Jordan
Jordan is a small Arab country with insufficient supplies of
water, oil, and other natural resources. Poverty, unemployment, and
inflation are fundamental problems, but King ABDALLAH II, since
assuming the throne in 1999, has undertaken some broad economic
reforms in a long-term effort to improve living standards. Since
Jordan's graduation from its most recent IMF program in 2002, Amman
has continued to follow IMF guidelines, practicing careful monetary
policy, making substantial headway with privatization, and opening
the trade regime. Jordan's exports have significantly increased
under the free trade accord with the US and Jordanian Qualifying
Industrial Zones (QIZ), which allow Jordan to export goods duty free
to the US. In 2006, Jordan reduced its debt-to-GDP ratio
significantly. These measures have helped improve productivity and
have made Jordan more attractive for foreign investment. Before the
US-led war in Iraq, Jordan imported most of its oil from Iraq. Since
2003, however, Jordan has been more dependent on oil from other Gulf
nations. The government ended subsidies for petroleum and other
consumer goods in 2008 in an effort to control the budget. The main
challenges facing Jordan are reducing dependence on foreign grants,
reducing the budget deficit, attracting investments, and creating
jobs.

Kazakhstan
Kazakhstan, the largest of the former Soviet republics in
territory, excluding Russia, possesses enormous fossil fuel reserves
and plentiful supplies of other minerals and metals. It also has a
large agricultural sector featuring livestock and grain.
Kazakhstan's industrial sector rests on the extraction and
processing of these natural resources. The breakup of the USSR in
December 1991 and the collapse in 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. Kazakhstan
enjoyed double-digit growth in 2000-01 - 8% or more per year in
2002-07 - thanks largely to its booming energy sector, but also to
economic reform, good harvests, and foreign investment. Inflation,
however, jumped to more than 10% in 2007. In the energy sector, the
opening of the Caspian Consortium pipeline in 2001, from western
Kazakhstan's Tengiz oilfield to the Black Sea, substantially raised
export capacity. In 2006 Kazakhstan completed the Atasu-Alashankou
portion of an oil pipeline to China that is planned in future
construction to extend from the country's Caspian coast eastward to
the Chinese border. The country has embarked upon an industrial
policy designed to diversify the economy away from overdependence on
the oil sector by developing its manufacturing potential. The policy
aims to reduce the influence of foreign investment and foreign
personnel. The government has engaged in several disputes with
foreign oil companies over the terms of production agreements;
tensions continue. Upward pressure on the local currency continued
in 2007 due to massive oil-related foreign-exchange inflows. Aided
by strong growth and foreign exchange earnings, Kazakhstan aspires
to become a regional financial center and has created a banking
system comparable to those in Central Europe.

Kenya
The regional hub for trade and finance in East Africa, Kenya
has been hampered by corruption and by reliance upon several primary
goods whose prices have remained low. 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 0.2% 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 1.2%. Growth lagged at
1.1% in 2002 because of erratic rains, low investor confidence,
meager donor support, and political infighting up to the elections.
In the key December 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. After some early progress in
rooting out corruption and encouraging donor support, the KIBAKI
government was rocked by high-level graft scandals in 2005 and 2006.
In 2006 the World Bank and IMF delayed loans pending action by the
government on corruption. The international financial institutions
and donors have since resumed lending, despite little action on the
government's part to deal with corruption. The scandals have not
weighed down growth, with estimated real GDP growth at more than 6
percent in 2007.

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. Private sector initiatives and a financial
sector are in the early stages of development. Foreign financial aid
from UK, Japan, Australia, New Zealand, and China equals more than
10% of GDP. Remittances from seamen on merchant ships abroad account
for more than $5 million each year. Kiribati receives around $15
million annually for the government budget from an Australian trust
fund.

Korea, North
North Korea, one of the world's most centrally directed
and least open economies, faces chronic economic problems.
Industrial capital stock is nearly beyond repair as a result of
years of underinvestment and shortages of spare parts. Industrial
and power output have declined in parallel from pre-1990 levels. Due
in part to severe summer flooding followed by dry weather conditions
in the fall of 2006, the nation suffered its 13th year of food
shortages because of on-going systemic problems including a lack of
arable land, collective farming practices, and persistent shortages
of tractors and fuel. During the summer of 2007, severe flooding
again occurred. Large-scale international food aid deliveries have
allowed the people of North Korea to escape widespread starvation
since famine threatened in 1995, but the population continues to
suffer from prolonged malnutrition and poor living conditions.
Large-scale military spending draws off resources needed for
investment and civilian consumption. Since 2002, the government has
formalized an arrangement whereby private "farmers' markets" were
allowed to begin selling a wider range of goods. It also permitted
some private farming on an experimental basis in an effort to boost
agricultural output. In October 2005, the government tried to
reverse some of these policies by forbidding private sales of grains
and reinstituting a centralized food rationing system. By December
2005, the government terminated most international humanitarian
assistance operations in North Korea (calling instead for
developmental assistance only) and restricted the activities of
remaining international and non-governmental aid organizations such
as the World Food Program. External food aid now comes primarily
from China and South Korea in the form of grants and long-term
concessional loans. During the October 2007 summit, South Korea also
agreed to develop some of North Korea's infrastructure and natural
resources and light industry. Firm political control remains the
Communist government's overriding concern, which will likely inhibit
the loosening of economic regulations.

Korea, South
Since the 1960s, South Korea has achieved an incredible
record of growth and integration into the high-tech modern world
economy. Four decades ago, GDP per capita was comparable with levels
in the poorer countries of Africa and Asia. In 2004, South Korea
joined the trillion dollar club of world economies. Today its GDP
per capita is roughly the same as that of Greece and Spain. This
success 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 1997-98 exposed
longstanding weaknesses in South Korea's development model including
high debt/equity ratios, massive foreign borrowing, and an
undisciplined financial sector. GDP plunged by 6.9% in 1998, then
recovered by 9.5% in 1999 and 8.5% 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 7%, despite anemic global growth. Between 2003 and 2007,
growth moderated to about 4-5% annually. A downturn in consumer
spending was offset by rapid export growth. Moderate inflation, low
unemployment, and an export surplus in 2007 characterize this solid
economy, but inflation and unemployment are increasing in the face
of rising oil prices.

Kosovo
Over the past few years Kosovo's economy has shown
significant progress in transitioning to a market-based system, but
it is still highly dependent on the international community and the
diaspora for financial and technical assistance. Remittances from
the diaspora - located mainly in Germany and Switzerland - account
for about 30% of GDP. Kosovo's citizens are the poorest in Europe
with an average annual per capita income of only $1800 - about
one-third the level of neighboring Albania. Unemployment - at more
than 40% of the population - is a severe problem that encourages
outward migration. Most of Kosovo's population lives in rural towns
outside of the capital, Pristina. Inefficient, near-subsistence
farming is common - the result of small plots, limited
mechanization, and lack of technical expertise. Economic growth is
largely driven by the private sector - mostly small-scale retail
businesses. With international assistance, Kosovo has been able to
privatize 50% of its state-owned enterprises (SOEs) by number, and
over 90% of SOEs by value. Minerals and metals - including lignite,
lead, zinc, nickel, chrome, aluminum, magnesium, and a wide variety
of construction materials - once formed the backbone of industry,
but output has declined because investment has been insufficient to
replace ageing Eastern Bloc equipment. Technical and financial
problems in the power sector also impedes industrial development.
The US has worked with the World Bank to prepare a commercial tender
for the development of new power generating and mining capacity. The
official currency of Kosovo is the euro, but the Serbian dinar is
also used in the Serb enclaves. Kosovo's tie to the euro has helped
keep inflation low. Kosovo has maintained a budget surplus as a
result of efficient tax collection and inefficient budget execution.
While maintaining ultimate oversight, UNMIK continues to work with
the EU and with Kosovo's government to accelerate economic growth,
lower unemployment, and attract foreign investment. In order to help
integrate Kosovo into regional economic structures, UNMIK signed (on
behalf of Kosovo) its accession to the Central Europe Free Trade
Area (CEFTA) in 2006. In February 2008, UNMIK also represented
Kosovo at the newly established Regional Cooperation Council (RCC).

Kuwait
Kuwait is a small, rich, relatively open economy with
self-reported crude oil reserves of about 104 billion barrels - 10%
of world reserves. Petroleum accounts for nearly half of GDP, 95% of
export revenues, and 80% of government income. High oil prices in
recent years have helped build Kuwait's budget and trade surpluses
and foreign reserves. As a result of this positive fiscal situation,
the need for economic reforms is less urgent and the government has
not earnestly pushed through new initiatives. Despite its vast oil
reserves, Kuwait experienced power outages during the summer months
in 2006 and 2007 because demand exceeded power generating capacity.
Power outages are likely to worsen, given its high population growth
rates, unless the government can increase generating capacity. In
May 2007 Kuwait changed its currency peg from the US dollar to a
basket of currencies in order to curb inflation and to reduce its
vulnerability to external shocks.

Kyrgyzstan
Kyrgyzstan is a 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, natural gas, and electricity. Following
independence, Kyrgyzstan was progressive in carrying out market
reforms such as an improved regulatory system and land reform.
Kyrgyzstan was the first Commonwealth of Independent States (CIS)
country to be accepted into the World Trade Organization. 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. The economy is heavily weighted toward
gold export and a drop in output at the main Kumtor gold mine
sparked a 0.5% decline in GDP in 2002 and a 0.6% decline in 2005.
GDP grew more than 6% in 2007, partly due to higher gold prices
internationally. The government made steady strides in controlling
its substantial fiscal deficit, nearly closing the gap between
revenues and expenditures in 2006, before boosting expenditures more
than 20% in 2007. The government and international financial
institutions have been engaged in a comprehensive medium-term
poverty reduction and economic growth strategy. In 2005, Bishkek
agreed to pursue much-needed tax reform and, in 2006, became
eligible for the heavily indebted poor countries (HIPC) initiative.
Progress fighting corruption, 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 one-party
Communist states, began decentralizing control and encouraging
private enterprise in 1986. The results, starting from an extremely
low base, were striking - growth averaged 6% per year in 1988-2007
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 underdeveloped infrastructure, particularly
in rural areas. It has no railroads, a rudimentary road system, and
limited external and internal telecommunications, though the
government is sponsoring major improvements in the road system with
support from Japan and China. Electricity is available in urban
areas and in most rural districts. Subsistence agriculture,
dominated by rice, accounts for about 40% of GDP and provides 80% of
total employment. The economy will continue to benefit from aid from
international donors and from foreign investment in hydropower and
mining. Construction will be another strong economic driver,
especially as hydroelectric dam and road projects gain steam.
Several policy changes since 2004 may help spur growth. In late
2004, Laos gained Normal Trade Relations status with the US,
allowing Laos-based producers to benefit from lower tariffs on
exports. Laos is taking steps to join the World Trade Organization
in the next few years; the resulting trade policy reforms will
improve the business environment. On the fiscal side, a value-added
tax (VAT) regime, slated to begin in 2008, should help streamline
the government's inefficient tax system.