable standard of living under a mixed
system of high-tech capitalism and extensive welfare benefits. It
has a modern distribution system, excellent internal and external
communications, and a skilled labor force. Timber, hydropower, and
iron ore constitute the resource base of an economy heavily oriented
toward foreign trade. Privately owned firms account for about 90% of
industrial output, of which the engineering sector accounts for 50%
of output and exports. Agriculture accounts for only 2% of GDP and
2% of the jobs. The government's commitment to fiscal discipline
resulted in a substantial budgetary surplus in 2001, which was cut
by more than half in 2002, due to the global economic slowdown,
revenue declines, and spending increases. The Swedish central bank
(the Riksbank) is focusing on price stability with its inflation
target of 2%. Growth remained sluggish in 2003. On September 14,
2003, Swedish voters turned down entry into the euro system,
concerned about the impact on democracy and sovereignty.

Switzerland
Switzerland is a prosperous and stable modern market
economy with low unemployment, a highly skilled labor force, and a
per capita GDP larger than that of the big western European
economies. The Swiss in recent years have brought their economic
practices largely into conformity with the EU's to enhance their
international competitiveness. Switzerland remains a safe haven for
investors, because it has maintained a degree of bank secrecy and
has kept up the franc's long-term external value. Reflecting the
anemic economic conditions of Europe, GDP growth dropped in 2001 to
about 0.8%, to 0.2% in 2002, and to -0.3% in 2003.

Syria
Syria's predominantly statist economy has been growing, on
average, more slowly than its 2.4% annual population growth rate,
causing a persistent decline in per capita GDP. Recent legislation
allows private banks to operate in Syria, although a private banking
sector will take years and further government cooperation to
develop. External factors such as the international war on
terrorism, the Israeli-Palestinian conflict, and the war between the
US-led coalition and Iraq probably will drive real annual GDP growth
levels back below their 3.5% spike in 2002. A long-run economic
constraint is the pressure on water supplies caused by rapid
population growth, industrial expansion, and increased water
pollution.

Taiwan
Taiwan has a dynamic capitalist economy with gradually
decreasing guidance of investment and foreign trade by government
authorities. In keeping with this trend, some large government-owned
banks and industrial firms are being privatized. Exports have
provided the primary impetus for industrialization. The trade
surplus is substantial, and foreign reserves are the world's third
largest. Agriculture contributes 2% to GDP, down from 32% in 1952.
While Taiwan is a major investor throughout Southeast Asia, China
has become the largest destination for investment and has overtaken
the US to become Taiwan's largest export market. Because of its
conservative financial approach and its entrepreneurial strengths,
Taiwan suffered little compared with many of its neighbors from the
Asian financial crisis in 1998. The global economic downturn,
combined with problems in policy coordination by the administration
and bad debts in the banking system, pushed Taiwan into recession in
2001, the first year of negative growth ever recorded. Unemployment
also reached record levels. Output recovered moderately in 2002 in
the face of continued global slowdown, fragile consumer confidence,
and bad bank loans. Growing economic ties with China are a dominant
long-term factor. Exports to China - mainly parts and equipment for
the assembly of goods for export to developed countries - drove
Taiwan's economic recovery in 2002.

Tajikistan
Tajikistan has the lowest per capita GDP among the 15
former Soviet republics. Only 8% to 10% of the land area is arable.
Cotton is the most important crop. Mineral resources, varied but
limited in amount, include silver, gold, uranium, and tungsten.
Industry consists only of a large aluminum plant, hydropower
facilities, and small obsolete factories mostly in light industry
and food processing. The civil war (1992-97) severely damaged the
already weak economic infrastructure and caused a sharp decline in
industrial and agricultural production. Even though 60% of its
people continue to live in abject poverty, Tajikistan has
experienced steady economic growth since 1997. Continued
privatization of medium and large state-owned enterprises will
further increase productivity. Tajikistan's economic situation,
however, remains fragile due to uneven implementation of structural
reforms, weak governance, widespread unemployment, and the external
debt burden. A debt restructuring agreement was reached with Russia
in December 2002, including an interest rate of 4%, a 3-year grace
period, and a US $49.8 million credit to the Central Bank of
Tajikistan.

Tanzania
Tanzania is one of the poorest countries in the world. The
economy depends heavily on agriculture, which accounts for half of
GDP, provides 85% of exports, and employs 80% of the work force.
Topography and climatic conditions, however, limit cultivated crops
to only 4% of the land area. Industry traditionally featured the
processing of agricultural products and light consumer goods. The
World Bank, the International Monetary Fund, and bilateral donors
have provided funds to rehabilitate Tanzania's out-of-date economic
infrastructure and to alleviate poverty. Growth in 1991-2002
featured a pickup in industrial production and a substantial
increase in output of minerals, led by gold. Oil and gas exploration
and development played an important role in this growth. Recent
banking reforms have helped increase private sector growth and
investment. Continued donor support and solid macroeconomic policies
should support continued real GDP growth of 5% in 2003.

Thailand
Thailand has a free enterprise economy and welcomes foreign
investment. Exports feature computers and electrical appliances.
After enjoying the world's highest growth rate from 1985 to 1995 -
averaging almost 9% annually - increased speculative pressure on
Thailand's currency in 1997 led to a crisis that uncovered financial
sector weaknesses and forced the government to float the baht. Long
pegged at 25 to the dollar, the baht reached its lowest point of 56
to the dollar in January 1998, and the economy contracted by 10.2%
that same year. Thailand then entered a recovery stage, expanding by
4.2% in 1999 and 4.4% in 2000, largely due to strong exports. An
ailing financial sector and the slow pace of corporate debt
restructuring, combined with a softening of global demand, slowed
growth to 1.4% in 2001. Increased consumption and investment
spending pushed GDP growth up to 5.2% in 2002 despite a sluggish
global economy.

Togo
This small sub-Saharan economy is heavily dependent on both
commercial and subsistence agriculture, which provides employment
for 65% of the labor force. Some basic foodstuffs must still be
imported. Cocoa, coffee, and cotton generate about 40% of export
earnings, with cotton being the most important cash crop. Togo is
the world's fourth-largest producer of phosphate, but production
fell an estimated 22% in 2002 due to power shortages and the cost of
developing new deposits. The government's decade-long effort,
supported by the World Bank and the IMF, to implement economic
reform measures, encourage foreign investment, and bring revenues in
line with expenditures has moved slowly. Progress depends on
following through on privatization, increased openness in government
financial operations, progress toward legislative elections, and
continued support from foreign donors.

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

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

Trinidad and Tobago
Trinidad and Tobago has earned a reputation as
an excellent investment site for international businesses. A leading
performer the past four years has been the booming natural gas
sector. Tourism is a growing sector, although not proportionately as
important as in many other Caribbean islands. The economy benefits
from low inflation and a trade surplus. The year 2002 was marked by
solid growth in the oil sector, offset in part by domestic political
uncertainty.

Tromelin Island
no economic activity

Tunisia
Tunisia has a diverse economy, with important agricultural,
mining, energy, tourism, and manufacturing sectors. Governmental
control of economic affairs while still heavy has gradually lessened
over the past decade with increasing privatization, simplification
of the tax structure, and a prudent approach to debt. Real growth
averaged 5.4% in 1997-2001 but slowed to 1.9% in 2002 because of
agricultural drought, slow investment, and lackluster tourism.
Increased rainfall portends higher growth levels for 2003, but
continued regional tension from the war in Iraq will most likely
continue to suppress tourism earnings. Tunisia has agreed to
gradually remove barriers to trade with the European Union over the
next decade. Broader privatization, further liberalization of the
investment code to increase foreign investment, improvements in
government efficiency, and reduction of the trade deficit are among
the challenges for the future.

Turkey
Turkey's dynamic economy is a complex mix of modern industry
and commerce along with a traditional agriculture sector that in
2001 still accounted for 40% of employment. It has a strong and
rapidly growing private sector, yet the state still plays a major
role in basic industry, banking, transport, and communication. The
most important industry - and largest exporter - is textiles and
clothing, which is almost entirely in private hands. In recent years
the economic situation has been marked by erratic economic growth
and serious imbalances. Real GNP growth has exceeded 6% in many
years, but this strong expansion has been interrupted by sharp
declines in output in 1994, 1999, and 2001. Meanwhile, the public
sector fiscal deficit has regularly exceeded 10% of GDP - due in
large part to the huge burden of interest payments, which account
for more than 50% of central government spending. Inflation, in
recent years in the high double-digit range, fell to 26% in 2003.
Perhaps because of these problems, foreign direct investment in
Turkey remains low - less than $1 billion annually. In late 2000 and
early 2001 a growing trade deficit and serious weaknesses in the
banking sector plunged the economy into crisis - forcing Turkey to
float the lira and pushing the country into recession. Results in
2002-03 were much better, because of strong financial support from
the IMF and tighter fiscal policy. Continued slow global growth and
serious political tensions in the Middle East could result in
negative growth in 2004.

Turkmenistan
Turkmenistan is largely desert country with intensive
agriculture in irrigated oases and large gas and oil resources.
One-half of its irrigated land is planted in cotton, making it the
world's tenth-largest producer. With an authoritarian ex-Communist
regime in power and a tribally based social structure, Turkmenistan
has taken a cautious approach to economic reform, hoping to use gas
and cotton sales to sustain its inefficient economy. Privatization
goals remain limited. In 1998-2003, Turkmenistan suffered from the
continued lack of adequate export routes for natural gas and from
obligations on extensive short-term external debt. At the same time,
however, total exports rose by 38% in 2003, largely because of
higher international oil and gas prices. Overall prospects in the
near future are discouraging because of widespread internal poverty,
the burden of foreign debt, and the unwillingness of the government
to adopt market-oriented reforms. However, Turkmenistan's
cooperation with the international community in transporting
humanitarian aid to Afghanistan may foreshadow a change in the
atmosphere for foreign investment, aid, and technological support.
Turkmenistan's economic statistics are state secrets, and GDP and
other figures are subject to wide margins of error. In any event,
GDP increased substantially in 2003 because of a strong recovery in
agriculture and rapid industrial growth.

Turks and Caicos Islands
The Turks and Caicos economy is based on
tourism, fishing, and offshore financial services. Most capital
goods and food for domestic consumption are imported. The US is the
leading source of tourists, accounting for more than half of the
93,000 visitors in 1998. Major sources of government revenue include
fees from offshore financial activities and customs receipts.
Tourism fell by 6% in 2002 but appeared to be picking up at yearend.

Tuvalu
Tuvalu consists of a densely populated, scattered group of
nine coral atolls with poor soil. The country has no known mineral
resources and few exports. Subsistence farming and fishing are the
primary economic activities. Fewer than 1,000 tourists, on average,
visit Tuvalu annually. Government revenues largely come from the
sale of stamps and coins and worker remittances. About 1,000
Tuvaluans work in Nauru in the phosphate mining industry. Nauru has
begun repatriating Tuvaluans, however, as phosphate resources
decline. Substantial income is received annually from an
international trust fund established in 1987 by Australia, NZ, and
the UK and supported also by Japan and South Korea. Thanks to wise
investments and conservative withdrawals, this Fund has grown from
an initial $17 million to over $35 million in 1999. The US
government is also a major revenue source for Tuvalu, because of
payments from a 1988 treaty on fisheries. In an effort to reduce its
dependence on foreign aid, the government is pursuing public sector
reforms, including privatization of some government functions and
personnel cuts of up to 7%. In 1998, Tuvalu began deriving revenue
from use of its area code for "900" lines and in 2000, from the
lease of its ".tv" Internet domain name. Royalties from these new
technology sources could increase substantially over the next
decade. With merchandise exports only a fraction of merchandise
imports, continued reliance must be placed on fishing and
telecommunications license fees, remittances from overseas workers,
official transfers, and investment income from overseas assets.

Uganda
Uganda has substantial natural resources, including fertile
soils, regular rainfall, and sizable mineral deposits of copper and
cobalt. Agriculture is the most important sector of the economy,
employing over 80% of the work force. Coffee accounts for the bulk
of export revenues. Since 1986, the government - with the support of
foreign countries and international agencies - has acted to
rehabilitate and stabilize the economy by undertaking currency
reform, raising producer prices on export crops, increasing prices
of petroleum products, and improving civil service wages. The policy
changes are especially aimed at dampening inflation and boosting
production and export earnings. During 1990-2001, the economy turned
in a solid performance based on continued investment in the
rehabilitation of infrastructure, improved incentives for production
and exports, reduced inflation, gradually improved domestic
security, and the return of exiled Indian-Ugandan entrepreneurs.
Ongoing Ugandan involvement in the war in the Democratic Republic of
the Congo, corruption within the government, and slippage in the
government's determination to press reforms raise doubts about the
continuation of strong growth. In 2000, Uganda qualified for
enhanced Highly Indebted Poor Countries (HIPC) debt relief worth
$1.3 billion and Paris Club debt relief worth $145 million. These
amounts combined with the original HIPC debt relief added up to
about $2 billion. Growth for 2001-02 was solid despite continued
decline in the price of coffee, Uganda's principal export. Prospects
for 2003 are mixed, with probable strengthening of coffee prices yet
with halting growth in the economies of major export customers.

Ukraine
After Russia, the Ukrainian republic was far and away the
most important economic component of the former Soviet Union,
producing about four times the output of the next-ranking republic.
Its fertile black soil generated more than one-fourth of Soviet
agricultural output, and its farms provided substantial quantities
of meat, milk, grain, and vegetables to other republics. Likewise,
its diversified heavy industry supplied the unique equipment (for
example, large diameter pipes) and raw materials to industrial and
mining sites (vertical drilling apparatus) in other regions of the
former USSR. Ukraine depends on imports of energy, especially
natural gas, to meet some 85% of its annual energy requirements.
Shortly after independence in December 1991, the Ukrainian
Government liberalized most prices and erected a legal framework for
privatization, but widespread resistance to reform within the
government and the legislature soon stalled reform efforts and led
to some backtracking. Output by 1999 had fallen to less than 40% of
the 1991 level. Loose monetary policies pushed inflation to
hyperinflationary levels in late 1993. Ukraine's dependence on
Russia for energy supplies and the lack of significant structural
reform have made the Ukrainian economy vulnerable to external
shocks. Now in his second term, President KUCHMA has pledged to
reduce the number of government agencies, streamline the regulatory
process, create a legal environment to encourage entrepreneurs, and
enact a comprehensive tax overhaul. Reforms in the more politically
sensitive areas of structural reform and land privatization are
still lagging. Outside institutions - particularly the IMF - have
encouraged Ukraine to quicken the pace and scope of reforms. GDP in
2000 showed strong export-based growth of 6% - the first growth
since independence - and industrial production grew 12.9%. The
economy continued to expand in 2001 as real GDP rose 9% and
industrial output grew by over 14%. Growth of 4.1% in 2002 was more
moderate, in part a reflection of faltering growth in the developed
world. In general, growth has been undergirded by strong domestic
demand, low inflation, and solid consumer and investor confidence.
Growth was a sturdy 6% in 2003 despite a loss of mementum in needed
economic reforms.

United Arab Emirates
The UAE has an open economy with a high per
capita income and a sizable annual trade surplus. Its wealth is
based on oil and gas output (about 33% of GDP), and the fortunes of
the economy fluctuate with the prices of those commodities. Since
1973, the UAE has undergone a profound transformation from an
impoverished region of small desert principalities to a modern state
with a high standard of living. At present levels of production, oil
and gas reserves should last for more than 100 years. The government
has increased spending on job creation and infrastructure expansion
and is opening up its utilities to greater private sector
involvement.

United Kingdom
The UK, a leading trading power and financial center,
is one of the quartet of trillion dollar economies of Western
Europe. Over the past two decades the government has greatly reduced
public ownership and contained the growth of social welfare
programs. Agriculture is intensive, highly mechanized, and efficient
by European standards, producing about 60% of food needs with only
1% of the labor force. The UK has large coal, natural gas, and oil
reserves; primary energy production accounts for 10% of GDP, one of
the highest shares of any industrial nation. Services, particularly
banking, insurance, and business services, account by far for the
largest proportion of GDP while industry continues to decline in
importance. GDP growth slipped in 2001-03 as the global downturn,
the high value of the pound, and the bursting of the "new economy"
bubble hurt manufacturing and exports. Still, the economy is one of
the strongest in Europe; inflation, interest rates, and unemployment
remain low. The relatively good economic performance has complicated
the BLAIR government's efforts to make a case for Britain to join
the European Economic and Monetary Union (EMU). Critics point out,
however, that the economy is doing well outside of EMU, and they
point to public opinion polls that continue to show a majority of
Britons opposed to the single currency. Meantime, the government has
been speeding up the improvement of education, transport, and health
services, at a cost in higher taxes. The war in March-April 2003
between a US-led coalition and Iraq, together with the subsequent
problems of restoring the economy and the polity, involve a heavy
commitment of British military forces.

United States
The US has the largest and most technologically
powerful economy in the world, with a per capita GDP of $37,600. In
this market-oriented economy, private individuals and business firms
make most of the decisions, and the federal and state governments
buy needed goods and services predominantly in the private
marketplace. US business firms enjoy considerably greater
flexibility than their counterparts in Western Europe and Japan in
decisions to expand capital plant, lay off surplus workers, and
develop new products. At the same time, they face higher barriers to
entry in their rivals' home markets than the barriers to entry of
foreign firms in US markets. US firms are at or near the forefront
in technological advances, especially in computers and in medical,
aerospace, and military equipment, although their advantage has
narrowed since the end of World War II. The onrush of technology
largely explains the gradual development of a "two-tier labor
market" in which those at the bottom lack the education and the
professional/technical skills of those at the top and, more and
more, fail to get comparable pay raises, health insurance coverage,
and other benefits. Since 1975, practically all the gains in
household income have gone to the top 20% of households. The years
1994-2000 witnessed solid increases in real output, low inflation
rates, and a drop in unemployment to below 5%. The year 2001 saw the
end of boom psychology and performance, with output increasing only
0.3% and unemployment and business failures rising substantially.
The response to the terrorist attacks of 11 September 2001 showed
the remarkable resilience of the economy. Moderate recovery took
place in 2002, with the GDP growth rate rising to 2.45%. A major
short-term problem in first half 2002 was a sharp decline in the
stock market, fueled in part by the exposure of dubious accounting
practices in some major corporations. The war in March/April 2003
between a US-led coalition and Iraq shifted resources to military
industries and introduced uncertainties about investment and
employment in other sectors of the economy. Long-term problems
include inadequate investment in economic infrastructure, rapidly
rising medical and pension costs of an aging population, sizable
trade deficits, and stagnation of family income in the lower
economic groups.

Uruguay
Uruguay's economy is characterized by an export-oriented
agricultural sector, a well-educated workforce, and high levels of
social spending. After averaging growth of 5% annually during
1996-98, in 1999-2002 the economy suffered a major downturn,
stemming largely from lower demand in Argentina and Brazil, which
together account for nearly half of Uruguay's exports. Total GDP in
these four years dropped by nearly 20%, with 2002 the worst year.
Unemployment rose to nearly 20% in 2002, inflation surged, and the
burden of external debt doubled. Cooperation with the IMF and the US
has limited the damage, which is still extensive. Moves to
reschedule debt and promote economic recovery may help limit a
further decline in output in 2003.

Uzbekistan
Uzbekistan is a dry, landlocked country of which 11%
consists of intensely cultivated, irrigated river valleys. More than
60% of its population lives in densely populated rural communities.
Uzbekistan is now the world's second-largest cotton exporter, a
large producer of gold and oil, and a regionally significant
producer of chemicals and machinery. Following independence in
December 1991, the government sought to prop up its Soviet-style
command economy with subsidies and tight controls on production and
prices. Uzbekistan responded to the negative external conditions
generated by the Asian and Russian financial crises by emphasizing
import substitute industrialization and by tightening export and
currency controls within its already largely closed economy. The
government, while aware of the need to improve the investment
climate, sponsors measures that often increase, not decrease, the
government's control over business decisions. A sharp increase in
the inequality of income distribution has hurt the lower ranks of
society since independence.

Vanuatu
The economy is based primarily on subsistence or small-scale
agriculture, which provides a living for 65% of the population.
Fishing, offshore financial services, and tourism, with about 50,000
visitors in 1997, are other mainstays of the economy. Mineral
deposits are negligible; the country has no known petroleum
deposits. A small light industry sector caters to the local market.
Tax revenues come mainly from import duties. Economic development is
hindered by dependence on relatively few commodity exports,
vulnerability to natural disasters, and long distances from main
markets and between constituent islands. A severe earthquake in
November 1999 followed by a tsunami, caused extensive damage to the
northern island of Pentecote and left thousands homeless. Another
powerful earthquake in January 2002 caused extensive damage in the
capital, Port-Vila, and surrounding areas, and also was followed by
a tsunami. GDP growth rose less than 3% on average in the 1990s. In
response to foreign concerns, the government has promised to tighten
regulation of its offshore financial center. In mid-2002 the
government stepped up efforts to boost tourism. Australia and New
Zealand are the main suppliers of foreign aid.

Venezuela
Venezuela continues to be highly dependent on the
petroleum sector, which accounts for roughly one-third of GDP,
around 80% of export earnings, and more than half of government
operating revenues. Despite higher oil prices at the end of 2002 and
into 2003, domestic political instability, culminating in a
two-month national oil strike from December 2002 to February 2003,
temporarily halted economic activity. The economy is likely to
remain in a recession in 2003, after sinking an estimated 8.9
percent in 2002.

Vietnam
Vietnam is a poor, densely-populated country that has had to
recover from the ravages of war, the loss of financial support from
the old Soviet Bloc, and the rigidities of a centrally planned
economy. Substantial progress was achieved from 1986 to 1996 in
moving forward from an extremely low starting point - growth
averaged around 9% per year from 1993 to 1997. The 1997 Asian
financial crisis highlighted the problems in the Vietnamese economy
but, rather than prompting reform, reaffirmed the government's
belief that shifting to a market-oriented economy would lead to
disaster. GDP growth of 8.5% in 1997 fell to 6% in 1998 and 5% in
1999. Growth then rose to 6% to 7% in 2000-02 even against the
background of global recession. These numbers mask some major
difficulties in economic performance. Many domestic industries,
including coal, cement, steel, and paper, have reported large
stockpiles of inventory and tough competition from more efficient
foreign producers. Meanwhile, Vietnamese authorities have moved to
implement the structural reforms needed to modernize the economy and
to produce more competitive, export-driven industries. The
US-Vietnam Bilateral Trade Agreement entered into force near the end
of 2001 and is expected to significantly increase Vietnam's exports
to the US. The US is assisting Vietnam with implementing the legal
and structural reforms called for in the agreement.

Virgin Islands
Tourism is the primary economic activity, accounting
for more than 70% of GDP and 70% of employment. The islands normally
host 2 million visitors a year. The manufacturing sector consists of
petroleum refining, textiles, electronics, pharmaceuticals, and
watch assembly. The agricultural sector is small, with most food
being imported. International business and financial services are a
small but growing component of the economy. One of the world's
largest petroleum refineries is at Saint Croix. The islands are
subject to substantial damage from storms. The government is working
to improve fiscal discipline, support construction projects in the
private sector, expand tourist facilities, reduce crime, and protect
the environment.

Wake Island
Economic activity is limited to providing services to
contractors located on the island. All food and manufactured goods
must be imported.

Wallis and Futuna
The economy is limited to traditional subsistence
agriculture, with about 80% labor force earnings from agriculture
(coconuts and vegetables), livestock (mostly pigs), and fishing.
About 4% of the population is employed in government. Revenues come
from French Government subsidies, licensing of fishing rights to
Japan and South Korea, import taxes, and remittances from expatriate
workers in New Caledonia.

West Bank
Real per capita GDP for the West Bank and Gaza Strip
(WBGS) declined by about one-third between 1992 and 1996 due to the
combined effect of falling aggregate incomes and rapid population
growth. The downturn in economic activity was largely the result of
Israeli closure policies - the imposition of border closures in
response to security incidents in Israel - which disrupted labor and
commodity market relationships between Israel and the WBGS. The most
serious social effect of this downturn was rising unemployment;
unemployment in the WBGS during the 1980s was generally under 5%; by
1995 it had risen to over 20%. Israel's use of comprehensive
closures during the next five years decreased and, in 1998, Israel
implemented new policies to reduce the impact of closures and other
security procedures on the movement of Palestinian goods and labor.
These changes fueled an almost three-year-long economic recovery in
the West Bank and Gaza Strip; real GDP grew by 5% in 1998 and 6% in
1999. Recovery was upended in the last quarter of 2000 with the
outbreak of violence, which triggered tight Israeli closures of
Palestinian self-rule areas and severely disrupted trade and labor
movements. In 2001, and even more severely in 2002, Israeli military
measures in Palestinian Authority areas have resulted in the
destruction of much capital plant and administrative structure,
widespread business closures, and a sharp drop in GDP. Another major
loss has been the decline in earnings of Palestinian workers in
Israel. International aid of $2 billion in 2001-02 to the West Bank
and Gaza Strip have prevented the complete collapse of the economy.

Western Sahara
Western Sahara depends on pastoral nomadism, fishing,
and phosphate mining as the principal sources of income for the
population. The territory lacks sufficient rainfall for sustainable
agricultural production, and most of the food for the urban
population must be imported. All trade and other economic activities
are controlled by the Moroccan Government. Moroccan energy interests
in 2001 signed contracts to explore for oil off the coast of Western
Sahara, which has angered the Polisario. Incomes and standards of
living in Western Sahara are substantially below the Moroccan level.

World
Growth in global output (gross world product, GWP) fell from
4.8% in 2000 to 2.2% in 2001 and 2.7% in 2002. The causes:
sluggishness in the US economy (21% of GWP) and in the 15 EU
economies (19% of GWP); continued stagnation in the Japanese economy
(7.2% of GWP); and spillover effects in the less developed regions
of the world. China, the second-largest economy in the world (12% of
GWP), proved an exception, continuing its rapid annual growth,
officially announced as 8% but estimated by many observers as
perhaps two percentage points lower. Russia (2.6% of GWP), with 4%
growth, continued to make uneven progress, its GDP per capita still
only one-third that of the leading industrial nations. The other 14
successor nations of the USSR and the other old Warsaw Pact nations
again experienced widely divergent growth rates; the three Baltic
nations continued as strong performers, in the 5% range of growth.
The developing nations also varied in their growth results, with
many countries facing population increases that erode gains in
output. Externally, the nation-state, as a bedrock
economic-political institution, is steadily losing control over
international flows of people, goods, funds, and technology.
Internally, the central government often finds its control over
resources slipping as separatist regional movements - typically
based on ethnicity - gain momentum, e.g., in many of the successor
states of the former Soviet Union, in the former Yugoslavia, in
India, in Indonesia, and in Canada. Externally, the central
government is losing decision-making powers to international bodies.
In Western Europe, governments face the difficult political problem
of channeling resources away from welfare programs in order to
increase investment and strengthen incentives to seek employment.
The addition of 80 million people each year to an already
overcrowded globe is exacerbating the problems of pollution,
desertification, underemployment, epidemics, and famine. Because of
their own internal problems and priorities, the industrialized
countries devote insufficient resources to deal effectively with the
poorer areas of the world, which, at least from the economic point
of view, are becoming further marginalized. The introduction of the
euro as the common currency of much of Western Europe in January
1999, while paving the way for an integrated economic powerhouse,
poses economic risks because of varying levels of income and
cultural and political differences among the participating nations.
The terrorist attacks on the US on 11 September 2001 accentuate a
further growing risk to global prosperity, illustrated, for example,
by the reallocation of resources away from investment to
anti-terrorist programs. The opening of war in March 2003 between a
US-led coalition and Iraq added new uncertainties to global economic
prospects. (For specific economic developments in each country of
the world in 2002, see the individual country entries.)

Yemen
Yemen, one of the poorest countries in the Arab world,
reported strong growth in the mid-1990s with the onset of oil
production, but has been harmed by periodic declines in oil prices.
Yemen has embarked on an IMF-supported structural adjustment program
designed to modernize and streamline the economy, which has led to
substantial foreign debt relief and restructuring. International
donors, meeting in Paris in October 2002, agreed on a further $2.3
billion economic support package. Yemen has worked to maintain tight
control over spending and implement additional components of the IMF
program. A high population growth rate and internal political
dissension complicate the government's task.

Zambia
Despite progress in privatization and budgetary reform,
Zambia's economic growth remains below the 5% to 7% necessary to
reduce poverty significantly. Privatization of government-owned
copper mines relieved the government from covering mammoth losses
generated by the industry and greatly improved the chances for
copper mining to return to profitability and spur economic growth.
However, low mineral prices have slowed the benefits of privatizing
the mines and have reduced incentives for further private investment
in the sector. Cooperation continues with international bodies on
programs to reduce poverty.

Zimbabwe
The government of Zimbabwe faces a wide variety of
difficult economic problems as it struggles with an unsustainable
fiscal deficit, an overvalued exchange rate, soaring inflation, and
bare shelves. Its 1998-2002 involvement in the war in the Democratic
Republic of the Congo, for example, drained hundreds of millions of
dollars from the economy. Badly needed support from the IMF has been
suspended because of the country's failure to meet budgetary goals.
Inflation rose from an annual rate of 32% in 1998 to 59% in 1999, to
60% in 2000, to over 100% by yearend 2001, to 228% in early 2003.
The government's land reform program, characterized by chaos and
violence, has nearly destroyed the commercial farming sector, the
traditional source of exports and foreign exchange and the provider
of 400,000 jobs.

This page was last updated on 18 December, 2003

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@2117 Pipelines (km)

Afghanistan
gas 651 km (2003)

Albania
gas 339 km; oil 207 km (2003)

Algeria
condensate 1,344 km; gas 87,347 km; liquid petroleum gas
2,213 km; oil 6,496 km (2003)

Angola
gas 214 km; liquid natural gas 14 km; liquid petroleum gas 30
km; oil 845 km; refined products 56 km (2003)