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.