Kenya
Kenya, the regional hub for trade and finance in East Africa,
is hampered by corruption and reliance upon several primary goods
whose prices remain low. Following strong economic growth in 1995
and 1996, Kenya's economy has stagnated, with GDP growth failing to
keep up with the rate of population growth. In 1997, the IMF
suspended Kenya's Enhanced Structural Adjustment Program due to the
government's failure to maintain reforms and curb corruption. A
severe drought from 1999 to 2000 compounded Kenya's problems,
causing water and energy rationing and reducing agricultural output.
As a result, GDP contracted by 0.3% in 2000. The IMF, which had
resumed loans in 2000 to help Kenya through the drought, again
halted lending in 2001 when the government failed to institute
several anticorruption measures. Despite the return of strong rains
in 2001, weak commodity prices, endemic corruption, and low
investment limited Kenya's economic growth to 1%. Growth fell below
1% in 2002 because of erratic rains, low investor confidence, meager
donor support, and political infighting up to the elections. In the
key December 27, 2002 elections, Daniel Arap MOI's 24-year-old reign
ended, and a new opposition government took on the formidable
economic problems facing the nation. Substantial donor support and
rooting out corruption are essential to making Kenya realize its
substantial economic potential.
Kingman Reef
no economic activity
Kiribati
A remote country of 33 scattered coral atolls, Kiribati has
few natural 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 from UK, Japan, Australia, New Zealand, and
China 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.
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. Industrial and
power output have declined in parallel. The nation has suffered its
tenth year of food shortages because of a lack of arable land;
collective farming; 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 mass starvation since 1995-96, but the population remains the
victim of prolonged malnutrition and deteriorating living
conditions. Large-scale military spending eats up resources needed
for investment and civilian consumption. Recently, the regime has
placed emphasis on earning hard currency, developing information
technology, addressing power shortages, and attracting foreign aid,
but in no way at the expense of relinquishing central control over
key national assets or undergoing widespread market-oriented
reforms. In 2003, heightened political tensions with key donor
countries and general donor fatigue have held down the flow of
desperately needed food aid and have threatened fuel aid as well.
Korea, South
As one of the Four Tigers of East Asia, South Korea has
achieved an incredible record of growth and integration into the
high-tech modern world economy. Three decades ago GDP per capita was
comparable with levels in the poorer countries of Africa and Asia.
Today its GDP per capita is 18 times North Korea's and equal 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
longstanding weaknesses in South Korea's development model,
including high debt/equity ratios, massive foreign borrowing, and an
undisciplined financial sector. Growth plunged to a negative 6.6% in
1998, then strongly recovered to 10.8% in 1999 and 9.2% in 2000.
Growth fell back to 3.3% in 2001 because of the slowing global
economy, falling exports, and the perception that much-needed
corporate and financial reforms had stalled. Led by consumer
spending and exports, growth in 2002 was an impressive 6.2%, despite
anemic global growth, followed by moderate 2.8% growth in 2003. In
2003 the six-day work week was reduced to five days.
Kuwait
Kuwait is a small, rich, relatively open economy with proved
crude oil reserves of about 98 billion barrels - 10% of world
reserves. Petroleum accounts for nearly half of GDP, 95% of export
revenues, and 80% 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. Kuwait continues its discussions with
foreign oil companies to develop fields in the northern part of the
country. Oil production declined by an estimated 8% in 2002 but is
expected to return to the 2001 level in 2003.
Kyrgyzstan
Kyrgyzstan is a small, poor, mountainous country with a
predominantly agricultural economy. Cotton, tobacco, wool, and meat
are the main agricultural products, although only tobacco and cotton
are exported in any quantity. Industrial exports include gold,
mercury, uranium, and natural gas and electricity. Kyrgyzstan has
been fairly progressive in carrying out market reforms, such as an
improved regulatory system and land reform. Kyrgyzstan was the first
CIS country to be accepted into the World Trade Organization. With
fits and starts, inflation has been lowered to an estimated 7% in
2001, 2.1% in 2002, and 4.0% in 2003. Much of the government's stock
in enterprises has been sold. Drops in production had been severe
after the breakup of the Soviet Union in December 1991, but by
mid-1995 production began to recover and exports began to increase.
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, 5% in 2000, and 5% again in 2001. The drop in output
at the Kumtor gold mine sparked a 0.5% decline in GDP in 2002 and
again in 2003. On the positive side, the government and the
international financial institutions have been engaged in a
comprehensive medium-term poverty reduction and economic growth
strategy. Further restructuring of domestic industry and success in
attracting foreign investment are keys to future growth.
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% in 1988-2001 except
during the short-lived drop caused by the Asian financial crisis
beginning in 1997. Despite this high growth rate, Laos remains a
country with a primitive infrastructure; it 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. The economy will continue to benefit from
aid from the IMF and other international sources and from new
foreign investment in food processing and mining.
Latvia
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. The
majority of companies, banks, and real estate have been privatized,
although the state still holds sizable stakes in a few large
enterprises. Latvia officially joined the World Trade Organization
in February 1999. Preparing for EU membership continues as a top
foreign policy goal. The current account and internal government
deficits remain major concerns, but the government's efforts to
increase efficiency in revenue collection may lessen the budget
deficit.
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 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% in 1996 and in 1997, but
slowed to 1.2% in 1998, -1.6% in 1999, -0.6% in 2000, 0.8% in 2001,
and 1.5% in 2002. During the 1990s annual inflation fell to almost
0% from more than 100%. Lebanon has rebuilt much of its war-torn
physical and financial infrastructure. The government nonetheless
faces serious challenges in the economic arena. It has funded
reconstruction by borrowing heavily - mostly from domestic banks. In
order to reduce the ballooning national debt, the re-installed
HARIRI government began an economic austerity program to rein in
government expenditures, increase revenue collection, and privatize
state enterprises. The HARIRI government met with international
donors at the Paris II conference in November 2002 to seek bilateral
assistance restructuring its domestic debt at lower rates of
interest. While privatization of state-owned enterprises had not
occurred by the end of 2002, the government had successfully avoided
a currency devaluation and debt default in 2002.