Part 344

Bhutan The economy, one of the world's smallest and least developed, is based on agriculture and forestry, which provide the main livelihood for more than 60% of the population. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult and expensive. The economy is closely aligned with India's through strong trade and monetary links and dependence on India's financial assistance. The industrial sector is technologically backward, with most production of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labor. Model education, social, and environment programs are underway with support from multilateral development organizations. Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. For example, the government, in its cautious expansion of the tourist sector, encourages visits by upscale, environmentally conscientious tourists. Complicated controls and uncertain policies in areas such as industrial licensing, trade, labor, and finance continue to hamper foreign investment. Hydropower exports to India have boosted Bhutan's overall growth. New hydropower projects will be the driving force behind Bhutan's ability to create employment and sustain growth in the coming years.

Bolivia Bolivia is one of the poorest and least developed countries in Latin America. Following a disastrous economic crisis during the early 1980s, reforms spurred private investment, stimulated economic growth, and cut poverty rates in the 1990s. The period 2003-05 was characterized by political instability, racial tensions, and violent protests against plans - subsequently abandoned - to export Bolivia's newly discovered natural gas reserves to large northern hemisphere markets. In 2005, the government passed a controversial hydrocarbons law that imposed significantly higher royalties and required foreign firms then operating under risk-sharing contracts to surrender all production to the state energy company in exchange for a predetermined service fee. After higher prices for mining and hydrocarbons exports produced a fiscal surplus in 2008, the global recession in 2009 slowed growth. A decline in commodity prices that began in late 2008, a lack of foreign investment in the mining and hydrocarbon sectors, a poor infrastructure, and the suspension of trade benefits with the United States will pose challenges for the Bolivian economy.

Bosnia and Herzegovina The interethnic warfare in Bosnia and Herzegovina caused production to plummet by 80% from 1992 to 1995 and unemployment to soar. With an uneasy peace in place, output recovered in 1996-99 at high percentage rates from a low base; but output growth slowed in 2000-02. Part of the lag in output was made up in 2003-08 when GDP growth exceeded 5% per year. However, the country experienced negative GDP growth of almost 3% in 2009 due in large part to a reduction in exports caused by the global economic crisis. One of Bosnia's main economic challenges in 2010 has been to reduce spending on public sector wages and social benefits to meet the IMF's criteria for obtaining funding for budget shortfalls. Banking reform accelerated in 2001 as all the Communist-era payments bureaus were shut down; foreign banks, primarily from Austria and Italy, now control most of the banking sector. The konvertibilna marka (convertible mark or BAM)- the national currency introduced in 1998 - is pegged to the euro, and confidence in the currency and the banking sector has increased. Bosnia's private sector is growing and foreign investment is slowly increasing, but government spending, at roughly 50% of GDP, remains high because of redundant government offices at the state, entity and municipal level. Privatization of state enterprises, however, has been slow, particularly in the Federation where political division between ethnically-based political parties makes agreement on economic policy more difficult. A sizeable current account deficit and high unemployment rate remain the two most serious macroeconomic problems. Successful implementation of a value-added tax in 2006 provided a predictable source of revenue for the government and helped rein in gray market activity. National-level statistics have also improved over time but a large share of economic activity remains unofficial and unrecorded. Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007.

Botswana Botswana has maintained one of the world's highest economic growth rates since independence in 1966, though growth fell below 5% in 2007-08, and turned sharply negative in 2009, with industry falling nearly 30%. Through fiscal discipline and sound management, Botswana transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of $13,100 in 2010. Two major investment services rank Botswana as the best credit risk in Africa. Diamond mining has fueled much of the expansion and currently accounts for more than one-third of GDP, 70-80% of export earnings, and about half of the government's revenues. Botswana's heavy reliance on a single luxury export was a critical factor in the sharp economic contraction of 2009. Tourism, financial services, subsistence farming, and cattle raising are other key sectors. Although unemployment was 7.5% in 2007 according to official reports, unofficial estimates place it closer to 40%. The prevalence of HIV/AIDS is second highest in the world and threatens Botswana's impressive economic gains. An expected leveling off in diamond mining production within the next two decades overshadows long-term prospects.

Bouvet Island no economic activity; declared a nature reserve

Brazil Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors, Brazil's economy outweighs that of all other South American countries, and Brazil is expanding its presence in world markets. Since 2003, Brazil has steadily improved its macroeconomic stability, building up foreign reserves, and reducing its debt profile by shifting its debt burden toward real denominated and domestically held instruments. In 2008, Brazil became a net external creditor and two ratings agencies awarded investment grade status to its debt. After record growth in 2007 and 2008, the onset of the global financial crisis hit Brazil in September 2008. Brazil experienced two quarters of recession, as global demand for Brazil's commodity-based exports dwindled and external credit dried up. However, Brazil was one of the first emerging markets to begin a recovery. Consumer and investor confidence revived and GDP growth returned to positive in 2010, boosted by an export recovery. Brazil's strong growth and high interest rates make it an attractive destination for foreign investors. Large capital inflows over the past year have contributed to the rapid appreciation of its currency and led the government to raise taxes on some foreign investments. President Dilma ROUSSEFF has pledged to retain the previous administration's commitment to inflation targeting by the Central Bank, a floating exchange rate, and fiscal restraint.

British Indian Ocean Territory All economic activity is concentrated on the largest island of Diego Garcia, where a joint UK-US military facility is located. Construction projects and various services needed to support the military installation are performed by military and contract employees from the UK, Mauritius, the Philippines, and the US. There are no industrial or agricultural activities on the islands. The territory earns foreign exchange by selling fishing licenses and postage stamps.

British Virgin Islands The economy, one of the most stable and prosperous in the Caribbean, is highly dependent on tourism generating an estimated 45% of the national income. More than 934,000 tourists, mainly from the US, visited the islands in 2008. In the mid-1980s, the government began offering offshore registration to companies wishing to incorporate in the islands, and incorporation fees now generate substantial revenues. Roughly 400,000 companies were on the offshore registry by yearend 2000. The adoption of a comprehensive insurance law in late 1994, which provides a blanket of confidentiality with regulated statutory gateways for investigation of criminal offenses, made the British Virgin Islands even more attractive to international business. Livestock raising is the most important agricultural activity; poor soils limit the islands' ability to meet domestic food requirements. Because of traditionally close links with the US Virgin Islands, the British Virgin Islands has used the US dollar as its currency since 1959.

Brunei Brunei has a small well-to-do economy that encompasses a mixture of foreign and domestic entrepreneurship, government regulation, welfare measures, and village tradition. Crude oil and natural gas production account for just over half of GDP and more than 90% of exports. Per capita GDP is among the highest in Asia, and substantial income from overseas investment supplements income from domestic production. The government provides for all medical services and free education through the university level and subsidizes rice and housing. A new monetary authority was established in January 2011 with responsibilities that include monetary policy, monitoring of financial institutions, and currency trading activities. Other plans for the future include upgrading the labor force, reducing unemployment, strengthening the banking and tourist sectors, increasing agricultural production, and, in general, further widening the economic base beyond oil and gas.

Bulgaria Bulgaria, a former Communist country that entered the EU on 1 January 2007, averaged more than 6% growth from 2004 to 2008, driven by significant amounts of foreign direct investment and consumption. Successive governments have demonstrated a commitment to economic reforms and responsible fiscal planning, but the global downturn sharply reduced domestic demand, exports, capital inflows, and industrial production. GDP contracted by approximately 5% in 2009, and stagnated in 2010, despite a significant recovery in exports. The economy is expected to grow modestly in 2011, however. Corruption in the public administration, a weak judiciary, and the presence of organized crime remain significant challenges.

Burkina Faso Burkina Faso is a poor, landlocked country that relies heavily on cotton and gold exports for revenue. The country has few natural resources and a weak industrial base. About 90% of the population is engaged in subsistence agriculture, which is vulnerable to periodic drought. Cotton is the main cash crop. Since 1998, Burkina Faso has embarked upon a gradual privatization of state-owned enterprises and in 2004 revised its investment code to attract foreign investment. As a result of this new code and other legislation favoring the mining sector, the country has seen an upswing in gold exploration and production. By 2010, gold had become the main source of export revenue.

Burma Burma, a resource-rich country, suffers from pervasive government controls, inefficient economic policies, corruption, and rural poverty. Despite Burma's emergence as a natural gas exporter, socio-economic conditions have deteriorated under the regime's mismanagement, leaving most of the public in poverty, while military leaders and their business cronies exploit the country's ample natural resources. The economy suffers from serious macroeconomic imbalances - including rising inflation, fiscal deficits, multiple official exchange rates that overvalue the Burmese kyat, a distorted interest rate regime, unreliable statistics, and an inability to reconcile national accounts to determine a realistic GDP figure. Burma's poor investment climate hampers the inflow of foreign investment; in recent years, foreign investors have shied away from nearly every sector except for natural gas, power generation, timber, and mining. The business climate is widely perceived as opaque, corrupt, and highly inefficient. Over 60% of the FY 2009-10 budget is allocated to state owned enterprises - most operating at a deficit. The government has recently privatized a number of state owned enterprises, but most of the benefits have accrued to regime insiders and cronies. The most productive sectors will continue to be in extractive industries - especially oil and gas, mining, and timber - with the latter two causing significant environmental degradation. Other areas, such as manufacturing, tourism and services, struggle in the face of inadequate infrastructure, unpredictable trade policies, neglected health and education systems, and endemic corruption. A major banking crisis in 2003 caused 20 private banks to close; private banks still operate under tight restrictions, limiting the private sector's access to credit. The United States, the European Union, Canada, and Australia have imposed financial and economic sanctions on Burma, prohibiting most financial transactions with Burmese entities, imposing travel bans on Burmese officials and others connected to the ruling regime, and banning imports of certain Burmese products. These sanctions affected the country's fledgling garment industry, isolated the struggling banking sector, and raised the costs of doing business with Burmese companies, particularly firms tied to Burmese regime leaders. The global crisis of 2008-09 caused exports and domestic consumer demand to drop. Remittances from overseas Burmese workers - who had provided significant financial support for their families - slowed or dried up as jobs were lost and migrant workers returned home. Though the Burmese government has good economic relations with its neighbors, better investment and business climates and an improved political situation are needed to promote serious foreign investment, exports, and tourism.

Burundi Burundi is a landlocked, resource-poor country with an underdeveloped manufacturing sector. The economy is predominantly agricultural which accounts for about 35% of GDP and employs more than 90% of the population. Burundi's primary exports are coffee and tea, which account for 90% of foreign exchange earnings, though exports are a relatively small share of GDP. Burundi's export earning - and its ability to pay for imports - rests primarily on weather conditions and international coffee and tea prices. The Tutsi minority, 14% of the population, dominates the coffee trade. An ethnic-based war that lasted for over a decade resulted in more than 200,000 deaths, forced more than 48,000 refugees into Tanzania, and displaced 140,000 others internally. Only one in two children go to school, and approximately one in 15 adults has HIV/AIDS. Food, medicine, and electricity remain in short supply. Burundi's GDP grew around 4% annually in 2006-09. Political stability and the end of the civil war have improved aid flows and economic activity has increased, but underlying weaknesses - a high poverty rate, poor education rates, a weak legal system, and low administrative capacity - risk undermining planned economic reforms. Burundi will continue to remain heavily dependent on aid from bilateral and multilateral donors; the delay of funds after a corruption scandal cut off bilateral aid in 2007 reduced government's revenues and its ability to pay salaries. Burundi joined the East African Community, which should boost Burundi's regional trade ties, and received $700 million in debt relief in 2009. Instability spilling over from eastern Congo-Kinshasa and the ban on minerals smuggled across Burundi's border will be the main challenges to economic growth.

Cambodia From 2004 to 2007, the economy grew about 10% per year, driven largely by an expansion in the garment sector, construction, agriculture, and tourism. GDP contracted 1.5% in 2009 as a result of the global economic slowdown, but climbed more than 4% in 1010, driven by renewed exports. With the January 2005 expiration of a WTO Agreement on Textiles and Clothing, Cambodian textile producers were forced to compete directly with lower-priced countries such as China, India, Vietnam, and Bangladesh. The garment industry currently employs more than 280,000 people - about 5% of the work force - and contributes more than 70% of Cambodia's exports. In 2005, exploitable oil deposits were found beneath Cambodia's territorial waters, representing a new revenue stream for the government if commercial extraction begins. Mining also is attracting significant investor interest, particularly in the northern parts of the country. The government has said opportunities exist for mining bauxite, gold, iron and gems. In 2006, a US-Cambodia bilateral Trade and Investment Framework Agreement (TIFA) was signed, and several rounds of discussions have been held since 2007. Rubber exports increased about 25% in 2009 due to rising global demand. The tourism industry has continued to grow rapidly, with foreign arrivals exceeding 2 million per year in 2007-08, however, economic troubles abroad dampened growth in 2009. The global financial crisis is weakening demand for Cambodian exports, and construction is declining due to a shortage of credit. The long-term development of the economy remains a daunting challenge. The Cambodian government is working with bilateral and multilateral donors, including the World Bank and IMF, to address the country's many pressing needs. The major economic challenge for Cambodia over the next decade will be fashioning an economic environment in which the private sector can create enough jobs to handle Cambodia's demographic imbalance. More than 50% of the population is less than 25 years old. The population lacks education and productive skills, particularly in the poverty-ridden countryside, which suffers from an almost total lack of basic infrastructure.

Cameroon Because of its modest oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa. Still, it faces many of the serious problems facing other underdeveloped countries, such as stagnate per capita income, a relatively inequitable distribution of income, a top-heavy civil service, and a generally unfavorable climate for business enterprise. Since 1990, the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalize the nation's banks. The IMF is pressing for more reforms, including increased budget transparency, privatization, and poverty reduction programs. Weak prices for oil and cocoa led to the significant slowdown in growth in 2009. The government is under pressure to reduce its budget deficit, which by the government's own forecast will hit 2.8% of GDP, but the presidential election in 2011 may make fiscal austerity difficult.

Canada As an affluent, high-tech industrial society in the trillion-dollar class, Canada resembles the US in its market-oriented economic system, pattern of production, and affluent living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban. The 1989 US-Canada Free Trade Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA) (which includes Mexico) touched off a dramatic increase in trade and economic integration with the US, its principal trading partner. Canada enjoys a substantial trade surplus with the US, which absorbs about three-fourths of Canadian exports each year. Canada is the US's largest foreign supplier of energy, including oil, gas, uranium, and electric power. Given its great natural resources, skilled labor force, and modern capital plant, Canada enjoyed solid economic growth from 1993 through 2007. Buffeted by the global economic crisis, the economy dropped into a sharp recession in the final months of 2008, and Ottawa posted its first fiscal deficit in 2009 after 12 years of surplus. Canada's major banks, however, emerged from the financial crisis of 2008-09 among the strongest in the world, owing to the country's tradition of conservative lending practices and strong capitalization. During 2010, Canada's economy grew only 3%, because of weak exports.

Cape Verde This island economy suffers from a poor natural resource base, including serious water shortages exacerbated by cycles of long-term drought and poor soil for agriculture on several of the islands. The economy is service oriented with commerce, transport, tourism, and public services accounting for about three-fourths of GDP. Although nearly 70% of the population lives in rural areas, the share of food production in GDP is low. About 82% of food must be imported. The fishing potential, mostly lobster and tuna, is not fully exploited. Cape Verde annually runs a high trade deficit financed by foreign aid and remittances from its large pool of emigrants; remittances supplement GDP by more than 20%. Despite the lack of resources, sound economic management has produced steadily improving incomes. Continued economic reforms are aimed at developing the private sector and attracting foreign investment to diversify the economy. Future prospects depend heavily on the maintenance of aid flows, the encouragement of tourism, remittances, and the momentum of the government's development program. Cape Verde became a member of the WTO in July 2008.

Cayman Islands With no direct taxation, the islands are a thriving offshore financial center. More than 93,000 companies were registered in the Cayman Islands as of 2008, including almost 300 banks, 800 insurers, and 10,000 mutual funds. A stock exchange was opened in 1997. Tourism is also a mainstay, accounting for about 70% of GDP and 75% of foreign currency earnings. The tourist industry is aimed at the luxury market and caters mainly to visitors from North America. Total tourist arrivals exceeded 1.9 million in 2008, with about half from the US. About 90% of the islands' food and consumer goods must be imported. The Caymanians enjoy one of the highest outputs per capita and one of the highest standards of living in the world.