Cyprus: Economic affairs are affected by the division of the country. The Greek Cypriot economy is prosperous but highly susceptible to external shocks. Erratic growth rates in the 1990s reflect the economy's vulnerability to swings in tourist arrivals, caused by political instability on the island and fluctuations in economic conditions in Western Europe. Economic policy is focused on meeting the criteria for admission to the EU. As in the Turkish sector, water shortage is a growing problem, and several desalination plants are planned. The Turkish Cypriot economy has about one-fifth the population and one-third the per capita GDP of the south. Because it is recognized only by Turkey, it has had much difficulty arranging foreign financing, and foreign firms have hesitated to invest there. It remains heavily dependent on agriculture and government service, which together employ about half of the work force. Moreover, the small, vulnerable economy has suffered because the Turkish lira is legal tender. To compensate for the economy's weakness, Turkey provides direct and indirect aid to tourism, education, industry, etc.

Czech Republic: Basically one of the most stable and prosperous of the post-Communist states, the Czech Republic has been recovering from recession since mid-1999. The economy grew about 2.5% in 2000 and should achieve somewhat higher growth in 2001. Growth is led by exports to the EU, especially Germany, and foreign investment, while domestic demand is reviving. Uncomfortably high fiscal and current account deficits could be future problems. Unemployment is down to 8.7% as job creation continues in the rebounding economy; inflation is up to 3.8% but still moderate. The EU put the Czech Republic just behind Poland and Hungary in preparations for accession, which will give further impetus and direction to structural reform. Moves to complete banking, telecommunications and energy privatization will add to foreign investment, while intensified restructuring among large enterprises and banks and improvements in the financial sector should strengthen output growth.

Denmark: This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, and high dependence on foreign trade. Denmark is a net exporter of food and energy and has a comfortable balance of payments surplus. The center-left coalition government has reduced the formerly high unemployment rate and attained a budget surplus as well as followed the previous government's policies of maintaining low inflation and a stable currency. The coalition has lowered marginal income tax rates and raised environmental taxes thus maintaining overall tax revenues. Problems of bottlenecks, and longer term demographic changes reducing the labor force, are being addressed through labor market reforms. The government has been successful in meeting, and even exceeding, the economic convergence criteria for participating in the third phase (a common European currency) of the European Monetary Union (EMU), but Denmark, in a September 2000 referendum, reconfirmed its decision not to join the 11 other EU members in the euro. Even so, the Danish currency remains pegged to the euro.

Djibouti: The economy is based on service activities connected with the country's strategic location and status as a free trade zone in northeast Africa. Two-thirds of the inhabitants live in the capital city, the remainder being mostly nomadic herders. Scanty rainfall limits crop production to fruits and vegetables, and most food must be imported. Djibouti provides services as both a transit port for the region and an international transshipment and refueling center. It has few natural resources and little industry. The nation is, therefore, heavily dependent on foreign assistance to help support its balance of payments and to finance development projects. An unemployment rate of 40% to 50% continues to be a major problem. Inflation is not a concern, however, because of the fixed tie of the franc to the US dollar. Per capita consumption dropped an estimated 35% over the last seven years because of recession, civil war, and a high population growth rate (including immigrants and refugees). Faced with a multitude of economic difficulties, the government has fallen in arrears on long-term external debt and has been struggling to meet the stipulations of foreign aid donors. The year 2001 will see only small growth as port activity should decrease now that Ethiopia has more trade route options.

Dominica: The economy depends on agriculture and is highly vulnerable to climatic conditions, notably tropical storms. Agriculture, primarily bananas, accounts for 21% of GDP and employs 40% of the labor force. Development of the tourist industry remains difficult because of the rugged coastline, lack of beaches, and the lack of an international airport. Hurricane Luis devastated the country's banana crop in September 1995; tropical storms had wiped out one-quarter of the crop in 1994 as well. The subsequent recovery has been fueled by increases in construction, soap production, and tourist arrivals. The government is attempting to develop an offshore financial industry in order to diversify the island's production base.

Dominican Republic: The Dominican economy experienced dramatic growth over the last decade, even though the economy was hit hard by Hurricane Georges in 1998. Although the country has long been viewed primarily as an exporter of sugar, coffee, and tobacco, in recent years the service sector has overtaken agriculture as the economy's largest employer, due to growth in tourism and free trade zones. The country suffers from marked income inequality; the poorest half of the population receives less than one-fifth of GNP, while the richest ten percent enjoy 40% of national income. In December 2000, the new MEJIA administration passed broad new tax legislation which it hopes will provide enough revenue to offset rising oil prices and to service foreign debt.

Ecuador: Ecuador has substantial oil resources and rich agricultural areas. Because the country exports primary products such as oil, bananas, and shrimp, fluctuations in world market prices can have a substantial domestic impact. Ecuador joined the World Trade Organization in 1996, but has failed to comply with many of its accession commitments. In recent years, growth has been uneven due to ill-conceived fiscal stabilization measures. The aftermath of El Nino and depressed oil market of 1997-98 drove Ecuador's economy into a free-fall in 1999. The beginning of 1999 saw the banking sector collapse, which helped precipitate an unprecedented default on external loans later that year. Continued economic instability drove a 70% depreciation of the currency throughout 1999, which eventually forced a desperate government to "dollarize" the currency regime in 2000. The move stabilized the currency, but did not stave off the ouster of the government. The new president, Gustavo NOBOA has yet to complete negotiations for a long sought IMF accord. He will find it difficult to push through the reforms necessary to make "dollarization" work in the long run.

Egypt: A series of IMF arrangements - along with massive external debt relief resulting from Egypt's participation in the Gulf war coalition - helped Egypt improve its macroeconomic performance during the 1990s. Sound fiscal and monetary policies through the mid-1990s helped to tame inflation, slash budget deficits, and build up foreign reserves, while structural reforms such as privatization and new business legislation prompted increased foreign investment. By mid-1998, however, the pace of structural reform slackened, and lower combined hard currency earnings resulted in pressure on the Egyptian pound and sporadic US dollar shortages. External payments were not in crisis, but Cairo's attempts to curb demand for foreign exchange convinced some investors and currency traders that government financial operations lacked transparency and coordination. Monetary pressures have since eased, however, with the 1999-2000 higher oil prices, a rebound in tourism, and a series of mini-devaluations of the pound. The development of a gas export market is a major plus factor in future growth.

El Salvador: El Salvador is a struggling Central American economy which has been suffering from a weak tax collection system, factory closings, the aftermaths of Hurricane Mitch of 1998 and the devastating earthquakes of early 2001, and weak world coffee prices. On the bright side, in recent years inflation has fallen to single digit levels, and total exports have grown substantially. The trade deficit has been offset by remittances (an estimated $1.6 billion in 2000) from Salvadorans living abroad and by external aid. As of 1 January 2001, the US dollar was made legal tender alongside the colon.

Equatorial Guinea: The discovery and exploitation of large oil reserves have contributed to dramatic economic growth in recent years. Forestry, farming, and fishing are also major components of GDP. Subsistence farming predominates. Although pre-independence Equatorial Guinea counted on cocoa production for hard currency earnings, the deterioration of the rural economy under successive brutal regimes has diminished potential for agriculture-led growth. A number of aid programs sponsored by the World Bank and the IMF have been cut off since 1993 because of the government's gross corruption and mismanagement. Businesses, for the most part, are owned by government officials and their family members. Undeveloped natural resources include titanium, iron ore, manganese, uranium, and alluvial gold. The country responded favorably to the devaluation of the CFA franc in January 1994. Boosts in production and high world oil prices stimulated growth in 2000, with oil accounting for 90% of greatly increased exports.

Eritrea: With independence from Ethiopia on 24 May 1993, Eritrea faced the economic problems of a small, desperately poor country. The economy is largely based on subsistence agriculture, with 80% of the population involved in farming and herding. The small industrial sector consists mainly of light industries with outmoded technologies. Domestic output (GDP) is substantially augmented by worker remittances from abroad. Government revenues come from custom duties and taxes on income and sales. Road construction is a top domestic priority. In the long term, Eritrea may benefit from the development of offshore oil, offshore fishing, and tourism. Eritrea's economic future depends on its ability to master fundamental social and economic problems, e.g., by reducing illiteracy, promoting job creation, expanding technical training, attracting foreign investment, and streamlining the bureaucracy. Eritrea's agriculture over the last two years was severely weakened by war and drought, and many farmlands must wait to be demined. Another major difficulty is the ports, which prior to the war were Ethiopia's preferred outlets but since have seen trade dry up.

Estonia: In 2000, Estonia rebounded from the Russian financial crisis by scaling back its budget and reorienting trade away from Russian markets into EU member states. After GDP shrank 1.1% in 1999, the economy made a strong recovery in 2000, with growth estimated at 6.4% - the highest in Central and Eastern Europe. Estonia joined the World Trade Organization in November 1999 - the second Baltic state to join - and continues its EU accession talks. For 2001, Estonians predict GDP to grow around 6%, inflation of between 4.2%-5.3%, and a balanced budget. Substantial gains were made in completing privatization of Estonia's few remaining large, state-owned companies in 2000, and this momentum is expected to continue in 2001. Estonia hopes to join the EU during the next round of enlargement tentatively set for 2004.

Ethiopia: Ethiopia's economy is based on agriculture, which accounts for half of GDP, 90% of exports, and 80% of total employment. The agricultural sector suffers from frequent periods of drought and poor cultivation practices, and as many as 4.6 million people need food assistance annually. Coffee is critical to the Ethiopian economy, and Ethiopia earned $267 million in 1999 by exporting 105,000 metric tons. According to current estimates, coffee contributes 10% of Ethiopia's GDP. More than 15 million people (25% of the population) derive their livelihood from the coffee sector. Other exports include live animals, hides, gold, and qat. In December 1999, Ethiopia signed a $1.4 billion joint venture deal to develop a huge natural gas field in the Somali Regional State. The war with Eritrea forced the government to spend scarce resources on the military and to scale back ambitious development plans. Foreign investment has declined significantly. Government taxes imposed in late 1999 to raise money for the war depressed an already weak economy. The war forced the government to improve roads and other parts of the previously neglected infrastructure, but only certain regions of the nation benefited. Recovery from the war is mostly contingent on natural factors. A drought has continued into the end of 2000 and food relief is expected to be needed through mid-2001 at least. Ethiopia may receive Highly Indebted Poor Countries (HIPC) debt relief by the end of the year.

Europa Island: no economic activity

Falkland Islands (Islas Malvinas): The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987 the government began selling fishing licenses to foreign trawlers operating within the Falklands exclusive fishing zone. These license fees total more than $40 million per year, which goes to support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. To encourage tourism, the Falkland Islands Development Corporation has built three lodges for visitors attracted by the abundant wildlife and trout fishing. The islands are now self-financing except for defense. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves.

Faroe Islands: The Faroese economy has had a strong performance since 1994, mostly as a result of increasing fish landings and high and stable export prices. Unemployment is falling and there are signs of labor shortages in several sectors. The positive economic development has helped the Faroese Home Rule Government produce increasing budget surpluses which in turn help to reduce the large public debt, most of it owed to Denmark. However, the total dependence on fishing makes the Faroese economy extremely vulnerable, and the present fishing efforts appear in excess of what is required to ensure a sustainable level of fishing in the long term. Oil finds close to the Faroese area give hope for deposits in the immediate Faroese area, which may eventually lay the basis for a more diversified economy and thus less dependence on Denmark and Danish economic assistance. Aided by a substantial annual subsidy (15% of GDP) from Denmark, the Faroese have a standard of living not far below the Danes and other Scandinavians.

Fiji: Fiji, endowed with forest, mineral, and fish resources, is one of the most developed of the Pacific island economies, though still with a large subsistence sector. Sugar exports and a growing tourist industry are the major sources of foreign exchange. Sugar processing makes up one-third of industrial activity. Roughly 300,000 tourists visit each year, including thousands of Americans following the start of regularly scheduled non-stop air service from Los Angeles. Fiji's growth slowed in 1997 because the sugar industry suffered from low world prices and rent disputes between farmers and landowners. Drought in 1998 further damaged the sugar industry, but its recovery in 1999 contributed to robust GDP growth. Long-term problems include low investment and uncertain property rights. The political turmoil in Fiji has had a severe impact with the economy shrinking by 8% in 1999 and over 7,000 people losing their jobs. The interim government's 2001 budget is an attempt to attract foreign investment and restart economic activity. The government's ability to manage the budget and fulfill predictions of 4% growth for 2001 will depend on a return to stability, a regaining of investor confidence, and the absence of international sanctions (which could cripple Fiji's sugar and textile industry).

Finland: Finland has a highly industrialized, largely free-market economy, with per capita output roughly that of the UK, France, Germany, and Italy. Its key economic sector is manufacturing - principally the wood, metals, engineering, telecommunications, and electronics industries. Trade is important, with exports equaling more than one-third of GDP. Except for timber and several minerals, Finland depends on imports of raw materials, energy, and some components for manufactured goods. Because of the climate, agricultural development is limited to maintaining self-sufficiency in basic products. Forestry, an important export earner, provides a secondary occupation for the rural population. Rapidly increasing integration with Western Europe - Finland was one of the 11 countries joining the euro monetary system (EMU) on 1 January 1999 - will dominate the economic picture over the next several years. Growth in 2001 will be bolstered by strong private consumption, yet may be 1 or 2 points lower than in 2000, largely because of a weakening in export demand.

France: France is in the midst of transition, from an economy that featured extensive government ownership and intervention to one that relies more on market mechanisms. The government remains dominant in some sectors, particularly power, public transport, and defense industries, but it has been relaxing its control since the mid-1980s. The Socialist-led government has sold off part of its holdings in France Telecom, Air France, Thales, Thomson Multimedia, and the European Aerospace and Defense Company (EADS). The telecommunications sector is gradually being opened to competition. France's leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that reduce income disparity and the impact of free markets on public health and welfare. The government has done little to cut generous unemployment and retirement benefits which impose a heavy tax burden and discourage hiring. It has also shied from measures that would dramatically increase the use of stock options and retirement investment plans; such measures would boost the stock market and fast-growing IT firms as well as ease the burden on the pension system, but would disproportionately benefit the rich. In addition to the tax burden, the reduction of the work week to 35-hours has drawn criticism for lowering the competitiveness of French companies.

French Guiana: The economy is tied closely to that of France through subsidies and imports. Besides the French space center at Kourou, fishing and forestry are the most important economic activities. The large reserves of tropical hardwoods, not fully exploited, support an expanding sawmill industry which provides sawn logs for export. Cultivation of crops is limited to the coastal area, where the population is largely concentrated; rice and manioc are the major crops. French Guiana is heavily dependent on imports of food and energy. Unemployment is a serious problem, particularly among younger workers.

French Polynesia: Since 1962, when France stationed military personnel in the region, French Polynesia has changed from a subsistence economy to one in which a high proportion of the work force is either employed by the military or supports the tourist industry. Tourism accounts for about one-fourth of GDP and is a primary source of hard currency earnings. The small manufacturing sector primarily processes agricultural products. The territory benefited from a five-year (1994-98) development agreement with France aimed principally at creating new jobs.

French Southern and Antarctic Lands: Economic activity is limited to servicing meteorological and geophysical research stations and French and other fishing fleets. The fish catches landed on Iles Kerguelen by foreign ships are exported to France and Reunion.

Gabon: Gabon enjoys a per capita income four times that of most nations of sub-Saharan Africa. This has supported a sharp decline in extreme poverty; yet because of high income inequality a large proportion of the population remains poor. Gabon depended on timber and manganese until oil was discovered offshore in the early 1970s. The oil sector now accounts for 50% of GDP. Gabon continues to face fluctuating prices for its oil, timber, manganese, and uranium exports. Despite the abundance of natural wealth, the economy is hobbled by poor fiscal management. In 1992, the fiscal deficit widened to 2.4% of GDP, and Gabon failed to settle arrears on its bilateral debt, leading to a cancellation of rescheduling agreements with official and private creditors. Devaluation of its Francophone currency by 50% on 12 January 1994 sparked a one-time inflationary surge, to 35%; the rate dropped to 6% in 1996. The IMF provided a one-year standby arrangement in 1994-95, a three-year Enhanced Financing Facility (EFF) at near commercial rates beginning in late 1995, and stand-by credit of $119 million in October 2000. Those agreements mandate progress in privatization and fiscal discipline. France provided additional financial support in January 1997 after Gabon had met IMF targets for mid-1996. In 1997, an IMF mission to Gabon criticized the government for overspending on off-budget items, overborrowing from the central bank, and slipping on its schedule for privatization and administrative reform. The rebound of oil prices in 1999-2000 helped growth, but drops in production hampered Gabon from fully realizing potential gains. An expected decline in oil output may lead to contraction in GDP in 2001-02.

Gambia, The: The Gambia has no important mineral or other natural resources and has a limited agricultural base. About 75% of the population depends on crops and livestock for its livelihood. Small-scale manufacturing activity features the processing of peanuts, fish, and hides. Reexport trade normally constitutes a major segment of economic activity, but a 1999 government-imposed preshipment inspection plan, instability of the Gambian dalasi, and the stable political situation in Senegal have drawn some of the reexport trade away from Banjul. The government's 1998 seizure of the private peanut firm Alimenta eliminated the largest purchaser of Gambian groundnuts; the following two marketing seasons have seen significantly lower prices and sales. A decline in tourism from 1999 to 2000 has also held back growth. Unemployment and underemployment rates are extremely high. Shortrun economic progress remains highly dependent on sustained bilateral and multilateral aid, on responsible government economic management as forwarded by IMF technical help and advice, and on expected growth in the construction sector.

Gaza Strip: Economic output in the Gaza Strip - which comes under the responsibility of the Palestinian Authority since the Cairo Agreement of May 1994 - declined perhaps one-third between 1992 and 1996. The downturn was largely the result of Israeli closure policies - the imposition of generalized border closures in response to security incidents in Israel - which disrupted previously established labor and commodity market relationships between Israel and the WBGS (West Bank and Gaza Strip). The most serious negative social effect of this downturn was the emergence of high unemployment; unemployment in the WBGS during the 1980s was generally under 5%; by 1995 it had risen to over 20%. Since 1997 Israel's use of comprehensive closures has decreased and, in 1998, Israel implemented new policies to reduce the impact of closures and other security procedures on the movement of Palestinian goods and labor. These changes fueled an almost three-year long economic recovery in the West Bank and Gaza Strip; real GDP grew by 5% in 1998 and 6% in 1999. Recovery was upended in the last quarter of 2000 with the outbreak of Palestinian violence, which triggered tight Israeli closures of Palestinian self-rule areas and a severe disruption of trade and labor movements.

Georgia: Georgia's economy has traditionally revolved around Black Sea tourism; cultivation of citrus fruits, tea, and grapes; mining of manganese and copper; and output of a small industrial sector producing wine, metals, machinery, chemicals, and textiles. The country imports the bulk of its energy needs, including natural gas and oil products. Its only sizable internal energy resource is hydropower. Despite the severe damage the economy has suffered due to civil strife, Georgia, with the help of the IMF and World Bank, has made substantial economic gains since 1995, increasing GDP growth and slashing inflation. The Georgian economy continues to experience large budget deficits due to a failure to collect tax revenues. Georgia also still suffers from energy shortages; it privatized the distribution network in 1998, and deliveries are steadily improving. The country is pinning its hopes for long-term recovery on the development of an international transportation corridor through the key Black Sea ports of P'ot'i and Bat'umi. The growing trade deficit, continuing problems with tax evasion and corruption, and political uncertainties cloud the short-term economic picture.

Germany: Germany possesses the world's third most technologically powerful economy after the US and Japan, but structural market rigidities - including the substantial non-wage costs of hiring new workers - have made unemployment a long-term, not just a cyclical, problem. Germany's aging population, combined with high unemployment, has pushed social security outlays to a level exceeding contributions from workers. The modernization and integration of the eastern German economy remains a costly long-term problem, with annual transfers from western Germany amounting to roughly $70 billion. Growth picked up to 3% in 2000, largely due to recovering global demand; newly passed business and income tax cuts are expected to keep growth strong in 2001. Corporate restructuring and growing capital markets are transforming the German economy to meet the challenges of European economic integration and globalization in general.

Ghana: Well endowed with natural resources, Ghana has twice the per capita output of the poorer countries in West Africa. Even so, Ghana remains heavily dependent on international financial and technical assistance. Gold, timber, and cocoa production are major sources of foreign exchange. The domestic economy continues to revolve around subsistence agriculture, which accounts for 36% of GDP and employs 60% of the work force, mainly small landholders. In 1995-97, Ghana made mixed progress under a three-year structural adjustment program in cooperation with the IMF. On the minus side, public sector wage increases and regional peacekeeping commitments have led to continued inflationary deficit financing, depreciation of the cedi, and rising public discontent with Ghana's austerity measures. Political uncertainty and a depressed cocoa market led to disappointing growth in 2000. A rebound in the cocoa market should push growth over 4% in 2001-02.

Gibraltar: Gibraltar benefits from an extensive shipping trade, offshore banking, and its position as an international conference center. The British military presence has been sharply reduced and now contributes about 11% to the local economy. The financial sector accounts for 20% of GDP; tourism (almost 6 million visitors in 1998), shipping services fees, and duties on consumer goods also generate revenue. In recent years, Gibraltar has seen major structural change from a public to a private sector economy, but changes in government spending still have a major impact on the level of employment.

Glorioso Islands: no economic activity

Greece: Greece has a mixed capitalist economy with the public sector accounting for about half of GDP. Tourism is a key industry, providing a large portion of GDP and foreign exchange earnings. Greece is a major beneficiary of EU aid, equal to about 4% of GDP. The economy has improved steadily over the last few years, as the government has tightened policy in the run-up to Greece's entry into the EU's Economic and Monetary Union (EMU) on 1 January 2001. In particular, Greece has cut its budget deficit to below 1% of GDP and tightened monetary policy, with the result that inflation fell from 20% in 1990 to 3.1% in 2000. Major challenges remaining include the reduction of unemployment and further restructuring of the economy, including the privatization of some leading state enterprises. Growth, 3.8% in 2000, may fall off to 3%-3.5% in 2001.

Greenland: The economy remains critically dependent on exports of fish and substantial support from the Danish Government, which supplies about half of government revenues. The public sector, including publicly owned enterprises and the municipalities, plays the dominant role in the economy. Despite several interesting hydrocarbon and minerals exploration activities, it will take several years before production can materialize. Tourism is the only sector offering any near-term potential, and even this is limited due to a short season and high costs.

Grenada: In this island economy progress in fiscal reforms and prudent macroeconomic management have kept annual growth steady since 1998. The increase in economic activity has been led by construction and trade. Tourist facilities are being expanded; tourism is the leading foreign exchange earner. Major short-term concerns are the rising fiscal deficit and the deterioration in the external account balance. Grenada shares a common central bank and a common currency with seven other members of the Organization of Eastern Caribbean States (OECS).

Guadeloupe: The economy depends on agriculture, tourism, light industry, and services. It also depends on France for large subsidies and imports. Tourism is a key industry, with most tourists from the US; an increasingly large number of cruise ships visit the islands. The traditional sugarcane crop is slowly being replaced by other crops, such as bananas (which now supply about 50% of export earnings), eggplant, and flowers. Other vegetables and root crops are cultivated for local consumption, although Guadeloupe is still dependent on imported food, mainly from France. Light industry features sugar and rum production. Most manufactured goods and fuel are imported. Unemployment is especially high among the young. Hurricanes periodically devastate the economy.

Guam: The economy depends on US military spending, tourism, and the export of fish and handicrafts. Total US grants, wage payments, and procurement outlays amounted to $1 billion in 1998. Over the past 20 years, the tourist industry has grown rapidly, creating a construction boom for new hotels and the expansion of older ones. More than 1 million tourists visit Guam each year. The industry has recently suffered setbacks because of the continuing Japanese slowdown; the Japanese normally make up almost 90% of the tourists. Most food and industrial goods are imported. Guam faces the problem of building up the civilian economic sector to offset the impact of military downsizing.

Guatemala: The agricultural sector accounts for about one-fourth of GDP, two-thirds of exports, and half of the labor force. Coffee, sugar, and bananas are the main products. Former President ARZU (1996-2000) worked to implement a program of economic liberalization and political modernization. The 1996 signing of the peace accords, which ended 36 years of civil war, removed a major obstacle to foreign investment. In 1998, Hurricane Mitch caused relatively little damage to Guatemala compared to its neighbors. Ongoing challenges include increasing government revenues, negotiating further assistance from international donors, and increasing the efficiency and openness of both government and private financial operations. Despite low international prices for Guatemala's main commodities, the economy grew by 3% in 2000 and is forecast to grow by 4% in 2001. Guatemala, along with Honduras and El Salvador, recently concluded a free trade agreement with Mexico and has moved to protect international property rights. However, the PORTILLO administration has undertaken a review of privatizations under the previous administration, thereby creating some uncertainty among investors.

Guernsey: Financial services - banking, fund management, insurance, etc. - account for about 55% of total income in this tiny Channel Island economy. Tourism, manufacturing, and horticulture, mainly tomatoes and cut flowers, have been declining. Light tax and death duties make Guernsey a popular tax haven. The evolving economic integration of the EU nations is changing the rules of the game under which Guernsey operates.

Guinea: Guinea possesses major mineral, hydropower, and agricultural resources, yet remains a poor underdeveloped nation. The country possesses over 30% of the world's bauxite reserves and is the second largest bauxite producer. The mining sector accounted for about 75% of exports in 1999. Long-run improvements in government fiscal arrangements, literacy, and the legal framework are needed if the country is to move out of poverty. The government made encouraging progress in budget management in 1997-99, and reform progress was praised in the World Bank/IMF October 2000 assessment. However, escalating fighting along the Sierra Leonean and Liberian borders will cause major economic disruptions. In addition to direct defense costs, the violence has led to a sharp decline in investor confidence. Foreign mining companies have reduced expatriate staff, while panic buying has created food shortages and inflation in local markets. Real GDP growth is expected to fall to 2% in 2001.

Guinea-Bissau: One of the 20 poorest countries in the world, Guinea-Bissau depends mainly on farming and fishing. Cashew crops have increased remarkably in recent years, and the country now ranks sixth in cashew production. Guinea-Bissau exports fish and seafood along with small amounts of peanuts, palm kernels, and timber. Rice is the major crop and staple food. However, intermittent fighting between Senegalese-backed government troops and a military junta destroyed much of the country's infrastructure and caused widespread damage to the economy in 1998; the civil war led to a 28% drop in GDP that year, with partial recovery in 1999-2000. Before the war, trade reform and price liberalization were the most successful part of the country's structural adjustment program under IMF sponsorship. The tightening of monetary policy and the development of the private sector had also begun to reinvigorate the economy. Because of high costs, the development of petroleum, phosphate, and other mineral resources is not a near-term prospect. However, unexploited offshore oil reserves could provide much-needed revenue in the long run.

Guyana: Severe drought and political turmoil contributed to Guyana's negative growth of -1.8% for 1998 following six straight years of growth of 5% or better. Growth came back to a positive 1.8% in 1999 and 3% in 2000. Underlying growth factors have included expansion in the key agricultural and mining sectors, a more favorable atmosphere for business initiative, a more realistic exchange rate, a moderate inflation rate, and continued support by international organizations. President JAGDEO, the former finance minister, is taking steps to reform the economy, including drafting an investment code and restructuring the inefficient and unresponsive public sector. Problems include a shortage of skilled labor and a deficient infrastructure. The government must persist in efforts to manage its sizable external debt and attract new investment.

Haiti: About 80% of the population lives in abject poverty. Nearly 70% of all Haitians depend on the agriculture sector, which consists mainly of small-scale subsistence farming and employs about two-thirds of the economically active work force. The country has experienced little job creation since the former President PREVAL took office in February 1996, although the informal economy is growing. Following legislative elections in May 2000, fraught with irregularities, international donors - including the US and EU - suspended almost all aid to Haiti. This destabilized the Haitian currency, the gourde, and, combined with a 40% fuel price hike in September, caused widespread price increases. Prices appear to have leveled off in January 2001.

Heard Island and McDonald Islands: no economic activity

Holy See (Vatican City): This unique, noncommercial economy is supported financially by contributions (known as Peter's Pence) from Roman Catholics throughout the world, the sale of postage stamps and tourist mementos, fees for admission to museums, and the sale of publications. The incomes and living standards of lay workers are comparable to, or somewhat better than, those of counterparts who work in the city of Rome.

Honduras: Honduras, one of the poorest countries in the Western Hemisphere, is banking on expanded trade privileges under the Enhanced Caribbean Basin Initiative and on debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. While reconstruction from 1998's Hurricane Mitch is at an advanced stage, and the country has met most of its macroeconomic targets, it failed to meet the IMF's goals to liberalize its energy and telecommunications sectors. Economic growth has rebounded nicely since the hurricane and should continue in 2001.

Hong Kong: Hong Kong has a bustling free market economy highly dependent on international trade. Natural resources are limited, and food and raw materials must be imported. Indeed, imports and exports, including reexports, each exceed GDP in dollar value. Even before Hong Kong reverted to Chinese administration on 1 July 1997 it had extensive trade and investment ties with China. Per capita GDP compares with the level in the four big countries of Western Europe. GDP growth averaged a strong 5% in 1989-97. The widespread Asian economic difficulties in 1998 hit this trade-dependent economy quite hard, with GDP down 5%. The economy is undergoing a rapid recovery, with growth of 10% in 2000 to be followed by projected growth of 5% in 2001.

Howland Island: no economic activity

Hungary: Hungary continues to demonstrate strong economic growth and to work toward accession to the European Union. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms is widespread, with cumulative foreign direct investment totaling $23 billion by 2000. Hungarian sovereign debt was upgraded in 2000 to the second-highest rating among all the Central European transition economies. Inflation - a top economic concern in 2000 - is still high at almost 10%, pushed upward by higher world oil and gas and domestic food prices. Economic reform measures such as health care reform, tax reform, and local government financing have not yet been addressed by the ORBAN government.

Iceland: Iceland's Scandinavian-type economy is basically capitalistic, yet with an extensive welfare system, low unemployment, and remarkably even distribution of income. In the absence of other natural resources (except for abundant hydrothermal and geothermal power), the economy depends heavily on the fishing industry, which provides 70% of export earnings and employs 12% of the work force. The economy remains sensitive to declining fish stocks as well as to drops in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon. The center-right government plans to continue its policies of reducing the budget and current account deficits, limiting foreign borrowing, containing inflation, revising agricultural and fishing policies, diversifying the economy, and privatizing state-owned industries. The government remains opposed to EU membership, primarily because of Icelanders' concern about losing control over their fishing resources. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, and new developments in software production, biotechnology, and financial services are taking place. The tourism sector is also expanding, with the recent trends in ecotourism and whale watching. Growth has been remarkably steady over the past five years at 4%-5%.

India: India's economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of support services. More than a third of the population is too poor to be able to afford an adequate diet. India's international payments position remained strong in 2000 with adequate foreign exchange reserves, moderately depreciating nominal exchange rates, and booming exports of software services. Growth in manufacturing output slowed, and electricity shortages continue in many regions.

Indian Ocean: The Indian Ocean provides major sea routes connecting the Middle East, Africa, and East Asia with Europe and the Americas. It carries a particularly heavy traffic of petroleum and petroleum products from the oilfields of the Persian Gulf and Indonesia. Its fish are of great and growing importance to the bordering countries for domestic consumption and export. Fishing fleets from Russia, Japan, South Korea, and Taiwan also exploit the Indian Ocean, mainly for shrimp and tuna. Large reserves of hydrocarbons are being tapped in the offshore areas of Saudi Arabia, Iran, India, and western Australia. An estimated 40% of the world's offshore oil production comes from the Indian Ocean. Beach sands rich in heavy minerals and offshore placer deposits are actively exploited by bordering countries, particularly India, South Africa, Indonesia, Sri Lanka, and Thailand.

Indonesia: Indonesia, a vast polyglot nation, faces severe economic problems, stemming from secessionist movements and the low level of security in the regions, the lack of reliable legal recourse in contract disputes, corruption, weaknesses in the banking system, and strained relations with the IMF. Investor confidence will remain low and few new jobs will be created under these circumstances. Growth of 4.8% in 2000 is not sustainable, being attributable to favorable short-term factors, including high world oil prices, a surge in nonoil exports, and increased domestic demand for consumer durables.

Iran: Iran's economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and small-scale private trading and service ventures. President KHATAMI has continued to follow the market reform plans of former President RAFSANJANI and has indicated that he will pursue diversification of Iran's oil-reliant economy although he has made little progress toward that goal. The strong oil market in 1996 helped ease financial pressures on Iran and allowed for Tehran's timely debt service payments. Iran's financial situation tightened in 1997 and deteriorated further in 1998 because of lower oil prices. The subsequent zoom in oil prices in 1999-2000 afforded Iran fiscal breathing room but does not solve Iran's structural economic problems, including the encouragement of foreign investment.

Iraq: Iraq's economy is dominated by the oil sector, which has traditionally provided about 95% of foreign exchange earnings. In the 1980s, financial problems caused by massive expenditures in the eight-year war with Iran and damage to oil export facilities by Iran led the government to implement austerity measures, borrow heavily, and later reschedule foreign debt payments; Iraq suffered economic losses of at least $100 billion from the war. After the end of hostilities in 1988, oil exports gradually increased with the construction of new pipelines and restoration of damaged facilities. Iraq's seizure of Kuwait in August 1990, subsequent international economic sanctions, and damage from military action by an international coalition beginning in January 1991 drastically reduced economic activity. Although government policies supporting large military and internal security forces and allocating resources to key supporters of the regime have hurt the economy, implementation of the UN's oil-for-food program in December 1996 has helped improve conditions for the average Iraqi citizen. For the first six, six-month phases of the program, Iraq was allowed to export limited amounts of oil in exchange for food, medicine, and some infrastructure spare parts. In December 1999, the UN Security Council authorized Iraq to export under the program as much oil as required to meet humanitarian needs. Oil exports are now more than three-quarters their prewar level. Per capita food imports have increased significantly, while medical supplies and health care services are steadily improving. Per capita output and living standards are still well below the prewar level, but any estimates have a wide range of error.

Ireland: Ireland is a small, modern, trade-dependent economy with growth averaging a robust 9% in 1995-2000. Agriculture, once the most important sector, is now dwarfed by industry, which accounts for 38% of GDP and about 80% of exports and employs 28% of the labor force. Although exports remain the primary engine for Ireland's robust growth, the economy is also benefiting from a rise in consumer spending and recovery in both construction and business investment. Over the past decade, the Irish government has implemented a series of national economic programs designed to curb inflation, reduce government spending, increase labor force skills, and promote foreign investment. Ireland joined in launching the euro currency system in January 1999 along with 10 other EU nations. The Irish economy is in danger of overheating, with the tight labor market driving up wage demands and inflation.

Israel: Israel has a technologically advanced market economy with substantial government participation. It depends on imports of crude oil, grains, raw materials, and military equipment. Despite limited natural resources, Israel has intensively developed its agricultural and industrial sectors over the past 20 years. Israel is largely self-sufficient in food production except for grains. Cuts diamonds, high-technology equipment, and agricultural products (fruits and vegetables) are the leading exports. Israel usually posts sizable current account deficits, which are covered by large transfer payments from abroad and by foreign loans. Roughly half of the government's external debt is owed to the US, which is its major source of economic and military aid. The influx of Jewish immigrants from the former USSR topped 750,000 during the period 1989-99, bringing the population of Israel from the former Soviet Union to 1 million, one-sixth of the total population, and adding scientific and professional expertise of substantial value for the economy's future. The influx, coupled with the opening of new markets at the end of the Cold War, energized Israel's economy, which grew rapidly in the early 1990s. But growth began moderating in 1996 when the government imposed tighter fiscal and monetary policies and the immigration bonus petered out. Growth was a strong 5.9% in 2000. But the outbreak of Palestinian unrest in late September and the collapse of the BARAK Government - coupled with a cooling off in the high-technology and tourist sectors - undercut the boom and foreshadows a slowdown to 2%-3% in 2001.

Italy: Italy has a diversified industrial economy with roughly the same total and per capita output as France and the UK. This capitalistic economy remains divided into a developed industrial north, dominated by private companies, and a less developed agricultural south, with more than 20% unemployment. Most raw materials needed by industry and more than 75% of energy requirements are imported. Since 1992, Italy has adopted budgets compliant with the requirements of the European Monetary Union (EMU); wage moderation agreements by representatives of government, labor, and employers have helped to bring Italy's inflation into conformity with EMU requirements. Italy's economic performance, however, has lagged behind that of its EU partners and it must work to stimulate employment, promote labor flexibility, reform its expensive pension system, and tackle the informal economy.

Jamaica: Key sectors in this island economy are bauxite (alumina and bauxite account for more than half of exports) and tourism. Since assuming office in 1992, Prime Minister PATTERSON has eliminated most price controls, streamlined tax schedules, and privatized government enterprises. Continued tight monetary and fiscal policies have helped slow inflation - although inflationary pressures are mounting - and stabilize the exchange rate, but have resulted in the slowdown of economic growth (moving from 1.5% in 1992 to 0.5% in 1995). In 1996, GDP showed negative growth (-1.4%) and remained negative through 1999. Serious problems include: high interest rates; increased foreign competition; the weak financial condition of business in general resulting in receiverships or closures and downsizings of companies; the shift in investment portfolios to non-productive, short-term high yield instruments; a pressured, sometimes sliding, exchange rate; a widening merchandise trade deficit; and a growing internal debt for government bailouts to various ailing sectors of the economy, particularly the financial sector. Depressed economic conditions in 1999-2000 led to increased civil unrest, including a mounting crime rate. Jamaica's medium-term prospects will depend upon encouraging investment in the productive sectors, maintaining a competitive exchange rate, stabilizing the labor environment, selling off reacquired firms, and implementing proper fiscal and monetary policies.

Jan Mayen: Jan Mayen is a volcanic island with no exploitable natural resources. Economic activity is limited to providing services for employees of Norway's radio and meteorological stations located on the island.

Japan: Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) have helped Japan advance with extraordinary rapidity to the rank of second most technologically powerful economy in the world after the US and third largest economy in the world after the US and China. One notable characteristic of the economy is the working together of manufacturers, suppliers, and distributors in closely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Industry, the most important sector of the economy, is heavily dependent on imported raw materials and fuels. The much smaller agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self-sufficient in rice, Japan must import about 50% of its requirements of other grain and fodder crops. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades overall real economic growth had been spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s largely because of the aftereffects of overinvestment during the late 1980s and contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth have met little success and were further hampered in late 2000 by the slowing of the US and Asian economies. The crowding of habitable land area and the aging of the population are two major long-run problems. Robotics constitutes a key long-term economic strength, with Japan possessing 410,000 of the world's 720,000 "working robots".

Jarvis Island: no economic activity

Jersey: The economy is based largely on international financial services, agriculture, and tourism. Potatoes, cauliflower, tomatoes, and especially flowers are important export crops, shipped mostly to the UK. The Jersey breed of dairy cattle is known worldwide and represents an important export income earner. Milk products go to the UK and other EU countries. In 1996 the finance sector accounted for about 60% of the island's output. Tourism, another mainstay of the economy, accounts for 24% of GDP. In recent years, the government has encouraged light industry to locate in Jersey, with the result that an electronics industry has developed alongside the traditional manufacturing of knitwear. All raw material and energy requirements are imported, as well as a large share of Jersey's food needs. Light taxes and death duties make the island a popular tax haven.

Johnston Atoll: Economic activity is limited to providing services to US military personnel and contractors located on the island. All food and manufactured goods must be imported.

Jordan: Jordan is a small Arab country with inadequate supplies of water and other natural resources such as oil. The Persian Gulf crisis, which began in August 1990, aggravated Jordan's already serious economic problems, forcing the government to stop most debt payments and suspend rescheduling negotiations. Aid from Gulf Arab states, worker remittances, and trade revenues contracted. Refugees flooded the country, producing serious balance-of-payments problems, stunting GDP growth, and straining government resources. The economy rebounded in 1992, largely due to the influx of capital repatriated by workers returning from the Gulf. After averaging 9% in 1992-95, GDP growth averaged only 1.5% during 1996-99. In an attempt to spur growth, King ABDALLAH has undertaken limited economic reform, including partial privatization of some state-owned enterprises and Jordan's entry in January 2000 into the World Trade Organization (WTrO). Debt, poverty, and unemployment are fundamental ongoing economic problems.

Juan de Nova Island: Up to 12,000 tons of guano are mined per year.

Kazakhstan: Kazakhstan, the second largest of the former Soviet republics in territory, possesses enormous fossil fuel reserves as well as plentiful supplies of other minerals and metals. It also is a large agricultural - livestock and grain - producer. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources and also on a growing machine-building sector specializing in construction equipment, tractors, agricultural machinery, and some defense items. The breakup of the USSR in December 1991 and the collapse of demand for Kazakhstan's traditional heavy industry products resulted in a short-term contraction of the economy, with the steepest annual decline occurring in 1994. In 1995-97, the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector. The Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan's Tengiz oil field to the Black Sea increases prospects for substantially larger oil exports in several years. Kazakhstan's economy again turned downward in 1998 with a 2% decline in GDP due to slumping oil prices and the August financial crisis in Russia. The recovery of international oil prices in 1999, combined with a well-timed tenge devaluation and a bumper grain harvest, pulled the economy out of recession in 2000. Astana has embarked upon an industrial policy designed to diversify the economy away from overdependence on the oil sector by developing light industry.

Kenya: Kenya is well placed to serve as an engine of growth in East Africa, but its economy has been stagnating because of poor management and uneven commitment to reform. In 1993, the government of Kenya implemented a program of economic liberalization and reform that included the removal of import licensing, price controls, and foreign exchange controls. With the support of the World Bank, IMF, and other donors, the reforms led to a brief turnaround in economic performance following a period of negative growth in the early 1990s. Kenya's real GDP grew 5% in 1995 and 4% in 1996, and inflation remained under control. Growth slowed after 1997, averaging only 1.5% in 1997-2000. In 1997, political violence damaged the tourist industry, and Kenya's Enhanced Structural Adjustment Program lapsed due to the government's failure to maintain reform or address public sector corruption. Severe drought in 1999 and 2000 caused water and energy rationing and reduced agricultural sector productivity. A new economic team was put in place in 1999 to revitalize the reform effort, strengthen the civil service, and curb corruption. The IMF and World Bank renewed their support to Kenya in mid-2000, but a number of setbacks to the economic reform program in late 2000 have renewed donor and private sector concern about the government's commitment to sound governance. Long-term barriers to development include electricity shortages, inefficient government dominance of key sectors, endemic corruption, and high population growth.

Kingman Reef: no economic activity

Kiribati: A remote country of 33 scattered coral atolls, Kiribati has few national resources. Commercially viable phosphate deposits were exhausted at the time of independence from the UK in 1979. Copra and fish now represent the bulk of production and exports. The economy has fluctuated widely in recent years. Economic development is constrained by a shortage of skilled workers, weak infrastructure, and remoteness from international markets. Tourism provides more than one-fifth of GDP. The financial sector is at an early stage of development as is the expansion of private sector initiatives. Foreign financial aid, largely from the UK and Japan, is a critical supplement to GDP, equal to 25%-50% of GDP in recent years. Remittances from workers abroad account for more than $5 million each year. Performance in 2000 fell short of the 2.5% growth in 1999, which benefited from increased copra production and exceptionally large revenues from fishing licenses.

Korea, North: North Korea, one of the world's most centrally planned and isolated economies, faces desperate economic conditions. Industrial capital stock is nearly beyond repair as a result of years of underinvestment and spare parts shortages. The nation faces its seventh year of food shortages because of weather-related problems, including major drought in 2000, and chronic shortages of fertilizer and fuel. Massive international food aid deliveries have allowed the regime to escape the major consequence of spreading economic failure, such as mass starvation, but the population remains vulnerable to prolonged malnutrition and deteriorating living conditions. Large-scale military spending eats up resources needed for expanding investment and consumption goods. In 2000, the regime placed emphasis on expanding foreign trade links, embracing modern technology, and attracting foreign investment, but in no way at the expense of relinquishing central control over key national assets or undergoing market-oriented reforms.

Korea, South: As one of the Four Dragons of East Asia, South Korea has achieved an incredible record of growth. Three decades ago GDP per capita was comparable with levels in the poorer countries of Africa and Asia. Today its GDP per capita is seven times India's, 16 times North Korea's, and comparable to the lesser economies of the European Union. This success through the late 1980s was achieved by a system of close government/business ties, including directed credit, import restrictions, sponsorship of specific industries, and a strong labor effort. The government promoted the import of raw materials and technology at the expense of consumer goods and encouraged savings and investment over consumption. The Asian financial crisis of 1997-99 exposed certain longstanding weaknesses in South Korea's development model, including high debt/equity ratios, massive foreign borrowing, and an undisciplined financial sector. By 1999 GDP growth had recovered, reversing the substantial decline of 1998. Seoul has pressed the country's largest business groups to restructure and to strengthen their financial base. Growth in 2001 likely will be a more sustainable rate of 5%.

Kuwait: Kuwait is a small, relatively open economy with proved crude oil reserves of about 94 billion barrels - 10% of world reserves. Petroleum accounts for nearly half of GDP, 90% of export revenues, and 75% of government income. Kuwait's climate limits agricultural development. Consequently, with the exception of fish, it depends almost wholly on food imports. About 75% of potable water must be distilled or imported. Higher oil prices put the FY99/00 budget into a $2 billion surplus. The FY00/01 budget covers only nine months because of a change in the fiscal year. The budget for FY01/02, which begins 1 April, contains higher expenditures for salaries, construction, and other general categories. Kuwait continues its discussions with foreign oil companies to develop fields in the northern part of the country.

Kyrgyzstan: Kyrgyzstan is a small, poor, mountainous country with a predominantly agricultural economy. Cotton, wool, and meat are the main agricultural products and exports. Industrial exports include gold, mercury, uranium, and electricity. Kyrgyzstan has been one of the most progressive countries of the former Soviet Union in carrying out market reforms. Following a successful stabilization program, which lowered inflation from 88% in 1994 to 15% for 1997, attention is turning toward stimulating growth. Much of the government's stock in enterprises has been sold. Drops in production had been severe since the breakup of the Soviet Union in December 1991, but by mid-1995 production began to recover and exports began to increase. Pensioners, unemployed workers, and government workers with salary arrears continue to suffer. Foreign assistance played a substantial role in the country's economic turnaround in 1996-97. Growth was held down to 2.1% in 1998 largely because of the spillover from Russia's economic difficulties, but moved ahead to 3.6% in 1999 and an estimated 5.7% in 2000. The government has adopted a series of measures to combat such persistent problems as excessive external debt, inflation, and inadequate revenue collection.

Laos: The government of Laos - one of the few remaining official communist states - began decentralizing control and encouraging private enterprise in 1986. The results, starting from an extremely low base, were striking - growth averaged 7% during 1988-97. Reform efforts subsequently slowed, and GDP growth dropped an average of 3 percentage points. Because Laos depends heavily on its trade with Thailand, it was damaged by the regional financial crisis beginning in 1997. Government mismanagement deepened the crisis, and from June 1997 to June 1999 the Lao kip lost 87% of its value. Laos' foreign exchange problems peaked in September 1999 when the kip fell from 3,500 kip to the dollar to 9,000 kip to the dollar in a matter of weeks. Now that the currency has stabilized, however, the government seems content to let the current situation persist, despite limited government revenue and foreign exchange reserves. A landlocked country with a primitive infrastructure, Laos has no railroads, a rudimentary road system, and limited external and internal telecommunications. Electricity is available in only a few urban areas. Subsistence agriculture accounts for half of GDP and provides 80% of total employment. For the foreseeable future the economy will continue to depend on aid from the IMF and other international sources; Japan is currently the largest bilateral aid donor; aid from the former USSR/Eastern Europe has been cut sharply.

Latvia: In 2000, Latvia's transitional economy recovered from the 1998 Russian financial crisis, largely due to the SKELE government's budget stringency and a gradual reorientation of exports toward EU countries, lessening Latvia's trade dependency on Russia. Latvia officially joined the World Trade Organization in February 1999 - the first Baltic state to join - and was invited at the Helsinki EU Summit in December 1999 to begin accession talks in early 2000. Unemployment fell to 7.8% in 2000, down from 9.6% in 1999, and 9.2% in 1998. Privatization of large state-owned utilities and the shipping industry faced more delays in 2000, and political instability will continue to delay completion of the privatization process over the next year. Latvia projects 6% GDP growth, 2.5%-3.0% inflation, and a 1.7% fiscal deficit in 2001. Preparing for EU membership over the next few years remains a top foreign policy goal.

Lebanon: The 1975-91 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. Peace enabled the central government to restore control in Beirut, begin collecting taxes, and regain access to key port and government facilities. Economic recovery was helped by a financially sound banking system and resilient small- and medium-scale manufacturers. Family remittances, banking services, manufactured and farm exports, and international aid provided the main sources of foreign exchange. Lebanon's economy has made impressive gains since the launch in 1993 of "Horizon 2000," the government's $20 billion reconstruction program. Real GDP grew 8% in 1994, 7% in 1995, 4% per year in 1996 and 1997 but slowed to 2% in 1998, -1% in 1999, and 1% in 2000. Annual inflation fell during the course of the 1990s from more than 100% to 0%, and foreign exchange reserves jumped from $1.4 billion to more than $6 billion. Burgeoning capital inflows have generated foreign payments surpluses, and the Lebanese pound has remained very stable for the past two years. Lebanon has rebuilt much of its war-torn physical and financial infrastructure. Solidere, a $2-billion firm, has managed the reconstruction of Beirut's central business district; the stock market reopened in January 1996; and international banks and insurance companies are returning. The government nonetheless faces serious challenges in the economic arena. It has funded reconstruction by tapping foreign exchange reserves and by borrowing heavily - mostly from domestic banks. The newly re-installed HARIRI government's announced policies fail to address the ever-increasing budgetary deficits and national debt burden. The gap between rich and poor has widened in the 1990s, resulting in grassroots dissatisfaction over the skewed distribution of the reconstruction's benefits.

Lesotho: Small, landlocked, and mountainous, Lesotho's primary natural resource is water. Its economy is based on subsistence agriculture, livestock, and remittances from miners employed in South Africa. The number of such mineworkers has declined steadily over the past several years. A small manufacturing base depends largely on farm products that support the milling, canning, leather, and jute industries. Agricultural products are exported primarily to South Africa. Proceeds from membership in a common customs union with South Africa form the majority of government revenue. Although drought has decreased agricultural activity over the past few years, completion of a major hydropower facility in January 1998 now permits the sale of water to South Africa, generating royalties for Lesotho. The pace of substantial privatization has increased in recent years. In December 1999, the government embarked on a nine-month IMF staff-monitored program aimed at structural adjustment and stabilization of macroeconomic fundamentals. The government is in the process of applying for a three-year successor program with the IMF under its Poverty Reduction and Growth Facility.

Liberia: A civil war in 1989-96 destroyed much of Liberia's economy, especially the infrastructure in and around Monrovia. Many businessmen fled the country, taking capital and expertise with them. Some returned during 1997. Many will not return. Richly endowed with water, mineral resources, forests, and a climate favorable to agriculture, Liberia had been a producer and exporter of basic products, while local manufacturing, mainly foreign owned, had been small in scope. The democratically elected government, installed in August 1997, inherited massive international debts and currently relies on revenues from its maritime registry to provide the bulk of its foreign exchange earnings. The restoration of the infrastructure and the raising of incomes in this ravaged economy depend on the implementation of sound macro- and micro-economic policies of the new government, including the encouragement of foreign investment. Recent growth has been from a low base, and continued growth will require major policy successes.

Libya: The socialist-oriented economy depends primarily upon revenues from the oil sector, which contributes practically all export earnings and about one-quarter of GDP. These oil revenues and 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. In this statist society, import restrictions and inefficient resource allocations have led to periodic shortages of basic goods and foodstuffs. The nonoil manufacturing and construction sectors, which account for about 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 requirements. Higher oil prices in 1999 and 2000 led to an increase in export revenues, which improved macroeconomic balances and helped to stimulate the economy. Following the suspension of UN sanctions in 1999, Libya has been trying to increase its attractiveness to foreign investors, and several foreign companies have visited in search of contracts.

Liechtenstein: Despite its small size and limited natural resources, Liechtenstein has developed into a prosperous, highly industrialized, free-enterprise economy with a vital financial service sector and living standards on a par with the urban areas of its large European neighbors. Low business taxes - the maximum tax rate is 18% - and easy incorporation rules have induced 73,700 holding or so-called letter box companies to establish nominal offices in Liechtenstein, providing 30% of state revenues. The country participates in a customs union with Switzerland and uses the Swiss franc as its national currency. It imports more than 90% of its energy requirements. Liechtenstein has been a member of the European Economic Area (an organization serving as a bridge between European Free Trade Association (EFTA) and EU) since May 1995. The government is working to harmonize its economic policies with those of an integrated Europe.

Lithuania: Lithuania, the Baltic state that has conducted the most trade with Russia, has been slowly rebounding from the 1998 Russian financial crisis. High unemployment and weak consumption have held back recovery. GDP growth for 2000 - estimated at 2.9% - fell behind that of Estonia and Latvia, and unemployment is estimated at 10.8%, the country's highest since regaining independence in 1990. For 2001, Lithuanians forecast 3.2% growth, 1.8% inflation, and a fiscal deficit of 3.3%. In early 2001, the Lithuanian Government announced that it will repeg its currency, the litas, to the euro (the litas is currently pegged to the dollar) some time in 2002. Lithuania must ratify 25 agreements along with other legal documents and obligations by 1 May 2001 before gaining World Trade Organization membership. Lithuania was invited to the Helsinki summit in December 1999 and began EU accession talks in early 2000. Privatization of the large, state-owned utilities, particularly in the energy sector, remains a key challenge for 2001.

Luxembourg: The stable, high-income economy features solid growth, low inflation, and low unemployment. The industrial sector, initially dominated by steel, has become increasingly diversified to include chemicals, rubber, and other products. Growth in the financial sector has more than compensated for the decline in steel. Services, especially banking, account for a substantial proportion of the economy. Agriculture is based on small family-owned farms. The economy depends on foreign and trans-border workers for 30% of its labor force. Luxembourg has a custom union with Belgium and the Netherlands, and, as a member of the EU, enjoys the advantages of the open European market. It joined with 10 other EU members to launch the euro on 1 January 1999.

Macau: The economy is based largely on tourism (including gambling) and textile and fireworks manufacturing. Efforts to diversify have spawned other small industries - toys, artificial flowers, and electronics. The tourist sector has accounted for roughly 25% of GDP, and the clothing industry has provided about three-fourths of export earnings; the gambling industry probably represents over 40% of GDP. More than 8 million tourists visited Macau in 2000. Macau depends on China for most of its food, fresh water, and energy imports. Japan and Hong Kong are the main suppliers of raw materials and capital goods. Output dropped 5% in 1998 and 3% in 1999, with a small 2% gain in 2000. Macau reverted to Chinese administration on 20 December 1999. Gang violence, a dark spot in the economy, probably will be reduced in 2000-01 to the advantage of the tourism sector.

Macedonia, The Former Yugoslav Republic of: At independence in November 1991, Macedonia was the least developed of the Yugoslav republics, producing a mere 5% of the total federal output of goods and services. The collapse of Yugoslavia ended transfer payments from the center and eliminated advantages from inclusion in a de facto free trade area. An absence of infrastructure, UN sanctions on its largest market Yugoslavia, and a Greek economic embargo hindered economic growth until 1996. GDP has subsequently increased each year, rising by 5% in 2000. Successful privatization in 2000 boosted the country's reserves to over $700 million. Also, the leadership demonstrated a continuing commitment to economic reform, free trade, and regional integration. Inflation jumped to 11% in 2000, largely due to higher oil prices.

Madagascar: Madagascar faces problems of chronic malnutrition, underfunded health and education facilities, a roughly 3% annual population growth rate, and severe loss of forest cover, accompanied by erosion. Agriculture, including fishing and forestry, is the mainstay of the economy, accounting for 30% of GDP and contributing more than 70% to export earnings. Industry features textile manufacturing and the processing of agricultural products. Growth in output in 1992-97 averaged less than the growth rate of the population. Growth has been held back by antigovernment strikes and demonstrations, a decline in world coffee prices, and the erratic commitment of the government to economic reform. The extent of government reforms, outside financial aid, and foreign investment will be key determinants of future growth. For 2001, growth should again be about 5%.

Malawi: Landlocked Malawi ranks among the world's least developed countries. The economy is predominately agricultural, with about 90% of the population living in rural areas. Agriculture accounts for 37% of GDP and 85% of export revenues. The economy depends on substantial inflows of economic assistance from the IMF, the World Bank, and individual donor nations. In late 2000, Malawi was approved for relief under the Heavily Indebted Poor Countries (HIPC) program. The government faces strong challenges, e.g., to fully develop a market economy, to improve educational facilities, to face up to environmental problems, and to deal with the rapidly growing problem of HIV/AIDS.

Malaysia: GDP grew at 8.6% in 2000, mainly on the strength of double-digit export growth and continued government fiscal stimulus. As an oil exporter, Malaysia also benefited from higher petroleum prices. Higher export revenues allowed the country to register a current account surplus, but foreign exchange reserves have been declining - from a peak of $34.5 billion in April 2000 to $29.7 billion by December - as foreign investors pulled money out of the country. Despite this development, Kuala Lumpur is unlikely to abandon its currency peg soon. An economic slowdown in key Western markets, especially the United States, and lower world demand for electronics products will slow GDP growth to 3%-6% in 2001, according to private forecasters. Over the longer term, Malaysia's failure to make substantial progress on key reforms of the corporate and financial sectors clouds prospects for sustained growth and the return of critical foreign investment.

Maldives: Tourism, Maldives largest industry, accounts for 20% of GDP and more than 60% of the Maldives' foreign exchange receipts. Over 90% of government tax revenue comes from import duties and tourism-related taxes. Almost 400,000 tourists visited the islands in 1998. Fishing is a second leading sector. The Maldivian Government began an economic reform program in 1989 initially by lifting import quotas and opening some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment. Agriculture and manufacturing continue to play a minor role in the economy, constrained by the limited availability of cultivable land and the shortage of domestic labor. Most staple foods must be imported. Industry, which consists mainly of garment production, boat building, and handicrafts, accounts for about 18% of GDP. Maldivian authorities worry about the impact of erosion and possible global warming on their low-lying country; 80% of the area is one meter or less above sea level.

Mali: Mali is among the poorest countries in the world, with 65% of its land area desert or semidesert. Economic activity is largely confined to the riverine area irrigated by the Niger. About 10% of the population is nomadic and some 80% of the labor force is engaged in farming and fishing. Industrial activity is concentrated on processing farm commodities. Mali is heavily dependent on foreign aid and vulnerable to fluctuations in world prices for cotton, its main export. In 1997, the government continued its successful implementation of an IMF-recommended structural adjustment program that is helping the economy grow, diversify, and attract foreign investment. Mali's adherence to economic reform and the 50% devaluation of the African franc in January 1994 have pushed up economic growth to a sturdy 5% average in 1996-2000. Growth should remain around 5% in 2001-02, and inflation should stay less than 2%.

Malta: Major resources are limestone, a favorable geographic location, and a productive labor force. Malta produces only about 20% of its food needs, has limited freshwater supplies, and has no domestic energy sources. The economy is dependent on foreign trade, manufacturing (especially electronics and textiles), and tourism. Malta is privatizing state-controlled firms and liberalizing markets in order to prepare for membership in the European Union. However, the island is divided politically over the question of joining the EU. The sizable budget deficit remains a key concern.

Man, Isle of: Offshore banking, manufacturing, and tourism are key sectors of the economy. The government's policy of offering incentives to high-technology companies and financial institutions to locate on the island has paid off in expanding employment opportunities in high-income industries. As a result, agriculture and fishing, once the mainstays of the economy, have declined in their shares of GDP. Banking and other services now contribute 42% to GDP. Trade is mostly with the UK. The Isle of Man enjoys free access to EU markets.

Marshall Islands: US Government assistance is the mainstay of this tiny island economy. Agricultural production is concentrated on small farms, and the most important commercial crops are coconuts, tomatoes, melons, and breadfruit. Small-scale industry is limited to handicrafts, fish processing, and copra. The tourist industry, now a small source of foreign exchange employing less than 10% of the labor force, remains the best hope for future added income. The islands have few natural resources, and imports far exceed exports. Under the terms of the Compact of Free Association, the US provides roughly $65 million in annual aid. Negotiations were underway in 1999 for an extended agreement. Government downsizing, drought, a drop in construction, and the decline in tourism and foreign investment due to the Asian financial difficulties caused GDP to fall in 1996-98.

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

Mauritania: A majority of the population still depends on agriculture and livestock for a livelihood, even though most of the nomads and many 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 half of total exports. The decline in world demand for this ore, however, has led to cutbacks in production. The nation's coastal waters are among the richest fishing areas in the world, but overexploitation by foreigners threatens this key source of revenue. The country's first deepwater port opened near Nouakchott in 1986. In the past, drought and economic mismanagement have resulted in a buildup of foreign debt. In March 1999, the government signed an agreement with a joint World Bank-IMF mission on a $54 million enhanced structural adjustment facility (ESAF). Mauritania withdrew its membership in the Economic Community of West African States (ECOWAS) in 2000. Privatization and debt relief are in full swing, and the rate of economic growth appears to be accelerating, especially in the construction, telecommunication, and information sectors. Diamonds and petroleum are beginning to be explored and exploited.