Chapter CII: Section 3: , Taipei, Taiwan, telephone: 886 (2) 2162-2000, FAX (38)

Bangladesh
Despite sustained domestic and international efforts to
improve economic and demographic prospects, Bangladesh remains a
poor, overpopulated, and ill-governed nation. Although half of GDP
is generated through the service sector, nearly two-thirds of
Bangladeshis are employed in the agriculture sector, with rice as
the single-most-important product. Major impediments to growth
include frequent cyclones and floods, inefficient state-owned
enterprises, inadequate port facilities, a rapidly growing labor
force that cannot be absorbed by agriculture, delays in exploiting
energy resources (natural gas), insufficient power supplies, and
slow implementation of economic reforms. Economic reform is stalled
in many instances by political infighting and corruption at all
levels of government. Progress also has been blocked by opposition
from the bureaucracy, public sector unions, and other vested
interest groups. The BNP government, led by Prime Minister Khaleda
ZIA, has the parliamentary strength to push through needed reforms,
but the party's political will to do so has been lacking in key
areas. One encouraging note: growth has been a steady 5% for the
past several years.

Barbados
Historically, the Barbadian economy had been dependent on
sugarcane cultivation and related activities, but production in
recent years has diversified into light industry and tourism.
Offshore finance and information services are important foreign
exchange earners. The government continues its efforts to reduce
unemployment, to encourage direct foreign investment, and to
privatize remaining state-owned enterprises. The economy contracted
in 2002-03 mainly due to a decline in tourism. Growth should be
positive in 2004, the precise level largely dependent on economic
conditions in the US and Europe.

Bassas da India
no economic activity

Belarus
Belarus' economy in 2003 posted 6.1 percent growth and is
likely to continue expanding through 2004, albeit at a slower growth
rate. The Belarusian economy in 2004 is likely to be hampered by
high inflation, persistent trade deficits, and ongoing rocky
relations with Russia, Belarus' largest trading partner and energy
supplier. Belarus has seen little structural reform since 1995, when
President LUKASHENKO launched the country on the path of "market
socialism." In keeping with this policy, LUKASHENKO reimposed
administrative controls over prices and currency exchange rates and
expanded the state's right to intervene in the management of private
enterprises. In addition, businesses have been subject to pressure
on the part of central and local governments, e.g., arbitrary
changes in regulations, numerous rigorous inspections, retroactive
application of new business regulations, and arrests of "disruptive"
businessmen and factory owners. A wide range of redistributive
policies has helped those at the bottom of the ladder. For the time
being, Belarus remains self-isolated from the West and its
open-market economies.

Belgium
This modern private enterprise economy has capitalized on
its central geographic location, highly developed transport network,
and diversified industrial and commercial base. Industry is
concentrated mainly in the populous Flemish area in the north. With
few natural resources, Belgium must import substantial quantities of
raw materials and export a large volume of manufactures, making its
economy unusually dependent on the state of world markets. Roughly
three-quarters of its trade is with other EU countries. Public debt
is about 100% of GDP, and the government has succeeded in balancing
its budget. Belgium, together with 11 of its EU partners, began
circulating the euro currency in January 2002. Economic growth in
2001-03 dropped sharply because of the global economic slowdown.
Prospects for 2004 again depend largely on recovery in the EU and
the US.

Belize
In this small, essentially private enterprise economy the
tourism industry is the number one foreign exchange earner followed
by cane sugar, citrus, marine products, bananas, and garments. The
government's expansionary monetary and fiscal policies, initiated in
September 1998, led to GDP growth of 6.5% in 1999, 10.8% in 2000,
4.6% in 2001, and 3.7% in 2002. Major concerns continue to be the
sizable trade deficit and foreign debt. A key short-term objective
remains the reduction of poverty with the help of international
donors.

Benin
The economy of Benin remains underdeveloped and dependent on
subsistence agriculture, cotton production, and regional trade.
Growth in real output has averaged a stable 5% in the past six
years, but rapid population rise has offset much of this increase.
Inflation has subsided over the past several years. In order to
raise growth still further, Benin plans to attract more foreign
investment, place more emphasis on tourism, facilitate the
development of new food processing systems and agricultural
products, and encourage new information and communication
technology. The 2001 privatization policy should continue in
telecommunications, water, electricity, and agriculture in spite of
initial government reluctance. The Paris Club and bilateral
creditors have eased the external debt situation, while pressing for
speeded-up structural reforms.

Bermuda
Bermuda enjoys one of the highest per capita incomes in the
world, equal to that of the US. Its economy is primarily based on
providing financial services for international business and luxury
facilities for tourists. The effects of 11 September 2001 have had
both positive and negative ramifications for Bermuda. On the
positive side, a number of new reinsurance companies have located on
the island, contributing to the expansion of an already robust
international business sector. On the negative side, Bermuda's
tourism industry - which derives over 80% of its visitors from the
US - was severely hit as American tourists chose not to travel.
Tourism rebounded somewhat in 2002-03. Most capital equipment and
food must be imported. Bermuda's industrial sector is small,
although construction continues to be important; the average cost of
a house in June 2003 had risen to $976,000. Agriculture is limited,
only 6% of the land being arable.

Bhutan
The economy, one of the world's smallest and least developed,
is based on agriculture and forestry, which provide the main
livelihood for more than 90% of the population. Agriculture consists
largely of subsistence farming and animal husbandry. Rugged
mountains dominate the terrain and make the building of roads and
other infrastructure difficult and expensive. The economy is closely
aligned with India's through strong trade and monetary links and
dependence on India's financial assistance. The industrial sector is
technologically backward, with most production of the cottage
industry type. Most development projects, such as road construction,
rely on Indian migrant labor. Bhutan's hydropower potential and its
attraction for tourists are key resources. Model education, social,
and environment programs are underway with support from multilateral
development organizations. Each economic program takes into account
the government's desire to protect the country's environment and
cultural traditions. For example, the government in its cautious
expansion of the tourist sector encourages the visits of upscale,
environmentally conscientious visitors. Detailed controls and
uncertain policies in areas like industrial licensing, trade, labor,
and finance continue to hamper foreign investment.

Bolivia
Bolivia, long one of the poorest and least developed Latin
American countries, made considerable progress in the 1990s toward
the development of a market-oriented economy. Successes under
President SANCHEZ DE LOZADA (1993-97) included the signing of a free
trade agreement with Mexico and becoming an associate member of the
Southern Cone Common Market (Mercosur), as well as the privatization
of the state airline, telephone company, railroad, electric power
company, and oil company. Growth slowed in 1999, in part due to
tight government budget policies, which limited needed
appropriations for anti-poverty programs, and the fallout from the
Asian financial crisis. In 2000, major civil disturbances held down
growth to 2.5%. Bolivia's GDP failed to grow in 2001 due to the
global slowdown and laggard domestic activity. Growth picked up
slightly in 2002, but the first quarter of 2003 saw extensive civil
riots and looting and loss of confidence in the government. Bolivia
will remain highly dependent on foreign aid unless and until it can
develop its substantial natural resources.

Bosnia and Herzegovina
Bosnia and Herzegovina ranked next to The
Former Yugoslav Republic of Macedonia as the poorest republic in the
old Yugoslav federation. Although agriculture is almost all in
private hands, farms are small and inefficient, and the republic
traditionally is a net importer of food. Industry has been greatly
overstaffed, one reflection of the socialist economic structure of
Yugoslavia. TITO had pushed the development of military industries
in the republic with the result that Bosnia hosted a number of
Yugoslavia's defense plants. The interethnic warfare in Bosnia
caused production to plummet by 80% from 1992 to 1995 and
unemployment to soar. With an uneasy peace in place, output
recovered in 1996-99 at high percentage rates from a low base; but
output growth slowed in 2000-02. Part of the lag in output was made
up in 2003-04. National-level statistics are limited. Moreover,
official data do not capture the large share of black market
activity. The konvertibilna marka (convertible mark or BAM)- the
national currency introduced in 1998 - is now pegged to the euro,
and the Central Bank of Bosnia and Herzegovina has dramatically
increased its reserve holdings. Implementation of privatization,
however, has been slow, and local entities only reluctantly support
national-level institutions. Banking reform accelerated in 2001 as
all the Communist-era payments bureaus were shut down. The country
receives substantial amounts of reconstruction assistance and
humanitarian aid from the international community but will have to
prepare for an era of declining assistance.

Botswana
Botswana has maintained one of the world's highest growth
rates since independence in 1966. Through fiscal discipline and
sound management, Botswana has transformed itself from one of the
poorest countries in the world to a middle-income country with a per
capita GDP of $8,800 in 2003. Two major investment services rank
Botswana as the best credit risk in Africa. Diamond mining has
fueled much of the expansion and currently accounts for more than
one-third of GDP and for nine-tenths of export earnings. Tourism,
subsistence farming, and cattle raising are other key sectors. On
the downside, the government must deal with high rates of
unemployment and poverty. Unemployment officially is 21%, but
unofficial estimates place it closer to 40%. HIV/AIDS infection
rates are the highest in the world and threaten Botswana's
impressive economic gains. Long-term prospects are overshadowed by
the expected leveling off in diamond mining production.

Bouvet Island
no economic activity; declared a nature reserve

Brazil
Possessing large and well-developed agricultural, mining,
manufacturing, and service sectors, Brazil's economy outweighs that
of all other South American countries and is expanding its presence
in world markets. From 2001-03 real wages fell and Brazil's economy
grew, on average, only 1.1% per year, as the country absorbed a
series of domestic and international economic shocks. That Brazil
absorbed these shocks without financial collapse is a tribute to the
resiliency of the Brazilian economy and the economic program put in
place by former President CARDOSO and strengthened by President Lula
DA SILVA. The three pillars of the economic program are a floating
exchange rate, an inflation-targeting regime, and tight fiscal
policy, which have been reinforced by a series of IMF programs. The
currency depreciated sharply in 2001 and 2002, which contributed to
a dramatic current account adjustment: in 2003, Brazil ran a record
trade surplus and recorded the first current account surplus since
1992. While economic management has been good, there remain
important economic vulnerabilities. The most significant are
debt-related: the government's largely domestic debt increased
steadily from 1994 to 2003, straining government finances, while
Brazil's foreign debt (a mix of private and public debt) is large in
relation to Brazil's modest (but growing) export base. Another
challenge is maintaining economic growth over a period of time to
generate employment and make the government debt burden more
manageable.

British Indian Ocean Territory
All economic activity is concentrated
on the largest island of Diego Garcia, where joint UK-US defense
facilities are located. Construction projects and various services
needed to support the military installations are done by military
and contract employees from the UK, Mauritius, the Philippines, and
the US. There are no industrial or agricultural activities on the
islands. When the Ilois return, they plan to reestablish sugarcane
production and fishing.

British Virgin Islands
The economy, one of the most stable and
prosperous in the Caribbean, is highly dependent on tourism,
generating an estimated 45% of the national income. An estimated
350,000 tourists, mainly from the US, visited the islands in 1998.
Tourism suffered in 2002 because of the lackluster US economy. In
the mid-1980s, the government began offering offshore registration
to companies wishing to incorporate in the islands, and
incorporation fees now generate substantial revenues. Roughly
400,000 companies were on the offshore registry by yearend 2000. The
adoption of a comprehensive insurance law in late 1994, which
provides a blanket of confidentiality with regulated statutory
gateways for investigation of criminal offenses, is expected to make
the British Virgin Islands even more attractive to international
business. Livestock raising is the most important agricultural
activity; poor soils limit the islands' ability to meet domestic
food requirements. Because of traditionally close links with the US
Virgin Islands, the British Virgin Islands has used the dollar as
its currency since 1959.

Brunei
This small, wealthy economy encompasses a mixture of foreign
and domestic entrepreneurship, government regulation, welfare
measures, and village tradition. Crude oil and natural gas
production account for nearly half of GDP. Per capita GDP is far
above most other Third World countries, and substantial income from
overseas investment supplements income from domestic production. The
government provides for all medical services and subsidizes rice and
housing. Brunei's leaders are concerned that steadily increased
integration in the world economy will undermine internal social
cohesion, although it became a more prominent player by serving as
chairman for the 2000 APEC (Asian Pacific Economic Cooperation)
forum. Plans for the future include upgrading the labor force,
reducing unemployment, strengthening the banking and tourist
sectors, and, in general, further widening the economic base beyond
oil and gas.

Bulgaria
Bulgaria, a former communist country striving to enter the
European Union, has experienced macroeconomic stability and strong
growth since a major economic downturn in 1996 led to the fall of
the then socialist government. As a result, the government became
committed to economic reform and responsible fiscal planning. A $300
million stand-by agreement negotiated with the IMF at the end of
2001 has supported government efforts to overcome high rates of
poverty and unemployment.

Burkina Faso
One of the poorest countries in the world, landlocked
Burkina Faso has few natural resources, a fragile soil, and a highly
unequal distribution of income. About 90% of the population is
engaged in (mainly subsistence) agriculture, which is vulnerable to
variations in rainfall. Cotton is the key crop. Industry remains
dominated by unprofitable government-controlled corporations.
Following the African franc currency devaluation in January 1994 the
government updated its development program in conjunction with
international agencies, and exports and economic growth have
increased. Maintenance of macroeconomic progress depends on
continued low inflation, reduction in the trade deficit, and reforms
designed to encourage private investment. The internal crisis in
neighboring Cote d'Ivoire continues to hurt trade and industrial
prospects and deepens the need for international assistance.

Burma
Burma is a resource-rich country that suffers from government
controls and abject rural poverty. The military regime took steps in
the early 1990s to liberalize the economy after decades of failure
under the "Burmese Way to Socialism", but those efforts have since
stalled. Burma has been unable to achieve monetary or fiscal
stability, resulting in an economy that suffers from serious
macroeconomic imbalances - including a steep inflation rate and an
official exchange rate that overvalues the Burmese kyat by more than
100 times the market rate. In addition, most overseas development
assistance ceased after the junta suppressed the democracy movement
in 1988 and subsequently ignored the results of the 1990 election. A
crisis in the private banking sector in early 2003 followed by
economic moves against Burma by the United States, the European
Union, and Japan - including a US ban on imports from Burma and a
Japanese freeze on new bilateral economic aid - further weakened the
Burmese economy. Burma is data poor, and official statistics are
often dated and inaccurate. Published estimates of Burma's foreign
trade are greatly understated because of the size of the black
market and border trade - often estimated to be one to two times the
official economy. Better relations with foreign countries and
relaxed controls at home are needed to promote foreign investment,
exports, and tourism. In February 2003, a major banking crisis hit
the country's 20 private banks, shutting them down and disrupting
the economy. In July and August 2003, the United States imposed a
ban on all Burmese imports and a ban on provision of financial
services, hampering Burma's ability to obtain foreign exchange. As
of January 2004, the largest private banks remained moribund,
leaving the private sector with little formal access to credit
outside of government contracts.

Burundi
Burundi is a landlocked, resource-poor country with an
underdeveloped manufacturing sector. The economy is predominantly
agricultural with roughly 90% of the population dependent on
subsistence agriculture. Economic growth depends on coffee and tea
exports, which account for 90% of foreign exchange earnings. The
ability to pay for imports, therefore, rests primarily on weather
conditions and international coffee and tea prices. The Tutsi
minority, 14% of the population, dominates the government and the
coffee trade at the expense of the Hutu majority, 85% of the
population. Since October 1993 an ethnic-based war has resulted in
more than 200,000 deaths, forced 800,000 refugees into Tanzania, and
displaced 525,000 others internally. Doubts about the prospects for
sustainable peace continue to impede development. Only one in two
children go to school, and approximately one in ten adults has
HIV/AIDS. Food, medicine, and electricity remain in short supply.

Cambodia
Cambodia's economy slowed dramatically in 1997-1998 due to
the regional economic crisis, civil violence, and political
infighting. Foreign investment and tourism fell off. In 1999, the
first full year of peace in 30 years, progress was made on economic
reforms. Growth resumed and has remained about 5.0% during
2000-2003. Tourism was Cambodia's fastest growing industry, with
arrivals up 34% in 2000 and up another 40% in 2001 before the 11
September 2001 terrorist attacks in the US. Cambodia expects 1
million foreign tourists in 2004. Economic growth has been largely
driven by expansion in the clothing sector and tourism. Clothing
exports were fostered by the U.S.-Cambodian Bilateral Textile
Agreement signed in 1999. Even given Cambodia's recent growth, the
long-term development of the economy after decades of war remains a
daunting challenge. The population lacks education and productive
skills, particularly in the poverty-ridden countryside, which
suffers from an almost total lack of basic infrastructure. Fear of
renewed political instability and a dysfunctional legal system
coupled with government corruption discourage foreign investment.
The Cambodian government continues to work with bilateral and
multilateral donors to address the country's many pressing needs.
The major economic challenge for Cambodia over the next decade will
be fashioning an economic environment in which the private sector
can create enough jobs to handle Cambodia's demographic imbalance.
About 60% of the population is 20 years or younger; most of these
citizens will seek to enter the workforce over the course of the
next 10 years.

Cameroon
Because of its oil resources and favorable agricultural
conditions, Cameroon has one of the best-endowed primary commodity
economies in sub-Saharan Africa. Still, it faces many of the serious
problems facing other underdeveloped countries, such as a top-heavy
civil service and a generally unfavorable climate for business
enterprise. Since 1990, the government has embarked on various IMF
and World Bank programs designed to spur business investment,
increase efficiency in agriculture, improve trade, and recapitalize
the nation's banks. In June 2000, the government completed an
IMF-sponsored, three-year structural adjustment program; however,
the IMF is pressing for more reforms, including increased budget
transparency, privatization, and poverty reduction programs.
International oil and cocoa prices have considerable impact on the
economy.

Canada
As an affluent, high-tech industrial society, Canada today
closely resembles the US in its market-oriented economic system,
pattern of production, and high living standards. Since World War
II, the impressive growth of the manufacturing, mining, and service
sectors has transformed the nation from a largely rural economy into
one primarily industrial and urban. The 1989 US-Canada Free Trade
Agreement (FTA) and the 1994 North American Free Trade Agreement
(NAFTA) (which includes Mexico) touched off a dramatic increase in
trade and economic integration with the US. As a result of the close
cross-border relationship, the economic sluggishness in the United
States in 2001-02 had a negative impact on the Canadian economy.
Real growth averaged nearly 3% during 1993-2000, but declined in
2001, with moderate recovery in 2002-03. Unemployment is up, with
contraction in the manufacturing and natural resource sectors.
Nevertheless, given its great natural resources, skilled labor
force, and modern capital plant Canada enjoys solid economic
prospects. Solid fiscal management has produced a long-term budget
surplus which is substantially reducing the national debt, although
public debate continues over how to manage the rising cost of the
publicly funded healthcare system. Trade accounts for roughly a
third of GDP. Canada enjoys a substantial trade surplus with its
principal trading partner, the United States, which absorbs more
than 85% of Canadian exports. Roughly 90% of the population lives
within 160 kilometers of the US border.

Cape Verde
This island economy suffers from a poor natural resource
base, including serious water shortages exacerbated by cycles of
long-term drought. The economy is service-oriented, with commerce,
transport, tourism, and public services accounting for 72% of GDP.
Although nearly 70% of the population lives in rural areas, the
share of agriculture in GDP in 2001 was only 11%, of which fishing
accounted for 1.5%. About 82% of food must be imported. The fishing
potential, mostly lobster and tuna, is not fully exploited. Cape
Verde annually runs a high trade deficit, financed by foreign aid
and remittances from emigrants; remittances supplement GDP by more
than 20%. Economic reforms are aimed at developing the private
sector and attracting foreign investment to diversify the economy.
Prospects for 2004 depend heavily on the maintenance of aid flows,
tourism, remittances, and the momentum of the government's
development program.

Cayman Islands
With no direct taxation, the islands are a thriving
offshore financial center. More than 40,000 companies were
registered in the Cayman Islands as of 1998, including almost 600
banks and trust companies; banking assets exceed $500 billion. A
stock exchange was opened in 1997. Tourism is also a mainstay,
accounting for about 70% of GDP and 75% of foreign currency
earnings. The tourist industry is aimed at the luxury market and
caters mainly to visitors from North America. Total tourist arrivals
exceeded 1.2 million in 1997, with 600,000 from the US. About 90% of
the islands' food and consumer goods must be imported. The
Caymanians enjoy one of the highest outputs per capita and one of
the highest standards of living in the world.

Central African Republic
Subsistence agriculture, together with
forestry, remains the backbone of the economy of the Central African
Republic (CAR), with more than 70% of the population living in
outlying areas. The agricultural sector generates half of GDP.
Timber has accounted for about 16% of export earnings and the
diamond industry for 54%. Important constraints to economic
development include the CAR's landlocked position, a poor
transportation system, a largely unskilled work force, and a legacy
of misdirected macroeconomic policies. Factional fighting between
the government and its opponents remains a drag on economic
revitalization, with GDP likely to contract in 2004. Distribution of
income is extraordinarily unequal. Grants from France and the
international community can only partially meet humanitarian needs.

Chad
Chad's primarily agricultural economy will continue to be
boosted by major oilfield and pipeline projects that began in 2000.
Over 80% of Chad's population relies on subsistence farming and
stock raising for its livelihood. Cotton, cattle, and gum arabic
provide the bulk of Chad's export earnings, but Chad will begin to
export oil in 2004. Chad's economy has long been handicapped by its
landlocked position, high energy costs, and a history of
instability. Chad relies on foreign assistance and foreign capital
for most public and private sector investment projects. A consortium
led by two US companies has been investing $3.7 billion to develop
oil reserves estimated at 1 billion barrels in southern Chad. Oil
production came on stream in late 2003.

Chile
Chile has a market-oriented economy characterized by a high
level of foreign trade. During the early 1990s, Chile's reputation
as a role model for economic reform was strengthened when the
democratic government of Patricio AYLWIN - which took over from the
military in 1990 - deepened the economic reform initiated by the
military government. Growth in real GDP averaged 8% during 1991-97,
but fell to half that level in 1998 because of tight monetary
policies implemented to keep the current account deficit in check
and because of lower export earnings - the latter a product of the
global financial crisis. A severe drought exacerbated the recession
in 1999, reducing crop yields and causing hydroelectric shortfalls
and electricity rationing, and Chile experienced negative economic
growth for the first time in more than 15 years. Despite the effects
of the recession, Chile maintained its reputation for strong
financial institutions and sound policy that have given it the
strongest sovereign bond rating in South America. By the end of
1999, exports and economic activity had begun to recover, and growth
rebounded to 4.2% in 2000. Growth fell back to 3.1% in 2001 and 2.1%
in 2002, largely due to lackluster global growth and the devaluation
of the Argentine peso, but recovered to 3.2% in 2003. Unemployment,
although declining over the past year, remains stubbornly high,
putting pressure on President LAGOS to improve living standards. One
bright spot was the signing of a free trade agreement with the US,
which took effect on 1 January 2004. In 2004, GDP growth is set to
accelerate to more than 4% as copper prices rise, export earnings
grow, and foreign direct investment picks up.

China
In late 1978 the Chinese leadership began moving the economy
from a sluggish, inefficient, Soviet-style centrally planned economy
to a more market-oriented system. Whereas the system operates within
a political framework of strict Communist control, the economic
influence of non-state organizations and individual citizens has
been steadily increasing. The authorities switched to a system of
household and village responsibility in agriculture in place of the
old collectivization, increased the authority of local officials and
plant managers in industry, permitted a wide variety of small-scale
enterprises in services and light manufacturing, and opened the
economy to increased foreign trade and investment. The result has
been a quadrupling of GDP since 1978. Measured on a purchasing power
parity (PPP) basis, China in 2003 stood as the second-largest
economy in the world after the US, although in per capita terms the
country is still poor. Agriculture and industry have posted major
gains especially in coastal areas near Hong Kong, opposite Taiwan,
and in Shanghai, where foreign investment has helped spur output of
both domestic and export goods. The leadership, however, often has
experienced - as a result of its hybrid system - the worst results
of socialism (bureaucracy and lassitude) and of capitalism (growing
income disparities and rising unemployment). China thus has
periodically backtracked, retightening central controls at
intervals. The government has struggled to (a) sustain adequate jobs
growth for tens of millions of workers laid off from state-owned
enterprises, migrants, and new entrants to the work force; (b)
reduce corruption and other economic crimes; and (c) keep afloat the
large state-owned enterprises, many of which had been shielded from
competition by subsidies and had been losing the ability to pay full
wages and pensions. From 80 to 120 million surplus rural workers are
adrift between the villages and the cities, many subsisting through
part-time, low-paying jobs. Popular resistance, changes in central
policy, and loss of authority by rural cadres have weakened China's
population control program, which is essential to maintaining
long-term growth in living standards. Another long-term threat to
growth is the deterioration in the environment, notably air
pollution, soil erosion, and the steady fall of the water table
especially in the north. China continues to lose arable land because
of erosion and economic development. Beijing says it will intensify
efforts to stimulate growth through spending on infrastructure -
such as water supply and power grids - and poverty relief and
through rural tax reform. Accession to the World Trade Organization
helps strengthen its ability to maintain strong growth rates but at
the same time puts additional pressure on the hybrid system of
strong political controls and growing market influences. China has
benefited from a huge expansion in computer internet use. Foreign
investment remains a strong element in China's remarkable economic
growth. Growing shortages of electric power and raw materials will
hold back the expansion of industrial output in 2004.

Christmas Island
Phosphate mining had been the only significant
economic activity, but in December 1987 the Australian Government
closed the mine. In 1991, the mine was reopened. With the support of
the government, a $34 million casino opened in 1993. The casino
closed in 1998. The Australian Government in 2001 agreed to support
the creation of a commercial space-launching site on the island,
projected to begin operations in mid-2004

Clipperton Island
Although 115 species of fish have been identified
in the territorial waters of Clipperton Island, the only economic
activity is tuna fishing.

Cocos (Keeling) Islands
Grown throughout the islands, coconuts are
the sole cash crop. Small local gardens and fishing contribute to
the food supply, but additional food and most other necessities must
be imported from Australia. There is a small tourist industry.

Colombia
Colombia's economy suffers from weak domestic and foreign
demand, austere government budgets, and serious internal armed
conflict, but seems poised for recovery. Other economic problems
facing President URIBE range from reforming the pension system to
reducing high unemployment. Two of Colombia's leading exports, oil
and coffee, face an uncertain future; new exploration is needed to
offset declining oil production, while coffee harvests and prices
are depressed. On the positive side, several international financial
institutions have praised the economic reforms introduced by URIBE,
which includes measures designed to reduce the public-sector deficit
below 2.5% of GDP in 2004. The government's economic policy and
democratic security strategy have engendered a growing sense of
confidence in the economy, particularly within the business sector,
and GDP growth in 2003 was among the highest in Latin America.

Comoros
One of the world's poorest countries, Comoros is made up of
three islands that have inadequate transportation links, a young and
rapidly increasing population, and few natural resources. The low
educational level of the labor force contributes to a subsistence
level of economic activity, high unemployment, and a heavy
dependence on foreign grants and technical assistance. Agriculture,
including fishing, hunting, and forestry, contributes 40% to GDP,
employs 80% of the labor force, and provides most of the exports.
The country is not self-sufficient in food production; rice, the
main staple, accounts for the bulk of imports. The government -
which is hampered by internal political disputes - is struggling to
upgrade education and technical training, to privatize commercial
and industrial enterprises, to improve health services, to diversify
exports, to promote tourism, and to reduce the high population
growth rate. Increased foreign support is essential if the goal of
4% annual GDP growth is to be met. Remittances from 150,000 Comorans
abroad help supplement GDP.

Congo, Democratic Republic of the
The economy of the Democratic
Republic of the Congo - a nation endowed with vast potential wealth
- has declined drastically since the mid-1980s. The war, which began
in August 1998, has dramatically reduced national output and
government revenue, has increased external debt, and has resulted in
the deaths from war, famine, and disease of perhaps 3.5 million
people. Foreign businesses have curtailed operations due to
uncertainty about the outcome of the conflict, lack of
infrastructure, and the difficult operating environment. The war has
intensified the impact of such basic problems as an uncertain legal
framework, corruption, inflation, and lack of openness in government
economic policy and financial operations. Conditions improved in
late 2002 with the withdrawal of a large portion of the invading
foreign troops. Several IMF and World Bank missions have met with
the government to help it develop a coherent economic plan, and
President KABILA has begun implementing reforms. Much economic
activity lies outside the GDP data. Economic stability, aided by
international donors, improved in 2003. New mining contracts have
been approved, which - combined with high mineral and metal prices -
could improve Kinshasa's fiscal position and GDP growth.

Congo, Republic of the
The economy is a mixture of village
agriculture and handicrafts, an industrial sector based largely on
oil, support services, and a government characterized by budget
problems and overstaffing. Oil has supplanted forestry as the
mainstay of the economy, providing a major share of government
revenues and exports. In the early 1980s, rapidly rising oil
revenues enabled the government to finance large-scale development
projects with GDP growth averaging 5% annually, one of the highest
rates in Africa. The government has mortgaged a substantial portion
of its oil earnings, contributing to a shortage of revenues. The 12
January 1994 devaluation of Franc Zone currencies by 50% resulted in
inflation of 61% in 1994, but inflation has subsided since. Economic
reform efforts continued with the support of international
organizations, notably the World Bank and the IMF. The reform
program came to a halt in June 1997 when civil war erupted. Denis
SASSOU-NGUESSO, who returned to power when the war ended in October
1997, publicly expressed interest in moving forward on economic
reforms and privatization and in renewing cooperation with
international financial institutions. However, economic progress was
badly hurt by slumping oil prices and the resumption of armed
conflict in December 1998, which worsened the republic's budget
deficit. The current administration presides over an uneasy internal
peace and faces difficult economic problems of stimulating recovery
and reducing poverty.

Cook Islands
Like many other South Pacific island nations, the Cook
Islands' economic development is hindered by the isolation of the
country from foreign markets, the limited size of domestic markets,
lack of natural resources, periodic devastation from natural
disasters, and inadequate infrastructure. Agriculture provides the
economic base with major exports made up of copra and citrus fruit.
Manufacturing activities are limited to fruit processing, clothing,
and handicrafts. Trade deficits are offset by remittances from
emigrants and by foreign aid, overwhelmingly from New Zealand. In
the 1980s and 1990s, the country lived beyond its means, maintaining
a bloated public service and accumulating a large foreign debt.
Subsequent reforms, including the sale of state assets, the
strengthening of economic management, the encouragement of tourism,
and a debt restructuring agreement, have rekindled investment and
growth.

Coral Sea Islands
no economic activity

Costa Rica
Costa Rica's basically stable economy depends on tourism,
agriculture, and electronics exports. Poverty has been substantially
reduced over the past 15 years, and a strong social safety net has
been put into place. Foreign investors remain attracted by the
country's political stability and high education levels, and tourism
continues to bring in foreign exchange. Low prices for coffee and
bananas have hurt the agricultural sector. The government continues
to grapple with its large deficit and massive internal debt. The
reduction of inflation remains a difficult problem because of rises
in the price of imports, labor market rigidities, and fiscal
deficits. Costa Rica recently concluded negotiations to participate
in the US - Central American Free Trade Agreement, which, if
ratified by the Costa Rican Legislature, would result in economic
reforms and an improved investment climate.

Cote d'Ivoire
Cote d'Ivoire is among the world's largest producers
and exporters of coffee, cocoa beans, and palm oil. Consequently,
the economy is highly sensitive to fluctuations in international
prices for these products and to weather conditions. Despite
government attempts to diversify the economy, it is still heavily
dependent on agriculture and related activities, which engage
roughly 68% of the population. After several years of lagging
performance, the Ivorian economy began a comeback in 1994, due to
the 50% devaluation of the CFA franc and improved prices for cocoa
and coffee, growth in nontraditional primary exports such as
pineapples and rubber, limited trade and banking liberalization,
offshore oil and gas discoveries, and generous external financing
and debt rescheduling by multilateral lenders and France. Moreover,
government adherence to donor-mandated reforms led to a jump in
growth to 5% annually during 1996-99. Growth was negative in 2000-03
because of the difficulty of meeting the conditions of international
donors, continued low prices of key exports, and severe civil war.
Political uncertainty will continue to cloud the economic outlook in
2004, but rising world prices for cocoa will help both the current
account and the government balances.

Croatia
Before the dissolution of Yugoslavia, the Republic of
Croatia, after Slovenia, was the most prosperous and industrialized
area, with a per capita output perhaps one-third above the Yugoslav
average. The economy emerged from a mild recession in 2000 with
tourism, banking, and public investments leading the way.
Unemployment remains high, at over 13 percent, with structural
factors slowing its decline. While macroeconomic stabilization has
largely been achieved, structural reforms lag because of deep
resistance on the part of the public and lack of strong support from
politicians. Growth, while impressively over 4% for the last several
years, has been achieved through high fiscal and current account
deficits. The government is gradually reducing a heavy back log of
civil cases, many involving land tenure. The EU accession process
should accelerate fiscal and structural reform.

Cuba
The government continues to balance the need for economic
loosening against a desire for firm political control. It has
undertaken limited reforms to increase enterprise efficiency and
alleviate serious shortages of food, consumer goods, and services. A
major feature of the economy is the dichotomy between relatively
efficient export enclaves and inefficient domestic sectors. The
average Cuban's standard of living remains at a lower level than
before the depression of the 1990s, which was caused by the loss of
Soviet aid and domestic inefficiencies. The government reluctantly
allows a large dollar market sector, fueled by tourism and
remittances from Cubans abroad.

Cyprus
The Greek Cypriot economy is prosperous but highly
susceptible to external shocks. Erratic growth rates over the past
decade reflect the economy's vulnerability to swings in tourist
arrivals, caused by political instability in the region and
fluctuations in economic conditions in Western Europe. Economic
policy is focused on meeting the criteria for admission to the EU.
EU-driven tax reforms in 2003 have introduced fiscal imbalances,
which, coupled with a sluggish tourism sector, have resulted in
growing fiscal deficits. As in the Turkish sector, water shortages
are a perennial problem; a few desalination plants are now on-line.
After 10 years of drought, the country received substantial rainfall
from 2001-03, alleviating immediate concerns. The Turkish Cypriot
economy has roughly one-third of the per capita GDP of the south.
Because it is recognized only by Turkey, it has had much difficulty
arranging foreign financing and investment. It remains heavily
dependent on agriculture and government service, which together
employ about half of the work force. To compensate for the economy's
weakness, Turkey provides grants and loans to support economic
development. Ankara provided $200 million in 2002 and pledged $450
million for the 2003-05 period. Future events throughout the island
will be highly influenced by the outcome of negotiations on the
UN-sponsored agreement to unite the Greek and Turkish areas.

Czech Republic
One of the most stable and prosperous of the
post-Communist states, the Czech Republic has been recovering from
recession since mid-1999. Growth in 2000-03 was supported by exports
to the EU, primarily to Germany, and a near doubling of foreign
direct investment. Domestic demand is playing an ever more important
role in underpinning growth as interest rates drop and the
availability of credit cards and mortgages increases. High current
account deficits - averaging around 5% of GDP in the last several
years - could be a persistent problem. Inflation is under control.
The EU put the Czech Republic just behind Poland and Hungary in
preparations for accession, which will give further impetus and
direction to structural reform. Moves to complete banking,
telecommunications, and energy privatization will encourage
additional foreign investment, while intensified restructuring among
large enterprises and banks, and improvements in the financial
sector, should strengthen output growth. Nonetheless, revival in the
European economies remains essential to stepped-up growth.

Denmark
This thoroughly modern market economy features high-tech
agriculture, up-to-date small-scale and corporate industry,
extensive government welfare measures, comfortable living standards,
a stable currency, and high dependence on foreign trade. Denmark is
a net exporter of food and energy and enjoys a comfortable balance
of payments surplus. Government objectives include streamlining the
bureaucracy and further privatization of state assets. The
government has been successful in meeting, and even exceeding, the
economic convergence criteria for participating in the third phase
(a common European currency) of the European Economic and Monetary
Union (EMU), but Denmark has decided not to join 12 other EU members
in the euro; even so, the Danish Krone remains pegged to the euro.
Given the sluggish state of the European economy, growth in 2003 was
a mere 0.3%.

Dhekelia
Economic activity is limited to providing services to the
military and their families located in Dhekelia. All food and
manufactured goods must be imported.

Djibouti
The economy is based on service activities connected with
the country's strategic location and status as a free trade zone in
northeast Africa. Two-thirds of the inhabitants live in the capital
city, the remainder being mostly nomadic herders. Scanty rainfall
limits crop production to fruits and vegetables, and most food must
be imported. Djibouti provides services as both a transit port for
the region and an international transshipment and refueling center.
It has few natural resources and little industry. The nation is,
therefore, heavily dependent on foreign assistance to help support
its balance of payments and to finance development projects. An
unemployment rate of 50% continues to be a major problem. Inflation
is not a concern, however, because of the fixed tie of the franc to
the US dollar. Per capita consumption dropped an estimated 35% over
the last seven years because of recession, civil war, and a high
population growth rate (including immigrants and refugees). Faced
with a multitude of economic difficulties, the government has fallen
in arrears on long-term external debt and has been struggling to
meet the stipulations of foreign aid donors.

Dominica
The Dominican economy depends on agriculture, primarily
bananas, and remains highly vulnerable to climatic conditions and
international economic developments. Production of bananas dropped
precipitously in 2003, a major reason for the 1% decline in GDP.
Tourism increased in 2003 as the government sought to promote
Dominica as an "ecotourism" destination. Development of the tourism
industry remains difficult, however, because of the rugged
coastline, lack of beaches, and the absence of an international
airport. The government began a comprehensive restructuring of the
economy in 2003 - including elimination of price controls,
privatization of the state banana company, and tax increases - to
address Dominica's economic crisis and to meet IMF targets. In order
to diversify the island's production base the government is
attempting to develop an offshore financial sector and is planning
to construct an oil refinery on the eastern part of the island.

Dominican Republic
The Dominican Republic is a Caribbean
representative democracy which enjoyed GDP growth of more than 7% in
1998-2000. Growth subsequently plummeted as part of the global
economic slowdown. Although the country has long been viewed
primarily as an exporter of sugar, coffee, and tobacco, in recent
years the service sector has overtaken agriculture as the economy's
largest employer, due to growth in tourism and free trade zones. The
country suffers from marked income inequality; the poorest half of
the population receives less than one-fifth of GNP, while the
richest 10% enjoys nearly 40% of national income. Growth turned
negative in 2003 with reduced tourism, a major bank fraud, and
limited growth in the US economy, the source of 87% of export
revenues. Resumption of a badly needed IMF loan was slowed due to
government repurchase of electrical power plants.

East Timor
In late 1999, about 70% of the economic infrastructure of
East Timor was laid waste by Indonesian troops and anti-independence
militias, and 260,000 people fled westward. Over the next three
years, however, a massive international program, manned by 5,000
peacekeepers (8,000 at peak) and 1,300 police officers, led to
substantial reconstruction in both urban and rural areas. By
mid-2002, all but about 50,000 of the refugees had returned. Growth
was held back in 2003 by extensive drought and the gradual winding
down of the international presence. The country faces great
challenges in continuing the rebuilding of infrastructure,
strengthening the infant civil administration, and generating jobs
for young people entering the workforce. One promising long-term
project is the planned development of oil and gas resources in
nearby waters, but the government faces a substantial financing gap
over the next several years before these revenues start flowing into
state coffers.

Ecuador
Ecuador has substantial petroleum resources, which have
accounted for 40% of the country's export earnings and one-fourth of
public sector revenues in recent years. Consequently, fluctuations
in world market prices can have a substantial domestic impact. In
the late 1990s, Ecuador suffered its worst economic crisis, with
natural disasters and sharp declines in world petroleum prices
driving Ecuador's economy into free fall in 1999. Real GDP
contracted by more than 6%, with poverty worsening significantly.
The banking system also collapsed, and Ecuador defaulted on its
external debt later that year. The currency depreciated by some 70%
in 1999, and, on the brink of hyperinflation, the MAHAUD government
announced it would dollarize the economy. A coup, however, ousted
MAHAUD from office in January 2000, and after a short-lived junta
failed to garner military support, Vice President Gustavo NOBOA took
over the presidency. In March 2000, Congress approved a series of
structural reforms that also provided the framework for the adoption
of the US dollar as legal tender. Dollarization stabilized the
economy, and growth returned to its pre-crisis levels in the years
that followed. Under the administration of Lucio GUTIERREZ, who took
office in January 2003, Ecuador benefited from higher world
petroleum prices, but the government has made little progress on
fiscal reforms and reforms of state-owned enterprises necessary to
reduce Ecuador's vulnerability to petroleum price swings and
financial crises.

Egypt
Lack of substantial progress on economic reform since the mid
1990s has limited foreign direct investment in Egypt and kept annual
GDP growth in the range of 2-3 percent in 2001-03. Egyptian
officials in late 2003 and early 2004 proposed new privatization and
customs reform measures, but the government is likely to pursue
these initiatives cautiously and gradually to avoid a public
backlash over potential inflation or layoffs associated with the
reforms. Monetary pressures on an overvalued Egyptian pound led the
government to float the currency in January 2003, leading to a sharp
drop in its value and consequent inflationary pressure. The
existence of a black market for hard currency is evidence that the
government continues to influence the official exchange rate offered
in banks. In September 2003, Egyptian officials increased subsidies
on basic foodstuffs, helping to calm a frustrated public but
widening an already deep budget deficit. Egypt's balance-of-payments
position was not hurt by the war in Iraq in 2003, as tourism and
Suez Canal revenues fared well. The development of an export market
for natural gas is a bright spot for future growth prospects, but
improvement in the capital-intensive hydrocarbons sector does little
to reduce Egypt's persistent unemployment.

El Salvador
With the adoption of the US dollar as its currency, El
Salvador has lost control over monetary policy and must concentrate
on maintaining a disciplined fiscal policy. GDP per capita is
roughly only half that of Brazil, Argentina, and Chile, and the
distribution of income is highly unequal. The trade deficit has been
offset by annual remittances of almost $2 billion from Salvadorans
living abroad and external aid. The government is striving to open
new export markets, encourage foreign investment, modernize the tax
and healthcare systems, and stimulate the sluggish economy.

Equatorial Guinea
The discovery and exploitation of large oil
reserves have contributed to dramatic economic growth in recent
years. Forestry, farming, and fishing are also major components of
GDP. Subsistence farming predominates. Although pre-independence
Equatorial Guinea counted on cocoa production for hard currency
earnings, the neglect of the rural economy under successive regimes
has diminished potential for agriculture-led growth (the government
has stated its intention to reinvest some oil revenue into
agriculture). A number of aid programs sponsored by the World Bank
and the IMF have been cut off since 1993 because of corruption and
mismanagement. No longer eligible for concessional financing because
of large oil revenues, the government has been unsuccessfully trying
to agree on a "shadow" fiscal management program with the World Bank
and IMF. Businesses, for the most part, are owned by government
officials and their family members. Undeveloped natural resources
include titanium, iron ore, manganese, uranium, and alluvial gold.
Growth will remain strong in 2004, led by oil.

Eritrea
Since independence from Ethiopia on 24 May 1993, Eritrea has
faced the economic problems of a small, desperately poor country.
Like the economies of many African nations, the economy is largely
based on subsistence agriculture, with 80% of the population
involved in farming and herding. The Ethiopian-Eritrea war in
1998-2000 severely hurt Eritrea's economy. GDP growth fell to zero
in 1999 and to -12.1% in 2000. The May 2000 Ethiopian offensive into
northern Eritrea caused some $600 million in property damage and
loss, including losses of $225 million in livestock and 55,000
homes. The attack prevented planting of crops in Eritrea's most
productive region, causing food production to drop by 62%. Even
during the war, Eritrea developed its transportation infrastructure,
asphalting new roads, improving its ports, and repairing war damaged
roads and bridges. Since the war ended, the government has
maintained a firm grip on the economy, expanding the use of the
military and party-owned businesses to complete Eritrea's
development agenda. Erratic rainfall and the delayed demobilization
of agriculturalists from the military kept cereal production well
below normal, holding down growth in 2002. Eritrea's economic future
depends upon its ability to master social problems such as
illiteracy, unemployment, and low skills, and to open its economy to
private enterprise so the diaspora's money and expertise can foster
economic growth.

Estonia
Estonia, as a new member of the World Trade Organization, is
steadily moving toward a modern market economy with increasing ties
to the West, including the pegging of its currency to the euro. The
economy benefits from strong electronics and telecommunications
sectors. Estonia has been invited to join the European Union and
will do so in May 2004. The economy is greatly influenced by
developments in Finland, Sweden, Russia, and Germany, four major
trading partners. The high current account deficit remains a
concern. However, the state budget enjoyed a surplus of $130 million
in 2003.

Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, which accounts for half of GDP, 60% of exports, and 80%
of total employment. The agricultural sector suffers from frequent
drought and poor cultivation practices. Coffee is critical to the
Ethiopian economy with exports of some $156 million in 2002, but
historically low prices have seen many farmers switching to qat to
supplement income. The war with Eritrea in 1998-2000 and recurrent
drought have buffeted the economy, in particular coffee production.
In November 2001 Ethiopia qualified for debt relief from the Highly
Indebted Poor Countries (HIPC) initiative. Under Ethiopia's land
tenure system, the government owns all land and provides long-term
leases to the tenants; the system continues to hamper growth in the
industrial sector as entrepreneurs are unable to use land as
collateral for loans. Drought struck again late in 2002, leading to
a 2% decline in GDP in 2003. Return to normal weather patterns late
in 2003 should help agricultural and GDP growth recover in 2004. The
government estimates that annual growth of 7% is needed to reduce
poverty.

Europa Island
no economic activity

European Union
Domestically, the European Union attempts to lower
trade barriers, adopt a common currency, and move toward convergence
of living standards. Internationally, the EU aims to bolster
Europe's trade position and its political and economic power.
Because of the great differences in per capita income (from $10,000
to $28,000) and historic national animosities, the European
Community faces difficulties in devising and enforcing common
policies. For example, both Germany and France since 2003 have
flouted the member states' treaty obligation to prevent their
national budgets from running more than a 3% deficit. In 2004, the
EU admitted 10 central and eastern European countries that are, in
general, less advanced technologically and economically than the
existing 15. The Economic and Monetary Union (EMU), an associated
organization, introduced the euro as the common currency on 1
January 1999. The UK, Sweden, and Denmark do not now participate;
the 10 new countries may choose to join the EMU when they meet its
fiscal and monetary criteria and the member states so agree.