The 2009 CIA World Factbook

by United States. Central Intelligence Agency

Japan In the years following World War II, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) helped Japan advance with extraordinary speed to the rank of second most technologically powerful economy in the world after the US. Today, measured on a purchasing power parity (PPP) basis, Japan is the third-largest economy in the world after the US and China. Two notable characteristic of the post-war economy were the close interlocking structures of manufacturers, suppliers, and distributors, known as keiretsu, and the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding under the dual pressures of global competition and domestic demographic change. Japan's industrial sector is heavily dependent on imported raw materials and fuels. A tiny agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self sufficient in rice, Japan imports about 60% of its food on a caloric basis. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades, overall real economic growth had been spectacular - a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s, averaging just 1.7%, largely because of the after effects of inefficient investment and an asset price bubble in the late 1980s that required a protracted period of time for firms to reduce excess debt, capital, and labor. In October 2007 Japan's longest post-war period of economic expansion ended after 69 months and Japan entered into recession in 2008, with 2009 marking a return to near 0% interest rates. The 10-year privatization of Japan Post, which has functioned not only as the national postal delivery system but also, through its banking and insurance facilities as Japan's largest financial institution, was completed in October 2007, marking a major milestone in the process of structural reform. The Japanese financial sector was not heavily exposed to sub-prime mortgages or their derivative instruments and weathered the initial effect of the global credit crunch, but a sharp downturn in business investment and global demand for Japan's exports in late 2008 pushed Japan further into a recession. Japan's huge government debt, which totals 170% of GDP, and the aging of the population are two major long-run problems. Debate continues on the role of and effects of reform in restructuring the economy.

Jersey
Jersey's economy is based on international financial
services, agriculture, and tourism. In 2005 the finance sector
accounted for about 50% of the island's output. Potatoes,
cauliflower, tomatoes, and especially flowers are important export
crops, shipped mostly to the UK. The Jersey breed of dairy cattle is
known worldwide and represents an important export income earner.
Milk products go to the UK and other EU countries. Tourism accounts
for one-quarter of GDP. In recent years, the government has
encouraged light industry to locate in Jersey, with the result that
an electronics industry has developed, displacing more traditional
industries. All raw material and energy requirements are imported,
as well as a large share of Jersey's food needs. Light taxes and
death duties make the island a popular tax haven. Living standards
come close to those of the UK.

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 with some
Israeli content duty free to the US. In 2006 and 2008, Jordan used
privatization proceeds to significantly reduce its debt-to-GDP
ratio. These measures have helped improve productivity and have made
Jordan more attractive for foreign investment. 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 growing budget
deficit, attracting investments, and creating jobs. Jordan is
currently exploring nuclear power generation to forestall energy
shortfalls. Jordan's conservative banking sector has been largely
protected from the worldwide financial crisis, but many businesses,
particularly in the tourism and real estate sector, are predicting a
slow-down in 2009.

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. Kazakhstan enjoyed
double-digit growth in 2000-01 and 8% or more per year in 2002-07 -
thanks largely to its booming energy sector, but also to economic
reform, good harvests, and increased foreign investment; growth
slowed to 2.4% in 2008, however, as a result of declining oil prices
and a softening world economy. Inflation reached 10% in 2007 and 17%
in 2008. In the energy sector, the opening of the Caspian Pipeline
Consortium 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 changed the corporate tax code
to favor domestic industry as a means 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, most recently, with regard to the Kashagan
project in 2007-08. Since 2007, Astana has provided financial
support to the banking sector which has been struggling with poor
asset quality and large foreign loans.

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. Post-election violence in
early 2008, coupled with the effects of the global financial crisis
on remittance and exports, reduced GDP growth to 2.2% in 2008, down
from 7% the previous year.

Kiribati
A remote country of 33 scattered coral atolls, Kiribati has
few natural resources and is one of the least developed Pacific
Islands. 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 the EU, UK, US, Japan, Australia, New Zealand, Canada, UN
agencies, and Taiwan accounts for 20-25% 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. Large-scale
military spending draws off resources needed for investment and
civilian consumption. Industrial and power output have declined in
parallel from pre-1990 levels. Severe flooding in the summer of 2007
aggravated chronic food shortages caused by on-going systemic
problems including a lack of arable land, collective farming
practices, and persistent shortages of tractors and fuel.
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. Since 2002, the
government has allowed private "farmers' markets" 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. In May 2008,
the US agreed to give 500,000 metric tons of food to North Korea via
the World Food Program and US nongovernmental organizations;
Pyongyang began receiving these shipments in mid-2008. During the
October 2007 summit, South Korea also agreed to develop some of
North Korea's infrastructure, natural resources, and light industry,
but inter-Korean economic cooperation slowed in 2008 as Pyongyang
restricted tourism and manufacturing joint ventures in the North,
and food aid from South Korea was suspended. 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. In 2008, its GDP
per capita was roughly the same as that of the Czech Republic and
New Zealand. Initially, 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% in 1999-2000. Korea adopted numerous economic
reforms following the crisis, including greater openness to foreign
investment and imports. 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. In 2008, inflation increased in
the face of rising oil and food prices before easing in the fourth
quarter. Korea was hit hard by the global financial turmoil that
began in September 2008. Stock prices fell by more than 40% for the
year and the value of the won fell by approximately 26%. Korean GDP
shrank in the fourth quarter and GDP growth for the year was just
2.2%. The Korean government adopted several measures to combat the
credit crunch and stimulate the economy.

Kosovo
Over the past few years Kosovo's economy has shown
significant progress in transitioning to a market-based system and
maintaining macroeconomic stability, 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 - are estimated to account
for about 15% of GDP, and donor-financed activities and aid for
another 15%. Kosovo's citizens are the poorest in Europe with an
average annual per capita income of only $2,300. Unemployment,
around 40% of the population, is a significant problem that
encourages outward migration and black market activity. 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. 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 of ageing equipment and insufficient
investment. A limited and unreliable electricity supply due to
technical and financial problems is a major impediment to economic
development. Kosovo's Ministry of Energy and Mining has solicited
expressions of interest from private investors to develop a new
power plant in order to address Kosovo and the region's unmet and
growing demands for power. The official currency of Kosovo is the
euro, but the Serbian dinar is also used in Serb enclaves. Kosovo's
tie to the euro has helped keep core inflation low. Kosovo has one
of the most open economies in the region, and continues to work with
the international community on measures to improve the business
environment and attract foreign investment.

Kuwait
Kuwait is a small, rich, relatively open economy with
self-reported crude oil reserves of about 104 billion barrels - 8%
of world reserves. Petroleum accounts for nearly half of GDP, 95% of
export revenues, and 80% of government income. Kuwait experienced
rapid economic growth over the last several years on the back of
high oil prices and in 2008 posted its tenth consecutive budget
surplus. As a result of this positive fiscal situation, the need for
economic reforms was less urgent and the government did not push
through new initiatives. The drop in oil prices in late 2008 will
reduce Kuwait's fiscal surplus in 2009. The global financial crisis
may slow the pace of investment and development projects, but Kuwait
has vowed to use its considerable financial resources to stabilize
the economy if necessary.