Chapter M: Major infectious diseases (135)

Mongolia
Economic activity in Mongolia has traditionally been based
on herding and agriculture - Mongolia's extensive mineral deposits,
however, have attracted foreign investors. The country holds copper,
gold, coal, molybdenum, fluorspar, uranium, tin, and tungsten
deposits, which account for a large part of foreign direct
investment and government revenues. 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. In 2008
Mongolia experienced a soaring inflation rate with year-to-year
inflation reaching nearly 30% - the highest inflation rate in over a
decade. By late 2008, as the country began to feel the effects of
the global financial crisis, falling commodity prices helped lower
inflation, but also reduced government revenues and forced cuts in
spending. In early 2009, the International Monetary Fund reached a
$236 million Stand-by Arrangement with Mongolia, and the country has
started to move out of the crisis. Although the banking sector
remains unstable, the government is now enforcing stricter
supervision regulations. In October 2009, the government passed
long-awaited legislation on an investment agreement to develop
Mongolia's Oyu Tolgoi mine, considered to be one of the world's
largest untapped copper deposits. The economy grew an estimated 7%
in 2010, largely on the strength of exports to nearby countries, and
international reserves reached $1.6 billion in September, an all
time high for Mongolia. 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 two-thirds of Mongolia's exports. Remittances from
Mongolians working abroad are sizable, but have fallen due to the
economic crisis; money laundering is a growing concern. Mongolia
joined the World Trade Organization in 1997 and seeks to expand its
participation in 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. In 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. The European Council granted candidate
country status to Montenegro at the December 2010 session.
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 has had a
significant negative impact on the economy, due to the ongoing
credit crunch, a decline in the real estate sector, and a fall in
aluminum exports.

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
Morocco's market economy benefits from the country's
relatively low labor costs and proximity to Europe, which aid key
areas of the economy such as agriculture, light manufacturing,
tourism, and remittances. Morocco is also the world's largest
exporter of phosphate, which has long provided a source of export
earnings and economic stability. Economic policies pursued since
2003 by King MOHAMMED VI have brought macroeconomic stability to the
country with generally low inflation, improved financial
performance, and steady progress in developing the service and
industrial sectors. In 2006, Morocco entered a Free Trade Agreement
(FTA) with the US, and in 2008 entered into an advanced status in
its 2000 Association Agreement with the EU. However, poverty,
illiteracy, and unemployment rates remain high. In response to these
challenges, King MOHAMMED in 2005 launched a National Initiative for
Human Development, a $2 billion program aimed at alleviating poverty
and underdevelopment by expanding electricity to rural areas and
replacing urban slums with public and subsidized housing, among
other policies. Morocco's trade and budget deficits widened in 2010,
and reducing govenment spending and adapting to sluggish economic
growth in Europe will be challenges in 2011. Morocco's long-term
challenges include improving education and job prospects for young
Moroccans, closing the disparity in wealth between the rich and the
poor, confronting corruption, and expanding and diversifying exports
beyond phosphates and low-value-added products.

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. 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 more than
half 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 and smallholder
agricultural productivity and productivity growth is weak. 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.
Mozambique grew at an average annual rate of 9% in the decade up to
2007, one of Africa's strongest performances. However, heavy
reliance on aluminum, which accounts for about one-third of exports,
subjects the economy to volatile international prices. The sharp
decline in aluminum prices during the global economic crisis lowered
GDP growth by several percentage points. Despite 8.3% GDP growth in
2010, the increasing cost of living prompted citizens to riot in
September 2010, after bread price increases were announced. In an
attempt to contain the cost of living, the government implemented
subsidies, decreased taxes and tariffs, and instituted other fiscal
measures.

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 35-40% 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, as shown by Namibia's GINI coefficient. The Namibian
economy is closely linked to South Africa with the Namibian dollar
pegged one-to-one to the South African rand. Until 2010, Namibia
drew 40% of its budget revenues from the Southern African Customs
Union (SACU). Increased payments from SACU put Namibia's budget into
surplus in 2007 for the first time since independence. SACU
allotments to Namibia increased in 2009, but will drop for 2010 and
2011 because South Africa went into recession during the global
economic crisis, reducing overall SACU income. Increased fish
production and mining of zinc, copper, uranium, and silver spurred
growth in 2003-08, but growth in recent years was undercut by poor
fish catches, higher costs of producing metals, and the global
recession.

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-quarter 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. Nepal has considerable scope
for exploiting its potential in hydropower, with an estimated 42,000
MW of feasible capacity, but political instability hampers foreign
investment. Additional challenges to Nepal's growth include its
landlocked geographic location, civil strife and labor unrest, and
its susceptibility to natural disaster.

Netherlands
The Netherlands 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 only 2% 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. After 26 years of uninterrupted economic growth, the
Netherlands' economy - which is highly open and dependent on foreign
trade and financial services - was hard-hit by global economic
crisis. Dutch GDP contracted 3.9% in 2009, while exports declined
nearly 25% due to a sharp contraction in world demand. The Dutch
financial sector has also suffered, due in part to the high exposure
of some Dutch banks to U.S. mortgage-backed securities. In response
to turmoil in financial markets, the government nationalized two
banks and injected billions of dollars into a third, to prevent
further systemic risk. The government also sought to boost the
domestic economy by accelerating infrastructure programs, offering
corporate tax breaks for employers to retain workers, and expanding
export credit facilities. The stimulus programs and bank bailouts,
however, resulted in a government budget deficit of nearly 4.6% of
GDP in 2009 and 5.6% in 2010 that contrasts sharply with a surplus
of 0.7% of GDP in 2008. With unemployment weighing on private-sector
consumption, the government of Prime Minister Mark RUTTE is likely
to come under increased pressure to keep the budget deficit in check
while promoting economic recovery.

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 rose for ten consecutive years
until 2007 in purchasing power parity terms, but fell in 2008-09.
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 before
the start of the global financial crisis and contracted for five
consecutive quarters in 2008-09. In line with global peers, the
central bank cut interest rates aggressively and the government
developed fiscal stimulus measures. The economy posted a 1.7%
decline in 2009, but pulled out of recession late in the year, and
achieved 2.1% growth in 2010. Nevertheless, key trade sectors remain
vulnerable to weak external demand. The government plans to raise
productivity growth and develop infrastructure, while reining in
government spending.

Nicaragua
Nicaragua, the poorest country in Central America and the
second poorest in the Hemisphere, has widespread underemployment and
poverty. 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
increases in the minimum wage during the ORTEGA administration will
likely erode its comparative advantage in this industry. ORTEGA's
promotion of mixed business initiatives, owned by the Nicaraguan and
Venezuelan state oil firms, together with the weak rule of law,
could undermine the investment climate for domestic and
international private firms in the near-term. Nicaragua relies on
international economic assistance to meet internal- and
external-debt financing obligations. Foreign donors have curtailed
this funding, however, in response to November 2008 electoral fraud.
Managua has an IMF extended Credit Facility program, which could
help keep the government's fiscial deficit on target during the 2011
election year and encourage transparency in the use of Venezuelan
off-budget loans and assistance. In early 2004, Nicaragua secured
some $4.5 billion in foreign debt reduction under the Heavily
Indebted Poor Countries (HIPC) initiative, however, Managua still
struggles with a high public debt burden. Nicaragua is gradually
recovering from the global economic crisis as increased exports
drove positive growth in 2010. The economy is expected to grow at a
rate of about 3% in 2011.

Niger
Niger is a landlocked, Sub-Saharan nation, whose economy
centers on subsistence crops, livestock, and some of the world's
largest uranium deposits. Drought, 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. In
2010, the Niger economy was recovering from the effects of a 2009
drought that reduced grain and cowpea production and decimated
livestock herds. The economy was also hurt when the international
community cut off non-humanitarian aid in response to TANDJA's moves
to extend his term as president. 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.

Nigeria
Oil-rich Nigeria has been hobbled by political instability,
corruption, inadequate infrastructure, and poor macroeconomic
management but in 2008 began pursuing economic reforms. 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. 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. Since 2008 the government
has begun to show the political will to implement the
market-oriented reforms urged by the IMF, such as modernizing the
banking system, curbing inflation by blocking excessive wage
demands, and resolving regional disputes over the distribution of
earnings from the oil industry. GDP rose strongly in 2007-10 because
of increased oil exports and high global crude prices in 2010.
President JONATHAN has pledged to continue the economic reforms of
his predecessor with emphasis on infrastructure improvements.
Infrastructure is the main impediment to growth and in August 2010
JONATHAN unveiled a power sector blueprint that includes
privatization of the state-run electricity generation and
distribution facilities. The government also is working toward
developing stronger public-private partnerships for roads. Nigeria's
financial sector was hurt by the global financial and economic
crises and the Central Bank governor has taken measures to
strengthen that sector.

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 financial services, although the
International Banking Repeal Act of 2002 resulted in the termination
of all offshore banking licenses. Economic aid from New Zealand in
FY08/09 was US$5.7 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-majority-owned
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
second-largest gas exporter; its position as an oil exporter has
slipped to ninth-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 the world's second largest
sovereign wealth fund, valued at over $500 billion in 2010. 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 1.8% in 2008, and the economy contracted by 1.4% in 2009 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. Because of declining reserves, Muscat has
actively pursued 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. Tourism and
gas-based industries are key components of the government's
diversification strategy. By using enhanced oil recovery techniques,
Oman succeeded in increasing oil production, giving the country more
time to diversify, and the increase in global oil prices thoughout
2010 provides the government greater financial resources to invest
in non-oil sectors.

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 and low levels
of foreign investment. Between 2001-07, however, poverty levels
decreased by 10%, as Islamabad steadily raised development spending.
Between 2004-07, GDP growth in the 5-8% range was spurred by gains
in the industrial and service sectors - despite severe electricity
shortfalls - but growth slowed in 2008-09 and unemployment rose.
Inflation remains the top concern among the public, climbing from
7.7% in 2007 to more than 13% in 2010. In addition, the Pakistani
rupee has depreciated since 2007 as a result of political and
economic instability. The government agreed to an International
Monetary Fund Standby Arrangement in November 2008 in response to a
balance of payments crisis, but during 2009-10 its current account
strengthened and foreign exchange reserves stabilized - largely
because of lower oil prices and record remittances from workers
abroad. Record floods in July-August 2010 lowered agricultural
output and contributed to a jump in inflation, and reconstruction
costs will strain the limited resources of the government. Textiles
account for most of Pakistan's export earnings, but Pakistan's
failure to expand a viable export base for other manufactures has
left the country vulnerable to shifts in world demand. Other long
term challenges include expanding investment in education,
healthcare, and electricity production, and reducing dependence on
foreign donors.

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.
The Compact of Free Association with the US, entered into after the
end of the UN trusteeship on 1 October 1994, provided Palau with up
to $700 million in US aid for the following 15 years in return for
furnishing military facilities. Business and tourist arrivals
numbered 85,000 in 2007. The population enjoys a per capita income
roughly 50% higher than 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.

Panama
Panama's dollarized economy rests primarily on a
well-developed services sector that accounts for three-quarters of
GDP. Services include operating the Panama Canal, banking, the Colon
Free Zone, insurance, container ports, flagship registry, and
tourism. Economic growth will be bolstered by the Panama Canal
expansion project that began in 2007 and is scheduled to be
completed by 2014 at a cost of $5.3 billion - about 25% of current
GDP. The expansion project will more than double the Canal's
capacity, enabling it to accommodate ships that are now too large to
transverse the transoceanic crossway, and should help to reduce the
unemployment rate. The United States and China are the top users of
the Canal. Panama also plans to construct a metro system in Panama
City, valued at $1.2 billion and scheduled to be completed by 2014.
Panama's aggressive infrastructure development projects will likely
lead the economy to continued growth in 2011. Strong economic
performance has not translated into broadly shared prosperity as
Panama has the second worst income distribution in Latin America.
About 30% of the population lives in poverty, however, during
TORRIJOS's term poverty was reduced from 40% to 30% and unemployment
dropped from 12% to 6%. Not a CAFTA signatory, Panama in December
2006 independently negotiated a free trade agreement with the US,
which, when implemented, will help promote the country's economic
growth. Seeking removal from the Organization of Economic
Development's gray-list of tax havens, Panama has also recently
signed various double taxation treaties with other nations.

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 copper, gold, and oil, account for nearly two-thirds of
export earnings. Natural gas reserves amount to an estimated 227
billion cubic meters. A consortium led by a major American oil
company is constructing a liquefied natural gas (LNG) production
facility that could begin exporting in 2013 or 2014. As the largest
investment project in the country's history, it has the potential to
double GDP in the near-term and triple Papua New Guinea's export
revenue. The government faces the challenge of ensuring transparency
and accountability for revenues flowing from this and other large
LNG projects. The government of Prime Minister SOMARE has expended
much of its energy remaining in power. He was the first prime
minister ever to serve a full five-year term. The government has
brought stability to the national budget, largely through
expenditure control; however, it relaxed spending constraints in
2006 and 2007 as elections approached. Numerous challenges still
face the government, including providing physical security for
foreign investors, regaining investor confidence, restoring
integrity to state institutions, promoting economic efficiency by
privatizing moribund state institutions, and balancing relations
with Australia, its former colonial ruler. Other socio-cultural
challenges could upend the economy including an HIV/AIDS epidemic,
with the highest infection rate in all of East Asia and the Pacific,
and chronic law and order and land tenure issues. The global
financial crisis had little impact because of continued high demand
for Papua New Guinea's commodities exports.

Paracel Islands
The islands have the potential for oil and gas
development. Waters around the islands support commercial fishing,
but the islands themselves are not populated on a permanent basis.

Paraguay
Landlocked Paraguay has a market economy distinguished by a
large informal sector, featuring re-export of imported consumer
goods to neighboring countries, as well as the activities of
thousands of microenterprises and urban street vendors. A large
percentage of the population, especially in rural areas, derives its
living from agricultural activity, often on a subsistence basis.
Because of the importance of the informal sector, accurate economic
measures are difficult to obtain. On a per capita basis, real income
has stagnated at 1980 levels. The economy grew rapidly between 2003
and 2008 as growing world demand for commodities combined with high
prices and favorable weather to support Paraguay's commodity-based
export expansion. Paraguay is the sixth largest soy producer in the
world. Drought hit in 2008, reducing agricultural exports and
slowing the economy even before the onset of the global recession.
The economy fell 3.8% in 2009, as lower world demand and commodity
prices caused exports to contract. The government reacted by
introducing fiscal and monetary stimulus packages. Growth resumed at
a 6.5% level in 2010. Political uncertainty, corruption, limited
progress on structural reform, and deficient infrastructure are the
main obstacles to growth.

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. The Peruvian economy grew by more than 4% per year
during the period 2002-06, with a stable exchange rate and low
inflation. Growth jumped to 9% per year in 2007 and 2008, driven by
higher world prices for minerals and metals and the government's
aggressive trade liberalization strategies, but then fell to less
than 1% in 2009 in the face of the world recession and lower
commodity export prices. Growth resumed in 2010 at nearly 8%, due
partly to increased exports. Peru's rapid expansion has helped to
reduce the national poverty rate by about 15% since 2002, though
underemployment remains high; inflation has trended downward in
2009, to below the Central Bank's 1-3% target. Despite Peru's strong
macroeconomic performance, overdependence on minerals and metals
subjects the economy to fluctuations in world prices, and poor
infrastructure precludes the spread of growth to Peru's non-coastal
areas. Not all Peruvians therefore have shared in the benefits of
growth and despite President GARCIA's pursuit of sound trade and
macroeconomic policies, persistent inequality has cost him political
support. Nevertheless, he remains committed to Peru's free-trade
path. Since 2006, Peru has signed trade deals with the United
States, Canada, Singapore, and China, concluded negotiations with
the European Union, and begun trade talks with Korea, Japan, and
others. The US-Peru Trade Promotion Agreement (PTPA) entered into
force 1 February 2009, opening the way to greater trade and
investment between the two economies.

Philippines
Philippine GDP grew nearly 7% in 2010. The economy
weathered the 2008-09 global recession better than its regional
peers due to minimal exposure to securities issued by troubled
global financial institutions; lower dependence on exports;
relatively resilient domestic consumption, supported by large
remittances from four-to five-million overseas Filipino workers; and
a growing business process outsourcing industry. Economic growth in
the Philippines has averaged 4.5% per year since 2001, when former
President MACAPAGAL-ARROYO took office. Despite this growth, poverty
worsened during the term of MACAPAGAL-ARROYO, because of a high
population growth rate and inequitable distribution of income.
MACAPAGAL-ARROYO averted a fiscal crisis by pushing for new revenue
measures and, until recently, tightening expenditures to address the
government's yawning budget deficit and to reduce high debt and debt
service ratios. But the government abandoned its 2008
balanced-budget goal in order to help the economy weather the global
financial and economic storm. The economy under AQUINO faces budget
shortfalls in the near term, but has had little difficulty issuing
debt both locally and internationally to finance the deficits.
AQUINO's first budget emphasizes education and other social spending
programs, relying on the private sector to finance important
infrastructure projects. Weak tax collection in recent years limits
the government's ability to address major challenges.

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. In October
2004, more than one-quarter of Pitcairn's small labor force was
arrested, putting the economy in a bind, since their services were
required as lighter crew to load or unload passing ships.

Poland
Poland has pursued a policy of economic liberalization since
1990 and today stands out as a success story among transition
economies. Before 2009, GDP had grown about 5% annually, based on
rising private consumption, a jump in corporate investment, and EU
funds inflows. GDP per capita is still much below the EU average,
but is similar to that of the three Baltic states. Since 2004, EU
membership and access to EU structural funds have provided a major
boost to the economy. Unemployment fell rapidly to 6.4% in October
2008, but climbed back to 11.8% for the year 2010, exceeding the EU
average by more than 2%. In 2008 inflation reached 4.2%, more than
the upper limit of the National Bank of Poland's target range, but
fell to 2.4% in 2010 due to global economic slowdown. Poland's
economic performance could improve over the longer term if the
country addresses some of the remaining deficiencies in its road and
rail infrastructure and its business environment. An inefficient
commercial court system, a rigid labor code, bureaucratic red tape,
burdensome tax system, and persistent low-level corruption keep the
private sector from performing up to its full potential. Rising
demands to fund health care, education, and the state pension system
caused the public sector budget deficit to rise to 7.9% of GDP in
2010. The PO/PSL coalition government, which came to power in
November 2007, plans to reduce the budget deficit in 2011 and has
also announced its intention to enact business-friendly reforms,
increase workforce participation, reduce public sector spending
growth, lower taxes, and accelerate privatization. The government,
however, has moved slowly on major reforms. The legislature passed a
law significantly limiting early retirement benefits. A health-care
bill also passed through the legislature, but the legislature failed
to overturn a presidential veto.

Portugal
Portugal has become a diversified and increasingly
service-based economy since joining the European Community in 1986.
Over the past two decades, 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 European Monetary Union (EMU) in 1998 and
began circulating the euro on 1 January 2002 along with 11 other EU
member economies. Economic growth had been above the EU average for
much of the 1990s, but fell back in 2001-08, shrank 2.6% in 2009,
before growing 1% in 2010. GDP per capita stands at roughly
two-thirds of the EU-27 average. A poor educational system and a
rigid labor market have been obstacles to greater productivity and
growth. Portugal also has been increasingly overshadowed by
lower-cost producers in Central Europe and Asia as a target for
foreign direct investment. Portugal's competitiveness problems, low
growth prospects, and high levels of public debt have made it
vulnerable to bond market turbulence. Lisbon is implementing
austerity measures to reduce the budget deficit from 9.4% of GDP in
2009 to 4.6% of GDP in 2011, but some investors have expressed
concern about Portugal's ability to achieve these targets and cover
its sovereign debt. Without the option for stimulus measures, the
government is focusing instead on boosting exports and implementing
labor market reforms to try to raise GDP growth and tackle
Portugal's competitiveness problems, which may help mitigate
investor concerns over time.

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 more than 3.6
million tourists in 2008.

Qatar
Despite the global financial crisis, Qatar has prospered in
the last several years - in 2010 Qatar had the world's highest
growth rate. Qatari authorities throughout the crisis sought to
protect the local banking sector with direct investments into
domestic banks. GDP rebounded in 2010 largely due to the increase in
oil prices. Economic policy is focused on developing Qatar's
nonassociated natural gas reserves and increasing private and
foreign investment in non-energy sectors, but oil and gas still
account for more than 50% of GDP, roughly 85% of export earnings,
and 70% of government revenues. Oil and gas have made Qatar the
second highest per-capita income country - following Liechtenstein -
and likely the country with the lowest unemployment. Proved oil
reserves of 15 billion barrels should enable continued output at
current levels for 37 years. Qatar's proved reserves of natural gas
exceed 25 trillion cubic meters, about 14% of the world total and
third largest in the world. Qatar's successful 2022 world cup bid
will likely accelerate large-scale infrastructure projects such as
Qatar's metro system and the Qatar-Bahrain causeway.

Romania
Romania, which joined the European Union on 1 January 2007,
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. Domestic
consumption and investment have fueled strong GDP growth in recent
years, but have led to large current account imbalances. Romania's
macroeconomic gains have only recently started to spur creation of a
middle class and address Romania's widespread poverty. Corruption
and red tape continue to handicap its business environment.
Inflation rose in 2007-08, driven in part by strong consumer demand
and high wage growth, rising energy costs, a nation-wide drought
affecting food prices, and a relaxation of fiscal discipline.
Romania's GDP contracted markedly in the last quarter of 2008 as the
country began to feel the effects of a global downturn in financial
markets and trade, and GDP fell more than 7% in 2009, prompting
Bucharest to seek a $26 billion emergency assistance package from
the IMF, the EU, and other international lenders. Drastic austerity
measures, as part of Romania's IMF-led agreement led to a further
1.9% GDP contraction in 2010. The economy is expected to return to
positive growth in 2011.

Russia
Russia has undergone significant changes since the collapse
of the Soviet Union, moving from a globally-isolated,
centrally-planned economy to a more market-based and
globally-integrated economy. Economic reforms in the 1990s
privatized most industry, with notable exceptions in the energy and
defense-related sectors. The protection of property rights is still
weak and the private sector remains subject to heavy state
interference. Russian industry is primarily split between
globally-competitive commodity producers - in 2009 Russia was the
world's largest exporter of natural gas, the second largest exporter
of oil, and the third largest exporter of steel and primary aluminum
- and other less competitive heavy industries that remain dependent
on the Russian domestic market. This reliance on commodity exports
makes Russia vulnerable to boom and bust cycles that follow the
highly volatile swings in global commodity prices. The government
since 2007 has embarked on an ambitious program to reduce this
dependency and build up the country's high technology sectors, but
with few results so far. The economy had averaged 7% growth since
the 1998 Russian financial crisis, resulting in a doubling of real
disposable incomes and the emergence of a middle class. The Russian
economy, however, was one of the hardest hit by the 2008-09 global
economic crisis as oil prices plummeted and the foreign credits that
Russian banks and firms relied on dried up. The Central Bank of
Russia spent one-third of its $600 billion international reserves,
the world's third largest, in late 2008 to slow the devaluation of
the ruble. The government also devoted $200 billion in a rescue plan
to increase liquidity in the banking sector and aid Russian firms
unable to roll over large foreign debts coming due. The economic
decline bottomed out in mid-2009 and the economy began to grow in
the first quarter of 2010. However, a severe drought and fires in
central Russia reduced agricultural output, prompting a ban on grain
exports for part of the year, and slowed growth in other sectors
such as manufacturing and retail trade. Russia's long-term
challenges include a shrinking workforce, a high level of
corruption, difficulty in accessing capital for smaller, non-energy
companies, and poor infrastructure in need of large investments.

Rwanda
Rwanda is a poor rural country with about 90% of the
population engaged in (mainly subsistence) agriculture and some
mineral and agro-processing. In 2008, minerals overtook coffee and
tea as Rwanda's primary foreign exchange earner. The 1994 genocide
decimated Rwanda's fragile economic base, severely impoverished the
population, particularly women, and temporarily stalled 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. GDP has rebounded and
inflation has been curbed. Nonetheless, a majority still live below
the poverty line of 250 Rwandan francs per day (about US$0.43).
Despite Rwanda's fertile ecosystem, food production often does not
keep pace with demand, requiring food imports. Rwanda continues to
receive substantial aid money and obtained IMF-World Bank Heavily
Indebted Poor Country (HIPC) initiative debt relief in 2005-06.
Rwanda also received a Millennium Challenge Account Compact in 2008.
Africa's most densely populated country is trying to overcome the
limitations of its small, landlocked economy by leveraging regional
trade. Rwanda joined the East African Community and is aligning its
budget, trade, and immigration policies with its regional partners.
The government has embraced an expansionary fiscal policy to reduce
poverty by improving education, infrastructure, and foreign and
domestic investment and pursuing market-oriented reforms, although
energy shortages, instability in neighboring states, and lack of
adequate transportation linkages to other countries continue to
handicap growth. The global downturn hurt export demand and tourism,
but economic growth is recovering, driven in large part by the
services sector, and inflation has been contained. On the back of
this growth, government is gradually ending its fiscal stimulus
policy while protecting aid to the poor.

Saint Barthelemy
The economy of Saint Barthelemy is based upon
high-end tourism and duty-free luxury commerce, serving visitors
primarily from North America. The luxury hotels and villas host
70,000 visitors each year with another 130,000 arriving by boat. The
relative isolation and high cost of living inhibits mass tourism.
The construction and public sectors also enjoy significant
investment in support of tourism. With limited fresh water
resources, all food must be imported, as must all energy resources
and most manufactured goods. Employment is strong and attracts labor
from Brazil and Portugal.

Saint Helena, Ascension, and Tristan da Cunha
The economy depends
largely on financial assistance from the UK, which amounted to about
$27 million in FY06/07 or more than twice the level of annual
budgetary revenues. The local population earns income from fishing,
raising 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
The economy of Saint Kitts and Nevis is
heavily dependent upon tourism revenues, which has replaced sugar,
the traditional mainstay of the economy until the 1970s. Following
the 2005 harvest, the government closed the sugar industry after
decades of losses of 3-4% of GDP annually. To compensate for
employment losses, the government has embarked on a program to
diversify the agricultural sector and to stimulate other sectors of
the economy, such as tourism, export-oriented manufacturing, and
offshore banking. More than 200,000 tourists visited the islands in
2009. Like other tourist destinations in the Caribbean, St. Kitts
and Nevis is vulnerable to damage from natural disasters and shifts
in tourism demand. The current government is constrained by one of
the world's highest public debt burdens equivalent to roughly 185%
of GDP, largely attributable to public enterprise losses.

Saint Lucia
The island nation has been able to attract foreign
business and investment, especially in its offshore banking and
tourism industries, with a surge in foreign direct investment in
2006, attributed to the construction of several tourism projects.
Although crops such as bananas, mangos, and avocados continue to be
grown for export, tourism provides Saint Lucia's main source of
income and the industry is the island's biggest employer. Tourism is
the main source of foreign exchange, although tourism sector
revenues declined with the global economic downturn as US and
European travel dropped in 2009. The manufacturing sector is the
most diverse in the Eastern Caribbean area, and the government is
trying to revitalize the banana industry, although recent hurricanes
have caused exports to contract. Saint Lucia is vulnerable to a
variety of external shocks including volatile tourism receipts,
natural disasters, and dependence on foreign oil. The public
debt-to-GDP ratio is about 77% and high debt servicing obligations
constrain the KING administration's ability to respond to adverse
external shocks. Economic fundamentals remain solid, even though
unemployment needs to be reduced.

Saint Martin
The economy of Saint Martin centers around tourism with
85% of the labor force engaged in this sector. Over one million
visitors come to the island each year with most arriving through the
Princess Juliana International Airport in Sint Maarten. No
significant agriculture and limited local fishing means that almost
all food must be imported. Energy resources and manufactured goods
are also imported, primarily from Mexico and the United States.
Saint Martin is reported to have the highest per capita income in
the Caribbean.

Saint Pierre and Miquelon
The inhabitants have traditionally earned
their livelihood by fishing and by servicing fishing fleets
operating off the coast of Newfoundland. The economy has been
declining, however, because of disputes with Canada over fishing
quotas and a steady decline in the number of ships stopping at Saint
Pierre. In 1992, an arbitration panel awarded the islands an
exclusive economic zone of 12,348 sq km to settle a longstanding
territorial dispute with Canada, although it represents only 25% of
what France had sought. France heavily subsidizes the islands to the
great betterment of living standards. The government hopes an
expansion of tourism will boost economic prospects. Fish farming,
crab fishing, and agriculture are being developed to diversify the
local economy. Recent test drilling for oil may pave the way for
development of the energy sector.

Saint Vincent and the Grenadines
Success of the economy hinges upon
seasonal variations in agriculture, tourism, and construction
activity as well as remittance inflows. Much of the workforce is
employed in banana production and tourism, but persistent high
unemployment has prompted many to leave the islands. This
lower-middle-income country is vulnerable to natural disasters -
tropical storms wiped out substantial portions of crops in 1994,
1995, and 2002. In 2008, the islands had more than 200,000 tourist
arrivals, mostly to the Grenadines, a drop of nearly 20% from 2007.
Saint Vincent is home to a small offshore banking sector and has
moved to adopt international regulatory standards. The government's
ability to invest in social programs and respond to external shocks
is constrained by its high public debt burden, which was over 90% of
GDP at the end of 2010. Following the global downturn, St. Vincent
and the Grenadines saw an economic decline in 2009, after slowing
since 2006, when GDP growth reached a 10-year high of nearly 7%. The
GONSALVES administration is directing government resources to
infrastructure projects, including a new international airport that
is expected to be completed in 2011.

Samoa
The economy of Samoa has traditionally been dependent on
development aid, family remittances from overseas, agriculture, and
fishing. The country is vulnerable to devastating storms.
Agriculture employs two-thirds of the labor force and furnishes 90%
of exports, featuring coconut cream, coconut oil, and copra. The
manufacturing sector mainly processes agricultural products. One
factory in the Foreign Trade Zone employs 3,000 people to make
automobile electrical harnesses for an assembly plant in Australia.
Tourism is an expanding sector accounting for 25% of GDP; 122,000
tourists visited the islands in 2007. In late September 2009, an
earthquake and the resulting tsunami severely damaged Samoa, and
nearby American Samoa, disrupting transportation and power
generation, and resulting in about 200 deaths. The Samoan Government
has called for deregulation of the financial sector, encouragement
of investment, and continued fiscal discipline, while at the same
time protecting the environment. Observers point to the flexibility
of the labor market as a basic strength for future economic
advances. Foreign reserves are in a relatively healthy state, the
external debt is stable, and inflation is low.

San Marino
San Marino's economy relies heavily on its tourism and
banking industries, as well as on the manufacture and export of
ceramics, clothing, fabrics, furniture, paints, spirits, tiles, and
wine. The per capita level of output and standard of living are
comparable to those of the most prosperous regions of Italy, which
supplies much of its food. San Marino boasts the world's longest
life expectancy for men with 80 years. The economy benefits from
foreign investment due to its relatively low corporate taxes and low
taxes on interest earnings. San Marino has recently faced increased
international pressure to improve cooperation with foreign tax
authorities and transparency within its own banking sector, which
generates about one-fifth of the country's tax revenues. Italy's
implementation in October 2009 of a tax amnesty to repatriate
untaxed funds held abroad has resulted in financial outflows from
San Marino to Italy worth more than $4.5 billion. Such outflows,
combined with a money-laundering scandal at San Marino's largest
financial institution and the recent global economic downturn, have
contributed to a deep recession and growing budget deficit. However,
San Marino has no national debt, and an unemployment rate half the
size of Italy's. The San Marino government has adopted measures to
counter the downturn, including subsidized credit to businesses. San
Marino also continues to work towards harmonizing its fiscal laws
with EU members and international standards. In September 2009, the
OECD removed San Marino from its list of tax havens that have yet to
fully implement global tax standards.