Micronesia, Federated States of
Economic activity consists primarily
of subsistence farming and fishing. The islands have few mineral
deposits worth exploiting, except for high-grade phosphate. The
potential for a tourist industry exists, but the remote location, a
lack of adequate facilities, and limited air connections hinder
development. In November 2002, the country experienced a further
reduction in future revenues from the Compact of Free Association -
the agreement with the US in which Micronesia received $1.3 billion
in financial and technical assistance over a 15-year period until
2001. The country's medium-term economic outlook appears fragile due
not only to the reduction in US assistance but also to the slow
growth of the private sector. Geographical isolation and a poorly
developed infrastructure remain major impediments to long-term
growth.
Midway Islands
The economy is based on providing support services
for the national wildlife refuge activities located on the islands.
All food and manufactured goods must be imported.
Moldova
Moldova remains the poorest country in Europe despite recent
progress from its small economic base. It enjoys a favorable climate
and good farmland but has no major mineral deposits. As a result,
the economy depends heavily on agriculture, featuring fruits,
vegetables, wine, and tobacco. Moldova must import almost all of its
energy supplies from Russia. Energy shortages contributed to sharp
production declines after the breakup of the Soviet Union in 1991.
As part of an ambitious reform effort, Moldova introduced a
convertible currency, freed prices, stopped issuing preferential
credits to state enterprises, backed steady land privatization,
removed export controls, and freed interest rates. The government
entered into agreements with the World Bank and the IMF to promote
growth and reduce poverty. The economy returned to positive growth,
of 2.1% in 2000, 6.1% in 2001, 7.2% in 2002, and 6.3% in 2003.
Further reforms will come slowly because of strong political forces
backing government controls. The economy remains vulnerable to
higher fuel prices, poor agricultural weather, and the skepticism of
foreign investors.
Monaco
Monaco, bordering France on the Mediterranean coast, is a
popular resort, attracting tourists to its casino and pleasant
climate. In 2001, a major construction project extended the pier
used by cruise ships in the main harbor. The principality has
successfully sought to diversify into services and small,
high-value-added, nonpolluting industries. The state has no income
tax and low business taxes and thrives as a tax haven both for
individuals who have established residence and for foreign companies
that have set up businesses and offices. The state retains
monopolies in a number of sectors, including tobacco, the telephone
network, and the postal service. Living standards are high, roughly
comparable to those in prosperous French metropolitan areas. Monaco
does not publish national income figures; the estimates below are
extremely rough.
Mongolia
Economic activity traditionally has been based on
agriculture and breeding of livestock. Mongolia also has extensive
mineral deposits; copper, coal, molybdenum, tin, tungsten, and gold
account for a large part of industrial production. Soviet
assistance, at its height one-third of GDP, disappeared almost
overnight in 1990-91 at the time of the dismantlement of the USSR.
Mongolia was driven into deep recession, prolonged by the Mongolian
People's Revolutionary Party's (MPRP) reluctance to undertake
serious economic reform. The Democratic Union Coalition (DUC)
government embraced free-market economics, eased price controls,
liberalized domestic and international trade, and attempted to
restructure the banking system and the energy sector. Major domestic
privatization programs were undertaken, as well as the fostering of
foreign investment through international tender of the oil
distribution company, a leading cashmere company, and banks. Reform
was held back by the ex-Communist MPRP opposition and by the
political instability brought about through four successive
governments under the DUC. Economic growth picked up in 1997-99
after stalling in 1996 due to a series of natural disasters and
declines in world prices of copper and cashmere. In August and
September 1999, the economy suffered from a temporary Russian ban on
exports of oil and oil products, and Mongolia remains vulnerable in
this sector. Mongolia joined the World Trade Organization (WTrO) in
1997. The international donor community pledged over $300 million
per year at the Consultative Group Meeting, held in Ulaanbaatar in
June 1999. The MPRP government, elected in July 2000, was anxious to
improve the investment climate; it also had to deal with a heavy
burden of external debt. Falling prices for Mongolia's mainly
primary sector exports, widespread opposition to privatization, and
adverse effects of weather on agriculture in early 2000 and 2001
restrained real GDP growth. Despite drought problems in 2002, GDP
rose 4.0%, followed by a solid 5.0% increase in 2003. The first
applications under the land privatization law have been marked by a
number of disputes over particular sites. Russia claims Mongolia
owes it $11 billion from the Soviet period; any settlement could
substantially increase Mongolia's foreign debt burden.
Montserrat
Severe volcanic activity, which began in July 1995, has
put a damper on this small, open economy. A catastrophic eruption in
June 1997 closed the airports and seaports, causing further economic
and social dislocation. Two-thirds of the 12,000 inhabitants fled
the island. Some began to return in 1998, but lack of housing
limited the number. The agriculture sector continued to be affected
by the lack of suitable land for farming and the destruction of
crops. Prospects for the economy depend largely on developments in
relation to the volcano and on public sector construction activity.
The UK has launched a three-year $122.8 million aid program to help
reconstruct the economy. Half of the island is expected to remain
uninhabitable for another decade.
Morocco
Morocco faces the problems typical of developing countries -
restraining government spending, reducing constraints on private
activity and foreign trade, and achieving sustainable economic
growth. Despite structural adjustment programs supported by the IMF,
the World Bank, and the Paris Club, the dirham is only fully
convertible for current account transactions. Reforms of the
financial sector are being contemplated. Droughts depressed activity
in the key agricultural sector and contributed to a stagnant economy
in 2002. Morocco reported large foreign exchange inflows from the
sale of a mobile telephone license, and partial privatization of the
state-owned telecommunications company and the state tobacco
company. Favorable rainfall in 2003 led to a growth of 6%.
Formidable long-term challenges include: preparing the economy for
freer trade with the EU and US, improving education, and attracting
foreign investment to boost living standards and job prospects for
Morocco's youth.
Mozambique
At independence in 1975, Mozambique was one of the
world's poorest countries. Socialist mismanagement and a brutal
civil war from 1977-92 exacerbated the situation. In 1987, the
government embarked on a series of macroeconomic reforms designed to
stabilize the economy. These steps, combined with donor assistance
and with political stability since the multi-party elections in
1994, have led to dramatic improvements in the country's growth
rate. Inflation was reduced to single digits during the late 1990s
although it returned to double digits in 2000-03. Fiscal reforms,
including the introduction of a value-added tax and reform of the
customs service, have improved the government's revenue collection
abilities. In spite of these gains, Mozambique remains dependent
upon foreign assistance for much of its annual budget, and the
majority of the population remains below the poverty line.
Subsistence agriculture continues to employ the vast majority of the
country's workforce. A substantial trade imbalance persists although
the opening of the MOZAL aluminum smelter, the country's largest
foreign investment project to date has increased export earnings.
Additional investment projects in titanium extraction and processing
and garment manufacturing should further close the import/export
gap. Mozambique's once substantial foreign debt has been reduced
through forgiveness and rescheduling under the IMF's Heavily
Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives, and is
now at a manageable level.
Namibia
The economy is heavily dependent on the extraction and
processing of minerals for export. Mining accounts for 20% of GDP.
Rich alluvial diamond deposits make Namibia a primary source for
gem-quality diamonds. Namibia is the fourth-largest exporter of
nonfuel minerals in Africa, the world's fifth-largest producer of
uranium, and the producer of large quantities of lead, zinc, tin,
silver, and tungsten. The mining sector employs only about 3% of the
population while about half of the population depends on subsistence
agriculture for its livelihood. Namibia normally imports about 50%
of its cereal requirements; in drought years food shortages are a
major problem in rural areas. A high per capita GDP, relative to the
region, hides the great inequality of income distribution; nearly
one-third of Namibians had annual incomes of less than $1,400 in
constant 1994 dollars, according to a 1993 study. The Namibian
economy is closely linked to South Africa with the Namibian dollar
pegged to the South African rand. Privatization of several
enterprises in coming years may stimulate long-run foreign
investment. Mining of zinc, copper, and silver and increased fish
production led growth in 2003.
Nauru
Revenues of this tiny island have traditionally come from
exports of phosphates, but reserves are now depleted. Few other
resources exist with most necessities being imported, mainly from
Australia, its former occupier and later major source of support.
The rehabilitation of mined land and the replacement of income from
phosphates are serious long-term problems. In anticipation of the
exhaustion of Nauru's phosphate deposits, substantial amounts of
phosphate income have been invested in trust funds to help cushion
the transition and provide for Nauru's economic future. As a result
of heavy spending from the trust funds, the government faces virtual
bankruptcy. To cut costs the government has called for a freeze on
wages, a reduction of over-staffed public service departments,
privatization of numerous government agencies, and closure of some
overseas consulates. In recent years Nauru has encouraged the
registration of offshore banks and corporations. In 2004 the
deterioration in housing, hospitals, and other capital plant
continued, and the cost to Australia of keeping the government and
economy afloat has substantially mounted. Few comprehensive
statistics on the Nauru economy exist, with estimates of Nauru's GDP
varying widely.