Lesotho
Small, landlocked, and mountainous, Lesotho relies on
remittances from miners employed in South Africa and customs duties
from the Southern Africa Customs Union for the majority of
government revenue, but the government has strengthened its tax
system to reduce dependency on customs duties. Completion of a major
hydropower facility in January 1998 now permits the sale of water to
South Africa, also generating royalties for Lesotho. As the number
of mineworkers has declined steadily over the past several years, a
small manufacturing base has developed based on farm products that
support the milling, canning, leather, and jute industries and a
rapidly growing apparel-assembly sector. The economy is still
primarily based on subsistence agriculture, especially livestock,
although drought has decreased agricultural activity. The extreme
inequality in the distribution of income remains a major drawback.
Lesotho has signed an Interim Poverty Reduction and Growth Facility
with the IMF.
Liberia
Civil war and misgovernment have destroyed much of Liberia's
economy, especially the infrastructure in and around Monrovia. Many
businessmen have fled the country, taking capital and expertise with
them. Some have returned; many will not. Richly endowed with water,
mineral resources, forests, and a climate favorable to agriculture,
Liberia had been a producer and exporter of basic products -
primarily raw timber and rubber. Local manufacturing, mainly foreign
owned, had been small in scope. The restoration of the
infrastructure and the raising of incomes in this ravaged economy
depend on the settlement of civil warfare, the implementation of
sound macro- and micro-economic policies, including the
encouragement of foreign investment, and generous support from donor
countries.
Libya
The socialist-oriented economy depends primarily upon revenues
from the oil sector, which contribute 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. 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. Higher
oil prices in the last three years led to an increase in export
revenues, which has improved macroeconomic balances but has done
little to stimulate broad-based economic growth. Libya is making
slow progress toward economic liberalization and the upgrading of
economic infrastructure, but truly market-based reforms will be slow
in coming.
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 its large European
neighbors. The Liechtenstein economy is widely diversified with a
large number of small businesses. Low business taxes - the maximum
tax rate is 20% - and easy incorporation rules have induced many
holding 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
the European Free Trade Association (EFTA) and the EU) since May
1995. The government is working to harmonize its economic policies
with those of an integrated Europe.
Lithuania
Lithuania, the Baltic state that has conducted the most
trade with Russia, has slowly rebounded from the 1998 Russian
financial crisis. Unemployment remains high, still 10.7% in 2003,
but is improving. Growing domestic consumption and increased
investment have furthered recovery. Trade has been increasingly
oriented toward the West. Lithuania has gained membership in the
World Trade Organization and has moved ahead with plans to join the
EU. Privatization of the large, state-owned utilities, particularly
in the energy sector, is nearing completion. Overall, more than 80%
of enterprises have been privatized. Foreign government and business
support have helped in the transition from the old command economy
to a market economy.
Luxembourg
This stable, high-income economy 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, which now accounts for about 22% of GDP, has more
than compensated for the decline in steel. Most banks are
foreign-owned and have extensive foreign dealings. Agriculture is
based on small family-owned farms. The economy depends on foreign
and trans-border workers for more than 30% of its labor force.
Although Luxembourg, like all EU members, has suffered from the
global economic slump, the country has maintained a fairly strong
growth rate and enjoys an extraordinarily high standard of living.
Macau
Macau's economy four years after reversion to China remains
one of the most open in the world. The territory's net exports of
goods and services account for 39% of GDP with tourism and apparel
exports as the mainstays. Although the territory was hit hard by the
1998 Asian financial crisis and the global downturn in 2001, its
economy grew an estimated 9.5% in 2002. A rapid rise in the number
of mainland visitors because of China's easing of restrictions on
travel drove the recovery. The budget also returned to surplus in
2002 because of the surge in visitors from China and a hike in taxes
on gambling profits, which generated about 63% of government
revenue. The liberalization of Macao's gambling monopoly may
contribute to GDP growth, as the three companies awarded gambling
licenses have pledged to invest $2.2 billion - roughly 33% of GDP -
in the territory. Much of Macau's textile industry may move to the
mainland as the Multi-Fiber Agreement is phased out. The territory
may have to rely more on gambling and trade-related services to
generate growth. Growth fell to 4% in 2003, according to early
government forecasts, with the drop in large measure due to concerns
over the Severe Acute Respiratory Syndrome (SARS).
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
Yugoslavia, one of its largest markets, and a Greek economic embargo
over a dispute about the country's constitutional name and flag
hindered economic growth until 1996. GDP subsequently rose each year
through 2000. However, the leadership's commitment to economic
reform, free trade, and regional integration was undermined by the
ethnic Albanian insurgency of 2001. The economy shrank 4.5% because
of decreased trade, intermittent border closures, increased deficit
spending on security needs, and investor uncertainty. Growth barely
recovered in 2002 to 0.3%, then rose to 2.8% in 2003. Unemployment
at one-third of the workforce remains the most critical economic
problem. But even this issue is overshadowed by the fragile
political situation.
Madagascar
Having discarded past socialist economic policies,
Madagascar has since the mid 1990s followed a World Bank and IMF led
policy of privatization and liberalization, which has placed the
country on a slow and steady growth path. Agriculture, including
fishing and forestry, is a mainstay of the economy, accounting for
one-fourth of GDP and employing four-fifths of the population.
Export earnings primarily are earned in the small industrial sector,
which features textile manufacturing and agriculture processing.
Deforestation and erosion, aggravated by the use of firewood as the
primary source of fuel are serious concerns. The separatist
political crisis of 2002 undermined macroeconomic stability, with
the estimated drop in output being subject to a wide margin of
error. Poverty reduction will be the centerpiece of economic policy
for the next few years.
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 accounted for
nearly 40% of GDP and 88% of export revenues in 2001. 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. In November 2002 the World Bank approved a $50
million drought recovery package, which is to be used for famine
relief. The government faces strong challenges, e.g., to fully
develop a market economy, to improve educational facilities, to face
up to environmental problems, to deal with the rapidly growing
problem of HIV/AIDS, and to satisfy foreign donors that fiscal
discipline is being tightened. The performance of the tobacco sector
is key to short-term growth as tobacco accounts for over 50% of
exports.