Chapter M: Major infectious diseases (129)

Laos
The government of Laos, one of the few remaining one-party
Communist states, began decentralizing control and encouraging
private enterprise in 1986. The results, starting from an extremely
low base, were striking - growth averaged 6% per year from 1988-2008
except during the short-lived drop caused by the Asian financial
crisis that began in 1997. Despite this high growth rate, Laos
remains a country with an underdeveloped infrastructure,
particularly in rural areas. It has no railroads, a rudimentary road
system, and limited external and internal telecommunications, though
the government is sponsoring major improvements in the road system
with support from Japan and China. Electricity is available in urban
areas and in many rural districts. Subsistence agriculture,
dominated by rice, accounts for about 40% of GDP and provides 80% of
total employment. The government depends upon aid from international
donors for over 80% of its capital investment. The economy has until
recently benefited from high foreign investment in hydropower,
mining, and construction. The fiscal crisis of late 2008, and the
rapid drop in commodity prices - especially copper - has slowed
these investments. Several policy changes since 2004 may help spur
growth. Laos, which gained Normal Trade Relations status with the US
in 2004, is taking steps to join the World Trade Organization.
Related trade policy reforms will improve the business environment.
On the fiscal side, a value-added tax (VAT) regime, which began with
a few large businesses in early 2009, should slowly help streamline
the government's inefficient tax system. Economic prospects will
improve gradually as the administration continues to simplify
investment procedures and as a more competitive banking sector
extends credit to small farmers and small entrepreneurs. The
government appears committed to raising the country's profile among
investors. Foreign donors have praised the Lao government for its
efforts to improve the investment regime. The World Bank has
declared that Laos' goal of graduating from the UN Development
Program's list of least-developed countries by 2020 could be
achievable.

Latvia
Latvia's economy experienced GDP growth of more than 10% per
year during 2006-07; but entered a severe recession in 2008 as a
result of an unsustainable current account deficit and large debt
exposure amid the softening world economy. The IMF, EU, and other
donors provided assistance to Latvia as part of an agreement to
defend the currency's peg to the euro and reduce the fiscal deficit
to about 5% of GDP. The majority of companies, banks, and real
estate have been privatized, although the state still holds sizable
stakes in a few large enterprises. Latvia officially joined the
World Trade Organization in February 1999. EU membership, a top
foreign policy goal, came in May 2004. The current account deficit
and inflation remain major concerns.

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

Lesotho
Small, landlocked, and mountainous, Lesotho relies on
remittances from miners employed in South Africa and customs duties
from the Southern Africa Customs Union for the majority of
government revenue. However, the government has recently
strengthened its tax system to reduce dependency on customs duties.
Completion of a major hydropower facility in January 1998 permitted
the sale of water to South Africa and generated royalties for
Lesotho. Lesotho produces about 90% of its own electrical power
needs. As the number of mineworkers has declined steadily over the
past several years, a small manufacturing base has developed based
on farm products that support the milling, canning, leather, and
jute industries, as well as a rapidly expanding apparel-assembly
sector. The latter has grown significantly mainly due to Lesotho
qualifying for the trade benefits contained in the Africa Growth and
Opportunity Act. The economy is still primarily based on subsistence
agriculture, especially livestock, although drought has decreased
agricultural activity. The extreme inequality in the distribution of
income remains a major drawback. Lesotho has signed an Interim
Poverty Reduction and Growth Facility with the IMF. In July 2007,
Lesotho signed a Millennium Challenge Account Compact with the US
worth $362.5 million.

Liberia
Civil war and government mismanagement destroyed much of
Liberia's economy, especially the infrastructure in and around the
capital, Monrovia. Many businesses fled the country, taking capital
and expertise with them, but with the conclusion of fighting and the
installation of a democratically-elected government in 2006, some
have returned. Richly endowed with water, mineral resources,
forests, and a climate favorable to agriculture, Liberia had been a
producer and exporter of basic products - primarily raw timber and
rubber. Local manufacturing, mainly foreign owned, had been small in
scope. President JOHNSON SIRLEAF, a Harvard-trained banker and
administrator, has taken steps to reduce corruption, build support
from international donors, and encourage private investment.
Embargos on timber and diamond exports have been lifted, opening new
sources of revenue for the government. The reconstruction of
infrastructure and the raising of incomes in this ravaged economy
will largely depend on generous financial and technical assistance
from donor countries and foreign investment in key sectors, such as
infrastructure and power generation.

Libya
The Libyan economy depends primarily upon revenues from the
oil sector, which contribute about 95% of export earnings, about
one-quarter of GDP, and 60% of public sector wages. The expected
weakness in world hydrocarbon prices throughout 2009 will reduce
Libyan government tax income and constrain Libyan economic growth in
2009. Substantial revenues from the energy sector coupled with a
small population give Libya one of the highest per capita GDPs in
Africa, but little of this income flows down to the lower orders of
society. Libyan officials in the past five years have made progress
on economic reforms as part of a broader campaign to reintegrate the
country into the international fold. This effort picked up steam
after UN sanctions were lifted in September 2003 and as Libya
announced in December 2003 that it would abandon programs to build
weapons of mass destruction. UN Sanctions against Libya were lifted
in September 2003. The process of lifting US unilateral sanctions
began in the spring of 2004; all sanctions were removed by June
2006, helping Libya attract greater foreign direct investment,
especially in the energy sector. Libyan oil and gas licensing rounds
continue to draw high international interest; the National Oil
Company set a goal of nearly doubling oil production to 3 million
bbl/day by 2012. Libya faces a long road ahead in liberalizing the
socialist-oriented economy, but initial steps - including applying
for WTO membership, reducing some subsidies, and announcing plans
for privatization - are laying the groundwork for a transition to a
more market-based economy. The non-oil manufacturing and
construction sectors, which account for more than 20% of GDP, have
expanded from processing mostly agricultural products to include the
production of petrochemicals, iron, steel, and aluminum. Climatic
conditions and poor soils severely limit agricultural output, and
Libya imports about 75% of its food. Libya's primary agricultural
water source remains the Great Manmade River Project, but
significant resources are being invested in desalinization research
to meet growing water demands.

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

Lithuania
Lithuania's economy grew on average 8% per year for the
four years prior to 2008, driven by exports and domestic consumer
demand. Unemployment stood at 4.8% in 2008, while wages grew at
double digit rates. The current account deficit rose to roughly 15%
of GDP in 2007-08. Lithuania has gained membership in the World
Trade Organization and joined the EU in May 2004. Despite
Lithuania's EU accession, Lithuania's trade with its Central and
Eastern European neighbors, and Russia in particular, accounts for a
growing percentage of total trade. Privatization of the large,
state-owned utilities is nearly complete. Foreign government and
business support have helped in the transition from the old command
economy to a market economy.

Luxembourg
This stable, high-income economy - benefiting from its
proximity to France, Belgium, and Germany - has historically
featured solid growth, low inflation, and low unemployment. The
industrial sector, initially dominated by steel, has become
increasingly diversified to include chemicals, rubber, and other
products. Growth in the financial sector, which now accounts for
about 28% of GDP, has more than compensated for the decline in
steel. Most banks are foreign owned and have extensive foreign
dealings. Agriculture is based on small family-owned farms. The
economy depends on foreign and cross-border workers for about 60% of
its labor force. Although Luxembourg, like all EU members, suffered
from the global economic slump in the early part of this decade, the
country continues to enjoy an extraordinarily high standard of
living - GDP per capita ranks third in the world, after
Liechtenstein and Qatar. After two years of strong economic growth
in 2006-07, turmoil in the world financial markets trimmed
Luxembourg's economy in 2008.

Macau
Macau's economy has enjoyed strong growth in recent years on
the back of its expanding tourism and gaming sectors. After opening
up its locally-controlled casino industry to foreign competition in
2001, the territory attracted tens of billions of dollars in foreign
investment, transforming Macao into the world's largest gaming
center. By 2006, Macau's gaming revenue surpassed that of the Las
Vegas strip, and gaming-related taxes accounted for 75% of total
government revenue. In 2008, government revenue from gaming was set
to double 2006 collections. The expanding casino sector, and China's
decision beginning in 2002 to relax travel restrictions, reenergized
Macau's tourism industry. This city of just over 500,000 hosted more
than 30 million visitors in 2008. Almost 60% came from mainland
China despite increasing restrictions on travel to the SAR. Macau's
traditional manufacturing industry has been in a slow decline since
the termination of the Multi-Fiber Agreement in 2005. In 2008,
exports of textiles and garments generated only $1.1 billion,
compared to $13.7 billion in gross gaming receipts. The Closer
Economic Partnership Agreement (CEPA) between Macau and mainland
China that came into effect on 1 January 2004 offers many Macau-made
products tariff-free access to the mainland. Macau's currency, the
Pataca, is closely tied to the Hong Kong dollar, which is also
freely accepted in the territory.

Macedonia
Having a small, open economy makes Macedonia vulnerable to
economic developments in Europe and dependent on regional
integration and progress toward EU membership for continued economic
growth. At independence in September 1991, Macedonia was the least
developed of the Yugoslav republics, producing a mere 5% of the
total federal output of goods and services. The collapse of
Yugoslavia ended transfer payments from the central government and
eliminated advantages from inclusion in a de facto free trade area.
An absence of infrastructure, UN sanctions on the downsized
Yugoslavia, and a Greek economic embargo over a dispute about the
country's constitutional name and flag hindered economic growth
until 1996. GDP subsequently rose each year through 2000. In 2001,
during a civil conflict, the economy shrank 4.5% because of
decreased trade, intermittent border closures, increased deficit
spending on security needs, and investor uncertainty. Growth
averaged 4% per year during 2003-06 and more than 5% per year during
2007-08. Macedonia has maintained macroeconomic stability with low
inflation, but it has so far lagged the region in attracting foreign
investment and creating jobs, despite making extensive fiscal and
business sector reforms. Official unemployment remains high at
nearly 35%, but may be overstated based on the existence of an
extensive gray market, estimated to be more than 20% of GDP, that is
not captured by official statistics. In the wake of the global
economic downturn, Macedonia has experienced decreased foreign
direct investment, lowered credit, and a slowdown of export growth.
The Government of Macedonia now predicts growth in 2009 to be no
more than 3%.

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
placed the country on a slow and steady growth path from an
extremely low level. Agriculture, including fishing and forestry, is
a mainstay of the economy, accounting for more than one-fourth of
GDP and employing 80% of the population. Exports of apparel have
boomed in recent years primarily due to duty-free access to the US.
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 most densely
populated and least developed countries. The economy is
predominately agricultural with about 85% of the population living
in rural areas. Agriculture accounts for more than one-third of GDP
and 90% of export revenues. The performance of the tobacco sector is
key to short-term growth as tobacco accounts for more than half of
exports. The economy depends on substantial inflows of economic
assistance from the IMF, the World Bank, and individual donor
nations. In December 2007, the US granted Malawi eligibility status
to receive financial support within the Millennium Challenge
Corporation (MCC) initiative. Malawi will now begin a consultative
process to develop a five-year program before funding can begin. In
2006, Malawi was approved for relief under the Heavily Indebted Poor
Countries (HIPC) program. The government faces many challenges
including developing a market economy, improving educational
facilities, facing up to environmental problems, dealing with the
rapidly growing problem of HIV/AIDS, and satisfying foreign donors
that fiscal discipline is being tightened. In 2005, President
MUTHARIKA championed an anticorruption campaign. Since 2005
President MUTHARIKA'S government has exhibited improved financial
discipline under the guidance of Finance Minister Goodall GONDWE and
signed a three year Poverty Reduction and Growth Facility worth $56
million with the IMF. Improved relations with the IMF lead other
international donors to resume aid as well.

Malaysia
Malaysia, a middle-income country, has transformed itself
since the 1970s from a producer of raw materials into an emerging
multi-sector economy. After coming to office in 2003, former Prime
Minister ABDULLAH tried to move the economy farther up the
value-added production chain by attracting investments in high
technology industries, medical technology, and pharmaceuticals. The
Government of Malaysia is continuing efforts to boost domestic
demand to wean the economy off of its dependence on exports.
Nevertheless, exports - particularly of electronics - remain a
significant driver of the economy. As an oil and gas exporter,
Malaysia has profited from higher world energy prices, although the
rising cost of domestic gasoline and diesel fuel forced Kuala Lumpur
to reduce government subsidies. Malaysia "unpegged" the ringgit from
the US dollar in 2005 and the currency appreciated 6% per year
against the dollar in 2006-08. Although this has helped to hold down
the price of imports, inflationary pressures began to build in 2007
- in 2008 inflation stood at nearly 6%, year-over-year. The
government presented its five-year national development agenda in
April 2006 through the Ninth Malaysia Plan, a comprehensive
blueprint for the allocation of the national budget from 2006-10.
ABDULLAH unveiled a series of ambitious development schemes for
several regions that have had trouble attracting business
investment. Real GDP growth averaged about 6% per year under
ABDULLAH, but regions outside of Kuala Lumpur and the manufacturing
hub Penang did not fare as well. The central bank maintains healthy
foreign exchange reserves and the regulatory regime has limited
Malaysia's exposure to riskier financial instruments and the global
financial crisis. Decreasing worldwide demand for consumer goods is
expected to hurt economic growth in 2009 and beyond, however.

Maldives
Tourism, Maldives' largest industry, accounts for 28% of
GDP and more than 60% of foreign exchange receipts. Over 90% of
government tax revenue comes from import duties and tourism-related
taxes. Fishing is the second leading sector. Agriculture and
manufacturing continue to play a lesser role in the economy,
constrained by the limited availability of cultivable land and the
shortage of domestic labor. Most staple foods must be imported.
Industry, which consists mainly of garment production, boat
building, and handicrafts, accounts for about 7% of GDP. 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. Real GDP growth averaged over 7.5%
per year for more than a decade. In late December 2004, a major
tsunami left more than 100 dead, 12,000 displaced, and property
damage exceeding $300 million. As a result of the tsunami, the GDP
contracted by about 4.6% in 2005. A rebound in tourism, post-tsunami
reconstruction, and development of new resorts helped the economy
recover quickly, with GDP growth registering 18% in 2006. Growth
slowed in 2007-08, but remained above 5% per year. The trade deficit
expanded sharply as a result of high oil prices and imports of
construction material. Government spending on social needs,
subsidies, and civil servant salaries have created a large budget
deficit and inflation has picked up sharply, reaching nearly 13% in
October 2008 due to high oil and food prices. Diversifying beyond
tourism and fishing, reforming public finance, and increasing
employment are the major challenges facing the government. Over the
longer term Maldivian authorities worry about the impact of erosion
and possible global warming on their low-lying country; 80% of the
area is 1 meter or less above sea level.

Mali
Mali is among the 25 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 gold and cotton, its main
exports. 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
has invested in tourism and a tractor assembly factory. Mali's
adherence to economic reform and the 50% devaluation of the CFA
franc in January 1994 have pushed up economic growth to a 5% average
in 1996-2008. Worker remittances and external trade routes for the
landlocked country have been jeopardized by continued unrest in
neighboring Cote d'Ivoire, however, Mali is building a road network
that will connect it to all adjacent countries and it has a railway
line to Senegal.

Malta
Malta produces only about 20% of its food needs, has limited
fresh water supplies, and has few domestic energy sources. Malta's
geographic position between the EU and Africa makes it a recipient
of illegal immigration, which has strained Malta's political and
economic resources. The financial services industry has grown in
recent years, but is not fully modernized. Malta's economy is
dependent on foreign trade, manufacturing - especially electronics
and pharmaceuticals - and tourism all of which have been negatively
affected by the global economic downturn. Malta adopted the euro on
1 January 2008. The Maltese government in 2009 will be challenged to
contain the budget deficit, which ballooned in 2008 to about 4.1% of
GDP, placing it above the euro zone's 3% maximum.

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

Mauritania
Half the population still depends on agriculture and
livestock for a livelihood, even though many of the nomads and
subsistence farmers were forced into the cities by recurrent
droughts in the 1970s and 1980s. Mauritania has extensive deposits
of iron ore, which account for nearly 40% of total exports. The
nation's coastal waters are among the richest fishing areas in the
world, but overexploitation by foreigners threatens this key source
of revenue. The country's first deepwater port opened near
Nouakchott in 1986. Before 2000, drought and economic mismanagement
resulted in a buildup of foreign debt. In February 2000, Mauritania
qualified for debt relief under the Heavily Indebted Poor Countries
(HIPC) initiative and nearly all of its foreign debt has since been
forgiven. In December 2007 donors pledged $2.1 billion at a
triennial Consultative Group review. A new investment code approved
in December 2001 improved the opportunities for direct foreign
investment. Mauritania and the IMF agreed to a three-year Poverty
Reduction and Growth Facility (PRGF) arrangement in 2006 and
Mauritania made satisfactory progress, but IMF and World Bank
suspended their programs in Mauritania following the August 2008
coup; following the July 2009 Presidential elections, the IMF and
World Bank agreed to meet with the Goverment to discuss a
resumption. Oil prospects, while initially promising, have largely
failed to materialize. The Government continues to emphasize
reduction of poverty, improvement of health and education, and
privatization of the economy.

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

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

Mexico
Mexico has a free market economy in the trillion dollar
class. It contains a mixture of modern and outmoded industry and
agriculture, increasingly dominated by the private sector. Recent
administrations have expanded competition in seaports, railroads,
telecommunications, electricity generation, natural gas
distribution, and airports. Per capita income is roughly one-third
that of the US; income distribution remains highly unequal. Trade
with the US and Canada has nearly tripled since the implementation
of NAFTA in 1994. Mexico has 12 free trade agreements with over 40
countries including, Guatemala, Honduras, El Salvador, the European
Free Trade Area, and Japan, putting more than 90% of trade under
free trade agreements. In 2007, during its first year in office, the
Felipe CALDERON administration was able to garner support from the
opposition to successfully pass a pension and a fiscal reform. The
administration continues to face many economic challenges including
the need to upgrade infrastructure, modernize labor laws, and allow
private investment in the energy sector. CALDERON has stated that
his top economic priorities remain reducing poverty and creating
jobs.

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

Moldova
Moldova remains one of the poorest countries in Europe
despite recent progress from its small economic base. It enjoys a
favorable climate and good farmland but has no major mineral
deposits. As a result, the economy depends heavily on agriculture,
featuring fruits, vegetables, wine, and tobacco. Moldova must import
almost all of its energy supplies. Moldova's dependence on Russian
energy was underscored at the end of 2005, when a Russian-owned
electrical station in Moldova's separatist Transnistria region cut
off power to Moldova and Russia's Gazprom cut off natural gas in
disputes over pricing, and again in January 2009, during a similar
dispute. Russia's decision to ban Moldovan wine and agricultural
products, coupled with its decision to double the price Moldova paid
for Russian natural gas, slowed GDP growth in 2006-07. However, in
2008 growth exceeded the 6% level Moldova had achieved in 2000-05,
boosted by Russia's partial removal of the bans, solid fixed capital
investment, and strong domestic demand driven by remittances from
abroad. Economic reforms have been slow because of corruption and
strong political forces backing government controls. Nevertheless,
the government's primary goal of EU integration has resulted in some
market-oriented progress. The granting of EU trade preferences and
increased exports to Russia will encourage higher growth rates, but
the agreements are unlikely to serve as a panacea, given the extent
to which export success depends on higher quality standards and
other factors. The economy remains vulnerable to higher fuel prices,
poor agricultural weather, and the skepticism of foreign investors.
Also, the presence of an illegal separatist regime in Moldova's
Transnistria region continues to be a drag on the Moldovan economy.
The deteriorating global economic crisis did not seriously effect
the Moldovan economy in 2008 due to its low exposure to the
international financial system, but a global economic slowdown,
particularly in the EU and Russia, could hurt the economy in 2009 as
Moldova relies heavily on remittances from Moldovans abroad.

Monaco
Monaco, bordering France on the Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. The principality also is a major banking center and has
successfully sought to diversify into services and small,
high-value-added, nonpolluting industries. The state has no income
tax and low business taxes and thrives as a tax haven both for
individuals who have established residence and for foreign companies
that have set up businesses and offices. 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.

Mongolia
Economic activity in Mongolia has traditionally been based
on herding and agriculture. Mongolia has extensive mineral deposits.
Copper, coal, gold, molybdenum, fluorspar, uranium, tin, and
tungsten account for a large part of industrial production and
foreign direct investment. Soviet assistance, at its height
one-third of GDP, disappeared almost overnight in 1990 and 1991 at
the time of the dismantlement of the USSR. The following decade saw
Mongolia endure both deep recession because of political inaction
and natural disasters, as well as economic growth because of
reform-embracing, free-market economics and extensive privatization
of the formerly state-run economy. Severe winters and summer
droughts in 2000-02 resulted in massive livestock die-off and zero
or negative GDP growth. This was compounded by falling prices for
Mongolia's primary sector exports and widespread opposition to
privatization. Growth averaged nearly 9% per year in 2004-08 largely
because of high copper prices and new gold production. Until late
2008 Mongolia experienced a soaring inflation rate with year-to-year
inflation reaching nearly 40% - the highest inflation rate in over a
decade. In late 2008 falling commodity prices in this import-reliant
country helped lower inflation but by that time, the country had
begun to feel the effects of the global financial crisis. Falling
prices for copper and other mineral exports have reduced government
revenues and are forcing cuts in spending. The global credit crisis
has stalled growth in key sectors, especially those that had been
fueled by foreign investment. Mongolia's economy continues to be
heavily influenced by its neighbors. Mongolia purchases 95% of its
petroleum products and a substantial amount of electric power from
Russia, leaving it vulnerable to price increases. Trade with China
represents more than half of Mongolia's total external trade - China
receives about 70% of Mongolia's exports. Remittances from
Mongolians working abroad both legally and illegally are sizable but
have fallen due to the economic crisis; money laundering is a
growing concern. Mongolia settled its $11 billion debt with Russia
at the end of 2003 on favorable terms. Mongolia, which joined the
World Trade Organization in 1997, seeks to expand its participation
and integration into Asian regional economic and trade regimes.

Montenegro
Montenegro severed its economy from federal control and
from Serbia during the MILOSEVIC era and maintained its own central
bank, adopted the Deutchmark, then the euro - rather than the
Yugoslav dinar - as official currency, collected customs tariffs,
and managed its own budget. The dissolution of the loose political
union between Serbia and Montenegro in 2006 led to separate
membership in several international financial institutions, such as
the European Bank for Reconstruction and Development. On 18 January
2007, Montenegro joined the World Bank and IMF. Montenegro is
pursuing its own membership in the World Trade Organization and
signed a Stabilization and Association agreement with the European
Union in October 2007. On December 15, 2008, Montenegro submitted an
EU membership application. Unemployment and regional disparities in
development are key political and economic problems. Montenegro has
privatized its large aluminum complex - the dominant industry - as
well as most of its financial sector, and has begun to attract
foreign direct investment in the tourism sector. The global
financial crisis is likely to have a significant negative impact on
the economy.

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 volcanic activity 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
Moroccan economic policies brought macroeconomic stability
to the country in the early 1990s but have not spurred growth
sufficient to reduce unemployment - nearing 20% in urban areas -
despite the Moroccan Government's ongoing efforts to diversify the
economy. Morocco's GDP growth rose to 5.9% in 2008, with the economy
recovering from a drought in 2007 that severely reduced agricultural
output and necessitated wheat imports at rising world prices.
Moroccan authorities understand that reducing poverty and providing
jobs are key to domestic security and development. In 2005, Morocco
launched the National Initiative for Human Development (INDH), a $2
billion social development plan to address poverty and unemployment
and to improve the living conditions of the country's urban slums.
Moroccan authorities are implementing reform efforts to open the
economy to international investors. 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. In 2000, Morocco entered an Association Agreement with
the EU and, in 2006, entered a Free Trade Agreement (FTA) with the
US. Long-term challenges include improving education and job
prospects for Morocco's youth, and closing the income gap between
the rich and the poor, which the government hopes to achieve by
increasing tourist arrivals and boosting competitiveness in textiles.

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,
and although it returned to double digits in 2000-06, in 2007
inflation had slowed to 8%, while GDP growth reached 7.5%. 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 work force. 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. At the end of 2007, and after years of negotiations, the
government took over Portugal's majority share of the Cahora Bassa
Hydroelectricity (HCB) company, a dam that was not transferred to
Mozambique at independence because of the ensuing civil war and
unpaid debts. More power is needed for additional investment
projects in titanium extraction and processing and garment
manufacturing that could 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. In July 2007 the Millennium Challenge Corporation
(MCC) signed a Compact with Mozambique; the Compact entered into
force in September 2008 and will continue for five years. Compact
projects will focus on improving sanitation, roads, agriculture, and
the business regulation environment in an effort to spur economic
growth in the four northern provinces of the country.

Namibia
The economy is heavily dependent on the extraction and
processing of minerals for export. Mining accounts for 8% of GDP,
but provides more than 50% of foreign exchange earnings. 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 one of the world's most unequal income distributions.
The Namibian economy is closely linked to South Africa with the
Namibian dollar pegged one-to-one to the South African rand.
Increased payments from the Southern African Customs Union (SACU)
put Namibia's budget into surplus in 2007 for the first time since
independence, but SACU payments will decline after 2008 as part of a
new revenue sharing formula. Increased fish production and mining of
zinc, copper, uranium, and silver spurred growth in 2003-07, but
growth in recent years was undercut by poor fish catches and high
costs for metal inputs.

Nauru
Revenues of this tiny island have traditionally come from
exports of phosphates now significantly depleted. An Australian
company in 2005 entered into an agreement intended to exploit
remaining supplies. 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. Reserves of phosphates may only last until 2010 at current
mining rates. In anticipation of the exhaustion of Nauru's phosphate
deposits, substantial amounts of phosphate income were 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 frozen wages and reduced overstaffed public service departments.
Nauru lost further revenue in 2008 with the closure of Australia's
refugee processing center, making it almost totally dependent on
food imports and foreign aid. Housing, hospitals, and other capital
plant is deteriorating. The cost to Australia of keeping the
government and economy afloat continues to climb. Few comprehensive
statistics on the Nauru economy exist with estimates of Nauru's GDP
varying widely.

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

Nepal
Nepal is among the poorest and least developed countries in
the world with almost one-third of its population living below the
poverty line. Agriculture is the mainstay of the economy, providing
a livelihood for three-fourths of the population and accounting for
about one-third of GDP. Industrial activity mainly involves the
processing of agricultural products, including pulses, jute,
sugarcane, tobacco, and grain. Bumper crops, better security,
improved transportation, and increased tourism pushed growth past 5%
in 2008, after growth had hovered around 3% - barely above the rate
of population growth - for the previous three years. The
deteriorating world economy in 2009 will challenge tourism and
remittance growth, 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 and landlocked geographic location, its
civil strife and labor unrest, and its susceptibility to natural
disaster.

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 3% 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 has been one of the leading European nations for attracting
foreign direct investment and is one of the four largest investors
in the US. The pace of job growth reached 10-year highs in 2007, but
economic growth fell sharply in 2008 as fallout from the world
financial crisis constricted demand and raised the specter of a
recession in 2009.

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 eight years, the islands enjoy a high
per capita income and a well-developed infrastructure compared with
other countries in the region. Most of the oil Netherlands Antilles
imports for its refineries come from Venezuela. Almost all consumer
and capital goods are imported, the US, Italy, 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. The Netherlands
provides financial aid to support the economy.

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 15% 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 some at the bottom of the ladder - and
broadened and deepened the technological capabilities of the
industrial sector. Per capita income has risen for nine consecutive
years and reached $27,900 in 2008 in purchasing power parity terms.
Debt-driven consumer spending drove robust growth in the first half
of the decade, helping fuel a large balance of payments deficit that
posed a challenge for economic managers. Inflationary pressures
caused the central bank to raise its key rate steadily from January
2004 until it was among the highest in the OECD in 2007-08;
international capital inflows attracted to the high rates further
strengthened the currency and housing market, however, aggravating
the current account deficit. The economy fell into recession in
2008. In line with global peers, the central bank has cut interest
rates aggressively; the new government is responding with plans to
raise productivity growth and develop infrastructure.

Nicaragua
Nicaragua has widespread underemployment and the second
lowest per capita income in the Western Hemisphere. The US-Central
America Free Trade Agreement (CAFTA) has been in effect since April
2006 and has expanded export opportunities for many agricultural and
manufactured goods. Textiles and apparel account for nearly 60% of
Nicaragua's exports, but recent increases in the minimum wage will
likely erode its comparative advantage in this industry. Nicaragua
relies on international economic assistance to meet internal- and
external-debt financing obligations. In early 2004, Nicaragua
secured some $4.5 billion in foreign debt reduction under the
Heavily Indebted Poor Countries (HIPC) initiative, and in October
2007, the IMF approved a new poverty reduction and growth facility
(PRGF) program. However, severe budget shortfalls resulting from the
suspension of large amounts of direct budget support from foreign
donors concerned with recent political developments has caused a
slowdown in PRGF disbursements. Similarly, private sector concerns
surrounding ORTEGA's handling of economic issues have dampened
investment. Economic growth has slowed in 2009, due to decreased
export demand from the US and Central American markets, lower
commodity prices for key agricultural exports, and low remittance
growth - remittances are equivalent to almost 15% of GDP.

Niger
Niger is one of the poorest countries in the world, ranking
near last on the United Nations Development Fund index of human
development. It is a landlocked, Sub-Saharan nation, whose economy
centers on subsistence crops, livestock, and some of the world's
largest uranium deposits. Drought cycles, desertification, and
strong population growth have undercut the economy. Niger shares a
common currency, the CFA franc, and a common central bank, the
Central Bank of West African States (BCEAO), with seven other
members of the West African Monetary Union. In December 2000, Niger
qualified for enhanced debt relief under the International Monetary
Fund program for Highly Indebted Poor Countries (HIPC) and concluded
an agreement with the Fund on a Poverty Reduction and Growth
Facility (PRGF). Debt relief provided under the enhanced HIPC
initiative significantly reduces Niger's annual debt service
obligations, freeing funds for expenditures on basic health care,
primary education, HIV/AIDS prevention, rural infrastructure, and
other programs geared at poverty reduction. In December 2005, Niger
received 100% multilateral debt relief from the IMF, which
translates into the forgiveness of approximately US $86 million in
debts to the IMF, excluding the remaining assistance under HIPC.
Nearly half of the government's budget is derived from foreign donor
resources. Future growth may be sustained by exploitation of oil,
gold, coal, and other mineral resources. Uranium prices have
increased sharply in the last few years. A drought and locust
infestation in 2005 led to food shortages for as many as 2.5 million
Nigeriens.

Nigeria
Oil-rich Nigeria, long hobbled by political instability,
corruption, inadequate infrastructure, and poor macroeconomic
management, has undertaken several reforms over the past decade.
Nigeria's former military rulers failed to diversify the economy
away from its overdependence on the capital-intensive oil sector,
which provides 95% of foreign exchange earnings and about 80% of
budgetary revenues. 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. Since 2008 the government has begun showing 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. In 2003,
the government began deregulating fuel prices, announced the
privatization of the country's four oil refineries, and instituted
the National Economic Empowerment Development Strategy, a
domestically designed and run program modeled on the IMF's Poverty
Reduction and Growth Facility for fiscal and monetary management. In
November 2005, Abuja won Paris Club approval for a debt-relief deal
that eliminated $18 billion of debt in exchange for $12 billion in
payments - a total package worth $30 billion of Nigeria's total $37
billion external debt. The deal requires Nigeria to be subject to
stringent IMF reviews. Based largely on increased oil exports and
high global crude prices, GDP rose strongly in 2007 and 2008.
President YAR'ADUA has pledged to continue the economic reforms of
his predecessor with emphasis on infrastructure improvements.
Infrastructure is the main impediment to growth. The government is
working toward developing stronger public-private partnerships for
electricity and roads.

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
emigration to New Zealand. Efforts to increase GDP include the
promotion of tourism and a financial services industry, although the
International Banking Repeal Act of 2002 resulted in the termination
of all offshore banking licenses. Economic aid from New Zealand in
2002 was US$2.6 million. Niue suffered a devastating typhoon in
January 2004, which decimated nascent economic programs. While in
the process of rebuilding, Niue has been dependent on foreign aid.

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 the 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
the petroleum sector, which accounts for nearly half of exports and
over 30% of state revenue. Norway is the world's third-largest gas
exporter; its position as an oil exporter has slipped to
seventh-largest as production has begun to decline. Norway opted to
stay out of the EU during a referendum in November 1994;
nonetheless, as a member of the European Economic Area, it
contributes sizably to the EU budget. In anticipation of eventual
declines in oil and gas production, Norway saves almost all state
revenue from the petroleum sector in a sovereign wealth fund. After
lackluster growth of less than 1.5% in 2002-03, GDP growth picked up
to 2.5-6.2% in 2004-07, partly due to higher oil prices. Growth fell
to 2.6% in 2008 as a result of the slowing world economy and the
drop in oil prices.

Oman
Oman is a middle-income economy that is heavily dependent on
dwindling oil resources, but sustained high oil prices in recent
years have helped build Oman's budget and trade surpluses and
foreign reserves. As a result of its dwindling oil resources, Oman
is actively pursuing a development plan that focuses on
diversification, industrialization, and privatization, with the
objective of reducing the oil sector's contribution to GDP to 9% by
2020. Some of these projects may be in jeopardy, however, because
Muscat overestimated its ability to produce or secure the natural
gas needed to power them. Oman actively seeks private foreign
investors, especially in the industrial, information technology,
tourism, and higher education fields. Industrial development plans
focus on gas resources, metal manufacturing, petrochemicals, and
international transshipment ports. The drop in oil prices and the
global financial crisis in 2008 will affect Oman's fiscal position
and it may post a deficit in 2009 if oil prices stay low. In
addition, the global credit crisis is slowing the pace of investment
and development projects - a trend that probably will continue into
2009.