Chapter CIV: Section 3: , Taipei, Taiwan, telephone: 886 (2) 2162-2000, FAX (40)

Liechtenstein
Despite its small size and limited natural resources,
Liechtenstein has developed into a prosperous, highly
industrialized, free-enterprise economy with a vital financial
service sector and living standards on a par with its large European
neighbors. The Liechtenstein economy is widely diversified with a
large number of small businesses. Low business taxes - the maximum
tax rate is 20% - and easy incorporation rules have induced many
holding or so-called letter box companies to establish nominal
offices in Liechtenstein, providing 30% of state revenues. The
country participates in a customs union with Switzerland and uses
the Swiss franc as its national currency. It imports more than 90%
of its energy requirements. Liechtenstein has been a member of the
European Economic Area (an organization serving as a bridge between
the European Free Trade Association (EFTA) and the EU) since May
1995. The government is working to harmonize its economic policies
with those of an integrated Europe.

Lithuania
Lithuania, the Baltic state that has conducted the most
trade with Russia, has slowly rebounded from the 1998 Russian
financial crisis. Unemployment remains high, still 10.7% in 2003,
but is improving. Growing domestic consumption and increased
investment have furthered recovery. Trade has been increasingly
oriented toward the West. Lithuania has gained membership in the
World Trade Organization and has moved ahead with plans to join the
EU. Privatization of the large, state-owned utilities, particularly
in the energy sector, is nearing completion. Overall, more than 80%
of enterprises have been privatized. Foreign government and business
support have helped in the transition from the old command economy
to a market economy.

Luxembourg
This stable, high-income economy features solid growth,
low inflation, and low unemployment. The industrial sector,
initially dominated by steel, has become increasingly diversified to
include chemicals, rubber, and other products. Growth in the
financial sector, which now accounts for about 22% of GDP, has more
than compensated for the decline in steel. Most banks are
foreign-owned and have extensive foreign dealings. Agriculture is
based on small family-owned farms. The economy depends on foreign
and trans-border workers for more than 30% of its labor force.
Although Luxembourg, like all EU members, has suffered from the
global economic slump, the country has maintained a fairly strong
growth rate and enjoys an extraordinarily high standard of living.

Macau
Macau's well-to-do economy has remained one of the most open
in the world since its reversion to China in 1999. The territory's
net exports of goods and services account for roughly 41% of GDP
with tourism and apparel exports as the mainstays. Although the
territory was hit hard by the 1998 Asian financial crisis and the
global downturn in 2001, its economy grew 9.5% in 2002. A rapid rise
in the number of mainland visitors because of China's easing of
restrictions on travel drove the recovery. The budget also returned
to surplus in 2002 because of the surge in visitors from China and a
hike in taxes on gambling profits, which generated about 70% of
government revenue. The liberalization of Macao's gambling monopoly
contributes to GDP growth, as the three companies awarded gambling
licenses have pledged to invest $2.2 billion in the territory. Much
of Macau's textile industry may move to the mainland as the
Multi-Fiber Agreement is phased out. The territory may have to rely
more on gambling and trade-related services to generate growth. The
government estimated GDP growth at 4% in 2003 with the drop in large
measure due to concerns over the Severe Acute Respiratory Syndrome
(SARS), but private sector analysts think the figure may have been
higher because of the continuing boom in tourism.

Macedonia
At independence in September 1991, Macedonia was the least
developed of the Yugoslav republics, producing a mere 5% of the
total federal output of goods and services. The collapse of
Yugoslavia ended transfer payments from the center and eliminated
advantages from inclusion in a de facto free trade area. An absence
of infrastructure, UN sanctions on Yugoslavia, one of its largest
markets, and a Greek economic embargo over a dispute about the
country's constitutional name and flag hindered economic growth
until 1996. GDP subsequently rose each year through 2000. However,
the leadership's commitment to economic reform, free trade, and
regional integration was undermined by the ethnic Albanian
insurgency of 2001. The economy shrank 4.5% because of decreased
trade, intermittent border closures, increased deficit spending on
security needs, and investor uncertainty. Growth barely recovered in
2002 to 0.9%, then rose to 2.8% in 2003. Unemployment at one-third
of the workforce remains the most critical economic problem. The
gray economy is estimated at around 40% of GDP. Politically, the
country is more stable than in 2002.

Madagascar
Having discarded past socialist economic policies,
Madagascar has since the mid 1990s followed a World Bank and IMF led
policy of privatization and liberalization. This strategy has placed
the country on a slow and steady growth path from an extremely low
level. Agriculture, including fishing and forestry, is a mainstay of
the economy, accounting for more than one-fourth of GDP and
employing four-fifths of the population. Exports of apparel have
boomed in recent years primarily due to duty-free access to the
United States. Deforestation and erosion, aggravated by the use of
firewood as the primary source of fuel are serious concerns.
President RAVALOMANANA has worked aggressively to revive the economy
following the 2002 political crisis, which triggered a 12% drop in
GDP that year. Poverty reduction and combating corruption will be
the centerpieces of economic policy for the next few years.

Malawi
Landlocked Malawi ranks among the world's least developed
countries. The economy is predominately agricultural, with about 90%
of the population living in rural areas. Agriculture accounted for
nearly 40% of GDP and 88% of export revenues in 2001. The economy
depends on substantial inflows of economic assistance from the IMF,
the World Bank, and individual donor nations. In late 2000, Malawi
was approved for relief under the Heavily Indebted Poor Countries
(HIPC) program. In November 2002 the World Bank approved a $50
million drought recovery package, which is to be used for famine
relief. The government faces strong challenges, e.g., to fully
develop a market economy, to improve educational facilities, to face
up to environmental problems, to deal with the rapidly growing
problem of HIV/AIDS, and to satisfy foreign donors that fiscal
discipline is being tightened. The performance of the tobacco sector
is key to short-term growth as tobacco accounts for over 50% of
exports.

Malaysia
Malaysia, a middle-income country, transformed itself from
1971 through the late 1990s from a producer of raw materials into an
emerging multi-sector economy. Growth was almost exclusively driven
by exports - particularly of electronics. As a result Malaysia was
hard hit by the global economic downturn and the slump in the
information technology (IT) sector in 2001 and 2002. GDP in 2001
grew only 0.5% due to an estimated 11% contraction in exports, but a
substantial fiscal stimulus package equal to US $1.9 billion
mitigated the worst of the recession and the economy rebounded in
2002 with a 4.1% increase. The economy grew 4.9% in 2003,
notwithstanding a difficult first half, when external pressures from
SARS and the Iraq War led to caution in the business community.
Healthy foreign exchange reserves and a relatively small external
debt make it unlikely that Malaysia will experience a crisis similar
to the one in 1997, but the economy remains vulnerable to a more
protracted slowdown in Japan and the US, top export destinations and
key sources of foreign investment. The Malaysian ringgit is pegged
to the dollar, and the Japanese central bank continues to intervene
and prop up the yen against the dollar.

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

Mali
Mali is among the poorest countries in the world, with 65% of
its land area desert or semidesert and with a highly unequal
distribution of income. Economic activity is largely confined to the
riverine area irrigated by the Niger. About 10% of the population is
nomadic and some 80% of the labor force is engaged in farming and
fishing. Industrial activity is concentrated on processing farm
commodities. Mali is heavily dependent on foreign aid and vulnerable
to fluctuations in world prices for cotton, its main export, along
with gold. The government has continued its successful
implementation of an IMF-recommended structural adjustment program
that is helping the economy grow, diversify, and attract foreign
investment. Mali's adherence to economic reform and the 50%
devaluation of the African franc in January 1994 have pushed up
economic growth to a sturdy 5% average in 1996-2002. Worker
remittances and external trade routes have been jeopardized by
continued unrest in neighboring Cote d'Ivoire.

Malta
Major resources are limestone, a favorable geographic
location, and a productive labor force. Malta produces only about
20% of its food needs, has limited fresh water supplies, and has no
domestic energy sources. The economy is dependent on foreign trade,
manufacturing (especially electronics and textiles), and tourism.
Malta is privatizing state-controlled firms and liberalizing markets
in order to prepare for membership in the European Union. The island
remains divided politically, however, over the question of joining
the EU. Continued sluggishness in the global economy is holding back
exports, tourism, and overall growth.

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

Marshall Islands
US Government assistance is the mainstay of this
tiny island economy. Agricultural production is primarily
subsistence and is concentrated on small farms; the most important
commercial crops are coconuts and breadfruit. Small-scale industry
is limited to handicrafts, tuna processing, and copra. The tourist
industry, now a small source of foreign exchange employing less than
10% of the labor force, remains the best hope for future added
income. The islands have few natural resources, and imports far
exceed exports. Under the terms of the Compact of Free Association,
the US has provided more than $1 billion in aid since 1986.
Negotiations have continued for an extended agreement. Government
downsizing, drought, a drop in construction, the decline in tourism
and foreign investment due to the Asian financial difficulties, and
less income from the renewal of fishing vessel licenses have held
GDP growth to an average of 1% over the past decade.

Martinique
The economy is based on sugarcane, bananas, tourism, and
light industry. Agriculture accounts for about 6% of GDP and the
small industrial sector for 11%. Sugar production has declined, with
most of the sugarcane now used for the production of rum. Banana
exports are increasing, going mostly to France. The bulk of meat,
vegetable, and grain requirements must be imported, contributing to
a chronic trade deficit that requires large annual transfers of aid
from France. Tourism, which employs more than 11,000 people, has
become more important than agricultural exports as a source of
foreign exchange.

Mauritania
Half the population still depends on agriculture and
livestock for a livelihood, even though many of the nomads and
subsistence farmers were forced into the cities by recurrent
droughts in the 1970s and 1980s. Mauritania has extensive deposits
of iron ore, which account for nearly 40% of total exports. The
decline in world demand for this ore, however, has led to cutbacks
in production. The nation's coastal waters are among the richest
fishing areas in the world, but overexploitation by foreigners
threatens this key source of revenue. The country's first deepwater
port opened near Nouakchott in 1986. In the past, drought and
economic mismanagement resulted in a buildup of foreign debt. In
February 2000, Mauritania qualified for debt relief under the
Heavily Indebted Poor Countries (HIPC) initiative and in December
2001 received strong support from donor and lending countries at a
triennial Consultative Group review. In 2001, exploratory oil wells
in tracts 80 km offshore indicated potential extraction at current
world oil prices. A new investment code approved in December 2001
improved the opportunities for direct foreign investment. Ongoing
negotiations with the IMF involve problems of economic reforms and
fiscal discipline. Substantial oil production and exports probably
will not begin until 2005. Meantime the government emphasizes
reduction of poverty, improvement of health and education, and
promoting privatization of the economy.

Mauritius
Since independence in 1968, Mauritius has developed from a
low-income, agriculturally based economy to a middle-income
diversified economy with growing industrial, financial, and tourist
sectors. For most of the period, annual growth has been in the order
of 5% to 6%. This remarkable achievement has been reflected in more
equitable income distribution, increased life expectancy, lowered
infant mortality, and a much-improved infrastructure. Sugarcane is
grown on about 90% of the cultivated land area and accounts for 25%
of export earnings. The government's development strategy centers on
expanding local financial institutions and building a domestic
information telecommunications industry. Mauritius has attracted
more than 9,000 offshore entities, many aimed at commerce in India
and South Africa, and investment in the banking sector alone has
reached over $1 billion. Mauritius, with its strong textile sector
and responsible fiscal management, has been well poised to take
advantage of the Africa Growth and Opportunity Act (AGOA).

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

Mexico
Mexico has a free market economy with a mixture of modern and
outmoded industry and agriculture, increasingly dominated by the
private sector. Recent administrations have expanded competition in
seaports, railroads, telecommunications, electricity generation,
natural gas distribution, and airports. Per capita income is
one-fourth that of the US; income distribution remains highly
unequal. Trade with the US and Canada has tripled since the
implementation of NAFTA in 1994. Real GDP growth was a weak -0.3% in
2001, 0.9% in 2002, and 1.2% in 2003, with the US slowdown the
principal cause. Mexico implemented free trade agreements with
Guatemala, Honduras, El Salvador, and the European Free Trade Area
in 2001, putting more than 90% of trade under free trade agreements.
The government is cognizant of the need to upgrade infrastructure,
modernize the tax system and labor laws, and provide incentives to
invest in the energy sector, but progress is slow.

Micronesia, Federated States of
Economic activity consists primarily
of subsistence farming and fishing. The islands have few mineral
deposits worth exploiting, except for high-grade phosphate. The
potential for a tourist industry exists, but the remote location, a
lack of adequate facilities, and limited air connections hinder
development. In November 2002, the country experienced a further
reduction in future revenues from the Compact of Free Association -
the agreement with the US in which Micronesia received $1.3 billion
in financial and technical assistance over a 15-year period until
2001. The country's medium-term economic outlook appears fragile due
not only to the reduction in US assistance but also to the slow
growth of the private sector. Geographical isolation and a poorly
developed infrastructure remain major impediments to long-term
growth.

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

Moldova
Moldova remains the poorest country in Europe despite recent
progress from its small economic base. It enjoys a favorable climate
and good farmland but has no major mineral deposits. As a result,
the economy depends heavily on agriculture, featuring fruits,
vegetables, wine, and tobacco. Moldova must import almost all of its
energy supplies from Russia. Energy shortages contributed to sharp
production declines after the breakup of the Soviet Union in 1991.
As part of an ambitious reform effort, Moldova introduced a
convertible currency, freed prices, stopped issuing preferential
credits to state enterprises, backed steady land privatization,
removed export controls, and freed interest rates. The government
entered into agreements with the World Bank and the IMF to promote
growth and reduce poverty. The economy returned to positive growth,
of 2.1% in 2000, 6.1% in 2001, 7.2% in 2002, and 6.3% in 2003.
Further reforms will come slowly because of strong political forces
backing government controls. The economy remains vulnerable to
higher fuel prices, poor agricultural weather, and the skepticism of
foreign investors.

Monaco
Monaco, bordering France on the Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. In 2001, a major construction project extended the pier
used by cruise ships in the main harbor. The principality has
successfully sought to diversify into services and small,
high-value-added, nonpolluting industries. The state has no income
tax and low business taxes and thrives as a tax haven both for
individuals who have established residence and for foreign companies
that have set up businesses and offices. The state retains
monopolies in a number of sectors, including tobacco, the telephone
network, and the postal service. Living standards are high, roughly
comparable to those in prosperous French metropolitan areas. Monaco
does not publish national income figures; the estimates below are
extremely rough.

Mongolia
Economic activity traditionally has been based on
agriculture and breeding of livestock. Mongolia also has extensive
mineral deposits; copper, coal, molybdenum, tin, tungsten, and gold
account for a large part of industrial production. Soviet
assistance, at its height one-third of GDP, disappeared almost
overnight in 1990-91 at the time of the dismantlement of the USSR.
Mongolia was driven into deep recession, prolonged by the Mongolian
People's Revolutionary Party's (MPRP) reluctance to undertake
serious economic reform. The Democratic Union Coalition (DUC)
government embraced free-market economics, eased price controls,
liberalized domestic and international trade, and attempted to
restructure the banking system and the energy sector. Major domestic
privatization programs were undertaken, as well as the fostering of
foreign investment through international tender of the oil
distribution company, a leading cashmere company, and banks. Reform
was held back by the ex-Communist MPRP opposition and by the
political instability brought about through four successive
governments under the DUC. Economic growth picked up in 1997-99
after stalling in 1996 due to a series of natural disasters and
declines in world prices of copper and cashmere. In August and
September 1999, the economy suffered from a temporary Russian ban on
exports of oil and oil products, and Mongolia remains vulnerable in
this sector. Mongolia joined the World Trade Organization (WTrO) in
1997. The international donor community pledged over $300 million
per year at the Consultative Group Meeting, held in Ulaanbaatar in
June 1999. The MPRP government, elected in July 2000, was anxious to
improve the investment climate; it also had to deal with a heavy
burden of external debt. Falling prices for Mongolia's mainly
primary sector exports, widespread opposition to privatization, and
adverse effects of weather on agriculture in early 2000 and 2001
restrained real GDP growth. Despite drought problems in 2002, GDP
rose 4.0%, followed by a solid 5.0% increase in 2003. The first
applications under the land privatization law have been marked by a
number of disputes over particular sites. Russia claims Mongolia
owes it $11 billion from the Soviet period; any settlement could
substantially increase Mongolia's foreign debt burden.

Montserrat
Severe volcanic activity, which began in July 1995, has
put a damper on this small, open economy. A catastrophic eruption in
June 1997 closed the airports and seaports, causing further economic
and social dislocation. Two-thirds of the 12,000 inhabitants fled
the island. Some began to return in 1998, but lack of housing
limited the number. The agriculture sector continued to be affected
by the lack of suitable land for farming and the destruction of
crops. Prospects for the economy depend largely on developments in
relation to the volcano and on public sector construction activity.
The UK has launched a three-year $122.8 million aid program to help
reconstruct the economy. Half of the island is expected to remain
uninhabitable for another decade.

Morocco
Morocco faces the problems typical of developing countries -
restraining government spending, reducing constraints on private
activity and foreign trade, and achieving sustainable economic
growth. Despite structural adjustment programs supported by the IMF,
the World Bank, and the Paris Club, the dirham is only fully
convertible for current account transactions. Reforms of the
financial sector are being contemplated. Droughts depressed activity
in the key agricultural sector and contributed to a stagnant economy
in 2002. Morocco reported large foreign exchange inflows from the
sale of a mobile telephone license, and partial privatization of the
state-owned telecommunications company and the state tobacco
company. Favorable rainfall in 2003 led to a growth of 6%.
Formidable long-term challenges include: preparing the economy for
freer trade with the EU and US, improving education, and attracting
foreign investment to boost living standards and job prospects for
Morocco's youth.

Mozambique
At independence in 1975, Mozambique was one of the
world's poorest countries. Socialist mismanagement and a brutal
civil war from 1977-92 exacerbated the situation. In 1987, the
government embarked on a series of macroeconomic reforms designed to
stabilize the economy. These steps, combined with donor assistance
and with political stability since the multi-party elections in
1994, have led to dramatic improvements in the country's growth
rate. Inflation was reduced to single digits during the late 1990s
although it returned to double digits in 2000-03. Fiscal reforms,
including the introduction of a value-added tax and reform of the
customs service, have improved the government's revenue collection
abilities. In spite of these gains, Mozambique remains dependent
upon foreign assistance for much of its annual budget, and the
majority of the population remains below the poverty line.
Subsistence agriculture continues to employ the vast majority of the
country's workforce. A substantial trade imbalance persists although
the opening of the MOZAL aluminum smelter, the country's largest
foreign investment project to date has increased export earnings.
Additional investment projects in titanium extraction and processing
and garment manufacturing should further close the import/export
gap. Mozambique's once substantial foreign debt has been reduced
through forgiveness and rescheduling under the IMF's Heavily
Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is
now at a manageable level.

Namibia
The economy is heavily dependent on the extraction and
processing of minerals for export. Mining accounts for 20% of GDP.
Rich alluvial diamond deposits make Namibia a primary source for
gem-quality diamonds. Namibia is the fourth-largest exporter of
nonfuel minerals in Africa, the world's fifth-largest producer of
uranium, and the producer of large quantities of lead, zinc, tin,
silver, and tungsten. The mining sector employs only about 3% of the
population while about half of the population depends on subsistence
agriculture for its livelihood. Namibia normally imports about 50%
of its cereal requirements; in drought years food shortages are a
major problem in rural areas. A high per capita GDP, relative to the
region, hides the great inequality of income distribution; nearly
one-third of Namibians had annual incomes of less than $1,400 in
constant 1994 dollars, according to a 1993 study. The Namibian
economy is closely linked to South Africa with the Namibian dollar
pegged to the South African rand. Privatization of several
enterprises in coming years may stimulate long-run foreign
investment. Mining of zinc, copper, and silver and increased fish
production led growth in 2003.

Nauru
Revenues of this tiny island have traditionally come from
exports of phosphates, but reserves are now depleted. Few other
resources exist with most necessities being imported, mainly from
Australia, its former occupier and later major source of support.
The rehabilitation of mined land and the replacement of income from
phosphates are serious long-term problems. In anticipation of the
exhaustion of Nauru's phosphate deposits, substantial amounts of
phosphate income have been invested in trust funds to help cushion
the transition and provide for Nauru's economic future. As a result
of heavy spending from the trust funds, the government faces virtual
bankruptcy. To cut costs the government has called for a freeze on
wages, a reduction of over-staffed public service departments,
privatization of numerous government agencies, and closure of some
overseas consulates. In recent years Nauru has encouraged the
registration of offshore banks and corporations. In 2004 the
deterioration in housing, hospitals, and other capital plant
continued, and the cost to Australia of keeping the government and
economy afloat has substantially mounted. Few comprehensive
statistics on the Nauru economy exist, with estimates of Nauru's GDP
varying widely.

Navassa Island
Subsistence fishing and commercial trawling
activities within refuge waters.

Nepal
Nepal is among the poorest and least developed countries in
the world with 42% of its population living below the poverty line.
Agriculture is the mainstay of the economy, providing a livelihood
for over 80% of the population and accounting for 40% of GDP.
Industrial activity mainly involves the processing of agricultural
produce including jute, sugarcane, tobacco, and grain. Security
concerns in the wake of the Maoist conflict and the 11 September
2001 terrorist attacks in the US have led to a decrease in tourism,
a key source of foreign exchange. Nepal has considerable scope for
exploiting its potential in hydropower and tourism, areas of recent
foreign investment interest. Prospects for foreign trade or
investment in other sectors will remain poor, however, because of
the small size of the economy, its technological backwardness, its
remoteness, its landlocked geographic location, its civil strife,
and its susceptibility to natural disaster. The international
community's role of funding more than 60% of Nepal's development
budget and more than 28% of total budgetary expenditures will likely
continue as a major ingredient of growth.

Netherlands
The Netherlands has a prosperous and open economy, which
depends heavily on foreign trade. The economy is noted for stable
industrial relations, moderate unemployment and inflation, a sizable
current account surplus, and an important role as a European
transportation hub. Industrial activity is predominantly in food
processing, chemicals, petroleum refining, and electrical machinery.
A highly mechanized agricultural sector employs no more than 4% of
the labor force but provides large surpluses for the food-processing
industry and for exports. The Netherlands, along with 11 of its EU
partners, began circulating the euro currency on 1 January 2002. The
country continues to be one of the leading European nations for
attracting foreign direct investment. Economic growth slowed
considerably in 2001-03, as part of the global economic slowdown,
but for the four years before that, annual growth averaged nearly
4%, well above the EU average. The government is wrestling with a
deteriorating budget position, and is moving toward the EU 3% of GDP
budget deficit limit.

Netherlands Antilles
Tourism, petroleum refining, and offshore
finance are the mainstays of this small economy, which is closely
tied to the outside world. Although GDP has declined or grown
slightly in each of the past seven years, the islands enjoy a high
per capita income and a well-developed infrastructure compared with
other countries in the region. Almost all consumer and capital goods
are imported, the US and Mexico being the major suppliers. Poor
soils and inadequate water supplies hamper the development of
agriculture. Budgetary problems hamper reform of the health and
pension systems of an aging population.

New Caledonia
New Caledonia has about 25% of the world's known
nickel resources. Only a small amount of the land is suitable for
cultivation, and food accounts for about 20% of imports. In addition
to nickel, substantial financial support from France - equal to more
than one-fourth of GDP - and tourism are keys to the health of the
economy. Substantial new investment in the nickel industry, combined
with the recovery of global nickel prices, brightens the economic
outlook for the next several years.

New Zealand
Over the past 20 years the government has transformed
New Zealand from an agrarian economy dependent on concessionary
British market access to a more industrialized, free market economy
that can compete globally. This dynamic growth has boosted real
incomes (but left behind many at the bottom of the ladder),
broadened and deepened the technological capabilities of the
industrial sector, and contained inflationary pressures. Per capita
income has been rising and is now 80% of the level of the four
largest EU economies. New Zealand is heavily dependent on trade -
particularly in agricultural products - to drive growth, and it has
been affected by the global economic slowdown and the slump in
commodity prices. Thus far the economy has been resilient, and
growth should continue at the same level in 2004. Expenditures on
health, education, and pensions will increase proportionately.

Nicaragua
Nicaragua, one of the hemisphere's poorest countries,
faces low per capita income, massive unemployment, and huge external
debt. Distribution of income is one of the most unequal on the
globe. While the country has made progress toward macroeconomic
stability over the past few years, GDP annual growth of 1.5% - 2.5%
has been far too low to meet the country's need. Nicaragua will
continue to be dependent on international aid and debt relief under
the Heavily Indebted Poor Countries (HIPC) initiative. Nicaragua has
undertaken significant economic reforms that are expected to help
the country qualify for more than $4 billion in debt relief under
HIPC in early 2004. Donors have made aid conditional on the openness
of government financial operation, poverty alleviation, and human
rights. A three-year poverty reduction and growth plan, agreed to
with the IMF in December 2002, guides economic policy.

Niger
Niger is a poor, landlocked Sub-Saharan nation, whose economy
centers on subsistence agriculture, animal husbandry, and reexport
trade, and increasingly less on uranium, because of declining world
demand. The 50% devaluation of the West African franc in January
1994 boosted exports of livestock, cowpeas, onions, and the products
of Niger's small cotton industry. The government relies on bilateral
and multilateral aid - which was suspended following the April 1999
coup d'etat - for operating expenses and public investment. In
2000-01, the World Bank approved a structural adjustment loan of
$105 million to help support fiscal reforms. However, reforms could
prove difficult given the government's bleak financial situation.
The IMF approved a $73 million poverty reduction and growth facility
for Niger in 2000 and announced $115 million in debt relief under
the Heavily Indebted Poor Countries (HIPC) initiative. Further
disbursements of aid occurred in 2002. Future growth may be
sustained by exploitation of oil, gold, coal, and other mineral
resources.

Nigeria
Oil-rich Nigeria, long hobbled by political instability,
corruption, inadequate infrastructure, and poor macroeconomic
management, is undertaking some reforms under the new civilian
administration. Nigeria's former military rulers failed to diversify
the economy away from overdependence on the capital-intensive oil
sector, which provides 20% of GDP, 95% of foreign exchange earnings,
and about 65% of budgetary revenues. The largely subsistence
agricultural sector has failed to keep up with rapid population
growth - Nigeria is Africa's most populous country - and the
country, once a large net exporter of food, now must import food.
Following the signing of an IMF stand-by agreement in August 2000,
Nigeria received a debt-restructuring deal from the Paris Club and a
$1 billion credit from the IMF, both contingent on economic reforms.
Nigeria pulled out of its IMF program in April 2002, after failing
to meet spending and exchange rate targets, making it ineligible for
additional debt forgiveness from the Paris Club. The government has
lacked the political will to implement the market-oriented reforms
urged by the IMF, such as to modernize the banking system, to curb
inflation by blocking excessive wage demands, and to resolve
regional disputes over the distribution of earnings from the oil
industry. During 2003, however, the government deregulated fuel
prices and announced the privatization of the country's four oil
refineries. GDP growth probably will rise marginally in 2004, led by
oil and natural gas exports.

Niue
The economy suffers from the typical Pacific island problems of
geographic isolation, few resources, and a small population.
Government expenditures regularly exceed revenues, and the shortfall
is made up by critically needed grants from New Zealand that are
used to pay wages to public employees. Niue has cut government
expenditures by reducing the public service by almost half. The
agricultural sector consists mainly of subsistence gardening,
although some cash crops are grown for export. Industry consists
primarily of small factories to process passion fruit, lime oil,
honey, and coconut cream. The sale of postage stamps to foreign
collectors is an important source of revenue. The island in recent
years has suffered a serious loss of population because of migration
of Niueans to New Zealand. Efforts to increase GDP include the
promotion of tourism and a financial services industry, although
Premier LAKATANI announced in February 2002 that Niue will shut down
the offshore banking industry. Economic aid from New Zealand in 2002
was about $2.6 million.

Norfolk Island
Tourism, the primary economic activity, has steadily
increased over the years and has brought a level of prosperity
unusual among inhabitants of the Pacific islands. The agricultural
sector has become self-sufficient in the production of beef,
poultry, and eggs.

Northern Mariana Islands
The economy benefits substantially from
financial assistance from the US. The rate of funding has declined
as locally generated government revenues have grown. The key tourist
industry employs about 50% of the work force and accounts for
roughly one-fourth of GDP. Japanese tourists predominate. Annual
tourist entries have exceeded one-half million in recent years, but
financial difficulties in Japan have caused a temporary slowdown.
The agricultural sector is made up of cattle ranches and small farms
producing coconuts, breadfruit, tomatoes, and melons. Garment
production is by far the most important industry with employment of
17,500 mostly Chinese workers and sizable shipments to the US under
duty and quota exemptions.

Norway
The Norwegian economy is a prosperous bastion of welfare
capitalism, featuring a combination of free market activity and
government intervention. The government controls key areas, such as
the vital petroleum sector (through large-scale state enterprises).
The country is richly endowed with natural resources - petroleum,
hydropower, fish, forests, and minerals - and is highly dependent on
its oil production and international oil prices, with oil and gas
accounting for one-third of exports. Only Saudi Arabia and Russia
export more oil than Norway. Norway opted to stay out of the EU
during a referendum in November 1994. The government has moved ahead
with privatization. With arguably the highest quality of life
worldwide, Norwegians still worry about that time in the next two
decades when the oil and gas begin to run out. Accordingly, Norway
has been saving its oil-boosted budget surpluses in a Government
Petroleum Fund, which is invested abroad and now is valued at more
than $43 billion. GDP growth was a lackluster 1% in 2002 and 0.5% in
2003 against the background of a faltering European economy.

Oman
Oman is a small, well-off middle Eastern economy with large oil
and gas resources, a substantial trade surplus, and low inflation.
The government is moving ahead with privatization of its utilities,
the development of a body of commercial law to facilitate foreign
investment, and increased budgetary outlays. Oman continues to
liberalize its markets and joined the World Trade Organization (WTO)
in November 2000. In order to reduce unemployment and limit
dependence on foreign countries, the government is encouraging the
replacement of expatriate workers with local people, i.e., the
process of Omanization. Training in information technology, business
management, and English support this objective. Industrial
development plans focus on gas resources.

Pacific Ocean
The Pacific Ocean is a major contributor to the world
economy and particularly to those nations its waters directly touch.
It provides low-cost sea transportation between East and West,
extensive fishing grounds, offshore oil and gas fields, minerals,
and sand and gravel for the construction industry. In 1996, over 60%
of the world's fish catch came from the Pacific Ocean. Exploitation
of offshore oil and gas reserves is playing an ever-increasing role
in the energy supplies of the US, Australia, NZ, China, and Peru.
The high cost of recovering offshore oil and gas, combined with the
wide swings in world prices for oil since 1985, has led to
fluctuations in new drillings.

Pakistan
Pakistan, an impoverished and underdeveloped country, has
suffered from decades of internal political disputes, low levels of
foreign investment, and a costly, ongoing confrontation with
neighboring India. However, IMF-approved government policies,
bolstered by generous foreign assistance and renewed access to
global markets since late 2001, have generated solid macroeconomic
recovery the last two years. The government has made substantial
inroads in macroeconomic reform since 2000, although progress on
more politically sensitive reforms has slowed. For example, in the
third and final year of its $1.3 billion IMF Poverty Reduction and
Growth Facility, Islamabad has continued to require waivers for
energy sector reforms. While long-term prospects remain uncertain,
given Pakistan's low level of development, medium-term prospects for
job creation and poverty reduction are the best in nearly a decade.
Islamabad has raised development spending from about 2% of GDP in
the 1990s to 4% in 2003, a necessary step towards reversing the
broad underdevelopment of its social sector. GDP growth is heavily
dependent on rain-fed crops, and last year's end to a four-year
drought should support moderate agricultural growth for the next few
years. Foreign exchange reserves continued to reach new levels in
2003, supported by robust export growth and steady worker
remittances.

Palau
The economy consists primarily of tourism, subsistence
agriculture and fishing. The government is the major employer of the
work force, relying heavily on financial assistance from the US.
Business and tourist arrivals numbered 50,000 in FY00/01. The
population enjoys a per capita income twice that of the Philippines
and much of Micronesia. Long-run prospects for the key tourist
sector have been greatly bolstered by the expansion of air travel in
the Pacific, the rising prosperity of leading East Asian countries,
and the willingness of foreigners to finance infrastructure
development.

Palmyra Atoll
no economic activity

Panama
Panama's dollarised economy rests primarily on a
well-developed services sector that accounts for three-fourths of
GDP. Services include operating the Panama Canal, banking, the Colon
Free Zone, insurance, container ports, flagship registry, and
tourism. A slump in Colon Free Zone and agricultural exports, the
global slowdown, and the withdrawal of US military forces held back
economic growth in 2000-03. The government has been backing public
works programs, tax reforms, new regional trade agreements, and
development of tourism in order to stimulate growth. Unemployment
remains at an unacceptably high level.

Papua New Guinea
Papua New Guinea is richly endowed with natural
resources, but exploitation has been hampered by rugged terrain and
the high cost of developing infrastructure. Agriculture provides a
subsistence livelihood for 85% of the population. Mineral deposits,
including oil, copper, and gold, account for 72% of export earnings.
The economy has faltered over the past four years. Former Prime
Minister Mekere MORAUTA had tried to restore integrity to state
institutions, to stabilize the kina, restore stability to the
national budget, to privatize public enterprises where appropriate,
and to ensure ongoing peace on Bougainville. The government has had
considerable success in attracting international support,
specifically gaining the backing of the IMF and the World Bank in
securing development assistance loans. Challenges face Prime
Minister Michael SOMARE, including curbing inflation, gaining
further investor confidence, continuing efforts to privatize
government assets, maintaining the support of members of Parliament,
and balancing relations with Australia, the former colonial ruler.

Paracel Islands
China announced plans in 1997 to open the islands
for tourism.

Paraguay
Paraguay has a market economy marked by a large informal
sector. The informal sector features both reexport of imported
consumer goods to neighboring countries as well as the activities of
thousands of microenterprises and urban street vendors. Because of
the importance of the informal sector, accurate economic measures
are difficult to obtain. A large percentage of the population
derives their living from agricultural activity, often on a
subsistence basis. The formal economy grew by an average of about 3%
annually in 1995-97; but GDP declined slightly in 1998, 1999, and
2000, rose slightly in 2001, only to fall again in 2002. On a per
capita basis, real income has stagnated at 1980 levels. Most
observers attribute Paraguay's poor economic performance to
political uncertainty, corruption, lack of progress on structural
reform, substantial internal and external debt, and deficient
infrastructure.

Peru
Peru's economy reflects its varied geography - an arid coastal
region, the Andes further inland, and tropical lands bordering
Colombia and Brazil. Abundant mineral resources are found in the
mountainous areas, and Peru's coastal waters provide excellent
fishing grounds. However, overdependence on minerals and metals
subjects the economy to fluctuations in world prices, and a lack of
infrastructure deters trade and investment. After several years of
inconsistent economic performance, the Peruvian economy was one of
the fastest growing in Latin America in 2002 and 2003, growing by 5%
and 4%, respectively, with the exchange rate stable and an annual
inflation lower than 2%. Foreign direct investment also was strong,
thanks to the ongoing Camisea natural gas pipeline project
(scheduled to begin operations in 2004) and investments in gold
mining. Risk premiums on Peruvian bonds on secondary markets reached
historically low levels in late 2003, reflecting investor optimism
and the government's fiscal restraint. Despite the strong
macroeconomic performance, political intrigue and allegations of
corruption continued to swirl in 2003, with the TOLEDO
administration growing increasingly unpopular, and local and foreign
concern rising that the political turmoil could place the country's
hard-won fiscal and financial stability at risk. Moreover, as of
late 2003, unemployment had yet to respond to the strong growth in
economic activity, owing in part to rigid labor market regulations
that act as an impediment to hiring.

Philippines
The Philippines was less severely affected by the Asian
financial crisis of 1998 than its neighbors, aided in part by annual
remittances of $6-7 billion from overseas workers. From a 0.6%
decline in 1998, GDP expanded by 2.4% in 1999, and 4.4% in 2000, but
slowed to 3.2% in 2001 in the context of a global economic slowdown,
an export slump, and political and security concerns. GDP growth
accelerated to 4.4% in 2002 and 4.2% in 2003, reflecting the
continued resilience of the service sector, gains in industrial
output, and improved exports. Nonetheless, it will take a higher,
sustained growth path to make appreciable progress in poverty
alleviation given the Philippines' high annual population growth
rate and unequal distribution of income. The MACAPAGAL-ARROYO
Administration has promised to continue economic reforms to help the
Philippines match the pace of development in the newly
industrialized countries of East Asia. The strategy includes
improving the infrastructure, strengthening tax collection to
bolster government revenues, furthering deregulation and
privatization of the economy, enhancing the viability of the
financial system, and increasing trade integration with the region.
Prospects for 2004 will depend on the economic performance of two
major trading partners, the US and Japan, and on increased
confidence on the part of the international investment community.

Pitcairn Islands
The inhabitants of this tiny isolated economy exist
on fishing, subsistence farming, handicrafts, and postage stamps.
The fertile soil of the valleys produces a wide variety of fruits
and vegetables, including citrus, sugarcane, watermelons, bananas,
yams, and beans. Bartering is an important part of the economy. The
major sources of revenue are the sale of postage stamps to
collectors and the sale of handicrafts to passing ships.

Poland
Poland has steadfastly pursued a policy of economic
liberalization throughout the 1990s and today stands out as a
success story among transition economies. Even so, much remains to
be done. The privatization of small and medium state-owned companies
and a liberal law on establishing new firms has encouraged the
development of the private business sector, but legal and
bureaucratic obstacles alongside persistent corruption are hampering
its further development. Poland's agricultural sector remains
handicapped by structural problems, surplus labor, inefficient small
farms, and lack of investment. Restructuring and privatization of
"sensitive sectors" (e.g., coal, steel, railroads, and energy),
while recently initiated, have stalled. Reforms in health care,
education, the pension system, and state administration have
resulted in larger than expected fiscal pressures. Further progress
in public finance depends mainly on privatization of Poland's
remaining state sector, the reduction of state employment, and an
overhaul of the tax code to incorporate the growing gray economy and
farmers, most of whom pay no tax. The government's determination to
enter the EU has shaped most aspects of its economic policy and new
legislation; in a nationwide referendum in November 2003, 77% of the
voters voted in favor of Poland's EU accession, now scheduled for
May 2004. Improving Poland's export competitiveness and containing
the internal budget deficit are top priorities. Due to political
uncertainty, the zloty has recently depreciated in relation to the
euro, while currencies of the other euro-zone aspirants have been
appreciating. GDP per capita equals that of the three Baltic states.

Portugal
Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past decade, successive governments have privatized many
state-controlled firms and liberalized key areas of the economy,
including the financial and telecommunications sectors. The country
qualified for the Economic and Monetary Union (EMU) in 1998 and
began circulating the euro on 1 January 2002 along with 11 other EU
member economies. Economic growth has been above the EU average for
much of the past decade, but fell back in 2001-03. GDP per capita
stands at 70% of that of the leading EU economies. A poor
educational system, in particular, has been an obstacle to greater
productivity and growth. Portugal has been increasingly overshadowed
by lower-cost producers in Central Europe and Asia as a target for
foreign direct investment. The coalition government faces tough
choices in its attempts to boost Portugal's economic competitiveness
and to keep the budget deficit within the 3% EU ceiling.

Puerto Rico
Puerto Rico has one of the most dynamic economies in the
Caribbean region. A diverse industrial sector has far surpassed
agriculture as the primary locus of economic activity and income.
Encouraged by duty-free access to the US and by tax incentives, US
firms have invested heavily in Puerto Rico since the 1950s. US
minimum wage laws apply. Sugar production has lost out to dairy
production and other livestock products as the main source of income
in the agricultural sector. Tourism has traditionally been an
important source of income, with estimated arrivals of nearly 5
million tourists in 1999. Growth fell off in 2001-03, largely due to
the slowdown in the US economy.

Qatar
Oil and gas account for more than 55% of GDP, roughly 85% of
export earnings, and 70% of government revenues. Oil and gas have
given Qatar a per capita GDP about 80% of that of the leading West
European industrial countries. Proved oil reserves of 14.5 billion
barrels should ensure continued output at current levels for 23
years. Qatar's proved reserves of natural gas exceed 17.9 trillion
cubic meters, more than 5% of the world total and third largest in
the world. Long-term goals feature the development of offshore
natural gas reserves to offset the ultimate decline in oil
production. Since 2000, Qatar has consistently posted trade
surpluses largely because of high oil prices and increased natural
gas exports.

Reunion
The economy has traditionally been based on agriculture, but
services now dominate. Sugarcane has been the primary crop for more
than a century, and in some years it accounts for 85% of exports.
The government has been pushing the development of a tourist
industry to relieve high unemployment, which amounts to one-third of
the labor force. The gap in Reunion between the well-off and the
poor is extraordinary and accounts for the persistent social
tensions. The white and Indian communities are substantially better
off than other segments of the population, often approaching
European standards, whereas minority groups suffer the poverty and
unemployment typical of the poorer nations of the African continent.
The outbreak of severe rioting in February 1991 illustrates the
seriousness of socioeconomic tensions. The economic well-being of
Reunion depends heavily on continued financial assistance from
France.

Romania
Romania began the transition from Communism in 1989 with a
largely obsolete industrial base and a pattern of output unsuited to
the country's needs. The country emerged in 2000 from a punishing
three-year recession thanks to strong demand in EU export markets.
Despite the global slowdown in 2001-02, strong domestic activity in
construction, agriculture, and consumption have kept growth above
4%. An IMF standby agreement, signed in 2001, was accompanied by
slow but palpable gains in privatization, deficit reduction, and the
curbing of inflation. The IMF Board approved Romania's completion of
the standby agreement in October 2003, the first time Romania had
successfully concluded an IMF agreement since the 1989 revolution.
In July 2004, the Executive Board of the IMF approved a 24-month
standby arrangement for $367 million. The Romanian authorities do
not intend to draw on this arrangement, viewing it as a precaution.
Meanwhile, recent macroeconomic gains have done little to address
Romania's widespread poverty, and corruption and red tape handicap
the business environment.

Russia
Russia ended 2003 with its fifth straight year of growth,
averaging 6.5% annually since the financial crisis of 1998. Although
high oil prices and a relatively cheap ruble are important drivers
of this economic rebound, since 2000 investment and consumer-driven
demand have played a noticeably increasing role. Real fixed capital
investments have averaged gains greater than 10% over the last four
years and real personal incomes have averaged increases over 12%.
Russia has also improved its international financial position since
the 1998 financial crisis, with its foreign debt declining from 90%
of GDP to around 28%. Strong oil export earnings have allowed Russia
to increase its foreign reserves from only $12 billion to some $80
billion. These achievements, along with a renewed government effort
to advance structural reforms, have raised business and investor
confidence in Russia's economic prospects. Nevertheless, serious
problems persist. Oil, natural gas, metals, and timber account for
more than 80% of exports, leaving the country vulnerable to swings
in world prices. Russia's manufacturing base is dilapidated and must
be replaced or modernized if the country is to achieve broad-based
economic growth. Other problems include a weak banking system, a
poor business climate that discourages both domestic and foreign
investors, corruption, local and regional government intervention in
the courts, and widespread lack of trust in institutions. In
addition, a string of investigations launched against a major
Russian oil company, culminating with the arrest of its CEO in the
fall of 2003, have raised concerns by some observers that President
PUTIN is granting more influence to forces within his government
that desire to reassert state control over the economy.

Rwanda
Rwanda is a poor rural country with about 90% of the
population engaged in (mainly subsistence) agriculture. It is the
most densely populated country in Africa; landlocked with few
natural resources and minimal industry. Primary foreign exchange
earners are coffee and tea. The 1994 genocide decimated Rwanda's
fragile economic base, severely impoverished the population,
particularly women, and eroded the country's ability to attract
private and external investment. However, Rwanda has made
substantial progress in stabilizing and rehabilitating its economy
to pre-1994 levels, although poverty levels are higher now. GDP has
rebounded, and inflation has been curbed. Export earnings, however,
have been hindered by low beverage prices, depriving the country of
much needed hard currency. Attempts to diversify into
non-traditional agriculture exports such as flowers and vegetables
have been stymied by a lack of adequate transportation
infrastructure. Despite Rwanda's fertile ecosystem, food production
often does not keep pace with population growth, requiring food to
be imported. Rwanda continues to receive substantial aid money and
was approved for IMF-World Bank Heavily Indebted Poor Country (HIPC)
initiative debt relief in late 2000. But Kigali's high defense
expenditures cause tension between the government and international
donors and lending agencies.

Saint Helena
The economy depends largely on financial assistance
from the UK, which amounted to about $5 million in 1997 or almost
one-half of annual budgetary revenues. The local population earns
income from fishing, the raising of livestock, and sales of
handicrafts. Because there are few jobs, 25% of the work force has
left to seek employment on Ascension Island, on the Falklands, and
in the UK.

Saint Kitts and Nevis
Sugar was the traditional mainstay of the
Saint Kitts economy until the 1970s. Although the crop still
dominates the agricultural sector, activities such as tourism,
export-oriented manufacturing, and offshore banking have assumed
larger roles in the economy. As tourism revenues are now the chief
source of the islands' foreign exchange, a decline in stopover
tourist arrivals following the 11 September 2001 terrorist attacks
has eroded government finances. The opening of a 1,000+ bed Marriott
hotel in February 2003 was expected to bring in much-needed revenue.