Asian Development Outlook 1998: Population and Human … · 2 ASIAN DEVELOPMENT OUTLOOK 1998 The...

Foreword

iii

This issue of the Asian Development Outlook is the tenth in a series of annual economicreports on the developing member countries (DMCs) of the Asian Development Bank.

In the context of developments in the world economy that have included some difficultchallenges, this Outlook analyzes the DMCs’ recent economic performance, assesses theireconomic prospects, and reviews the policy issues that confront them.

The year 1997 was a difficult one for many countries in developing Asia. Last year’sOutlook noted the marked slowdown in export growth in East and Southeast Asia during1996. The substantial decrease in export growth rates was the prelude to the worst year theregion has seen since its development began accelerating three decades ago. The exportslowdown was followed by a currency and financial crisis that affected much of developingAsia during 1997. The consequences are still unfolding, and are being felt worldwide. Manycommercial banks and finance companies in the region were closed, the real estate sectorcollapsed in some countries, interest rates soared, currencies depreciated rapidly, and manyregional stock markets fell to unprecedented lows. In an attempt to rescue Indonesia, Republicof Korea, Philippines, and Thailand, multilateral agencies, including the Asian Develop-ment Bank, and several countries arranged a $117 billion assistance package, which was thelargest such program ever put together.

The financial crisis and its consequences are raising the question of whether the Asianmiracle is over. Underlying this discussion is the issue of whether deeper reasons lie behindthe crisis, in particular, whether a decline in the countries’ competitiveness was a partialcause. The success of Asian countries was initially based on the production and export oflabor-intensive manufactures. During the last few years, however, a number of other Asiancountries capable of producing at lower costs have reached the same stage in the productcycle. Some of the relatively more developed Asian countries are now failing to meet thechallenge presented by these economies and to move up the development ladder.

As a result of the events throughout the year, growth rates in East and Southeast Asiain 1997 were below those in previous years, and given recent events, forecasting the region’sperformance for 1998 and 1999 is more difficult than before. Nevertheless, projections indi-cate that growth rates will be modest in 1998, and negative in some countries, as the fullimpact of the crisis has yet to be felt. The year 1998 will be Asia’s most difficult since the1974 oil crisis recession. However, signs of recovery may begin to appear in 1999.

If, in the past, economies had to adjust to changing international conditions to remaincompetitive, in the present context such adjustment is imperative. First, the region mustresolve its financial crisis. Second, it must implement policies to create, once again, anenvironment for sustained growth. This will require some reforms of institutions and policies,but I am confident that the affected Asian countries will succeed.

2 ASIAN DEVELOPMENT OUTLOOK 1998

The format of this year’s Outlook is slightly different from that of previous years. Part Iis now divided into two chapters. The first chapter briefly surveys recent growth experienceand the short-term prospects for the world economy, and then focuses on the Asian andPacific region. The second chapter, which is an addition to this year’s Outlook, discusses thefinancial crisis facing some of the Asian economies. This chapter shows that, while themassive inflows of capital in the form of direct and portfolio investments during the lastdecade have been an important determinant of growth, they have also proved to be a majorsource of macroeconomic instability. The structural weaknesses in the region’s financialsectors, in conjunction with inappropriate exchange rate management policies and rapid,short-term capital inflows, have been major contributory factors in precipitating the crisis.Part II discusses each of the 35 DMCs in Asia and the Pacific, analyzing their recent eco-nomic performance and assessing their prospects for the next two years. Note that thisyear’s country profiles devote greater attention than in the past to discussions of policy anddevelopment issues. Part III addresses the important issue of the role of human resources ineconomic development. It analyzes the links among population, human resources, and com-petitiveness and stresses their critical importance as determinants of long-run growth. Theanalysis provides important insights into the issue of the long-run sustainability of the Asianmiracle.

Mitsuo SatoPresident

1economic trends and prospects in the dmcs

v

Acknowledgments

T he Asian Development Outlook 1998 has benefited from the support of and valuablecontributions from many individuals, both inside and outside the Asian Development

Bank. Special thanks are due to the following Bank staff for comments on various parts ofthe Outlook: Paul Dickie, Kazi F. Jalal, S. Ghon Rhee, Yoshihiro Iwasaki, Edward M. Haugh,Jr., Anita Kelles-Viitanen, Kok Heng Phua, Albab Akanda, Stephen Banta, Indu Bhushan,Jeffrey Liang, Urooj Malik, Narhari Rao, and Ramesh Subramaniam. The following indi-viduals provided critical support, guidance, and advice on various matters relating to thepreparation of the Outlook: Basudev Dahal, Shoji Nishimoto, Eustace Nonis, G. H. P. B. Vander Linden, and Yang Wei Min. The help and support of the following in preparing thecountry reports in Part II are deeply appreciated: Nihal Amerasinghe, Werner Schelzig,Thomas Crouch, Khaja Moinuddin, Bruce Murray, Rajat Nag, Filologo Pante, Jr., FrankPolman, and Cedric Saldanha. Bindu Lohani, Charles Currin, and S. A. Chowdhury assistedthe Outlook team by preparing background writeups or providing research advice. IsidoroDavid and Bishnu Dev Pant offered support with data-related matters. Robert H. Salamon,Karti Sandilya, Ian Gill, Lynette Mallery and Myo Thant provided advice and assistance inpublicizing the Outlook.

The prepress work was done by the Printing Unit under the supervision ofRaveendranath Rajan. Vicente Angeles of the Printing Unit did the art design for the Outlook.The assistance of the Bangladesh Resident Mission, India Resident Mission, Office ofAdministrative Services, and Office of Computer Services in the preparation of the Outlookis also gratefully acknowledged.

Many scholars, policymakers, and economists from international organizations par-ticipated in the Tenth Workshop on Asian Economic Outlook to discuss the background mate-rials for this issue of the Outlook. In particular, we would like to acknowledge the contributionsof the following individuals, who either prepared papers or acted as designated commenta-tors: Stephen Yan-Leung Cheung, Andrew Freris, Alejandro Herrin, Vikas Kakar, Rajiv Lall,Geoffrey McNicoll, and Gang Yi.

A number of individuals from outside the Bank prepared background papers for Part IIof the Outlook, namely: Iwan Azis, Stephen Yan-Leung Cheung, Ian Collins, John Fallon,Tan Khee Giap, Mohamed Jaleel, Jun Il Kim, Eshya Mujahid Muktar, Nguyen Van Quy,Ismail Md. Salleh, Pronob Sen, Shankar Sharma, Nimal Siripala, Chung Shu Wu, and MaoYushi. Anil Deolalikar and Andrew Mason prepared background papers for Part III.

Several international institutions shared their research material and data with theOutlook team. In particular, we would like to acknowledge the contributions of FrancescoCaramazza from the International Monetary Fund and Amar Bhattacharya and Kwang WooJun from the World Bank, who shared their research on global economic prospects and the


financial turbulence in developing Asia and participated in the Tenth Workshop on AsianEconomic Outlook.

The Outlook has benefited extensively from advice and guidance provided by JereBehrman, Marc Nerlove, and T. N. Srinivasan during the conceptual stage of Part III andfrom reviews and comments on Part I by John Malcolm Dowling, Jr., Takatoshi Ito, andSalim Rashid. Finally, the Outlook team is grateful to Abhijit Banerjee, Paul Krugman, andFrederic Mishkin for graciously permitting the use of their research material for preparingboxes for the Outlook.

Jungsoo LeeChief Economist

vii

THE 1998 OUTLOOK TEAM

T he Asian Development Outlook 1998 was prepared by a team drawn from the Economicsand Development Resource Center of the Asian Development Bank. M. G. Quibria

led this core team, assisted by Douglas Brooks, Dilip K. Das, Rana Hasan, Haider Ali Khan,Pradumna B. Rana, and Reza Siregar. The team included Jesus Felipe, Francis Harrigan,Soo-Nam Oh, Juzhong Zhuang, Emma Banaria, Barbara Carreon, Charissa Castillo, ElizabethLeuterio, Emma Murray, Aludia Pardo, James Villafuerte, and Cherry Lynn Zafaralla. Thecore team was assisted by the following members of the Programs Departments, who pre-pared most of the country reports in Part II of the Outlook: Shiladitya Chatterjee, Evelyn Go,David Green, Sophia Ho, Yun-Hwan Kim, Rajiv Kumar, Srinivasa Madhur, Sudipto Mundle,Ernesto M. Pernia, Alessandro Pio, Min Tang, Toru Tatara, Richard Vokes, and Hong Wang.John McCombie and Alice Dowsett edited the Outlook. The work was carried out under theoverall direction of Bong-Suh Lee, Vice-President (Region West) and the supervision ofJungsoo Lee, Chief Economist.

Many others inside and outside the Asian Development Bank wrote backgroundpapers, provided helpful comments, and participated in the Tenth Workshop on Asian EconomicOutlook, held in Manila on 21-22 October 1997 to discuss the background papers.Contributors and participants are listed in the Acknowledgments. The statistical databaseand country tables were prepared by staff from the Economic Analysis and Research Divisionin collaboration with the Statistics and Data Systems Division. Overall administrative coor-dination was handled by Elizabeth E. Leuterio. James Villafuerte was responsible forpreparation of the Statistical Appendix. Ma. Teresa Cabellon, along with Zenaida Acacio,Ma. Lourdes Antonio, Patricia Baysa, Anna Maria Juico, Ma. Lourdes J. Maestro, Eva Olanda,and Anna Liza Silverio, provided secretarial and administrative support. Mercedita Cabañeroswas responsible for the layout. Charissa Castillo and Cherry Lynn Zafaralla coordinatedproduction. Mildred Belizario and Reynaldo Cancio provided additional research andtechnical assistance.


viii

Contents

xiii Acronyms and Abbreviationsxiv Definitions

DEVELOPING ASIA AND THE WORLD

3 Economic Developments and Prospects4 The World Economy7 The Developing Economies

18 Risks and Uncertainties

19 The Financial Crisis in Asia19 The Evolution of the Crisis23 Explaining the Financial Crisis33 Economic Impacts of the Crisis35 Policy Options for the Affected Economies36 Lessons for Nonaffected Economies

ECONOMIC TRENDS AND PROSPECTS IN THE DMCs

Newly Industrialized Economies41 Hong Kong, China46 Republic of Korea50 Singapore55 Taipei,China

People’s Republic of China and Mongolia59 People’s Republic of China66 Mongolia

Central Asian Republics71 Kazakstan75 Kyrgyz Republic78 Uzbekistan

Southeast Asia83 Cambodia86 Indonesia90 Lao People’s Democratic Republic93 Malaysia98 Myanmar

100 Philippines105 Thailand110 Viet Nam

PART

II

PART

I


ix

South Asia115 Bangladesh120 Bhutan123 India128 Maldives130 Nepal134 Pakistan138 Sri Lanka

Pacific Islands143 Fiji146 Papua New Guinea149 Cook Islands151 Kiribati153 Marshall Islands155 Federated States of Micronesia157 Samoa159 Solomon Islands161 Tonga162 Tuvalu164 Vanuatu

POPULATION AND HUMAN RESOURCES

168 Population and Human Resources: Building Blocks or Binding Constraintsto Future Asian Development?

170 The Changing Demographic Structure in Developing Asia176 Demographic Change and Savings184 Demographic Change and Labor Force Growth187 Improving Productivity by Investing in Human Resources188 Health and Productivity in the ADEs192 Education and Productivity in the ADEs203 Human Resource Development in Agriculture 205 Human Resource Development in Industry209 Nurturing Technological Capability212 International Integration and the Returns to Skills213 Human Resource Development in Services214 Financing Human Resource and Technology Development215 Strategies and Policies for Improving Human Resources219 Conclusions

223 SELECTED BIBLIOGRAPHY

229 STATISTICAL APPENDIX

6 1.1 European Monetary Union May Help Future Asian Growth16 1.2 El Niño: Nature Plays Havoc with the Southeast Asian Economies21 1.3 Chronology of the Financial Crisis in Asia

PART

III

BOXES


x

24 1.4 How the Contagion Spreads29 1.5 Sheep Herd, So Do Investors31 1.6 The Role of Information in a Financial Crisis34 1.7 The Effects of the Crisis on Labor Market Integration and Remittances64 2.1 The Weak Financial Sector in the PRC

170 3.1 Demographic Terms178 3.2 Republic of Korea’s Age Structure182 3.3 The Life Cycle Saving Model 194 3.4 Does Education Facilitate the Adoption of New Agricultural Technologies?194 3.5 Does Education Facilitate the Adoption of New Industrial Technologies?195 3.6 Complementarity between Human Resources and Technology196 3.7 Economic Growth and International Technological Spillovers208 3.8 Are Deficiencies in Human Resources Constraining Thailand’s

Movement Up the Export Ladder?212 3.9 Do Technology Imports Inhibit or Promote Local Efforts in R&D?

Evidence from India

10 1.1 Selected Economic Indicators: Developing Asia, 1995-199925 1.2 Major Economic Indicators: Affected and Nonaffected Economies,

1991-199742 2.1 Major Economic Indicators: Hong Kong, China, 1995-199947 2.2 Major Economic Indicators: Republic of Korea, 1995-199951 2.3 Major Economic Indicators: Singapore, 1995-199956 2.4 Major Economic Indicators: Taipei,China, 1995-199960 2.5 Major Economic Indicators: People’s Republic of China, 1995-199967 2.6 Major Economic Indicators: Mongolia, 1995-199987 2.7 Major Economic Indicators: Indonesia, 1995-199994 2.8 Major Economic Indicators: Malaysia, 1995-1999

101 2.9 Major Economic Indicators: Philippines, 1995-1999106 2.10 Major Economic Indicators: Thailand, 1995-1999111 2.11 Major Economic Indicators: Viet Nam, 1995-1999117 2.12 Major Economic Indicators: Bangladesh, 1995-1999124 2.13 Major Economic Indicators: India, 1995-1999131 2.14 Major Economic Indicators: Nepal, 1995-1999135 2.15 Major Economic Indicators: Pakistan, 1995-1999139 2.16 Major Economic Indicators: Sri Lanka, 1995-1999172 3.1 Life Expectancy and Infant Mortality, Selected Asian Economies,

1950-1955 and 1990-1995175 3.2 Aggregate Public Expenditures on Family Planning,

Selected Asian Economies, 1985 and 1989176 3.3 Population Growth, Selected Asian Economies, 1950-2025177 3.4 Growth of Working-Age Population, Selected Asian Economies, 1970-2025179 3.5 Working-Age Population as a Proportion of Total Population,

Selected Asian Economies, 1970-2025180 3.6 Young Dependents as a Percentage of Total Population, Selected Asian

Economies, 1970-2025181 3.7 The Elderly as a Proportion of Total Population,

Selected Asian Economies, 1970-2025

TEXTTABLES


xi

184 3.8 Labor Force Growth Rates, Selected Asian Economies, 1970-1995185 3.9 Labor Force Projections, Selected Asian Economies, 1985-2025185 3.10 Women as a Percentage of the Total Labor Force,

Selected Asian Economies, 1970-1995186 3.11 Agricultural Labor as a Percentage of the Total Labor Force,

Selected Asian Economies, 1970-1990189 3.12 Reported Cases of AIDS, Tuberculosis, and Malaria,

Selected Asian Economies and Years190 3.13 Population per Physician and Per Nurse,

Selected Asian Countries, 1988-1991209 3.14 Average Annual Salary per Employee, Selected Asian Economies, 1990211 3.15 Unit Labor Costs in Manufacturing, Selected Asian Economies, 1990

11 1.1 Real GDP Growth: Newly Industrialized Economies, 1997-199912 1.2 Real GDP Growth: PRC and Mongolia, 1997-199913 1.3 Real GDP Growth: Central Asian Republics, 1996-199714 1.4 Real GDP Growth: Southeast Asia, 1997-199915 1.5 Real GDP Growth: South Asia, 1997-199920 1.6 Changes in Nominal Bilateral Exchange Rates and Composite

Stock Market Price Indexes: Selected DMCs, June 1997-January 199823 1.7 Weekly Nominal Exchange Rates Indexes: Selected Asian Economies,

End of June 1997 - End of January 199825 1.8 Weekly Composite Stock Price Indexes: Selected Asian Economies,

January 1996-January 199826 1.9 Current Account Balances, Selected Asian Economies, 1986-199727 1.10 Weighted Real Effective Exchange Rates: Selected Asian Economies,

1990-199728 1.11 Net Private Capital Flows: Selected Asian Economies, 1970-199661 2.1 Net Foreign Direct Investment: People’s Republic of China, 1990-199672 2.2 Growth of Money Supply (M2) and Consumer Price Index:

Kazakstan, 1991-199776 2.3 External Capital and Current Account Balances:

Kyrgyz Republic, 1992-199780 2.4 Composition of GDP: Uzbekistan, 1991 and 199691 2.5 Direction of Trade: Lao People’s Democratic Republic, 199696 2.6 Banking System Loans to Major Sectors: Malaysia, March 1996-March 1997

102 2.7 Exports by Commodity Classification: Philippines, 1990-1996112 2.8 External Capital Flows: Viet Nam, 1992-1997125 2.9 Foreign Investment Inflows: India, 1991-1997132 2.10 GDP Growth by Sector: Nepal, 1991-1996136 2.11 Gross National Investment: Pakistan, 1992-1997140 2.12 Fiscal Deficit, Domestic Borrowing, and Interest Rates: Sri Lanka, 1991-1997144 2.13 Exports, Imports, and the Current Account Balance: Fiji, 1993-1997147 2.14 Australian Dollar and US Dollar per Kina Exchange Rates:

Papua New Guinea, 1987-1997150 2.15 Growth of Real GDP and Population: Cook Islands, 1992-1997152 2.16 Sectoral Shares of GDP: Kiribati, 1992-1996154 2.17 Balance of Payments: Marshall Islands, 1991-1995

TEXTFIGURES


xii

156 2.18 Current and Overall Balances: Federated States of Micronesia, 1994-1997158 2.19 Composition of Money Supply (M1): Samoa, 1993-1997159 2.20 Total Revenue and Government Expenditure:

Solomon Islands, 1993-1997161 2.21 Balance of Payments: Tonga, 1992-1997163 2.22 Sectoral Shares of GDP: Tuvalu, 1993-1997165 2.23 Composition of Current Revenue: Vanuatu, 1993-1997171 3.1 Asia’s Demographic Transition173 3.2 Total Fertility Rates, Selected Asian Economies, 1995-1997174 3.3 Years to Complete Fertility Transition, Selected Economies183 3.4 Saving Forecasts for Taipei,China, 1990-2050197 3.5 Adult Literacy Rates, Selected Asian Economies, 1970 and 1994198 3.6 Gross Primary Enrollment Rates, Selected Asian Economies, 1960 and 1992200 3.7 Gross Secondary Enrollment Rates, Selected Asian Economies, 1960 and 1992201 3.8 Gross Secondary Enrollment Rates and Per Capita Income,

Selected Asian Economies, 1990202 3.9 Gross Tertiary Enrollment Rates, Selected Asian Economies, 1960 and 1990203 3.10 The Status of Research and Development Capabilities,

Selected Countries and Years207 3.11 Wages and Productivity in Manufacturing, Selected Asian Economies, 1990210 3.12 Value Added per Employee in Relation to Mean Years of Schooling,

Manufacturing Sector, Selected Asian Countries 1990

234 A1 Growth Rate of GDP235 A2 Growth Rate of Per Capita GDP236 A3 Growth Rate of Value Added in Agriculture237 A4 Growth Rate of Value Added in Industry238 A5 Growth Rate of Value Added in Services239 A6 Sectoral Share of GDP240 A7 Gross Domestic Savings241 A8 Gross Domestic Investment242 A9 Changes in Consumer Prices243 A10 Growth Rate of Money Supply (M2)244 A11 Growth Rate of Merchandise Exports245 A12 Direction of Exports246 A13 Growth Rate of Merchandise Imports247 A14 Balance of Trade248 A15 Balance of Payments on Current Account249 A16 Balance of Payments on Current Account/GDP250 A17 Foreign Direct Investment251 A18 External Debt Outstanding252 A19 Debt-Service Ratio253 A20 Exchange Rates to the Dollar254 A21 Central Government Expenditure255 A22 Central Government Revenue256 A23 Overall Budget Surplus/Deficit of Central Government

STATISTICALAPPENDIXTABLES

acronyms and abbreviations

xiii

ADE Asian developing economyASEAN Association of Southeast Asian NationsBOP Balance of paymentCDF Commodity Development Framework (Fiji)CMEA Council for Mutual Economic AssistanceCRP Comprehensive Reform Program (Vanuatu)DMC Developing member countryEMU Economic and Monetary UnionEU European UnionFAO Food and Agriculture OrganizationFDI Foreign direct investmentFSM Federated States of MicronesiaFSU Former Soviet UnionGDI Gross domestic investmentGDS Gross domestic savingsGDP Gross domestic productGNP Gross national productGNS Gross national savingsIMF International Monetary FundLao PDR Lao People’s Democratic RepublicMAS Monetary Authority of SingaporeMFN Most Favored NationM1 Currency in circulation plus demand depositM2 M1 plus savings and time depositNIE Newly industrialized economyOECD Organisation for Economic Co-operation and DevelopmentPNG Papua New GuineaPRC People’s Republic of ChinaRBI Reserve Bank of IndiaR&D Research and developmentRERF Revenue Equalization Reserve Fund (Kiribati)SOE State-owned enterpriseUN United NationsUNIDO United Nations Industrial Development OrganizationWTO World Trade Organization

definitions

xiv

The classification of economies by major analytic or geographic groupings suchas industrial countries, developing countries, Africa, Latin America, Middle Eastand Europe, and transitional countries follows the classification adopted by theInternational Monetary Fund. Latin America, however, refers to the WesternHemisphere in that classification and transitional countries include Kazakstan,Kyrgyz Republic, Mongolia, and Uzbekistan, which are for the purposes of thisOutlook included in Asia.

For the purposes of this Outlook, the following apply:

• Newly industrialized economies (NIEs) comprise Hong Kong, China;Republic of Korea; Singapore; and Taipei,China.

• East Asia comprises the NIEs, People’s Republic of China, and Mongolia.• South Asia comprises Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan,

and Sri Lanka.• Southeast Asia comprises Cambodia, Indonesia, Lao People’s Democratic

Republic, Malaysia, Myanmar, Philippines, Thailand, and Viet Nam.• Central Asian republics comprise Kazakstan, Kyrgyz Republic, and

Uzbekistan.• Pacific islands comprise Cook Islands, Fiji, Kiribati, Marshall Islands,

Federated States of Micronesia, Papua New Guinea, Samoa, Solomon Islands,Tonga, Tuvalu, and Vanuatu.

• Developing Asia refers to the 35 developing member countries of the AsianDevelopment Bank discussed in this Outlook.

Billion is 1,000 million.Trillion is 1,000 billion.Tons are metric tons, equal to 1,000 kilograms or 2,204.6 pounds.Unless otherwise specified, the symbol $ means United States dollars; dollars arecurrent US dollars.The symbol ... in tables indicates that data are not available or not applicable.The symbol -- in tables indicates that the figure is nil or negligible.

This Outlook is based on data available up to 15 March 1998.

��

��

��

�

��

��

��

�� !��

��

��!�� "��#��

$��#��%��&�� '��

��

(��)��"�� $("�%��

�� '��*�� +��

��$,-(%��'��.

��+��

��

��

��

��

��

� ��

��

��

��

��

�� !� ��

��!

��

��

��

��

��

"��

� ��!� ��

�� #� ��

��

�� !� �� $��"� ��

� ��

��!��

�� %��

�� !� ��

��"� �� !�� !

�� &� ��

�� '��!� ��

� � ��

� ��!��(� ��

�� )��

�� "��

�� &

�� !��

��

� �� !� �� *��

� � �� &� ��

� � ��

�� !� ��

��

��

��

��+�� "� ��

��

,�� "� �� -��

��!��

��.�/��

�� 0!��

�� 1��

2��

� �� % ��3 ��% ��$��

�� !

�� 2��

�� 2��

��4��

5�� !

��

�� 61��

��

��

�� 7��

��

��

�� 8�+� � 4��

% ��$��!��

�� "� ��

�� +��*��

� ��(��!��(��

$�� !� �� !� ��

��

��

�� (��0!�� 9

��

�� :��

$��"� �;��

��!��

��

#�� <

��6!�� 0!��

��

�� =�� 4��

�� 2�� ,�� :=42,;�

��% ��$��&� ��:��

�� ;� �� (� ��!� ��

�� >��!�*��!� �� -��

�� "��

��

��!� ��

%��7��?�� !��

�� :��

�� !��

�� !�� ;!��

��

�� !� ��

�� !� ��

��

��

��?��!�� :��!��

��!� �� !� ��

� �� ;� ��

��,�� +0��6��

��/�6��!��

�� 6��

��@��0��

A��/�� !�� /1��

�� )��

�� !� ��

��!� ��

�� !� ��

��

�� *��"��

$�� !�� #��

��=�� :#�=;��B�� <1� ��

�� 5�� "��

�B�� !��

��1��

��!��

��/111��/11<�

��)��

� �� +��!

�� "� ��

��A</�� A�1��

��+�

5��

��

��0!��

��A.11�� B��

��"� ��

��

��

�� '��!��

�� !��

�� !� �� !�� &��

�� :��

�� ;�� "��(��

�� "� ��

��

��

�� !� ��

� �� :?54�;!� ��

�� 5��

�� !� � ��

5�� !�3��!� ��B��

��

�� A�1� � �� !� ��

�� A�.��

>�� +� ��"� ��

� � ��

�� !��

��

��

�� /��=42,��

. �� !�� +��=�

��

�� !

��!� 2��!� >��!�*��!� 5��!� -��!

% ��3 ��!��% ��$��,��

��% ��$��&��.�+��!� ��

� �� $� ��&��

�� 1�0� �� !� ��

�� 1�/��

� ��0��"�� ?��C��

�� .��.�.��

��!� ��

D��

��% ��3 ��% ��$��!��

�� 6��'��

��!� �� 2��

4�� >��!�*��!� �� 5��!� �� !

�� )��

��

��B�� :��@��

��;!��

� �� ?��!��

�� >��!� � ��

��!� ��

��!�� =��

��/�6�� >��*��

�� /�� 5��

�� /�6��

�� !��

% ��3 ��!�� .�6� ��

�� % ��

3 �� % ��$��

��

�� "� �� '��

��

�� +� �� 5

�� !� $� �� )��

��

��"� ��

��

"� �� )��

�� +�

" �� 5�� !� �� !� ��

��"� �� !��

�� 5�-��+!��

,��2�� 3��

�� >��

��!111�)��# ��

�� "� �� !�4��

��

�� "� ��

��)�� +� ��"� �

� � �� 1�0� ��

�� 1�6� ��

�� =42,�� "��

=42,�� !� -�� )��

� �!�� <��

�� 1�0� ��

"�� ?��C��

� ��

�� 7 �� %��

�� 2�� 4�� !

��

��B��

�� 4�� !� ��

��

$��"� �� !��

�� "� ��

:�� 3��;� ��

��

��

=�� 2��

��4��4�� 0!��

� �� 5� �� !� ��

��/��

��@�� !��2��$�� !

��'��

��!��

��

��&��

��

� � ��

5�>��/�4��

��4��% �!��B��

��!� �� ?��

� �� 6�

��7��!�� 4��2��

�� 5� �� B�� !� ��

4��

�� &��

4��7��B�� !��

��

5� �� !� ��

��

��

��

� ��6��

�� !��

�� /��

��

�� !� ��

. ��*, !��

01��*, �� B��

��

� �� >�� !� ��

��

��

5�� >��*��!��

�� 4��B��

% �� :4B%;�� >�� -��

�� /11/!� ��

�� 4��!

��!��

"��)��)��

��

��

��4��2��@��

$�� 4B%��

� � � � ��

��4��

��E��

��E� �� 4��

�� !��

�� 4B%��

��

��4��

'��!� ��

� )� �� 4B%� ��

�� #��

�� 4B%��

�� ?��!� ��4B%��

�� -��!� ��

4��

� �� % ��3 ��

��)� ��4B%� �� !��

� ��

��

��"� ��

�� 4B%� ��

�� 4��!� ��

�� 4�� "� ��

��"��

��"� �� 4��% �

:4%;� �� 4B%!� ��

��!� �� "�� !

� ��

� �� %$��

�� "� �

�� %$��!��

4%�� "� �

�� !��!��

�� !� �� $��"� �

��

��

�� 7��

�� "�� !�"�� )�!

*�� !�3��!� ��3��7��

��

$��

�� 0��!��

�� 2�� 5��

��$��2��"� ��

2�� F��

��1�!��

�!111��!��

�� .1��7��

%��

��!�� 6��

@�� 7��

��

B��

��

��

��

��)��

��

�� "��

��"�� )�� /1� �� .1� ��

*�� !

��

��!��

��!��

�� !� ��

��!� ��

�� $��!� � �� D �� !� ��

�� "� ��

��

"�� !� ��

��

��

��

��

�� &�� !

�� $��"� �� !��

��

��

�� !� ��

��6�� 0��0 ��

��

��

$��"� ��

�� $�� "� ��

��+��

* ��

��

� �� !��

� � � ��

��'��!��

� ��

��

�� 5� �� !� ��

$��"� ��

� ��

��+�

� ��

��0��6��

=�� !� �� :>,5;

��A�/�� !�.<��

��6�� 72�� !��

�� >,5� ��

��

4��!��

��

��

��

� �� %$�� 4��

��

5�� !��

��4%��

�� "� �

�� * ��

��

�� !�� % ��$��!� ��

4B%��

7��

�� !� �� "� ��

�� "�� !� ��

"� �� 4B%��

=�� !��

��"� ��

�� 4%

��

��

��

�� #��

�� !�� (� ��

��

��% ��$�� F��!��

��!� ��

��

��

��"� �� :��

� �� ;��* ��

��

"� �� !�� "� ��

�� 4B%� ��

�� !��)��

�� "� ��(� ��

�� 4B%�

��

�� (��

��

�� 5��

�� !� ��

��

��

��

��)��

��

�� 5��

� � ��

�� !� �� 2G��

�&5�� !�B�� !��$��!��

�� )��

� ��<� ��

�� @��!�B�� !� �� %��

�)��

��

3�� 2��@��!

��B�� (��!�� !��C ��

�� 5� ��!�? �� &�

��

�� 7��

$��"�� &��

�� !� ��*, � ��

��

�� "� ��

�� "�� &�� +!��

�� "� ��

"�� &��

/��# ��

D�� "�� 2�� !��

�� $ ��

��B�� 6!��

�� !�� "�� !�2� ��!�B�� !��

H��!� �� 7��

��6�� !

�� &��

��6�6��0��(� ��

��

@��

�� "�� &�!�2� ��&�!

��B�� &�� '��!��

2� �� !��

�.��

�� !�� 0

�� @��

�� 5��

��0��

�� >�� !

��

��

��

5��

� � ��!��D�� "��

��

��

��

�� 0

��1� ��

� ��!� ��!� ��!� ��!� ��!"��#��$��%��"��#��$��%��"��#��$��%��"��#��$��%��"��#��$��%��

��"� ��

�� !��

��

�� (�� +� ��

�� "� ��

��

��

�� "��

�� !�� 0�

��//�"��

� ��

�� "�� I

�� I ��

�� "�� E� ��

�� 61��?��

��!�� !��

"��

��)�� +1��

*�� !��

�� 0��*, ��.��!��

��<�<�� 0��,��

�� !� ��

4� ��!�3��!� �� $�� #��

��

��'��!��

��

� �� $��

��

@�� !�2��7�� !�,�� 7��

2��!�3��!��%��

5��"�� !� ��

��

��

�� "��

��

5�� !��

��

� �� *��

�� "�� !

�� 7�� $��"�� !��

��

�� !�� C� ��!�C�� !

��C ��' ��

� ��

��

� ��

��

"��

��5��!� ��

�11�� H��

� ��)��

��

��$��2��2��B��

��

��!� �� "�� !

�� !� �� !

�� @�� B�� !��

�� !��

��

�� /1��

�� 1�!��

��4��"� �� @��6!� ��D��

"��

��

��'��!� ��

��

�� 6�

��4�� $��"� ��

�� )��

�� !��

��"�� !� ��+�@��

��

�� %$ ��

� ��

��

��%$�� +!�� !��

�� 6� ��"�� &�

��

� � �� "� ��

�� $��"� �

�� 2� ��2��

��

��

��0��5��0�� &��*, ��

�� /!� ��

�@�� !�3�� !�=��!�J��!��$�� "��

��

��

��

��

��

4��

�� )��

�� &��"��

��!��

�� *, ��

$�� !��

5��(!� -��!� ��!� ��

� �� 0��5��

��!� 5��&��

��

��

��

� ��"�� "�� "�� "�� "��&��#��$��%��&��#��$��%��&��#��$��%��&��#��$��%��&��#��$��%��

�� +�/� ��

"� �� 6��

��6�� 0��"� ��

�� 0��

�� :��;�� )��

��<�� +!��

��

��

�� 5��!� ��

��2��"� �� !�*, ��

�� "� �� !� ��

�� '��!

�� $��

"� �!��

� �� 0�

�� 72��?54��

��

��0�� $��"� ��

� �� E��!

��

#� ��@�� $� � D��!

�� 5� ��

� ��

,�� 0��"� ��

��

B��

��

0�� 0�� <� �� 6!

��

�� "��

�� $��"� �� !

�� &��

6�0 �� '��!��

�� !

$��"� �&��

��/�� +�

5��0��

��/��*, ��

��*, !��

� � ��

��'��()(��'��()(��'��()(��'��()(��'��()(� ��*��#��$��%�"��+�(,,-!(,,,��*��#��$��%�"��+�(,,-!(,,,��*��#��$��%�"��+�(,,-!(,,,��*��#��$��%�"��+�(,,-!(,,,��*��#��$��%�"��+�(,,-!(,,,

�� ! ��

��"��#��"�#��$��%,�� "� � +�/ ��6 0�� <�1 6��

?�� < 0�< 0�1 /�/ <�. 72��B�� 1�6 ��0 +�+ ��/ 0�+2��"� �� -6�6 .�� + � �$��"� � +�/ �� .�� -1�< /�<$��"� � 0�0 0�+ <�+ 0�< 0�� -�� .�. �<��

� $�� $��(1%,�� "� � ��< 0�� <�. 0�� 0�6

?�� <�0 <�. .�6 0�� <�� 72��B�� +�. /�+ <�1 0�12��"� �� +.�0 .0�6 /<�+ � �$��"� � ��. 0�0 6�0 �/�� +��$��"� � �� . �� < ��6 � � � �� +�0 .��

%�� ##�� &�� #��$��,-(%

,�� "� � -�� -��/ 1�1 �� 1�6?�� / 1�/ ��< <�6 /�� 72��B�� 1�/ 1�� /�/ 1�� 1�<2��"� �� -�1�+ -��/ -+�6 � �$��"� � -6�� -6�6 -<�� -��< -1�/$��"� � -/�< -/�< -/�1 -/�� -/�< � � � �� +�. /�+ �.��

'�&�(��)�#��$��!��+��%,�� "� � �6�/ ��. �+�/ �0�0 �0�+

?�� 72��B�� 1�� + ��1 ��12��"� �� .�� .�� $��"� � �<�< �+�6 /.�� $��"� � ./�� .6�� /��. /��0 /0�� < �0�6 � � �

� ?�� 2 5 ��

�� !� �� I

�� '��!��

� ��

� ��

� � �� >��

�� $��"� �&��

��!��

��

�� )��

��

�� A1�+� � ��

��

�� !��

�� +1�!

�� &�� %� �

��!��

� �� 9��

�� !� ��

�� $��

�� I�� 5�� !�B�� !��

��

��

� ��!� ��

��B��"� ��

� ��

2�� %$

��

�� $��

��

"� ��

�� !� �� (�� !

��5��!

��

��!��

� �� &��

�� 1��2��

*, ��?54�I'��3��!�2� �E

3��E�$ ��E�� !2� �I��

0�<� �� 0� �� 0� �� !� ��

��

�� !� �� !� ��!� ��

��

��

��<�. �� 0� ��.�6��

$ ��

�� 5� ��

'�� 3��! 2� �!��

��

�� !��

��

�� (��"�

6��!��

��0�� 3��

�� ,��

�� E� ��

�� 0�

�� !2� �� !

1�� !��.�� 0�

#��

�� !� ��

�� :��

��;!�� (� ��

�� '��3��'��$�� 5��!

��$ ��$�� 5��!� ��

#� ��$��4��5��

@��!��

�� !� ��$��2�� 5��

��

3��!� �� !��

� �� =��

3�� <<��!��

#+<<��%$��#�!61.��%$ ��

��

�� !

��&��&�� !

��

�� !��

-�� B��"��

�� E

��!� ��

A.1 � �� @��

��3��&� ��

��5B>�

5� ��,�� !�3��

�� 5B>�� A6��

�� (� � ��

��

: ;� �� E� : ;� ��

�� (� �� 61� ��

66�� +E�: ;��*, ��

�� +� ��.� ��E� : �;� ��

�� *, E� ��

:�; �� 6��!� ��

��

�� =� /<�,��

B ��> ��

� � ��

�� ?��

"�� !

�� !

�� !��

� �� !��

�� !�� )��

��&�� $ � ��

?�� ?��

"��

�� ?54�� +��

�� "� �� *, � ��

��/�/��?54��

� ��'��3��!�2� �&��

��.�� +��

��

�� )��

�� $��"� �&��

�� '��3��!

2� �&�� !�� <1��

�� $ ��&��

��)��.�� +!��

�� $��"� ��

�� 3��

��!�� +

��

��)�� +� ��

� �� 3��&��

�� !��

� �� $ �� !2� ��

�� !��

� ��'��3��!�2� ��

��)�� !��

��

��("�� 0��

72&�� <� ��

��0!��

�� 0� �� &��*,

��1��!��

� �� +�+� ��

��

��

�� : ;��

�� !�: ;��

�� 2�� @�� !

: ;� ��

�� !� �� : �;� ��

�� !

�� !� ��

��

'��!��

��

��

� ��

�� !� �� !� ��

�� 72&�

��

5� ��

�� '��!

�6�� !��

��/6��

��

"��"� ��

��!� ��

)��

��+��*��

��)��

��

"� ��

�� 72&��>��

��!��

� ��

��

$��"� ��

5�� !��

�� "� �&�� (� ��

� ��&�� 72��'��!

��

��

�� : ;� ��

�� !� : ;� ��

�� !� �� : ;� ��

� ��

�� $��"� �

��

�� B�� &��*, � ��

�� 0�.� �� 6� �� /�<� ��

��0!�� .��

��

��

��!��

�� (� ��

��B�� &��0��

�� !

��

�� 5

�� !� �� !

�� 1��

# ��

� ��!� �� /0+

�� .��/1��

��

��!�� !� ��0��

��

�� (��6�0��*, � ��

"��

�� !��

��

��"��

�� "� ��,��@��

�� 2��"� �� I3��!

3��7�� !��%�� I��

��

�� !��

�� 5��

�� B��>��:5B>;!��

�� @��

�� !� ��

�� *, ��

�� 0��,��

�1��'��!

��0�� 5��

��3��7�� 1�<��

��!�� 3��&�� /��

��%�� &��6�/��

"��

�� !� ��

3�� %�� !��

�� $��

��

�� 5��.� ��

�� !111��!��

��0�� .0�6 ��?��

��!� ��

�� &

��

�� : ;�� !�: ;��

�� :��

� � �� ;!� �� : ;� ��

��

��

��

��

��$��"� ��

��5��0��!��

�� <��!��

��

0�0�� 0��6�0�� '��

��!�� )�� +��

��

�� 5�� !��

�� !

��

��

��

�� !��

��

�� 5� �� (��

� ��!� ��!� �� !

��

��

$��

�� !

�� 5�� !��

��.1�6��-��+!�� !

�� /��5�� !

��

�� *��

�� )��

��

� �� &��

,�� 1� �� 0� ��

�� $��"� �

��

5� ��6� �� 0� �� 5�� !

�� !��H ��?��

��

�� !

��

��

�� 5��!��!�$��"� �&�

�� A/<

� �� !� �� A.<� � �� 0�

5�� !� �� !� ��

��

�� $��"� ��

�� !

��

��!��

��

�� "��

��!� �� !� �� B��

�� !��

�� !

��!��

� � �� >�� !�

-��+�B��

��

��

5�� !� ��

B�� &�� !��

��

��

�� $��

�� =��

D�� ,7��

��.�� 0��6��

�� &��

� �� !��

�� ,��

�� $��"� �

�� !� �� !� ��

B�� !��5�� !��

��

��

� ��H ��?��&��

�� %$��

��0��5��$��"� �� !

��!��

�� !� ��

��

��

�� !��

�!�� E��E

�� E� ��

�� @��

�� !��

�� B��

��!� ��

��

��

�� !��

��6�� !��

� ��6�<�� 0�

��

��.�� 0!� ��

��@��

��<�� !� ��

�� !��

"� �� !� ��

��!��

� �� $� �D��&��

� �� 6�� 0� ��

��1�� 5� �� !��

��

�� 1�+

�� 0� �� 0� �� >��

��

�� !�� (��

��

��

�� A/<� � �� !� ��

A��6 � �� 0��@��

�� !��5� �&��

�� A/�.��

� ��

�� !� ��

��"� �� 9�4��? K�!��

��

� � �=��:��@��/;�� 5��4��? K��

�� !��

� ��!�� !��

��

��

�� +� ��

��

�� 5B>

�� :��

> � ��2� � �� "� �;�� )��

$��"� ��

1�< �� +!��

��

�� 5��

��)��

��$��"� �� +��

"��

�� !� ��

��/�� +��5�� )��

�� !��

��/1��

2��

�� +!��!

��

��7�� )��

��A0�� +��A1��

�� ,��

�� !� ��$��"� ��

�� 0�+��

��<��0!��

�� !� ��

�� 5� ��!� ��!� ��

��$��"� ��

��6��

��

�� &��

�� !

�� 5� ��

�� 6�� !� ��

��6 �� 0!� ��

��

��

�� <�0� �� 0� ��

.�� $� �D��!��!��

�� !��

��!� �� .�+��

� ��0� �� 0�.� �� @��

��

��* ��+�,�-�+��.��)�#��/�� #� ��

��2��5�� !

� �� ?��*� ��

�� !� ��

�� !��

@�� !�4��? K��

��

5�� "�� =�� !

�� !��

$��"� ��

�� !�� (�� !��

��!��

5�2��3�� !�� 5�� !��

�� .!111

� �� !��

�� /01��

(��

��

�� !� �� !� �� !� ��

)��5��

��

��

�� !��

A/1� � �� "�� !

B�� " �� A��6��

�� '��

��1��

��

�� 5�B�� !��!��

��

�� //��

�� !� �� )��

0� ��<<�� 5��$ ��

��

��

��

� � ��

5��!�4��? K�&�� 5�� !

B�� !� � � �� !�$ ��!��

�� "�� !��

��4��? K�� A/1��

� �!� ��

�� 4��? K�� +/8+.�� >��

5�� !�B�� !� �� !��

�� 4��? K�!�� )��

�� +�

4��? K��

��/��+��5��

��

=��!��(��!��

� ��

4� ? K�� B��

�� B��+�

��4��? K��

�61��5�� !�B�� !� � � �� !�$ ��!

�� !

�� !��

�� +��5��

��

�� "��

� � �� ,��"�� !��

�� 4��? K�!��/.1!111��

� �� 2��

D�� 5�� @�� !

��

��4��? K�� -��+��,��

�� B ��!��

��11!111�� !

�� '��

��!� �� !�� 0<1!111��

�� //� ��

��!�� 1��

��4��? K��

�� 2�� 5�� !� ��

��

� �� $�� *��

�� 5�� 7��

:A//1 � �� ,��

��A�� 7�<!611;� ��

��!� �� 11!111��

�� !��

��!��!�� !�� E

��

�� !�� <1��

4��? K��

�� $ �� !�B��

$ ��

�� #�� $ ��!��

��B�� !��

�� 5� �� !��

�� "��

��

��

� ��

��

��

�� 4��!

�� &��

��!��

�� $��"� ��

# �� )�� !

��)��!��!�� !��

� �!��

��"� �� !��

�� !��

�� 0��*, !

��

��

"� �� $��"� �&��

��

��1�!�� !� ��

�� %� ��

�� "�� $��"� �

?�� !��

� � ��E� �� !� ��!� � ��

�� $��"� �

�� "�� "��

�� !��

� ��

�� 5� �!� �� !

��-��$� D��&��

��0�

'��!� ��

��

��

��"�� 5� �&��

�� !��

��!��(��

�� >��!� ��

�� (�� !

�� !� ��

�� 5B>&��4��$��"�)��

>� � ��A��0��

�� )��

��

��)�� $��"� �

�� 0�<��

�� +�� 6��

��!�� !��

$� �D�� )��

�� 6�0� ��!� �� 0�.� ��

��'��!� ��

��+!��!�� !��

�� !� �� !� ��

��)��

�� &� ��

# �� ?�� !��

�� &��

��+!�� <��)��

� ��

��

��)��

� ��!��

��

��(�� 1��

�� E��

�� E��

�� !��

��!� �� !��

�� !� ��?��*� ��!

�� &� �� "

�� ?��*� ��

�� 061!111��

�� +��#� ��

�� !��)��

��

��/1��*,

��

> ) &��

��.�� 0��

��!� ��

�� !� ��

��!�� !

�� !� ��

��

��

�� *�� 3 � ��

��/��

�� "��

��6�� 6��0!

�� 2��5�� 1�6��

��>��!��

�� !

�� !

� ��

�� B��

5��

�� !� � ��*, � �� 6� �� !

�� %$��>��

$��B ��

��6�� 5��$��5��

��

��

� �� 1��6��

��

��.��"��/��.��"��/��.��"��/��.��"��/��.��"��/��"��"��"��"��"��

*�� 5��

� ��

��

��"�� !��!��

�� (� ��

��)��

��

��)��

�� $��"� ��

3��

��

��

>� ��

$��"� ��3��&�� !��

� ��

��5��+��

��)��% ��$��!

��4��% �!��=42,��

�� -�� 6

�� "��

�� (� � ��

�� "� �

�� !��

� ��5�� 3��!�� +

�� &��

��

� ��&� ��

7 �� 4��

�� $��"� ��

� � �� !�� "� �

�� !��

��

� ��!�� $��"� ��2��

"� �� !� ��

�� %��

��

��

��

�� 2� ��

'��3��

�� &�� 2��

��B��"�� '��3��

��&��@��2� �� '��3��

��

�� '�� 3�� "� �

�� -��"��-��

��+!��

�� %$� ��# ��

�� $��"� �

�� "� ��

�� !��'��3��

��2� �� )��

��

��

�� "� �

��

%��

� �� !

��

�� 5� ��

�� "� �� !� ��

#�=��

� �� +��5�,��

�� 1� ��

��

�� !��

� �� #�=�� !��

)�� !� ��

�� B��'��

��!� ��

� �� >��

�� !� �� (� ��

�� !��

�� $��!� �� "� ��

��

� �� $�� (� ��

��

��!��(��

�� 5��

�� )��* ��

��

�� #�=��

��!��

��

> ��!� �� L��M� ��

�� !�� &��

��$��"� ��

�� "��

��

�� !� ��

�� "� ��

��

��

��

��

��

��

��

��

��!� �� !��

��"�� !�� "��

��

� ��

��

��

��

��

�� !��

��

"�� #� $�� %�� &��

�� %�� '#�( � �� #� ��)��

��&��

�� '

�� #� �� !��

��

�� #� ��*��

��

�� +��#� ��#��+�� +��

�� +�� !��

��#� ��

�� +�� +��

��"�� #��

�� !��

�� !�� ,�� ! ��#

�� !��)�� $��

��-�� &)$-'� ��.��%�#�-�� #��

��

"�� #��

��+�� +��

��&,��/��

�� !�� +��

+�� !��'��

�� !��

��

��

��+��0��+��

��

�� #� ��

��1��#2��!��

��

��

��

��

� �� +�� &3�!��4��

��'��3 +�� #� ��

��

( �� #� ��

�� 5��

�� 6� �� +� ��

&,��'��"�� #��( � ��

��#� �� )��

� �� +��

��

�� 7��#��#

��

��!��

��8��9��#� ��/�:��

��

�� %�� #� ��

��#�� ;��

�� <#� "��

�� <=�� +�� +��

�� ;��

��#� �� *��#� ��

��

�� #��

��

�� "�� (�� ,��

&"(,'� �� 6� � � �� <� ��

�� +� � �+��#� ��

��

�� +��

�� !�� !�� #

( � �� -�� 3 +� ��

�� !�� +�� >��

��

��

>��

�� <#� �� !�� &��

�� '� ��

��

�� <8��#��

�� 64� ��#� �� 75� ��

��#� �� 4/��%��

�� ?��#

��

�� 9��

��

��

5�� 3 +��

�� )��-�� 3 +� ��

57�� 4<��

6�� @��"�� (�� ,��&"(,'� �� + ��

�� "(,� �� + �� A��5� ��"(,#�� :��3 +#��B��3 +#� ��

�7�� "�� !��

�/�>�� "�� *��$�4��

�7�?�� ,� �� $�� =�� "�� ( ��-�� ;��

58�54�?�� .��%�#�-�� +�� +�� #�� ;� ��

4��?�� "(,�� + �#�� :��3 +#��B��3 +#� �� #��A54��"��

��9�� +�� *�� +� %�� .��%�#�-��

��9�� :�� ( �� ( �� ,� ��+�

��9�� %�� %�� ( �� -�� +�� +� �� !��

57�9�� +�� +�� C � �� >�� -�� D��#� �� # ��

56�9�� +��+�� +��6��>� � ��E�)�� %��

4�:�� %�� "(,� ( �� :�� (�� - �� %�� A6��

��:�� $�� "�� )�� >�� >�� +��#��

�5�:�� "�� +�� /� �� +� �� )��>�� !��+� ��

�/�:�� %�� !��

��:�� )��(��$�� . �� C5��&A�6��'�� !��

��:�� :�� 3 +� �� "�� %�� # ��A4�6�� A7��#��

��

� �� #

��

�� #� �� <8� ��#� ��

�� <�

�� #��

� �� #��

�� 9��

��#�� +�� D ��

�� #�� #� ��9��F� � ��

�� #��

�� >��+

� �+�� %��

�� /� &,�� <'�

"�( � �� )��#��

�� #� �� +� ��

65� �� 7<� ��#� ��#� ��

��#��

� � �� <�� "� "�� #� �� +� � �+��

55�:�� (�� "��>�� #�� *�+�� (�� "�� #� %�� #� �� ( � �� +� �� "�� +��

57�:�� "(,� ��G��>� �� 5�� A�8�� %�� "��

5��:�� %�� 4�� <�� 78��

4��:�� "�� (��,� �� + �� =��!�� +��<�

5�� < ( *��G>� ��0�� +�� %�� A�6�� 4��:��"�� #� ��( � �� )�� 9�� C� ��

6�� +��"(,�� A��5�� + �� #�� #�� )��(��-�� D��+� �� +�� "(,��;�� <�

�� "�� #�( � �� #�)��#� �� #�� +�� #� �� "�� #� �� #� � ��

�6�� "� "�� #� )�� >�� "(,� �� #� �� +�� +��

�/�� "�� %�� 4��( ��

5�� H��"�� +�� +�� "�� 3 +� $�� #� �� +��"� ��#�� I�� +� �� I�� #� �� +�� #��#� �� #��!��

5�� H��%�� 4�� +�� !�� !�� A57��%�� +��

��

��

-��

D �� <8��

��8�� ! ��

��!�� !�� #� ��

�� !�

�� #��

�� !� ��

��#� ��

�� !��

�� &�� !��

��

��

�� !��

��

�� !��&>��

3�!��7�� !��

��+��'�3��

�� <��>� ��

� �� #��D ��+��

�� /� ��#� �� "�� ) +��

�� <� �� :��

�� +��

��. �>��"��!�� 5/��

��

��<#� ��.��%��

� ��

.��%�#�-�� &

�� !��!��

�� #� �� +

��#� �� +��!�� '�

��

�� !��

��'�"��#��

�� +��

�� !��

� ��H��!�� #��

�� +��&��

� � �� '��

�� !��

�� +��.��#��!��

��#��

��#� �� 0!�� $ �� (��

�� 0�� 5��4�� "� �� 0��

��#� ��

�� !�� #� ��

�� "��#��

�� "��

�� #��

��#� ��

�� !��

�� +�� #� ��

��

��#��

�� I��

�� +��

��

.��!��

�� <J� �� #

��,��#��

�� !��

�� !� ��

��&>�� 5��

� *��

� ��>�� 0 ��

��'� ��

�� K� ��

�� 7�

��/��3��#��

�� 9��

�� #� ��

�� #��

�� !�� #��

�� !��

��

� �� #� ��

�� >��#� ��

� �� !��

��

�� #�� B�� +��!�� #� �� !�� 9��#��

,��#��1�� 2�� +��#� �� #� ��!�� :�� #��! ��#�� ( � �� #�� #� ��#� �� ( � �� !��

>��#� �� +�� +�� #�� #��#�� ?�� &� ��1D �� 2��1�� 2'� � ��#�� ,��! ��#��<8�#��D �� #��

��(�!��D �� "�� #��)�� #�� D �� .��#� �� #� �� )��#� � ��>� ��#�� D �� #� ��

��#�� !��!�� *�� 1�� 2� �� "�#� ��! ��#�� #��"�� ( � ��

,��#�� ,�� #�%�� +�� >�� "�� !��%�� #�� +��.��#� �� #�� #�� %�� >��

#��$�%�� &��<'�

��

�� !��"!��#��$%�� !��"!��#��$%�� !��"!��#��$%�� !��"!��#��$%�� !��"!��#��$%��&&��#�"��"��&&��#�"�� !�$'�&&��#�"��"��&&��#�"�� !�$'�&&��#�"��"��&&��#�"�� !�$'�&&��#�"��"��&&��#�"�� !�$'�&&��#�"��"��&&��#�"�� !�$'��((�)�((*�((�)�((*�((�)�((*�((�)�((*�((�)�((*+,��#-

��

�� !!�"!# �!!$ �!!% �!!�"!# �!!$ �!!%

H:)�� 4 ��8 7�7 /�6 6�� /�6"�� /�� 6�< 6�� 7�� 4�� 5�6H�� =H:) 44�� 44�4 45�< 4��< 4��6 4��4-�� =H:) �4�8 �6�8 �4�8 7�� 7�� 7�5,�� =H:) 8�4 8�7 �8�5 �8�� 5�8 ��7(��&(5'�� 6 �<�/ �<�6 �7�6 ��< <��

%��$ �� "�� #� %�� #� ( � �� #� )��#� �� 9� �� .� %�#�-�� @�>� ��@� �� #-��

#��K�� :��3 +��

�� #� ��

��"��#� ��

��

� ��

��#��

� �� !��

��!� ��

��

"��#� ��

��!�� "��

��!�� &��

��

��

�� !�� '#�� #��

�� #� �� +��

��

�.��#��.��#��.��#��.��#��.��#��.�#�/�&!�!#��"� !$!�0��.�#�/�&!�!#��"� !$!�0��.�#�/�&!�!#��"� !$!�0��.�#�/�&!�!#��"� !$!�0��.�#�/�&!�!#��"� !$!�0 ��1��1��1��1��1�2��0�� #�$�2��0�� #�$�2��0�� #�$�2��0�� #�$�2��0�� #�$

B��

�� #� �� #� ��

�� ( � ��

��

&,��'��:��6#��

�� H:)� � �� /�7� ��

( � �� #��

�� )�� & �� 4�/� ��'#� "��

&5�4��'#� ��%�� &��4��'��"��/��

��

��!��( � �� #��

<� �� 6 ��

%��

��

�� 1�� 2� ��

��

�!�� "� �� #� ��

( � �� !��

��

�� #��

�� #��

�� "��/� � ��

��

��& ��

�� '� ��

�� !�� "

��!��#��

��

�� &��

��'��

�!�� :��6�

�� #� �� !��

5�� )��#� �7� ��

�� #� �� 5� �� "��

( � �� %�� !�� #

�� 6��&,��8'�

�� !��

��

�� @

�� G>�� #� ��

�� @� ��

��

�� 0�� @� ��

�� )$-� ��#� �� #� �� 7�

��

�� !��

��

��!3�#��,!#��&��4$�!3�#��,!#��&��4$�!3�#��,!#��&��4$�!3�#��,!#��&��4$�!3�#��,!#��&��4$

)��

��

�� !�� "��#� ��

��

�� #� ��

�� :��

� �� #� �� +��

�� I ��#� ��

� �� &>��I ��

� +�� +��

��

��

��'

>�� <8�#��

�� !��

&,��'��)$-#��

� �� ?� � ��

� ��#� �� <�� /#� %��

��A<8��#�� A�6��#

"�� ( � �� A/<� �� #

��)��A54��

�� 5��H:)��

�� ( � �� #� �� 7� �� #

6��"�� #�6��%�� #� �

7�4��)��?��

��

��

�� +��

B�� +�� J

�� 1��2

��1��2�� ,��#��

��8�#� �� +� �� 0��

��

�� >��

��

��

�� 0��

�� +��

�� >��#� �� I ��

� ��<8�� 8��

� ��

��

��

��

�� !�� +�

��

� ��

�� B��

� ��

�� #� ��

�� +�� !��

�!�� "��

�� #� � �� +��

��#� ��

��

�� &,�� !��

��3�!��6�'

?��

��

� ��

� ��

�� #��

�� #� �� #

�� /� ��

�� >��

��

�� +��

�� +��

�� !��

��

� ��

��&�� +��

��'� �� $��

�� +�� !�� &��

��#� �� '� ��

�� ;�� "� �� #� ��

��

�� #��

��

�� +��

�� +� ��

��

�� #��

� ��

��

,� ��#��

�� #� ��!��

� ��#��

#��$�3 ��*��&��5'� ��%�� &��<'�

(�� +��.��#�� +�� !�� +��- �� !�� #�� #�� B�� J

.�� K�� .��#� �� 0�� !�� ?��!�� +�� #�� #�� ;� �� #� �� "�� #�� 5�� #� ��

�� 4� � �� "�� . �� #�� 5#�� #� �� "�� 4#�� 5�� #�� "�� 4�� >�� #� �� !�� 1��2��

��!�� (�� K� �� 0�� +�� +�#�� ;�� I��&�� '#� �� +�� +�� *��

��#��&��'�� (��

��

�� #� � �� 1�� 2� ��

�� I �� ! ��

�� !�� +�� B�� I ��

�� !�� #

�� #� ��

��

��

�� &>�� 3�!� ��/� ��

�� I ��

�� '�� I ��

��D�+��#��

��

��

��

��#�� I ��

�� I�

�� G��+��

��#� ��

��

��%�� +��

��

��

��

��

��

�� "� ��#��

��

��

�� #� ��

�� ;� ��#��

�� +�� !��

��

�� I ��

�� +�� +� ��

�� H�� I ��

�� ! ��

� I ��

��

"��

�� I��

��

��"��#��

��

��"�� #

��G>�&��<��#��<4�#

�<6�#��<�4#��<<7#��<�4#��8�#� ��5��44'��

�� *��

��

�� G>� �� .��#� ��

��

��

��

��

��"� ��

��#��

��#�� ;��#��

��

�!��!��#�� $�!��!��#�� $�!��!��#�� $�!��!��#�� $�!��!��#�� $��"��"��"��"��"��!�#!�$��!�#!�$��!�#!�$��!�#!�$��!�#!�$

��

�� +��

�� ,��#��4� ��/

�� +��

�� 5�� #��

�� 3��

�� #� ��

��#� �� +��

�� #� ��

��

>��#�� +��

�� ;��#

�� 1��2��

��,� ��#� �� +�

��

�� #� �� +��

��

�� +��

�� L��

��#� ��

�� "�#�� #��

�� #

�� +�

�� !��

�� #

�� +�

�� & ��

�� '�� ?� �� #

��

�� ;�� #� ��

�� +� ��

� �� ,� ��#��

�� +� � �� #� ��

� �� #�� #

� �� +�� +� ��

��

� ��

"� �� #� ��

��

��

��$��)��*��

�� +�� !� � �� 3�� +�� +�� K� �� I ��

�� +�� +�� +�� #�� +�� +�� !�� +�� & ��'�� +�� +�� #��!��+�&��*��'�� +��

(�� I �� D�� +� &� I ��'� �� &�� '� �� #�� +��+�� +��,��! ��#�� +�� +��&�� +�� '#�� *�� 3�� I ��#�� #� ��

�� +�� I �� +�� +��

��#��

,�� K�� #�� #� �� +�� #� �� +� � �� ,��#� �� +�#�� +�� +�� 3�� #�� +�� #�� >��#� �� +�� #�� #�� +� � �+�� +�� +�� +�� I ��#�� +�� :�� I �� +��#� �� #�� *�� +�� ?�� !�� 3�� #�� +�� B�� # �� #� �� #�� ,� ��#� +�� -��;��#� � �� +�� 0�� +�� #��

#��$�(��+��&��'�

��

�� #� �� +�� *��

��;� �� +�#�� ;��+��

� �� #� ��

�� ?�� +��

�� #� �� #� ��

��

� ��

��

�� ;� ��

55555��6��$$�$� !��,��#��3��6��$$�$� !��,��#��3��6��$$�$� !��,��#��3��6��$$�$� !��,��#��3��6��$$�$� !��,��#��3��

��

�� #��*��

� ��

��

��#��

� �� +� ��

�� "�� #

��

�� #� ��

� �� ;� �� %��

�� -��

�� "�� )�� B��

��

�� &�� #� ��

��

�� '#� ��

��

��#��

� �� +�� !� �

�� !��#

�� !� ��

�� "�%�� #

��! ��#��

�� .��#� �� ;��

��!��+�� #��

� �� !��

��

�� #� �� %�� #

�� !��

��I�� #��

��

�� "��#��

� � ��

B��

�� ;�� #� ��

�� +��

�� +��

��&�� +��

�� +��

��

�� '

"� ��#� ��%�� #� � ��

�� !��#� ��

�;�� 7K�#� �� 8K��

� ��

��

�� +�� +��

+�� +��

��

� +��

,� ��#�� #��! ��#

"�� #� �� +��

� �+��!��"� ��#��

�� +��

�� *��,��! ��#��

�� +��#� ��#� %�� !

� �� A��

�� +��

"��#��

�� #� �� #� �

�!��

��

�� +�� +�� B��

�� #� ��

��

��#��

��

�2��!��$$.�$%��. ��7�2��!��$$.�$%��. ��7�2��!��$$.�$%��. ��7�2��!��$$.�$%��. ��7�2��!��$$.�$%��. ��7

��

�� !��,��

�� #� ��

��

��

� ��#�� #� ��

�� #��

�� !��

� ��)�� I ��#� ��

��

�� +� ��#� ��

� ��!�� #��

�� #� ��

�� .��#��

�� +�� I ��

�� +�� #� ��

�� !�� +�

��*��

B��

�� !��

��

"�� #� ( � �� #� )��#� ��

� ��!��

�� /��!��

�� #��*��

�� #��

��!��#��+��

��

��

�� #� ��

��

�� +��

�� !��

�� ?��#

��

�< �� "��#��

��

��#� ��

�� !��

�� ;��

�� +��

��

��

��;��"��#��

�� %�� #� ��

��%��&��'��&:��4�#

��'#� � �� 76��

� +�� :��

� �� #� 48#888� ��

�� +�� +��<

��%�� #� ��

�� "�� #� ��

��;��

�� +��

��

B��!��

��#� ��

��

� +�� B�� *��

�� #��

�� !�� #� ��

�!��

��

0��

��

��

H��

� �� #��

� �� +��

�� #�� +��#

��

(�!�� L�� 7�

��6� �� ;�� -�� 9��#� ��

��

�� #��

��+�� #� �� #

��

H:)��

�� #� ��

�� <#� ��

��#� �� "�� #� %�� #� �

�� #� ��*��

� �� >��

�!�� ( � �� )��H��

�� +��.��%�#�-��

�� I��

�� #� ��

��, ��

�� #� ��

��

��

��

� ��

��

�� "��"�� ,� ��#

��

� �� A�5� �� #� ��

� ��A�4��/��)��

� �� +��!��

�� #� ��

�� #��

��

��

� +�� A5�� #� ��

��A6/��/��,��

��

�� A�� #� ��!��

��/��

��

� �� )��

�� A�5 ��

�� #� ��

A�5��/��

�� #��

��

��

��

��

� ��#� ��

�� ;� ��

�� .��#��

�� #�� #� �

�� !��

��

�� +��

� �� #��

�� #

� ��8��)��46 ��

��"��

�� H:)� � ��

� �� )�� 78� ��

�� #

��#� �� 4�7� �� )��

��

��

��

��

��

�� #� ��

�� #

� �� #

�� ?��

��

�� #� ��#� ��

�� +��

�� !�� #� ��

��!��

�� #��#��

��+��

��!��

��#��H:)

�� +�

�� "� ��#��

�� +

� �+��#��! ��#��)$-� �

.��%�#�-�� #��

� +�� +��

9�� #��

��+� �� +��

� ��#-�� #��

�� H�� )$-� �

�� >��

�� +��#��

�� #� ��

�!�� +�� >��

��

��#�� #��

�� #� �� #� ��

�� #� ��

�� !� �� +��

��&>��3�!��

� �� '

��

��

�� +�� !��

��

��

��

�� "

��#�� +� ��

� ��#��

��

��I��:��

�� "�� #� � � ��

��% )��+��,�-��.�/�� *��

"�� #�(� � �#�) +�� #�)��#� �� #�� #� �� #� "�� +�� #�� +�� "� ��#�� )��#�� #�� )�88� �� &�� A5�6� ��'� �� ,��+��H�� 3 � �� +�� ( � �� #� �� *��#��

"�� #�� +�� +��*��I��@��#��*�� *�� +��B��+�� +��#�� +�� #��

"�� #�� +�� >�� 8�#� �� +��#�� +��+��#�� "�� #� �� #��+�� 7�6��,�� #� �� A7�4��#�� 7�4�� H9)��D �� #��.��%�#�-�� "�� 3 +� 9� � � �� 488� �� 788"�� +�� >�� +�� B�� B�� 8�#�� <8�� 8�� +��0 �� >��

"�� +��#�%�� #�( � �� # �� +��#��3 � ��#�"�� #

��

� � ��I ��&� ��

�!�� 48� ��'#� ��

��#� �� #� ��

�� #� ��

� �� #

�� *��

�� +�� H��

�� #��

�� !��

�� !��

��

.��

�� J

��

��

�� &��

�� '#�� #� ��

�� B�� !��

.� %�# -�� >� ��#��

��

��B��.��%�#�-�� >� ��

� �� #��

��#� ��+��

� �� "� ��#� .�� %�#� -��

� ��

��>� �� !��!�� #

�� +��

��?��

��

��+�� .��#� ��

��

�� &�� #� ��

�� '#� � ��

��*��

"�� #� �� >��

� ��!��

��.��#�� ;��+��

��%�� #�� 5��

� �� #��

��

�� 58� ��

�� !��#�<��G��>� ��

�!��#� ��4��0�� !��(� ��

�� +#��!��

�� 5�< �� H:)#

�� H:)#�8�� G��

>� �� H:)#� �� 8�/� �� 0�� H:)�

0��

�� H:)� �

�� ?� �� 0�� -��

�� :�� 8�/��

&8�7� �� 0�� G��#� 8�/� ��

�� G�� >� ��#� �� 7 �� '�

,�� #��

� �� #� �� H:)� ��

��

��8�� 8�� 8�� 8�� 8�� /��/��/��/��/��

��+��;��

��

�� #��

�� 9�

��#��

�� +� � ��

��#��

��

��"(,��

��

��

� � ��

�� #

��

� �� #� �� +��#� ��

�� #��

�� #� �� +�#� ��

��?�� +#�� #� ��

;�� #� ��

�� #� ��#��

�� #��

�� ;� ��;��

�� +��

�� ?��

��

� �� #��

��

��

�� #

��"(,��

��

�� "��

�� +#��+��

��

��

� �� .��

��

�� ;��

�� #��

�� +��

��

��

��+��

*��

�*�� *��

��

��

B��

��#��

��

�� #� ��

�� >��

�� !� ��

�� .�� #� ��

�� *��

��#��#� ��

�*��

��

9��#��

� �� .��#� ��

��

��

�� "(,�� + �� "��

�� #�� #��

� �#�� +�#� �� #� ��

��

��

(�!��;�� -��7�

��6� �� ;��+��

��

�� "��

��;��

��

0!��

��*��

�� >��

�� *��

�� K� �� #� ��

��#� �� H��

��

�� >��

�� $��

��

��

�� *��

��

��

�� "��

�� #� ��

��#� ��

�� /�� /�� /�� /�� /��

��!��>�� 0 ��

��

� ��

��#� �� #� �� !�

�� I��

�� #

�� #� �� !��

��!��

��

.��#� �� #

��

��

�� "��

��#� �� #� � ��

��;��

��

��

�� +��

��

�� !��

��

�� B��

� �� I��

�� 8�#�� +�

�� +� ��

��

�� +��

�� I �� ;��

�� &�'� ��

�� +�#� ��

� �� #� ��

��#� � �+�� #� �� +� � ��

��@�&��' �� #��

��#� �� @� ��&��'��

��

��

�� +��

�� +��

��+��

�� ;�� *�� K

&�' � �+�� #��

�� ;��

�� @� &��'� �� #

�� #� ��

�� @� ��&��'��

�� +��

��

�� +�� $�� #

�� +��#� �� ;��

�� +��

�� ;� �� I ��#

��

�� #��

� ��

�� .��#��

�� I ��#��

� �� #� ��

��#��

�� H�� I ��

�� "��

��

�!��

�� I ��

�� I ��

��

41Newly INDUSTRIALIZED ECONOMIES

The handover of Hong Kong to the People’s Republic of China (PRC) took place smoothly in1997. While Hong Kong, China, continues to develop as a financial and business servicescenter, the region’s economic crisis and high interest rates have slowed economic activity.

Hong Kong, China

41

RECENT TRENDS AND PROSPECTS

Two events of major importance took place inHong Kong, China in 1997. The first was the

political handover of Hong Kong, China to the PRCin July. At that time Hong Kong, China became aSpecial Administrative Region of the PRC. (Notethat Hong Kong, China and the PRC maintain sepa-rate memberships in the Asian Development Bankand are therefore discussed here as separate econo-mies.) The second event was the sharp downturn instock and property markets that began around thefourth quarter of the year. Whereas the handovertook place smoothly against a backdrop of a fairlyrobust economic environment, the market down-turn—which largely reflects the currency and finan-cial crisis engulfing the region—led to a sharpslowdown in economic activity.

During the first three quarters of 1997 con-sumer and investment spending grew rapidly, influ-enced by buoyancy in the stock and propertymarkets. As a result GDP rose by 5.2 percent in1997, an increase over the rate of growth in 1996.Spending on high value consumer goods such as carsand jewelry increased. Retained imports of capitalgoods showed a large increase, particularly importsof office equipment, industrial machinery for manu-facturing, and construction machinery. While theimports of construction machinery were drivenlargely by a high demand for housing, imports ofoffice equipment and industrial machinery reflected

increased demand for information technology andretooling of existing manufacturing activities toincrease the capital intensity of production.

From the fourth quarter, however, high inter-est rates adversely affected financial and propertymarkets. By the end of 1997, the benchmark HangSeng Index stood 36 percent below its August peakand property prices had dropped by 14 percent sinceOctober. The profitability of both financial andnonfinancial firms came under pressure, and alongwith the sharp falls in asset markets caused a slow-down in consumer and investor spending.

Poorer than expected exports also affected theeconomy during 1997. While goods exports grew ata moderate pace, exports of services were weak inthe second half of 1997. An anticipated pickup inexports did not fully materialize because of astrengthening US dollar (which implied a strongHong Kong dollar because of the link between thetwo currencies) and weak import demand in somemajor industrial country markets, such as Japan andthe United Kingdom.

Travel and tourism, which has accounted formore than a quarter of exports of services in recentyears, was expected to be a source of robust growthfor 1997, especially with the handover ceremoniesscheduled in the end of June. However, the numberof incoming visitors during the first six months of1997 was actually lower than in the last six monthsof 1996. The situation failed to improve after thehandover because the regional economic crisis and


the continued strength of the Hong Kong dollar dis-couraged tourism.

Imports of goods grew faster in 1997 than in1996, with retained imports of capital goods largelyresponsible for the acceleration. Imports of goodswere once again larger than exports, but the result-ing deficit on the merchandise trade account for1997 was balanced to some extent by a surplus onthe services trade account.

After tightening during the first three quar-ters of 1997, labor markets began to reflect the slow-down in consumption and investment expenditures.The labor force grew by 3.9 percent during 1997 asa whole, and robust labor demand until the last quar-ter resulted in an unemployment rate of around2.5 percent. Most of the unemployed were semi-skilled and unskilled workers from the manufactur-ing, construction, wholesale and retail sectors. Whiletotal employment increased by about 4.6 percentcompared to 1996, the trend of declining employ-ment in the manufacturing sector continued withthe relocation of labor-intensive production fromHong Kong, China to other economies, particularlythe PRC. Whereas manufacturing employment was46 percent of total employment in 1980, it was downto some 13 percent in September 1997.

Inflation remained under 6 percent. Upwardpressures on prices generated by tightening labor

markets and property rentals in the earlier part of1997 were balanced out by subdued imported infla-tion. In the last quarter the drop in property pricesand slowdown in economic activity further reducedany likelihood of accelerating inflation.

Budgetary deficits are the exception ratherthan the rule in Hong Kong, China and a surplusof some HK$77 billion (around $10 billion) hasbeen estimated for 1997-1998. This will add toHong Kong, China’s healthy official fiscal reserves,which received a major injection of funds when thePRC transferred the almost HK$200 billion (around$26 billion) Land Fund to Hong Kong, China in June1997. (The Land Fund consisted of revenues fromland auctions reserved for the Hong Kong SpecialAdministrative Region agreed on under the 1984Sino-British Joint Declaration.)

Hong Kong, China’s economy is clearly feel-ing the strains of the regional economic crisis. Thecombination of high interest rates, sharp contrac-tions in share and property prices, and expectationsof a protracted economic slump in the region willcontinue to dampen consumer and investmentspending. External demand for Hong Kong, China’sgoods and services is also likely to remain weak in1998, both because of weak demand in some exportmarkets and competition. Unemployment is boundto increase as the economy slows down.

Table 2.1 Major Economic Indicators: Hong Kong, China, 1995-1999(percent)

Item 1995 1996 1997 1998 1999

Gross domestic product growth 3.9 5.0 5.2 3.0 3.5

Gross domestic investment/GDP 34.8 32.3 34.5 31.0 32.0

Gross domestic saving/GDP 30.5 30.7 30.6 30.0 32.0

Inflation rate (consumer price index) 8.6 6.0 5.7 4.5 5.0

Money supply (M2) growth 14.6 10.9 8.4 9.4 9.6

Fiscal balance/GDP -0.3 2.2 5.8 0.3 0.1

Merchandise exports growth 14.8 4.0 4.0 2.2 3.5

Merchandise imports growth 19.1 3.0 5.1 1.0 6.0

Service exports growth 10.3 8.7 0.3 4.1 1.5

Service imports growth 11.6 3.6 6.3 1.4 1.0

Sources: Hong Kong Monetary Authority data and staff estimates.


On a positive note, inflationary pressures willremain weak and some fiscal stimulus should resultfrom the cuts in corporate and income taxesannounced in February 1998. Moreover, if expecta-tions of moderate growth in the PRC and a stablerenminbi are borne out, then the economy can ex-pect some relief from its close links with the PRC.Over the longer term, as regional growth and in-vestments resume, Hong Kong, China’s economyshould once again pick up as long as it maintains itscompetitiveness in providing financial and otherbusiness services, not just to the PRC, but to Asiaas a whole.

CRITICAL ISSUES IN SHORT-TERMECONOMIC MANAGEMENT

The economy of Hong Kong, China has come un-der severe pressure as a result of the regionalfinancial and economic crisis. While businessexposure to recession-prone regional economies hascontributed to the economic slowdown of thisextremely open economy, fears of declining competi-tiveness of Hong Kong, China’s products have alsotaken their toll. With substantial currency devalua-tions occurring in such advanced Asian economiesas Republic of Korea; Singapore; and Taipei,China,some market participants expect Hong Kong, Chinato follow suit to remain competitive. The linkedexchange rate system under which the Hong Kongdollar is pegged to the US dollar has come underheavy speculative attack on a number of occasionsas investors sell Hong Kong dollars and buy USdollars in anticipation of a devaluation of the localcurrency. However, Hong Kong, China’s authoritieshave ruled out a devaluation, and the PRC supportsthis decision.

The speculative attacks have led to an increasein interest rates in Hong Kong, China. Interest ratesrose because the linked exchange rate system entailsnot only pegging the local currency to the US dol-lar, but backing local currency by an equivalentamount of US dollars. Thus a speculative exchangeof Hong Kong dollars for US dollars by investorsanticipating a devaluation reduces the supply ofdomestic currency, thereby putting upward pressureon interest rates. The loss of US dollars by note-issuing banks constrains their ability to issue newHong Kong dollars and counter the rise in interestrates.

The main result of the increase in interest rateshas been to choke off funds that were flowing intothe share and property markets. The steep declinesin asset prices in conjunction with the continuedhigh interest rates—the 3-month interbank loan rateat end-January 1998 was about 6 percentage pointshigher than a year earlier—have taken a toll on busi-ness. In addition, the continuation of the peg hascaused concerns in the tourism and manufacturingsectors, because the relatively strong Hong Kongdollar makes local goods and services moreexpensive.

While it may appear that maintenance of thelocal currency’s peg to the US dollar is makingHong Kong, China uncompetitive, this is not neces-sarily the case for several reasons. First, flexibility ofprices and wages can make up for the lack of nomi-nal exchange rate adjustments. Available evidencesuggests that wages in Hong Kong, China are quitedownward-flexible, and property prices and rentals,major determinants of Hong Kong, China’s coststructure, have already fallen. In addition, and incontrast to those Asian economies that have de-valued their currencies, adherence to the peg iskeeping “imported” inflation in check.

Finally, Hong Kong, China is essentially aservice-oriented economy and does not competedirectly with those regional economies such asIndonesia and Thailand that have seen devaluationsof 50 percent or more. A more relevant comparatorfor Hong Kong, China may be Singapore, which hasseen its currency devalue by 17 percent in relationto the US dollar (and hence the Hong Kong dollar).While a devaluation of this magnitude is not trivial,the competitiveness of high-end services such asfinance, insurance, and other related businessservices that Hong Kong, China is increasinglyproviding is not as sensitive to prices as, say, low-technology manufactured goods. However, tourismis somewhat more sensitive to prices than otherservices. Perhaps more important, Hong Kong, Chinahas a strategic position as the chief provider ofservices to the PRC. Thus as long as growth in thePRC does not slow down dramatically during thenext year, the economy of Hong Kong, China shouldcontinue to benefit.

In sum, a devaluation of the Hong Kong dollarwould be of no obvious overall benefit to theeconomy. Its value in increasing competitiveness isquestionable, and it might, perversely, only add to


the instability both in Hong Kong, China and in theregion. Hong Kong, China’s current economic slow-down should be seen not as a result of the decisionto maintain the linked exchange rate system, but asthe inevitable consequence of an extremely openeconomy operating during a period of regionalslowdown.

POLICY AND DEVELOPMENT ISSUES

Structural changes in Hong Kong, China’s economyduring the last 15 to 20 years have made it one ofthe most service-oriented economies in the world,with services now accounting for around 85 percentof GDP. The resulting decline in the importance ofmanufacturing has caused concern among someobservers that too much of the manufacturing basehas been lost. Observers are also concerned aboutthe paucity of high-technology industries within themanufacturing sector. As a result, some have calledfor setting up a high-technology industrial park, in-troducing tax breaks for multinationals, and estab-lishing a venture capital fund for domestic firmsattempting to establish high-technology businesses.

However, the loss of the manufacturing basewithin Hong Kong, China itself need not be viewedwith particular alarm. Since the early 1980s,Hong Kong, China’s manufacturing facilities haveincreasingly been relocated to the PRC asHong Kong, China companies contract out all orpart of their production processes to companies inthe PRC to take advantage of the abundant supplyof low-cost labor. In parallel with this, offshoretrading and exports of professional and otherbusiness services that service the relocated manu-facturing facilities have grown in importance. Thuswhile Hong Kong, China’s own manufacturing sectorhas diminished in importance, its service sector isnot bereft of a manufacturing base.

The economy has benefited from its increasedservice orientation and is likely to continue to doso. In the last 15 years the PRC has attracted some$200 billion as foreign direct investment, of whicharound 55 percent has flowed through Hong Kong,China. Moreover, the Asian and Pacific region isexpected to generate a huge demand for infrastruc-ture upgrading once it is back on a firmer economicfooting. This will lead to a rise in the demand forinvestment funds and professional support services,and Hong Kong, China is in a good position to play

a key role as a provider of financial and businessservices.

However, two factors may constrain furtherdevelopment of financial and business services,namely, a human resource constraint and a possibledeterioration in the business environment.

Currently, aside from those in the financesector, many of Hong Kong, China’s service sectorjobs tend simply to be “front office” operations forlow-skill-intensive manufacturing firms. Moreover,even within manufacturing, much of the activitytakes place under contract production, so firms tendnot to be involved in higher end research, design,and market promotion activities. Thus the concernis that Hong Kong, China’s workforce is not ad-equately equipped to make the transition to moreskill-intensive manufacturing and to high-endservices.

Government efforts to upgrade the humanresource base have included providing vocationaland retraining programs and encouraging greaterenrollment in tertiary education. Some progress isapparent. For example, the percentage of the popu-lation aged 17 to 20 enrolled in tertiary educationincreased from about 5 percent in 1984 to about18 percent in 1994-1995. In addition, universitiesand training centers are stressing communicationand computer skills, both of which are essential whenproviding high-end services. Nevertheless, room forimprovement still exists. For instance, enrollmentin tertiary education remains low by industrial coun-try standards, and recently there have been com-plaints about declining proficiency in English, acrucial language in international business.

As concerns the business environment, it iscurrently characterized by openness, low taxes, highstandards of corporate disclosure, and generally well-policed capital markets. Moreover, the overall policystance has been and continues to remain one ofpositive nonintervention by the state, whose activi-ties are essentially limited to providing prudentialregulation and supervision. Hong Kong, China hasprospered under this framework, and there is noreason why it should not continue to do so.

Recent events in East and Southeast Asia havedemonstrated the importance of maintaining highstandards of prudential regulation and supervisionand ensuring transparency in economic transactions.While the record of Hong Kong, China on this frontis among the best, its close ties with business in the


region suggest that it cannot rest on its laurels.Whereas business in Hong Kong, China has so farbeen based foremost on clear-cut market consider-ations, business elsewhere in the region tends to takeplace in the shadow of government and market. Thisgenerates the potential for lack of transparency, cor-ruption, and political interference. While these can

obstruct the efficient working of markets, they canbe particularly devastating for financial markets asthe regional economic turmoil has revealed. ForHong Kong, China’s future competitiveness as aninternational center for financial and businessservices, its business environment must not beallowed to deteriorate.


A loss of confidence in its financial markets led the Republic of Korea (henceforth referred toas Korea) to ask the International Monetary Fund (IMF) for a bailout. In the meantime,contractionary monetary and fiscal policies and an extended recession are expected, and thegovernment should strictly implement overall economic reforms.

Republic of Korea

46

At this time, a series of insolvencies of largebusiness conglomerates or chaebols led to an accu-mulation of bad loans by financial institutions thatundermined their soundness. At the same time,instability in international financial markets becauseof the currency crisis in Southeast Asia had a con-tagion effect. This led to a deterioration of Korea’screditworthiness in international financial marketsand reduced inflows of capital. Finally, in December1997, the government sought help from the IMF inthe form of a bailout package totaling $57 billion,which included assistance from the IMF itself, fromthe World Bank, and from the Asian DevelopmentBank. In accordance with the standby arrangement,Korea undertook a number of measures tostrengthen its economy and pledged to continueimplementing more reform policies in the comingyears.

Budget expenditure increased by 12.4 percentin 1997, resulting in a budget deficit of around0.5 percent of GDP. As concerns monetary policy,the stance was contractionary. The growth rate ofthe targeted money supply (a slightly broader defi-nition than M2) decreased throughout 1997 exceptfor December. This mainly reflected a recession, andtherefore a decrease in demand for liquidity. It wasalso affected by a structural change unrelated to aliquidity condition, that is, shifts between financialassets. In December, the money supply increasedmore rapidly, reflecting the Central Bank’s efforts


Korea grew steadily during the 1990s, reached apeak of 8.9 percent in 1995, and then began a

steady slowdown, declining to 7.1 percent in 1996and 5.5 percent in 1997. The 1996 slowdown wascaused by a slackening of external demand, fallingprices of semiconductors, and sluggish capital in-vestments. In 1997, even though exports experi-enced growth in real terms, the downward trend ofthe previous year continued in other major sectors.Investment in equipment decreased throughout1997 because of excess capacity and high uncer-tainty. Investment in construction stayed at muchthe same level as in 1996, even though infrastruc-ture-related construction remained robust. Thegrowth of consumer spending dropped steeply be-cause of concerns about job security and the waveof corporate bankruptcies. As an outcome of slowereconomic growth, the unemployment rate rose from2 percent in 1996 to 2.6 percent in 1997.

However, the slackening of economic growthdid not give rise to serious concern until the thirdquarter of 1997. Even when the Southeast Asiancountries had already experienced the financial andcurrency crisis, the Korean economy was in relativelygood shape. For the first three quarters of the year,the inflation rate remained at 3.8 percent, and theratio of the current account deficit to GNP was3.7 percent.

47NEWLY INDUSTRIALIZED ECONOMIES

to ease the credit crunch created by the shakyfinancial markets.

The increase in the growth of consumer pricesdropped slightly to 4.5 percent in 1997, down from5 percent in 1996. The prices of agricultural, for-estry, and marine products showed unstable move-ments, recording higher increases than in 1996.Charges for services slowed, reflecting a steep risein 1996, as well as stability in the prices of privateservices. The prices of manufactured goods showeda large increase in the first quarter of 1997 becauseof the rise in the prices of petroleum products andin the fourth quarter of 1997 because of deprecia-tion. Producer prices rose 3.9 percent during 1997,which was higher than the 2.7 percent recorded in1996. The pace of wage increases, which have af-fected economic performance, fell from 12.2 per-cent in 1996 to 7.5 percent in 1997.

The balance of payments deteriorated signifi-cantly in 1996; however, exports reversed theirdownward trend in the second quarter of 1997 andexpanded strongly in the third quarter. Exports in-creased by 7.2 percent during 1997, in contrast tothe 4.1 percent growth registered in 1996. This washelped by the sharp pickup in exports of heavy in-dustrial and chemical products, such as semicon-ductors and refined petroleum products. Meanwhile,export prices fell, partly because of the steady weak-ening of semiconductor prices. Imports showed aslight decrease of 2.3 percent in 1997, down from a

12.2 percent increase in 1996, largely in responseto sluggish consumption and the decrease in invest-ments. The trade balance registered a deficit of $2.8billion during 1997. Overall, the current accountimproved quarter by quarter in 1997. It recorded adeficit of $8.8 billion, or 2 percent of GDP, far lessthan the 4.8 percent in 1996.

The Korean won depreciated by 15.4 percent,on average, in nominal terms in 1997, and by 43.5percent year-on-year in response to the crisis. Asconcerns exchange rate policy, the authoritieswidened the band for daily movement from 2.2 per-cent to 10 percent, and then finally abolished it asof 16 December 1997.

The IMF agreement demands extreme con-traction in both fiscal and monetary policies. Themain objective of monetary policy is to maintaininflation at 9 percent in 1998 and to limit down-ward pressure on the won. The targeted moneysupply indicator was further broadened to M3 in1998, and is projected to increase by only 13 per-cent, compared with 16.5 percent in 1997. The gov-ernment will maintain tight fiscal policy to alleviatethe burden on monetary policy and to provide forthe still uncertain costs of restructuring the finan-cial sector. To this end the government has increasedspecial excise tax and transportation tax rates. Ithas also widened the bases of the value-added tax,corporate taxes, and income taxes by curtailing orabolishing tax exemptions or reductions, which were,

Table 2.2 Major Economic Indicators: Republic of Korea, 1995-1999(percent)

Item 1995 1996 1997 1998 1999

Gross domestic product growth 8.9 7.1 5.5 -1.0 3.1


Gross domestic savings/GDP 36.8 35.2 34.5 34.9 33.9



Fiscal balance/GDP 0.5 0.0 -0.5 -0.9 -1.0


Merchandise imports growth 32.1 12.2 -2.3 -12.3 14.0

Current account balance/GDP -1.8 -4.8 -2.0 6.9 3.4

Sources: International Monetary Fund (1998), National Statistics Office (1997), and staff estimates.


in any case, inconsistent with international stan-dards. On the expenditure side, the government willmake major cuts in infrastructure outlays and de-fense expenditures. As a result, the fiscal deficit islikely to be about 1 percent of GDP in 1998.

These policies imply that the economy willcontract, and expectations are that it will take longerthan two years for it to return to its potential growthpath. Provided that the government implements theIMF agreement faithfully, the GDP growth rate isexpected to decline to -1.0 percent in 1998 and riseto 3.1 percent in 1999. The unemployment rate willincrease to 4.3 percent in 1998 because of thecontractionary policies and the restructuring of theeconomic system. Even if replacement investmentis active, new investment is likely to be suspendedor reduced. Thus total investment in real terms isexpected to decrease by 28.7 percent in 1998, andthen to increase by 12.3 percent in 1999. Consump-tion in real terms will decrease by 4.2 percent in1998 because of greater fears of future unemploy-ment as well as actual high unemployment, but willthen increase by 1.6 percent in 1999.

Reflecting the lagged effects of the steepdepreciation of the Korean won on input costs in1997, both consumer and producer prices areexpected to rise by around 10 percent in 1998,higher than the initial target set by the governmentand the IMF. Nominal wages are likely to stay attheir 1997 level in the coming years, or even to de-crease, in response to contractionary policies andcorporate restructuring.

Exports will grow by 5.8 percent while importswill decline by 12.3 percent in 1998, mainly becauseof the depreciation of the won in 1997. The tradebalance is expected to record a surplus of $22.4 bil-lion. The steep depreciation of the won in 1997 andthe extended economic recession will help improvethe trade balance in the next few years. The cur-rent account balance is expected to yield a largesurplus of $21.1 billion in 1998 and $11.4 billion in1999. However, a decrease in the imports of invest-ment goods is likely to have a negative effect on theeconomy in the longer run.


After the economy slowed down in 1996, concernswere voiced about the “high-cost and low-efficiency economic system.” The government’s

reaction was swift and focused on structural adjust-ments. While the government rapidly reached con-sensus about some policy measures and started toimplement them, it needed more time to reachagreement on other issues, such as financial reforms.

The government’s economic reforms turnedout to be insufficient to protect the economy fromthe financial and currency crisis, even though theywere generally in line with the IMF package. Theeffect of the financial crisis and the IMF packagewas to provide the momentum for reforms that werebroad in scope and immediate in implementation.As such, the distinction between short-term andlong-term policy issues disappeared and prioritizationwas difficult. The issues discussed in the followingsections are the most urgent and have the greatestimpact on the economy.

Financial Market Reform

In terms of international competitiveness, the finan-cial sector is far behind the real sector. The keysource of the financial sector’s weakness was thepredominantly state-led distortion in creditallocation. This practice deprived the financialsector of its primary function of screening and moni-toring, and led to excessive risky investments by thecorporate sector, and eventually to the current crisis.

The government became aware of this prob-lem, and in response established the FinancialReform Committee in January 1997. The commit-tee produced a report in June; however, the crisishit before the government implemented full-scalereforms that reflected the report’s recommendations.The IMF package, which shared many ideas withthe report, called for restructuring financial institu-tions to construct a sound and competitive finan-cial industry. Measures to be taken includedprotecting deposits, closing troubled merchantbanks, resolving nonperforming assets of banks andmerchant banks, facilitating mergers, and strength-ening prudential supervision standards. Tostrengthen supervision of the financial sector, threeagencies responsible for supervising banking,security, and insurance institutions were consoli-dated into the Financial Supervisory Commission.In addition, the Central Bank was given greaterautonomy.

While to date the financial reforms appear tohave touched on all major issues and to comply with


market mechanisms, they will confront many chal-lenges, mainly because of the unprecedented busi-ness environment characterized by competition. Thegovernment can no longer avoid the challenge ofcompetition by resorting to protection. Instead,autonomy of and accountability by each financialinstitution can enhance the efficiency of the finan-cial sector.

Trade and Capital AccountLiberalization

The IMF agreement required the government to seta timetable for trade liberalization in line with WorldTrade Organization commitments; and the govern-ment promised to shorten the timetable for abolish-ing trade-related subsidies, restrictive importlicensing schemes, and its import diversificationsystem. The government opened stock and bondmarkets wider and ahead of schedule, promised toliberalize money market instruments, increased theceiling of domestic bank shares that foreign bankscould acquire, and allowed domestic corporationsto borrow long-term loans from overseas.

One question in this context is the extent towhich these measures will help protect financialmarkets against volatile capital movements. Con-sidering the high interest rate target of more than20 percent, capital account liberalization couldstimulate hot money movements and cause theperformance of already highly leveraged domesticfirms to deteriorate. It will also increase interest raterisk, exchange rate risk, and credit risk and hamperthe development of long-term capital markets. Tomitigate this undesirable situation, the interest ratetarget needs to be lowered to a level that the weakcorporate sector can manage. At the same time,sufficient monetary policy instruments need to bedeveloped so that the Central Bank can stabilizeinterest rates.

Corporate and Labor Market Reform

Much of the blame for the crisis has fallen on thechaebols, because of their excessive capacityexpansion and industrial diversification. Thegovernment has recently encouraged the restruc-turing of corporate finances, including measures toreduce corporations’ high debt-to-equity ratios andto facilitate mergers and acquisitions. To achievethese goals, the government has prepared legisla-tion that would require corporations to preparefinancial statements on a consolidated basis.Another item of legislation would gradually reducethe cross-debt payment guarantees among groupaffiliates that had enabled the chaebols to take onexcessive debt.

The chaebol problem is intimately related tolabor market rigidity. Because trade unions havedeveloped through confrontations with chaebolmanagement, labor market flexibility could begreatly improved if promoted at the same time ascorporate reforms. The IMF package provided a goodopportunity for labor, government, and industryrepresentatives to form a committee to examine anddiscuss the current crisis, especially in relation tolayoffs and how to maintain workers’ livingstandards. While providing a sufficient social safetynet is a good idea, given its high costs it will bepossible only after the crisis is over. In addition, moretransparent corporate management would helpworkers regain confidence in their employers.

To the extent the crisis originated from a lossof confidence, strict implementation of the economicreforms is crucial for the recovery of foreign invest-ment. One of the main features of the crisis is thatit is a private sector problem, and therefore involvesa complicated combination of vested interests ofmany firms and financial institutions. Thus to keepthe reforms on track, the emphasis should be ontransparency and accountability.


While Singapore withstood the region’s financial crisis better than its neighbors in 1997, theregion’s crisis is likely to affect future growth. Industrialization policy remains active, and thefinancial sector is poised for expansion.

Singapore

50


E xcept for its currency and stock market,Singapore was only mildly affected by the

region’s economic crisis in 1997. The economysurged ahead with 7.8 percent growth in GDP asworld demand for computer-related electronics,especially semiconductors, rebounded. Manufactur-ing output rose by 4.3 percent, spurred by chemi-cals, petroleum, and electronics. Electronics accountfor roughly half of manufactures, which in turnaccount for more than three quarters of exports, andSingapore now has the world’s largest disk driveindustry. While the petrochemicals subsectorexpanded significantly as new plants came onstream, commerce, and in particular tourism,suffered somewhat from reduced regional demand.

High salaries and property prices relative tothose in neighboring countries have taken their tollon Singapore’s manufacturing base, particularly forlower value-added and labor-intensive manufac-turing, much of which has migrated to Malaysia.While the remaining manufacturing sector hasmaintained increasing productivity, it has becomemore concentrated on electronics. The servicessector now accounts for more than 66 percent ofGDP, while industry accounts for 34 percent.Financial and business services, particularly foreignexchange activity and provision of business hub ser-vices, grew by 11 percent in 1997, assisted by taxbreaks. The steady rise in net services income has

played an important role in the current account sur-plus, although this was tempered somewhat in 1997by the slowdown in tourism resulting from the fi-nancial crisis and the haze that affected the regionfollowing the forest fires in Indonesia.

The construction industry benefited frompublic investment in infrastructure in 1997, whichincluded expansion of the mass rapid transit systemand port facilities and land reclamation. It expandedby 13.3 percent and led employment growth. Publicand private housing projects contributed to thesector’s robust growth. Growth in such spendinggenerally offset the slower growth in machinery andequipment, resulting in fixed investment growth ofnearly 10 percent.

Activity in the property market remained sub-dued as restrictions imposed in 1996 to prevent over-heating remained generally in force (except for astamp duty on sellers of properties held for less thanthree years, which was removed), and propertydemand from neighboring countries diminished. Theresulting glut of private housing prompted the gov-ernment to halt land sales in late 1997 and extendthe time granted to developers to construct theirprojects.

The labor market remained tight, with unem-ployment running at less than 2 percent. The con-centration on electronics manufacturing hasincreased the demand for engineers and technicians,and resulting wage increases have been only partiallyconstrained by importing skilled foreign workers.


Real wage increases have, in turn, supported pri-vate consumption, although such increases are likelyto moderate because of the regional slowdown.Public sector consumption remained strong in 1997,increasing by 8.6 percent.

The Monetary Authority of Singapore (MAS)practices a managed floating exchange rate system,with a target of a trade-weighted currency basket.As the MAS only adjusts the weights every three tofive years, the region’s currency turmoil and chang-ing trade patterns may require the MAS to reassessthis target. The sensitivity of the small, openeconomy to trade and capital fluctuations necessi-tates a focus on monetary stability. Money supply(M2) growth averaged 10.3 percent for the year, andinflation was just 2 percent, aided by lower pricesfor imported food from neighboring countries withdepreciated currencies. Meanwhile, prices foradministrative charges, transportation, communica-tions, water, health care, and housing increased.Singapore pledged to assist in the bailout packagesfor neighboring Indonesia and Thailand led by theInternational Monetary Fund.

The high savings rate (equivalent to roughlyhalf of GDP), fiscal surplus, current account surplus,limited foreign debt, and the world’s highest percapita foreign reserves helped the country come

through the regional currency and financial turmoilless affected than its neighbors. While the Singaporedollar depreciated about 17 percent relative to theUS dollar, it appreciated substantially more relativeto most regional currencies.

In recent years the emphasis on outward directinvestment has increased, and successive currentaccount surpluses and substantial inward boundforeign direct and portfolio investment have led tosteady growth in international reserves. With thelow level of foreign debt, which consists primarily oflong-term borrowing by the private sector, andsubstantial exports, the debt-service ratio is less than1 percent.

External demand typically contributes moreto Singapore’s growth than domestic demand.Singapore’s merchandise exports to Southeast Asiamay be relatively unaffected by the slowdown there,as many of them are intermediate goods with endmarkets ultimately in Europe or North America. Ofgreater significance is the steep depreciation of theKorean won, as the Republic of Korea produces andexports electronic goods that compete directly withthose of Singapore.

While the region’s difficulties had some nega-tive impact on Singapore’s exports, robust futureeconomic activity in Europe and North America is

Table 2.3 Major Economic Indicators: Singapore, 1995-1999(percent)

Item 1995 1996 1997 1998 1999






Fiscal balance/GDP 7.6 6.8 3.3 1.7 na

Merchandise exports growth 21.0 6.4 -3.1 2.0 4.0


Current account balance/GDP 17.0 15.4 15.2 12.9 10.3

na Not available

Sources: International Monetary F und (1997a), Ministry of Trade and Industry (1996), and staff estimates.


likely to more than offset this. Of Singapore’s fivelargest markets (the European Union; Hong Kong,China; Japan; Malaysia; and the United States), thefinancial turbulence has affected only Malaysia.Exports declined slightly in US dollar terms in 1997,but are expected to recover in 1998. Slow growth inimports is expected to compensate to a large extentfor the reduced growth in exports, and the currentaccount surplus is expected to decline slightly as apercentage of GDP, but to remain substantial.

Slower regional growth is expected to affecthub-related services, such as entrepot trade, andshipping services, such as freight, insurance, and portcharges, leading to slower growth and rising unem-ployment in 1998. The appreciation of the Singaporedollar relative to other regional currencies is alsolikely to affect net tourism and retail receipts nega-tively. In addition, reduced residential constructionin 1998 is expected to contribute to slower invest-ment growth. Projections indicate that GDP growthwill fall to 3 percent before recovering somewhat to4.5 percent in 1999.

Given the government’s commitment toincreasing spending on education and infrastructure,such spending is expected to continue to rise, al-though at a more moderate pace in 1998 and 1999.The government has maintained its operatingexpenditure near a constant 20 percent of GDP.Development expenditure is expected to remainhigh because of upcoming infrastructure projects,including land reclamation, communications facili-ties, a new rapid transit line and extension to ChangiAirport, and light rail projects.


The financial crisis in much of Southeast Asia havebrought to the fore a nexus of issues that will affectSingapore’s future prospects. Prominent amongthese are the country’s industrial policy and devel-opment of the financial services industry.

Industrial Policy

Singapore maintains a concerted effort to broadenand deepen its economy, particularly in relation tothe Southeast Asian subregion. The governmentemphasizes low land-intensity operations, and usestax incentives, investment allowances, training,research and innovation programs, and capital

assistance schemes to steer investment toward highervalue-added activities. The objective is to attractforeign investment, promote and develop servicesectors, and develop small- and medium-size enter-prises. Within the services sectors, the focus is onserving regional business headquarters (approxi-mately 2,000 of which are located in Singapore),logistics, education and health care services, andcommunications and media. The authorities alsodevote substantial effort to promoting financialservices.

Infrastructure and technological innovationsare necessary to boost productivity and attract for-eign investment. The government’s Manufacturing2000 program aims to maintain manufacturing at25 percent of GDP and 20 percent of employment,but these goals may come into conflict with theexpansion of business and financial services. Thegovernment is devoting more resources to researchand development (R&D) and to technical trainingof the labor force. Singapore’s gross expenditure onR&D has been growing rapidly, expanding at a rateof 19 percent per year over the last five years, butremains lower in relation to GDP than in other in-dustrial countries. The small size of Singapore’spopulation may limit the amount of R&D that canbe done domestically.

Singapore is a prominent investor in othercountries in Asia, including PRC, India, Indonesia,Myanmar, and Viet Nam. To some extent this ispatterned after the Swiss model of obtainingsubstantial national income from foreign invest-ments. In this effort, the sharp depreciation of otherAsian currencies in 1997 may create a buyingopportunity for Singapore’s regional investmentobjectives.

The Singapore ONE (One Network forEveryone) plan to link every home by computer andturn Singapore into an “intelligent island” isintended to help establish Singapore as a regionalfinancial and product design center. Singapore ONEaims to bring multimedia services with a broadbandnetwork and high-speed links to other economiesto most Singaporeans by the end of 1998. Companiesthat participate in developing products and servicesthat facilitate or use the new network are eligiblefor income tax exemptions, tax deductions for R&Dexpenditures, funding from the National Scienceand Technology Board, and preferential telecommu-nications tariffs.


ratio for banks is set at 12 percent, substantiallyabove that recommended by the Bank forInternational Settlements, but most banks maintaineven higher ratios, all in assets that have the lowestrisk. While this ensures that banks are well capital-ized, it reduces the sector’s return on equity. In 1997estimates indicated that less than 3 percent of loanswere nonperforming, but this ratio may increase asevents unfold in Indonesia and Malaysia, with whichSingapore has close economic links. The MASestimates that offshore loans are roughly three timesthe value of domestic loans. The large banking sectorcomprises both domestic and foreign institutions,but the former are limited in size. The four largestdomestic banks are either family or governmentcontrolled, and are too small to compete effectivelyin financing most of the region’s large infrastruc-ture projects. Foreign banks are currently restrictedfrom owning more than 40 percent of any localbank’s capital, thereby limiting the prospects formergers to increase the size of domestic banks tointernationally competitive levels. Transparency isalso limited as, among domestic banks, only thegovernment-owned bank reveals information aboutbad loans or provisions made against these loans tothe public.

In 1997 the financial services sector benefitedfrom greater foreign exchange trading and volati-lity-induced trading in the stock market, althoughSingapore’s stock market fell by more than 40 per-cent, which reduced the benefits for domesticallylisted financial service firms. The foreign exchangemarket is active, and a futures exchange has beenset up. There are no restrictions on forward exchangetransactions. Forward exchange rates of up to oneyear’s term are available for most major and regionalcurrencies, and foreign currency futures are tradedat the Singapore International Monetary Exchange.Plans to expand the financial services sector may,however, have to be scaled back if the region’s set-back results in reduced foreign borrowing fromSingapore’s banks, as seems likely.

In its July 1997 budget the government intro-duced a set of tax breaks for income earned fromoverseas activities of banks, income earned by fundmanagers in managing nonresident funds, incomeearned in managing initial public offerings in sharesdenominated in foreign currency, income earnedfrom trading foreign currency shares, and incomeearned from credit ratings of foreign currency

The Economic Development Board’s Innova-tion Development Scheme has been allotted S$500million to offer companies grants for half their costsin such areas as product and process design. Inno-vation Development Scheme funding is also avail-able for companies that participate in SingaporeONE for up to 70 percent of development costs.

In addition, the authorities are promoting bio-technology. In 1997 the National Science and Tech-nology Board started an incubator unit for infantbiotechnology firms at the Bioprocessing Technol-ogy Centre, which makes laboratory space andequipment available for rent.

The concentration of fiscal incentives tobenefit particular sectors reflects a governmentcommitment to industrial policy that is likely todeepen. While Singapore appears to be moving to-ward an industrial policy in which the private sectortakes the lead, that transition appears to be someway off. While one could argue that Singapore’sindustrial policy has been successful at pickingindustries for promotion, one could also argue thatit may have been more a matter of the industriespicking Singapore based on comparative advantage.Yet Hong Kong, China succeeded in many of thesame sectors with much less government interven-tion. Some of the industries, such as electronics, thatthe government has promoted may have madeSingapore’s economy particularly susceptible to theregional export slowdown in 1996. In addition, somesectors, such as biotechnology, have received consi-derable promotion with limited results. WhetherSingapore can continue to guide the market as wellas in the past remains to be seen as the economyexpands, diversifies, and moves increasingly intoservices, and as other examples of national industrialpolicy (such as in the Republic of Korea) appear lesssuccessful in hindsight. Fortunately, Singaporemaintains a high degree of transparency in its policyimplementation.

Development of Financial Services

The limited size of the domestic market implies thatto maintain rapid growth financial activity must beexternally oriented. To promote its efforts to expandas a regional financial center, the government hasinitiated a review of the banking and financial sector.The sector is considered sound, and Singapore main-tains an open capital account. The capital adequacy


denominated securities issued in Singapore. Inaddition, offshore bond issues no longer need to beunderwritten locally to qualify as tax exempt, andthe authorities raised the limit on tax deductiblebank provisions against unforeseen losses by 50 per-cent. The number of seats on the stock exchangeoffered to foreign brokerage houses is expected toincrease, fixed commissions on stock sales may beabolished, and the Singapore dollar is likely to begradually internationalized by eased restrictions onforeigners lending Singapore dollars.

Market reaction has been muted, partlybecause of skepticism about the government’s will-ingness to ease its traditionally tight control of thecountry’s finances. This control is still apparent inthe concentration of national savings in the CentralProvident Fund, the large budgetary surpluses, the

substantial deposits of government agencies in thegovernment-controlled savings bank, and a host ofregulations covering relatively minor details offoreign bank branch operations. The 1998 budgetaims to ease some of this control. Pressure from theUnited States and the World Trade Organization toliberalize the sector further is likely. However, inNovember 1997 the government announced thatin future, the MAS will focus on supervision ratherthan on strict regulation of financial markets, andthat listing requirements on the stock exchangewould be eased. These modest efforts are in the rightdirection, but more can be done. The success of thegovernment’s efforts to establish Singapore as a re-gional financial center will depend critically on thegovernment’s willingness to cede more of its controlover national savings.

Taipei,China

55

The region’s financial crisis has left Taipei,China largely untouched. Reforms in the bankingand financial sectors are to continue. Policy to encourage high technology, which will bringabout a number of structural changes, remains active, but needs to gain momentum.


In a year of unprecedented turmoil in Asia’sfinancial markets, Taipei,China has managed to

avoid a major financial crisis. Not only has it sur-vived this turbulent period, but its economy grew at6.8 percent during 1997, slightly faster than in theprevious two years. This was largely due to sustainedgrowth in finance, insurance, real estate, and socialservices. While the manufacturing sector is stillrecovering from its previous slowdown, the recoveryis noticeable, and the growth rate is a little morethan 4 percent.

Despite the higher growth rate and only amodest increase in the labor force, unemploymentrose to 2.7 percent, a little higher than in 1996.However, the current rate is still relatively low byinternational standards, and future unemploymentrates are not expected to be much higher.

Gross domestic investment as a percentage ofGDP increased slightly compared to 1996. This wasdue mainly to an increase in private investment, asinvestment in public enterprises grew only slightly,and several public investment projects fell far behindschedule. Government investment increased by lessthan 2 percent. By contrast, the growth rate ofprivate investment more than doubled in 1997, com-pared with 1996, to just under 13 percent. Theprimary cause was the optimism generated by thestock market boom.

With the strong growth in income tax collec-tion, overall government current revenues rose by

10.6 percent in 1997, but government currentexpenditures grew only 5.8 percent. Nevertheless,total revenues still fell short of total expendituresby about 5.7 percent of GDP, largely because of theimplementation of government investment projectsthat had fallen behind schedule in previous years.

Slow growth of the money supply (M2) at7.2 percent was largely an outcome of the CentralBank’s anti-inflationary policy and weak demand forbank financing by the construction industry. Theformer has proven successful to the extent thatconsumer price inflation was about 1 percent, thelowest rate since 1987. The depreciation of theJapanese yen, which reduced the prices of importsfrom Japan, helped keep the inflation rate down.

Exports grew by more than 5 percent in 1997,with exports of heavy industrial products holdingup particularly well. In sharp contrast, agriculturaland processed agricultural exports continued theirslowdown, shrinking by as much as 19 and 34 per-cent, respectively. Livestock epidemics explain someof this slowdown, but it also reflects a general declineof the agriculture sector.

The value of imports rebounded in 1997, grow-ing by about 10 percent after stagnating in 1996.The principal imports were machinery, electricalequipment, and chemicals, which togetheraccounted for more than 45 percent of total importsin 1997. As in 1996, imports of consumer goods grewmore rapidly than imports of capital goods and rawmaterials. This may reflect an increasing consumer-ist orientation in a maturing economy.


As a result of the faster growth of imports, thecurrent account balance declined to a surplus of2.7 percent of GDP, a marked fall from the 4 per-cent surplus in 1996. Under pressure from a strongUS dollar, the New Taiwan dollar depreciated anaverage of 15 percent. Despite the depreciation, thetrade surplus did not increase further in 1997.

After a slight decline to 5.8 percent in 1998,real GDP growth is expected to recover in 1999.Accordingly, government current revenues are alsoprojected to pick up in 1999. In an attempt to bringdown the budget deficit, the government’s capitalexpenditure will be more conservative. Projectionsindicate that the ratio of government expenditureto GDP will decrease by 3 percentage points overthe next two years, down from 28 percent in 1997.By contrast, because tax revenues will exhibit stablegrowth, the overall deficit to GDP ratio will decreaseby less than one percentage point in 1999.

The money supply will grow slightly fasterin 1998 and 1999 than in 1997, with a growth rateof about 7.4 percent. The Central Bank’s anti-inflationary policy and the direct financing ofbusinesses supported by the stock market will beresponsible for the low monetary growth.

With aggregate demand increasing as a resultof sustained growth of the economy, depreciation ofthe New Taiwan dollar, and continuing steady

growth in service prices, the consumer price indexis expected to grow at 3.2 percent in 1998 and2.2 percent in 1999.


Taipei,China has been relatively insulated from theregion’s currency turbulence. However, the contin-ued emphasis on advertising the economy’s successeshas raised some concerns that the government hasnot paid sufficient attention to how Asia’s financialcrisis might affect the domestic economy and whatadjustment strategies it should pursue. Two areas inparticular deserve attention.

The first is the domestic economy. Currentprojections of both private consumption and invest-ment growth for 1998 may turn out to be overlyoptimistic. At the same time, fears of creeping infla-tion may lead to tight monetary and fiscal policies.Given that the economy is not at present over-heated, some flexibility in short-term macro-economic management, including the provision ofadequate liquidity through the banking system,would seem to be prudent.

The second area is the external economy.Taipei,China should maintain its open trading sys-tem even in the face of a declining trade surplus. In

Table 2.4 Major Economic Indicators: Taipei,China, 1995-1999(percent)

Item 1995 1996 1997 1998 1999






Fiscal balance/GDP -7.4 -7.4 -5.7 -5.3 -4.8


Merchandise imports growth 21.2 -0.1 10.1 9.5 10.0

Current account balance/GDP 2.1 4.0 2.7 1.5 0.8

Debt-service/exports 0.1 0.1 0.1 0.1 0.1

Sources: Directorate-General of Budget, Accounting and Statistics data; Wu (1997); and staff estimates.


this respect 1998 will be a crucial year. Even with-out a devaluation of the People’s Republic of China’s(PRC’s) renminbi, Taipei,China’s exports will slowdown. Maintaining a free trade stance will be crucialfor the future of not only the domestic economy,but also of free and open trading in the region.


The economy is still undergoing considerable struc-tural transformation, in particular, the industrysector is continuing to experience major structuralchanges. Light and labor-intensive manufacturingactivities are declining in importance, and efforts toincrease the share of capital-intensive and high-technology activities are under way. In the changingglobal trade environment, promoting specific indus-tries in which the economy may have distinct compa-rative advantages continues to be a major challenge.

To make the process of structural transforma-tion as smooth as possible, two policy areas deserveparticular attention, namely, liberalizing financialand capital markets in the face of the continuingturmoil in the region and continuing with the planto convert Taipei,China into a regional center forfinancial and high-technology-based economicactivities. Successful implementation of these tworelated sets of policies could go a long way towardensuring the economy’s transition to a high-technology base. However, the problems involvedcould also be formidable.

Capital markets are being liberalized with theintroduction of new financial instruments and thepledge by monetary authorities to lift capital con-trols by 2000. However, the ad hoc committee, whichconsists of Ministry of Finance and Central Bankrepresentatives, has suggested strengthening finan-cial institutions along with carrying out further lib-eralization. The recent currency crisis seems to havestrengthened the position of those who argue for aslower pace of reforms. Historically, Taipei,China’sfinancial liberalization has been gradual; too slowaccording to some critics. However, such a step-by-step policy may be defensible, as it probably playeda major role in protecting the economy from thefinancial turmoil of 1997.

Reforms under discussion include allowingcommercial banks to become involved in investment

banking by entering the securities and bond mar-kets. The authorities also launched a domesticfutures exchange, thereby giving companies theoption to hedge risks without going offshore. Inaddition, the central government has taken steps toprivatize state-run banks, a plan that was boostedby constitutional reforms passed in July 1997 thatshrank provincial governments and stripped themof their substantial assets.

The objective of ensuring smooth maturationand playing a significant role in the next centuryhas led to the formulation of a scheme—the Asia-Pacific Regional Operations Center plan—to turnTaipei,China into a regional financial and economiccenter. The idea is to attract private capital flows,especially to high-technology industries, such asmicrochips and semiconductors.

For a comprehensive plan of this type tosucceed, a number of developments will be neces-sary. To begin with, it will require free mobility ofgoods, services, capital, human resources, andinformation, which will call for institutional andregulatory reforms. Furthermore, physical infrastruc-ture will need to be improved to support the move-ment of productive factors into increasinglysophisticated activities. At the same time, specificsupporting sectors, such as financial services, tele-communications, and air transportation, would haveto be liberalized further.

Along with the push for high-technologyindustries, Taipei,China is also aiming for stable re-lations, and even direct business and transport links,with the PRC. Positive developments in this direc-tion will help improve the general business climate.In particular, the environment for implementing theobjectives of the Asia-Pacific Regional OperationsCenter plan will be more favorable. To sum up, froma long-run perspective Taipei,China is continuingthe transition from labor-intensive activities tocapital-intensive and high-technology activities.Such a transition has posed complex problems ofcompetitiveness, skill bottlenecks, and internal andexternal balance. Nevertheless, an export-driven,high-technology future appears to be attainable.However, to realize this vision, the challenges notedmust be tackled boldly and imaginatively throughflexible, short-term, macroeconomic policies andstrategies for long-run transformation.

71CENTRAL aSIAN REPUBLICS

While Kazakstan’s postindependence economic trauma may have come to an end, muchdeeper reforms in policy and governance structures are now needed to accelerate growth. Inaddition, prudent management of the country’s natural resource wealth will be critical.

Kazakstan

71


Following independence, Kazakstan was pre-occupied with crisis management. On the dis-

solution of the former Soviet Union (FSU),Kazakstan’s trade collapsed; income support fromMoscow was severed; and its inherited economicand legal institutions, forged within a centrallyplanned system of production and distribution, werecompletely ill-suited to its new circumstances. More-over, as a fledgling state Kazakstan lacked many ofthe institutions of modern government.

Against this backdrop, the country’s outputcollapsed, and by 1996 output was only half what ithad been five years earlier. Output declines werearrested in 1996. In that year GDP growth of 0.5 per-cent was recorded, and in 1997 moderate GDPgrowth of 2.0 percent was achieved. Two years ofpositive output growth have buttressed confidencein the view that the era of postindependence eco-nomic depression may now have ended. However,the economy is still narrowly based: a few export-oriented sectors—oil and gas and some nonferrousmetals—dominate. These sectors have benefitedfrom the shifts in the terms of trade since indepen-dence, and the bulk of foreign direct investment(FDI) has been directed toward these sectors.

Agriculture depends heavily on rainfed grain.While wheat and related crops have now recoveredfrom a poor harvest in 1995, to date, signs of anyunderlying growth in productivity are few. Most

crops other than grain show continuing productiondeclines, but at more moderate rates than in earlieryears. The reported livestock population has alsodeclined, but with the ongoing privatization of farmssome underreporting of livestock populations ispossible.

Industry has tended to move away from pro-cessing raw materials toward primary, extractiveactivity. This trend reflects the shifts in the terms oftrade that have occurred since independence, thecessation of subsidies from the FSU that had soughtto encourage industrialization, and the concurrentcollapse of traditional markets and supply relation-ships with FSU enterprises. For example, while theproduction of metals has grown, the machinerysector’s output has declined. Similarly, the produc-tion of woolen textiles has contracted by almost twiceas much as the production of raw wool. The oil sec-tor, however, has exhibited considerable expansion.In recent years, investment in oil and gas has repre-sented approximately one third of all FDI. Fuel andenergy now account for just under 40 percent oftotal industrial output, up from 15.5 percent in 1990.

There is evidence that the service sectors arebuoyant. In some urban centers, such as Almaty andShimkent, the number of retail trade outlets andrestaurants has increased markedly and a significantnumber of new hotels and service centers for ve-hicles, appliances, and computers have sprung up.The FSU economy had severely restricted the de-velopment of many of these services.


The need to mitigate hardship has led to de-mands for the government to do more, but at thesame time the resources available to the governmenthave shrunk. As a result, maintaining fiscal balanceshas proven extremely difficult: in 1997 the deficitwas over 4 percent of GDP. Efforts to collect rev-enues have been hampered by the poor economicsituation of larger enterprises in the formal, regis-tered economy and administrative difficulties in tax-ing smaller enterprises in the informal economy. Inaddition, the need to create public sector institu-tions in the wake of independence has strainedexpenditure control systems.

The government has, however, made signifi-cant headway in controlling inflation. In 1997 in-flation was 20.4 percent, but in 1994 it was almost2,000 percent. This reduction in inflation has beenthe outcome of much tighter monetary control andan improving fiscal position. Financial sector reformshave also helped promote monetary stability. Somebanks have been restructured, others have had theirlicenses revoked, and the weakest banks have beenallowed to fail. With lower inflation, capital marketdevelopment has proved easier. Securities trans-actions have deepened, interbank credit and settle-ment systems for commercial banks have been

In mid-1997, 4.7 percent of the registered la-bor force was unemployed; however, a much largernumber of people are thought to be unofficially un-employed or underemployed. In addition, real wageshave fallen dramatically, and the payment in-kindof many wage obligations reflects the weakening oftraditional payments systems. These in-kind pay-ments are often of little utility to the workers andtheir families, thereby reducing disposable incomeseverely. Wage arrears running to many months arealso common: in mid-1997 the wage arrears of stateenterprises were about $600 million, which posedserious political problems for the government.

A deterioration in the social indicators of well-being reflects the extent of economic dislocation.Estimates suggest a sharp increase in both the inci-dence and depth of poverty. In 1996 more than onethird of households lived below the official povertyline. Pensioners and children have been particularlybadly affected by the weakening of social support.Rapid inflation and a decline in the real value ofpensions have destroyed the savings of the elderly,while the health, nutritional, and educational sta-tus of children in poor households has worseneddramatically as public services have contracted alongwith the resources available to the government.


developed, and investors are eager to acquire Trea-sury bills.

Large trade and current account deficits per-sist. In 1997 the current account deficit stood atmore than 4 percent of GDP. The development ofnew markets for Kazakstan’s output has been slow,and the Russian Federation remains as Kazakstan’slargest trading partner. The lack of restructuring andreinvestment in farms and state enterprises andKazakstan’s locational disadvantages thwart thepenetration of new markets. Inward capital flows,especially those related to the large foreign invest-ments in oil and gas, mining, and metallurgy, con-tinue to finance current account deficits.

Over the next two years, output growth of 3percent is achievable. The oil and gas sector is ex-pected to continue to show strength, but the cur-rent dependence on pipelines controlled by theRussian Federation restricts large increases in ex-port sales of oil and gas. The construction of otherpipelines to markets either in Europe or in thePeople’s Republic of China is planned, but consid-erable political and administrative problems needto be resolved before construction begins, oil flows,and public revenues rise. Output from the mineralssector should also increase.

The squeeze on public resources will continueduring the next few years, especially given the needto restore an adequate social safety net; to clearwage, pension, and social assistance arrears; to pro-vide support for pension reform; and to finance abroader program of public capital investment. Thelast item is particularly important. The failure toincrease public investment, particularly for infra-structure rehabilitation, will increasingly place farmsand enterprises at a competitive disadvantage. Thedecision to move the capital from Almaty in thesoutheast to Akmola in the north-central region willplace further pressure on public resources, as thisrelocation has necessitated large-scale constructionof new public buildings, residences, and infrastruc-ture facilities in a comparatively short period. As aresult of these fiscal pressures, the fiscal deficit isexpected to increase to more than 5 percent of GDPin 1998.

Although fiscal policy will ease to some extent,the government is likely to maintain a tight mon-etary stance. As a consequence, inflation is expectedto continue to moderate, and could be as low as 10percent in 1998. Faster economic growth is, how-

ever, anticipated to make further containment ofthe current account deficit difficult. As a propor-tion of GDP it is likely to remain at around its 1997level.


In the short run, the main challenge for economicpolicy is to consolidate the progress made towardmacroeconomic stabilization while providing strongfoundations for future growth. At the same time,the government must develop safety net mechanismsthat can assist the most needy and ease some of thepain of poverty.

Future progress on macroeconomic stabili-zation will rest on three pillars, namely: the govern-ment must persist with its anti-inflationary monetarystance, it must strengthen its revenue mobilizationefforts so that fiscal balances improve, and it musttake steps to support the development of a modernand robust financial system. The banking sectorremains weak and unable to provide attractivesavings facilities and meaningful intermediation forloanable funds. It also has limited capacity forcommercial risk assessment for evaluating loanportfolios.

Achieving sustainable growth over the longerrun will require restructuring of and reinvestmentin the operations of farms and firms. In most sectors,enterprises are handicapped by a set of interlockingdisadvantages: they continue to operate with obso-lete equipment from the Soviet era for which spareparts are often difficult to obtain; managers whopossess basic business skills are in short supply; mostenterprises are heavily indebted, owing suppliers andthe government (for tax payments and pensioncontributions); deteriorating utility and infrastruc-ture services, especially electricity, hamper enter-prises’ operations; and enterprises lack financing foreither trade or investment credit. To date, privat-ization has resulted in the formal transfer of someassets, but not the development of entrepreneurswilling to take risks, new investment, and competi-tive markets.

Unreconstructed enterprises are a source ofconsiderable inefficiency for the economy andjeopardize fiscal stability. In 1996 government sub-sidies to loss-making firms amounted to 2 to 3 per-cent of GDP; however, it has demonstrated somewillingness to tackle this complex problem. It has


shut down some nonviable operations, and retrench-ments have occurred in others as part of restructur-ing. Nevertheless, more determined efforts areneeded. While Kazakstan’s location means that for-eign investors are unlikely to be attracted to morethan a few sectors, the role of foreign investment inproviding needed capital and technological, mana-gerial, and institutional know-how is still likely tobe important. However, even where foreign take-over of enterprises has occurred, effective restruc-turing has been fraught with difficulties. Above all,foreign investors require a predictable legal andpolicy environment, which in turn necessitates even-handedness and consistency in implementing rulesand regulations. Without improved governancestructures, particularly in government-private sectorrelationships, kindling growth is likely to prove hard.

While natural resources will be an importantfuture source of income for Kazakstan, the manage-ment of these resources will present challenges.Looking to the longer term, the development ofmanufacturing industries often seems to be prob-lematic in resource-rich economies like Kazakstan,partly because an abundance of natural resourcesautomatically tends to shift the terms of trade againstthe manufacturing sector. To the extent that themanufacturing sector is where most productivitygains are realized, economic dynamism is then lost.

In addition, large resource rents often seem topresent difficult problems for public sector manage-ment, especially in economies where governancecapacities are weak. Despite these difficulties, someeconomies have managed their natural resourcewealth well. These economies have actively pro-moted economic diversification, partly through pro-cessing before export, but also through policies ofopenness to FDI and trade and wise investment oftheir resource windfalls. They have struck a judiciousbalance between investment and consumption usesof rents. Kazakstan could benefit from looking atthese experiences.

Kazakstan faces a number of other difficultchallenges. For a landlocked and remote countrysuch as Kazakstan, regional transport and commu-nications systems are particularly important.Regional cooperation aimed at harmonizing andcoordinating investment in transboundary trans-portation and distribution would be one way to easethe constraints of geography. Regional cooperationmight also help to develop markets, making invest-ment feasible in sectors that might otherwise not beviable. While the difficulty of overcoming the dis-advantages of physical isolation should not beunderestimated, the process of integration in theglobal economy is likely to be easier if integrationstarts close to home.


Following severe economic dislocation, growth in the Kyrgyz Republic has recovered,supported by growth in both the agriculture and industrial sectors. However, the transition tomarket institutions required for long-term growth still has a long way to go.

Kyrgyz Republic

75


T he breakup of the former Soviet Union broughtpolitical freedom to the Kyrgyz Republic, but

also dislocated the production, trade, and financialnetworks on which its centrally planned economyrested. As a result, GDP declined by about 50 per-cent from 1990 through 1995, external trade wasdisrupted, inflation accelerated, and fiscal deficitsincreased sharply. In response to these difficulties,the government adopted a comprehensive programof macroeconomic stabilization and structuralreforms. It is now committed to developing aneconomy that is based much more on market insti-tutions and much less on state direction.

After six difficult years, some signs of economicrecovery are now apparent. Real GDP has grownfor two consecutive years: by 5.6 percent in 1996,and by an impressive 10.4 percent in 1997. Solidgrowth in the agriculture sector has helped this turn-around in economic performance. Agriculture is thelargest sector in the Kyrgyz economy, accounting foraround 50 percent of GDP. In the past two years,agricultural output has grown by an average of10 percent, assisted not only by favorable weatherconditions, but also by economic reforms. These re-forms have allowed private sector farmers to respondto market incentives more easily, and despite a con-tinuing lack of essential farm inputs, the output ofkey crops has increased in response to growing urbandemands.

The spurt in GDP growth in 1997 was largelydue to a leap in industrial production, whichexpanded by a massive 46.8 percent. Much of this isattributed to the commencement of production fromthe newly completed Kumtor gold mine. Strongerindustrial growth has also been assisted by a re-covery in food processing activity. Input supplies tofood processing have expanded with the growth inagricultural production. Demand for industrial out-put has also increased as the economies of formerSoviet Union partners have begun to stabilize.

Compared with agricultural and industrial pro-duction, activity in services seems to have beensomewhat sluggish. Official statistics estimate theoutput growth in services to be about 1 percent in1996. However, measuring the output of services issomewhat difficult, and some market activity prob-ably goes unrecorded. In particular, the number ofprivate businesses engaged in the urban retail tradeand in other services has expanded rapidly in recentyears, but is underreported in official statistics.

Despite recent output growth, the employmentsituation shows few signs of improvement. The over-all unemployment rate at the beginning of 1997 isestimated to have been about 22 percent. Difficultlabor market conditions, exacerbated by the dete-riorating quality and delivery of social services andthe erosion of the social safety net, have increasedthe incidence of poverty. The proportion of house-holds below the official poverty line rose from40 percent in 1993 to 49 percent in 1996. Those in


rural areas, pensioners, young people, and those inlarge families have been affected particularly badly.

Economic expansion has eased fiscal pressures,and fiscal consolidation is proceeding slowly, butsteadily. Budgetary and civil service reforms havecontributed to reduced government spending. Theauthorities have also taken measures to strengthentax administration and increase tax revenues. As aconsequence, in 1997 the budget deficit fell to4.5 percent of GDP, down from 5.6 percent in 1996.

Inflation has improved markedly, declining to25.5 percent in 1997 from nearly 300 percent in1994. The successful containment of monetarygrowth helped to subdue domestic inflationarypressures, as did greater nominal exchange rate sta-bility in 1997, which followed a sharp depreciationin 1996.

External balances remain fragile, althoughsome improvement is detectable. The importationof capital goods needed to develop the Kumtor minehas, to some extent, exacerbated current accountdeficits, but structural weaknesses are also appar-ent. In 1997, despite a slowdown in capital goodsimports, the current account deficit was still around11 percent of GDP. To finance its current accountdeficits, the Kyrgyz Republic continues to rely largelyon official transfers. Notwithstanding the Kumtor

project, foreign direct investment remains small.One reason for this is that the country faces a com-petitive disadvantage compared with its neighbors,as it lacks Kazakstan’s large energy and mineralresources and Uzbekistan’s larger markets.

Since 1990, output and incomes have fallenprecipitously. While the recent growth is welcome,the country still has a long way to go to restore pre-vious standards of living. The potential for growthin the medium term is good. Output from theKumtor mine project should again bolster growth in1998 and 1999, and reforms in the agriculture sectorshould improve productivity. Overall economicgrowth of around 7 percent per year is expected.Improvement on other fronts is also likely, namely,a steady reduction in the fiscal deficit through 1999;more disciplined monetary control resulting inreduced inflation rates; and a decrease in the currentaccount deficit, partly as a result of revenues fromthe Kumtor mine.

POLICY DEVELOPMENT AND ISSUES

Agriculture is the most important sector of theKyrgyz economy and is likely to remain as such forthe foreseeable future. Productivity gains in agricul-ture will, above all, determine the economy’s


medium-term development prospects. Accordingly,the authorities must make determined efforts toaddress the pronounced policy and institutionalinefficiencies that still exist in the structure of agri-cultural production and organization. While theyhave made some progress, a long agenda of unfin-ished reforms remains to be dealt with. In themedium term, agricultural policy and institutionalreforms should focus on developing the legal frame-work for private farms and privatizing the remain-ing state and collective farms. Promoting theefficiency of the supply of inputs will also be neces-sary to alleviate input shortages. Other measures thatwould help agriculture include improving efficiencyin the use of irrigation water and providing agricul-tural credit on a commercial basis.

The state has retained either full or partialownership of the key medium and large industrialenterprises. These firms are, by and large, moribund.Inefficient enterprises survive only through subsi-dized loans and income transfers from the govern-

ment. The ability of these firms to compete in inter-national markets is limited, and they show little ins-titutional or technological dynamism. Enterprisereform is thus essential, both to stabilizemacroeconomic balances and, more generally, topromote a healthy market economy. Where enter-prises can be maintained as going concerns, theyshould be sold off in such a way that the state receivesa fair price for its assets. Where enterprises areeffectively insolvent and are beyond resuscitation,they should be closed with the recovery of whateversalvage value remains. To win the political and socialconsensus for these bold measures, some kind ofsocial safety net is likely to be needed. However,safety net provisions must be well targeted; keptwithin the government’s fiscal means; and, to theextent possible, support the development of humancapabilities. Failure to take tough decisions on stateenterprise reform will not only deprive the trulyneedy of resources, but will jeopardize everyone’sfuture living standards.

83SOUTHEAST ASIA

Cambodia’s economy has exhibited a general slowdown in growth. Areas that require atten-tion include tax reform, budgetary discipline, administration of the Foreign Investment Law,and poverty alleviation. In addition, to promote capital formation the authorities need to de-dollarize the economy and reform the financial sector.

Cambodia

83

garment industries, construction, and tourism. Therecent declines in trade volume and investment re-flect the general slowdown in economic activity. The1997 national budget targeted a shift from defenseand security expenditures to social expenditures,while the expenditure to GDP ratio declined to 13.9percent. Operational outlays by the civil admin-istration, which include the bulk of social spending,were targeted to increase by 0.5 percent of GDP;however, actual social expenditures decreased by0.18 percent of GDP compared with 1996. Overallexpenditures still reflect strong demand from thedefense and security sectors. In 1998 Cambodia willneed $21 million to fund elections, of which morethan 60 percent will have to be financed by foreignassistance.

Increasing political instability in the coalitiongovernment culminated in the violent politicalevents of early July 1997, when Prime Minister HunSen toppled his co-prime minister, Prince NorodomRanariddh. The July event severely disrupted econo-mic performance and slowed the economy’s regionalintegration. Not only did tourism slump, but moreimportant, trade and customs duty receipts fellsharply (customs duty receipts provide, on average,about 70 percent of annual government tax rev-enues). To make things worse, some bilateral donorssuspended their programs and Cambodia’s plannedmembership in the Association of Southeast Asian


T he economy’s performance in 1997 was far frompromising. GDP growth was 2 percent, the in-

flation rate was 9.1 percent, and budget revenueswere 9.3 percent of GDP. These numbers fell con-siderably short of the government’s targets of 7 per-cent real GDP growth, an inflation rate of less than5 percent, and budget revenues of 10 percent of GDP.Agriculture, which is the largest sector in theeconomy, did show a respectable growth rate of 4.9percent in 1997, after growing at only 1.8 percentin 1996. However, both the industry and servicesectors experienced drastic slowdowns, reporting 0.6percent and -0.4 percent growth, respectively, for1997. The labor force grew by 3 percent in 1997,which translated into a need for around 135,000new jobs, 100,000 of them in rural areas. The agri-culture sector absorbed some 75 percent of theworkforce.

Trade reform and exchange rate liberalizationhave had positive effects on trade volumes since1992. Both export and import volumes reportedrespectable increases from 1992 to 1995, but expe-rienced negative growth rates from 1995 to 1997.The trade deficit was around $388 million in 1997.Foreign direct investment amounted to about $240million in 1996, but substantially fell in 1997. Themain areas of investment include the textile and


by 10 percent. Thus restoring international confi-dence in the country is the key to Cambodia’srecovery. Nevertheless, political commitments,economic development, and domestic policies toimplement programs that ensure more effective man-agement of natural resources, especially forestry,would immediately lead to marked improvementsin national income.

Financial Sector Reform and ForeignInvestment Policy

Further reform of the financial sector is essential topromote capital formation by increasing domesticsavings and investment. It will also raise the poten-tial for more effective monetary policy as increasedformal transactions through banks enhance theeconomy’s responsiveness to monetary instruments.At the same time, the government must acceleratede-dollarization of the economy by continuing todenominate all its transactions in riels and restor-ing confidence in the currency through a com-mitment to both macroeconomic and politicalstability.

The authorities also need to address the lackof banks in rural areas. While existing rural creditprograms by nongovernment organizations haveproved useful, they are limited in both geographicalcoverage and the scope of local participation. Inaddition, interest rates in some nongovernmentorganization programs are based more on an esti-mation of clients’ ability to pay than on marketdetermined rates of interest. The development of asustainable rural credit system will require liberal-ization of interest rates. Furthermore, the govern-ment needs to strengthen Central Bank supervisionof commercial bank lending practices, particularlyin the areas of credit risk analysis and debt recov-ery. In general, increased coverage of rural creditmust be based on sustainable financial service pro-vision to the poor and must be consistent with na-tional financial stability. However, if the CentralBank is to take on the necessary supervisory tasks,it must first completely end its direct involvementin the commercial banking sector, and then intro-duce appropriate market-oriented monetary instru-ments, such as Treasury bills.

Given Cambodia’s current stage of economicdevelopment, external financing will have to play amuch more active role than at present. While po-

Nations was put on hold. In addition, the Inter-national Monetary Fund suspended budgetary sup-port because of the government’s failure to meetformally agreed performance conditionalities,particularly as concerned the management of nontaxproceeds from logging and other forestry practices.

If confidence in the Cambodian economy bythe international community and domestically isrestored fairly rapidly following new elections, GDPgrowth may reach as much as 3.5 percent in 1998and 7 percent in 1999. Inflation is projected to riseto 9.6 percent in 1998, but to drop to 6 percent in1999.


The major critical issue in short-term economicmanagement is the need for tax reform and budget-ary discipline. Fiscal policy has to aim at managingthe government’s budget more efficiently throughrestructured revenue and expenditure measures, sothat the authorities can meet budget targets with-out increasing the money supply. From the revenueside, the main thrust of fiscal policy has been taxpolicy. By adopting the Law on Taxation in Febru-ary 1997, the government intended to expand itsrevenue base by further improving tax administra-tion and by introducing a value-added tax. In thiscontext, the main priority at this point is to speedup the implementation of this new law. Anotherpriority relates to discipline with respect to theapproved budget: the implementation of the 1997budget did not achieve its main targets. In addi-tion, the weak budget position will undermine effortsto contain inflation.


Financing its development will inarguably beCambodia’s most important objective in years tocome. About 40 percent of government expendi-ture is financed by foreign aid, which amounts to$200 million to $300 million a year. In September,the International Monetary Fund decided to freezea $120 million, three-year Enhanced StructuralAdjustment Facility program to the country. HunSen’s takeover also led the United States to suspendall but humanitarian aid and Germany to cut allassistance, both of which reduced total foreign aid

85SOUTHEAST ASIA

litical stability; social security; sound institutional,financial, and legal frameworks; macroeconomic sta-bility; and appropriate physical and social infrastruc-tures will gradually have to be instilled in theeconomy, a more direct way to improve the domes-tic investment environment is major improvementin the administration of the Foreign Investment Law.The latter incorporates liberal provisions for profitremittances, exemptions from duties, limited taxholidays, and a ceiling of 9 percent corporate tax onforeign investors. However, to be effective it requiresstrengthening through further simplification ofapproval procedures and elimination of inconsisten-cies pertaining to royalties. In addition, the authori-ties should develop a monitoring system to trackeverything from the number of queries by foreigninvestors, to the number of formal applications andthe number of approved investments that are actu-ally implemented. The monitoring system wouldinvolve regular reporting on the operation of for-eign investment policy so that any necessary changescould be implemented efficiently.

Poverty Alleviation

Cambodia must focus on alleviating poverty: 30 per-cent of the population fall below the poverty line.In developing Asia, Cambodia has one of the lowest

life expectancies at birth, one of the highest infantmortality rates, and lowest calorie intake per per-son, facts which all indicate the existence of wide-spread poverty. Implementation of the reformsalready mentioned will certainly promote economicgrowth, and thereby contribute to alleviating pov-erty, but policies that directly address poverty arealso needed. These efforts would include providingbasic social support services, improving access tobasic education and training, and creating job op-portunities.

To facilitate the targeting of poverty reduc-tion initiatives the government must rely on exter-nal assistance. Given its current fiscal constraints,without any external assistance the government haslittle capacity to identify and design effective deliv-ery mechanisms to protect vulnerable groups. Thefacts are daunting: even with an annual growth rateof 7 percent, the target growth rate for GDP set bythe government, the economy may not be able toabsorb more than 250,000 low-skilled, unemployedworkers and simultaneously create jobs for 135,000new entrants into the labor force each year. Neithercould it absorb the 30,000 workers likely to be dis-placed as a result of initial public sector restructur-ing. The task of poverty alleviation is going to belong and arduous, but it is certainly one that thegovernment cannot afford to postpone.


Indonesia

86

Despite its sound macroeconomic fundamentals, Indonesia suffered some of the worst conse-quences of the recent regional financial crisis. As a result, Indonesia is pursuing a comprehen-sive and credible economic reform program to address the economy’s various weaknesses. Therisk of stagflation in 1998 remains real. In the long run, one of the pressing politico-economicproblems that the country will have to address is the economic disparity that is prevalent bothamong income groups as well as between regions.


In terms of the extent of its currency depreciation,Indonesia is the most serious casualty of Asia’s

financial crisis. This is paradoxical, given the sound-ness of Indonesia’s economic position in 1996 andthe economy’s good performance during the first halfof 1997, which was supported by tight fiscal policies,prudent monetary policies, and an adequate ex-change rate policy. The end result is that the crisisthat has afflicted Southeast Asia since mid-1997 hasradically changed Indonesia’s economic position,with the rupiah suffering a severe depreciation of 80percent between July 1997 and January 1998. As theprivate sector’s creditworthiness fell concomitantly,many foreign creditors stopped renewing debt toIndonesian companies and capital inflows declined,thereby putting further pressure on the exchangerate.

The strong economic performance before thecrisis was not, however, without its problems, andthe apparent creditworthiness of Indonesian borrow-ers, coupled with low interest foreign commercialloans, increased their exposure to unhedged short-term external debt. The growth of non-oil exportshad slowed, and oil exports grew sluggishly. Therupiah began to weaken in the second week of July1997, immediately following the floating of the Thai

baht. GDP growth for 1997 declined to slightly lessthan 5 percent. Growth in the manufacturing sec-tor slowed to 6 percent because of liquidity con-straints; the drought brought about by El Niñohampered agricultural performance, causing agricul-tural prices to rise; and at the same time, the forestfires in Sumatra and Kalimantan imposed severecosts on the economy and reduced tourism, thecountry’s third largest export industry.

The steep decline in the rupiah’s exchange ratesince July 1997 affected the inflation rate. The con-sumer price index climbed 11.6 percent year-on-yearby December (an annual average of 6.6 percent) de-spite tight monetary policy. Following the currency’sdepreciation, the prime lending rate reached 30 per-cent, compared with 20 percent in 1996.

Exports grew by 11.2 percent in 1997. Imports,after registering a growth rate of about 8 percent in1996, decelerated to 4.8 percent in 1997. Most ofthe decline was in consumption goods. Capital goodsimports slowed little, given the persistence of stronginvestment until mid-1997. Imports of intermedi-ate goods also showed little in the way of a slow-down. Notable exceptions were synthetic fibers andsome chemical products that are essential for thetextiles industry, primarily because domestic textilesproduction increased. The current account showeda reduced deficit of 2.7 percent of GDP, and total

87SOUTHEAST ASIA

external debt was 61 percent of GDP in 1997, ofwhich the private sector accounted for half. Thedebt-service ratio was approximately 30 percent.International reserves are estimated to be $20 bil-lion, including $3 billion drawn from the Interna-tional Monetary Fund (IMF) standby facility inNovember 1997. In 1996 foreign reserves amountedto 5 months worth of imports, and by May 1997 hadrisen to 5.5 months worth of imports. Thus, the bal-ance of payments showed few signs of any majorweaknesses immediately prior to the currency crisis.

The exchange rate policy was designed to res-pond to increased capital inflows, including short-term portfolio capital and private debts. Since 1993the monetary authorities have opted for a strategyof periodic widening of the nominal exchange rateband. In announcing the increase from 2 to 3 per-cent in December 1995, the monetary authoritiesstated that the move was meant to improve the ef-fectiveness of monetary control and the stability ofthe exchange rate to anticipate future growth ofcapital flows. In 1996 they widened the band twice,the last of which was in July 1997, when it was in-creased from 8 to 12 percent (but this was short-lived since the rupiah was floated on 14 August).

Given the magnitude of the crisis, projectionsindicate that Indonesia will take about three yearsto recover fully. The most likely outcome is a decline

Table 2.7 Major Economic Indicators: Indonesia, 1995-1999(percent)

Item 1995 1996 1997 1998 1999

Gross domestic product growth 8.2 8.0 4.6 -3.0 1.0





Fiscal balance/GDP 0.4 0.8 -0.2 0.0 3.0


Merchandise imports growth 26.6 8.1 4.8 -5.0 2.0

Current account balance/GDP -3.2 -3.4 -2.7 -1.6 2.5

Debt service/exports 30.9 29.5 30.0 28.0 30.0

Sources: Bank Indonesia data, Bank Indonesia (1997), International Monetary Fund (1998), World Bank (1997d), andstaff estimates.

in GDP of around 3 percent in 1998, followed bystabilization in 1999. Given the depreciation of therupiah, inflation is projected to increase to 20 per-cent in 1998. Exports are expected to grow by 5 per-cent and imports to decline by 5 percent in 1998.The growth of non-oil exports is forecast to bearound 12 percent in 1998, which is rather a lowincrease given the extent of the rupiah’s deprecia-tion. In 1998 oil exports are expected to stagnate;however, the prospects for export growth will beharmed unless the country can secure some form ofinternational guarantee for its letters of credit.


Even as the crisis unfolded during mid-1997,Indonesia’s economy appeared robust. However, afterthe baht fell, the rupiah entered a phase duringwhich international financial markets expected arapid depreciation, and the rest was a self-fulfillingprophecy. The crisis did, however, magnify theadverse consequences of past policy mistakes.

In end-October 1997, Indonesia reached agree-ment with the IMF, which, with the participation ofthe Asian Development Bank, the World Bank, andvarious nations, came up with an economic assis-tance package of $23 billion. The package was linked


to a three-year IMF adjustment program whose te-nets are fiscal and monetary discipline, banking sec-tor restructuring, and acceleration of deregulationand trade reforms. A major step related to the agree-ment was the decision in November to liquidate 16banks. After a few days of shake up, it soon becameclear that market confidence had not been restored.The rupiah continued to fall and the stock marketplummeted. The government revised the Letter ofIntent to the IMF in January 1998, spelling out adeeper and wider reform program and a strongermacroeconomic agenda in response to the continu-ing economic crisis. This projects, among otherthings, zero growth in 1998; a year-on-year infla-tion rate of 20 percent; and a budget deficit of 1percent of GDP, assuming an exchange rate ofRp5,000 per US dollar. However, given that this isan optimistic exchange rate, inflation could well endup in the neighborhood of 40 to 50 percent. Keyreforms include restructuring and consolidating thebanking sector, reducing import and export tariffs,removing trading monopolies for some key staplefoods, allowing foreign companies to set up theirown distribution wholesale outlets, dismantlingmonopolies, and imposing greater transparency. Inaddition, the government postponed or canceledseveral expensive infrastructure projects, especiallyenergy and road projects.

Indonesia currently faces three related short-term problems. The first is the dual task of stabiliz-ing the rupiah and bringing it to a new and morerealistic level. In early February 1998 Indonesia an-nounced its intent to establish a currency board.Under this arrangement, Indonesia would peg therupiah at a fixed exchange rate (the level under dis-cussion is around Rp5,500 per US dollar). If thiswere done, Indonesia’s base money supply would bebacked by dollar reserves at the fixed exchange rate.The most important economic policy implication isthat the country would automatically lose its abilityto use monetary policy. The advantage of such ascheme is that it would bring monetary and fiscaldiscipline to the country; for example, the govern-ment could not print money to finance a budgetdeficit unless it were backed by an equivalent amountof dollars at the fixed exchange rate. However, manyobservers believe that Indonesia does not currentlymeet the requirements for a currency board, becauseto succeed, the government would have to respectthe currency board’s two key features, namely, a com-

mitment to exchange domestic currency for dollarsat a fixed rate, and a commitment to issue currencyonly if it were backed by dollars. In addition, from atechnical point of view, the country must have asound banking system. The issue is that given thepresent level of political uncertainty, investorsmight perceive that the government would not keepits commitments. Also, Indonesia does not have asound banking system. However, some of the bank-ing system’s problems are a result of the currencycrisis and cannot be resolved without stabilizing theexchange rate. At the end of February the IMF andthe government agreed to postpone the implemen-tation of a currency board.

The second problem is the banking sector cri-sis. Although some issues are still unresolved, theIMF package outlines how the banking sector shouldbe restructured, and the government has announcedthe establishment of the Indonesian Bank Restruc-turing Agency, which is to help restructure or takeover troubled banks. The objective is to have fewer,more efficiently managed banks. The number of statebanks will be reduced from 7 to 4, and the remain-ing 144 private banks will also have to face mergersand consolidations. The government has announcedthe provision of a guarantee to all depositors andcreditors of locally incorporated banks for at leasttwo years. Deregulation will also take place to en-courage foreign participation, including grantingpermission to start full branching and removing the49 percent cap on foreign ownership of publicly listedbanks. Finally, the Central Bank will need to un-dergo institutional changes in light of its weaknessesin bank supervision. Reforms of the Central Bankwill be the cornerstone of a healthy banking system.

The third problem—which is related to thestabilization of the rupiah—is the private sector debtcrisis. Without a stable currency the foreign debtburden of the corporate sector will keep mounting,and without serious prospects for debt reduction,the currency will continue to be under pressure. Sofar no satisfactory solution has been found. Therecent announcement of a voluntary, temporaryfreeze on corporate foreign debt repayments shouldease pressure on the currency in the short term.However, this is not a durable solution. Uncertaintysurrounding the resolution of the debt crisis meansthat investor sentiment will remain volatile. Becausethe private sector is responsible for most of the debt,ascertaining what role the government might play

89SOUTHEAST ASIA

is difficult. To date, attempts to register the amountof private debt and coordinate efforts between thegovernment and private sector debtors have notsucceeded. Indonesia must avoid defaults to preventits international credibility from being eroded evenfurther.


While Indonesia has made impressive strides in pov-erty reduction in the last 30 years, the financial cri-sis has undone some of these gains. In January 1998,three quarters of the companies in Indonesia eitherhad already or were in the process of having a largepart of their workforce retrenched. The majority ofthese companies were in export sectors, such as tex-tiles, garments, and shoes, that employ mostlywomen. According to some estimates, an additional3 million workers will be unemployed in 1998, whichwould place the unemployment rate at 11 to 14 per-cent of the workforce of 95 million people. Thosemost likely to be most severely affected are the ur-ban lower-middle-class, for whom little in the wayof social safety nets is available. The increase inunemployment may fuel social unrest. The unem-ployment problem, which has been exacerbated bythe recent financial crisis, is likely to be a major chal-lenge for policymakers for some time to come.

Although the country has had some successin alleviating poverty, income distribution has beena pressing problem throughout the 1990s. The prob-lem has perhaps been further compounded by thefinancial crisis, whose impact has been far from sym-metrical across various social groups. The futurechallenge for policymakers will be to maintainmacroeconomic balances, while at the same timeimproving the distribution of income to ensure thatdisadvantaged segments of society do not bear thebrunt of the economic crisis.

Public expenditures directed at providinghealth, nutrition, and education to those in lowerincome groups could help address problems of in-equality. Indeed, much has been done in this regardin the past; however, more needs to be done in thefuture in terms of policy changes and institutionalreforms. The government needs to undertake sup-portive measures to promote small businesses. It alsoneeds to correct major policy distortions in theeconomy that have arisen from the absence or lackof enforcement of antimonopoly laws and to intro-

duce various institutional reforms to ensure that allsegments of society have equal access to publicresources.

Another long-run policy challenge is to ad-dress development imbalances between regions.Despite the strong economic growth of the last twodecades, Indonesia has not achieved regionally bal-anced development. For example, disparities in eco-nomic development between Java and the rest ofthe country and between the eastern and westernregions are considerable. The eastern region is gen-erally less developed. Its lack of infrastructure and asizable pool of skilled labor are frequently cited asfactors hindering the region’s further growth. Lackof geographical proximity to central levels of powerin a system dominated by excessive bureaucracy mayalso have contributed to its backwardness.

The economic structure of the eastern regionis quite different from that of the western region. Inthe 1990s, more than half of the gross regionaldomestic product in the eastern region still origi-nated in the agriculture sector, compared with amere 18 percent in the western region. Similarly, at10 percent of GDP, manufacturing’s share in theeastern region is less than half that in the westernregion. Furthermore, the eastern region has 21 per-cent of the country’s small agricultural estates, butonly 0.6 percent of large estates. Likewise, the east-ern region has 6.7 percent of small and home-basedmanufacturing industries, but 2.6 percent of thecountry’s medium and large industries. With a lowlevel of industrialization, virtually all provinces inthe eastern region have a low level of urbanization.Social indicators further demonstrate the relativedeprivation of the eastern region: even though itsshare of the total population is 13.2 percent, it has16.5 percent of the nation’s poor. In many cases,isolation and difficult geographic conditions haveleft villages with inadequate transportation, com-munication, and other services.

All these differences between the two regionsindicate an imbalance in regional development. Theremoval of the numerous regulations and unneces-sary red tape and the nurturing of a market-friendlyenvironment would have a considerable impact onthe development of the eastern region. However,that may not be enough. The government may haveto adopt special programs and policies in favor ofthe eastern region to redress the persistent regionalimbalance.


The Lao People’s Democratic Republic (Lao PDR) continued its steady growth of the 1990sthrough 1997. The crisis in Thailand, however, affected Lao PDR’s trade and currency.Membership in the Association of Southeast Asian Nations (ASEAN) is expected to increasetrade liberalization and facilitate foreign investment, as is the promise of Most Favored Nation(MFN) trading status from the United States.

Lao People's Democratic Republic

90

Following the rapid depreciation of the Thaibaht, uncertainty spread to the Lao kip. The kipcontinued to depreciate, especially in the second halfof 1997, to a level roughly 50 percent lower than atthe beginning of the year, relative to the US dollar.The financial system remains fragmented, and theinterbank market for kip is small. With the baht’sstatus as the principal currency for cross-border tradebetween Lao PDR and Thailand, inflation has beenlargely imported. This has resulted both from thebaht’s depreciation and the August increase in theThai value-added tax, which appears to have beenpassed on to Lao consumers. Estimates indicate thatinflation reached more than 19 percent during 1997.

Widespread use of the Thai baht and theUS dollar hampers the central bank’s implementa-tion of effective monetary policy. Foreign currencydeposits account for roughly 40 percent of broadmoney and one third of loans to the private sector.As the kip depreciated, the authorities restricted theuse of foreign currency for imports. The resultingmonetary expansion was somewhat erratic, as consu-mers tended to hoard dollars and release them onlygradually to the banking system. The foreign cur-rency restrictions thus had the perverse effect of de-creasing the amount of dollars available to thebanking system and further undermined public con-fidence in the government and banks. At the sametime, the restrictions had a limited effect on reducing


F looding in 1996 took its toll on GDP growth,which slipped to 6.9 percent. In 1997 more fa-

vorable weather conditions and increased govern-ment incentives to farmers resulted in improvedagricultural performance, which contributed to GDPgrowth of 7.2 percent. Agriculture continues to ac-count for more than half of GDP, but slow growth inagriculture has meant that manufacturing, construc-tion, and services (including tourism) have been thedriving forces behind the strong growth of the 1990s.Industry accounts for about 22 percent of GDP andservices for 26 percent.

As a landlocked country heavily dependenton trade with its neighbors, particularly withThailand, Lao PDR has not escaped the effects ofthe Southeast Asian currency turmoil. Thailand hasbeen the largest investor in Lao PDR, accountingfor more than a third of foreign direct investmentthrough August 1997. Information on domestic sav-ings and investment is not available, but they arebelieved to amount to relatively small shares of GDP.The economic dominance of subsistence agricultureand a correspondingly low level of monetizationbuffered the real economy from the regional crisisto some extent, but inflationary pressures remain asignificant danger, both from the floods’ effects onagricultural prices and from events in Thailand.

91SOUTHEAST ASIA

imports because of the porous nature of the country’slong border. They did, however, restrict imports ofgoods that earn high import duties, thereby affect-ing government revenues negatively. They alsorestricted imports of materials and equipment crucialfor export production. At present, wood prod-ucts remain the largest source of export earnings,followed by electricity sales. Expansion of hydro-electric projects has resulted in increased logging,contributing to export receipts, and future electri-city sales should eventually reduce reliance onforeign aid.

Despite some improvements in tax collection,particularly in timber royalties and income taxes,the tax base needs to be broadened further to reducereliance on customs revenues. The ratio of fiscalrevenues to GDP remains low, but limits on expen-ditures in 1997 led to current fiscal surpluses and adeclining trend in the overall fiscal deficit. Capitalspending is widely financed by external assistance,and domestic debt has been reduced. Substantialforeign assistance and investment has strengthenedthe capital account and reserve position.

The 1996/97 budget increased current expen-diture allocations on social sectors by 10 percent inan effort to raise the level of human resources inthe country, and future increases are planned. Thebudget for 1997/98 aims to increase revenues and

decrease expenditures (as a percentage of GDP)further, thereby raising the current surplus and re-ducing the overall deficit. Inflation is expected toremain in double digits in 1998, and the large tradedeficit is likely to exert continued downward pres-sure on the kip. Growth is expected to pick up some-what in 1998.


As a relatively small, low-income, landlocked coun-try, Lao PDR is heavily dependent on other countriesfor opportunities and resources for its development.In recent years the government has taken major stepsto expand such links, which has increased both risksand opportunities.

In 1997 Lao PDR became a member ofASEAN. Membership will result in further tradeliberalization in preparation for the ASEAN FreeTrade Area. The scheduled lowering of tariffs willalso motivate fiscal reform, because currently some20 percent of revenue is derived from tariffs. Theregular schedule of numerous ASEAN meetings,however, is likely to tax the country’s limited English-speaking human resources severely, and substantialcapacity building efforts are required. ASEANmembership also confirms the shift in external rela-tions in recent years to broader commercial ties in


hopes of stimulating trade and investment. WhileThailand remains the principal source of imports bya large margin, since 1994 Viet Nam has been theleading destination for Lao PDR’s exports.

The United States has promised to grantLao PDR a MFN status in the near future. As arequirement for MFN status, Lao PDR has adopteda legal framework that should also facilitate acces-sion to the World Trade Organization. In addition,MFN status will increase the attractiveness ofLao PDR for foreign investors who wish to producefor export. Capitalizing on this potential will requirethe authorities to reduce bureaucratic delays in cus-toms procedures, increase transparency in grantinglicenses, and address infrastructure inadequacies.

Access to the outside world is increasing: Japanhas agreed to fund a second bridge across theMekong River and has donated an internationaldirect dialing system, agreement was reached on newThai-Lao border passes, and renovation of the

Vientiane airport has begun. However, as Thailandis the main source of Lao PDR’s imports and foreigndirect investment and a principal destination ofexports, the slowdown in the Thai economy maytemper the expansion of foreign trade and invest-ment. Thailand’s agreement with the InternationalMonetary Fund may require Thailand to reopen talkswith Japan on the planned 50-50 financing of theproposed third Mekong River bridge.

Before the regional currency turmoil, Lao PDRmanufacturing workers were generally consideredto be less productive, but to be paid more, than com-petitors in Cambodia, PRC, or Viet Nam. To theextent that the kip has now depreciated further thanthe currencies of these other countries and foreigncurrency restrictions have eased, Lao PDR’s exportprospects may improve. Cross-border infrastructureand trade links are expanding, which should help,but recovery in Thailand would have the biggesteffect.

93SOUTHEAST ASIA

Financial turbulence reduced economic growth in 1997 and a more marked decline is likely in1998. The potentially favorable impact of the depreciation of the ringgit on exports requirescomplementary measures, and stronger and broader responses to the financial crisis may benecessary.

Malaysia

93


Currency instability and asset market disruptionbuffeted Malaysia’s financial and corporate

sectors in 1997. A massive depreciation of theringgit, combined with plunging stock market values,seriously eroded the financial standing of manyMalaysian businesses. After some initial hesitancy,the Malaysian government responded to theseevents by paring back public expenditures on pres-tige projects, tightening monetary policy, and takingmeasures to strengthen the financial system.Although asset values plummeted in 1997, theeffects of the crisis have yet to register fully onincomes.

The financial crisis that unfolded during thesecond half of 1997 took its toll on economicperformance. Economic growth for the year slowedto 7.5 percent from 8.6 percent in 1996. All com-ponents of aggregate demand grew more slowly,largely because of diminished confidence in marketsand the loss of purchasing power associated withlarge reductions in the capital value of assets. Thefiscal and monetary measures introduced in thelatter part of the year in response to the crisis heldback growth still further.

Notwithstanding difficulties in other sectors,agriculture performed well. Output grew by a strong3.5 percent in 1997. The growth in output wasbroadly based, with palm oil, sawlogs, and livestock

output all growing. However, rubber and cocoa pro-duction declined, largely because of the conversionof land to other uses and labor shortages.

Manufacturing output growth eased, particu-larly because of the weak performance of the elec-trical and electronics industry. This industrydominates Malaysian manufacturing and has beenhard hit by the slowdown in the growth of globaldemand in this sector. Growth in the constructionsector also slowed. Measures taken to limit lendingto the property sector and a general slackening indemand for office space, condominiums, and retailoutlets affected construction activity. The servicesector was comparatively buoyant based on strongperformance of the transportation, storage, and com-munications subsectors. However, finance, insur-ance, real estate, and business services, as well aswholesale and retail trade, and hotel and restaurantservices, recorded lower growth. This was attribut-able to the instability in the financial markets andto the haze problem that resulted from the South-east Asian forest fires caused by the drought associ-ated with El Niño. This led to a downturn in tourism.

Despite the moderation in economic growth,Malaysia’s unemployment rate remained low at2.5 percent in 1997. This was the sixth year in arow that the economy was virtually at full employ-ment. As a result, upward pressure on wages grew,and wage increases again outpaced productivitygains. Unskilled foreign workers continue to provide


an important reservoir of labor that is used to meetlocal demands. Estimates indicate the presence ofmore than a million documented foreign workers in1997 and another million undocumented migrants.

Malaysia continued to finance its developmentexpenditure through public savings to avoid borrow-ing and tried to minimize increases in both operat-ing and development expenditures. Although publicsector operating and development expenditures in-creased, so did public sector revenues. The govern-ment maintained the overall public sector surplusat 2.1 percent of GNP.

Inflation picked up slightly during 1997. Con-sumer prices increased by 4 percent during the year.Strong credit growth in the first half of 1997 helpsexplain some of the acceleration.

The direction of monetary policy in the sec-ond part of 1997 was tentative as Malaysia struggledto find a way to stop the hemorrhaging of the ringgitand the collapse of its stock market. Foreignexchange controls, which were introduced inAugust, quickly proved counterproductive, as theyled to an exodus of investors from the stock marketand further weakened the ringgit. As a consequence,the government abandoned these measures. Inter-est rate policy also lacked clear direction. The gov-ernment relaxed an initial tightening of interest rates

as equity prices declined, but comparatively lowinterest rates made stemming the tide of the ringgit’sdepreciation more difficult. Subsequently, the gov-ernment tightened monetary policy again as part ofan overall policy response to the crisis.

Merchandise exports increased by only 6 per-cent in 1997. While this is only slightly less thanthe increase in 1996, it is far below the double-digitexport growth that Malaysia has routinely posted inthe past. The dominance of electronic and electri-cal goods production has left Malaysia particularlyprone to the vagaries of global demand in this sector.Unfortunately, exports of textiles, clothing, and foot-wear—traditionally the second largest foreignexchange earner among manufactured goods—havealso been languishing. Stiffer competition from lowercost countries is now adversely affecting growth inthese sectors. The performance of other exports wasmixed. Commodity exports increased by slightly lessthan 1 percent, led by higher export volumes of palmoil and palm kernel oil. However, export earningsfrom crude petroleum declined by 1.7 percent asglobal prices softened. Led by exports of liquefiednatural gas, “mining” exports registered stronggrowth.

Capital goods imports accounted for much ofthe 7 percent expansion in merchandise imports in

Table 2.8 Major Economic Indicators: Malaysia, 1995-1999(percent)

Item 1995 1996 1997 1998 1999






Fiscal balance/GDP 0.9 0.7 1.8 0.9 1.4



Current account balance/GDP -8.4 -5.0 -5.3 -4.9 -3.8

Debt-service/exports 6.2 na na na na

na Not available.

Sources: Ministry of Finance (1997), International Monetary Fund (1998), and staff estimates.

95SOUTHEAST ASIA

1997. Some of these imports, particularly ships andcommercial aircraft, are needed to offset Malaysia’slong-standing service account deficit. Imports of in-termediate and consumption goods grew more mod-erately because of the ringgit’s depreciation. Thefaster growth of imports relative to exports causedMalaysia’s trade surplus to contract in 1997. To-gether with the deficit on the income and serviceaccount, this contributed to a widening of the cur-rent account deficit to 5.5 percent of GNP.

Projections indicate that growth will slowabruptly in 1998. The growth of GDP will be some-where between 3 and 4 percent, the slowest growthin more than a decade. As a result of the deprecia-tion of the ringgit, the collapse in asset values, andthe tighter fiscal and monetary policies, domesticdemand will fall markedly. In 1999, as the govern-ment eases its restrictive policies somewhat and netexports respond favorably to the currency deprecia-tion, growth may pick up to about 4 to 5 percent.However, private investment is likely to remain sub-dued for some time.

On the production side, slower growth isanticipated in all sectors. Agricultural output isexpected to grow by only 2 percent in 1998 becauseof anticipated weakness in international commodityprices and competition from lower cost countries.Short-term growth in the manufacturing sector islikely to be weak. Intermediate goods will cost more,foreign direct investment (FDI) may falter, and glo-bal demand conditions in the electronic and elec-trical goods sector are not expected to strengthenmuch. Some firms may find obtaining new creditdifficult. The construction sector will also experi-ence lower growth in the face of excess capacity inresidential and office space, high interest rates, andthe measures introduced to dampen speculation inthe property market. Beyond 1998, manufacturinggrowth should recover as restocking of inventoriesoccurs and manufacturers begin to feel the benefitsof the ringgit’s depreciation. A favorable supply res-ponse depends, however, on the containment of do-mestic inflationary pressures, as well as on externalmarket conditions.

Service activity will also be badly hit in 1998.The finance, real estate, and business service sectorwill bear the brunt of asset and currency market dis-location. Consumer services will also suffer as realincome growth slows. The hosting of the Common-wealth Games in September 1998 should help buoy

services and, provided the haze does not return, tour-ism may pick up as a consequence of the currencydepreciation.

Inflationary pressures emanating from aweaker ringgit will put upward pressure on consumerprices. Despite sluggish domestic demand, consumerprice inflation could accelerate to about 5 percentin 1998. As the economy adjusts to the newexchange rate regime and labor constraints loosen,continued fiscal and monetary discipline shouldsucceed in easing price increases in the latter partof 1999.

Exports are expected to pick up in 1998 as aresult of the ringgit’s depreciation. Subdued importgrowth will lead to a larger trade surplus. To moder-ate import growth, the government is planning toestablish a RM1 billion ($250 million) fund for smalland medium-scale manufacturers to spur local pro-duction. Companies with paid-up capital of less thanRM50 million will be able to avail themselves of thisfund. With service payments for freight and insur-ance and FDI income repatriation growing moreslowly, the service account deficit is projected tonarrow somewhat. Thus the current account deficitis expected to decline to 5 percent of GNP in 1998.

By 1999, exports should respond strongly to amore favorable exchange rate and should outpaceimport growth even more. While the trade accountsurplus will continue to increase, this will likely bemore than offset by a persistent deficit on the ser-vice account. Consequently, the current accountwill remain in deficit, although it is projected to easesomewhat. External borrowing by public enterprisesis expected to be less in 1998 than in 1997. Malaysiashould maintain a relatively comfortable inter-national reserves position, although some short-termcapital outflows are likely to persist.


Malaysia is exposed to a number of short-run eco-nomic risks, of which the most immediate is its cur-rent account position, which remains fragile. Thereis no prospect for anything other than marginalimprovement in 1998. Indeed, the deficit may evenwiden because of lumpy imports (for instance, foraircraft, ships, and infrastructure projects), lowerexport growth, and continued increases in netservice payments. At the same time, financing the


deficit could become a problem if FDI flows decline,particularly in the electrical and electronics indus-try as a result of excess capacity. While lower FDIwould also reduce capital imports, the net effect onthe balance of payments will be negative. To miti-gate risks, Malaysia should focus on re-evaluatingthe economic returns of planned large infrastruc-ture projects, maintaining a restrictive monetarystance, and encouraging long-run capital inflowswhenever possible.

Malaysia also faces the difficult challenge ofreining in its overheated property sector. Althoughthe growth of the broad construction sector appearsto be slowing, the banking system’s exposure to theproperty market remains high at nearly 26 percentof total loans in early 1997. Bringing this exposuredown to the target limit of 20 percent or less willrequire a strong and resolute effort. While the au-thorities have instituted measures to restrict thesupply of credit to the sector, the momentum ofcredit growth and activity in the construction sec-tor cannot be halted overnight.

Malaysia’s financial sector would benefit frommore prudent supervision and tighter regulation. Inthis regard, the government’s plan to undertake abroad review of the supervisory and regulatory sys-

tem is appropriate, and should result in long-termbenefits if follow through on the outcome of the re-view is appropriate. A stronger regulatory and su-pervisory framework should improve loan quality andstandards of asset management, leading to a morehealthy and robust financial sector. Fuller and moretimely disclosure of information would be a criticalcomponent of improved regulation. In this connec-tion, the Bank Negara’s recent initiatives to increasetransparency in the conduct of monetary policy area welcome move.


To promote a solid platform for long-term growth,Malaysia must devote more resources to investingin the development of relevant skills for its laborforce. Secondary education and curricula need tobe strengthened further, as do tertiary-level techni-cal and vocational education programs. Indeed, theneed to invest in the domestic provision of educa-tion has become more urgent as the foreign exchangecosts of educating Malaysians overseas have nowrisen sharply. The development of a modern andresponsive education system is an objective worthyof consistent support, even during troubled times.

97SOUTHEAST ASIA

The need to upgrade Malaysia’s industrial basein a way that is responsive to its shifting compara-tive advantage raises broader questions. While, aspart of its strategy to deal with the current crisis,the government has put the recruitment of foreignworkers on hold, it needs to work out a longer termvision that is not only sensitive to the needs of im-migrant workers, but also meets national economicobjectives. Given the structure of migrant flows toMalaysia, these issues could perhaps be usefully con-sidered within the broader framework of the Asso-ciation of Southeast Asian Nations.

Malaysia’s New Economic Policy has helpedlift many from poverty. For some time the policy alsoseemed to succeed in reducing income inequality;however, income distribution appears to haveworsened since the mid-1980s, both between and

within ethnic groups, and especially within theMalay group. At the same time, regional inequali-ties seem to be on the rise. East Malaysia and theeastern states of Peninsular Malaysia have not ben-efited from growth to the same extent as parts ofwest Peninsular Malaysia. To the extent that poorand comparatively uneducated Malays are dispro-portionately concentrated in those regions that arelagging, regional and ethnic inequality are related.For distributional reasons, and with a view to eas-ing congestion and related costs, especially in theKlang Valley, Malaysia might consider policies topromote more balanced growth across its regions,for example, by supporting existing initiatives ongrowth areas with a more balanced spatial appor-tionment of resources for education, and for infra-structure more generally.


Myanmar is continuing to implement market reforms. Its integration with the region’s econo-mies will improve following its recent membership in the Association of Southeast AsianNations (ASEAN). However, the existence of a dual exchange rate system continues toundermine the efficient functioning of the economy. Long-term growth prospects depend onthe extent to which Myanmar can improve its openness and competitiveness and overcomeinfrastructural bottlenecks.

Myanmar

98


Myanmar is continuing the slow process ofimplementing a market economy. While the

government has already partially liberalized foreigndirect investment (FDI), trade, and agriculturalprices, the legacy of central planning continues tohamper development. In 1997 GDP grew by 5 per-cent. Nevertheless, Myanmar continues to sufferfrom structural problems, such as inefficient stateenterprises that continue to require budget subsi-dies and an underdeveloped financial system. Theseare preventing the economy from growing morerapidly. With the recent financial crisis in the region,a realignment of the fixed exchange rate has becomeimperative. Myanmar has yet to implement the mea-sures needed to achieve greater openness and com-petitiveness, such as providing more infrastructurein areas like transportation, shipping, ports, and utili-ties. The country’s political status and internationalrelations have yet to be resolved, and informationabout Myanmar remains limited.

Despite being to a large extent a closedeconomy, Myanmar felt the impact of the financialcrisis in East and Southeast Asia. In the last fewyears, despite its economic and political problems,

Myanmar has managed to achieve fairly respectablegrowth rates. However, the mini-boom has begunto fade, and the financial crisis has highlighted boththe country’s economic frailty and policy short-comings.

Inflation has generally remained in the 20 to30 percent range in recent years. However, in mid-1997 serious flooding in the south and in theIrrawaddy delta region destroyed 1.2 million hectaresof rice. This drove up food prices and increasedinflation from 30 to 35 percent in April 1997 to morethan 40 percent by the end of the year. In earlySeptember the situation forced the government toappeal to the United Nations for emergency foodrelief.

Gross investment stood at 16.8 percent ofGDP in 1997, while national savings amounted to8.3 percent. Total foreign investment rose to $6 bil-lion by April 1997, up from $5.3 billion in December1996. The United Kingdom was the largest inves-tor, with around $1.3 billion, followed by Singaporewith $1.2 billion and Thailand with $1 billion.Despite a highly publicized pullout by Westerninvestors, investment continues to flow in from Asia.

Growth is expected to remain at 5 percent in1998 and 1999. This is lower than in previous years

1997 refers to fiscal year 1997/98, ending 31 March.

99SOUTHEAST ASIA

because of adverse factors that will affect agriculturalproduction, such as a lack of inputs and continuedgovernment intervention in production decisions.Gross investment is expected to decline slightly to16 percent of GDP, and national savings to a littleunder 8 percent of GDP. Fiscal deficits and lax mone-tary policy will keep inflation high. Althoughfinancing problems will moderate import growth,weak export growth will keep the current accountin a substantial deficit.


The single most critical problem Myanmar faces re-lates to the management of the exchange rate sys-tem. Myanmar’s dual system of an official exchangerate and one determined in a parallel market wascause for concern well before the recent regionalcurrency depreciations. In the last few months, theinfluence of the fixed official exchange rate in re-stricting the country’s ability to maintain growth,investment, and trade and to hold inflation at bayhas become even more apparent. The official ex-change rate continues to be fixed at MK6 to thedollar. However, at the beginning of the region’sfinancial crisis, the kyat’s rate of exchange in theparallel market fell by nearly 100 percent. At onepoint it traded at more than MK300 to the dollar.

In June and July 1997, as foreign exchangebecame scarcer, confidence collapsed. The govern-ment then resorted to printing kyat to buy dollars atthe parallel rate, but this generated inflation. Theseevents reflect the fragility of Myanmar’s economyand its lack of resources to react to current eventsin the region. While the authorities are well awareof the exchange rate problem, they consider that adevaluation will not only increase inflation, but willalso increase the amount of kyat necessary to repayforeign debt that is denominated in foreign currency.While the authorities have made some attempts todepreciate the kyat by shifting transactions from thefixed official rate to the parallel exchange market,about a third of external transactions, all related tothe public sector, still use the official rate. Most pri-vate sector external transactions are now conducted

in the parallel market. However, the complex set offoreign exchange and trade regulations still neededto maintain the dual exchange system has reducedtransparency and undermined the efficiency of othermeasures taken to orient Myanmar toward a mar-ket economy.

The second important problem that Myanmarneeds to resolve is the recurrent large fiscal deficits,which result from a small revenue base. Budgetrevenues declined from about 8.4 percent of GDPin the early 1990s to 5.1 percent in 1996. Despite asignificant reduction in government expendituresfrom about 10 percent of GDP to 6.6 percent duringthe same period, the nonfinancial public sectordeficit (that of the central government and stateenterprises) remains at some 5 to 6 percent of GDP.These deficits are routinely financed with credit fromthe Central Bank and contribute to inflationary pres-sures. During the first six months of 1997 the amountof net credit to the public sector increased sharply.At the same time, credit to the private sector alsobegan to expand rapidly, growing by 45 percent(albeit from a small base).


Myanmar’s long-term growth prospects depend onthe extent to which it succeeds in introducinggreater openness and competitiveness, improvinginfrastructure, accelerating market reforms, liberal-izing trade, and increasing its capacity to attract FDI.Myanmar must encourage FDI as a way to obtainforeign technology, but this will be difficult as longas current distortions persist.

As concerns integration into the worldeconomy, probably the most important event in 1997was Myanmar’s entry into ASEAN. This is expectedto lead to substantial inflows of investment fromneighboring countries. Myanmar is a resource-richnation and possesses a large, low-cost workforce,which makes it potentially attractive as a produc-tion base for industrializing ASEAN members, suchas Malaysia, Singapore, and Thailand. Myanmar willalso join the ASEAN Free Trade Area and has beengiven until 2008 to complete the tariff reductionprocess.


Philippines

100

Despite the currency crisis, economic performance in the Philippines was satisfactory in 1997.The current account deficit was kept manageable, supported by high receipts in the servicesector, particularly from remittances of overseas contract workers, and inflation was unex-pectedly low. However, the full impact of the currency turmoil will become apparent in 1998.

19 percent. Private savings accounted for roughly60 percent of total savings. Gross domestic invest-ment fluctuated within a band of 20 to 24 percentof GNP during 1990-1996. After sluggish perfor-mance in 1995, investment activity picked up sig-nificantly in 1996, and this trend continued rightup to the third quarter of 1997, when the high in-terest rates that prevailed at that time because ofthe currency turmoil dampened investment activ-ity. Gross domestic investment as a percentage ofGNP was 24 percent in 1997, with public invest-ment accounting for roughly one fifth.

The government has succeeded in its effortsto achieve budget surpluses since 1994, and thetrend continued in 1997. However, the public sectoras a whole posted a deficit because of deficits ingovernment corporations.

Broad money (M2) grew by about 20.5 per-cent in 1997, up from about 16 percent in the pre-ceding year. Nevertheless, inflation was kept incheck at 5.1 percent in 1997, mainly because of satis-factory output growth early in the year.

Export growth has been strong in recent years,increasing from a mere 4.7 percent in 1990 to29.4 percent in 1995. Some slowdown in exportgrowth was evident in 1996 as a result of slackeningglobal demand for electronic components; however,1997 saw a resumption of high export growth of22.8 percent. Imports had maintained even highergrowth rates throughout the 1990s, but slackened


The Philippine economy performed satisfactorilyin 1997 despite disruptions caused by the re-

gional currency turmoil in the latter half of the year.GNP and GDP registered relatively high growthrates of 5.8 and 5.1 percent, respectively, in 1997,which were, however, lower than the 6.9 and 5.7 per-cent, respectively, achieved in 1996. The differencebetween GNP and GDP was largely due to the re-mitted earnings of overseas Filipino workers, and theconvergence of their growth rates in 1997 reflectsthe stabilization of these earnings. The industry andservice sectors recorded reasonable growth rates of5.7 and 5.6 percent, respectively. Notwithstandingpessimistic expectations based on the El Niñophenomenon, which caused adverse weatherconditions, including severe droughts, the agricul-ture sector posted a growth rate of 2.8 percent, whichwas better than anticipated.

Overall aggregate employment growth sloweddown to around 2 percent in 1997, with the agri-culture sector affected most severely. The labor forcegrew similarly, but with 40 percent of the labor forceemployed in agriculture, the unemployment rate isestimated to have risen marginally to 8.7 percent in1997.

Gross national savings as a percentage of GNPhave tended to hover around 15 to 19 percent inthe 1990s, with 1997 being no exception at around

101SOUTHEAST ASIA

The Philippines has experienced large capitalinflows in recent years: net capital inflows increasedfrom $1.8 billion in 1990 to $8.6 billion in 1996.Following the currency instability, foreign invest-ment inflows and capital inflows to commercialbanks dropped sharply, and in 1997 the resultingcapital account surplus could not cover the currentaccount deficit. The overall balance-of-paymentsdeficit exceeded $3 billion, financed through a draw-down of reserves, which dropped to $8.8 billion bythe end of 1997.

GNP growth will slow down considerably to2.9 percent in 1998, and will be accompanied by asignificant rise in unemployment. High liquiditygrowth and rising import costs will be evident in1998, and the inflation rate is likely to reach doubledigits. The savings rate is likely to fall as higher debt-service costs and inflation affect the savings capa-bility of both the public and private sectors. Thecurrent account deficit is projected to improve to3.8 percent of GDP in 1998, largely because of areduced trade deficit.

As lower GDP growth will likely affect govern-ment revenues in 1998, they are unlikely to growmuch beyond the levels achieved in 1997. Thus thenational budget is not expected to yield a significantsurplus in 1998. Expenditure will be trimmed to

in 1997, when merchandise imports rose by14 percent.

The trade deficit increased during 1990-1996,rising from $4 billion in 1990 to 11.3 billion in 1996.In 1997 the trade deficit was virtually unchangedat $11.4 billion. The increase in the trade deficitcould have been lessened had the appreciation ofthe real exchange rate not been so significant. Be-tween 1990 and September 1997, the real effectiveexchange rate appreciated by 28 percent against thecurrencies of major trading partners and by 20 per-cent against competing countries’ currencies.

The current account deficit was kept at man-ageable levels in the 1990s, with the highest deficitreaching 5.5 percent of GDP in 1993. In 1997 thefigure was 5.2 percent. This was largely a result ofhigh receipts in the services sector, particularly re-mittances from overseas contract workers. Eventhough the major share of remittances is from out-side the region, some slowdown is likely in the me-dium term if overseas workers in other Asiancountries are retrenched as a result of the regionaleconomic contraction that has followed on the heelsof the currency instability. This highlights the factthat the Philippines cannot rely on such remittancesas a sustainable source of support for bolstering thecurrent account.

Table 2.9 Major Economic Indicators: Philippines, 1995-1999(percent)

Item 1995 1996 1997 1998 1999


Gross domestic investment/GNP 21.6 23.3 23.9 20.0 22.0

Gross national saving/GNP 16.8 18.8 19.2 17.0 19.0



Fiscal balance/GDP 0.6 0.3 0.1 0.2 0.3





Sources: Bangko Sentral ng Pilipinas (1998a,b); National Statistical Coordination Board (1997, 1998); Department of Budgetand Management, Fiscal Planning Service data; and Bureau of Treasury data. Projections are entirely staff estimates.


match available revenues, and as the government isunlikely to reduce its current operating expendituressignificantly in an election year, cuts are expectedin maintenance and capital expenditures that willprobably affect the public sector developmentprogram in 1998.

The full impact of the monetary expansion,the peso depreciation, and the El Niño weather phe-nomenon will be felt with a lag in 1998. In addition,unemployment is likely to rise in 1998 as agricul-tural employment falls further. The government’sability to maintain public investment levels will bean important determinant of economic performancein 1998. With conditions stabilizing in the rest ofthe region, recovery is expected to begin in 1999.


The year 1998 is likely to be crucial for the Philippineeconomy. Successful containment of the economicimpacts of the currency turmoil and the pace of eco-

nomic recovery will depend on such policies as main-taining aggregate investment levels, preventing dis-ruption in banking and financial services, managingcorporate indebtedness, enabling the export sectorto take maximum advantage of the opportunitiescreated by the currency depreciation, and effectinga smooth political transition after the elections. Thecontinuation of economic reforms is crucial and willbe closely monitored by foreign investors.

With high interest rates prevailing to stabilizethe currency, private investment demand is likelyto be sluggish. Unless public investment levels aremaintained, overall investment and growth will beseverely affected. Rising interest and debt servicingcosts as a result of the sharp depreciation of the peso;the lack of flexibility in major items of currentexpenditure, such as salaries; and absence of buoy-ancy in revenue generation because of reducedgrowth are going to pose a challenge to governmentefforts to sustain public development expenditures.

The possibilities of corporate defaults and con-sequent difficulties for the banking sector are likely,

103SOUTHEAST ASIA

further reforms in the financial and capital markets,promoting the sustainability of export growth, andreappraising the exchange rate policy.

Reform in Financial andCapital Markets

Central to the reform process are measures to boostdomestic savings and to restore the confidence offoreign investors. Reforms under way on the equityside of the capital market include improving thefunctioning of the stock market, increasing trans-parency, ensuring the protection of shareholders’interests, introducing international standards andpractices, and ensuring better supervision andregulation.

In addition, further development of the debtmarket is necessary. Treasury bills dominate the bondmarket; corporate debt is confined mainly to short-term commercial paper; municipal and project bondsare largely underdeveloped; and domestic institu-tional investors, such as pension funds and insur-ance companies, prefer to hold risk-free governmentpaper. Reforms are needed to enable all these enti-ties to play a more meaningful role in augmentingsavings. In addition, considerable policy and insti-tutional reforms are required to develop the domes-tic debt market to cater to the economy’s long-terminvestment needs. These measures include chang-ing the tax treatment of and regulations concern-ing debt instruments; strengthening secondarymarket and credit rating institutions; and buildingthe capacity of agencies, financial institutions, andlocal governments.

Export Development

Although the export growth the Philippines has ex-perienced is among the most impressive in the re-gion, the authorities need to take steps to ensurethat the growth performance is sustainable over thelong term. These include paying more attention totraditional exports that have not experienced muchbuoyancy, such as garments and food processing, andtrying to diversify manufactured exports and increasetheir local content, particularly of electronicsexports. Accomplishing this calls for a wide array ofpolicy and capacity building measures in the areasof trade, foreign investment, and industry. Theseinclude upgrading the skills of the work force,

and need careful attention. Official estimates of thebanking sector’s exposure to the real estate sectorhave been revised upward, and currently stand at13.7 percent of total loans. The current estimate ofthe share of nonperforming loans is 4.7 percent;however, this will rise given the much greater ex-cess capacity in the real estate sector likely to beexperienced in 1998. The capabilities of the BangkoSentral ng Pilipinas (the Central Bank) and thePhilippine Deposit Insurance Corporation to super-vise the banking system, and of the Securities andExchange Commission to supervise the corporatesector need to be enhanced, and policy measuresshould be put in place to allow these agencies toplay a more effective supervisory role. In addition,the monetary authorities need to develop effectivehedging instruments to protect those with foreigncurrency loans.


Despite its improved economic performance sincethe mid-1990s, the Philippine economy exhibits sev-eral weaknesses, namely: the domestic savings rateremains low and stagnant; the growth in agricul-tural production has been weak and variable, and issubject to large output fluctuations as a result ofweather changes because irrigation remains insuffi-cient; the industry sector’s technological progresshas been slow, especially in small and medium en-terprises; the integration of manufactured exportswith local manufacturing has been weak, which hasprevented the surge in exports from having a sig-nificant impact on local industry; and the physicalinfrastructure needs considerable upgrading. Thehigh rate of population growth has reduced the gainsthat resulted from economic growth, and GNP percapita growth was negative from 1990 to 1993.However, since 1994 GNP per capita has shownsome improvement. The provision of social servicesis still inadequate, especially in health and educa-tion. In addition, the distribution of the benefits ofgrowth has also been uneven across income classesand regions. Concerted action to overcome theseweaknesses is necessary for sustained development.

The major medium-term policy concern is toaddress the economic vulnerabilities exposed by thecurrent currency turmoil and to find ways to im-prove the economy’s resilience in the context of itsfurther globalization. This involves implementing


before the onset of the currency turmoil the peso-dollar nominal exchange rate had experiencedunusual stability. However, despite some deprecia-tion of the nominal effective exchange rate, the realeffective exchange rate had witnessed a steadyappreciation. The gains from the current steep nomi-nal depreciation of the peso could similarly bequickly reversed unless fiscal and monetary policywere used effectively to keep inflation under control.The attainment and maintenance of appropriate realeffective exchange rates is necessary to sustain themomentum of growth in exports and output.

improving the technology base of the economy,removing infrastructural bottlenecks, paying greaterattention to credit provision for exports, promotingsmall- and medium-size enterprises, and adoptingspecific capacity building measures for governmentagencies concerned with export promotion.

The exchange rate policy should be viewed notonly in the context of assisting exporters, but also ofoverall macroeconomic management. Although theBangko Sentral maintains that the exchange rate isdetermined by the market with only occasional lim-ited intervention to provide indicative guidance,

105SOUTHEAST ASIA

Thailand’s recent era of high growth ended in 1997. The financial crisis spread throughoutthe economy, underscoring its fragility. Accustomed to double-digit growth rates, Thailandsaw negative growth in 1997, and 1998 is expected to be worse with the onset of stagflation.The short-term priority is to resolve the financial crisis that is strangling business. In themedium to long term, Thailand must rethink its growth strategy, emphasize those sectors thathave a long-term growth potential, and enhance education.

THAILAND

105


By the first quarter of 1997, the Thai economywas showing clear signs that it was in trouble.

Speculative attacks on the baht and the closure ofseveral finance companies constituted the preludeto financial turmoil of unprecedented magnitude.The currency depreciated from B26 to the US dol-lar in July 1997 to more than B50 to the dollar byJanuary 1998. Negative growth occurred in 1997,and the political consequences included the primeminister’s resignation in November 1997.

The lack of liquidity caused by the financialcrisis had serious repercussions on manufacturing.While production declined only slightly during thefirst seven months of 1997, with growth running at5.1 percent compared with 7.1 percent during thesame period of 1996, the last three months of 1997saw a decline in production of more than 5 percentcompared with the same period of 1996. Capacityutilization fell to around 70 percent in such indus-tries as automotive assembly and sales of motor ve-hicles fell 73 percent from the previous year’s figures.This will undoubtedly adversely affect the futuregrowth of the petrochemicals, glass making, rubber,and steel sectors.

Private investment expanded moderately by4.1 percent in July 1997, but only by 2.5 percent in

August 1997, from the levels during the correspond-ing months in 1996. This reflected the economicslowdown and the excess capacity prevailing in manyindustries, particularly the real estate sector. Privateconsumption fell by approximately 5 percent in realterms because of declining real incomes.

Thailand’s fiscal position further deterioratedin 1997, with the budget deficit as a proportion ofGDP reaching 0.9 percent in 1997. This was causedby a shortfall in revenues because of a decline infunds collected from the value-added tax and fromcustoms duties. In contrast, expenditures remainedas budgeted.

Liquidity conditions in money marketsremained tight during the year. In August 1997 theinterbank rate climbed to an average of 15.4 per-cent, up from 12.1 percent in December 1996, inan attempt to counteract the outflows of capital andthe persistent excess demand for US dollars in theforeign exchange market.

Inflation accelerated during the second halfof the year, because of the increased costs of im-ports following depreciation of the baht, as well asthe increase in the value-added tax from 7 to 10 per-cent. By December 1997, the year-on-year inflationrate was 7.7 percent. This must be seen as asignificantly low, even puzzling, increase in pricesgiven the large fall in the value of the baht. Likely


reasons why inflation has not shot up to date is thecontraction of the domestic economy; the decreasein imports; the cutting of salaries, especially of annualbonuses; and the selling off of inventories.

After the 1996 slump, exports began showingsigns of recovery around March 1997, and furtherminor improvements were observed throughout theyear. Medium-technology exports, such as automo-biles and parts, as well as electrical products andresource-based products, performed well. Exportsgrew by 3.2 percent during 1997, a slight improve-ment on the decline of almost 2 percent the previousyear. Imports, by contrast, declined by about 9 per-cent. Imports of motor vehicles fell by 50 percent inthe first ten months of 1997, while sales of brand-label clothing and leatherwear fell by 30 to 40 per-cent during the same period. Despite the improve-ment in the current account deficit, the ratio of ex-ternal debt-service to exports doubled from slightlymore than 12 percent in 1996 to 25 percent in 1997.

Projections indicate that the economy will reg-ister a negative growth rate of around 3 percent in1998. Signs of a mild recovery will appear in 1999,with growth of around 1 percent. Further declinesin private consumption by 9 percent in 1998 and1.5 percent in 1999 are predicted. Inflation is pro-jected to be 15 percent in 1998, but the exact figurewill depend partly on the extent of the depreciation

of the baht and the increase in import prices. Finally,exports are expected to grow at 5 percent, whileimports are expected to continue decreasing. Withthis pattern the current account balance will showa surplus of around 3.4 percent of GDP. An increasein unemployment is also forecast for 1998.


The interaction of two factors contributed in im-portant ways to the Thai financial crisis. The firstwas Thailand’s exchange rate policy, which tied thebaht to a basket of currencies heavily weighted bythe US dollar. The appreciation of the dollar in 1995made Thai exports uncompetitive. The second wasthe lack of effective regulatory control over the pri-vate financial sector, whose lending policies wereimprudent. The crisis has therefore raised questionsabout the conduct of Thailand’s economic policy aswell as the adequacy of its institutional and sectoralstructures. Consequently, in the short to mediumterm, Thailand must address the problems of theliquidity constraint created by the closing of privatebanks and finance companies, and must restructureits financial sector. The latter is required to avoidfuture misallocation of foreign capital to speculativeassets and to projects with inadequate rates of return.

Table 2.10 Major Economic Indicators: Thailand, 1995-1999(percent)

Item 1995 1996 1997 1998 1999

Gross domestic product growth 8.8 5.5 -0.4 -3.0 1.0





Fiscal balance/GDP 3.0 0.9 -0.9 -2.0 -1.0

Merchandise exports growth 24.8 -1.9 3.2 5.0 8.0

Merchandise imports growth 31.9 0.6 -9.3 -15.0 3.0

Current account balance/GDP -7.9 -7.9 -4.0 3.4 2.0


Sources: Asian Development Bank (1997f), Bank of Thailand (1997), International Monetary Fund (1998), and staff estimates.

107SOUTHEAST ASIA

The substantial volume of nonperformingloans, the depreciation of the baht, and a run ondeposits have weakened the capital base ofThailand’s financial institutions. Together withsluggish economic activity, this could increase theincidence of corporate bankruptcy. A fall in inflatedproperty prices could further depress the commer-cial banks’ balance sheets. With monetary policy nolonger constrained by a fixed exchange rate, the bahthas depreciated substantially since July 1997 inresponse to the perception that the authorities mighthave decided to rescue the economy and the bank-ing system by printing money. In the absence of acomprehensive reform package for the financialsector, the international capital markets’ fears of abanking crisis are likely to keep the baht underpressure.

The establishment in October 1997 of theFinancial Restructuring Agency and the AssetManagement Company was an important step for-ward. The Financial Restructuring Agency willsupervise the overall rehabilitation of the financialsector and will help viable companies merge and/orraise capital, while the Asset Management Companywill oversee the liquidation of unviable companies.In December 1997 the government announced thatit would liquidate all but 2 of the 58 suspendedfinance companies in a move to restore investor con-fidence and to reduce selling pressure on the baht.The government has also decided to allow foreign-ers to hold controlling interests in the bankingsector. In addition, the Central Bank has lifted mostremaining foreign exchange controls, for example,local financial institutions can now resume their bahttrading with nonresidents, and foreigners are nolonger restricted from transferring baht offshore af-ter selling Thai stocks and bonds. Finally, thegovernment now prohibits banks and the remain-ing finance companies from lending for nonproduc-tive purposes, for instance, consumer spending andreal estate development. The restructuring costs willbe large: around 15 percent of GDP.

In August 1997 Thailand negotiated a $17 bil-lion line of credit with the International MonetaryFund (IMF) in exchange for implementing an aus-terity plan. The initial plan called for increasing thevalue-added tax from 7 to 10 percent, which hasalready been implemented; reducing the currentaccount deficit to 3 percent by 1998; low but posi-tive growth; capping inflation at 9.5 for 1997 and

5 percent for 1998; maintaining foreign exchangereserves equivalent to more than four months’ worthof imports; implementing fiscal policies to generatea budget surplus of 1 percent of GDP in 1998; andrestructuring the financial sector. However, sixmonths after the implementation of the IMF pro-gram the economy showed few signs of improvement.This called into question the feasibility of targetsnegotiated with the IMF, in particular, the require-ment for a budget surplus, and has created uncer-tainty about the final policy mix the authorities arescheduled to adopt.

Sectors of Thai society have questioned theappropriateness of the IMF program. The combina-tion of anti-inflationary policies with reductions inthe money supply and in government spending coulddeepen a crisis generated by private sector debt.These concerns led the IMF and the Thai govern-ment to revise previous agreements, and toward theend of February 1998, they issued a third Letter ofIntent that set more realistic objectives, such as anegative GDP growth rate for 1998, higher infla-tion, and a budget deficit. Likewise, the governmentbacktracked on some previous privatization com-mitments. On the financial side, the governmentaims to reduce its stake in four recently national-ized banks.


Thailand’s industrialization process beganaccelerating in the mid-1980s. Given its relativeabundance of labor, the country specialized in pro-ducing and exporting labor-intensive products. How-ever, after only a little more than one decade, thiscomparative advantage has ended. Thailand iscurrently caught between the newly industrializedeconomies, against which it cannot yet compete inmedium- to high-technology products, and coun-tries such as People’s Republic of China, Indonesia,and Viet Nam, which can produce a wide variety oflabor-intensive products at lower labor costs.

Bias in the Pattern of Industrialization

Compared with countries at a similar level of devel-opment, Thailand’s industrial structure is biasedtoward light industries that produce consumer goods,in particular, toward food and beverages, textiles,and apparel. This bias is partly explained by the


economy’s natural resource base. The industrialsector processes natural resources and manufactureslabor-intensive products. Intermediate and invest-ment goods are imported. Thailand depends heavilyon demand in the industrial countries to which itexports. This pattern of trade and industrializationlies at the core of Thailand’s balance-of-paymentsproblems.

As concerns Thailand’s policy options, oneshort-run strategy would be to reduce the prices ofexports to stay competitive. This would probably bereflected in real wage cuts and the adoption ofcapital-intensive technologies. A second, longerterm option would be to develop the domestic mar-ket rather than relying on exports. Either strategyor a mix of the two should be combined with invest-ment and research in more technologically advancedsectors. To achieve product diversification andimprove product quality, Thailand will have to raiseits current level of human capital and its capacityto adopt and adapt advanced technologies.

Given Thailand’s economic structure andnatural endowments, the sectors that offer the mostpromising possibilities for the future are food pro-cessing and tourism. Thailand has plenty of scopefor continuing to develop a competitive and world-class food processing industry. Thai producers mustconstantly adapt to changing tastes: wealthiersocieties may consume less regular rice, but spendmore on first-class (and well-marketed) mangoes,aromatic rice, and oven-ready frozen foods. Theseare goods for which, as income grows, the demandfor them grows more than proportionately. The busi-nesses that make and export such items can useincreasingly sophisticated production technologiesand management methods to increase agriculturalproductivity and raise incomes.

Thailand also has considerable potential fordeveloping its tourism industry further. In 1997,6 million tourists visited Thailand. This figure couldbe increased by targeting tourists with high purchas-ing power. The Tourism Authority of Thailand hasprepared the “Amazing Thailand” campaign for1998/99 to try to make the best of the currency de-preciation by increasing tourist arrivals to 7.7 mil-lion in 1998 and 8.3 million in 1999.

The appropriate development strategy is forThailand to focus on the factors that are likely togive the country a longer term comparative advan-tage. Thus from a policy perspective, the important

question is to be able to move to higher stages ofdevelopment, avoiding the types of shocks theeconomy is currently experiencing. To accomplishthis Thailand must work on three fronts. The first isintra-industry restructuring, implementing changeswithin existing industries, such as textiles and foodprocessing, to improve production methods andattain best practice standards. The second front isrelocating labor-intensive activities in the country’spoorer regions for reasons of both efficiency andequity. The third front is intrasectoral restructur-ing. This involves making the transition from low-productivity, low-skill, labor-intensive industries tohigher productivity industries, such as informationtechnology. The first two are medium-term strate-gies and the third is a long-term strategy.

Lack of Competitiveness and the Roleof Education

Thailand has a weak human capital base.Until recently, it lagged far behind other Asian coun-tries in terms of the enrollment ratio at the second-ary school level. While enrollment at the primarylevel was satisfactory, more than half of those whofinished primary school did not go on to secondaryeducation. This is partly because a large share ofthe population was still engaged in agriculture. Alow value placed on education plus difficult accessto schools made secondary education unattractive.

In the past five years, however, the situationhas improved, and currently the transition rate fromprimary to secondary education is close to 90 per-cent. While Thailand currently has only 6 years ofcompulsory education, plans exist to raise this to9 years in the near future and to 12 years by 2007.The government plans to achieve almost universallower secondary education by 2000 or so and virtual-ly universal upper secondary education around 2020.

Today, 80 percent of Thailand’s labor force ofaround 33 million has no formal education or onlya primary education. These workers have little accessto better jobs and frustrate Thailand’s hopes ofmoving up the development ladder. Four reasonsaccount for the prevailing situation. The first isaccess: institutions of higher education tend to beconcentrated in the capital, Bangkok, thereby put-ting rural populations at a disadvantage in terms oftheir access to higher education. Second, curriculado not match employers’ needs. This is due, in part,

109SOUTHEAST ASIA

to the predominance of course offerings in the hu-manities and arts at the expense of scientific andapplied education and training. While education ofthe latter kind is more costly to deliver, it is likely tohave greater linkages with the economy’s needs andthereby have greater benefits, particularly in thelonger term. Moreover, the quality of the system islow, it does not encourage creativity, and it does notemphasize research at the university level. Effortsmust be made to increase agricultural research inparticular. This could not only raise the sector’s pro-ductivity by providing new and improved inputs,methods of cultivation, and machinery, but couldhave a far-reaching effect on the job situation inrural villages as higher incomes increase demand forgoods and services. Third, teachers are underpaid

and undertrained, as reflected in the quality of teach-ing. Finally, the physical infrastructure of manyschools is extremely poor.

Thailand needs a radical, sustained, and far-reaching reform of its national education system toface the economic challenges of the 21st centuryand the technology age. However, even if such areform program is implemented immediately, theremay not be any significant effect on the economy inthe short run. The reform, which should be directedtoward improving the quality of education acrossvarious levels and increasing enrollment ratios, par-ticularly at the secondary level, will take at least adecade to bear fruit and contribute toward enhancedgrowth and structural transformation of theeconomy.

115SOUTH ASIA

While economic growth has accelerated, inflation has slowed down, and fiscal and currentaccount balances have improved, unemployment has remained high. Despite the currencyturmoil in Asia, Bangladesh’s taka has remained relatively stable.

Bangladesh

115


The most striking macroeconomic developmentin 1997 was the upturn in economic growth,

with much lower inflation and improved fiscal andcurrent account balances. GDP grew by 5.7 percentin 1997, the highest rate in the 1990s to date. Theagriculture sector performed impressively, with agrowth rate of 6 percent. The services sector alsoperformed well, growing by 6.2 percent. The weak-ness in the economy was the industry sector, whosegrowth was sluggish and was the lowest in thedecade, mainly because of supply bottlenecks in thepower sector and low private investment. The slowpace of financial sector reforms and further dete-rioration in the performance of state-owned enter-prises were further factors that hindered the growthrate.

The savings rate rose from around 6 percentof GDP in 1992 to 9 percent in 1997, a reflection ofbetter control over current government spendingand improvements in private saving. However, thiswas less than in 1994 and 1995, when savings wasabout 13 percent of GNP. Despite a drastic declinein inflows of foreign finance, the country was ableto maintain the steady increase in the investmentrate, which rose from 12.1 percent of GDP in 1992to 17.4 percent in 1997. Part of this was due toincreased private investment in response to the

government’s efforts to encourage private sectoractivities.

Although the open unemployment rate basedon official statistics is low, estimates indicate thatabout 40 percent of the labor force is underem-ployed. While Bangladesh’s labor costs are probablyamong the lowest in Asia, this cheap labor cannotbe matched by adequate capital investment, andlabor productivity is low.

While the overall fiscal deficit remained high,it showed some improvement in 1997. The collec-tions of major tax revenue items, including customsduties, value-added tax, and income tax, largely mettargets. On the expenditure side, revenue expendi-ture slightly exceeded the budget target because ofunexpected interest payments on domestic debt andincreased subsidies to public enterprises. However,this increase was largely offset by below target capi-tal expenditures caused by slow progress in aiddisbursement and project implementation. As aresult, the overall budget deficit was 5.5 percent ofGDP in 1997, about half a percentage point lowerthan in the previous year.

The money supply expanded modestly, withbroad money supply (M2) growing by 10.8 percentin 1997, up from 8.2 percent in 1996. Net credit tothe private sector rose by only 12.6 percent, com-pared with an average of 22.8 percent per year in1995-1996, partly reflecting the crowding out effects

1997 refers to fiscal year 1996/97, ending 30 June.


of the rapid expansion of credit to the government,and also the commercial banks’ more cautiousapproach toward extending new credit, as well astheir increased efforts to recover overdue loans.

Sufficient food crop production and moderatemonetary expansion kept inflation under control.Food prices only increased by a modest 1.3 percent.The inflation rate was 3.9 percent during 1997, lowerthan the 4 percent recorded in 1996. Transport,communications, and health care prices recordedthe largest price increases.

Since 1990, measures to liberalize trade andpayments have included reducing tariff and nontariffbarriers, simplifying import procedures, introducingexport incentives, and liberalizing foreign exchangecontrols. The authorities lowered the unweightedmean tariff from 89 percent in 1991 to 23 percentin 1997, and reduced the number of items subjectto quantitative restrictions from 315 in 1990 to 23in 1997. As a result, the external trade position hasimproved considerably in recent years. Export earn-ings remained buoyant in 1997 at $4.4 billion,although growth commodity was varied. Ready-made garments exports contributed more than halfof the earnings, and grew by 14.8 percent. Importsgrew slowly at 3.0 percent, mainly because of a de-cline in foodgrain purchases. Worker remittancesfrom abroad surged by 21 percent. These factorsbrought down the current account deficit from5.2 percent of GDP in 1996 to 2.6 percent of GDPin 1997.

However the deterioration in the capitalaccount outweighed these improvements. Food andcommodity aid decreased and many project aiddisbursements were behind schedule. Net privatecapital outflow amounted to $120 million, andconsisted largely of an outflow of foreign portfolioinvestments.

Despite the recent turbulence in SoutheastAsian currency markets, the taka has so far remainedrelatively stable. The following factors contributedto this stability: (i) the taka’s convertibility on thecurrent account rather than on the capital account;(ii) the government’s pursuit of a flexible exchangerate policy (from June 1996 to the end of 1997 theexchange rate devalued by more than 11 percent);(iii) the relatively low current account deficit com-pared with that of other Southeast Asian countries;and (iv) the foreign capital inflow to Bangladesh,which to date has been minimal, so that the subse-

quent outflow has not had any major financialconsequences.

Nonetheless, the recent currency turbulencein Southeast Asia could have some adverse impacton Bangladesh’s economy in the future. Theeconomy is particularly vulnerable in the followingareas: (i) its official foreign reserves stood at an un-comfortably low level of $1.6 billion in December1997, equivalent only to 2.4 months of imports ofgoods and services; (ii) the competitiveness ofBangladesh in labor-intensive exports such asgarments and frozen foods could be reduced becauseof the sharp depreciation of currencies in SoutheastAsia; (iii) the level of potential foreign investmentfrom East and Southeast Asian countries intoBangladesh could be depressed because of thesecountries’ financial problems; and (iv) the demandfor Bangladeshi overseas workers could be reduced,which would dampen workers’ remittances to thecountry.

The medium-term outlook also depends criti-cally on the pace of economic reforms. Based on theassumption that the government implements majorstructural reforms in a timely manner and maintainsmacroeconomic stability, projections indicate thatGDP growth will rise slightly from 5.7 percent in1998 to 6 percent in 1999. While the growth inagriculture may slow down somewhat compared toits impressive achievement in 1997, the industrysector could rebound from its disappointing perfor-mance. However, to achieve this, adequate infra-structure, including energy, roads, ports, andtelecommunications, must be developed. Thisgrowth scenario assumes substantial increases in thedomestic savings and investment rates, which in turndepend on timely implementation of comprehen-sive banking sector and capital market reforms, aswell as further fiscal consolidation. Efforts to attractinvestments from the private sector, both domesticand foreign, need to be intensified through acceler-ated implementation of reforms in infrastructure andpublic enterprise restructuring.

As a result of the expected increase in tax col-lection, the fiscal deficit is forecast to decline from5.5 percent of GDP in 1997 to about 5 percent in1999. It will remain high in 1998, as the recent payincrease for the public sector will raise public ex-penditure. In line with the general expansion of eco-nomic activities, the money supply will increase byaround 12.2 percent per year. Appropriate restruc-

117SOUTH ASIA

turing of the banking system and capital marketswill be needed to ensure that adequate funds areavailable to the private sector. The inflation rate isprojected to average just over 5 percent during 1998and 1999.

In the next two years, the government shouldintensify its efforts to maintain robust exports. Exportgrowth is projected at 15 percent in 1998 and 16 per-cent in 1999. The current account deficit is fore-cast to be about 3 percent of GDP in the next twoyears. An increased amount of foreign investmentis expected in power generation, gas exploration,telecommunications, and cement production.


Bangladesh must weather the adverse economicwinds set in motion by the crisis in Southeast Asia.Despite improvements, its macroeconomic stabilityremains fragile. The two areas of short-term eco-nomic management that are particularly importantare fiscal and monetary policies and external tradeand the balance of payments.

Fiscal and Monetary Policies

To maintain macroeconomic stability Bangladeshmust reduce its budget deficit. At the same time it

must mobilize resources for funding essential publicservices and productive investment. Therefore, thegovernment must adopt appropriate policies to re-duce nonessential expenditures, especially as theimplementation of the National Wage Commission’srecommendations will lead to substantial increasesin expenditures. In addition, hidden deficits arisefrom loss-making public enterprises and banks thatmust be eliminated. On the revenue side, given thelow tax-to-GDP ratio, there is much scope for rais-ing tax revenues by enforcing income tax laws,expanding the base of value added tax, and makingcustoms administration more transparent andefficient.

While monetary policy should be noninflation-ary, the supply of credit to the private sector couldincrease somewhat from the 12.6 percent rate in1997. Greater provision of credit and liquidity topromising and soundly managed firms is necessaryto maintain the growth momentum. However, forsuch monetary and credit policy to be a realisticoption, the government must carry out the finan-cial reforms discussed below without delay.

External Trade and theBalance of Payments

Bangladesh’s policies of trade liberalization andexport promotion have so far been relatively

Table 2.12 Major Economic Indicators: Bangladesh, 1995-1999(percent)

Item 1995 1996 1997 1998 1999











Sources: Asian Development Bank (1997c), Bangladesh Bureau of Statistics, Bangladesh Bank, and staff estimates.


successful; however, the export base remains narrow.This, together with the possible slowing of the inflowof emigrants’ remittances, means that the balance-of-payments position remains fragile. The tempo-rary assurance of garment exports in major marketsthrough quotas and the Generalized System of Pref-erences agreements should not lead to a false senseof security. (The Generalized System of Preferencesis an agreement to give preferential access to themarkets of certain of the industrial economies ofexports of some low-income countries.)

The export processing zones can continue toplay an important role in promoting trade andattracting foreign investment. With the establish-ment of new export processing zones and the inten-sification of the activities of existing ones, continuingto improve the balance of payments withoutsubstantial depreciation in the value of taka shouldbe possible.


Bangladesh’s primary challenges into the nextcentury will be to reduce poverty and improve livingconditions. In this context, three significant areasof ongoing policy efforts are of strategic importance:financial sector reforms, governance reforms, andenvironmental protection. Together, these policiescan bring Bangladesh closer to maintaining a suffi-cient and sustainable growth rate to achieve itsdevelopment goals, barring the impact of any adversedevelopments in the world economy.

Financial Sector Reforms

For many years, inefficiency, poor quality inter-mediation, and a lack of accountability havecharacterized Bangladesh’s financial system. To fa-cilitate adequate economic growth Bangladesh mustaccelerate improvements in the efficiency and flex-ibility of financial markets. Without efficientfinancial markets the mobilization of additionalresources for development will slow down. There-fore, the implementation of comprehensive capitalmarket and banking reforms should have the high-est priority.

In terms of banking sector reform, supervisionand regulation by the Central Bank—reported tobe lax, particularly in enforcement—must bebrought up to international standards. Capital

adequacy requirements, criteria for asset classifica-tion, and prudential regulations must be imple-mented quickly and uniformly. The authoritiesshould vigorously accelerate loan recovery, restruc-ture private banks, and privatize weak nationalizedcommercial banks. In addition, they should imple-ment strong loan recovery measures, such as theamended Financial Loan Court Act, impartially.

The problems of the capital market are deep-rooted. The Securities and Exchange Commissionis largely an ineffective regulatory and supervisoryagency. In operation only since 1993, it has not hada well-established system of monitoring and surveil-lance. Partly because of this, the stock market showsexcessive volatility.

If Bangladesh is to attract domestic and foreignsavings through its equity and bond markets, thegovernment must exert considerable efforts todevelop a fair, transparent, and efficient capitalmarket. The recently reorganized Securities andExchange Commission should have wide discretion-ary powers of surveillance. Separation of the man-agement of stock exchanges from the brokers mustbe maintained without exception. In the future,improved prudential regulation and incentives forchanneling capital to productive enterprises willenable the financial sector to facilitate investmentbetter.

Governance Reforms

After initial steps such as reviewing the size and func-tions of government departments and setting up theEfficiency Unit in the prime minister’s office, thereform process should accelerate.

The Public Administration Reform Commis-sion needs to be reorganized and given adequatesupport for carrying through reforms to enhance theefficiency of public sector management and admin-istration. A new incentive structure based on meritand productivity is needed. The strategic emphasisshould be on establishing mechanisms to improvetransparency and accountability in all areas, includ-ing budgeting, the regulatory environment, and thegovernment’s day-to-day operations.

In terms of devolution of power, local govern-ments should be strengthened and given financialpowers to use local resources. The development ofhuman resource and technical capacities at the lo-cal level is also urgently needed.

119SOUTH ASIA

Environmental Protection

Finally, the government must pay attention tomaintaining environmental quality. Air and waterpollution and other environmental problems needto be monitored and actions taken to preventfurther deterioration. The environmental issue mustbe addressed immediately if sustainable developmentis to be a realistic goal. The reduction of publicexpenditures should not mean abandoning pre-liminary efforts in this direction. On the contrary,by making the environment a priority, gains

from public sector reforms could more easily beused to contain ecological damage and improve theenvironment.

Some specific areas where the governmentneeds to sustain and deepen its efforts are providingprotection from floods and cyclones, managing for-estry, reforesting mangrove swamps, restocking fishpopulations, and improving environmental manage-ment in the industry sector. With international sup-port the government should be able to take furthersteps toward implementing the National Environ-ment Management Action Plan.


Bhutan is continuing its cautious policy of modernization and accelerated growth while main-taining its commitment to preserving its environmental and cultural heritage. Although thepublic sector still plays a dominant role in the economy, the government is committed toreducing its presence in certain areas while still concentrating on the provision of infrastruc-ture. Bhutan must maintain its efforts to diversify the economy and reduce poverty, which isstill high.

Bhutan

120


Bhutan initiated a cautious policy of modern-ization in the mid-1960s, but remains a pre-

dominantly agriculture-based economy. Growth in1996 was 6.1 percent, partly because of the cons-truction of a ferro-alloy plant and expenditures toincrease the capacity of the power and cement in-dustries. In 1997, however, despite the absence ofsuch new projects, growth was slightly higher ataround 6.6 percent.

Fiscal policy has been prudent during the lastfew years. Recently commissioned power projects,together with adjustments in electricity tariffs toIndia, increased fiscal revenues. These have helpedthe government cover its increasing recurrent ex-penditures brought about by a 25 percent increasein civil service pay at the beginning of 1996 andanother 20 percent raise in early 1997. These wageincreases were intended to help reverse the erosionof real wages that has occurred since the last gen-eral wage increase in 1988. Development expendi-tures also increased significantly in 1997, and thesewere mainly financed by foreign grants and loans.Tax revenues have increased gradually because of

improved administration. Nevertheless, the tax ratioof 8 percent of GDP caused by an extremely narrowtax base remains low compared with other coun-tries at similar income levels. The government iscontinuing its tax reform policy introduced earlier,and is also attempting to strengthen nontax revenuesby expanding user fees and improving cost recov-ery. However, despite these measures and a stronginflow of grants, Bhutan recorded an overall budgetdeficit of 5 percent of GDP in 1997. With gross do-mestic savings at 30 percent of GDP and gross do-mestic investment at 47 percent, the resource gapwas 17 percentage points.

In 1997 the money supply (M2) grew by 20percent and inflation was kept to 7 percent. Thegovernment has implemented policies to increasethe efficiency of the financial sector. These includeliberalizing rates for deposits above Nu5 million, in-troducing a government securities auction, andconverting the Unit Trust of Bhutan into a secondcommercial bank.

Bhutan is continuing its cautious policy ofmodernization and accelerated growth while main-taining its commitment to preserving its environ-mental and cultural heritage. Although the public


121SOUTH ASIA

sector still plays a dominant role in the economy,the government is committed to reducing itspresence in certain areas while still concentratingon the provision of infrastructure. Bhutan mustmaintain its efforts to diversify the economy andreduce poverty, which is still high. The external bal-ance deteriorated in 1997: while exports grew at 8.5percent, this was more than offset by a 25 percentincrease in imports. As a result, the current accountdeficit, which in 1996 amounted to $48 million (or14 percent of GDP), increased to $79 million (22percent of GDP) in 1997. At the same time thecountry’s external debt increased from 35 to 45 per-cent of GDP. However, the debt-service ratio halvedfrom 24 percent in 1996 to 12 percent in 1997. Atthe end of 1997 Bhutan’s reserves stood at $180 mil-lion, enough to cover imports for 17 months.

The short- and medium-term economic pros-pects for Bhutan are favorable. Assuming that thereform measures and investment projects announcedfor the Eighth Plan (1997/98-2001/02) will be real-ized, GDP growth is projected at 5 percent for 1998and some 7 percent for 1999. To improve revenueprospects, the government should focus on broad-ening the tax base; introducing user fees; improv-ing cost recovery; and preventing any deteriorationin the fiscal situation, while safeguarding such ex-penditures as those on social services and operationsand maintenance.

Projections indicate that the agriculture sec-tor, which contributes 40 percent of GDP and em-ploys 90 percent of the workforce, will grow about2.5 percent in 1998, mainly because of productivitygains and horticultural development. Higher growthof around 12 percent is projected for manufactur-ing in 1998, while the figure for energy is 7 percent.

Although external assistance will continue tofinance capital investments, domestic revenues willcover recurrent costs completely. The upward trendin the budget deficit is expected to continue during1998 and 1999, with deficits reaching 9 and 12 per-cent of GDP, respectively, because of the implemen-tation of a number of major projects.

The growth rate of exports is expected to de-cline slightly to around 6 percent in 1998, while in1999 it will be around 9 percent. The growth rate ofimports during the same period will be around 7 to9 percent. Projections indicate that the current ac-count deficit will reach 30 percent of GDP by 1999.Reserves will continue increasing to reach a level

that could finance 18 months worth of imports. Thedebt-service ratio is expected to stay at around 15to 16 percent during 1998 and 1999, while thecountry’s external debt will continue to increase tomore than 65 percent of GDP. Inflation will remainat around 8 percent, and the resource gap will con-tinue at around 17 percentage points.


Bhutan’s growth and development prospects for thenext five years depend largely on the success withwhich the government implements the Eighth Five-Year Plan. This plan retains the overall objectives ofearlier plans, namely, accelerated growth and im-proved living standards, and is also committed topreserving Bhutan’s environment and culturalheritage.

While the public sector continues to dominatethe economy, the Eighth Plan emphasizes strength-ening the private sector’s contribution to economicactivity. Thus the government is committed to re-ducing the state’s role in the commercial sectors ofthe economy through such means as privatizingpublic sector enterprises, which should improve tele-communications and transportation; allowing thestate to focus on providing infrastructure, includingaddressing the various structural and institutionalconstraints; strengthening the legal framework;introducing tariff reform; implementing financial,industrial, and trade liberalization; helping smallbusinesses, including cottage enterprises; and de-centralizing government decisionmaking. If thesemeasures are implemented successfully, they will laythe foundations for future sustained growth.

Bhutan needs to increase the amount of do-mestic resources mobilized for investment. Finally,if plans to establish a free trade zone among the sevenmembers of the South Asian Association for Re-gional Cooperation between 2000 and 2005 mat-erialize, this could provide a major boost to Bhutan’sdevelopment.


Bhutan continues to be a poor country, with one ofthe lowest per capita incomes in the world. Some80 percent of the population live in rural areas. Adultilliteracy remains high. The fertility rate is high, with


an average of 5.6 births per woman. The maternalmortality rate has decreased to 380 deaths per100,000 live births.

Since Bhutan began opening its borders to theworld in the 1960s, it has established a series of long-term development objectives. These include pro-moting self-reliance, encouraging sustainability,preserving the country’s culture and traditions,ensuring balanced development as well as nationalsecurity, promoting industrialization, developinginstitutional and human resources, and focusing onintegrated rural development. The country needsto continue its efforts to escape from the povertytrap and to achieve sustainable growth. To this end,

Bhutan has rapidly expanded its expenditure onprimary education and health services during thepast few years. These policies will greatly enhanceits development potential, as such investments havea high rate of return in countries at low levels ofdevelopment. Bhutan also needs to improve itstransportation network. In a country of such breath-taking beauty, tourism could play an important rolein generating foreign exchange. At present, how-ever, road access is extremely difficult and air con-nections are limited. As access expands, a delicatebalance will have to be maintained between pre-serving cultural heritage and enjoying the benefitsof globalization.

123SOUTH ASIA

While the fallout from Asia’s crisis has been limited, economic growth slowed down in 1997because of weather-related factors and subdued demand. Infrastructure bottlenecks also playeda role and will need to be alleviated to enhance India’s future growth prospects.

India

123

range of other measures designed to boost savingsand investment and revive the capital market. Withgovernment expenditure held constant in real terms,the budget also envisaged a further reduction in thefiscal deficit from 5 to 4.5 percent of GDP. This wasbased primarily on assumptions of improved taxbuoyancy, although measures to improve tax com-pliance, as well as increased income from thedisinvestment of government holdings in publicenterprises, were also expected to contribute to theimproved budget outcome.

However, with the economy, especially indus-try, failing to respond to the budgetary stimulus, rev-enues fell well short of the target, despite the successof the government’s tax amnesty scheme. In addi-tion, the government had to cut back its plans tosell off its holdings in public enterprises because ofthe downturn in global stock markets in the latterhalf of 1997. At the same time, the government’sdecision in July 1997 to grant major pay increasesin excess of those recommended in the Fifth PayCommission Report pushed expenditures well abovebudgeted levels. Even allowing for the impact of thegovernment’s supplementary budget, introduced inSeptember to deal with the revenue shortfall, thefiscal deficit is expected to have risen rather thanfallen in 1997. The increase in civil servants’ paywill also contribute to the intense pressure on stategovernments’ finances, because they are more or less


After a strong performance in 1996, when realGDP grew by 7.5 percent, growth slowed to

5 percent in 1997. Agriculture, which accounts fora little more than a quarter of GDP, grew at a robustrate of nearly 8 percent in 1996. However, delayedmonsoons in some areas and unseasonable andheavy rainfall in much of the country resulted in adramatic fall in agricultural growth, which stood atjust 2.5 percent in 1997.

Industrial growth remained disappointing in1997 at 6.5 percent, well below the target of 12 per-cent. Manufacturing growth fell for the second con-secutive year, dropping to 5 percent, compared with7.9 percent in 1996. Once again, both consumergoods and capital goods industries were affected.Continued slow growth in consumer demand, sub-dued export demand, and worsening infrastructureconstraints—which by raising the costs of produc-tion have played a role in limiting demand—werethe main factors responsible for the slowdown in in-dustrial growth, although heightened political un-certainty was also a factor.

The government’s 1997 budget was designedto continue the process of fiscal consolidation, whileat the same time giving a strong push to growth,particularly in industry. In addition to substantialcuts in direct taxation, the budget also included a

1997 refers to fiscal year 1997/98, ending 31 March.


the bank rate, which, with controls lifted on almostall deposit and lending rates, was reintroducedespecially to signal the policy stance of the CentralBank. Despite the fall in lending rates, the amountof credit taken up by the corporate sector remainedsubdued because of lack of business confidence andthe continued high real costs of domestic borrow-ing. Another factor was the persistent caution onthe part of banks in appraising the riskiness of loans,a result of the stricter requirements of the RBI’s newprudential norms. As business confidence began topick up in the latter part of the year, credit uptakealso began to increase. However, this may have beenpartially offset as the RBI tightened monetary policyin an effort to ease downward pressure on theexchange rate toward the end of the year.

While the scope for further improvements incredit appraisal and loan recovery is substantial, thebanking system’s performance continued to improvein response to financial sector reforms. The 27 pub-lic sector banks posted an aggregate profit of $950million in 1996, compared with a loss of $110 mil-lion in 1995. The RBI intensified its supervision ofnonbank financial institutions during 1997, particu-larly those that were sponsored by or had close linkswith particular corporate groups. In December the

obliged to follow salary revisions made by the cen-tral government.

On a more positive note, the release of theGovernment White Paper on Subsidies in May 1997has initiated more open debate on the subsidy issueand is expected to prompt substantial reform in thenext few years. Total budgetary subsidies, both atthe central and state levels, amounted to a massive14.4 percent of GDP in 1994. Only about a quarterof these subsidies could be justified on the groundsthat the market by itself would not provide the rightlevel of output. Another important development wasthe government’s announcement in the 1997 bud-get that, despite its continued fiscal pressures, as of1 April 1997 it would discontinue the system of adhoc Treasury bills as a means of automatic financ-ing for the budget deficit. This move was designedto strengthen fiscal discipline while providing greaterautonomy to the Reserve Bank of India (RBI) in itsconduct of monetary policy.

Monetary policy was further eased in 1997 inan effort to complement the fiscal stimulus given tothe economy by the budget and to prevent the ru-pee from appreciating as a result of strong capitalinflows in the first half of 1997. Measures takenincluded further cuts in the cash reserve ratio and

Table 2.13 Major Economic Indicators: India, 1995-1999(percent)

Item 1995 1996 1997 1998 1999

Gross domestic product growtha 7.2 7.5 5.0 6.7 7.0








Current account balance/GDP b -1.8 -1.0 -1.2 -1.5 -2.0

Debt service/exports 37.3 41.9 31.8 29.9 28.9

Note: All data are on a fiscal year basis.a Based on constant 1980 factor cost.b Excluding official transfers.

Sources: Central Statistical Organisation (1998), Reserve Bank of India (1997), and staff estimates.

125SOUTH ASIA

government appointed the Second Financial SectorCommittee to review the progress of financial sectorreforms. The committee is expected to pay particu-lar attention to the role and operations of all-Indiadevelopment financial institutions and nonbank fi-nancial institutions. The continued fall in inflationwas one of the main bright spots of 1997, with infla-tion as measured by the consumer price index fall-ing to 6.5 percent.

After rapid growth in both exports and im-ports between 1992 and 1995, the rate of growthfell sharply in 1996 and 1997. Exports are estimatedto have increased by just 5 percent in 1997, whileimports are estimated to have risen by 8.2 percent,although in both cases these growth rates are higherthan in 1996. The major cause of slow export growthin 1997 was the fall in exports of primary productsand garments. As in 1996, the slow growth in im-ports primarily reflected the continued slow growthof the industry sector, and hence reduced demandfor imported capital goods. However, it also reflecteda fall in crude oil imports because of increased do-mestic production. The current account deficit isestimated to have increased marginally to 1.2 per-cent of GNP.

Inflows of foreign direct investment (FDI) in-creased to around $4 billion, almost 50 percent more

than in 1996, while FDI approvals reached $17 bil-lion, compared with $8.7 billion a year earlier.Although foreign portfolio investment in 1997increased marginally over the previous year, net out-flows of portfolio investment occurred in bothNovember and December 1997 as a result of theworsening Asian currency crisis and the loss ofconfidence in the region’s stock markets.

The economy is expected to grow by between6.7 and 7 percent during 1998 and 1999 based on arecovery in both agriculture and industry. While thepotential for a stronger recovery in industry exists,infrastructure constraints are becoming increasinglybinding. With exports rising more slowly thanimports, the trade deficit will widen, leading to asubstantially wider current account deficit. In viewof this, and in light of the Asian currency crisis, theauthorities must try to ensure that India’s exchangerate remains competitive.


Apart from efforts to boost economic growth, par-ticularly industrial growth, concerns about the ex-change rate dominate economic management.While concerns in the first half of 1997 revolved


around the upward pressure on the rupee resultingfrom the then strong capital inflows, the focus ofconcern since around the fourth quarter of 1997shifted to limiting the contagion from the Asian cur-rency crisis. The RBI’s initial welcoming of the weak-ening of the rupee in August and September 1997was not surprising. However, from mid-Decemberonward, the RBI began to intervene to defend thecurrency. The RBI introduced measures to defendthe rupee after it hit an all-time low of Rs39.93 tothe US dollar, and responded even more vigorouslywhen the rupee fell below the psychologically im-portant rate of Rs40 to the US dollar. As a result,the rupee appreciated to around Rs38 to the USdollar by the end of January 1998.

However, whether further weakening of therupee would be undesirable is not clear. Given themassive devaluations that have occurred in Indonesia,Republic of Korea, Malaysia, Philippines, andThailand, the rupee is now significantly overvaluedcompared with these countries’ currencies. Whilerelatively few of India’s exports compete directly withthose of these countries, the currency depreciationshave also increased their attractiveness as locationsfor FDI and tourism. Some further depreciation ofthe rupee may therefore be necessary to maintainIndia’s external competitiveness. Moreover, some ofthe measures adopted to contain the rupee’s slide,such as the increase in the cash reserve ratio by 2 per-cent in January, could choke off an industrial recov-ery by dampening business enthusiasm to borrowfunds for investment. These considerations suggestthat the authorities will need to weigh carefully thecosts and benefits of supporting the rupee if it comesunder renewed pressure during 1998.


Although India has already made substantialprogress in implementing economic reforms in recentyears, the government will need to enhance boththe scope and pace of economic reforms if it is tosustain the improved economic performance of thelast few years. Among the many areas that need at-tention, infrastructure development is one of themost critical.

Serious infrastructural deficiencies present amajor impediment to sustainable growth of theIndian economy, and are among the major contri-butors to the slowdown in growth in the last two

years. Estimates indicate that the level of invest-ment in infrastructure needs to be increased byalmost 50 percent in real terms during the next de-cade if India is to maintain GDP growth of at least7 percent. Given the pressure on government capi-tal spending, the private sector will have to comeup with the bulk of the additional requirements.Projections suggest that the level of private invest-ment would need to increase almost sevenfold peryear, to some $23 billion by 2007. Substantial scopefor private sector participation also exists in indus-trial parks, ports, power, roads, telecommunications,and urban infrastructure.

However, the commercialization of infrastruc-ture faces several major constraints, including theabsence of an appropriate, long-term framework andpolicy incentive mechanism for private investment;the poor policy coordination among different gov-ernment agencies in the implementation of largeinfrastructure projects; and a shortage of long-termfunding. Although recent years have seen someprogress, a number of critical issues need resolution.

Governments in developing economies havetraditionally provided infrastructure services belowsupply costs, and India’s government has been noexception. In the case of the power sector, netsubsidies in India have been estimated to be around1 percent of GDP. Even though the costs of privatesector operations may be lower because of betterefficiency, greater cost recovery though increaseduser charges is essential to ensure the viability andsustainability of the private sector. Unfortunately,any adjustment of prices and tariffs remains asensitive issue, and setting user charges that aresufficiently high to provide adequate returns to theprivate sector, while ensuring that users do notperceive the charges as unfair, will be important.

Because of such factors as high costs, long ges-tation periods, and irregular revenue flows, infra-structure investments rely heavily on long-term debtfinancing. However, in contrast to equity markets,India’s debt markets are not well developed and con-strain infrastructure financing. One critical prob-lem with the debt market is the thinness of thesecondary market, which makes it difficult for hold-ers of long-term debt to convert it into more liquidassets. This has served to reduce the attractivenessof holding long-term debt. One factor constrainingliquidity is the stamp duty states impose on the issu-ance and trade of financial instruments. Stamp

127SOUTH ASIA

duties are an important source of revenue for stategovernments and cannot be abolished. However,exempting the trade of financial instruments, par-ticularly those relating to infrastructure funding,from these duties should be made possible in orderto develop secondary markets.

In addition, institutional investors with a long-term investment horizon, such as insurance compa-nies, provident funds, and pensions funds, are criticalsources of long-term funding. Opening up this sec-tor to greater competition and allowing the entry offoreign institutional investors will widen the inves-tor base. Attempts to do this have, however, metwith setbacks. The government had to back off from

its initial moves to introduce competition into healthinsurance because of opposition in Parliament, andthe opening up of the insurance sector, especially toforeign companies, remains constrained.

While the private sector must increasingly takethe lead in infrastructure development, it will besome time before the appropriate legal and regula-tory frameworks are in place. In addition, publicinvestment in basic infrastructure, as well as a strongpublic-private partnership in infrastructure devel-opment, are needed to increase private investment.Given the vital role that the public sector continuesto play, any further cuts in public sector capitalexpenditure need to be carefully evaluated.


The Maldives consolidated its growth during 1997, and growth is projected to continue at6 percent per year in 1998 and 1999. The economy continues to depend heavily on fishingand tourism, and the authorities should ensure that future development does not damage theenvironment, on which these industries depend. The policy priorities for the future are toliberalize and modernize the financial sector; to reduce the government’s role in the commer-cial sector; and to develop human resources, so that the economy can become less dependenton foreign workers.

Maldives

128

sion was a modest 3 percent, reflecting a decline innet credit to the government. However, credit tothe private sector and public entities increased. For-eign workers increased by 17 percent in response tostronger demand for labor in the face of a relativelystable domestic labor supply. Foreign labor, bothskilled and unskilled, now accounts for nearly a quar-ter of the labor force. Consequently, job opportuni-ties for nationals are likely to be plentiful in thefuture if the present growth momentum continuesand domestic workers can upgrade their skills.

The Maldives continued to pursue a prudentfiscal policy in 1997. The modest deficit was financedthrough concessional foreign loans, eliminating, forthe second consecutive year, the need to resort tomonetary financing from the Monetary Authority.While more than 90 percent of governmentrevenues are still derived from import duties andtourism tax receipts, some diversification is expectedin 1998 with the introduction of a rental incomeand business turnover tax.

In the first half of 1997 the trade deficit de-teriorated to $86 million, compared with $75.8 mil-lion during the same period of 1996. The increasein fish prices partly offset the reduced catch, whiletourism receipts compensated for the growth in


Real GDP growth was approximately 6 percentin 1997. Tourist arrivals in the first half of the

year amounted to almost 177,000, 6 percent higherthan during the corresponding period of 1996. Thiswas associated with an increase of nearly 2 percentin total hotel bed capacity and an increase in theoccupancy rate from 75 to 78 percent. Fisheries’ out-put declined in volume in 1997, but the total valueof production remained relatively stable because ofa significant increase in the price of fresh fish.Construction activity was brisk as work started onseveral new tourist resorts scheduled to open in 1998and 1999, and continued on some key economicand social infrastructure (ports, schools, hospitals)in the atolls outside Malé. Transportation and com-munications also grew rapidly, while retail andwholesale trade remained relatively stable.

Inflation was about 8 percent in 1997, some-what higher than the 6.2 percent registered in 1996.Higher fish prices caused by the low catch and theincreased demand from the brisk constructionactivity were the main reasons behind the rise.Monetary growth was about 20 percent in 1997,compared with 24 percent in 1996. Credit expan-

129SOUTH ASIA

imports. As a result, the overall balance-of-paymentsposition improved. At the end of 1997 internationalreserves stood at about four months worth of imports,despite the repayment of a balance-of-paymentssupport loan contracted earlier.

The outlook for 1998 and 1999 remains bright,with growth rates projected at 6 percent. As Asiantourists account for approximately 20 percent ofarrivals in the Maldives, the recent currency crisisin East Asia may lead to a modest decline in tour-ism. In addition, the increase in resort constructionin 1998 and 1999 may result in some inflationarypressures and in a further increase in the foreignlabor force.


The macroeconomic stabilization measures imple-mented in 1994 succeeded in eliminating the ex-cessive budget deficits and high inflation thatcharacterized the early 1990s. They have, however,left a legacy of high domestic debt contracted bythe Treasury with the Monetary Authority. Macro-economic policies should continue to be cautiousto facilitate noninflationary growth. Somewhatgreater flexibility than in the recent past may beadvisable in the management of the exchange rate,especially in light of the substantial depreciation ofthe Southeast Asian currencies. There is still a needfor structural reform in the financial sector. Thescope for liberalizing and modernizing the financialsector by shifting from direct to indirect instrumentsof monetary control is considerable. A prerequisitefor this course of action would be gradually to retireoutstanding government debt, followed bysecuritization of the balance. A gradual reductionin the role of public enterprises is also needed, asis the improvement of the legal and regulatory

framework (particularly commercial and bank-ruptcy laws) in order to foster private sectordevelopment.


The Malé atoll suffers from both population andenvironmental pressures. To relieve these, the gov-ernment will have to ensure that growth and infra-structure development are more widely distributedamong the atolls. The government has started torespond to these issues and has identified growthcenters in the north and south where investment ininfrastructure is being concentrated. However, thegovernment will have to attempt to maintain abalance between developing the economy and pre-serving the environment to avoid undermining thesustainability of tourism and fisheries, the two pillarsof the economy.

The Maldives will also need to respond to twomain challenges in relation to human resource de-velopment. First, the successful implementation ofa number of social policies has resulted in suchachievements as the virtual eradication of malaria,nearly universal literacy rates, and greatly improvedlife expectancy. However, the population growthrate, at nearly 3 percent per year, is still one of thehighest in the world, and if this is sustained it willlead to considerable pressures on the country’s natu-ral resources, including land. Thus the governmentneeds to adopt more effective policies to reducepopulation growth. The second challenge is to con-tinue the expansion of educational opportunities atall levels, especially for girls and women. Those whoacquire secondary and postsecondary education willbe able to compete for relatively high-paying jobscurrently occupied by foreign workers. This is ne-cessary if the country is to sustain its current levelof growth and dynamism.


Growth will continue to be weak, while inflation should remain moderate. Structural weak-nesses relate to external trade, resource mobilization, and fiscal imbalances.

Nepal

130


GDP growth declined to 4.3 percent in 1997,compared with 6.1 percent in 1996. The slow-

down was evident in all sectors, particularly thenonagriculture sectors. Although the rapid growthof nonagriculture sectors in recent years reduced theshare of agriculture in GDP from about 50 percentin 1990 to 41 percent in 1997, agriculture is stillthe single most important determinant of overalleconomic performance. About 80 percent of thetotal labor force depend on agriculture for their live-lihood. Aided by the favorable monsoons, agricul-ture grew 4.1 percent in 1997, close to the averageannual growth rate of the sector for the past twodecades.

Industrial growth slowed from 5.9 percent in1996 to 3.2 percent in 1997, mainly because of slowgrowth in construction. Although manufacturinggrew by a respectable 5.7 percent, this was lowerthan in 1996. The major obstacles to further indus-trial development are limited infrastructure, powershortages, and a lack of skilled human resources.The public sector has reduced its involvement inmany areas, and private sector participation has beenenhanced since 1992 through privatization, insti-tutional reforms, and economic liberalization. Inaddition, in September 1997 amendments to theIndustrial Enterprises Act reduced distortionary taxholiday incentives.

The service sector grew by 5.0 percent in 1997,down from 7.9 percent in 1996. This reflected asignificant slowdown in finance, real estate, andcommunity and social services. Increasing concernsabout environmental pollution, natural disasterssuch as flash floods and landslides, malaria in India,and political disturbances had an adverse effect ontourism. Unemployment stood at about 23 percentof the total labor force in 1997 and underemploy-ment remains widespread.

Total budgetary revenues grew by almost12 percent, less than half the government’s target,and remained at about 11 percent of GDP in 1997.Tax revenues have gradually increased their contri-bution to 80 percent of total revenues (excludinggrants), and grew from less than 7 percent of GDPin 1992 to 9 percent in 1997. The continued weak-ness in revenue collection since 1995 reflects re-duced growth of imports and changes in importcomposition toward low tariff commodities. Importsaccount for almost 30 percent of tax revenuesthrough custom duties, and sales tax generatesanother 20 percent. In September 1997 the govern-ment amended the Customs Act to improve cus-toms valuations in preparation for the introductionof an automated customs system at the internationalairport.

With low revenue collections and lower thanexpected foreign grants, the government’s fiscal per-formance would have deteriorated in 1997 if not

1997 refers to fiscal year 1996/97, ending 15 July.

131SOUTH ASIA

Table 2.14 Major Economic Indicators: Nepal, 1995-1999(percent)

Item 1995 1996 1997 1998 1999

Gross domestic product, growtha 2.8 6.1 4.3 3.7 4.0





Fiscal balance/GDPb -4.6 -5.6 -5.3 -5.6 -5.8

Merchandise exports growth -9.6 1.7 10.3 4.0 6.0

Merchandise imports growthc 21.9 9.0 10.3 5.0 6.0



Note: All data are on a fiscal year basis.a At factor cost.b Including grants.c Cost, insurance, and freight.

Sources: Asian Development Bank (1998); Central Bureau of Statistics (1997a, b); Ministry of Finance data; and staff estimates.

for a significant shortfall in development expendi-tures, which rose just 6 percent rather than the33 percent envisaged in the budget. This was partlydue to a slowdown in project implementationresulting from political disturbances and staffchanges after local elections. The fiscal deficit (in-cluding foreign grants) improved slightly to 5.3 per-cent of GDP in 1997.

Money supply (M2) growth slowed to 10.7 per-cent, down from about 14 percent the previous year.Net domestic assets, which account for more than90 percent of the change in money supply since1995, rose by 17 percent in 1997. Domestic creditgrew by 13 percent, and credit to the private sectorposted a relatively modest, but still respectable,increment of 18 percent.

The auction of Treasury bills and securitiesfrom the Central Bank is now an integral part of themonetary program. Open market operations are aprincipal instrument for controlling domestic liquid-ity. In addition, the authorities took steps to reducethe government’s automatic recourse to the Cen-tral Bank’s overdraft facilities, which had compli-

cated the conduct of monetary policy in the past, byplacing a binding annual limit on its annual over-draft of NRs1 billion as of the beginning of 1998.The commercial banking system was strengthenedthrough the recapitalization of the two government-owned commercial banks—Nepal Bank Limited andRastriya Banijya Bank—which account for about65 percent of total deposits. The governmentreduced its ownership in Nepal Bank Limited to40 percent in early 1997 as part of its privatizationefforts. The Rastriya Banijya Bank is undertakingmajor restructuring and is high on the government’spriority list for privatization.

Inflation declined from 8.1 percent in 1996 to7.8 percent in 1997, reflecting moderate pricechanges. Because of the open border trading withIndia, price developments in Nepal closely reflectthose in India.

The exchange rate was relatively stable in early1997, with the Nepalese rupee depreciating about3 percent against the US dollar, and thereby exert-ing little inflationary pressure on the economy. Thecurrency’s depreciation since July 1997 reflects


adjustment of the Indian rupee as well as the align-ment of the real effective exchange rate to main-tain the competitiveness of Nepalese products.

Exports continued to recover, with an increaseof more than 10 percent in 1997, compared with1.7 percent the previous year. Imports showed a simi-lar increase, up slightly from 9 percent in 1996, thusmaintaining the trade deficit at 23 percent of GDP.Nepal generally has a large trade deficit because ofits low export base and high import levels. Remit-tances from overseas workers were an importantsource of earnings. Higher investment income alsocontributed to the improvement in the current ac-count. As a result, the current account deficit (ex-cluding grants) improved by 38 percent to $354million, or 7.2 percent of GDP. Inflows of officialgrants and concessional aid continued to finance asubstantial portion of the current account deficit.By the end of 1997, the balance of payments hadregistered a surplus of $161 million and foreign ex-change reserves had grown to $812 million, equiva-lent to more than six months’ worth of imports ofgoods and services.

Projections indicate that in 1998 real GDPgrowth will be 3.7 percent, with increased crop pro-

duction and continued normal growth trends in thefinancial, manufacturing, and service sectors. Withimplementation of the Agriculture Perspective Plan,revitalization of reform efforts, and favorableweather, real GDP growth may reach 4 percent in1999; however, agricultural growth is expected todecelerate to 2.0 percent following unfavorableweather conditions during the first quarter of 1998.

The government continues to encourage pri-vate sector development in industry by pursuingmacroeconomic stability and removing distortionsin prices and regulations. The industry sector istherefore forecast to grow by 4.6 percent in 1998and 4 percent in 1999. Hydropower developmentshould also improve Nepal’s long-term developmentprospects through power exports to India. In 1997Parliament ratified the Mahakali Integrated Devel-opment Treaty between India and Nepal, a jointhydroelectric, irrigation, and flood control project,and an agreement was also signed between the twocountries for possible investment in and financingof hydroelectric projects by the private sector andlending agencies. More development projects in sec-tors like power, transportation, and irrigation wouldsupport a gradual recovery in construction activi-

133SOUTH ASIA

ties. The strength of export demand for carpets andgarments will largely determine the prospects formanufacturing.

Increased tourist arrivals and trading andfinancial activities will support growth in services,although at a lower rate than in the past. Providingthe necessary legal framework and continuingeconomic liberalization efforts will foster greaterprivate sector participation. Service sector growthis expected to exceed 4 percent in 1998 and 1999.

While forecasts indicate that domestic savingsand investment will increase in 1998 and 1999, theresource gap is likely to widen. Economic liberaliza-tion programs have not only helped to open up newinvestment opportunities for investors, but have alsoencouraged consumption and savings mobilization,particularly through the establishment of rural fi-nancial institutions. Therefore, the government’scommitment to continue its efforts to improve re-source mobilization will be crucial, including majortax reforms and measures to ensure efficiency in thefinancial sector and revitalize the capital market.

The 1998 budget includes programs to facili-tate development activities and improve the stag-nant revenue performance by strengthening taxcollection and administration. The value-added taxintroduced in November 1997 will further enhancedomestic revenues by expanding the tax base. Whilethe full impact of proposed tax reforms and revenuemobilization measures will not be apparent for a fewyears, government expenditures are expected to in-crease in 1998, mainly because of adjustments incivil service salaries and the implementation of ma-jor projects. Thus despite the anticipated increasein domestic revenues, the fiscal deficit as a percent-age of GDP is likely to deteriorate in 1998. Net do-mestic borrowing in 1998 will be contained at about1 percent of GDP if revenue targets and anticipatedforeign grants and loans are realized.

Merchandise exports and imports are likely togrow at roughly the same rate in 1998 and 1999,and the current account will stabilize at just under9 percent of GDP, compared with 7.2 percent in1997. The expected increase in tourist visits as aresult of the “Visit Nepal Year 1998” campaign andthe operation of international flights by private sec-tor airlines could raise net service receipts during

the next two years. However, the increase in theservice and transfer accounts surplus will not besufficient to cover trade deficits. Official capital in-flows should increase substantially in 1998 and sub-sequent years, reflecting improved use of externalaid. Net transfers are projected to increase tempo-rarily because of the return of a large number ofGurkha soldiers formerly stationed in Hong Kong,China. Increased remittances can also be expectedfrom the increasing number of Nepalese workers inthe Middle East and India. The government’s totaloutstanding external debt will increase to more than55 percent of GDP in 1999, but the debt-serviceratio will remain below 9 percent of exports duringthe next two years, as most foreign loans are onconcessional terms and substantial repayments arenot due to begin for some time.


Even assuming favorable results from economic poli-cies to increase private sector participation, substan-tial government support will be needed to boostoverall development in the next few years. How-ever, the extent of government support will be con-strained by its limited capacity to mobilize domesticresources and the country’s weak implementationand monitoring capabilities. Measures are neededto address the economy’s structural weaknesses,particularly in the areas of external trade, resourcemobilization, and fiscal imbalances.

Reducing fiscal expenditures will be difficultwithout further cuts in operation and maintenanceexpenditures and/or local counterpart funds for newdevelopment projects. However, the country can-not afford any slippage in its fiscal targets, particu-larly in revenue mobilization and domesticborrowing, unless it accepts lower growth and/orhigher inflation and external imbalances. Underthese circumstances, the government will need totackle the structural weaknesses that are at the rootof the fiscal imbalances. This should include effortsto reduce public service overstaffing, contain theburden of loss-incurring public enterprises, priori-tize development expenditures effectively to avoidproject underfunding, and find new sources ofrevenues.


In addition to a declining growth rate and stagnant production, investment and savingsperformance continues to be weak, export growth is decelerating dramatically, and gover-nance is weak and inefficient.

Pakistan

134


that include adopting major tax and tariff reformsin March 1997, which substantially lowered tax andtariff rates across the board. The purpose of reduc-ing tax and tariff rates was to boost private sectorindustrial activity, enhance productivity, and pro-mote new production techniques. Furthermore, awide range of financial sector reforms that covercapital markets, the central banking system, andcommercial banks are either under way or on thedrawing board. Although these reforms have pro-duced some favorable outcomes in recent months,such as a small increase in exports, major effects maynot be visible for one or two years.

In 1997 investment and saving rates remainedextremely low. Total investment as a percentage ofGNP fell to 18.4 percent in 1997 because of finan-cial and foreign exchange constraints, low growthin exports, policy conflict with the InternationalMonetary Fund (IMF), and frequent governmentchanges. The continued decline in national savingssince 1994 exacerbated the effect of these factorson investment.

Official unemployment was reported at 2 mil-lion, or 5.4 percent of the labor force, in 1997. How-ever, given the definition of employment in the laborforce survey, that is, a person who works for at leastone hour during the reference period is consideredemployed, actual underemployment is substantiallyhigher.


GDP growth was only 3.1 percent in 1997.Agriculture grew by just 0.7 percent because

of low productivity coupled with untimely rainfalland cotton viruses. Manufacturing showed poorgrowth of 1.8 percent, largely as a result of negativegrowth in the large-scale manufacturing subsector,which made up three quarters of total manufactur-ing. This can be attributed to limited financialresources, reduced exports, and outdated equipment.Growth in the service sector also fell in 1997. During1996 and 1997 foreign exchange reserves were at aprecarious level, equivalent to an average of onlyabout four weeks worth of imports.

Two factors are responsible for the low growthand the accompanying high macroeconomic insta-bility. The first is the political situation, which hasincluded frequent changes of government and anunstable law and order situation in Karachi.Although the three-month-long political crisisended in December 1997, its economic consequen-ces have persisted. The second factor is structuralbottlenecks, such as persistent fiscal imbalances,limited financial resources, and inadequate infra-structure. Lengthy legal procedures and poorlyorganized regulatory systems aggravate the situation.To deal with these weaknesses, the government hasundertaken a series of broadly based policy reforms

135SOUTH ASIA

Budgetary deficits have long impaired effortsto achieve macroeconomic stability. In an effort toreduce the deficit, in 1997 the government stream-lined development plans and projects and cut thePublic Sector Development Plan budget by 19 per-cent. It also restructured the tax system to tax agri-cultural income more efficiently. However, theseefforts met with limited success, as the consolidatedbudget deficit remained at 6.3 percent of GDP, thesame as in 1996. This led to substantial domesticborrowing from financial markets, which financedmore than 80 percent of the deficit.

Government borrowing for budgetary supportis a main contributor to domestic credit expansion.The banking and financial sector also suffers fromextensive levels of loan defaults, which by 1997amounted to 7 percent of GDP. The authoritiespursued a tighter monetary policy in 1997 and therate of M2 growth decelerated to 13.1 percent. How-ever, inflation was 11.6 percent, about 2.6 percent-age points above the government’s target, as a resultof fiscal laxity in 1996.

Commodity exports declined by 2.7 percentin 1997, mainly because excessive rains curtailed

cotton production. Other major products whoseexports suffered included raw leather, medicalinstruments, and chemicals and pharmaceuticals.Persistent inflation, a low-technology industrial base,and a shortage of financial resources hindered anyrecovery in exports. Imports were 5 percent lowerthan in 1996. The rise in capital goods imports wasoffset by the decline in imports of food (except forwheat and rice), chemicals, and metals. As a result,the trade deficit improved marginally in 1997. Anddespite the widening of the deficit on the servicesaccount because of increased debt servicing, thecurrent account deficit narrowed to 6.5 percent ofGDP. However, there was a significant drop in thecapital account surplus, which led to a considerabledecrease in foreign exchange reserves.

If the government continues both its economicand governance reforms and no severe naturaldisasters take place in the next two years, Pakistan’smacroeconomic prospects are likely to improve. GDPgrowth is projected to be a little more than 5 per-cent in both 1998 and 1999. The agriculture sector,after its minimal growth in 1997, is forecast to growfaster. With the government’s support for private

Table 2.15 Major Economic Indicators: Pakistan, 1995-1999(percent)

Item 1995 1996 1997 1998 1999

Gross domestic product, growtha 5.2 4.6 3.1 5.1 5.5

Gross domestic investment/GNP 18.3 18.7 18.4 20.0 22.0




Fiscal balance/GDPb -5.5 -6.3 -6.3 -5.0 -5.0

Merchandise exports growth 16.1 7.1 -2.7 6.0 9.0

Merchandise imports growth 18.5 16.7 -5.0 0.5 10.0

Current account balance/GDPc -4.1 -7.1 -6.5 -5.1 -5.2


Note: All data are on a fiscal year basis.a At constant factor cost.b Based on consolidated federal and provincial accounts and including surplus of autonomous bodies.c Excluding official transfers.

Sources: Economic Adviser’s Wing (1997); State Bank of Pakistan (1997, 1998); Asian Development Bank (1997b); and staffestimates.


meet the accompanying IMF macroeconomictargets. A critical issue in this context is revenuecollection. According to estimates by independenttax experts, revenues are expected to fall some 15to 20 percent short of the target during 1997. Thusto adhere to the budget deficit target prescribed bythe IMF the government needs to broaden the taxbase, revamp tax administration, and rationalizegovernment expenditures.

The level of foreign exchange reserves has alsobeen a source of concern. This will probably reducePakistan’s ability to import capital and intermediategoods, thereby prolonging the industrial recessionof 1996 and 1997, when 4,000 factories closed down.A high priority is the need to increase the growth ofexports and rationalize imports.


Economic growth has barely kept pace with popu-lation growth, and the debt-service ratio reached37 percent, the highest in Asia. To revive economicdynamism, Pakistan must promote investment andexports.

The two 1997 IMF programs require a num-ber of medium-term reforms needed to revitalize theeconomy. To promote growth the government is to

sector-led industrialization, industrial output is alsoexpected to increase. Likewise, the service sector isprojected to grow because of a gradual recovery inthe financial sector. Projections also indicate thatexports will increase because of improved industrialactivity in 1997 and that imports are likely toincrease only marginally because of increasedimports of petroleum products and chemical prod-ucts. Therefore, the current account deficit isexpected to decline further to a little more than5 percent of GDP in 1998 and 1999.


Pakistan suffers from a number of macroeconomicimbalances and structural problems, which in thepast were frustrated by slippages in policy implemen-tation. As a consequence, in October 1997 the IMFapproved SDR1,137.3 million ($1,558 million)under two of its programs (the Extended FundFacility and the Enhanced Structural AdjustmentFacility) for macroeconomic adjustments andreforms. Under these programs Pakistan is to rein inthe inflation rate and current account deficit.

An important issue in short-term economicmanagement relates to the government’s ability to

137SOUTH ASIA

strengthen the private sector and rationalize thepublic sector. The privatization program is to begiven a new impetus by privatizing public assets inthe manufacturing, power and gas, and telecommu-nications sectors. This program is to be extended tothe financial sector, complemented by efforts tostrengthen supervisory and regulatory institutions.Although the two IMF programs focus on fiscal andbalance of payments areas, education, health care,population welfare, and family planning are alsoaddressed. Therefore expenditures on the social sec-tors will rise in the near term.

Promoting Investment and Saving

Gross national investment has been low: as apercentage of GDP it stood at around 18 percentduring 1995-1997, while such high-performingAsian countries as Indonesia and Malaysia wereinvesting more than 30 percent of their GDP. Toachieve a growth rate of 6 percent per year willrequire an investment ratio of about 25 percent,which implies that the savings rate must rise. How-ever, a low savings rate is one of Pakistan’s majorproblems. The national savings rate hovers at about12 percent of GNP, one of the lowest levels in Asia.Pakistan’s financial sector, which is dominated bynationalized banks, is ineffective in mobilizingsavings. The 360 national savings centers are pri-marily designed to help finance public sector defi-cits. Specialized private savings institutions arenonexistent, the insurance industry is small, and thegrowth rate of quasi-money is far slower than in otherAsian economies. The result is that financial insti-tutions have developed little in the past two decades.If this situation is remedied, savings performancewill improve.

As households with fewer dependents savemore and family size is gradually declining in

Pakistan, the savings rate may rise in the mediumterm. An increase in the real interest rate wouldalso improve savings performance. Evidence fromother Asian economies indicates that a relativelysmall rise in the interest rate can lead to a largeincrease in savings.

Encouraging Exports to Revivethe Economy

As noted earlier, exports contracted in 1997, caus-ing low utilization of industrial capacity. The declinein Pakistan’s exports can be attributed in part to anunfavorable commodity composition. Most exportsare either primary, for instance, rice, for whichdemand has not been growing rapidly, or manufac-tured products, for which market access is limited,for example, the Multifibre Arrangement currentlyrestricts Pakistan’s textile exports. Export promotionpolicies should therefore address production as wellas marketing.

The potential for upgrading the major exportindustries is vast. For instance, local firms should beencouraged to capture some of the world’s fashiongarments and leather product markets by develop-ing joint ventures with firms in the industrial world.As concerns textiles, the emphasis should be on pro-ducing ready-made textiles and high-end fabrics.There is a large market in Asia and Africa, as wellas in the industrial economies, for embroidered cloth,lace, and so on. By developing a large productionbase of such high value-added items (which are alsolabor-intensive), Pakistan could develop a reason-ably large export market. To this end, the govern-ment should not only encourage appropriateincentives, but should ensure the presence of thephysical and institutional infrastructure necessaryfor a smooth supply of required imported materialsand other inputs.


Despite the prolonged ethnic strife, Sri Lanka’s economic fundamentals continue to improve,although the regional currency crisis may have some indirect impact on future prospects.Foreign direct investment increased in 1997 and contributed to a balance-of-payments sur-plus of more than $400 million.

Sri Lanka

138


GDP growth accelerated to 6.3 percent in 1997,a significant increase from the 3.8 percent

growth in 1996. This was primarily due to recoveryin the agriculture sector, which grew by 5.4 percentin 1997 as fair weather resulted in good crops.Manufacturing remained the most dynamic sectorin 1997, growing at around 9 percent, stimulatedby buoyant demand for Sri Lanka’s manufac-tured exports such as garments and rubber goods.Growth in the services sector was also robust, par-ticularly in the communications, banking andfinance, and tourism-related sectors. Despite con-tinuing civil conflict, tourist arrivals recoveredstrongly from the 1996 slump, increasing by morethan 20 percent.

Investment was about 26 percent of GDP anddomestic savings ran at 17 percent in 1997, slightlyup on 1996. Increased business confidence and adecline in interest rates translated into higher privatedomestic investment. The reduction of the budgetdeficit and the use of privatization proceeds to retirepublic debt also stimulated private investment byreducing public sector claims on available financialresources. Local investors and a high demand forplantation sector shares dominated activity on theColombo Stock Exchange. Foreign investors con-tinued to remain cautious because of the turbulentsituation in Asia.

Unemployment declined to about 10 percentof the labor force, a moderate fall from the 1996figure. Real wages continued to decline in industry,commerce, and services in 1997, but remainedsubstantially unchanged in agriculture. To correctdistortions in relative salaries, the government raisedcivil service wages and allowances by an average of12 percent in 1997, with a further 15 percentincrease planned for 1998.

The 1997 budget was designed to continuefiscal consolidation and achieved the target oflimiting the budget deficit to 4.9 percent of GDP.Government revenues were up nearly 15 percent innominal terms, reflecting increased tax collectionfrom improved corporate profits, and governmentexpenditures did not increase significantly. Therecent decline in wheat prices resulted in savingson subsidies. The privatization of 35 percent ofSri Lanka Telecom was finalized in A ugust 1997, andyielded $225 million to the government, a large shareof which the government used to retire Treasury bills.This reduced government debt and the interest pay-ment burden. The sale of government-held con-vertible debentures for the National DevelopmentBank raised an additional $73 million, further easingpublic budget constraints. Over time, the fall ininterest rates and the partial shift in governmentborrowing from short-term to medium-term debtshould have a positive impact on the budget’sinterest component.

139SOUTH ASIA

Monetary policy was eased considerably in1997, with broad money growing by 14.7 percent,and the statutory reserve ratio was lowered in twosteps. Combined with greater fiscal discipline, thesemeasures helped reduce interest rates considerably.The yield on one-year Treasury bills fell to 10 per-cent in 1997 from 17 percent in 1996, and the primelending rate declined from 18 to 12 percent. Giventhe relatively long duration of deposits, deposit ratesdid not fall by as much, creating temporary pressureon bank intermediation spreads and profitability.

The inflation rate declined from 16 percentin 1996 to 9.6 percent in 1997. Annual average in-flation was on a declining trend since the start ofthe year because of improved supplies of rice, veg-etables, coconut, and other food crops and the lowercost of money as a result of declining interest rates.

Imports grew by 7 percent in 1997 in dollarterms, while exports increased by approximately13 percent. Investment and intermediate goods ledthe recovery of imports, followed by consumer prod-ucts. Industrial exports, particularly clothing, leather,and rubber products, led export growth. Agricul-tural exports also rose because of favorable tea and

coconut prices, and a modest expansion in volume.In the first ten months of 1997 tourist arrivals were22 percent higher than in 1996 and tourist earningswere 29 percent higher, resulting in an improvedservices account. Overseas remittances increased by9 percent and the current account deficit fell to2.1 percent of GDP in 1997, down 3 percentagepoints from 1996.

The capital account balance was positive in1997, reflecting a 27 percent increase in long-termforeign aid inflows and more than $550 million offoreign investment. Large-scale privatization ofSri Lanka Telecom and the National DevelopmentBank contributed to these inflows. The balance ofpayments closed with a $400 million surplus at theend of 1997, increasing reserves to approximatelyfive months worth of imports. The exchange ratedepreciated by nearly 7 percent in nominal termsduring 1997, with the depreciation rate accelera-ting in the last two months of the year. In real terms,the exchange rate remained relatively unchanged.

Projections indicate that the economy willcontinue to grow at a rate of between 5 and 6 per-cent in both 1998 and 1999. In the absence of

Table 2.16 Major Economic Indicators: Sri Lanka, 1995-1999(percent)

Item 1995 1996 1997 1998 1999

Gross domestic product growtha 5.5 3.8 6.3 5.6 6.0







Merchandise imports growthb 11.6 2.5 7.0 10.0 9.0

Current account balance/GDPc -6.3 -5.3 -2.1 -4.2 -4.0


a At constant 1982 factor cost.b Cost, insurance, freight.c Excluding official transfers.

Sources: Central Bank of Sri Lanka (1997); Siripala (1997); Ministry of Finance and Planning (1997); and staff estimates.


ment, stimulated by a decline in interest rates, isexpected to expand and support growth. As thepublic sector’s financing requirements decrease, areorientation of the private sector’s savings shouldtake place from traditional saving deposits andinvestment in government securities to other finan-cial instruments.

The 1998 budget envisions a deficit reductionto 6.5 percent of GDP in 1998 and 4 percent by2000. The improvement in government accountsin 1998 is to be achieved through lower real currentexpenditures and an expansion in capital expendi-tures, matched by increased revenues. The revenuesfrom privatization in 1998 are projected to be $125million, or one third of those in 1997. Defense ex-penditure remains as a potentially destabilizing com-ponent in the budget, although the government hasasserted that it will not exceed defense targets.

Also included in the 1998 budget are a num-ber of investment promotion measures to which thebusiness community has reacted favorably. Thesemeasures include accelerated depreciation andinvestment tax credits, duty exemptions for importsof advanced technology machinery and equipment,

adverse weather conditions, expectations are thatthe agriculture sector will grow 3 percent per yearin both years. Tea is likely to perform well in thenext two years, with stable or growing output andprices, while rubber prices are likely to recover mod-erately. The industry sector is forecast to grow byaround 8 percent in 1998 and 1999. Stronger pricecompetition by Southeast Asian countries inSri Lanka’s export markets and a possible reductionin foreign investment flows will partially offset thepositive impact of the incentives included in the1998 budget. The services sector is anticipated togrow by more than 5 percent in 1998 and 1999, re-flecting increased tourism, greater activity in theretail and wholesale sector, and growth in the bank-ing and finance subsectors.

Savings and investment patterns will dependon the general health of the economy, on thegovernment’s ability to reduce the budget deficit,on the continuation of privatization, and on successin containing the impact of the Asian currencyturmoil on Sri Lanka. Gross domestic investment isprojected to increase to about 27 percent of GDP in1998 and 28 percent in 1999. Private sector invest-

141SOUTH ASIA

nale for a second wave of privatization clearly, andshould continue to pursue the privatization and/orcommercialization of public enterprises withattention to the development of an appropriate regu-latory framework. Structural measures on pensions,on the size and efficiency of the civil service, and onother relevant expenditure and revenue items willcontinue to be needed to achieve the government’starget of a budget deficit equivalent to 4 percent ofGDP by 2000.

Reducing the deficit and the government’sfinancing requirements would also have beneficialeffects on the financial market. The immediateimpact would be lower interest rates, which wouldreduce the crowding out private sector investmenthas experienced and generate a virtuous cycle oflower budget outlays for public debt service and stilllower deficits. This would permit lengthening thematurity of government debt, which would free thegovernment from frequent renewal of short-termdebt and would provide useful benchmarks fordeveloping the long-term debt market, which iscurrently extremely thin. This should be accom-panied by other interventions to strengthengovernance in the financial sector, such as improvedaccountability by and performance of the two state-owned commercial banks and more stringentprudential regulations and banking supervision.

The status of the ongoing civil conflict is akey determinant of the country’s long-term devel-opment prospects. Successful conclusion of the con-flict would increase investor confidence, reduce thedrain of defense expenditures on the budget, freeresources for investment and economic growth, andlead to a resurgence in tourist arrivals. This wouldlead to an upward revision of the growth outlookand offer the potential for sustained growth.

and extended tax holidays for investment and em-ployment creation in backward areas. The budgetalso introduced a goods and services tax that willreplace the business turnover tax.

The government will have to manage mon-etary policy prudently to accommodate growth with-out fueling inflation. Inflation in 1998 and 1999should remain at, or slightly above, the 1997 rate of9.6 percent. Interest rates will be influenced by theextent of fiscal consolidation and the strength ofeconomic growth and monetary expansion.

Exports and imports are expected to grow bysome 9 to 10 percent in 1998 and 1999. Improvedagricultural exports will reflect increased export de-mand and higher prices. Manufactured exports willface stronger competition from some Asian coun-tries whose exchange rates have depreciated sharply.Duty exemptions granted in the 1998 budget willsustain import growth. Services receipts are expectedto increase as the tourist industry recovers and eco-nomic activity strengthens generally, and the cur-rent account deficit will remain at some 4 percentof GDP. Private capital inflows are likely to moder-ate, particularly in 1998, as the international cli-mate becomes more cautious and economicadjustment takes place in some economies that havebeen traditional sources of foreign direct investment.


Maintaining fiscal discipline remains a critical eco-nomic policy issue. The public deficit (as a percent-age of GDP) has declined for three consecutiveyears, and the authorities have set targets to con-tinue on this path. The use of privatization revenuesto retire public debt sent an important signal tomarkets. The government should define its ratio-

149PACIFIC ISLANDS

149

For the Cook Islands, 1997 refers to fiscal year 1997/98, ending 31 March; for Samoa and Tonga, the fiscal year ends on 30 June;and for the Marshall Islands and the Federated States of Micronesia, the fiscal year ends on 30 September. All other referencesare to the calendar year.

Cook Islands, Kiribati, Marshall Islands,Federated States of Micronesia, Samoa,

Solomon Islands, Tonga, Tuvalu, and Vanuatu

The year 1997 was a tough one for the Pacific developing member countries (DMCs). Mostexperienced contractions in their real GDP growth rates, and some even registered absolutedeclines in their GDP. Inflation stayed subdued in most of these countries, while large tradeand current account deficits remained a common feature of their external accounts.

Most of the economies of the Pacific DMCsare highly dualistic, consisting of a sub-

sistence sector on which a large segment of the popu-lation depends for its basic livelihood and apredominantly urban sector that accounts for thebulk of measured GDP and for most formal employ-ment. The Pacific islands vary widely, however, interms of their size, resource endowments, economicgrowth potential, and institutional capacity for eco-nomic management. The smaller Pacific islandeconomies tend to have extremely small resourcebases. Manufacturing is generally limited, and publicsector budgets tend to account for high proportionsof GDP and stay in deficit. Six of the Pacific DMCshave no national currency, which constrains theirchoice of policy instruments. The Cook Islands usesthe New Zealand dollar, the Marshall Islands andthe Federated States of Micronesia use the US dollar,and Kiribati and Tuvalu use the Australian dollar.

Most of the Pacific DMCs found 1997 to be achallenging year. Their GDP growth slowed, andthey ran large current account deficits. Sluggishdemand for the Solomon Islands’ commodity exportscontributed to its current account deficit in 1997.For Cook Islands, Samoa, Tonga, and Vanuatu, tour-ism receipts continued to be a principal source of

foreign exchange. In the case of the Marshall Islandsand the Federated States of Micronesia, officialtransfers from the United States persisted as themain source of external income.

COOK ISLANDS

The Cook Islands are still dealing with the after-math of the 1995 fiscal crisis. Growth is recovering,but remains weak, and privatization has been slow.While tax reforms are under way, tariff reform isneeded.

After recording steady growth for most of the1980s and early 1990s, the economy contractedsharply starting in mid-1994, and exhibited contin-ued weakness in 1995 and 1996, with output fallingby around 5 percent per year in both years. The con-traction in GDP in 1995 was caused largely by acurrency crisis and a fall in tourism. In 1996 thecause was a fall in expenditure as the governmentcut the pay of civil servants and continued with asubstantial retrenchment of staff. These measureswere necessary because the government had fi-nanced much of its earlier expenditure, which hadbeen a major factor in driving growth, by borrow-ing, which proved to be unsustainable.


However, some recovery occurred in 1997,with a growth rate of 0.5 percent. Small-scale activityincreased as many of the displaced public servantsestablished small businesses. Tourism, the largestprivate sector activity, performed well in the firsthalf of 1997 before weakening somewhat in thesecond half. The first three quarters of 1997 saw a5 percent rise in visitor arrivals compared with thesame period a year earlier, and hotel occupancy ratesrose from 57 to 61 percent. The sale of two resortsto the private sector will further improve the sector’sprospects. The value of pearl exports for the first sixmonths of 1997 was $1 million, almost the same asfor the entire year in 1996. While a major cyclonelate in the year devastated the main pearl produc-ing island, significant damage was confined to in-frastructure, and the pearl crop was not damaged.In any case, the main farmers had reportedly estab-lished substantial reserves.

The reduced public sector employment is be-ing partially offset by a rise in informal and formalemployment in the tourism, agriculture, and marinesectors. However, the scale of the reduction in pub-lic sector employment has been massive, and manypeople have left the country. Estimates indicate thatsince the restructuring began in 1995, some 2,000people, or a little more than 10 percent of the popu-lation, have moved away.

Inflation was negative in 1996 and 1997, andthe fall in prices was fairly broadly based across suchsectors as food, clothing, housing, and transport.

While external accounts have been problem-atic in the 1990s, improvements have taken placesince 1992-1993. The current account for 1997 isestimated to show a small surplus.

The land under tillage is increasing, and theagriculture sector should continue to contribute toexports. Copra exports have recommenced, and boththe pawpaw and mango industries have seen posi-tive developments since the privatization of the paw-paw heat treatment plant in 1996 and the agreementon protocols for re-establishing mango exports toNew Zealand in late 1997. However, agriculture isnot likely to become a major source of income giventhe limited amount of land available. While theislands currently do not export fish, foreign interestin establishing joint ventures has been expressed.

The ratio of government expenditure to GDPremained at around 50 percent. Even though fur-ther expenditure cuts are planned, a high govern-

ment debt means that the community will have tobear the cost of previous poor budget managementfor some time. Excluding the stalled VaimaangaHotel project, external debt was $63 million in late1996, and would more than double if the hotel wereincluded. Debt servicing costs for fiscal year 1997were projected to be 19 percent of GDP. Aid is stillthe single largest source of funding, but internalsources are projected to account for 72 percent ofrevenues in 1997.

Projections indicate that growth will pick upin 1998 and 1999 to levels of around 4 to 5 percent.Key assumptions underlying this prediction are thatinvestment for more new hotels will be available andthat pearl exports will continue to increase as theresult of developments on two new pearl farmingislands. Over the next few years the current accountis expected to move into a modest deficit from asmall surplus in 1997 as imports rise in line witheconomic recovery. Income from remittances fromislanders living abroad and more of readily avail-able opportunities to migrate to Australia and NewZealand will also help to maintain income standards.Inflation should remain low, reflecting developments

151PACIFIC ISLANDS

in major trading partner countries, and fiscal andexternal balances should remain manageable.

Building on the recovery that was under wayin 1997, maintaining prudent fiscal policies, tax re-form, and the facilitation of private sector activityare the critical short-term economic performanceissues. Because of the earlier financial crisis, thegovernment can no longer borrow and must run abalanced or nearly balanced budget. Given the cur-rent economic situation and projected revenues, theestimated deficit without adjustments to the 1998budget is nearly 2 percent of GDP. Further reduc-tions in government expenditure will be needed toensure a balanced budget.

Privatization and tax reform have been keyaspects of the strategy to promote private sectoractivity, but overall progress on privatization hasbeen disappointing. As of mid-1997 the governmenthad sold about NZ$12 million worth of assets, in-cluding some tourist resorts, the Broadcasting Cor-poration, the Printing Office, and the HousingCorporation. In addition, by August 1997 the gov-ernment had made substantial progress in finalizingthe sale of the Rarotongan and Rapai hotels. How-ever, it is reluctant to accommodate extensive for-eign involvement, and the privatization of transport,power, and telecommunications operations facesdifficulties because of concerns about foreign own-ership and monopoly power. The government is stillcommitted to privatization, but is considering thedesign and implementation of a Trade Practices Actto deal with market power and other trade practiceissues.

Recent major reforms of the tax system are animportant feature of the government’s developmentobjectives. Prior to the reforms the Cook Islands hadalmost 300 different income tax rates that rangedfrom 7 to 37 percent. Now there are only four taxbands with a top tax rate of 30 percent. A value-added tax of 12.5 percent has replaced the old turn-over tax.

The new system will reduce the tax rate forforeign-owned companies from 27.5 to 20 percent,will allow immediate deduction of the full cost ofcapital equipment, and will not issue any new con-cessions for economic development. The new com-pany tax will also remove the double taxation ofdividends, as it will only levy taxes on net profitsless dividends, therefore only taxing dividends onceat the personal level.

These tax reforms will create a more efficientand equitable system. The initiatives to allow im-mediate deductions for all capital equipment andremove concessions for economic developmentshould prove particularly effective. However, thetariff (import levy) system still needs to be reformed.The existing tariff system has had distortionary andprotective effects and has generally contributed toa higher cost structure than in other countries. Thegovernment has maintained the import levy as asafety net because of uncertainty about the levels ofvalue-added tax revenues. It has, however, agreedto reduce tariff rates if the revenue collected fromthe tax exceeds the target level.

Most local producers of products that com-pete with imports receive a protective tariff of atleast 20 percent. Commodities covered include co-conut milk, printed T-shirts, fresh fish, fresh veg-etables, soft drinks, ice cream, cut flowers, coffee,pawpaws, pineapples, and citrus fruits and theirjuices. There are also numerous anomalies in thelevy rates that reflect the lack of a consistent, guid-ing rationale for setting rates and problems relatedto the exemptions that apply when a good is im-ported for private use.

Given the government’s emphasis on encour-aging efficient private sector development, tariff re-form is particularly important. Industries that canonly be sustained through protection will harm theeconomy in the long term, and if the economy is toexpand, it must do so through its export goods sec-tor, which is generally hindered by high anddistortive tariffs. High average tariff rates on busi-ness inputs raise costs, and thereby reduce competi-tiveness. The tourism industry faces the biggestproblem because of its high dependence on imports.The pearl industry is also at a disadvantage becauseof the levies on some of its equipment.

The new value-added tax and direct tax sys-tems could serve as a model that other Pacific islandcountries could aspire to. However, a sound designis not in itself sufficient to ensure a well-performingtax system. It must also be well implemented andsupervised.

KIRIBATI

Although weak growth has become a long-standingeconomic feature, the devaluation of the Austra-lian dollar has benefited the economy in several


to rely on domestic taxes and revenues to coverrecurrent expenditures and to use the RERF to coverunexpected shortfalls. A capital budget has beenlargely funded by external assistance in the form ofconcessionary loans or direct grants from donorcountries.

For most of the past ten years Kiribati main-tained large fiscal surpluses that contributed to theobjective of expanding the RERF. However, in 1995a new government adopted a more active fiscalpolicy stance to encourage faster growth. It increasedrecurrent expenditures substantially to finance alarge public sector wage increase and to form twonew ministries. This increased the fiscal deficitsubstantially in 1995. And while the deficit declinedin 1996, it rose again in 1997. While currentexpenditure has increased relative to GDP in recentyears, development expenditure has been halved.This is bound to have an adverse effect on futuregrowth prospects.

While the expansionary fiscal stance in 1995and 1996 may have supported higher growth, thisimpact is only likely to be temporary. If the govern-ment is to improve long-term prospects, it needs toavoid a steep rise in its recurrent expenditures, even

ways. Key development strategies include reform-ing the public sector and public enterprises, facili-tating foreign investment, and reallocatingdevelopment expenditure.

Real GDP growth averaged a little more than7 percent per year from 1994 through 1996. This isan improvement over the average for the early 1990sand reflects a shift to expansionary fiscal policies.The key productive sectors—fishing and copra—have contracted though, because of poor climaticconditions. Inflation has been declining broadly inline with that of Kiribati’s major trading partners,particularly Australia, whose currency is used as legaltender. The estimated growth rate for 1997 is3 percent.

Domestic lending by the Bank of Kiribati hasremained relatively low. Lending rates have beengenerally stable, while deposit rates have declinedslightly in line with Australian conditions. Increasedgovernment expenditures have been largely financedby a more aggressive drawdown of funds from theRevenue Equalization Reserve Fund (RERF), whichis an accumulation of long-term budget surplusesestimated to be about A$460 million in December1997. These funds are invested in several differentinternational capital markets, which providesKiribati with steady interest and dividend income.

One of the government’s objectives is to main-tain the real per capita value of the RERF. Thisobjective was at risk prior to the recent devaluationof the Australian dollar; however, its devaluation inlate 1997 and early 1998 by about 12 percent hassubstantially increased the RERF’s value, as muchof the portfolio is in currencies other than the Aus-tralian dollar. However, devaluation of the Austra-lian dollar will raise the cost of imports, givenAustralia’s importance as a source of imports, butexport revenues in Australian dollars should rise asthe devaluation increases exports, the most impor-tant of which is copra to Bangladesh. License feesfor foreign fishing are also an important source ofrevenues, and most are customarily paid in US dol-lars. Thus the overall impact of the currencydevaluation on the RERF, as well as on the economy,has been positive. The budget should revert to asmall surplus in the near future.

Weak growth, government domination, andcautious macroeconomic management have beenlong-standing features of the economy. The typicalapproach to macroeconomic management has been

153PACIFIC ISLANDS

The budget is expected to return to surplus asthe economy benefits from increased production inthe copra and fisheries sectors and from higherremittances, fishing license fees, and investmentincome as a result of the weaker Australian dollar.However, the long-term outlook is not as encourag-ing. Kiribati faces daunting environmental, eco-nomic, and social development challenges. Inaddition, its isolation and cultural factors are likelyto slow the extent to which the government canimplement development strategies effectively.

MARSHALL ISLANDS

While grants under the so-called Compact agree-ment have financed a massive level of governmentexpenditure, the economy has been contractingsince 1996. Two critical challenges are reducing thegovernment’s overall involvement in the economyand development of private sector activities.

The economy contracted substantially after1996 because of major reductions in governmentexpenditure. Estimates indicate that real GDPdeclined by about 5 percent per year in 1996 and1997, partly because of tight lending conditions andlower copra production because of bad weather.

The Compact of Free Association with theUnited States, which provides for substantial finan-cial and technical assistance from the United Statesfor a 15-year period that ends in October 2001,dominates the economy. Total financial assistancefor the entire period is estimated to be $790 mil-lion. The most important part of this assistance isthe base grant, but federal grants and access to in-kind assistance are also available. Significant reduc-tions in the base financial grant occurred in 1992and 1997. Explicit payments declined from 70 per-cent of GDP in the late 1980s to less than 50 per-cent in 1997. These grants have financed a massivelevel of government expenditure. The fiscal situa-tion is also dominated by the availability of foreigngrants under the Compact. The budget deficit be-fore grants averaged nearly 70 percent of GDP inthe first half of the 1990s, but after the grants thiswas down to about 15 percent.

The overwhelming reliance on grants from theUnited States without any conditions attached toensure effective use of the funds has had pervasiveand damaging effects on the Marshall Islands’ abil-ity to develop a productive economic base. The

if the RERF continues to increase in value. Ensur-ing that as any surplus develops it is spent on devel-opment activities that facilitate private sectordevelopment and public sector reform is important.Also, the RERF’s resources need to be deployed moreas productive investment and less as governmentexpenditure.

Kiribati is one of the poorest Pacific islandcountries and one that faces large challenges in itsefforts to sustain economic and social development.Kiribati consists of 33 coral atolls with a total landarea of only 810 square kilometers spread over 3.5million square kilometers. Most islands are narrowand low lying, and have limited agricultural poten-tial because of corralline soils and periodic droughts.

The population is nearly 80,000 but is con-centrated on the South Tarawa atoll, where some30,000 people live, mostly in extremely unsanitaryconditions. Increasing environmental health prob-lems, especially diarrhea, have been linked togroundwater and lagoon pollution. Infant deathrates of 65 per 1,000 are the highest of all the Pacificisland economies and about triple the average forFiji, Samoa, and Tonga. Unless the pressure on thenatural environment is reduced or the authoritiescommit substantial expenditures to expanding andmaintaining water and sewerage systems, furtherhealth problems are inevitable.

Most people are employed in subsistenceactivities. The public sector, which accounts for morethan two thirds of GDP, dominates formal sectoractivity. The production base is narrow, with copraand fish being the principal exports. The NationalDevelopment Strategy has adopted a new approachof formulating a strategic framework for develop-ment rather than setting out a comprehensivedevelopment plan. The specific measures takenunder the strategy are (i) reducing and reformingthe public enterprise sector, (ii) attracting foreigninvestment, and (iii) restructuring the budget infavor of private sector development to reduce thepublic sector’s dominance over the economy. Thegovernment will focus on providing social servicesand infrastructure and on establishing an enablinginvestment environment. Nongovernment organi-zations help with developing human resources andproviding social support systems. Donors areexpected to continue to play an important role indeveloping infrastructure and providing technicalassistance.


problem has now reached crisis stage because thegovernment borrowed heavily against all futureCompact resources. Recent budgets have recognizedthe need to make urgent and substantial adjust-ments. Measures have included reforming the pub-lic sector; cutting real wages; reducing the size ofthe civil service; lowering subsidies for public enter-prises; implementing an across-the-board increasein import duties; and increasing duties on petroleum,alcohol, cigarettes, cars, and other luxury items.

The external position also reflects the substan-tial dependence on Compact funds. Excluding offi-cial transfers, the current account deficit averaged60 percent of GDP in the first half of the 1990s. Asthe government had borrowed heavily against fu-ture Compact funds, substantial capital outflow oc-curred during the mid-1990s. External debt stoodat $141 million in 1994-1995, or 134 percent of GDP,with debt service at the alarming level of more than40 percent of exports.

The rate of inflation during 1996 was 6 per-cent, falling slightly to 4 percent in 1997.

The current program of fiscal stabilization ini-tially emphasized expenditure cuts along with rev-enue raising measures designed to have a greaterimpact during 1997-2000 than previously. Tax re-forms have included raising income taxes and in-troducing a value-added tax in late 1998. Thegovernment is also considering making complemen-tary changes to the income tax to help offset theregressive effects of the value-added tax and hastaken steps to improve the independence and effec-tiveness of the tax administration. These plannedchanges to the tax system will provide the MarshallIslands with one of the most economically efficienttax policy environments in the Pacific. Merely re-turning the budget to a balanced position in the nextfew years will not be sufficient. Substantial fiscalsurpluses that average more than 20 percent of GDPare needed each year until 2001, largely to meetprincipal repayments. While the government hasalready made substantial adjustments, further ad-justments will be needed for several years

Incomes in urban centers are much higherthan in rural areas, but considerable inequality isapparent within urban centers. Although civil ser-vants who lose their jobs will bear much of the bruntof adjustment, cuts in government services, highercharges for utilities, and steeper indirect taxes willalso affect other segments of society. Under the Com-

pact, Marshall Islanders are entitled to work in theUnited States until 2001. Emigration is likely to in-crease in the short term as employment opportuni-ties diminish. In time, remittances from abroad couldbecome an important source of income as is the casefor several other Pacific Island countries.

Agriculture and fisheries have traditionallybeen the mainstay of the productive economy. Thecontribution of agriculture increased in the first halfof the 1990s, largely because of increased copra pro-duction. Increased subsidies and improved transpor-tation were key factors in enhancing incentives toproduce more copra. While further expansion of thecopra industry is possible, for the industry to be sus-tainable, it must be developed efficiently, in particu-lar, in a manner that eliminates the need for futuredirect support in the form of subsidies. Developmentefforts should focus on atolls that have relativelygood resource potential and access to Majuro. Cur-rently, the most critical factor in expanding produc-tion of copra, as well as of other commercial crops,is interisland freight.

155PACIFIC ISLANDS

With an exclusive economic zone of more than2 million square kilometers of ocean and a relativelylow level of resource exploitation, fisheries are thesector with the best prospects for generating large-scale export income and becoming the lead sectorin the development of the economy. However, thissector suffers from several long-standing problems,including limited surveillance capabilities withrespect to foreign fishing fleets, lack of skills, highdomestic costs, and inappropriate government in-vestment decisions. Foreign license fees average only5 percent of declared catch values.

In the past, government policy was couchedwithin a framework that established a clear role forthe government in undertaking commercial projectsthat the private sector was not interested in. How-ever, the consensus now is that the public sectorcannot operate direct fisheries investments profit-ably. The future success of the fisheries sector lies inthe government withdrawing from direct involve-ment in fishing and restricting itself to providingsupport infrastructure for longline fleets operatingin the Western Pacific. To this end, the governmenthas prepared a fisheries strategy that emphasizesdeveloping Majuro as a base for servicing foreignand domestic fishing fleets, with fisheries businessactivities carried out by the private sector. The newstrategy also aims to increase the returns from fish-eries by improving bilateral and multilateral accessarrangements.

The tourism sector is underdeveloped, and ofthe 5,000 visitors a year during the mid-1990s, onlyabout 700 were tourists. The government has re-cently completed the construction of the 150-roominternational standard Outrigger Hotel in Majuro,with the management contracted out to a majorHawaii-based hotel operator. A number of othertourism projects are being developed or considered,including niche projects, such as a diving ventureat Bikini atoll. While the prospects for small-scaletourism that takes advantage of the Marshall Islands’military history and fishing and diving opportuni-ties are reasonably good, significant development isunlikely. The most effective role the government canplay in promoting tourism is to establish a transpar-ent and consistent policy and regulatory environ-ment to encourage foreign investment and to ensurethat supporting public infrastructure is in place. Thegovernment also needs to deal with the environ-mental pollution around Majuro.

FEDERATED STATES OF MICRONESIA

The so-called Compact program of financial assis-tance will cease in 2001. The outlook for economicgrowth and development in the medium term isgrim.

Economic performance has been poor, withreal GDP registering negative growth in 1997. Thedecline in output in recent years is largely attribut-able to low growth in tourism and fisheries and agri-culture, the key export sectors.

A major source of government revenues in theFederated States of Micronesia (FSM) has been aprogram of financial assistance that the country hasreceived from the United States under the Com-pact of Free Association (the Compact) since 1986.This is due to be phased out in 2001, and the run-down in funding is taking place in three stages. Thefirst occurred in 1991, when external grants fell by20 percent. This was followed by a further 15 per-cent reduction in grants in October 1996. The finalstage in 2001 will mean a significant reduction ingovernment revenues, and is necessitating a majorreassessment of government expenditures. The 1996grant reduction led to staff retrenchment and wagecuts, and the government has introduced a wide-ranging program of adjustment and retrenchment.In January 1998, the restructuring of the govern-ment itself began.

Of major concern is the continued weaknessof the government’s consolidated budgetary position,despite its efforts to reduce expenditure, particularlycapital spending. The overall position swung from asurplus of 3.4 percent of GDP in 1995 to deficits ofa little more than 2 percent in 1996 and 1 percentin 1997. Tax revenues are low, and account for onlyabout 8 percent of GDP. The FSM must find othersources of government revenue. To this end, the gov-ernment introduced the new Customs Act, whichbecame effective in October 1997 and is projectedto increase revenues from customs duties by approxi-mately 35 percent. Its most important features are ashift from a free on board to a cost, insurance, andfreight basis for valuation; the elimination of a largeexemption; and major improvements in collection,enforcement, and penalties.

While the FSM does not have an official con-sumer price index, with imports equivalent to morethan 60 percent of GDP, domestic prices are heavilyinfluenced by price movements in the United States,


the main source of imported goods. Estimates indi-cate that inflation has been around 4 percent peryear in recent years.

Merchandise exports grew strongly during1991-1994, principally because of rapid expansionof fish exports. That growth leveled off in 1995 anddeclined slightly in 1996, partly because of thecompletion of certain bilateral fishing agreements,although a new agreement with the Republic ofKorea commenced in mid-1996.

The importance of official transfers for thebalance of payments is demonstrated by the fact thatif these transfers are excluded, the current accountdeficit in 1997 was a substantial 56 percent of GDP.However, once these transfers are included, the cur-rent account records a surplus of 6 percent.

External debt is also high: at the end of 1995outstanding debt amounted to 55 percent of GDP,and its servicing was equivalent to 18 percent ofgoods and services exports. Consequently, the gov-ernment has been progressively drawing down onits cash reserves, which by the end of 1996 wereestimated at the equivalent of two months worth ofimports.

The present weak fiscal and current accountpositions indicate a need for substantial adjustmentsin the economy following the cessation of the Com-pact in 2001. This concern has dominated govern-ment policy in the last few years and will continueto do so.

The outlook for economic growth and devel-opment in the medium term is not encouraging.Export growth is estimated at around 2 percent for1997, and is expected to continue at this rate dur-ing 1998 and 1999. The step-downs in the Com-pact require a level of fiscal adjustment andreduction in living standards that are unlikely to bemade quickly enough and that will be unpopularwith the nation’s voters. Furthermore, while privatesector investment in sectors such as tourism, manu-facturing, and agriculture and fisheries could easethe fiscal adjustment, such investment is likely tobe slow in coming, while large infrastructure projectsnormally have long gestation periods. Consequently,the FSM will rely heavily on external resources wellinto the post-Compact period. Even then, overallliving standards are likely to decline, unemploy-ment—which is already high, particularly among theyoung—is likely to increase, and growth is almostcertain to remain low for some years.

The overriding economic issue is the adjust-ment to the Compact funding step-downs by boththe national and state governments. The nationalgovernment has formulated a structural reform pro-gram aimed at restoring macroeconomic stability,promoting sustainable development, and ensuringexternal viability in the post-Compact era. It hasalso endorsed strategies to reduce the public sector’ssize and cost, and to promote private sector activity.However, it has made little progress in implement-ing such reforms, even though funding of $10 mil-lion for the Public Sector Reform Program becameavailable during 1997. At the same time, the gov-ernment must find ways to increase revenues in theimmediate future, for instance, through tax reform.Fiscal adjustments should also focus on generatingthe overall fiscal surpluses necessary to meet debt-service obligations and to rebuild the government’sfinancial holdings.

Despite the cessation of the Compact, the FSMwill continue to rely heavily on external resourcesfor the foreseeable future. Technical assistance, grantaid, and concessional loans will all be required tosupport continued development efforts. In addition,

157PACIFIC ISLANDS

the government has proposed the establishment ofa trust fund to help support its operations in thepost-Compact era.

For sustained economic growth in the future,the FSM must reduce its reliance on public sectoremployment and encourage the rise of a vibrant pri-vate sector. Developing the private sector calls forimplementing a consistent and transparent regula-tory framework, reforming the land tenure system,and simplifying foreign investment policy. Expand-ing tourism will also require developing infrastruc-ture and services.

Foreign investment has the potential to sup-port private sector development and the fiscal ad-justment process. To facilitate such investment thegovernment needs to provide appropriate policiesand support. In the past, the approval process forforeign investment was cumbersome, because boththe national and state governments had to approveeach proposal. However, the new Foreign Invest-ment Act, in effect since 1 January 1998, is expectedto help liberalize foreign investment.

Future prospects depend on a broadening ofthe economic base. Tourism is one sector that couldcontribute significantly to investment, exports, andemployment, and consequently, to economic growth.Again, foreign investment and the private sectorshould lead the development of tourism. To supportthe development of tourism the government willneed to review such restrictions as those on whichairlines can fly into the country.

As the FSM has no central bank and uses theUS dollar as the unit of currency, it is unable toimplement independent monetary policy. This limitsthe financing options available for addressing fiscaldeficits, while any attempts to set interest ratesadministratively are unlikely to be sustainablebecause of the likely impact on capital flows. Theinability to use monetary policy effectively presentsa policy dilemma for which no ready solution isapparent.

SAMOA

Real GDP increased by just under 10 percent in 1995and a further 6 percent in 1996. This growth waslargely generated by the private sector, with tourism,agriculture, and several manufacturing activities allperforming well. Growth fell to 3 percent in 1997.

In the wake of the natural disasters of the early1990s, Samoa’s government was forced to make

sizable expenditures to restore the economy’sproductive potential and provide basic services. Asa result of a fall in revenues, significant foreign aidwas required, but even this was not enough, andthe government had to run significant budget defi-cits during 1992-1995. The budgetary situationimproved thereafter, and after two years of surplus,a small budget deficit is estimated for fiscal year1997/98.

Money supply (M2) growth slowed markedlyin 1996, but increased again in 1997. Overall creditto the private sector increased by about 11 percentin 1996, but by mid-1997 private sector credit out-standing was 20 percent higher than a year earlier.Inflation has shown considerable volatility over theyears, and was 8 percent in 1997.

The current account had been in deficit formost of the 1990s, but by 1996 this deficit hadshrunk to less than a quarter of its nominal value in1992 because of strong growth in net services trade(mainly tourism), an improvement in themerchandise trade deficit, and sustained high levelsof private transfers. The current account deficit for1997 improved slightly compared with 1996. Thereal exchange rate appreciated by some 4 percentin 1996, and with the nominal effective ex-change rate showing stability in the first half of 1997,further real appreciation of around 4 percent isexpected for 1997 as a whole. The government willneed to monitor carefully the implied loss incompetitiveness.

The Samoan economy depends largely on ag-ricultural production, which has generally beenpatchy for most of the 1990s, mostly as a result of asignificant decline in the production of beef cattleand taro. (In 1994, leaf blight disease destroyed taro,which was the main export crop.) In contrast, fishproduction increased dramatically in 1996, andtogether with an expansion in copra, led to an over-all increase in agriculture and fisheries productionof 23 percent.

Industrial production has grown significantlysince 1991, and is based mainly around coconutprocessing. The restarting of the local oil mill in 1996has injected cash into rural households through thepurchase of coconuts nationwide, and exports ofcopra, coconut oil, and coconut cream for the firsthalf of 1997 were nearly 40 percent higher than forthe same period of 1996. Other significant industriesinclude beer, cigarettes, soft drinks, concrete


modest growth in exports of goods and tourism. In-flation should remain at moderate levels in line withthat of Samoa’s trading partners, and foreign reservesshould remain healthy. Exchange rate managementwill be an important issue in the light of thecurrency’s real appreciation in 1996 and the firsthalf of 1997, and the recent depreciation of the Aus-tralian dollar. Although the new emphasis on theprivate sector could raise living standards, where thegrowth will come from is not clear, given Samoa’sisolation and narrow production base.

Despite three decades of development plans,sectoral strategies, technical assistance, and aid-funded capital projects, Samoa’s economy remainsdependent on foreign aid, foreign loans, and remit-tances from expatriate Samoans. While the increasein travel receipts is a welcome sign, the governmenthas recognized the need to put Samoa’s economyon a more dynamic path by redefining thegovernment’s role, implementing a privatizationpolicy, and creating an economic environment thatfacilitates private sector economic activity. Whilethe government has declared its commitment toreforming public enterprises for several years, it hasmade only modest progress. The Bank of WesternSamoa has been fully privatized, some governmentservices have been contracted out to the privatesector, and some other public enterprises have beenfully or partially privatized. However, some see thefailure of two recently privatized companies as con-firmation of the failure of the entire program, whena possible explanation is that the companies werenot viable without the support of significant gov-ernment resources. The government should makegreater efforts to privatize and reform public enter-prises effectively so as to achieve sustainable eco-nomic growth.

A central element of public sector reform isthe implementation of a performance budgetingframework that entails a focus on delivering speci-fied outputs and clear accounting of the costs ofproducing the outputs. Performance budgeting wasfirst introduced in the 1995/96 fiscal year and ex-tended to all departments in the 1996/97 fiscal year.The performance budgeting framework has involvedintegrating the old recurrent and development bud-gets, and defining and classifying outputs. Exten-sive training in the use of effective accountabilityarrangements will be needed to ensure the successof the new system. The authorities are continuing

products, and sawn timber production. A large as-sembly operation that produces electrical wiringharnesses for motor vehicles (the Yazaki factory) wasestablished in the early 1990s and is the country’slargest private sector employer.

Despite the strength of economic activity inrecent years, by 1997 real income per capita wasstill only at about the same level as in 1987-1989.The economy has long been characterized by weakgrowth, a large public sector, and strong dependenceon remittances from overseas. However, there hasalso been a long-standing problem in the calcula-tion of accurate national accounts, and living stan-dards are probably higher than official statisticsindicate.

The short-term outlook is relatively good, al-though growth could slow somewhat in 1998 if fishexports weaken. Provided the government is ableto maintain a prudent approach to fiscal policy andachieve success with its public sector reform pro-gram, slight growth in GDP per capita is expectedfor the next few years. This projection is predicatedon stable terms of trade, the absence of major cy-clones, continued support from remittances, and

159PACIFIC ISLANDS

to simplify the number of outputs, establish budgetplans early in the fiscal year, and develop rollingthree-year estimates of specific outputs to assist inlong-term planning. The introduction of perfor-mance budgeting will allow greater devolution ofresponsibility to government spending agencies thanthe previous system of line item budgeting, but theauthorities must take care that the degree of decen-tralization of decisionmaking does not outstrip theaccounting system’s ability to cope with thesechanges. However, the development of a medium-term budgetary framework, the provision of appro-priate staff training, and the preparation ofperformance contracts would ensure that the ac-tivities of individual departments reflected thegovernment’s overall priorities. The adoption of per-formance budgeting should enable the governmentto achieve its objective of reducing its overall in-volvement in the economy.

SOLOMON ISLANDS

After growing by an average of 5.4 percent per yearduring 1990-1995 and an estimated 3.5 percent in1996, the economy of the Solomon Islands con-tracted by 1 percent in 1997. This decline in econo-mic activity was an outcome of declining productionof major commodities (induced partly by theweather), falling commodity prices, lower construc-tion activity, and a fiscal contraction. Moreover,rapid population growth has meant that per capitaincome was appreciably lower in 1997 than in 1996.Average real income in 1995 was only 11 percenthigher than in 1980.

In the 1990s successive governments have in-curred large budget deficits and have relied on theCentral Bank to finance these. In addition to creat-ing balance-of-payment difficulties and inflationarypressures, the deficits have crowded out private in-vestment and have caused a serious problem for thefinancial system. With Central Bank loans and ad-vances to the government going well beyond thelegal limit in 1995, the Central Bank was forced tosuspend dealing in government securities. The gov-ernment began accumulating interest arrears on itsdomestic debt, postponing its contributions to theNational Provident Fund, and suspended most ofits external debt servicing.

The Solomon Islands has been a high infla-tion economy relative to its trading partners. Infla-

tion was around 12 percent in 1997. The nominaleffective exchange rate was devalued at an annualaverage rate of 9.7 percent during 1986-1996 to helpmaintain competitiveness. Further downward pres-sure on the exchange rate is likely as long as infla-tionary pressures are higher in the Solomon Islandsthan in its trading partners.

The cycle of frequent devaluation and persis-tent inflation has proven difficult to break, becauseit has been driven by persistently irresponsible fiscalpolicies. The devaluations have meant continuedincreases in import prices, but the prices of localitems have also increased because of demand pres-sures resulting from fiscal expansion and associatedlarge public sector wage rises. The current accountis expected to continue to record small surplusesduring 1997 and 1998.

The overriding issue for the Solomon Islandsis its alarming financial crisis. Mounting domesticand external debt-service payment arrears, fallingrevenues and growing expenditures, and decliningpublic and private investment, along with an over-exposed financial sector, threaten the nation’s eco-nomic and financial stability. Remedial action is


urgently needed, otherwise the payments system isunder serious threat and a currency crisis is likely.

Attention to servicing official debt and therenegotiation of debt repayment are pressing issues.In 1996 the country paid only a little over one fifthof the principal and interest payments on its officialdebt. The government’s borrowing requirementshave grown too large to be accommodated by thealready highly exposed domestic financial system.The virtual collapse of the securities market as gov-ernment borrowing exceeded the legal limit for bor-rowing from the Central Bank means that monetarypolicy is inoperative and that economic correctionswill rely heavily on fiscal policy.

During the 1990s external reserves have cov-ered two weeks to two months worth of imports. InJune 1997 the cover was not quite two months, butif government arrears are allowed for, the coverdropped to around one month. Given the country’sheavy dependence on log exports and the chance offurther price declines for logs, the government con-fronts the prospect of a balance-of-payments crisisdeveloping during 1998. The government devaluedthe currency by 20 percent in December 1997 in aneffort to preempt such a crisis, yet the low foreignexchange import cover and likely balance-of-pay-ments pressures remain a serious concern, particu-larly in terms of the potential to support the currencyand external payments system.

The growing budget deficit is also a pressingissue. Part of the reason for the increase in the bud-get deficit is the sharp decline in revenues as a re-sult of a contraction in real GDP.

Declining private investment reflects a grow-ing crisis of confidence and the urgent need to ad-dress the many complex financial issues the countryfaces. Attempts at debt restructuring must be ac-companied by a firm commitment to undertake cred-ible policy reform and establish a consistent trackrecord of implementation. The authorities shouldalso support foreign investment by applying simpli-fied, consistent, and transparent requirements forsuch investment.

In October 1997, shortly after coming topower, the government initiated a comprehensivepolicy and structural reform program. The imme-diate focus is on renegotiating domestic and externaldebt, along with strengthening revenue collectionand controlling expenditure. These efforts need tobe intensified, and the nation’s trading partners and

aid donors need to support them. The governmenthas developed the organizational structure and abroad reform agenda, with a focus on macro-economic and microeconomic policies, to achievestability, enhance productivity, facilitate public sec-tor reform, and promote private sector-led growth.

Nonetheless, the short- to medium-term out-look remains poor. The uncertainty about exportcommodity prices, the country’s serious financialposition, the recent declines in public and privateinvestment, and the rapid rate of population growthall imply that recovery will be slow. In the longerterm—beyond the next five years—the outlook isbetter, provided that the government addresses fis-cal imbalances and debt as a matter of urgency. Tofacilitate future development, the government mustalso renew run-down infrastructure and enhancelabor skill levels.

The growth of the Solomon Islands’ economyin the long term depends critically on the perfor-mance of merchandise exports based on its naturalresource sectors. The realization of the nation’s eco-nomic potential depends largely on careful manage-ment of these resources, on the extent to whichSolomon Islanders’ capture the profits from this re-source exploitation, and on how these profits aredivided between consumption and investment. Forexample, in the commercial fisheries sector, whichcomprises harvesting and processing of an exten-sive tuna resource, the estimated biologically sus-tainable catch is 120,000 tonnes per year, while thelargest recent catch was 56,000 tonnes in 1995. Thusan effective national strategy for expanding the tunaindustry is urgently needed. Some of the issues thatthe government will need to address include howmuch access to give to foreign purse seiners in areasaway from the main group archipelago, how to allo-cate quotas and manage resources, and what therole of private investment in the expansion of thetuna industry should be.

In contrast to the fisheries sector, which hasconsiderable scope for expansion, forest resourcesare being rapidly depleted. The forestry sector hasprovided about half of the economy’s foreign ex-change, and 20 to 30 percent of government rev-enues for the past four years, but current harvestlevels are two to three times the estimated sustain-able yield. If present extraction rates continue, thecommercial resource will likely be depleted by theend of the next decade. Furthermore, the monitor-

161PACIFIC ISLANDS

ing of both the price and harvesting of this resourceis virtually nonexistent, with the result being un-certainty about the value and volume of the resourcebeing exported.

Maximizing the capture of the value of theseresources, reinvesting the resultant cash flowsprudently, and placing timber harvesting on a sus-tainable basis are urgent policy needs. In addition,the government should re-establish the TimberControl Unit to improve price and harvest levelmonitoring.

TONGA

After several years of good growth performance,Tonga recorded slower growth in 1996. The growthof previous years had been fueled by a rapid increasein the production and export of squash and in con-struction activity. However, disease; marketing prob-lems; soil depletion; and increased foreigncompetition, particularly from Latin America, hadan adverse impact on the squash industry. Despite arecovery in squash production in 1997, prices wereabout half the level of the previous year’s prices, andthus export values continued to decline. Never-theless, GDP growth recovered to about 3 percentin 1997.

The decline in the value of squash exports hasalso had a substantial impact on external accounts.The current account balance moved into a substan-tial deficit of about 28 percent of GDP in 1994, incontrast to smaller deficits experienced in earlieryears. However reduction in the current accountdeficit has taken place since, mainly as a result of asignificant fall in imports. Revenues from the sale ofpassports to foreigners and lease payments by suchentities as Bell South in New Zealand from a tele-communications satellite Tonga purchased relativelycheaply several years ago also helped to relievepressures on the current account.

Monetary policy tightened in 1996, squeezingcredit growth. The government increased the re-quired reserve ratio for banks from 5 to 10 percentin February 1996, thereby slowing net domesticcredit growth to 8 percent in 1996, compared with25 percent a year earlier. The bulk of the impactwas on private credit, but this has since resumed togrow in the 8 to 10 percent range. More than halfthe outstanding credit has gone for housing andother personal expenditures.

The 1997 budget restrained recurrent expen-diture to 1996 levels, but provided for a furtherincrease in development expenditures, which led toan overall deficit of about 3 percent of GDP. The1998 budget reduced government current expend-iture on goods and services and capital spending,and as a result the deficit is estimated to contractto less than 0.5 percent of GDP. External financingof the deficit has been mainly on concessional terms,so the debt-service burden has remained relativelylow.

Increased demand associated with the growthin private credit mainly spilled over into imports.Inflationary pressures subsequently picked up some-what in 1996, but inflation is currently estimatedto have stabilized at less than 2 percent. Interestrates for both deposits and lending have been stable.By mid-1997 the base rate for lending was 9 per-cent and the passbook savings rate was 4.2 percent.

In terms of sectoral developments, the mainfeatures in 1997 were weaknesses in agriculture andfisheries, a substantial decline in construction ac-tivity, continued weakness in the restaurant andhotel sector, dramatic growth in transport and


communications, and modest growth in most othersectors. Telecommunication services have expandedsubstantially following the introduction of mobilephones and electronic mail services.

Tonga has achieved reasonably good economicgrowth in the past decade, but its performance hasat times been erratic, reflecting the narrow produc-tion base. There are now clear signs of a narrowingin the niche opportunities for squash and vanilla,which have provided the basis for good growth inthe past. This highlights the need to diversify theeconomic base. Growth in communication, trans-port, and tourism activities is, however, expected tooffset weaknesses in the agriculture sector. A targetgrowth rate of at least 3 percent per year is desir-able, particularly in light of the growing unemploy-ment among young people. This will require eitherincreasing squash export revenues or diversifyinginto other exports and implementing reforms thatentail a greater role for the private sector. The 1998squash crop is expected to be good, and competi-tion from Latin America is expected to be weakerbecause of the effects of El Niño.

Restoring economic growth while containingthe budget deficit within prudent levels is the domi-nant short-term economic performance issue. Tongahas no significant macroeconomic imbalances, andthe scope for expansionary fiscal or monetary policyto restore growth in the short term is limited, as themain impact of such policy is likely to be a deterio-ration in the external account. A strategy that ismore likely to have enduring benefits would be tocontinue efforts to redefine the role and improvethe performance of the public sector and graduallyto increase the contribution of the private sector.Expected benefits from such a strategy would in-clude improved public sector efficiency and publicexpenditure effectiveness and greater scope for taxa-tion reform, including a taxation environment thatwould be more conducive to business.

Tonga’s high dependence on remittances is amajor structural weakness of the economy, and hasled to recommendations to pursue diversification inagriculture and fisheries, and in tourism. However,Tonga should not purse diversification for its ownsake, and should instead base it on a careful assess-ment of economic returns and consideration of theimpact on the environment. Moreover, for diversi-fication to succeed, it would have to be carried outthrough public sector reform, facilitation of private

sector development, improved management of pub-lic debt, and human resource development.

The first step in operationalizing the publicsector reform strategy should be consideration of thecore roles of government. Tonga currently has a largeand diverse public enterprise sector that generallydoes not require subsidies, but pays neither taxesnor significant dividends. The government woulddo well to increase the rate of privatization. At thesame time, the scope for government involvementin developing its human resources is considerable.Public spending needs to be reprioritized to focuson improving the quality of basic education and pro-viding preventive rather than curative health care.Public spending may also have to entail assistancefor displaced civil servants and the development ofappropriate training programs.

In its efforts to encourage greater private sec-tor dynamism, Tonga will have to improve the gen-eral environment for private sector activity byreforming its tax system and providing more secureproperty rights. The tax system has undergone nu-merous studies in recent years and various detailedproposals have been prepared, but little effectivereform has taken place. The tax system is charac-terized by large discretionary exemptions under theIndustrial Development Incentives Act, exemptionsfor the entire public sector, and heavy reliance ontrade taxes. In particular, the act provides tax in-centives as well as tax holidays, duty exemptions,and special depreciation provisions to approvedenterprises. Because of its discretionary and discrimi-natory nature, the act’s actual operations have in-troduced distortions and encouraged unproductiveactivity. Surveys of the private sector have confirmedthat it would prefer nondiscriminatory measures,such as lower taxes or more generous depreciationallowances applicable to all businesses.

TUVALU

Analyzing recent trends in Tuvalu’s economy is dif-ficult because of lack of comprehensive, up-to-datesocial and economic data. Nevertheless, estimatesindicate that growth in 1997 was similar to the av-erage growth rate during 1990-1995, when GDPgrew at an average annual rate of just under 2.9 per-cent, while GDP per capita increased at an averageannual rate of 1.8 percent. These rates have beenamong the best in the Pacific islands in recent years.

163PACIFIC ISLANDS

Subsistence or nonmarket production arisingmainly from the agriculture and fisheries and for-estry sectors accounts for about one third of GDP.Growth in these sectors matched the growth inpopulation of 1.1 percent per year during 1990-1995.The public sector is the main provider of marketedoutput, which grew at an annual average rate of 3.7percent during the same period.

The private sector remains relatively small anddepends largely on the provision of services to thepublic sector. With forestry and agriculture and fish-eries remaining stagnant, growth has been drivenby the public utilities and government-ownedenterprises in the finance, real estate, trade, and hos-pitality sectors, together with community and per-sonal services. General government, the economy’slargest sector, grew by 13 percent during 1990-1995.

The ratio of gross domestic investment to GDPaveraged 52 percent during 1990-1995. However,given the growth of GDP at less than 3 percent peryear, this suggests a low capital productivity or inef-ficient use of investment. This partly reflects Tuvalu’sdevelopment constraints and the concentration ofinvestment in infrastructure.

GDP does not fully reflect income growth.While no official GNP figures are available, nationalincome is likely to exceed GDP because of signifi-cant net remittances from Tuvaluans employedabroad, for example, in the maritime industry, andnet interest income receivable from assets ownedoverseas. Remittances grew at an estimated annualrate of 4.8 percent between 1988 and 1995, total-ing 14 percent of GDP in 1995. These data do notreflect remittances in kind, but in other Pacific is-land countries estimates indicate that such remit-tances amount to at least 30 percent of official cashremittances.

Aid, remittances, and investment income un-derwrite Tuvalu’s large trade deficit, which reflectsthe limited opportunities for merchandise exports.The bulk of investment income is derived from over-seas assets held by the government. The nation’soverall external position is sound, in that Tuvaludoes not have an external debt problem. However,continuation of this situation relies on the mainte-nance of grant aid at existing levels.

Fiscal policy has been sound, with real rev-enues and expenditures normally growing at aver-age annual rates of about 2 percent. The recurrentbudget showed a small surplus from 1980-1996, anddevelopment expenditure has been confined to whataid funding has allowed.

Inflation has been less than 1 percent per yearin the last two years. Because Tuvalu uses the Aus-tralian dollar as the domestic currency, inflation islargely a function of movements of Australian pricesand of the rate of exchange of the Australian dollaragainst the currencies of other major exporters toTuvalu, namely, Fiji, Japan, and New Zealand.Inflation is expected to stay low in the medium term.

The medium-term outlook is that the presenteconomic situation will change little. Livingstandards will continue to rely on flows of invest-ment income from the Tuvalu Trust Fund, whichconsists almost exclusively of Australian bonds,remittance income from Tuvaluans working abroad,and licensing fees from deep water fishing nationsexploiting Tuvalu’s tuna resources. Aid will continueto fund capital development. Projections suggestthat the per capita real value of the Trust Fund willbe maintained.

In the immediate future, the potential forprivate sector investment in export-oriented acti-vities is limited, and the development of a


substantive merchandise export base is unlikely.While the government has signaled its commitmentto limiting the size of the public sector and makingit more efficient and to facilitating private sectorinvestment, it needs to pursue such commitmentsmore vigorously if the current development strategyis to succeed and the economy is to become morediversified.

Government plans to reform the public sectorthrough commercializing or corporatizing variousactivities have stalled and need revitalization. Publicsector commercial enterprises have accounted forjust over half of the marketed component of GDPin recent years, thus public enterprise reform couldhave a substantial impact on economic efficiency.The main constraint on the public sector reformprogram is the continuing control of public sectorcommercial enterprises by the government’s politi-cal and civil service arms.

Accelerating moves toward creating a policyenvironment that encourages private investmentand restructuring the economy toward export-oriented business investment are critical for Tuvalu’sfuture economic and social position. The trade defi-cit has grown since 1991 as exports have declinedand imports have risen, and the continued relianceon aid and remittances is undesirable.

The government has passed the Foreign Di-rect Investment Act to help develop export-orientedbusinesses. Its salient features include establishmentof the Foreign Investment Facilitation Board as a“one-stop shop” for potential investors and removalof the exemption from payment of import duties forpublic enterprises. However, while economic devel-opment through exports is an appropriate aim, theopportunities for such development are limited.Apart from labor exports, such as those Tuvaluansemployed overseas in merchant marine fleets, fish-eries resources provide the best opportunity for in-creased exports. Tuvalu must, however, learn fromthe experience of other Pacific nations and not com-mit scarce public funds to developing fisheries.Rather, it should pursue possibilities for establishingjoint ventures with foreign investors to exploit thefisheries resources. Such an approach should recog-nize the inherent price and production risks associ-ated with exploiting ocean fish resources.

Access to the scarce land available is a signifi-cant constraint to development, and land disputesprevent its easy use as collateral for commercial bor-

rowing and its use as an input into investmentprojects. Land is central to Tuvaluan culture, so free-ing up the land market will be a gradual process.Nevertheless, the need for the government to fa-cilitate access to land by domestic and foreign in-vestors and to ensure security of property rights forthose investors is pressing.

Characteristics of the labor force and wagestructures present another set of constraints to de-velopment. The subsistence sector provides the larg-est source of employment in Tuvalu (62 percent ofthe working-age population was engaged in this sec-tor in 1991), and the public sector, where most jobsare in administration, dominates formal employ-ment. Growth in total formal sector employment inthe 1990s has been negligible and all indicationspoint to a growing problem of disguised unemploy-ment, particularly in Funafuti. The safety valve ofoverseas employment, for example, contract workin New Zealand and in the merchant marine withEuropean companies, is critical to reduce the grow-ing pressures of an excess supply of unskilled laborin the domestic labor market. However, the mostimportant source of overseas employment, Nauru,will become progressively less important as Nauru’sphosphate mine nears exhaustion.

As well as coping with an excess supply ofunskilled labor, Tuvalu faces a continuing shortageof domestically supplied skilled labor, which hasaffected both the public and private sectors. Thesupply of accountants, engineers, medical person-nel, economists and development planners, teach-ers, managers, marine officers, and small businessadvisers is inadequate. A coordinated response tolabor market imbalances, with attention to skill defi-cits and surpluses and education and training needs,is required.

The public sector is more attractive as an em-ployer than the private sector because public sectorsalaries and casual labor rates tend to be higher, andthe public sector also provides job security and extrabenefits, such as subsidized housing. The govern-ment will need to address such issues if private sectorand export industry development is to occur.

VANUATU

In recent years Vanuatu’s economy has been typi-fied by modest economic growth and stagnatingliving standards. GDP is expected to have grown by

165PACIFIC ISLANDS

around 3 percent in 1997, roughly the same as av-erage annual growth rates during 1983-1996, helpedby strong contributions from tourism and copra ex-ports. However, during the last 15 years annualgrowth rates have fluctuated widely from year to year,reflecting the impact of the climate on agriculture,of reduced confidence in the investment climate inthe mid-1990s, and of a prolonged public serviceindustrial dispute in 1994. It has barely matched thepopulation growth rate of around 2.8 percent peryear. Consequently, living standards have stagnated.

Inflation has declined somewhat in recentyears and was around 2.5 percent in 1997. The un-derlying trend of declining inflation reflects lowerimported inflation, subdued economic activity, andthe recent absence of hurricanes. The nominal ex-change rate has been relatively stable, but couldcome under pressure in 1998 following the devalu-ation of Fiji’s currency by 20 percent in early 1998.

Vanuatu’s trade account is persistently in defi-cit, but this is generally more than offset by surpluseson the service and transfer accounts. Tourist num-bers increased by 7.5 percent in 1997, and whilecopra exports increased only slightly, the increase

was in addition to already high levels in 1996. Copraexports are expected to increase further in 1998,but tourist arrivals are expected to decline in 1998,possibly because of concerns about the civil unrestthat followed an internal report about suspect prac-tices associated with the National Provident Fund.

External grant aid forms a significant compo-nent of foreign exchange receipts, representing morethan 30 percent of current account receipts. Thisaid should continue given the successful implemen-tation of the Comprehensive Reform Program (CRP)developed in 1997. The overall balance of paymentshas reflected a surplus in most years. The surpluslargely results from remittances from foreign cur-rency deposits, which reflect residents’ preferencefor saving overseas.

Vanuatu has a low debt-service ratio, indica-ting its favorable external debt position. Forecastsindicate that in 1997 debt service will have beenequivalent to 0.7 percent of exports, and by 2004will rise to 2 percent of 1997 export levels. Whilethis is still a favorable situation, the recent rapidgrowth in external debt, which amounted to 18 per-cent of GDP in 1995, is cause for concern. Mostdebt has been issued to the government, with someon-lent to public corporations. As funds have beensourced from international agencies, mostly on con-cessional terms, Vanuatu’s debt profile remainsmodest.

Fiscal policy has aimed to balance the recur-rent budget, and this has normally been achieved.However, the recurrent budget has deterioratedsomewhat in the past two years, and the recurrentdeficit for 1997 is estimated to amount to 3 percentof GDP, compared with less than 1 percent of GDPin 1996, and a surplus that averaged 1.5 percent ofGDP during 1992-1995. In addition to the recurrentbudget, Vanuatu also has a development budget, andthe authorities have not applied the same level offiscal discipline to the development budget as theyhave to the recurrent budget. Development expen-ditures are responsible for the substantial overallbudget deficits that have occurred since the late1980s.

The recent deficits in the recurrent budgethave occurred as revenue collections, which rely tooheavily on import duties, contracted because of lowimport growth. At the same time, reductions in pub-lic sector expenditures and in import duty exemp-tions did not occur as expected in 1997. Deficits


have now soaked up the government’s entire work-ing capital, and as a result, development expendi-tures fell from Vt2 billion ($17.8 million) in 1995 toless than Vt1 billion ($9 million) in 1996 and a simi-lar level in 1997.

Greater efforts to collect accounts receivableand delays in making payments are funding the over-all deficit in the short term. In the longer term, theintroduction of a value-added tax in July 1998 isexpected to improve the cash position by increasingrevenues to around 27 percent of GDP.

The medium-term outlook for economicgrowth is modest, and rates are likely to remain ataround the same levels as in recent years. Vanuatu’seconomic position is relatively sound, its fiscal man-agement generally prudent, and its debt levelssustainable. In the longer term, on the assumptionthat the government implements the recentlydeveloped CRP successfully, improves labor skilllevels in both the public and private sectors, andachieves greater political stability, Vanuatu can lookforward to attaining better living standards for mostof its population.

In February 1997 Vanuatu committed itself tomajor public sector and economic reforms. Subse-quently, the government developed the CRP, whichemphasizes increased and sustainable economicgrowth, improved public sector management, andgood governance. While private sector developmentis seen as the key to increasing economic growth,the authorities recognize that such developmentrequires a politically stable environment. Indeed, theincreasing politicization of day-to-day operations andadministration of government and public enterprisesin the early 1990s not only led to inefficiencies, butalso destabilized the political system. In 1996 therewere three different governments and one majorrealignment.

A recent policy issue is how aid resources mightbe invested in the private sector as well as in thepublic sector, thereby generating a more immediate

economic growth response. Aid is normally investedthrough the public sector, but much of it has beenineffective in facilitating economic growth, and waysshould be found to provide aid more directly to theprivate sector, but in a nondistortionary manner.

The government is involved in a range of com-mercial functions: it operates eight statutory corpo-rations and has interests in a range of othercompanies. In nearly all cases business performanceand profitability are poor. This indicates that thegovernment is not well equipped to perform busi-ness functions efficiently, and efforts to divest thegovernment of its commercial interests and toaccelerate the privatization and/or corporatizationof public sector enterprises should be accelerated.

The CRP will also receive technical assistancefrom donors in a number of areas of government.Such assistance needs to be supported by trainingfor local staff, given the generally low level of skillsavailable in the public sector. Skilled labor is alsolacking in other sectors, notwithstanding high levelsof underemployment. This shortage is constrainingincreased production in sectors such as agricultureand tourism.

Eighty percent of Vanuatu’s population isengaged in subsistence agriculture, and economicdevelopment efforts must take this into account. Thecentral medium- and long-term development issueis the transformation of subsistence communitiesinto a more commercially active sector. This callsfor developing rural infrastructure, education andother social subsectors, and transport and market-ing services. These are currently poorly developedand hinder economic and social development. Inaddition, the land tenure system prevents the use ofland as collateral for credit and, in any case, accessto appropriate credit for smallholders and other smallbusiness operators is extremely limited. Theseconstraints also hinder economic development andthe equitable distribution of the benefits of growth,and policies to address these constraints are needed.

143PACIFIC ISLANDS

After achieving an average growth rate of 2.7 percent during 1990-1996, Fiji’s economycontinued to weaken during 1997 because of major changes in global currency and commodi-ties markets. The devaluation of the currency in early 1998 and the continuation of economicreforms aimed at stimulating growth through private sector initiatives are expected to improveeconomic performance in the medium term.

Fiji

143


Fiji is one of the most developed of the Pacificisland economies and has the standard of liv-

ing of a lower-middle-income developing country.In the past decade economic growth has been low.After growing 3.1 percent in 1996, economic acti-vity contracted by about 1 percent in 1997. Adecline in sugar production caused by cyclones andindustrial disputes and a decrease in investmentbecause of the continued uncertainty about therenewal of leases for land used for sugarcane farm-ing adversely affected the agriculture sector. Thedecline in gold prices had a negative impact on themining industry. Activity in the building and con-struction sector was weak, and garment productionfaced increased competition from other Asianexporters. Tourism, however, continued to make astrong contribution to the economy, with substan-tial increases in visitor arrivals. Overall, investmentremained low, reflecting the weaknesses in theeconomy and low investor confidence. Both privateand public enterprise investment fell to around 4 per-cent of GDP. Government capital expenditure de-creased to less than 3 percent, while operationalexpenditure remained at around 23 percent of GDP.Consumer prices rose by 2.9 percent in 1997. Weakdomestic demand and excess capacity in theeconomy, a relatively stable exchange rate, and sub-

dued inflationary pressures in the economies of majortrading partners contributed to the low inflation rate.

Fiscal performance deteriorated significantly.The budget deficit rose from 0.7 percent of GDP in1995 to 5.7 percent in 1996 and to around 9.2 per-cent in 1997. In 1997, for the first time in morethan a decade, government revenues did not coveroperating expenditures. The government approvedtwo supplementary budgets in 1997, including onefor the Commodity Development Framework(CDF), which provides large-scale support to theagriculture sector. The increase in the budget defi-cit was partly caused by the decision to fund a re-structuring program for the National Bank of Fiji, agovernment-owned commercial bank, which in1995 had become essentially insolvent. Governmentdebt increased from 41 percent of GDP in 1996 to48 percent in 1997. About 90 percent of this debtwas financed from domestic resources. The balanceof payments switched from a surplus in 1996 to adeficit in 1997, largely because of a turnaround inthe current account. Foreign reserves continued toremain at high levels, equivalent to almost fivemonths of imports.

The exchange rate of the Fiji dollar is linkedto a weighted basket of currencies of the country’smain trading partners. Faced with a weak economyand a deteriorating medium-term outlook, the gov-ernment devalued the currency by 20 percent in


January 1998 in an attempt to increase the com-petitiveness of Fiji’s products and to protect incomesand jobs. In the months ahead inflation is expectedto rise substantially to up to 9 percent, but to de-crease to lower levels by 1999. Much will dependon the response of wage setters to the devaluation.A strong increase in exports is forecast, with eco-nomic activity growing by 2 to 3 percent in 1998and beyond. The enactment of the new constitu-tion in 1997 that gives more rights to native Indiansand the subsequent readmission of Fiji to the Com-monwealth is expected to lead to a recovery ofdomestic and foreign direct investment and to a de-cline in the rate of emigration.


The 1998 Budget Address, delivered in November1997, emphasized the government’s efforts to adoptfinancial management policies that are consistentwith promoting economic growth. This is to beachieved by consolidating revenue collection—

including improving tax compliance and reducingconcessions and exemptions—and by controllingoperating expenditures. Revenues are projected togrow in 1998, with half of the growth expected fromthe sale of government assets. Total expenditure isto rise only marginally, largely because of the comple-tion of the restructuring program at the NationalBank of Fiji in 1997. Capital expenditure is also fore-cast to increase only slightly, yet operating expendi-tures will rise to more than 26 percent of GDP. Thegovernment needs to adopt bolder reforms for re-ducing the budget deficit and debt levels, and tofocus government expenditure on areas that encour-age growth and development. Consistent fiscalpolicies would also help increase private sectorinvestment levels.

In the near future the government will needto direct major efforts toward controlling inflation-ary pressures resulting from the devaluation. Thegovernment promised to exercise monetary policywith a view to containing inflation, and urged thatproductivity increases should be the only considera-tion in negotiating wage increases. The prices of

145PACIFIC ISLANDS

many consumer items are now rising. With one infour households below the poverty line, the priceincreases of basic food items are a particular concern.

The Asian crisis will affect Fiji indirectly bydampening growth prospects in its main exportmarkets, and by strengthening competitivenesseffects on the tourism and garment industries. Globaltrade liberalization policies are likely to have anadverse effect on exports under preferential tradearrangements, such as the South Pacific RegionalTrade and Economic Cooperation Agreement andthe Sugar Protocol under the Lomé Convention ofthe European Union. The implementation of struc-tural adjustment policies and more effective utiliza-tion of resources is therefore crucial for achievingsustainable growth rates in the short to mediumterm.


Land tenure issues relating to the expiration andrenewal of sugar land leases are proving to be a majorproblem in Fiji. During the period 1997-2005, some5,345 leases are due to expire. The National LandTrust Board has indicated that most of the land-owners want the sugar land back from the lessees togrow sugar themselves, because they think that theirreturns will be higher than what they would obtainby leasing the land to others. The authorities aredeveloping proposals for more flexible leases in thefuture that will help avoid the current bunchingproblem and that can provide more secure tenure.However, they do not appear to be working on policymeasures to resolve the problem of a possibledisplacement of a large number of leaseholdersduring a short period.

Land tenure and the protection of propertyrights are also major issues for foreign investors, par-ticularly those with large-scale investments as in the

tourist sector. Recent attacks on resorts, disputeswith landowners, and perceptions that legal meansto redress such problems will be ineffective are im-portant disincentives for foreign investors.

Inconsistencies and uncertainties with respectto government policies discourage private sectorinvestment. The CDF, the government’s involve-ment in the construction of a major new hotel re-sort, and the escalation of tariff rates in the 1998budget are important examples of government ini-tiatives that are inconsistent with its stated aim ofreducing its level of involvement in the economy.The CDF initiative was incorporated in a supple-mentary budget in 1997. While the original budgetdid not consider agricultural development as a cen-tral priority, the CDF was subsequently developedand given the status of an essential governmentactivity. The program involves a range of functions,such as research, extension services, marketing, andquality control, which are considered to be govern-ment functions essential for supporting economicgrowth. However, the CDF also involves direct pro-duction and investment by government entities,which are inconsistent with the government’s statedpolicy objectives and framework. In addition, criticshave raised doubts about the government’s abilityto follow through on all these activities.

The medium-term economic outlook is notencouraging. The fiscal burden of the National Bankof Fiji’s failure and lack of progress in curbingnonessential government expenditures will meanpersistent budgetary pressures. Commitments ofadditional support for the National Bank of Fiji, thepossibility of further government support for amajor hotel development, and an infrastructure pro-ject for the sugar industry will keep pressure on thebudget for several years. These pressures suggest thatthe government is unlikely to achieve its medium-term fiscal target of a balanced budget by 2000.


While economic growth has picked up, it is likely to slow. The terms of trade have deterio-rated, the exchange rate is likely to come under pressure in 1998, and the banking system issuffering from a major liquidity overhang. In addition, measures taken to ameliorate the recentdrought were inadequate.

Papua New Guinea

146

The banking sector poses an additionalproblem. Demand deposits in banks have grownrapidly in recent years. As these deposits can beconverted on demand to foreign exchange in PNG,the existing level of reserves, while not low, is notnecessarily comfortable. To ward off any possibilityof mass conversion of demand deposits into foreigncurrency, the authorities have reacted by allowingthe currency to weaken rather than face eventualpressure on reserves.

Interest rates have been pushed up in responseto possible pressure on foreign exchange reserves.The Treasury bill rate increased from 9 percent inSeptember 1997 to 13 percent by early December.A small budget deficit was recorded in 1997.

The mining sector’s contribution to economicactivity and export revenue is likely to fall sharplyin 1998. Both major mines have become victims ofthe drought because of the lack of water for pro-cessing. One of them completely stopped shipmentsin August 1997, while the other operated at 12 per-cent of capacity. Tax revenues generated from themining sector are also expected to be considerablylower in 1998 than in 1997.


Managing a buildup of liquidity in the bankingsystem, maintaining a prudent approach to fiscal


Economic growth recovered in 1996 but sharplydeclined to -6.5 percent in 1997. Completion

of the Lihir mine, pre-election expenditures, andrising incomes from agricultural crops all contribu-ted to GDP growth. However, a major drought, anda fall in gold and copper prices affected growthduring the second half of 1997. In addition,Papua New Guinea (PNG) was affected by anotherbout of political instability. Rain recently providedsome relief in certain areas of the country, althoughthe current coffee and cocoa outputs are stillexpected to be some 20 percent less than in 1997.Therefore, GDP growth is likely to decelerate in thefuture.

The rate of inflation fell to 3.9 percent in 1997.After a period of relative stability, further weaken-ing of the currency was evident in late 1997 despitea buildup of substantial foreign exchange reserves,which amounted to some K768 million ($1,061million) by mid-1997, or 5.8 months of import cover.The weakness in the currency reflects the follow-ing: a recent decline in the terms of trade, thesignificant food imports as a result of the drought,the prospective decline in volumes of agriculturaland mining exports, and the reduced confidence inthe economy and in government policies. The termsof trade declined by 10 percent in 1997 because ofdeclining copper, gold, and timber prices.

147PACIFIC ISLANDS

adjustment program that is currently being imple-mented contains a range of measures to liberalizethe economy through trade and tax reforms, improvethe management of forestry resources, restore fiscalstability, increase public investment, and improvesocial services. While the government has been ableto deliver on some key macroeconomic targets thatwere part of the structural adjustment program, littlefundamental reform has taken place. No progresshas been made in improving the government’s effi-ciency and effectiveness, and the privatizationprogram has stalled.

A supply bill was introduced in November1997, and the government announced a delay inthe implementation of the value-added tax to 1999.The delay is a problem, because tariffs have alreadybeen reduced, and this has left the government witha revenue shortage. The supply bill increased thetop income tax rate to 47 percent and created threenew tax brackets. On the one hand, this is not likelyto raise much revenue, and on the other, it is likelyto discourage foreign investors.

Public governance suffers from major weak-nesses and the entire government system exhibits a

policy, managing the exchange rate, and respond-ing effectively to the drought are the key short-termissues. The monetary system accumulated excessiveliquidity during the period of fiscal expansion in 1993and 1994. By late 1997 the government was run-ning a small surplus.

Although recent rains have provided somerespite, many communities still face a desperate situ-ation because of record drought. Food shortages arelikely to occur in 1998, and estimates indicate thatup to 650,000 people will need food aid for severalmonths in early 1998, and a monthly cost ofK6 million ($8.29 million).


The economy is beset with long-standing structuralproblems. The key constraints are a serious and wide-spread law and order problem, formal and informalinstitutions that are ineffective in facilitatingeconomic development, poor workforce skills, andinadequate infrastructure. Together these con-straints lead to an environment that is not conduciveto broadly based economic growth. The structural


pervasive lack of accountability for performance. Amajor long-standing issue is that government policygenerally tends to be ad hoc and highly politicized.Effective medium-term fiscal planning and fiscalresponsibility legislation are lacking, policy reversalsare common, and large gaps between announcedpolicies and actual implementation are frequent.

Under the new constitutional law, governmentdecentralization is to be promoted and the impor-tance of provincial and local governments is to beenhanced. To this end, a large array of programs andservices are being developed that provincial andlocal governments are to implement. The budgethas earmarked funds to meet the financial require-ments of the provincial and local governments.However, fund transfers have not taken place to

date, creating tension between the provincial andlocal governments and the central government. Thenew division of responsibilities is not absolutelyclear-cut, and a good deal of confusion exists aboutthe revised roles of central government departmentsand provincial and local government departments.To further complicate the situation, under the newscheme most central government departments wereto be restructured, but progress with the restructur-ing has been limited. The provincial governmentshave their own restructuring-related problems inthat they are short of administrative and technicalmanpower. Given these problems, doubts have beenraised about whether the reforms will work. Criticsincreasingly believe that the intended improvementin governance will be difficult to accomplish.

��

��

��

��

��

��

��

��

�� !��

��"��#$�%& ��

'��(��"

�� ) ��

�� *�+��, �

�� -�� #./0�& ��

��"�� +��/�� !

��)��

�� 12��"'��'�� '��

* ��, ��

�� ./0�"� �� "��

��+�� !��!+��

��#��3��+�&�

��'��

�� "

�� , ��

��"�� " ��

��'��" �� "

�� " ��

��3�" �� " �� '��

�� 4��" ��

�� "��

��'��

�� 0�� '��/��"

� ��'��"��

��2�� % ��4��"� ��

�� 2��

�� 2�� 3��

�� 3� ��

�� , �

��

��

��

�� !�"��

��!�#��

��

��!�$��!�"��%

��&��

��!

'��

��!�(��

��

��!��

��!

��

�� !"�

% ��

��3"� ��

'�� '� ��

��, ��3��

'��"��

�� "��

� ��

��" ��'��3�'��

.�� " ��

��"� ��

'� ��

�� "� �� '�� +�, �

��

�� "� �� '��

�� , ��+��

��

'��)� ��

5 ��

�� #��'� � ��

��&"��

��'��'��

�� 3��

��'��, ��

�� + �� '��

��'�� 3��6��

��3��

��

��'��-��, ��

�� 6�� /� � ��

�� 7

, �� 6��'��

�� )� ��"��

�� , ��

��"'��

��" � �� 6��

��'�� '��

� �� '��, ��

��

� � ��

$�� "

� � ��-�" �� "��

� �6�� 3��

� ��

��, ��

��"��"�� "

�� " ��"

��"��, �6��

�� 6�� '��

�� "��

��" �� " ��

��/��

� ��

��

8'��

�� 2��

�� '�� 6��

��

��"��

9��"��

��

��

��, ��

��'��-��"� ��

�� "��"��

�� 3��, � ��'��

��'��

�� '��9��

��'�� 6��3�� '��

�� 3 ��

��0�� '�6��3��

�� '��

� �� "��"��'��'��, �

��

��

��, �� "� ��

��"��3��

� �� '�� )� �� ,�

'�� '�� "��

�� 3�� "

�� 6��

��

, ��

��

��

��#�0�&�� 6��

�� /� '�� '�

��'��

�'��

�� 3��:� �

6�� :��

��0��;��0��:��

�� :��

�� 3��, ��

�� '��

��'�� '��

��'�� '��"��

��

�� " � ��

2�� 0��)� ��

�� "� ��"� ��

��

��3��;�� 2��

��

�� '��

4��"� ��

�� '��

��-� �� " ��

��" �� '�� 9�� " � � '��

��"��

�� '��

�� 3�� /�

�� "��

�� 9��

��" �� #�� '�� & ��

�� "��'��

�� '��

�� -�� 3��<��'�

��'��"'��

��<��'��

�� "'��

��3�� <

��'��

, ��

��0��

� ��

, �� 6��

��

��" �� " ��

�� 0��2��

� ��

�� '�� #��

��=�� 3�� &�

, ��'��

��

��"'��

�� #��

4�� >��" ? ��2��&�5��

��'�� " ��

�'�� '��

��

�� '��

�� '��

��9�� " � ��

�� '��

��'��-��9��

�� 6�� '��

� ��

�� '��

�� %��

��

��6��=��

��:�� "��

��"�� 3��:

� ��

�� '��, ��

��

, ��0��

��" ��'��" � ��

��, ��

��

��"��"��

� ��

��

9�� '��

�� '��

��'�� 0�"

� � ��

�� '� �� 8��

� ��

��

�0�"'�� "'��'��

, ��0� �� '�� '� ��

�� #��

�� &" ��"

��

*��+� ��'�� "��'�� ,��+��

�� %�� +� � � ��'��

� ��'�� "��+� ��'��

�� -��+� ��

�� -�� .�� '�� /��"��'��*��*��'�� .�� /�� + � � ��'��

��'��0��+� ��

�� !�� !� @�1��+� ��

�� @�� !� @�

�� !"�

��'�� A��

�� '��

�� '��

� �� ?��6��" ��

��'�� "� ��

��'�� , �� "��

��"��

�� 0��

� �� " ��

��

��

��'��

��"��'��=��

� �� "� �� '��"��

�� '�� /�

� ��!��B��

�� .�� "

B��)��"��

'�� '�� !�?��

=�� B��)��3

�� '�� '��

��8��4��>��"? �� ,��"? ��

��-�� '��*�!�

�� =�� '� �� /�

��" � � �� =��

4�� >��" ? ��"� �� "

�� '�� *��!�

,��"? ��)� �� =�� -��

�� *��!�

�� -��

�� 3� ��

��" � �� '��

�� /��

0��'��"

��

��

��#��9��&�/��

'�� *�� '��

�� '��

�� 6��" ��

�� /��

��"��" ��

�� " ��

��

��"��

��/��

�� '�� *��

�� /� ��

��

�� !��

, � ��

�� '� �� '�� ?��

��6��" ��

� �� "�� +��"��

��

2��!��

�� 4��" ��

��

�� '��

��'�� '��

'� �� "��-��

�� " ��"

��'��"�� 1�'��-��"��

��-��" ��

#�� &" ��

��

��;��'��

�� '� �� '��-��

�� " ��

��"��

�� '��

��

%��

��" ��'�� '��

��/��

�� " �� " ��

� ��'�� /��

��

�� 3��C��

��"'��

� � ��

��

�� '��

��

��

�� " ��" �� "

;��"��.��<��

��'��*��'��

� ��!�� 9��

�� "��'�� '�

*��

'�� !��

, � �� '��

��

�� !��.��" ��" � �� '��

2�� 0�� "

�� 2�� 0��

� ��'��

�� 2 �� "��)�

�� '�� *��

��

, ��

��'��

�� , � �� 6��

�� /��

��

��

��"'��

��/�� '��

�� '��

�� '��

'��

��'��

��" � �1��.�� #1.& ��

��'��

��, ��

�� 1. �� #��

��,��"? ��&'��

�� '��

�� '��

, ��

�� '��

��, ��" ��

��"�� "'��

��

��=�� 3��

��

��

��

;��

�� $��

��

��B��

� ��*!��

.��2��"��@��

��"��'��B��"� ��

��

4��" ��

��=��

�� *��

�� #,�'�� &�, � ��

'��

�� /� ��

�� '��

��!��"#$�!��"#$�!��"#$�!��"#$�!��"#$ ��%��&'��%��%��&'��%��%��&'��%��%��&'��%��%��&'��%��(��(��(��(��(�� )�� (�$*+,-$*++��$**,-$**+� ��)�� (�$*+,-$*++��$**,-$**+� ��)�� (�$*+,-$*++��$**,-$**+� ��)�� (�$*+,-$*++��$**,-$**+� ��)�� (�$*+,-$*++��$**,-$**+

��

��

��

!��

�"�� #$�%�#$$ �##�%�##$ �#$�%�#$$ �##�%�##$

& ��'�� $(�� ()�( ()�� *��

%A? @��( (�! ��!�� @@��4��>��"? �� +(� +�� +��>��"A�� @+�! +�� !�� 2�� @ +@�( �� ,��"? �� !(��

�+@��

'� ��

�(��

�

�!�� '�� )�� +$�� )+�, )+��

/�� +�! *�+ � �� !(��;�� @(�! +��( �� ;�� !+� *� �� (@��% �� @+�! �� @@��, �� @+�� *�� +��D��.�� @��@ !�* �(�� @*��

�!��'�� )��) +��+ �+#�+ ((�)

�� !!� �(�� (��/�� (�+ ��@ �� (*��.�� !��! ��+�� ((��%�3�� (�� ! �� 2��C��3� ! � +�� (��

� ��!*�' ��*�� ! �� *�

2��+ 9��"��,��"? ��"1��.��#��@&�9��,��"? ��E�� 2�� #��@& ��$�� "��"��2��#��( &��<��2��#��@&��

�� !"�

,��"? ��?��=��/��

�� 3��'��

�� % ��"� ��

��=��

�� 3� � �� " ��

�� '��

��C��

��#9��&�/�� 5��

��"��

��

5�� 6��" ��

0��6��

��"'��

��, ��

��

��;��

�� '��

'�� '��

, ��'��

��!��, ��'��

��0��"��2�� "��

�� 2�� "�� 9��

�� 2�� C��3�" ��"

��

�� '��;��)��

�� '��3��

��/��

��!�!'�� "� ��

�� + '��

�� =��

�� " ��

��" ��

� ��

?�� '��

�� #9�� *&� 2��0�

��

�� " ��

'�� " ��" ��E

%��)� A��'�� ? �� #%A?&<

4��>��"? ��<A��'��>��

# �� >��&<

,��"? ��< 2��< ��

, �� /� ��" ��

%�3��.��

�� '�� " ��

��8� ��

�� '�� /� /��" ��

�� '��

��'��

� �� '�� /�;��

% ��

'��A��

�� '��

/��

�� '��E��

�� '��

�� !'��

��

, � ��

�� 0� �� '��

��

�� , ��

�� 6��(��

�� 4�� >��" ? ��< ** ��

�� 2��< �� *( ��

��

�� " ��

�� C��

2��" �� " ��

��+�9��F��%��"��

�� '�� '�� " ��

2��)��"��

�� /��<>��<;��<,��"? ��<

��, �� +2��

��%��'�1.2��$��

1, �� /��0�� " ��

��

�� '��

��

;��

��'��

�� 8�� '�� "

�� "��'�� "� ��

�� '��

�� '��

�� , � ��

�� )��

��'��A��'��

�� '��

�� " '�� (��

�� -��/�

��(!2��2��C��3� �� '��

��

��'�� '��

��#$.%&"� ��

�� #,�'��*&�

B��

�� 3�?��

�� '��

�� '��

��, ��=��'��

��"��"� ��

�� '�� "

�� 4��" � �

��

�� '��'��

��;��3��'��

�'��'��

��=��"��"��3��

�� '�� , �

��

��

�� '��'��'��

�� )�

��/�;��"

�� " ��

�� %��;��;� ��

��

�� (��

�� -��

��" � �� )� ��

��

��

��

�� , ��

��

��

��

� ��'��

��%%�� %%�� %%�� %%�� %%�� '.��'.��'.��'.��'.��/�� /�� /�� /�� /��

��

��'�� 0�" ��

��

��'��

�� E

�� !"�

��* ��

*�*!� �� "/��";��"

;��".��"% ��"��D��.��'�

��!�� %�3��)��

�� '��#,�'��&�

$�� 3��

��

��"� �� '��

��, �0��

�� '��!��

*��!<��2�� *!��

��=��, ��<

�� 2�� 3��

�� #,�'��@&�

��0��0��0��.��.��0��0��0��.��.��0��0��0��.��.��0��0��0��.��.��0��0��0��.��.��

, � �� '�

��

#��* �� &�0��

�� " ��

�� " � ��'��

�� '��

�� '��

��"� ��

�� 3��

,�� "� ��

��

, � �� 3��

�� '��

� ��0��)��+�

��!� ��3��

�� @ �� * ��

#,�'�� !&� , � �� 2��

�� " � �� " ��

��@*��!��, ��

2�� "��@@

��@+��

��

� ��3�� 0��"

�� 3��, ��

�� *��!�, ��" � � ��

�� 3�� =��

��"��"�� %A?�

/��

�� 3��

�� '��"'��

� ��=��

��3��'��

��8�� "� ��

��!��"#1��00��0��!��"#1��00��0��!��"#1��00��0��!��"#1��00��0��!��"#1��00��0��.!��&'��.�� .!��&'��.�� .!��&'��.�� .!��&'��.�� .!��&'��.�� )��0(�� )�� (�)��0(�� )�� (�)��0(�� )�� (�)��0(�� )�� (�)��0(�� )�� (

$*2+��$*2*$*2+��$*2*$*2+��$*2*$*2+��$*2*$*2+��$*2*

'��

�� !�� '��

� ��"��!� ��-./

!��

�"�� #*$ �#*# �#*$ �#*#

& ��'��

%A? (�� (�� +4��>��"? �� * �� >��"A�� +�� *�� @ ��*2�� @ �� ,��"? �� *��

�!�� '��

/�� *�� * ��;�� *�� *�� *% �� *�� @�� ! ��, �� @�� @�� @ ��D��.�� !�� !

�!��'��

�� (�� +/�� *�� +.�� @�� 2��C��3� ��

�� .�� '��

2��+ A��";��"��;��#��",�'��*�"��*�&<2��,��#��",�'��@&�

'�� !� �� ! � � ��

�� '��, ��

�� ";��" % ��" ��

, ��"� ��

%�3��6��, ��0�:

�� "%A?"/��"/��"��%�3��:

��'��*� '�� !"

�� '��!��

A�� 3��

��0��/�0��

��'��'��+�"��2�� '��+!"��

�� 2�� '� ��(!� 9�� !�*�� =��

�� '��

�� %A?<4�� >��" ? ��< >��< 2��<

2�� C��3�<,��"? ��<��, ��/��)�

�� '��!��

��/��)��'��+��"

��

��

��!��"#"��!��"#"��!��"#"��!��"#"��!��"#"��'.��/��(�� )�� (�$*+,-1,1+�'.��/��(�� )�� (�$*+,-1,1+�'.��/��(�� )�� (�$*+,-1,1+�'.��/��(�� )�� (�$*+,-1,1+�'.��/��(�� )�� (�$*+,-1,1+

'�� ##$��!� ��

!�� " /��!� ��##$

�� !� �"�� #$� �#(� �#*$ ,��$ ,�,$

& ��'�� ($��+� ��# ��(� ��#� ��( ��(

%A? �"**�"@ * @! ( (( �� *!4��>��"? �� !"( ! �@ + �� >��"A�� @@"��! @! +� �� *�2�� *"(@( � +� �� + ��(,��"? �� *�"�!� �! � �� *�

�!�� '�� )+$��(, ��+ ��$* ��*, ��* ��)#

/�� +"!(( @� � (! ��! ��;�� *�"�@� �� !@ +( �*� �!+;�� @ "!*+ �( !( (� �** � *% �� +"!(� �� ! (� �*� �!!, �� !("+�� @ � (+ �� *!D��.�� +@"!@! @� !+ (� �** �!(

2�!��'�� ,�+�#)+ ��+ ��$+ ��*� ��,� ��+(

�� *�"@�� ! !! (* �*@ � �/�� !"+@@ �( !� (* ��( �@�.�� *�"��( � !* ++ �*( �( %�3�� @�"@�+ *( @+ +� ��* *��2��C��3� �("�!@ @* ( (( ��* ��

2��+ 9��,��"? ��E1��.��#��@&<��,��"? ��E?��0��%�� #��&�

� �� 2�� 2��

��, ��:/��"2�� C��3�"��

D��.��:��

��

, � ��

��#��&��

�� *�*!"��

'��+�#,�'�� &�

9�� "��

�� !��

'�� 0��#,�'��

��+&�8� ��" � � ��

��'��'��+��!"��@��

�� + �� B��"

� ��@�� " ��

�� "��'�*�*!��

��B��'��

0��

�� 0��" '��

��

��!��*�*!� ��

�� ! �� '�� 2��

��@��+��2��

#,�'��+&�0��

��

�� "��

��" �� "��" ��

�� -��, ��

� ��

��'��

��

��

��, ��

��

3��"�� " ��"��

�� !"�

��!��"#3��/��%�4�!��"#3��/��%�4�!��"#3��/��%�4�!��"#3��/��%�4�!��"#3��/��%�4��5��0-��5��0-��5��0-��5��0-��5��0-�0��0��0��0��0��'.��(�� )�� (�$*6,-1,1+�'.��(�� )�� (�$*6,-1,1+�'.��(�� )�� (�$*6,-1,1+�'.��(�� )�� (�$*6,-1,1+�'.��(�� )�� (�$*6,-1,1+

0��1��% � '�� ##$�2 �!

!�� !� ��##$

�"�� !� �"�� #(� �#*$ ,��$ ,�,$

& ��'�� ((,�� $, *� ��

%A? +* "**@ !� ++ �� *�4��>��"? �� "+** !� (� ��( �@>��"A�� *+"�� !� (� ��* ��(2�� "(�� !� ( �� ,��"? �� *" ( !� (@ ��! ��

�!�� '�� ,�$�#�, )# (+ �,+ �*�

/�� *"(!� !* + �*! � !;�� "((@ @! +@ �� *;�� **"!!� !@ ++ �* �� % �� *"��( @+ ++ �� *, �� "�!+ @� +! ��+ ��@D��.�� !"�+� !* +@ ��* *�@

�!��'�� +�(�(*) $, (+ �� ,�+

�� !!" @� !� +� ��+ *� /�� @+*"@@@ !@ +( �*! �+(.�� "!!� !! ++ ��@ *��%�3�� "��@ @� +* ��( *!�2��C��3� �"(@! !+ (� �*� �!�

3��+ , ��3�� *�� @�

2��+ 9��,��"? ��E1��.��#��@&<��,��"? ��E?��0��%�� #��&�

��"��

�� '�� " ��" ��

��4��

��

��

9��

�� 6�� '��

� �� 5 �� "

��

��"��"��'��-��

'��

, � ��

��

�� '�� '=��'��'��, �

�� "��"

�� '��, � ��

��

��'�� '��'��

�� "

� �� '� � �� " ��

�� "��" ��

��7, �� '��

��

C��

� �� " � � ��

�� -��

��"� ��"� ��

��! �� ! �� @�5 ��

� �� "� ��

�� '��

��3��4��

'� �� "��

'� �� " � �

��'��3�� '��

��" �� "

��

��

��,��3�!��4�� 5��'�� !��!�

��'�� , � �� '�� >��, � �� '��E� �� 3��#*�� @&"��#��*�&"��# !��&"��!��=�� *�!��

,�� , �� 3��1��"�� '�� 3�� /��+�� '�� "�� !�9�� '��6��*!�� 3��/�*�*�� '��"��'��"��'�� *�� 3��'��'��!�� , �� 3��

��'��"�� 3��@��

, � �� '�� /��!��(�� " ��!� �� +�� " ��'� *�!�� '��, �'�� 3�� '�� *�*!" ��">��)��'��2�� '��" �� " �� '��"'�� '�� 2��"��"��

4��" �� '�

� �� '��

��%�� '��

��

��'�� 3��

4�� '��

��

�� " ��"

� ��

5 �� '��

��3" ��

�� '��

��4��

��

�� " ��

'��

� ��4��

��

��

� �0�� #��

��&�� "

��

��" �� '��

'� �� '� � ��

��

�� !"�

,��0��'��

�� '��

� ��"��" ��

��

��/��)��/��/��)��/��/��)��/��/��)��/��/��)��/��%��%��%��%��%��%%��7��0%%��7��0%%��7��0%%��7��0%%��7��0

8��)� ��

� �� , ��

��'��

��#��&��

�� "

�� "��

�� , ��'��

��

� ��)��

C��

�� , �

��'��, �

��" ��"��

5 �� 3��

��'��

�� "��

� ��'�� , ��"� ��

��3��

/�� "��

��

%��#'��3��"

��&��'��'��

�� #'��"��&"��

� �� /��

��" ��"� ��

��'��0��

��/��

��"� ��'�� 3��

�� '��

��, ��

��

, ��

��

�� '��

� � � �� /� �� '��

�� #��

��&" ��

��/��'��

��"��

��, ��

�� '��

� � ��

��!��"#+��4�!��"#+��4�!��"#+��4�!��"#+��4�!��"#+��4��5��0-��5��0-��5��0-��5��0-��5��0-�0��0��0��0��0��'.�� '.�� '.�� '.�� '.�� '��%��'��%��'��%��'��%��'��%��'.��(�'.��(�'.��(�'.��(�'.��(

�� )�� (�$*6,-1,1+�� )�� (�$*6,-1,1+�� )�� (�$*6,-1,1+�� )�� (�$*6,-1,1+�� )�� (�$*6,-1,1+8'��9

!��

�"�� #(� �##$ ,��$ ,�,$

& ��'�� )$�# +��+ +��( $#��

%A? @!�� !��! ��* ��4��>��"? �� @(�� ! � !(�+>��"A�� @@�( *�� 2�� @!�� @�@ !+��,��"? �� @!�! !�� *�( !��

�!�� '�� ),�� $��, $��+ +��

/�� @@�( !*�� ! �! ��!;�� @��* @�� !*� ��*;�� @!�� @(�! !�� !(�!% �� @��! @+�( !��@ !��*, �� @��* ! �@ �� D��.�� @*�@ @+�* !��* ��

�!��'�� )��+ )(�) $��* $(�#

�� @�� @ �* !��* ��*/�� @ �� !��! !��@ ��!.�� @!�� @�� @!�( !@�+%�3�� + @*�� @@�� !�� 2��C��3� @@�( !�� !(�+ !��

3��+ , ��3�� *�� @�

2��+ 9��,��"? ��E1��.��#��@&<��,��"? ��E?��0��%�� #��&�

, ��

��, ��

��"� ��

�� '��, ��

�� C��

��5 ��

� ��

�� "��'�

��"��'��/��

�� "

��

��< �� " �� =��

� ��

�� "��=��

� ��

��

��

��" � � ��

��

4��

�� 7, ��

��

�� '�� '��

��"� ��-��"

�� 9��

��"� ��

��'��

��

��"��

�� '� ��

.�� "��3��

��

�� '��

��"��0��

��7��0��7��0��7��0��7��0��7��0��7� ��%��0��7� ��%��0��7� ��%��0��7� ��%��0��7� ��%��0�

��

� �� "'��

� ��

� �� '�� '� �� /��

��

� ��

��%��

��

, �� '��

��

�� ? �� '��

��%��

��

�'��

��

��

�� '��

, � ��

�� '��'��"

�� " ��

��

� ��!�� C��

��" �� "��

��

G��H� ��'��

�� /� ��+��

(� ��

,��"? �� "

�� 9��

�� "� �� /�� (��

� ��

� �� + �� /��"

(* ��;��"��*��, ��

4��" ��

��

��, � �� '��%��

��

�� , ��

��"��

�� '��

��

, �� '�� '��

�� "� � ��'��

� �� '��

, � ��

�� 1�� "��

��!��"#:��;�!��"#:��;�!��"#:��;�!��"#:��;�!��"#:��;�.�0��'�� .�0��'�� .�0��'�� .�0��'�� .�0��'�� 0��%��0��%��0��%��0��%��0��%��'.��(�� )�� (�$*6,-1,1+�'.��(�� )�� (�$*6,-1,1+�'.��(�� )�� (�$*6,-1,1+�'.��(�� )�� (�$*6,-1,1+�'.��(�� )�� (�$*6,-1,1+

8'��9

!��

�"�� #(� �#*$ �##$ ,��$ ,�,$

& ��'�� $�� (�, ��, ,(�� ,,�,

%A? !��+ @*�@ �@�@ ��! * ��4��>��"? �� @+�� *�� * �@ *�� +>��"A�� !�� @�� *�@ *(� *!��2�� !��+ �� *��+ * �� **��,��"? �� !�� ! �� *+�( *��

�!�� '�� $)�$ )#�+ )$�+ )��) ��#

/�� !*�� @�� @�� (�� *;�� !!�@ @��@ @+�� @*�+ ��!;�� !�� !�� @+�! @!�@ �!��% �� ! �( !��+ @(�( @@� ��!, �� ! �( @+�@ �(� �� *(�@D��.�� !�� !*�* @+�� @��( �*��

�!��'�� $�� $��) )*�( ))�( �$��

�� !@� !!�( !��+ @!�@ ��/�� !�� @+�� @@�� @�� *.�� !��+ !@�� !�� !�� @��+%�3�� !+�� !@�( !@�� !�� @��@2��C��3� !�� @@� @��! �@�@ *��

3��+ F��

2��+ 9��,��"? ��E1��.��#��@&<��,��"? ��"?��0��%��#��&�

�� !"�

��

��(* �� +� �� '��+�

��( "��

� ��

�� (��

? ��"

��"��'��

��

��

� �� )� �� /� � � ��

��,��"? ��" �� " � � ��

��

�� '��

��" '�� 3��

��

��9��

�� '��

�� #��

��& ��

��"'� ��'��'��

��

�� #� ��" � ��&

� ��

��

�� " '��

��" �� , �

3��

��

��

��'��"��

��

, � ��

�� " � � ��

� �� /�

��

� �� " � ��

��

5��

��"� ��

��

,��"? �� 3�� "� ��

�� '��

�� '��

��'��*��'��+��

��!�� '��

��

� ��

��/��

��"� ��

��

��!��"#6�� !��"#6�� !��"#6�� !��"#6�� !��"#6�� '��%��'��%��'��%��'��%��'��%��'.��(�'.��(�'.��(�'.��(�'.��(�� )�� (�$*6,-1,1+�� )�� (�$*6,-1,1+�� )�� (�$*6,-1,1+�� )�� (�$*6,-1,1+�� )�� (�$*6,-1,1+

8'��9

!��

�"�� #(� �#*$ �##$ ,��$ ,�,$

& ��'�� ( $�$ (�, #�� (�+

%A? @�� !�* �� +�* ��4��>��"? �� @�� +�! ��* �*�( *@�!>��"A�� @�� !� +�( �@�*2�� @ !�* �+ (�+ *��,��"? �� *�� !�� +� ��@ �+�*

�!�� '�� , ��+ )�� $�� *�,

/�� @�� !�� (��;�� @ ��+ �� @�+ (��;�� + ��( @�� @�! ��% �� *�+ *�� @ @�� +�*, �� !�� @ ��D��.�� @�� @�! @�� !�� +��

�!��'�� ) ��$ )�� )�$ (��

�� ! ��* �� @ !�(/�� + @�* @� !�� (��.�� *�� *�+ ��@ �� @�!%�3�� * *�� * !��2��C��3� �� @�+ !�( ��

3��+ , �� !��

2��+ 9��,��"? ��E1��.��#��@&< ��,��"? ��E?��0��%��#��&�

��"��

��3��C��

��

��

, �� 3��

��3��'��3��

�� +��

��

/��

�� 9��

��" ��

��1��

��"� �

��

��

? �� 0��

��

� ��/�,��"? ��

��

�� /��3��

��"� ��

��"��"� ��

��"��

� �� 3��

��

��.�.��.�.��.�.��.�.��.�.�� 7��0�� 7��0�� 7��0�� 7��0�� 7��0

, � �� -�

�� '��

��

� � �� '�� ,��

��"��"� �122��2��2��

�� % �� " ��

��3��

��, ��"�� "��

��

�� 9�� " �� 2��)�

?�� %�� 9��" � ��

��'��

��" ��

��

�� '��

��6�� 2��7�"�

�� "� �� 3�� 3�� "��

5 �� '��" �� '��5 �� 7/��"�� "��'�� "��"�� #��"��&��

, ��'�� 3�� 2��'�� "�� " �� "�� 3�� , �� '�� 2�� "� ��'�#��&�� "��3�� "�� 6�� 3��

$��"��'�� )��, �� "��3��"� �� /��

�� !"�

��

��9��"��'��

��"�� /�

�� '�� "� ��

� �� 6�� 3��

/�� 6��

��, ��'��

��'��2��"� ��

�� , ��

��0� ��

��

��

��4��"� ��6��

�� 8��

�� '�� #��

�� '�

�� &" ��

��6��

C��

��

��

��B��"��"

��

��

'��'��

B�� " ��" ��)��

�� , ��

��"� ��'��"� ��'�

�� 5��

��B��"�� '��

��'��

��'��

�� , ��

�� " ��

�� '�� '��

B��2��3��

��,��

��,��"? �� #9��

�� @&��

�� ,��"? ��

�� %��'��

��'��

�� 0�"��"%A?">��"��

'��2��" '��

��

��2��

��3��

5 ��

��"��'��

��

��"2�� G�� '��H

��

� � � ��

�� "��4��"��

��

��

� ��3��

� � �� ?��

6��"�0��

� ��

�� <� �� <� �� <� �� <� �� <� �� 4�� 4�� 4�� 4�� 4��

, ��

��'��

��'�� 3�

�� " '�� '� ��

�� $��

��

� � �� 0��" ��

��'��3��

��3��

, ��'�� -��'��

�'��

��)��

��

��3��, ��'�� 3��

��"��

��"�� )��

��3�� '��'��'��

�� , ��

�� '��

�� '�� -��'� ��

��'��

;��0��6��

�� '��

��0��E��

��'��

��<��'�� '��

�� 3��<�� " � ��

��'�� <� ��

��

��'��

, � �� 3��

�� '�� )�

�� " � ��

� ��A�� '��

'��

��

2��5��5��//��

�� -��3��#,�'��

��(&�9��+��!� ��0� ��'��

�� '��*��@�!��, �

��'�� %�3��

��!��"#2��!��!��"#2��!��!��"#2��!��!��"#2��!��!��"#2��!��/�� (��/�� (��/�� (��/�� (��/�� (�� )�� (�$*6,-$**+�� )�� (�$*6,-$**+�� )�� (�$*6,-$**+�� )�� (�$*6,-$**+�� )�� (�$*6,-$**+

8'��9

!�� #(�% �##�% � ��##$8

�"�� ##$ �##$ � ��#(�

& ��'�� ,�$ ��$ ��*+

%A? *�� 4��>��"? �� *�! �� (�>��"A�� *�! �� (�2�� *�( ��+ ��

�!�� '�� ,�+ ,�� #�

/�� *�+ *�! ��@;�� *�+ *��!;�� *�� ( �� % �� *�( *�+ *��*, �� *�+ �� !D��.�� *�@ �� (*

�!��'�� ,�# ,�) ,��#

�� @�� *�� *��*/�� *�� *�� + .�� *�� *�@ �� %�3�� @ �� *��+2��C��3� *�* *�� +�

2��+� 5��3#��+'&�

�� " �� '�;��

% ��C�'��

��0��"��! ��

�� !"� �� 2��

2�� '��

�'��*��"��

��, ��

A�� '��

�� +�

��!0��'��=��'��

� � �� *�� @�, �

2�� '��

� �� 3�� 2��

��'��

��"�� '��3��

��'��" ��

��'��

��

$�� 3��

�� '��

�� !"�

�� '�� < �� "

�� "/��">��".��"%�3��"��

2�� '��

�� '��

.��

��'��

� �� '��

��< � �� " � ��

��

�� /�� " �� " � ��

��'��

��3�#��

��"��"��3&

� ��'��

, �� '��

�� '��E � ��

�� '�� ! � ��

'��+�� "��

��'�� /��'��

��

��!��"#*��!��!��"#*��!��!��"#*��!��!��"#*��!��!��"#*��!��=�� (��=�� (��=�� (��=�� (��=�� (�� )�� (�$*2+-1,1+�� )�� (�$*2+-1,1+�� )�� (�$*2+-1,1+�� )�� (�$*2+-1,1+�� )�� (�$*2+-1,1+

� ��9��"�

� �� ##$�:��

!�� ##$

�"�� #*$ ,��$ ,�,$

& ��'�� (�$�) *� ��, ��*

%A? +�� (� ��* �*�4��>��"? �� >��"A�� *�� (� �� *@2�� @ �� ,��"? �� (! �� *

�!�� '�� ,�*�( (( �,$ �(�

/�� ((�+ +( �*� � �;�� (�� + �� ((;�� *�� +( �* ��*% �� *(�� ++ �*� ��, �� ( +� ��@ �*�D��.�� + �*( �(�

�!��'�� $,,�, (* �,# �#)

�� !�� +! �� /�� (�@ +� �*@ �+�.�� + ��* *�!%�3�� @ �� +� ��( *@�2��C��3� +�! (@ �*� �@

�� .��'��

2��+ ��! ��E5��3 #��+'&< ��=��E ��

��!��"#$,��4�!��"#$,��4�!��"#$,��4�!��"#$,��4�!��"#$,��4�)�� )�� )�� )�� )�� 0��%��0��%��0��%��0��%��0��%��!��!��!��!��!��(��(��(��(��(

�� )�� (�$*6,-$**+�� )�� (�$*6,-$**+�� )�� (�$*6,-$**+�� )�� (�$*6,-$**+�� )�� (�$*6,-$**+

!��

�"�� #(� �#*� �##� �##$

& ��'�� + �*�) �#�# �#�#

%A? @��+ @@�� @!�+ @ ��4��>��"? �� @�+ �@�* � �+ � �@>��"A�� *�� (�+ �� @��!2�� *!�� +�� (

�!�� '�� #�� )��+ ),�� ),�(

/�� * �!�( ��! @�� ;�� + �!�+ � �(;�� @@�@ @��+ @@�� @@�+% �� *�� !�� * � � , �� @(�* @+�@ @ �+ @+��D��.�� @+�+ @(�� !�� !��*

�!��'�� ,��+ �� )�+ �$�*

�� !�@ @�� @��+ @*�*/�� *��@ ��( ��* �*��.�� @ @�� @��!%�3�� *��@ * �� *(�!2��C��3� *!�� *+�� @� �!�+

2��+ 5��3#��+'&�

�� '��8��

�� " � � ��'�� 2��

��*!��'��

�� 9��

��2�� '��

��/�0��

�*��#,�'��&�

, �� '� ��

��'�� '��

�� '��#,�'��&�

, � �� '��

�� /��+��"��

�� 3�� '� �� '�� /�

2�� ,��"? ��" �� " ��+�

��'��6��3��

, � �� '��

� �� '��

��

, ��'��3�� '��

��

��'��

��"��'��"

�� '��

;��

�� %A?��/��/�/�� '��

��"� �� 3��

��"��

�� '��

8� �� "��"�� "

/��"%�3��"��% ��"��

��/�� %A?� ��

��

�� 4��"� ��

��'�� 3��

�� '�

�'��'��

��

��0��2��

�� /� >��" �� " � � ��3��

��'��'��

��9��'��

��'��<��

�� 3�� , �

�� '��

� �� '�� 3��

�� >��)� ��8� � � ��

2�� ", ��3��

�� '��3��

�� , ��

��'�� 2��

��

��< ��"� �� '��

�� 5 ��

�'��'��

�� 2��

��"� ��

��

A��'��

�� 2�� 2�� "

'��/�0��"��'��

�� !��

�� '�� !��

��6��"� ��'��3��

��'��*��

/�� "� ��

��

�� 3��

, ��3��

��!��"#$$��0��.��.��!�� !��"#$$��0��.��.��!�� !��"#$$��0��.��.��!�� !��"#$$��0��.��.��!�� !��"#$$��0��.��.��!�� 0��%��0��%��0��%��0��%��0��%��!��!��!��!��!��(��(��(��(��(�� )�� (�$*6,-$**,�� )�� (�$*6,-$**,�� )�� (�$*6,-$**,�� )�� (�$*6,-$**,�� )�� (�$*6,-$**,

!��

�"�� #(� �#*� �##�

& ��'�� * ,*�# ,��,

%A? +(�� +!� +��!4��>��"? �� @�� >��"A�� @�� +�� (��2�� @ �� @

�!�� '�� +*�* +,�� $+��

/�� !(�� ! � ;�� !��+ @��( *+��;�� +(�@ +!�( +��% �� !+�� !*�� @!�*, �� +��( +�� (D��.�� + � +��* +��(

�!��'�� (,�� (��+ +$�(

�� (��@ +�� /�� +�� + @��.�� @�@ �!�� !�*%�3�� !(�( ��( ! �*2��C��3� !!�� !*�� @��*

2��+ 5��3#��+'&�

��3��"� ��

�� '��

�� '��

�� 3��

��/�� %A?��2��

��2�� "�� 3��

�� +��

��#,�'��&�? ��

��

�� '�� -� ��

��/�>��"� ��

��'�� +��

�� *� �� /� �� "

�� 3��

�� /� � � ��)� �� "

�� 6��? ��3��

� ��/��3��, ��

��3�� '��

�� '�� -��

��

�� !"�

� �� , ��

��:�� "/��"/��";��"

% ��" ��D��.��:� �� =��

��+ ��

��!�*��!�/�>��";��".��"

%�3��"2��C��3�"��, ��"� ��3��

��

��'��@��

, �� '��

��'�� , �

��3�� 6��3��

�� '��

�� /��" ��

��'��

�� 5 ��0� ��

�� '��"� ��

��

��/��" ��

��

��

��

/�� "��'��

�� 9��

�� "��'��

��

4��"� �� '�� '��

'��'��

� ��

��'��

��-��

�� ;�<�� ;�<�� ;�<�� ;�<�� ;�<;;;;;��

, ��

�� 6��

��'��"'��

� ��

��,�� "��)��3��

��

��3�� /�� 3��

��

�� , ��

��'� �� '� �6��3��

��"� ��"�� "'��

��'�� '�� 3�

�� "3��"

�� 3�� 2�� " ��

�� #�� &"��'��

�� "��

��"��

��3��'��'��

��

�� 4��" � ��

��

�� E��

�� '��

�� " � �� " ��

��'��, �� 6��

�� " �� 3��

�3��

/� � � �'�� 6��

�� "��)� ��

��'��

��

�� /��" � � ��

�� 0��

��

��

��'�� 0��

��'� �� , ��'��

� � �� /��";��"

% ��" ��, ��

��8��

�� 2�� '��

� �� "'��

�� 3��

�� G��H��/��

��"��3�� 6��

��3��

��) ��'� �� '��

��

��

�� %A?" /��" ��D�� .��

��3��'��

5 ��

�� 0�)�� "� ��

��

�� , ��'��

��'��

�� 0�"� ��

�� 8��

��

��

�0�"'�� 3�'��

��

�� '��

� ��'��'��

��

�� ;�� ;�� ;�� ;�� ;��

, ��

�� 0��

� ��

�� '��

�� '��

��4��4��4��4��4��5��5��5��5��5�� .��7��.��7��.��7��.��7��.��7�

0�� "��

��3��"

��'��"'��

�� 7��'��3��#��((&

�� /�� , �

��

��3�� +!��++ ��

�� %��

;� �� " ��

��/��

, ��'��3��

�� '��

#�� "

�� '��" �� &�, ��" '� ��

�� "��'��

��, ��

� ��

��, �� 3� #� � ��

��& ��/��"� �

�� 3��"

�� '� � �� " ��

��, ��

��'��3��

� ��#��

��&"��

, ��

�� '�� '� ��

�� '��)��3�

��

�� '��, � ��

� ��E�� #'��

�� 3�& ��

��

�� 3�" �� "��

��"�� "��"� ��

�� '��

� �� 3�"��3��

��"� ��

8� ��

�� "/��"

% ��"2��C��"��2��C��3�"��

��

��'��"��

��, �� "��"

�� 3��)��"��

��'�'�� " �� 3��

�� "��

�� "��3��

, � ��

� ��

�� :��

��6��3�"�� "��

�� '��:�� '�� /� ��"

��'�� 6��

��

� ��)� ��

��"'�� '��

'��

, � ��

��

��"��

��?��6��"� ��3��

��'��3��0�)��

�� " '�� "

��3�� '��'�� '�

'�� 3��?��6��"

�� 3��

��

��

$�� " '��

��

��"� ��

6��E5 �� 0�7

��%�� %�� %�� %�� %��

��

��0��

��"� ��'��

��"�� 0��

��"��

��'��

��#��2�� &�

4�� '��

�� /��"��3��

�� "� ��

��0��

�� !"�

2�� C��3�)��, ��'��

�� ?��'��" /��" ��% ��

�� '��

��

, �4/DI/�2��3��

��'�� 0��

� � �� " ��

�� '�� 0��

�� '�*��" �� 4/D��

'�� 0��,�'��*� ��

�� /�2 ��'�� 0�" ��

?��'��";��" 2��" ��, ��

2��

�� 4/DI/�2��

��?��'��, ��

�� 3�� '�

�� /�2

�� 8��, ��

�� "

� �� -��'��

��-��

.��1/��*��4��!�4��

��

�� "��

� ��

�'�� '��

�� " ��

�� '��

�� @� ��

!��'��0��0��

4��>��"? ��<>��<;��< 2��<

2�� C��3�<��, ��'��

��

�� "%A?"/��"/��"% ��"��

D��.��.�� " ��

�� '�� 3�'�� 2��

��" ��" �� ?��'��

C�� %��)��A��'��#C��%�A& ��

��

C�� " ��

��"��

� � �� C��

�� " '��

�� '�� "

?��'��" C�� %�A" %�3��" �� % ��

��

�� '�� " %A?"

>��";��"2��C��3�"��, ��

��

��

�� 3�'��

��@��!��"�� 2��C��3�"

�� 2�� "?��'��"

C�� %�A"��;��'��

#�� '�2� ��

��&�

*��!��'��

��'��, ��'��'��'��

�� "��'��

'�� "

'�� 3 ��, ��

'�� ,�'��*"� ��

�� /�2" ��'��" ��

�� 0�� 9�� " � � ��'��

2�� C��3�� "

'��

��!��"#$1�� !��"#$1�� !��"#$1�� !��"#$1�� !��"#$1�� '�� %��(�'�� %��(�'�� %��(�'�� %��(�'�� %��(��.!��.�� (��(.!��.�� (��(.!��.�� (��(.!��.�� (��(.!��.�� (��(

�� )�� ;�� )�� ;�� )�� ;�� )�� ;�� )�� ;�� 8�.)!��%�� '��$,,(,,,�'��'��9

!�� '�� !��!�� 7 � ��

�"�� ##$� ��##)� ��##,�

& ��'��

%A? �� !�+4��>��"? �� ( �� >��"A�� (!�+ ��2�� *�� !�� (

�!�� '��

?��'�� !!�� "��!� /�� *!�! +*��C��%�A �� *@�� ((*��;�� + !��@ *�*�!;�� !�* *!@��% �� *+��* �+��, �� ! (*�+ ��@D��.�� * +��! *�!�

�!��'��

�� @��@ ��+� /�� **�� *@�� %�3�� (2��C��3� �� !�� *"�@!�@

�� .�� '��

2��E 1��.��%��#��+&�

��

�� 3�� '��

��'��

� � �� 4��" ��=��

�� '�*��"��

, �� '�� '�

4/D��

�� '��

4�� 0��!��

��

��

��

��" �� 0� #��

;��& ��

��+!�� 4��"� ��

��

�� "�� 6��

� �� '��

�� /��"

% ��"��, ��/�/��

�� " � ��

��

��/��)'��7��/��)'��7��/��)'��7��/��)'��7��/��)'��7��

0�� '�� 6��

�� " �� -��

��"��'��

�� " ��'��

��

�� 0��

/��" �� '��

�� %A?" 2�� C��3�" �� /��

>�� '��

��

� �� -��

�� 3

��

;��0� ��-�'��

��'�� '�� "��

��

��

�� 4��" ��

��'��<

��6�� -��'��6��

��<��

��"� ��

��/�� "��

�� >�� /��

>��

�� 3�� /��

��2��" ��

��/��, ��

�� >��)� �� "

�� '�� -��

�� "

��'��'�� )��

�� , ��

��"�� 3��"��

'� ��

��

, ��

��

D��.�� 0��"� ��

� � �� '�� #,�'��

��&� � � � �� "

;��" ��% ��"� ��

�� , � ��

��" ��" � ��

��!��"#$"�!��"#$"�!��"#$"�!��"#$"�!��"#$" ��'.��'.��'.��'.��'.�� .� �(��.� �(��.� �(��.� �(��.� �(�� .�� (�� .�� (�� .�� (�� .�� (�� .�� (

$*22-$**$$*22-$**$$*22-$**$$*22-$**$$*22-$**$

!��

�"�� /�� /��!��

& ��'��

>��"A�� "*�! �"!�(2�� +*! ��

�!�� '��

/�� +"�@� *"(!+C��%�A @"!@! ��;�� *"! @ ��;�� *"!�� % �� ("�� , �� @"+ * �"� @D��.�� *@+ �"�@�

�!��'��

�� *"!�� *�"�� "�� " +/�� *"@�� "��.�� " + ��"��%�3�� *"�� "@@(2��C��3� +"�@� �"+!@

�� .�� '��

2��+ 1��.��%��#��+&�

�� !"�

'�� '��

��)�� /��"��

�� '�� '��

� �� '�

��

5 �� '��

�� )�

�� " �� '� �� 9��

�� "��

��

�� -��

� ��

'��

8'��" ��

��

��)��'��"��

��'��4��"��

� ��

�� '��6��

'�� 9��"� ��

��

�� -��

��

�� " �� %A?

��2��C��3�"��"

'��

��0��

�� /��"� ��

�� '� �� !� /��

�� .��

��

�� "��

�� "��

�� "'��

�� 3�� '��

��

��#��$��0��/�2��

�� "�� 6��

�� "��'��

�� ;��

� �� -�� " ��

2�� " ��

��

��'��

��

��

, � ��

��

'� � � �� 3��" '��

��

�� 9��" ��

�� %��=�'"� �� 3��

�6��

��"��'��

��

�� %�3��)� ��

��

�� '��"��

�'�� '��

0��

��" ��-��

'��

��

��

��'��"��

�� '��'��

�� )� ��

��'�� 3�'�

��

��-��.��5��$��6��!

9��'�� -��

�� " ��

�� "�� " ��"

��6�� 2��" ��

��

��=��'��-��" ��

��'��3 ��

��" � ��

�� '��

�� 9�� " ��

=�� 3�� /�� '��

�� (+�

�� -��

�� '�� '=��6��

��

� � � ��

� ��

��"��3��'� ��

��

��" � � �� -��

��3��

��/�� "� � ��

'��

� �� 6��

�� '�� 4��

��-��

�� "� � ��

��'��'��"

��

�� , ��

��"� ��

�� '�

�� " �� '��

��-��'��

��"��

��"��

��'��" ��

��" � � ��

�� '��

, �'��

��

��"��

��

,�3�� /��" � �'��

'��

��"� �� '��(��

'��(@I(!��(+I(("��

��"� ��

�� '� �'�� ( ��

��A��

��" ��"��'��*��

�� C��

��

��6��

�� /� �� " ��

� �� "��'�'��-��"

��

��"�� "

��'��"��"��

��=��

�� ;�� ;�� ;�� ;�� ;��

��" ��" �� " ��

�� 6��

��3��3��"��'��

�� 3��

�� " ��

�� , ��

� ��

��

��.��4��.��4��.��4��.��4��.��4��5��5��5��5��5��

,�� 3��) ��

�� 7 ��

�'�� '��

��"��'��

��

��, ��

�� '��

�� '�� '��

��

�� '��

��3� �� 0� ��

��

��

�� '� � �� A��

��

'�6�� "��

�� '��

��2��

��

��"��

�� " � ��

�� 6��/��

�� " �� -��

��'��"��

��

�� -��

��

6��6��0��"��$��

0��!�, � �� '��

�� 0��

��'��

� �� =��'��"� ��

�� '��

�� -��

�� 3�� 5�� "

��"� �� "��

'��"��

� ��'�� "

� �� " �� 0��

��"� ��'�� '��3

� ��" ��'�� 3��

��=��"��'��

�� "� ��

��

9��"� ��/�� '��

�� '��!��

'��(��(+#� ��/��)�

��=��&"� �'��

��'��'��

�� "� �� '� +!��"� ��

�� '��*� ��

, �� '��

��'��3��

�� !"�

� �� 2� ��

�� '��

��"� ��=�'��, ��

� �� 1�� 2�� '��

�((� �� *�"� �� 6��

��

�� '��, �� '�

��

�� '��

��0�" ��

'��

, ��

��3��

��.��

��'��0� ��

��'��

��

��

�� /� ��" ��

��

��

��'��

��

�� " ��'� � �

�� "��'��

� � �� '��

�� '�

�� 2��/�;�� #��!& � ��

��" � ��

�� '��6��

��

4��" ��

�� "� ��

��

�� 5 ��

�� '��

��'��"� ��3'��

�� 0��

��

��@��!��@��

��

�� !��

��

, � ��

��E �� '�� 3�

�� "��"

�� 3�� '�� '��

�'��

��

�� 4��"

��

0��

��

�� , ��

��'��0��

��

�� @��, ��

�� 3��

�� "��

�� 3��

��

��

'�� '�� '�� "

'�� '��

�� '��

, ��3��

�� 0��

�� " ��

��

�� A��>��"

;��" ��, ��

��

�� *" !" �� " ��

��, ��

�� " �� " � � ��

�� "� �� '��

��3��-��

A��

�� " ��

�� "� ��9��"� ��

��

*! ��

/��

?��'��

5 ��

�� 7

/��

� �� "��

��"� ��

��3��

�� '� ��'��, � ��

�� '� ��

�� ?��'��

/��

��=�� 9�� " � ��

�� "��

�� " �� '��

!� �� "� ��

��

��.��.��.��.��.��)�� )�� )�� )�� )�� 0��0��0��0��0��'�!��)��/��'�!��)��/��'�!��)��/��'�!��)��/��'�!��)��/��

5 ��

�� '��3�� 3��

�� "��3��'��'��3

�� '��"� ��"� �

��'��

� ��

��

��:� � �� 5��

�� 6��3��"�

�� '� �'�� '��

��

, � ��3� '�� " ��

��'��" ��

��

#AJ�& ��5 �� '� �'��

��:��

��" ��" ��:��

� �3��3��'��6��

AJ��" ��

�� 0�7

/� ��" �� 3��

�� '��

��AJ��

/�� "� ��'��

��

� � �� AJ��

'�� *! ��9��

�� AJ� ��

� ��, �� '��

�� /��

��

��*!��(��

, �� AJ� ��

� ��0�� '��3��

�� 3 ��

AJ��'��"��

�� '�� '��AJ�"� ��

��

��3��"�� AJ�

�� AJ�"� ��

��

�� "��

9�� 0�"��AJ��3��

2�� AJ� ��'��0�

��6��

��" �� 6��

��

��$��&"!� ��; ��

'"��.9��"!�� <

9�� '�� '��3�� '�,�� #��!" ��+&�1�� " ��,��"? ��" � � �� )�� 3��)3��"�� "�� '�� 3�� #�� & �� 3�� '��" � � �� '��3��3�� 9�� " � �� ,��"? �� 3��3�� "��" � !@ �� 3�� "� ��3��3�� "��"��!�� ;��"� �� 3��3�� "� �� 3��3��

��)��&"!� ��; �� '"��

��.9�'��!��!� ��<

5 ��'��'�� 3��3��6�� " � � �� '�� 9�� :�� '�:� � ��

A�� '�9��A��-��#�� &�� /��)�� 1�� "��"�� "9��A��-�� '��'�� '�� /�� "��)�� @ �� , �� '�� '�� 6�� "�� -��

8�� '�� "��'��

�� !"�

�� "��

��'��

��

0�� '��

��

�� "'��

�� , � G��H �� '� AJ�

�� '�� 3��

��3�� , ��

�� 3� �� 3��

��3�� =�'��3��3��

��

�� #A��

��'��)��

�� &

5 ��

�� AJ�� '� ��

��

��" ��

> �� #�� &�� '� ��3�� 5 �� " �� "�� "�� 3��'��"'�� 0�� 9�� " �� '�� B�� 1��2��"�� '��"'�� 3��3��"� ��'�� 0��, �� '��'�� >��,��"? ��4��"�� "� �� , �� 3��0��'�� , �� "�� 6��"�� 0��'��

��3 ��E��3��'�� "� �� 5�� 3��'��"�� , ��'��3��#%8C/2& ��'��'��

A��6�� '�� "'��'��'�� '��3��'�� /�� " �� 3�� '�� #�� '��"��"�� 3��3��& �� 3� �� ?�� E �� '�� 3��3�� 3�'�� ,�'��'��3��"� �� :�� :��'��

2�� 3�� '�� " � � �� "��"��,� �� " �� 3� �� 3 �� 5��3��'�� '��'��

?��"�� '�� /��"� �� '�� "��

��+��6�� 9��=! ��3��!�� "��

��, � ��3��

�� " ��

�� "��

� � �� '�� '��

��

�� ?��'��

��

�� '�� '��

�� '��

�� '��

��AJ� �� 0 ��

�'��

��

� �'�� , ��

��'��

��'��5 ��

�� -��AJ��

��'��'��'��

�� "

��

��'��:��#��+��

��&�

��%��.��%��.��%��.��%��.��%��.��

$��

�� 3��" � ��

��

�0��"��

�� '��

��?��6��" � ��

��'�� 0��

, � �� 0� ��

��'��9��"��

��2��

��'��,�� "

��"��3��

��"��

�� )��

��"��'��

�� 3��2��"� ��

� ��0� ��

��

��" �� '��" �� '��" �� '��

��(��&��-��9�� "�� 2��

, �� '��"'�� AJ� �� E � �� AJ��!��$�%�� "� �� 6�� AJ�� !�� $�%�� 4��" �� -��" � � �� AJ��)�� )��

, �� , ��=�� AJ�� 4��"��'�� 3�� '�� "�� '��#� �� '��'�� 3��"��3��AJ�&��?�� AJ��3��

5 �� 71�� +��"��'�0��2�� #��+&��#� �� '��)��"�� '��"�� &�, �� 3 �� '�� 3��AJ�� 3�� AJ��'� ��'��)�$�%�, �� AJ��3�� 3�� 4��"�� 3��3�� '��, �� AJ��'�� , �� AJ��'�� '��

��7, ��

��'��

�� AJ��

, ��

AJ�" '�� '��

��'�0��2�� #��+&��

�� +��

��

��#$�%&�� , �� '��

��3�� AJ�#��AJ��

�� & �� 3 ��

��AJ��3��

��$�%�� , ��

�� AJ��

�'�� AJ�"��

�� 3��

��"��

��

��AJ��, ��

� � ��

AJ��

��, �� )��

�� '��

��:� �� " ��

�� !"�

��'��'��3�� "

��?��'��"C��%�A"D��.��

�� 2�� "��

�� , ��" � � 6��

��0�"�� "��

�� 6��5 �� 6��

��'� ��'��

��'��

�� '��

�� "��

��, ��3��3��'��

�� '�� 6��

6��

, � ��

�� 0��, ��

��'�� ./0��

2�� "'��

��

��

��.��!�0��

�� 0�" ��

��

�� 5 ��

�� >��"% ��"2��C��3�"��

, ��

��'��+�"��

�� "��

�� #9��

��!&��@" ��" � ��

��

'�@�� .��

� ��"�� "��

��2��

��"�� ".��"��

%�3��'�� @��

�� 0�� /��" ��

��@�

� ��

� ��'��"� ��

�� 0��

��4��"� ��'�

��"'��

��'��"��

C��

��"��

'��

�� '��

��

6��1��!�� "� ��0�)��

��

'��0�� 2��

��

'� =��'�� !" � ��

��

��"��"

��/�2��

�� "��

�� "��

��+�� !�?��6��"��

�� 0�

�� " ��

�� 0"

��

��

� ��

��0.��"#+��0.��"#+��0.��"#+��0.��"#+��0.��"#+ ��.�� (�� )�� (�.�� (�� )�� (�.�� (�� )�� (�.�� (�� )�� (�.�� (�� )�� ($*6,��$**3$*6,��$**3$*6,��$**3$*6,��$**3$*6,��$**3

8'��9

��

��" ��"� ��

��9��"

� ��

��.��"� ��

�� *

#9�� &�#, ��

��'��

��'��'��

��'��

��&�� %�3��"� ��

��@@ ��

��'�� *�

/��"��

��

�� " � �

�� '��

� �� 0� ��'�

�� /��"��

�� *��

�� "�� " ��

%�3��4��"��

� �� '��" ��>��" � � ��

��

�� "� ��

� ��

��0��, ��'�� '��

�� '��

��0��

?��'��" C�� %�A"D��.��" �� 2��

��"��

��

5 ��"��"��

�� '��

��0�� %�3��"� �

�� 3 ��

�� '��

��

�� "

�� 2��

9��"��/��

��(� �� '��"

� ��%�3�� !��

��, ��

��'��

�0� �� '��

�� "��

��2��

C�� '�

��

5 ��'��

��'��

��"��

��0��

�� '��

��'��'��9��

��" ��?��'�� C��%�A"

� ��

�� *� ��

��"��"�!��@�

��

*��, ��

�� " '��

��

��

��

0�� 6��

�� '�

�� !"�

, �./0�� '��'��

��

6�� '��

��"� ��'��

�� /��"��

��'�� 6��

��0��'�� 3��

�� "��

� ��"��'�� "��

��'��" � ��'��

��

��

��"��

��"��"� ��

��"� ��

2��1��!�, ��

��

��

�� "� ��

�� *��"� ��

�� >��)� ��

#9��+&�� "

� ��3�'��

�� 0��9��"� ��

��

��>��"��

��@��

��'��"��

��

��4��"��9��(��3��"� ��

�� '� �� 9��

��"� �� /�� 2�� C��3� ��

�� =��

�� "

2�� C��3� ��

�� /��, ��

��"� ��

��" ��

��"��

�� " '��

�'��

;�� '��

�� 0� ��

�� " �� #��

� �� &"��

6�� "�� "��

�6��2��

��

��

��6�� 0�" � � 6��

�� '�� 0��

2��'�� 6��

�� " �� < ��

��"��

��"��'��3�<��

�� < ��

��, ��6��

��

��" �� "��

��/��0�"�'��6��

�� " ��

��6��"��

��

2��0��

�� "'��

� �� 3��

�� , ��

��

� ��E��

��

��3��

�� , ��'��

��

��

�� , � ��

��

�� 0�" ��

�'�� , � ��

��"��"� ��

�� '��

��

�� 6��"'��

�� -�� '��

�� '��

�� 0�" �� -��*��

��;��, ��-��

�� /��

��, �� '�� " � �6��

�� /��

��'�� ;��, ��

.��" ��"� �� ./0�

��'��

� ��@��/��">��

�'��!��;�� "��

�� ./0� ��

'��6�� :��'��

�� 8��0��?��

��:��

6�� '��

��

��

�� )��

��" �� '�� " ��

�� 3��

��

�� , ��

��

��"� ��

��-�� "��=��"

� ��

��

� �6��'��

��'�G��H��

'��'��

�� 9�� " ��

�� '��

��'��

�� 3

��

� �� , ��

� �� '��

�� '��'��

�� 3��

��

��

'��

��

��

��

��

/��3��

�� '��

3��"��

��) �� " '��

��

��

, ��

��

��" �� 9�� " �

5��3��

��?��'��,��-��:

��

'�� +��:��

� ��

��

'�� '��

��'=��

��

�� "� ��

��

��, �

�� , �� '��

�� 6��

=��

��;��"��

� �� 6��

�� " �� " �� " � �

% ��"� ��

�� "��"/��"��'��

�� 6��E

� �� % ��

�� /��

$��

�� , ��

��'��0�"�� '�

�� !"�

��

��

�-�� 3�� 6��

�� 6��

��

/� ��" � � �� ) ��

��

�� '��

��

��2��"��/��

��-��

�� '��3��

��'��

��

, ��3��

��

�� '��

'� � �� '��

��

, ��

��

�� '��

��'�� 6��

�� 8��

�� '� � �� G�� H ��

#5�� 3 ��&� A��

�� 3��" � ��

�� )

��

��

��3��"��

��" '��

� �� "��

�� '�� '� ��

�� 6��

��, �� 3��

� �� 3��'��

�� ) ��" '��

��'�� '��'��

�� " ��

� ��

"��1��!�,��

�� 0��/��

��

'�� 2��

'�� 2��

� �� % �� #9��&�, �

�� 0��

�� "��

��

�� >�� ,��"? ��

��

, ��

��

� ��'��/�� %A?

��>��"��"@��!��

�� ".��

, �� '��

��

2��1��-7#� ��!�/��

�� AJ��

��'��

��'��"� ��3��

��'��9��

� ��>��2��

��AJ��

� ��

��'�� , �

%A?��D��.�� 3��

�� "��

�'��'�� 6�� #��

� ��! �� "��

��&�$�� "��

�� ;��, ��

� ��'��

�� 0��2��

��

9��AJ��

�� $.% ��

�� '��

�� AJ��

��0�">��

��$.% ��AJ� � �� /�� %�3��

/��"% ��"��, ��

��AJ��

�� !"�

�� ./0�"� ��

�� "��

��" � ��

�� 6�� ;��"

��"�� '�� @� ��

�� "�� " ��

�� 0� ��

��

�"�� , ��

� �% ��#�!��"��&�

;��

'��

�� "�� , � ��'��

/�� #��

�� /��& ��

��

��, �./0��

�� "�� ;��

��

��

, ��

��

�� 0�� , � ��

��

��

��'��

�� 0��9��"

� � �� "

��"��"��

��

, ��

�� -��/��

��'��"��

�� '��

�� /��

�� '��

�� "��

� �� " �� 4��

��"��'�=��"

�� '� ? ��)� �� "

� ��'�� '��

�� "��

�� ;��"� ��

��? ��)�$�% ��

��"� �� , ��

��

8� ��

��'��"� ��

��5 ��'��3��

�� "� ��

��

�� '�� '��3 �� '��

��"�� >��

�� 0�#++'��3��

��'�� "��&�/��"/��"

�� % ��"��

�� #�� '��3 ��'��

��"��"��&�

8��3��

�� /�� 0�)

�� "'��

��

, ��" ��" ��

��

'��" '�� '��

��"��

��

��

��, �� =��

��:� ��" ��" ��-�:� ��

��'�� 9�� " ��

/��"�0�"��D��.��"��

�� >��)�

��2��"� �%A?)��

��'�� %�3��, ��

��

�0��

8��

��

��, ��'=��

�� '��

� ��'��"��

��6��"�� 3��

� ��

'��

�� "��

��

�� "��

�� 3��" ��

�� -��"

��)�� '��

�� -��, �

��

��

��'��

5 ��

�� !��"

� ��

�� 9��

��8��-��#98&��

��

��((��(�#98��(�&��

�� -��

�� '�� '��

��-�� +��, ��'��

��3��

��5 ��(��

�� *��"!�* ��3�� ( ��

��-��"� �98��

!@*"�� 3��" ��

�� +��

%��

�� 98 ��" ��

��

�� $�% ��

��((�4��" � �� '��

��(� �� ((� , ��

�� " �� '� � � ��

��'�� -�� 3��"

�� 3��

��3��

/� � ��

��"� ��

��'��

2��

��'��

�� , �� #�& � � ��

�� "#��&� ��-��

�� " #��& � � �� "

#��& � � ��

�� "#�& � ��=�� "#��& � � ��

�� " #��& � � ��

� �� " �� #��& � ��

�� 0��

�� '�� ) ��'��

'� ��-��"� ��

��" �� -��" ��

��"��

��5 ��

��

'�� "��

��

� ��'�� '��

� � �� '��

��"�� 3��

��/��"� ��

�'��"��

�� '��

�� , �98)� �� 2��

��0��?��'��

�� '��

, � ��'��

�� '��

, �� "

��"��C��"��"

��" �� '�

3��

�� 3��

��'��

� ��-��6��

��, �;��%��

% ��"� �9��0��I?��%��

/��"��

>�� '�� !��

�� !"�

��

��

8�� /��

��

�� '� �+�! ��" ��

�� 5 ��

��"��'�'��'�

�� " '��

��

� �� "��

��'��"'��

'��

;��"� �98#��(�& ��

��'��"��

�� '��

��" ��

�� , ��=��

��

��

�� 9�� " ��

�� '�� '�� "

�� "��"��

�� " ��"��

�� '�� " ��

�� "

�� =��-��

�� " �� "��

�� '��, ��'��

� �98��'��

�� #��

��&��

� ��E� ��A�� E�* ��

% ��98��/��)�9��

;��-��2� ��

�� -� ��

'��'�! ��"� ��

�� '��'��

�� " � �'��

�� '� �+ ��, �

98��

�� '�*!��

, �� '��

��"��"� ��0�

'�� 4��

��" �� 3��

�'��" ��6��

� �� 2��

��6�� '��

��3��

�� "� �� "�� "�

'��, ��

�� 6��

��

��

�� ;;;;;

��"��3�� 0��

��

��3��, � ��

�� " �� " ��

�� '��

��.�� " � ��

��3��

�� 0�"

�� 2��

�� 3�'��

�� , �

�� 3��

�� 3��

� ��

��)'��7�� )'��7�� )'��7�� )'��7�� )'��7�� !��)��!��)��!��)��!��)��!��)

, � ��

��

9��", ��)��

��'��'��, �

�� 12��!"��

� �, �� '� �� " �� , ��

�� '��

$��

�� %A?"/��"

��D��.�� '��

��'��, ��)��, ��

�� '��

�� " � �

��)��#� ��

�� & �� ) ��

��"� ��

��

��"��

��

,��

�� -�� 9��"��

��

��

��2��"��

�� " '��

��

�� '�� 6��

��

�� , ��, ��)� ��

��'��'� ��

��

��"'��'��

��

�3��, ��

��" ��" ��3��

�� 3��

��3��'��

��, ��" � �3��

��0��

��'�� '��3��

��)��

��)'��7�� )'��7�� )'��7�� )'��7�� )'��7�� .��7��.��7��.��7��.��7��.��7��

, ��

�� E � �� "

��'��"��'��, ��

�� )� �� " � � ��

� ��"��"��

�� "��

�� )� ��'��C�3��"

�� "��"��

�� '��

��9��"� � �� )�

��'��"�� '��6��"� ��

� �� )� ��

,� �� )� ��

��'�� " ��

��"

� ��"��'��C�'��

�� '��/�

�� "

� �� '��

�� '�� 2��" �� '��

�� "

� ��

��'��

��'��

��

� �� '��

��4��"��

��"� �� '=��

�� " � ��

��, ��'��

�� '��'��

�� '�� 0��"��

�� '��"��

�� '�� /��"��9��

�� " � � ��'�� 3��

��'��:��'��#��3��

��'��&��

��:��

��0��, ��

�� '��

��

,��

�� '��

�� " ��'�� #��

��'��&��'��

��

��0��, ��

��'��

�� #9�� *&�5��

��3�� "

��'�� '��

��"�� '��'��

�� 3��

��)'��7�� 0��0��)'��7�� 0��0��)'��7�� 0��0��)'��7�� 0��0��)'��7�� 0��0��.��.��%��.��.��%��.��.��%��.��.��%��.��.��%��.��.��.��.��.��

��"��

��2�� '��

��'��

�3��

�� %A?��/��

� ��=��3��

�3�� '�� /��" � �%A?"��

��3��3��'��

��

� ��" ��'��'��

��3��, � �� /��"

;��"% ��"��, ��" ��

�� 3��3

��'��" ��"� ��3��

6��3��

4�� 78��"

�� -� � �� '��

�� +��("

�� "��E

�� < ��

�� 12��"� ��

��0��

��"� �B��"�� ? ��

��'�<��

�� "� ��

�� !"�

, ��3��3��

��-��

��

��

�� !��

8� ��

��0� ��

��3�� 3�� '��

��

��'�� 0��.��

��'��

��'��

.�� " �� "��'��

��"��'��",�'��!

��" '� ��" �� ) �� '��

��, ��)��'��

'��

, ��)�"� �� '��

�� /� ��" ��

�� " %A?"%�3��" ��2��

C��3� �� '��

��, �� '�� "

� �� 4��>��"

? ��< 2��< ��,��"? ��

��'��3��4��"� �

��3��6��

��"��"�� '��

��

��'��

��'��

��

��#��(&�

/��"��

��'� � � ��'��

�0�� -��

��

�� '��

� �� '��

��0��

��

�� 3��

�� 3�� 3�� '��

��,�'�� @ � ��

�� 0��, ��'��

� ��0�� "/��"%�3��"��

2��C��3�� 0�

��;�� % ��

��3��3��'��

��

��'�� , ��C��

�� /�� >��

��

5 �� '��E

��3�, ��

��

�� 3��

�3��'��

�� , ��

��'��

��'��'��

��

.��'�� '��

��

��*��'��=! ��3��!��6�� "5�

7�2��>��&�� ""�<

��3�� 3��'��

/�� '��"�� ,�� ", �� "'��6��'��3��

, �� , ��"�� " �� '�� 3�� "��3�� , �'�� , ��)� �� '�� '�'��'��0�� , �� '�� 6��"�� 0�� , �� /��;��"� ��, �� :��'��"�� "��"��3�"��:�� 0�� %�3�� % �� /��!, ��K ��"'��K��"�� %�3��)� �� K�*�� K* �� % ��) �� K��K*��

�� 3�� '��, ��)��4��"'�� '�� , ��)�� '��'��'��

��'�� 0��2�� "�� B��"��'��'�� "�� ./0��0��3� ��2��" �� 3��" �� "��'��'�� G��H

��", ��'�� "'�� '��?��", �� 3�� " ��*��(��(��!"�� 6�� ;��"�� '�� "�� '�� /��!�� '�� "'�� '��

5 �� 7, ��'�� , ��)� �� "%A?"/��"��D��.��, ��'�� '� �� /��"��'��'� �� '�� , ��)��'��4��"� �� '�� , �� '�� , �� " �� "�� "� ��6�� 3��'�� 3��, ��4��", ��)��

�� !"�

��!��"#$3��7��0��.��'��)'��(�� )�� (�$**,�!��"#$3��7��0��.��'��)'��(�� )�� (�$**,�!��"#$3��7��0��.��'��)'��(�� )�� (�$**,�!��"#$3��7��0��.��'��)'��(�� )�� (�$**,�!��"#$3��7��0��.��'��)'��(�� )�� (�$**,8>��. �� 9

6�� ; �� "

/ �� !"�� /��

�� 0��" ��"!�� !� �� % ��"!�� ?��

!�� !� �% ;��"� �� "!�� !�� !�� !� �� !� �%

�"�� !�� 2� ��9 � �!��!� �� "!�� @!�� !��

& ��'��

4��>��"? �� (� � �*�@! (��( +��! ��+ �� (�(� ��* ��@� (�(�>��"A�� (�+ �� + �+@ +� � ��+( ��+� ��*� ��@ ��!� �(�

�!�� '��

/�� @ ��+� ��(� �� !� ��! *� � ��*@ ��+�;�� @�!* *�*( *�� !��* ��!* @�� @� *��!% �� *�� *�@@ ��@ ��!! *�@� ��+ ��!� *�@! *�� @�

�!��'��

�� +@ ��(@ �� *( �� +* ��@+/�� ! ��+@ ��(@ ��+ ��* �� ! �� @*%�3�� +� �� ! ��*! ��+� *�!* ��+� *�� +� ��*!

2��C��3� �� ! ��@� ��+@ ��@ �� * ��+* ��!�

2��+ 1��.�� /��8��-�� '��

�� '�� '��

�� 6�� -��

��'��6��'��

9��

�� '��

� ��

�� " ��

�'��

��

��

��"��

��"��"��3��

�� '�� 5 �� '��

��6��3��

�� '��" � � ��

� ��'��"'��

��

��

�� <��;�<��;�<��;�<��;�<��;

,�� '��

�� '��5 �� '��

��"��"��6��

��3��3��"� ��'��

�� 6��

3��3��5 �� "� ��

�� /��"� ��

�� AJ�"

� ��

�� '��" ��

�� /�� "� ��

�� 3�� 3��

��

'��" �� '��

��'��

9�� >��<

2��<��,��"? ��

�� AJ�"'�� '��

�� "� ��

��

��#2��

�� '��

��AJ�� "

�� /��& 2��

��

��>��"� ��

� ��

��AJ��'��5 ��

��

�� #��'��

�� &��

�� " ��

>�� '��

�� 3��

��,��"? �� '��

�� '��

�� 3��'�

��

;�� "��

'� ��" ��

�� "��

'�� " ��

�� " �� '��

��

'�� '��

� �� " �� '�� "

��"�� '��

� � � �� "� ��

�� '� ��

�� 3��3��"

� ��"� ��"��

�� 3��3��

�'��'��

�� , �?�� '��

>�-�3��">��-A��'��" ��1-'�3��

�� =��

�� '��

�� 3�� '��< ��" � ��

��'��

�� 3�� /� �� '��

�� 3�� '�� "

�� '��"��3��

��" �� '��

��'��

�3�� /� ��" ��

�� 3��

��

/��0� ��

��

/��'��"/��

�� 3��3��" ��" ��

#�� /��)� ��" � ��

�� '��&�4��" /��

��

��3��'��

�� 5�� '��

�-�� (��"� �

�� !"�

��

�� "��

�� '��

1��2��0��"/�� '��

��'��

�� /��

�� "

��

K� '��;�� 1��

2��0��

��/��

8'��" � ��

�� 3��

�3��'��'��"��'�

��" �� '�� 9�� "

��

��'��"��

��

��" � � �� /��";��" ��

, �� (�� >��

,��"? �� '�� '��

�� 3�

��"��"��"��, ��

�� "��

��'��

, �% ��

��

��

�� "��

��'��+�� "� ��

�� '��(�*��

��"� �� 0��

� ��>��,��"? ��, ��

��

��'��% ��"'��

� �% ��"��3�� '��"��

� ��" ��'��0��

�� "��"�� "

�� % ��

��,��3��"��

��!��"#$+��!�� .%��.��0(�� )�� (�$**,�!��"#$+��!�� .%��.��0(�� )�� (�$**,�!��"#$+��!�� .%��.��0(�� )�� (�$**,�!��"#$+��!�� .%��.��0(�� )�� (�$**,�!��"#$+��!�� .%��.��0(�� )�� (�$**,8��&(��?�$9

6�� ; �� "

/ �� !"�� /��

�� 0��" ��"!�� !� �� % ��"!�� ?��

!�� !� �% ;��"� �� "!�� !�� !�� !� �� !� �%

�"�� !�� 2� �� 9 � �!��!� �� "!�� @!�� !��

& ��'��

%A?� ��!+ ��+@ ��* ��+ ��!� ��!( ��!� ��@@ ��@@ ��@�4��>��"? �� @ ��!� ��(! ��( ��!� �� @ ��@� �� @ *�@ >��"A�� (� �� *� �� (! ��! �� (+ ��!!2�� * ��!( ��!* ��!+ ��@ �� @ ��+� ��+ ��(�,��"? �� @! ��*� ��! *�� + ��!� ��*! ��+� ��@� ��

�!�� '��

/�� +� ��! ��+� ��(@ ��(� �� (� �� ( ��!;�� ! ��@ ��! �� (� �� ! ��+� ��@�% �� (! ��++ ��@@ ��( ��(( ��+! ��(@ ��*( �� , ��

�!��'��

�� (( ��* ��*� ��*� �� + ��+� ��(� �� (/�� !* �� !� ��(( �� + �� (� �� +�%�3�� + �� ! �� @ ��*( �� ( ��+@ ��** ��+ ��@

2��C��3� �� * ��@* ��( ��@ ��(� �� * �� !� �� (!

� ��( �

2��+ 1��.��/��8��-��'��

��

��#��/�� &��3A�<

&2�"��"�

;��'�� '�� )� 3�� '�� '�� 3��'��"�� 3�� )�� "�� 6��"� ��'��

2��'��/�� /��"� �� AJ�" ��, �� " '��AJ� �� 3��3��"�� '�� 9�� AJ��

, ��'��6�� /��'�� AJ�� 8�� /��)� �� " �� " ��'�� " �� 6��5 �� " � ��

�� 3�� , � �� '� �� '�� AJ�� '�� "�� AJ��

��"�� /��AJ�� /�� "� ��/��)�� AJ�� '��'�� '�� AJ��, ��'��'��)��, ��" ��"� ��AJ��/��"� �� AJ�� 6��

, �� '�� I��'��'��3��'�� AJ�"'��'��)��4��"��AJ� ��"� ��AJ�"�� '��6��

�� @�� @�� @�� @�� @��

/�� !��"

�� " �� '��-�

� ��

��

��

�3��'�� "��

��

��3��'��3��'��

��, ��'��"��

��"� ��

��-� �� 3� ��

�'��"��3��3��, ��

�� '��

��3��3��

4��"��

��

�� % ��

��

'��

��!��*!��

��"��@!��;��

��+!�� ,��"? ��0��" ��

�� '��

% �� "��

��

9��"�� )��

��'��'��

��3��

�� '�� 5��

�� '��

�� " ��

�� 3�� /� ��

�� '��

��"��

��

�� !"�

� �� 3��3�

��8��

��

�� '��-��

��, ��

��3��

'�� " �� 6��"

��

��'��

��/��

�� 6�� 3�� " � ��

��3��3��0��

�� 6�� 3��3��

�� " ��

��6�� 3��'��-��

��'��0��

��"� ��

�� 3��3��, ��

��'��

��3��3��'��'��

��"� ��

��

��

, ��'��-��"��

��" ��

��3��

��

��

, ��

��

��4��"� ��

��=��

, ��

��

9�� "� ��

��$�% �� '�� "� ��

��'�� , �

��

�� 0��5 ��

�� 0��

%A?"C�� %�A"��1-'�3��"��!��

�� ./0��4��"��

�� ./0�E� ��

�� !� �� >�� (! ��

4�� >��"? �� /� ��"4��>��"? ��

� ��

, �� :��

��'��:�� /� ��

�� "

��" ��"� ��" ��" ��

��"'��

��, ��"

��" �� 5��

��"� ��

��

�� 4��" � ��'��

�� '��

�� " ��

��

��'��-��" ��

��"�� '��

��

�� !��"��

��(��"��

�� , ��

��"'��3��"��

9�� ./0��

4��>��"? ��< 2��< ��,��"? ��

��"� ��

�� " ��

�� 3��'��

� ��

��

�� 3�� 3��

��6�� /��"��

��6��=��3��3��'��3�

�� "'��

��" ��" ��" ��"

��"��"��

��

4��" � � �� ./0�) ��

�� "

�� 8� ��"��

�� 2��

4�� >��"? ��" �� 3�� '� ��

� �� ./0��, �./0��

� �� '��

��

��'�� '�� "� ��

�� 3��, ��

'�� "'��

��'��

�� 6�� '��

�� 3��

��3��

��

/��"�� '��-��"��

��'��

�� #� ��

�� '�� &� , ��

��

�� /��"�� 0�� "

�� 6��

�� , � /��

��"'��

��'��"��

��" �� '� ��

/��" �� /��

��0��

, ��'��

'��/�� "� �� 6��

�� /��"�� ./0��

'� �� 1��2��2��"� ��

�� ./0�� " ��

�� '��/��

�� 1��2�� %��

�� '� � � ��

�� "'�� /��'��

�� "'��

��0�� ./0�#��

� �� 0�&��'��

, �� '� � � ��

�6��/��:��"

��" �� :��

��'��"�� ./0��

�� '��

��:�� '��3�� :��

�� 0��

� ��

�� ./0� ��

2�� 3��

��5 ��

��

��" ��3��

��

�� '��

��#��'��&��

�� 3� ��

�3��, ��'��)��'��

��

�� '��

��, �� )��3��

��

��"�� " ��'��

��'��

�� ;��;��;��;��;��

$��

��

��"� ��

6�� " ��

��" � � ��

� �� ?��" ��"��

�� "��3�

�� '��

�� AJ�" '��

�0��

��

4��" � �� '��

��"��

��"��"� ��

#'�� ./0� ��

�� &�

, � �� '�� '�� '��

�� "��=��

�� " � �� " ��

�� , � �� =��

��6��'��

��/��"

� ��3��'��

��0��

��3� �� 3��

�� " � ��

�� /��" ��

��'��"��

� ��'��

��

, ��'��

�� =��'��2��

��

��"��

�0�� /� ��

�� 6��

��;��"� ��

��

�� "��'��"� ��

�� /� � �� 3��

� �� " � �� "��

��3�� '��

�� "� �� '�

�� '��-��

� �� '��4��"

�� "

�� !"�

� ��3�� '��

��?��6��" � � ��

��

��"��

��"��

��"�� '��'��

��/��"� �� ./0��

�� "� ��

�� '��

��

��

;��3��

��

��"�� 3��

��"��

��'�� /�� 3��

��

�� "��

��

�� /� ��"�� '��

��

�� , ��

��

��'��

, ��

��"'�� '�� '��

��"��

'��'�� '��

�'��'�� '��"� ��'�

�� " ��

�� AJ�

�� '��

� �� " � ��

'�� 4��" ��

�� AJ� ��

�� " ��

�� /��

��" ��

�� '�� " ��

�� 0� ��'��

�� "

� � �� AJ� �� '�

��'��

?��"��

� ��

��"�� >��"2��"��,��"? ��"

��

��"�� '��

�� AJ� ��;��

��'��

�� '�� " ��

�� " � ��

��'��

�� $�� '��

�� " ��'��

�� '� ��

'��

��

, ��

�� '��

�� 0��

��9�� 0�"�� ?��

'��" C��%�A" D��.��" �� 2��

��"� �� " � �

�� '��'��

'��"�� "��"

�� " ��

#��" ��'��" ��

��" ��"��&�%��

��"��"��

��" �� "

�� '��"��

, �� -��'� ��

�� " ��

�� " ��

��'��, � �� "� ��

��

��"��'��

��

, ��0��-��

��'��'��

��"��

��"�� 6��

�� /� ��" �� '� ��

� ��

��

�� 6��

�� 3�� 9��" ��

��'��'��

��

��

;��0� ��

��2��

��, ��

��3��"

'��

��'��3��3��

��

��'�� 5��

��" � �� 3��

��3��

��

� � ��0��,� ��

�� 3��

��"� ��

��

��"��AJ��

, ��0��

��9��"� �� =��

��"�� % ��"

� ��

��, ��"��" ��

�� "� ��

/��;��

�� 1��

��'��"� ��'��

�� )�'��

��

2��"� ��0��

�� '��

�� , ��

��6��

��

��1��"� ��

��/��, ��

��

��/��

, ��"'�� 3��

��'��"� ��0��

��AJ��/��"��AJ�

��/��"% ��"��, ��

��$.%��6��

�� /��+��

>��, ��>��,��"? ��

�� AJ�

��

��/��"� � ��

�� 3��'��

3��" �� " �� '��

� �� "��

��AJ��

�� >��,��"? ��

�� 2��

��

�0�:;�� : �� -��

�� "�� '��3��

��" �� 4��"

��AJ��

��

�� " 6��

�� '�� , ��

�� '��

6�� 6��

�� -��

��

$�� ./0��

�� " � ��

��

�� " ��

��4��>��"? ��2��"� ��

�� "��"

�� " �� 6��

�� '��

�� ,��

�� "

�� , ��

�� 3��

�� " '��

��'��

� �� '��

��

��

, � �� 0� ��

��" �� ?�� '��

�� '��3��

�� 2��1��" � ��

�� 3��

��, ��=��

�� " ��

��

��4��"'��

�� " � ��'��

��

�� 3��'�� , ��

��

� �� " �� 3�

� ��AJ��

��3��, ��

��/��)��

�� " �� "��

�� '��=��

��

4�� 0� �� '��

�� 7 /� ��

��'��"��

��3��3��

��

��

�� !"�

��.��0��.��0��.��0��.��0��.��0��0��0��0��0��0��0��) ��0��) ��0��) ��0��) ��0��) �� )�� )�� )�� )�� )��

, � ��0��

��"��

��"��

�� 4��"��

�� '��'�

�� 8��

��

�� "

�� " ��'��

�� "��

� ��#��/��&"��

�� #�� & ��

��,��

� ��"'��"��

�� " ��

��

��

� ��!�� 0�� !�� 0�� !�� 0�� !�� 0�� !�� 0�� ' �/�� ' �/�� ' �/�� ' �/�� ' �/��)).�� 0�7��)��)).�� 0�7��)��)).�� 0�7��)��)).�� 0�7��)��)).�� 0�7��)��

/� �� 6��"

��

��

��

�� '��

�� 0��

�� 3��'��

��'�� 6��

� ��

��3��

��-��

��

��"��'��

��

)'��7��0��A.��)'��7��0��A.��)'��7��0��A.��)'��7��0��A.��)'��7��0��A.�� . �A.�� . �A.�� . �A.�� . �A.�� . �A.��

�� '��

�� 6��"� ��

�� '��

, � ��6��

��" �� 6�� "

� ��

�� 6��< ��

��'�� < ��

��"�� "��'��3�"

�� <��-��

, � ��

�� '�

��

, �� 6��

� �� '� ��

��3�� " ��

�� '�� 6��

�� 6�� >��

#��3��"�� &��

�� '��

��

� �� '��, ��

��

�� " ��

� ��'�� 3��

��" � �� " � ��6��'��G��H�� "

�� '� ��

��

��"�� 6��

��

��

��E��

�� "��"'��

�� '�� " ��

��'��8�� '��

�� 3�

�� "��

��'�� "� ��

��

�� '��

��

�� "� ��

��

��

, ��

�� " ��

�� '��

�� 6��4��"

��0��

��"� ��

'�� 6��

��7��0�<�� 7��0�<�� 7��0�<�� 7��0�<�� 7��0�<�� .�� .�� .�� .�� .�� .��7�� .��7�� .��7�� .��7�� .��7��

0��

��

��

��

��"�� 0��

/� � �� " � ��" ��

� ��'��

��

2�� '�� 6��'��"

'��0��

��

��

��

4��"� ��0�"� ��

�� "��

�� '��

��"��"��

� ��

�� " � � ��

�� '�� '��

� ��

�� "'��'��

��

��

��

��)��0�� )��0�� )��0�� )��0�� )��0�� 7��7��7��7��7��7� ��7� ��7� ��7� ��7� ��

;��

��:�� "��

�� 6��" �� :��

��

�� , ��

� ��

��

��, ��

�� "'��

��

��

�� "

'��"� ��'��

6��

�7� ��0� ��7��)��0��7� ��0� ��7��)��0��7� ��0� ��7��)��0��7� ��0� ��7��)��0��7� ��0� ��7��)��0��)).��!�� )).��!�� )).��!�� )).��!�� )).��!��

�� '��

�� '�� -��

��2�� 2��

��A��'��

��'�� "

�� " �� "��

�� "��-��"��8��

�� 3��

�� '��

��"'�� '�� '��

�� " �� '��

�� '��4��"

�� 6��

'��0��

�� "��

�� '��"� ��

��

��'��

4/DI/�2��"'��

��0�"��"?��'��"/��"C��%�A"

;��"��, ��" ��

��4/D�� "��

�� 4/DI/�2 ��

�� '��/�

�� 4/DI/�2

��"�� "��

��"� �� , �

�� 4/DI/�2 �� '��

��#�&��"��

'��<#��&��<#��&��<

��#��&�� '�� , �

�� 4/DI/�2 ��

�� '� �� '��

��/�2��, ��

'��/�2��

��3��#��&��

0��

4/DI/�2 ��?��'��" '�� =��

� �� "��

��K��+'�� K*�(*'��

��+�*�� /�� "

� �� , � ��

�� /�2��

�� 0� �� '��

��

��0��'� B�� .�� 0��'� B�� .�� 0��'� B�� .�� 0��'� B�� .�� 0��'� B�� .��

8��

��AJ��, ��

>��/�� '��

� �>��/��2��,��

��3�� /��

��" � � ��

��'��

�� '�� /� � � ��+��

�� !"�

�� -��

��"�� "��

��'��"�� "��"��

��"�� " ��" � ��" ��

��" ��" � ��'��" ��

�� +��>��

� AJ��"��

�� ;��2��,��

��(��

>��)�AJ�� 3��

�� 2��

��AJ��/�� 3��

��"'��

�� " � ��

��

��

�� 0� �� 0� �� 0� �� 0� �� 0� ��7��7��7��7��7��%�� B��%�� B��%�� B��%�� B��%�� B��0��0��0��0��0��7��')��7��')��7��')��7��')��7��')��

5 �� 3� � �

��

��"��

��3� �� ">��)�

��0��/��

��+��

6�� AJ��"'��'�

� � �� " (�� AJ��

��'��'�� .��" ��"� ��

'��AJ� �� 3�"AJ��

�� 0��

�� !" *� �� (�

��AJ��>��

��7��0��7��0��7��0��7��0��7��0��.��.��.��.��.��0��0��0��0��0

A��

��

��

��

��"� ��

�� 9�� "� ��'��

�� 6�� '��

�� " ��

�� 3��

��, ��

�� '��

��

�� '��

��

�� " ��" ��

��

��

�� '�� '��

��

��

��

��

��

%��'��

�� '��

�3��" �� '��

�� 2��

��'��

�� '��

��=��

� ��3�� =�'��

��

, � ��

�� '�� , ��

��

��

�� 3��

�� '��

�� 6��''��

�� '�� "

�� '� �� '� � ��

��

�� /��

��" �� " ��

��

, � ��

�� '��

��/��"� ��

� ��

��=��

�� '��

/�� "� ��

�� 6��"

��

4��"�� 0� ��

�� ./0�� ";��"

.��"��D��.��"��"��

��)��

��

, �6��

��

��'��'��3��'��

��

��, ��

��

�� " ��

��0�� ./0��

��

�� ./0��

�� "

�� '��'=��

, � �� "��

��'��

�� "�� ./0�" ��

'��

�� 3��

��, �./0�)��'��'��

�� 3��

� ��

� ��

, �� E ��

�� "��

��"� �� ;��

��"2�� '��

'��3��"��

'�� '��0��"� �

�� 2��

4��"�� '��

'��6�� /��

��

��5 ��

�� 8�� 3��'��

�� "��

��

��" �� '��

�� "� ��

0��

� �� "� ��

� �� 3��

��'��"�� 6��

�� "

��"��

/� ��" ��

��

, ��-��

��'��6��

�� 3��" ��

�� 23�� 6��

�� " �� " ��

� �� "��"AJ��

9�� " ��"��

��

�� " '��

�� '�� 3�

��3"�� "�� "��

��"��

�� 3��

.�� "�� 0��

�� "��

� �� "�� 3��3��

4��" ��

��"��

�� 6��" �� "

�� /� ��" ��

�� "��

� �� "��

��"��'��

?��6��"��

�� /��

��

��"'��

��"��6��, ��

'�� '��

�� "��"��"��

��"��3��

��-��9�� "� ��

��'��'��

��"�� '��

�� ;��

�� =��

��3��

�� 0��

��=��

��"��'��

� �� 6��6��

�� ) ��

;��0 �� '��

��'��"�� 3��

�� " '��

� �� " ��

��'��

�� '� � ��

��

/� ��" ��

��

��0��9��"��

�� "

�� !"�

��0��

�� 2��

�� '��

�� "� ��'��

��

$�� 0�

� ��'��

�� , ��

��"��

�� '��

��

��/��'��6��'��"'��

� ��

��'��3��4��"� �

�� '��0� � ��

��

�� "��

��

��'�� 5 ��

�� '�� " ��

��'��

��"�� '��-��

�� A��

�� '� � � ��

��

��

��"��3��

�� " ��

� ��'� �� 6��4��" ��

� �� '��

�� '��3��" ��

��3� ��

��'� ��,��

��

��

��6��

;��"��=�� 6��

�� " '�� 6��, ��

��'��

��

��

��'� ��

�� , � �� 0�

�� '�� '��

�� -��

�� "��"��

��

0��

�� ?��

� ��"��"� ��

�� < � � �� < ��

��"� ��"� ��

�� '��

�� 2��

��"'��3��

��"��0��

� ��'��"��

.��

'� �� #�� &"

��

�� " ��

�� , ��

��"'��

��"� ��

�� , �

��" ��

��'��" �� 3��

'��"��

�� '�

�� "��3��, �

3�� "��

�� "'��

��

, �� 2��

�� '��

�� '� �� '� ��

��

�'�� '��" � �� '��

��-��'��

4��"� ��

��"��'��"��

��'��"'��

��'�� 0�"�� "%A?"

/��"��D��.��"� �� '��

��3��" ��

�� 2��

��

;��

��

� � �� '��

��

�� 5 ��

��

��

��

��

�� ;��

�� 6��

��'�� 3��5��

� � �� 3� ��

��

��"� �� '�

�� 5 ��

�� '��" �� 3��'��2��

��'�� '� ��'��"'��

��'��-��"�3��

��6�� '� � ��, �

��3�� '��6��

�� 3�� 3�� " ��

� ��'��

��"��"��"��

�� 0�� ./0�"� ��

�� " ��

��

�� " '��

�� "��

�� '�� " ��

� �� 3��'��'��

, � ��

��

��

��

�� 0��

�� " ��

�� 0�� '��

�� 5�� "��

� ��0� ��

��

, ��

�� '��

�0��5��

��'��

��, ��

��

�� '��

��8'��

'��"'��

�0��

9�� 0�� "'��

�� "��"��'��

� � �� 6�� 9��

��" � � ��'��

��"'��"��

��

��

�� '��

3��

��"� ��0��

��

�� '�� /� �� "

� � �� '��-�� '��

� ��

� ��%�� '��

� � �� " �� '��

�� '� � � � ��

��"�� '�� /� � � ��" ��

�� " ��3� �� "��

��

� ��

, �� 0��

�� 3��) ��

�� 6�� , � ��

�� '��

��"��'�� 8��

��"��

��"��3��

��


Selected Bibliography

224

Bank of Thailand, 1997. Monthly Bulletin. Bangkok.Barro, R. J., and J. W. Lee, 1993. “International Com-

parisons of Educational Attainment.” Journal ofMonetary Economics 32(5):363-94.

Barro, R. J., and X. Sala-I-Martin, 1995. EconomicGrowth. New York: McGraw-Hill.

Basant, R., and B. Fikkert, 1996. “The Effects ofR&D, Foreign Technology Purchase, and Inter-national and Domestic Spillovers on Productiv-ity in Indian Firms.” The Review of Economics andStatistics 78(2):187-99.

Behrman, J. R., 1988. “Nutrition, Health, BirthOrder, and Seasonality: Intrahousehold Alloca-tion among Children in Rural India.” Journal ofDevelopment Economics 28(1-3): 43-62.

Behrman, J. R., and A. B. Deolalikar, 1991. “SchoolRepetition, Dropouts, and the Returns to School:The Case of Indonesia.” Oxford Bulletin ofEconomics and Statistics 53(4):467-80.

Bhattarcharya, A., S. Claessens, and L. Hernandez,1997. “Recent Financial Turbulence in SoutheastAsia.” Paper presented at the Tenth AsianEconomic Outlook Workshop, 21-22 October,Asian Development Bank, Manila. Mimeo.

Bikhchandani, S., D. Hershleifer, and I. Welch, 1992.“A Theory of Fads, Fashion, Cultural Change asInformational Cascades.” Journal of PoliticalEconomy 100(5):992-1026.

Birdsall, N., 1988. “Economic Approaches to Popu-lation Growth.” In H. C. Chenery and T. N.Srinivasan, eds., Handbook of Development Eco-nomics. Vol. I. North Holland: Elsevier SciencePublishers.

Caramazza, F., 1997. “World Economic Outlook.”Paper presented at the Tenth Asian EconomicOutlook Workshop, 21-22 October, AsianDevelopment Bank, Manila. Mimeo.

Asian Development Bank (ADB), 1996a. “Consul-tative Group Report.” Manila.

, 1996b. “Economic Report 1996 for MarshallIslands.” Manila.

, 1997a. Emerging Asia: Changes and Chal-lenges. Manila.

, 1997b. Key Indicators of Developing Asian andPacific Countries 1997. Vol. XXVlll. Hong Kong:Oxford University Press for the Asian Develop-ment Bank.

, 1997c. “Country Economic Review forBangladesh.” Manila.

, 1997d. “Country Economic Review forKazakstan.” Manila.

, 1997e. “Country Economic Review forKyrgyz Republic.” Manila.

, 1997f. “Country Economic Review forThailand.” Manila.

, 1997g. “Country Economic Review forUzbekistan.” Manila.

, 1997h. “Country Economic Review for theSocialist Republic of Viet Nam.” Manila.

_____, 1998. “Country Economic Review forNepal.” Manila.

Azis, I., 1997. “Short-Term Outlook of theIndonesian Economy.” Background paperprepared for the Asian Development Outlook1998. Cornell University, Ithaca, New York.Mimeo.

Banerjee, A. V., 1992. “A Simple Model of HerdBehavior.” Quarterly Journal of Economics107(3):797-817.

Bangko Sentral ng Pilipinas, 1998a. The Philippines:Staying on Course. Manila.

, 1998b. Selected Economic Indicators. Manila.Bank of Indonesia, 1997. Weekly Report. Jakarta.

December 15.

225Selected Bibliography

Central Bank of Samoa, 1997. Central Bank of SamoaBulletin 12(3) (September) . Apia, WesternSamoa.

Central Bank of Sri Lanka, 1997. Sri Lanka Socio-economic Data 1997. Colombo.

Central Bureau of Statistics, 1997a. FY1997-98 GDPForecast. Kathmandu, Nepal.

, 1997b. National Accounts of Nepal 1997.Kathmandu, Nepal.

Central Statistical Organisation, 1998. Press Noteon Quick Estimates of National Income, Con-sumption Expenditure, Saving, and Capital Forma-tion, 1996-97. Delhi, India: Department ofStatistics.

Cheung, S., 1997. “Hong Kong Country Report.”Background paper prepared for the AsianDevelopment Outlook 1998. City University ofHong Kong, Hong Kong, China. Mimeo.

Cheung, S. Y. L., and V. Kakkar, 1997. “Recent Cur-rency Crisis, Short- and Medium-Term EconomicProspects and Issues of Macroeconomic Man-agement in Asia.” Paper presented at the TenthAsian Economic Outlook Workshop, 21-22 Oc-tober, Asian Development Bank, Manila.Mimeo.

Coale, A., and E. Hoover, 1958. Population Growthand Economic Development in Low-Income Coun-tries: A Case Study of India. Princeton, NewJersey: Princeton University Press.

Collins, I., 1997. “Country Report for Cambodia.”Background paper prepared for the Asian Devel-opment Outlook 1998. Policy Development andPlanning, Sydney, Australia. Mimeo.

Council for Economic Planning and Development,1993. Taiwan Statistical Data Book 1993.Taipei,China.

Das, D. K., 1997. “Recent MacroeconomicDevelopments and Short-Term Growth Pros-pects for the Developing Asian Economies.”Paper presented at the Tenth Asian EconomicOutlook Workshop, 21-22 October, AsianDevelopment Bank, Manila. Mimeo.

Deolalikar, A. B., 1988. “Nutrition and Labor Pro-ductivity in Agriculture: Wage Equation andFarm Production Function Estimates for RuralIndia.” The Review of Economics and Statistics70(3):406-13.

, 1997. “Education, Training, and Interna-tional Competitiveness in Asia.” Paper presentedat the Tenth Asian Economic Outlook Work-

shop, 21-22 October, Asian Development Bank,Manila. Mimeo.

, forthcoming. “Increasing School QuantityVersus Quality: Impact on Children from Low-Income Versus High-Income Households.”Journal of Policy Reform.

Department of Statistics, 1994. Statistical Abstract.Taipei,China: Ministry of Interior.

Diel, M., and R. Schweickert, 1998. Currency Crisis:Is Asia Difficult? Kiel Discussion Papers. Kiel,Germany.

Directorate-General of Budget, Accounting, andStatistics, 1986. Statistical Yearbook. Taipei,China.

Economic Adviser’s Wing, 1997. Economic Survey1996-97. Islamabad: Finance Division, Govern-ment of Pakistan.

Evenson, R. E., and Y. Kislev, 1975. AgriculturalResearch and Productivity. New Haven, Connecti-cut: Yale University Press.

Evenson, R. E., and L. Singh, 1997. EconomicGrowth, International Technological Spillovers,and Public Policy: Theory and Empirical Evi-dence from Asia. Center Discussion Paper No.777. Yale University, Economic Growth Center,New Haven, Connecticut.

Fallon, J., 1998. “Recent Economic Performance andMedium-term Prospects for Pacific IslandsEconomies.” Background paper prepared for theAsian Development Outlook 1998. EconomicInsights, Brisbane, Australia. Mimeo.

Flood, R., and P. Garber, 1984. “Collapsing ExchangeRate Regimes: Some Linear Examples.” Journalof International Economics 16-17(1-4): 1-13.

Food and Agriculture Organization (FAO), 1989.“Agricultural Extension Approaches: WhatFAO’s Case Studies Reveal.” Paper presented atthe Global Consultation on Agricultural Exten-sion organized by the FAO, 4-8 December, Rome,Italy.

Foster, A., and M. Rosenzweig, 1996. “TechnicalChange and Human-Capital Returns andInvestments: Evidence from the Green Revolu-tion.” American Economic Review 80(4):931-53.

General Statistical Office for the Socialist Republicof Viet Nam, 1996. Statistical Yearbook 1996.Hanoi: Statistical Publishing House.

_____, 1997. Viet Nam Demographic and HealthSurvey. Hanoi: Statistical Publishing House.

Giap, T. K., and C. Kang, 1997. “Economic Out-look for Singapore.” Background paper prepared


for the Asian Development Outlook 1998.Nanyang Business School and Nanyang Tech-nological University, Singapore. Mimeo.

Government of Singapore, 1997. 1997 AnnualEconomic Survey. Singapore.

Hasan, R., 1997. “Productivity Growth and Tech-nological Progress in a Reforming Economy: Evi-dence from India.” Unpublished Ph.D.dissertation, University of Maryland.

Institute of International Finance, 1998. CapitalFlows to Emerging Market Economies. Washing-ton, D.C.

International Institute for Management Develop-ment, 1996. The World Competitiveness ReportYearbook 1996. Lausanne, Switzerland.

International Monetary Fund (IMF), 1997a. Balanceof Payments Statistics Yearbook 1997. Washington,D.C.

, 1997b. World Economic Outlook, InitialAssessment. Washington, D.C.

, 1998. International Financial Statistics.Washington, D.C.

Jaleel, M., 1998. “Country Report for Maldives.”Background paper prepared by the MaldivesMonetary Authority for the Asian DevelopmentOutlook 1998. Mimeo.

Jun, K. W., 1997. “Presentation on World EconomicProspects.” Paper presented at the Tenth AsianEconomic Outlook Workshop, 21-22 October,Asian Development Bank, Manila. Mimeo.

Khan, H. A., 1997. “The Future of Miracles; Inter-preting East Asian Growth.” Graduate Schoolof International Studies, University of Denver,Colorado. Unpublished manuscript.

, forthcoming. Technology, Development, andDemocracy: Limits of National Innovation Systemsin the Age of Postmodernism. Cheltenham, UK:Edward Elgar.

Kim, J. I., 1997. “The Korean Economy 1997-1999:Recent Trends and Future Prospects.” Back-ground paper prepared by the Korea Develop-ment Institute, Seoul, for the Asian DevelopmentOutlook 1998. Mimeo.

Krugman, P., 1979. “A Model of Balance of PaymentsCrisis.” Journal of Money, Credit and Banking11(1-4):311-25.

, 1997. “Currency Crisis.” Unpublishedmanuscript.

, 1998. “What Happened to Asia?” Unpub-lished manuscript.

Lee, R., A. Mason, and T. Miller, 1997. Savings,Wealth, and the Demographic Transition. East-West Center Working Papers, Population Series88-7. East-West Center, Honolulu, Hawaii.

Leff, N. H., 1969. “Dependency Rates and SavingsRates.” American Economic Review. 59(Decem-ber):886-95.

_____, 1984. “Dependency Rates and Savings Rates:Another Look.” American Economic Review74(March):231-33.

Mason, A., 1987. “National Saving Rates and Popu-lation Growth: A New Model and New Evi-dence.” In D. Gale Johnson and R. D. Lee, eds.,Population Growth and Economic Development:Issues and Evidence. Madison, Wisconsin: Uni-versity of Wisconsin Press.

, 1988. “Saving, Economic Growth, andDemographic Change.” Population and Develop-ment Review 14(March):113-44.

, 1996. “Population and Housing.” PopulationResearch and Policy Review 15(December):419-35.

, 1997. “Population Change and Asia’sEconomies.” Paper presented at the Tenth AsianEconomic Outlook Workshop, 21-22 October,Asian Development Bank, Manila. Mimeo.

Mingat, A., 1995. “Towards Improving Our Under-standing of the Strategy of High PerformingAsian Economies in the Education Sector.” Paperpresented at the Conference on FinancingHuman Resource Development in AdvancedAsian Countries, 17-18 November, AsianDevelopment Bank, Manila.

Minister for Finance, 1996. “The 1997 BudgetFinance Statement.” Presented to the NationalParliament, Papua New Guinea. September.

Ministry of Finance, Government of Malaysia, 1997.Economic Report 1997/98. Kuala Lumpur.

Ministry of Finance, Government of the SolomonIslands, 1996. “Summary of Economic Perfor-mance and Prospects for 1996.” Honiaria.Mimeo.

Ministry of Trade and Industry, Department ofStatistics, 1996. Yearbook of Statistics Singapore1996. Singapore.

Mishkin, F. S., 1997. “Understanding FinancialCrisis: A Developing Country Perspective.” InM. Bruno and B. Pleskovi, eds., Annual WorldBank Conference on Development Economics 1996.Washington, D.C.: World Bank.

227Selected Bibliography

Monetary Authority of Singapore, 1997. MonthlyStatistical Bulletin. Singapore.

Mujahid-Mukhtar, E., 1997. “Pakistan: EconomicPerformance in 1996/97 and Prospects for 1997/98 and 1998/99.” Background paper preparedfor the Asian Development Outlook 1998.Islamabad, Pakistan. Mimeo.

National Reserve Bank of Tonga, 1997. QuarterlyBulletin 8(2).

National Statistical Coordination Board, variousyears. Philippine Statistical Yearbook. Manila.

_____, 1998. “National Accounts of the Philippines,CY 1995 to CY 1997.” Manila. Mimeo.

National Statistics Office, 1997. Korea StatisticalYearbook 1997. Seoul: National Statistical Or-ganization.

Nguyen, V. Q., 1997. “Viet Nam: Economic Situa-tion in 1997 and Outlook.” Background paperprepared for the Asian Development Outlook1998. Central Institute of Economic Manage-ment, Hanoi, Viet Nam. Mimeo.

Pissarides, C., 1997. “Learning by Trading and theReturns to Human Capital in Developing Coun-tries.” The World Bank Economic Review 11(1):17-32.

Pitt, M., M. R. Rosenzweig, and Md. N. Hassan,1990. “Productivity, Health, and Inequality inthe Intrahousehold Distribution of Food in Low-Income Countries.” American Economic Review80(5):1139-56.

Population Reference Bureau, various years. WorldPopulation Data Sheet. Washington, D. C.

Pray, C. E., and V. W. Ruttan, 1990. “Science andTechnology Policy: Lessons from the AgriculturalSector in South and Southeast Asia.” In R. E.Evenson and G. Ranis, eds., Science and Tech-nology: Lessons for Development Policy. Boulder,Colorado: Westview Press.

Psacharopoulos, G., and W. Loxley, 1985. Diversi-fied Secondary Education and Development: Evi-dence from Colombia and Tanzania. Baltimore,Maryland: The Johns Hopkins University Press.

Psacharopoulos, G., and M. Woodhall, 1985. Edu-cation for Development: An Analysis of InvestmentChoices. New York: Oxford University Press.

Quibria, M. G., 1997. “Labor, Migration, and LaborMarket Integration in Asia.” World Economy20(1):21-42.

Rana, P. B., 1997. “Trends in Private Capital Flowsto Asian Developing Countries.” Paper presented

at the Tenth Asian Economic Outlook Work-shop, 21-22 October, Asian Development Bank,Manila. Mimeo.

Reserve Bank of India, various years. Annual Re-port. Mumbai.

Ross, J. W., P. Mauldin, and V. C. Miller, 1993. Fam-ily Planning and Population: A Compendium of In-ternational Statistics. New York: PopulationCouncil.

Salleh, I. Md., 1998. “Country Economic Outlook:Malaysia.” Background paper prepared for theAsian Development Outlook 1998. Kuala Lumpur,Malaysia. Mimeo.

Sanderson, W., and J. P. Tan. 1993. Population Issuesin Asia. Washington, D. C.: World Bank.

Sen, P., 1998. “Recent Economic Performance andProspects of India.” Background paper preparedfor the Asian Development Outlook 1998. Plan-ning Commission, Delhi, India. Mimeo.

Sharma, S., 1997. “Nepal: Trends and Prospects.”Background paper prepared for the Asian Devel-opment Outlook 1998. Ministry of Finance,Kathmandu, Nepal. Mimeo.

Siripala, N., 1997. “Country Report: Sri Lanka, BriefDiscussion of the Economic Outlook and As-sumptions Underlying the Forecast.” Back-ground paper prepared for the Asian DevelopmentOutlook 1998. Department of National Planning,Colombo, Sri Lanka. Mimeo.

State Bank of Pakistan, various years. Annual Re-port. Karachi.

State Statistical Bureau, People’s Republic of China.1997. China Statistical Yearbook 1997. Beijing.

Stiglitz, J., 1997. “Building Robust Financial Sys-tems.” Lecture at the Asian Development Bank,19 November, Manila.

Strauss, J., 1986. “Does Better Nutrition Raise FarmProductivity?” Journal of Political Economy94(2):297-320.

Strauss, J., and D. Thomas. 1995. “Human Re-sources: Empirical Modeling of Household andFamily Decisions.” In J. R. Behrman and T. N.Srinivasan, eds., Handbook of Development Eco-nomics. Vol. 3. North Holland: Elsevier SciencePublishers.

Summers, R., and A. Heston, 1994. World PennTables, Mark 5.6 (online). Philadelphia: Univer-sity of Pennsylvania.

Tan, H., and G. Batra, 1995. “Enterprise Trainingin Developing Countries: Incidence, Productiv-


Human Resources Department, Education andEmployment Division, Washington, D. C.

, 1994. Socioeconomic Time-Series Access andRetrieval System (online), version 3.0. (STARSdatabase.) Washington, D. C.

, 1997a. Philippines: Managing Global Inte-gration. Report No. 17024-PH. East Asia andPacific Regional Office, Poverty Reduction andEconomic Management Sector Unit, Washing-ton, D. C. Mimeo.

, 1997b. World Development Indicators.CD-ROM version. Washington, D. C.

, 1997c. Private Capital Flows to DevelopingCountries. Washington, D. C.

, 1997d. Global Development Finance. Wash-ington, D. C.

Wu, C. S., 1997. “Recent Developments and NearFuture Outlook for Taipei,China Economy.”Background paper prepared for the Asian Devel-opment Outlook 1998. The Institute of Econo-mics, Taipei,China. Mimeo.

Yushi, M., 1997. “Country Report for People’sRepublic of China.” Background paper preparedfor the Asian Development Outlook 1998. UniruleInstitute of Economics, Beijing, People’s Repub-lic of China. Mimeo.

ity Effects, and Policy Implications.” World Bank,Washington, D.C. Mimeo.

, 1997. “Technology and Firm Size -WageDifferentials in Colombia, Mexico, and Taiwan(China ).” The World Bank Economic Review11(1):59-83.

United Nations (UN), 1994. World Population Pros-pects, 1950-2050. New York.

United Nations Development Programme (UNDP),1997. Human Development Report 1997. NewYork: Oxford University Press.

United Nations Educational, Scientific, andCultural Organization (UNESCO), 1995. WorldEducation Report 1995. Paris: Oxford UniversityPress.

Williamson, J., and M. Higgins, 1997. The Accu-mulation and Demography Connection in EastAsia. East-West Center Working Papers, Popu-lation Series 88-6. East-West Center, Honolulu,Hawaii.

World Bank, 1988. Indonesia: Poverty Assessmentand Strategy Report. Report No. 8034-IND. AsiaRegion, Country Department V, Washington,D.C. Mimeo.

, 1991. “Vocational and Technical Educationand Training.” Policy Paper. Population and


Statistical Notes

230

data-rebasing techniques were used to make theseries consistent. However, there remain data breaksdue to changes in definitions and methodologies.

For most countries, we have adopted the cal-endar/fiscal year reference cited in various economicaccounts from official country sources. For India,Maldives, and Myanmar, all data are on a fiscal yearbasis. For Bangladesh, Nepal, and Pakistan, the na-tional accounts, consumer price index, and balanceof payments are fiscal year data. For all countries,data on government finance are reported on a fiscalyear basis.

Nine tables display regional averages or totalsfor the DMCs as a whole and for each of the sub-regions, namely, the newly industrialized economies(NIEs), People’s Republic of China (PRC) andMongolia, Central Asian republics (CARs),Southeast Asia, South Asia, and the Pacific islands.These are the tables on growth rate of gross domes-tic product (GDP), growth rate of per capita GDP,changes in consumer prices, growth rate of merchan-dise exports and imports, balance of trade, currentaccount balance in absolute level and as a percent-age of GDP, and level of outstanding external debt.The averages are simple weighted arithmetic meanscomputed using contemporaneous GDP values incurrent US dollars, for 1992 to 1996, as weights.From 1997 onward the weights used are the valuesof GDP in 1996. For the CARs, the weight used isthe average GDP value in current US dollars from1994 to 1996. The computation of the averages ortotals for the DMCs exclude data for Myanmar andthe CARs. Owing to sizable devaluation/deprecia-tion of the currencies in Indonesia, Republic ofKorea, Malaysia, Philippines, and Thailand, adjust-ments of the weights were implemented for 1998

T his Statistical Appendix comprises 23 tablescontaining selected economic indicators for the

developing member countries (DMCs) of the AsianDevelopment Bank (ADB). The selected indicatorsare presented by account, namely, sector compo-nents of the national income accounts, consumerprice index, money supply, components of the bal-ance of payments, external debt outstanding anddebt-service ratio, exchange rate, and the budgetaccounts of the central government. These tablespresent a historical series for 1992-1996 and pre-liminary data for 1997. Except for the exchangerate and budget account, which are treated as policyvariables, and foreign direct investment, where dataare not available for the current year, the tables con-tain projections for 1998 and 1999. What followsare notes that describe the source, scope, and con-ceptual definition of the data in each table.

Most of the historical data are obtained fromupdated statistical publications available from offi-cial local sources; publications; and internal docu-ments from the ADB, World Bank, InternationalMonetary Fund (IMF), and United Nations. Someof the preliminary data for 1997 are ADB staff pro-jections derived from quarterly or monthly dataavailable for the year. Projections for 1998 and 1999are purely staff estimates.

Efforts were made to standardize the data toallow comparability over time and across the DMCs,and to ensure consistency across accounts. How-ever, limitations exist because of differences in sta-tistical methodology, definitions, coverage, andpractice. The informed judgment of the staff wasrelied upon in cases where there were peculiaritiesin selected accounts. In particular, breaks in time-series data were unavoidable, and data-splicing and

231Statistical NOTES

and 1999 to reflect the declining shares of thesecountries in total regional output. The method usedwas to substitute the three-year moving average forthe annual nominal GDP values for 1996. The effectof this adjustment was to minimize the sharp down-turn in regional output arising from the effects ofthe currency crisis.

Tables A1, A2, A3, A4, A5, and A6. Growth andStructure of Production. In most countries, the defi-nitions relating to national income accounts arebased on the United Nations System of NationalAccounts. Table A1 shows the annual growth rateof GDP valued either at constant market prices orat constant factor costs. For this issue, we tried touse market prices uniformly for all the DMCs, butowing to data quality and informed preferences ofADB staff regarding developments in the factor mar-kets, GDP valued at constant factor cost were usedin some cases. The GDP data for Bhutan, Fiji, India,Mongolia, Nepal, Pakistan, Sri Lanka, and Tongaare reported in constant factor cost. For Papua NewGuinea, the growth rate is based on GDP at constantpurchaser’s value. Tables A3, A4, and A5 presentannual growth rates for real gross value added inagriculture, industry, and services, respectively.Agriculture includes agricultural crops, livestock,poultry, fisheries, and forestry. The industry sectorcomprises mining and quarrying, manufacturing,construction, and utilities. The services sectorconsists of trade, transportation and communica-tions, finance, public administration, and otherservices. The sector growth rates are consistentlydefined with the reported GDP values in Table A1,and adding up restrictions are imposed where nu-merical discrepancies were noted or where reclassi-fications of the sectors were implemented.

The growth rate figures for per capita real GDPare presented in Table A2. Per capita real GDP isobtained by dividing GDP at constant market prices

by population. In countries where GDP growth rateis based on constant factor costs, except for India,the per capita real GDP growth in constant marketprices is used for uniformity. This creates a residualitem between GDP growth, per capita GDP growth,and population growth. For most DMCs, the 1996data for per capita gross national product (GNP) inUS dollars were obtained from the World Bank.

Table A6 shows the sector shares of GDP basedon constant market prices. For Bangladesh, CookIslands, Fiji, India, Lao People’s DemocraticRepublic, Mongolia, Nepal, Pakistan, Sri Lanka, andTonga, the sector shares of GDP are based on con-stant factor costs. In the case of Hong Kong, Chinathe sector value added and GDP figures used in com-puting the sector shares are in current factor costsbecause constant price estimates are not available.The sector shares for Bhutan are based on valueadded at current factor cost.

Tables A7 and A8. Saving and Investment. Gross na-tional saving (GNS) or gross domestic saving (GDS)is computed as the difference between GNP or GDPand total consumption expenditure in the nationalaccounts statistics. For some countries, gross savingdata were obtained from official country sources.Gross savings differ from GNS/GDS in that it is de-rived from the consolidated income and outlay ac-count, and includes the amount of private transfersfrom the balance-of-payments account. Gross do-mestic investment (GDI) is the sum of gross fixedcapital formation and increases in stocks. For thePacific islands, except Fiji, where reliable estimatesof consumption expenditures are not available, GDSis taken as the sum of GDI and current accountbalance minus the sum of net factor income fromabroad and net transfers. For Nepal, Pakistan, andPhilippines, GNS/GDI as a ratio to GNP was usedand was also obtained from official country sources.For Bhutan, Cambodia, and Viet Nam, gross saving/


GDI as a ratio to GDP was used and was obtainedfrom official country sources. For India, GNS/GDIas a ratio to GDP was used and was obtained fromofficial country sources. For the rest of the DMCs,GDS/GDI as a ratio to GDP was used and wasobtained from official country sources. All figuresused in computing the GNS/GDS/GDI ratios toGNP/GDP are in current prices.

Table A9. Consumer Prices. The table presents theannual inflation rate (period average) based on theconsumer price index obtained from official localsources and from the IMF International FinancialStatistics (January 1998) for DMCs for which dataare not available locally. For Cambodia, the infla-tion rate for 1997 was based on the fourth quarterbasis. For Lao PDR, end-of-period inflation rate forVientiane is reported. The rate reported forViet Nam is an end-of-period inflation rate. ForIndia, the inflation rate refers to the general indexfor the country, while for Bangladesh and thePhilippines, the inflation rates refer to Dhaka middleclass and Metro Manila, respectively.

Table A10. Growth of Money Supply. The annualgrowth rates of M2 are given in Table A10. M2 isdefined as M1—the sum of currency in circulationand demand deposits with deposit money banks—plus quasi money. Data for M2 are obtainedfrom country sources, except for Fiji, Indonesia,Papua New Guinea, Samoa, and Vanuatu, whichare taken from the ADB Key Indicators of DevelopingAsian and Pacific Countries and IMF InternationalFinancial Statistics. For India, M3 is used for liquidity.

Tables A11 and A13. Growth Rate of MerchandiseExports and Imports. Historical data on merchandiseexports and imports are taken from the balance-of-payments accounts from country sources. These aregenerally on a free on board basis. Data for

Cambodia, PRC, Republic of Korea, Lao PDR,Malaysia, Mongolia, and Thailand were obtainedfrom IMF documents. Of these countries, data forBangladesh, Bhutan, India, Maldives, Myanmar,Nepal, and Pakistan refer to fiscal years.

Table A12. Direction of Exports. The table presentsthe annual growth rate of exports to the DMCs andother major trading partners (Japan, United States,European Union, and Australia/New Zealand) fromthe individual DMCs for the years 1985 and 1996.The data were extracted from the tape of IMF’sDirection of Trade Statistics Yearbook 1997. Data forTaipei,China are from a local source.

Tables A14, A15, and A16. Balance of Payments. Thebalance of trade is the difference between merchan-dise exports and merchandise imports. The currentaccount balance is the sum of the balance of trade,net trade in services and income, and net unrequitedtransfers. In the case of Cambodia, India, Lao PDR,and Viet Nam, official transfers are excluded. Datareported for Cambodia, PRC, Indonesia, Republicof Korea, Malaysia, and Thailand are from Interna-tional Financial Statistics (January 1998). Thebalance-of-payments data for other countries arefrom local sources.

Table A17. Foreign Direct Investment (FDI). The dataon gross FDI flows were obtained from the UnitedNations Conference on Trade and Development,World Investment Report 1997. Direct investmentcapital includes equity capital, reinvested earnings,and other capital that is associated with the trans-actions of enterprises.

Tables A18 and A19. External Debt. For most coun-tries, external debt outstanding includes long-termdebt, short-term debt, and use of IMF credit. Debt-service payments consist of principal repayments and

233Statistical NOTES

interest payments on long-term debt and IMF credit,and interest payments on short-term debt. ForCambodia and Viet Nam, external debt includesmedium- and long-term debt in convertible currencyonly. For Mongolia, medium- and long-term debtincludes payment on Council for Mutual EconomicAssistance (CMEA) debts but excludes unresolvedclaims of former CMEA members. For all countries,the debt-service ratio is defined as debt-servicepayments as a percentage of exports of goods andservices. The data were obtained from local sourcesfor most countries. Data provided by the World Bankwere used for Cambodia, PRC, Indonesia, Lao PDR,Malaysia, Maldives, Myanmar, and Thailand.

Tables A20. Foreign Exchange Rates. The foreignexchange rate quoted is the annual average of theexchange rate of the currency of each of thecountries to the US dollar. Basic data were obtainedfrom local sources except for Bangladesh; Cambodia;Indonesia; Lao PDR; Mongolia; Taipei,China; and

Thailand where the data were sourced from IMFdocuments.

Tables A21, A22, and A23. Government Finance.These tables relate only to central governmentfinance. Government expenditure includes bothcurrent and capital expenditure. Total revenue in-cludes current revenue and capital receipts. In mostcountries, the overall budget surplus/deficit is thebalance between government revenue and expen-diture, excluding grants. In the case of Bhutan,Republic of Korea, Marshall Islands, FederatedStates of Micronesia, Nepal, Pakistan, and Vanuatu,the overall balance includes grants. For India, theoverall balance includes recovery of loans and assetsales. For Pakistan, the account reported refers toconsolidated federal and provincial accounts, andincludes surpluses of autonomous bodies. All ratiosare reported as a percentage of GDP in currentprices. Data are taken from official country sourcesand are on a fiscal year basis.


Table A1 Growth Rate of GDP(percent per annum)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized Economies 5.9 6.4 7.6 7.4 6.4 6.0 2.2 4.3Hong Kong, China 6.3 6.1 5.4 3.9 5.0 5.2 3.0 3.5Korea, Rep. of 5.1 5.8 8.6 8.9 7.1 5.5 -1.0 3.1Singapore 6.2 10.4 10.5 8.7 6.9 7.8 3.0 4.5Taipei,China 6.8 6.3 6.5 6.0 5.7 6.8 5.8 6.2

People’s Rep. of China and Mongolia 14.2 13.5 12.6 10.5 9.6 8.8 7.2 6.8China, People’s Rep. of 14.2 13.5 12.6 10.5 9.6 8.8 7.2 6.8Mongolia ... -3.0 2.3 6.3 2.4 3.3 ... ...

Central Asian Republics -13.5 -13.3 -16.5 -5.5 3.9 7.8 ... ...Kazakstan -14.0 -12.9 -12.6 -8.2 0.5 2.0 ... ...Kyrgyz Republic -13.8 -15.5 -20.1 -5.3 5.6 10.4 ... ...Uzbekistan -11.1 -2.3 -5.2 -0.9 1.6 5.2 ... ...

Southeast Asia 6.6 7.2 7.7 8.2 7.1 3.9 -0.4 2.4Cambodia 7.0 4.1 4.0 7.6 6.5 2.0 ... ...Indonesia 7.2 7.3 7.5 8.2 8.0 4.6 -3.0 1.0Lao People’s Democratic Rep. 7.0 5.9 8.1 7.0 6.9 7.2 ... ...Malaysia 7.8 8.3 9.2 9.5 8.6 7.5 3.5 4.5Myanmar 9.7 6.0 7.5 6.9 5.8 5.0 ... ...Philippines 0.3 2.1 4.4 4.8 5.7 5.1 2.4 4.0Thailand 8.1 8.7 8.6 8.8 5.5 -0.4 -3.0 1.0Viet Nam 8.6 8.1 8.8 9.5 9.3 9.2 5.0 6.5

South Asia 5.5 5.4 7.0 6.6 6.8 4.8 6.4 6.7Bangladesh 4.2 4.5 4.2 4.4 5.4 5.7 6.0 6.2Bhutan 4.5 6.1 6.4 7.4 6.1 6.6 ... ...India 5.3 6.0 7.8 7.2 7.5 5.0 6.7 7.0Maldives 6.3 6.2 6.6 7.2 6.5 6.0 ... ...Nepal 4.6 3.3 7.9 2.8 6.1 4.3 3.7 4.0Pakistan 7.7 2.3 4.5 5.2 4.6 3.1 5.1 5.5Sri Lanka 4.3 6.9 5.6 5.5 3.8 6.3 5.6 6.0

Pacific Islands 9.2 12.1 3.0 -1.7 3.3 -4.1 ... ...Cook Islands 11.0 1.5 1.5 -5.7 -5.3 0.5 ... ...Fiji 4.9 2.2 3.9 2.0 3.1 -1.0 ... ...Kiribati 2.5 3.1 6.8 12.8 1.7 2.0 ... ...Marshall Islands 1.1 2.5 4.7 4.7 -5.0 -5.0 ... ...Micronesia, Federated States of 1.3 1.4 -1.9 0.8 0.8 -5.0 ... ...Papua New Guinea 11.8 16.6 3.1 -4.7 3.9 -6.5 ... ...Samoa -0.9 6.3 -7.8 9.5 5.9 3.0 ... ...Solomon Islands 12.5 2.3 5.6 7.6 3.5 -1.0 ... ...Tonga ... 2.8 4.7 2.6 1.6 3.0 ... ...Tuvalu 2.7 5.2 6.2 2.0 2.5 2.5 ... ...Vanuatu 1.0 4.5 2.5 3.2 3.0 3.0 ... ...

Average for DMCs 8.1 8.4 8.7 8.2 7.5 6.1 4.0 5.1

235STATISTICAL aPPENDIX

Table A2 Growth Rate of Per Capita GDP(percent per annum)

Per CapitaGNP (US$)

1992 1993 1994 1995 1996 1997 1998 1999 1996

Newly Industrialized Economies 4.7 5.1 6.3 5.3 5.1 4.6 0.9 3.1Hong Kong, China 5.4 4.3 3.1 1.9 2.4 2.1 0.5 1.5 24,290Korea, Rep. of 4.0 4.7 7.5 7.8 6.1 4.5 -1.9 2.1 10,610Singapore 4.1 8.3 8.4 6.5 5.1 5.7 0.4 3.2 30,550Taipei,China 5.7 5.2 5.7 5.1 4.9 6.0 5.0 5.4 13,310

People’s Rep. of China and Mongolia 12.9 12.2 11.3 9.3 8.5 7.7 6.1 5.7China, People’s Rep. of 12.9 12.2 11.3 9.3 8.5 7.7 6.1 5.7 750Mongolia ... -4.4 0.9 4.5 0.8 1.2 ... ... 360

Central Asian Republics -14.4 -13.8 -15.7 -6.8 3.7 7.1 ... ...Kazakstan -13.3 -12.8 -12.2 -6.5 1.5 3.1 ... ... 1,350Kyrgyz Republic -15.0 -15.8 -18.9 -7.7 5.3 10.0 ... ... 550Uzbekistan -13.2 -4.5 -6.0 -2.9 -0.1 ... ... ... 1,010

Southeast Asia 4.4 5.2 5.8 5.3 5.2 1.7 -2.3 0.6Cambodia 1.6 0.3 1.8 4.0 1.5 -0.7 ... ... 300Indonesia 5.4 5.5 5.8 6.5 6.2 2.9 -4.4 -0.5 1,080Lao People’s Democratic Rep. 4.3 3.2 5.4 4.3 4.3 4.6 ... ... 400Malaysia 3.3 5.0 6.5 6.4 6.1 5.1 1.2 2.1 4,370Myanmar 7.6 4.1 5.5 4.9 3.9 4.5 ... ... ...Philippines -2.1 -0.5 2.0 2.3 3.3 2.8 -0.4 1.7 1,160Thailand 6.8 7.4 7.3 7.6 4.3 -2.8 -4.7 -0.5 2,960Viet Nam 6.1 5.6 6.6 7.4 7.3 7.0 3.0 4.4 290

South Asia 3.4 3.3 4.4 4.3 4.8 3.1 4.5 4.9Bangladesh 2.5 2.8 2.0 2.6 3.5 3.8 4.1 4.3 260Bhutan 1.3 2.9 3.5 3.8 2.9 2.9 ... ... 390India 3.3 4.1 5.3 5.5 5.6 3.4 5.0 5.4 380Maldives 2.8 2.8 3.3 5.7 ... ... ... ... 1,080Nepal 2.5 1.2 5.7 0.8 3.9 2.2 1.6 1.9 210Pakistan 4.7 -1.0 0.9 2.4 1.3 0.6 2.3 2.5 480Sri Lanka 3.3 5.6 4.2 4.0 2.6 5.2 4.5 4.9 740

Pacific Islands 7.1 10.6 1.0 -0.6 -0.4 0.3 ... ...Cook Islands 10.5 0.4 0.4 -3.2 -6.3 3.5 ... ... ...Fiji 4.5 -0.1 2.3 1.3 1.4 0.9 ... ... 2,470Kiribati -21.4 -1.4 -0.7 5.3 -0.2 1.0 ... ... 920Marshall Islands -4.0 0.3 -1.2 0.9 ... ... ... ... 1,890Micronesia, Federated States of -0.7 -0.3 -3.2 -0.5 -0.5 ... ... ... 2,070Papua New Guinea 9.5 14.5 1.0 -2.0 -2.4 ... ... ... 1,150Samoa -0.3 2.9 -7.0 7.6 5.3 2.4 ... ... 1,170Solomon Islands 2.0 7.4 -0.8 6.9 13.9 ... ... ... 900Tonga -14.9 0.2 2.8 1.2 -3.7 0.1 ... ... 1,790Tuvalu 1.4 3.9 4.8 0.7 0.7 1.2 ... ... ...Vanuatu -1.7 7.5 -0.1 0.7 0.6 ... ... ... 1,290

Average for DMCs 6.5 6.9 7.1 6.2 6.0 4.6 2.5 3.7


Table A3 Growth Rate of Value Added in Agriculture(percent per annum)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized EconomiesHong Kong, China ... ... ... ... ... ... ... ...Korea, Rep. of 6.0 -2.9 1.6 3.7 3.5 0.6 1.0 1.0Singapore 0.6 -2.4 5.4 11.0 6.0 -5.8 ... ...Taipei,China 1.4 8.1 3.9 5.4 -4.1 -3.4 0.5 1.4

People’s Rep. of China and MongoliaChina, People’s Rep. of 4.7 4.7 4.0 5.0 5.1 3.5 3.5 3.5Mongolia -2.1 -2.7 2.7 4.2 10.0 2.6 ... ...

Central Asian RepublicsKazakstan 0.5 -12.1 -20.8 -23.7 -6.9 3.5 ... ...Kyrgyz Republic -3.2 -9.1 -9.0 -2.0 13.0 ... ... ...Uzbekistan -9.7 1.5 -3.4 2.0 -7.3 5.8 ... ...

Southeast AsiaCambodia 1.9 -1.0 -0.0 6.5 1.8 4.9 ... ...Indonesia 6.3 1.7 0.6 4.4 3.0 0.6 1.5 2.5Lao People’s Democratic Rep. 8.3 2.7 8.3 3.1 2.8 5.8 ... ...Malaysia 4.7 4.3 -1.0 1.1 2.2 3.5 2.0 2.0Myanmar 10.5 4.6 5.9 4.8 4.6 6.4 ... ...Philippines 0.4 2.1 2.6 0.8 3.1 2.8 -1.0 2.0Thailand 6.0 0.5 2.8 2.5 3.8 1.2 3.0 ...Viet Nam 7.1 3.8 3.9 5.1 4.4 4.9 3.0 3.5

South AsiaBangladesh 2.2 1.8 0.3 -1.0 3.7 6.0 3.2 3.4Bhutan -2.0 3.6 3.9 4.0 6.4 4.1 ... ...India 6.1 3.6 4.6 -3.0 7.9 -2.0 4.5 3.0Maldives -1.1 0.0 2.6 1.5 ... ... ... ...Nepal -1.1 -0.6 7.6 -0.3 4.4 4.1 2.0 3.5Pakistan 9.5 -5.3 5.2 6.6 5.3 0.7 5.0 3.0Sri Lanka -1.6 4.9 3.3 3.3 -4.6 5.4 3.0 3.0

Pacific IslandsCook Islands -8.3 0.2 1.9 ... 5.0 ... ... ...Fiji 3.5 0.6 9.4 -2.8 4.2 -2.3 ... ...Kiribati ... -5.6 11.4 -8.3 -9.4 ... ... ...Marshall Islands -3.0 2.3 24.4 -3.1 ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ... ... ...Papua New Guinea 6.1 9.5 6.0 0.7 3.0 ... ... ...Samoa -10.1 10.8 -22.6 11.5 4.2 ... ... ...Solomon Islands -0.5 18.9 -1.4 18.7 3.5 -2.2 ... ...Tonga -7.6 -0.1 4.7 4.4 -7.3 -3.8 ... ...Tuvalu -1.6 0.9 0.6 0.5 0.5 1.0 ... ...Vanuatu 1.9 18.4 2.2 6.4 1.6 ... ... ...


Table A4 Growth Rate of Value Added in Industry(percent per annum)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized EconomiesHong Kong, China ... ... ... ... ... ... ... ...Korea, Rep. of 3.4 6.2 9.0 10.3 6.2 5.4 -2.5 4.0Singapore 5.8 9.3 13.2 9.5 6.5 6.6 ... ...Taipei,China 3.6 4.0 1.8 3.1 4.0 5.7 3.1 4.1

People’s Rep. of China and MongoliaChina, People’s Rep. of 21.2 19.9 18.4 13.9 12.1 10.8 8.0 7.0Mongolia -12.9 -6.9 2.1 14.6 0.5 2.3 ... ...

Central Asian RepublicsKazakstan -23.2 -19.7 -25.9 -21.9 5.1 -3.5 ... ...Kyrgyz Republic -25.9 -22.0 -38.5 -11.5 -1.2 ... ... ...Uzbekistan -15.5 -4.2 -6.6 -5.6 1.7 6.5 ... ...

Southeast AsiaCambodia 15.5 13.0 7.7 9.8 13.3 0.6 ... ...Indonesia 8.2 9.8 11.2 10.4 10.6 5.4 -3.0 1.5Lao People’s Democratic Rep. 7.5 10.3 10.7 12.9 17.5 9.8 ... ...Malaysia 8.9 10.1 12.4 13.8 11.2 10.5 5.0 6.0Myanmar 12.7 11.0 10.3 12.5 10.7 9.8 ... ...Philippines -0.6 1.6 5.8 7.0 6.3 5.7 3.0 3.5Thailand 9.9 10.4 10.2 10.5 7.0 -0.1 -0.3 ...Viet Nam 14.0 13.1 14.0 13.9 14.4 13.6 7.3 10.0

South AsiaBangladesh 7.1 8.0 7.8 8.4 5.3 3.6 8.1 8.0Bhutan 15.1 7.3 13.9 17.0 8.4 1.6 ... ...India 4.2 6.8 9.4 14.1 7.2 6.0 7.0 9.0Maldives 9.1 8.9 6.6 8.2 ... ... ... ...Nepal 16.8 4.8 9.0 3.9 5.9 3.2 4.6 4.0Pakistan 7.7 5.5 4.5 4.8 3.6 3.3 4.5 6.5Sri Lanka 7.1 9.8 8.1 7.8 5.6 7.9 7.5 8.5

Pacific IslandsCook Islands 24.0 -17.1 10.6 ... 2.0 ... ... ...Fiji 7.1 6.0 5.6 1.9 3.9 -0.1 ... ...Kiribati ... 1.8 1.4 2.9 2.6 ... ... ...Marshall Islands 1.3 -7.5 13.3 20.7 ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ... ... ...Papua New Guinea 28.5 35.8 -0.8 -8.0 7.6 ... ... ...Samoa 19.7 2.2 -3.2 26.6 14.0 ... ... ...Solomon Islands 8.4 6.7 11.5 39.7 ... 1.7 ... ...Tonga 12.3 1.6 -2.2 -2.7 6.3 -1.7 ... ...Tuvalu 38.8 -8.1 -10.1 -6.5 2.7 2.7 ... ...Vanuatu -8.4 1.2 7.3 6.4 -9.2 ... ... ...


Table A5 Growth Rate of Value Added in Services(percent per annum)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized EconomiesHong Kong, China ... ... ... ... ... ... ... ...Korea, Rep. of 7.6 7.4 8.6 7.6 8.1 7.1 0.1 2.6Singapore 6.0 10.7 9.5 8.2 7.3 8.8 ... ...Taipei,China 9.5 7.8 9.9 7.9 7.3 7.9 7.6 7.5

People’s Rep. of China and MongoliaChina, People’s Rep. of 12.4 10.7 9.6 8.4 7.8 8.2 7.5 8.4Mongolia -13.2 1.0 2.0 0.2 -4.1 5.3 ... ...

Central Asian RepublicsKazakstan -9.0 -7.0 0.7 3.8 0.1 5.0 ... ...Kyrgyz Republic -11.6 -16.4 -19.3 -7.8 0.8 ... ... ...Uzbekistan -49.5 -3.0 -5.4 -0.5 5.1 4.6 ... ...

Southeast AsiaCambodia 11.2 7.2 7.4 7.9 8.8 -0.4 ... ...Indonesia 6.8 7.4 7.1 7.6 7.3 5.3 -4.6 -0.1Lao People’s Democratic Rep. 3.9 7.7 5.5 10.2 8.5 10.0 ... ...Malaysia 8.5 9.7 9.5 9.2 9.5 8.5 6.0 7.0Myanmar 7.6 6.1 8.3 7.2 5.3 5.1 ... ...Philippines 1.0 2.5 4.2 5.0 6.5 5.6 3.5 5.0Thailand 7.2 9.6 8.8 9.0 4.6 -1.1 -0.3 ...Viet Nam 7.0 9.2 10.2 10.6 10.0 9.5 5.0 6.0

South AsiaBangladesh 4.8 5.3 5.8 6.9 6.5 6.2 7.1 7.2Bhutan 6.6 10.1 6.2 5.9 5.2 13.9 ... ...India 5.5 7.3 7.5 9.8 7.3 9.1 7.9 8.1Maldives 8.7 7.9 8.1 8.7 ... ... ... ...Nepal 6.5 7.3 7.7 6.0 7.9 5.0 5.0 4.5Pakistan 6.8 4.6 4.2 4.8 4.7 4.1 5.5 6.2Sri Lanka 5.3 6.2 5.1 4.9 6.0 5.6 5.3 5.4

Pacific IslandsCook Islands 13.7 3.1 5.9 ... -8.9 ... ... ...Fiji 5.5 0.2 1.7 4.3 2.3 2.7 ... ...Kiribati -4.5 0.7 0.7 3.7 3.4 ... ... ...Marshall Islands 2.0 4.5 -0.8 3.4 ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ... ... ...Papua New Guinea 2.9 3.0 5.6 -9.1 0.5 ... ... ...Samoa 2.0 -1.8 11.0 -0.5 2.4 ... ... ...Solomon Islands 8.3 4.7 2.9 -0.2 1.7 2.4 ... ...Tonga -19.8 -0.7 2.1 0.8 -1.8 8.6 ... ...Tuvalu 59.5 -16.6 -8.5 -9.2 3.0 2.9 ... ...Vanuatu 3.0 9.8 1.7 1.4 6.2 ... ... ...


Table A6 Sectoral Share of GDP(percent)

Agriculture Industry Services

1970 1980 1997 1970 1980 1997 1970 1980 1997

Newly Industrialized EconomiesHong Kong, China ... 0.9 0.2 ... 32.0 15.5 ... 67.2 84.4Korea, Rep. of 29.8 14.2 6.1 23.8 37.8 43.7 46.4 48.1 50.2Singapore 2.2 1.1 0.1 36.4 38.8 34.3 61.4 60.0 65.5Taipei,China ... 7.9 2.9 ... 46.0 35.3 ... 46.1 61.8

People’s Rep. of China and MongoliaChina, People’s Rep. of 42.2 25.6 17.2 44.6 51.7 54.9 13.2 22.7 27.9Mongolia 33.1 17.4 36.9 26.3 33.3 34.0 40.6 49.3 29.1

Central Asian RepublicsKazakstan ... ... 13.4 ... ... 30.5 ... ... 51.6Kyrgyz Republic ... ... 49.8 ... ... 25.0 ... ... 25.2Uzbekistan ... ... 21.3 ... ... 18.0 ... ... 60.7

Southeast AsiaCambodia ... ... 43.9 ... ... 19.6 ... ... 36.5Indonesia 35.0 24.4 14.8 28.0 41.3 43.2 37.0 34.3 42.0Lao People’s Democratic Rep. ... ... 52.5 ... ... 21.5 ... ... 26.0Malaysia ... 22.9 11.7 ... 35.8 47.6 ... 41.3 40.8Myanmar 49.5 47.9 44.5 12.0 12.3 16.8 38.5 39.8 38.7Philippines 28.2 23.5 20.5 33.7 40.5 35.9 38.1 36.0 43.6Thailand 30.2 20.2 10.8 25.7 30.1 42.2 44.1 49.7 47.0Viet Nam ... 42.7 31.2 ... 26.3 30.1 ... 31.0 38.7

South AsiaBangladesh ... 49.4 32.4 ... 14.8 19.2 ... 35.8 48.4Bhutan ... 56.7 36.2 ... 12.2 28.0 ... 31.1 35.9India 44.5 38.1 24.3 23.9 25.9 31.9 31.6 36.0 43.8Maldives ... ... ... ... ... ... ... ... ...Nepal ... 61.8 41.0 ... 11.9 19.1 ... 26.3 39.8Pakistan 40.1 30.6 24.2 19.6 25.6 26.4 40.3 43.8 49.4Sri Lanka 30.7 26.6 18.3 27.1 27.2 32.3 42.2 46.2 49.4

Pacific IslandsCook Islands ... ... ... ... ... ... ... ... ...Fiji 30.2 22.5 22.1 23.1 21.7 23.4 46.7 55.8 54.5Kiribati ... ... ... ... ... ... ... ... ...Marshall Islands ... ... ... ... ... ... ... ... ...Micronesia, Federated States ... ... ... ... ... ... ... ... ...Papua New Guinea ... ... ... ... ... ... ... ... ...Samoa ... ... ... ... ... ... ... ... ...Solomon Islands ... 52.5 35.7 ... 10.0 23.7 ... 37.4 40.6Tonga ... 47.6 35.3 ... 11.0 15.4 ... 41.4 49.3Tuvalu ... ... ... ... ... ... ... ... ...Vanuatu ... ... ... ... ... ... ... ... ...


Table A7 Gross Domestic Savings(percentage of GDP)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized EconomiesHong Kong, China 33.8 34.6 33.1 30.5 30.7 30.6 30.0 32.0Korea, Rep. of 35.2 35.4 36.5 36.8 35.2 34.5 34.9 33.9Singapore 45.6 46.3 48.8 51.0 51.2 51.8 50.0 50.0Taipei,China 27.0 27.0 25.8 25.6 25.1 24.7 24.9 25.2

People’s Rep. of China and MongoliaChina, People’s Rep. of 38.3 41.5 42.2 41.9 41.4 42.6 39.0 39.0Mongolia 23.9 12.4 11.3 21.8 19.9 19.3 ... ...

Central Asian RepublicsKazakstan ... ... 13.4 15.8 10.3 ... ... ...Kyrgyz Republic 7.9 4.0 2.7 5.5 2.2 3.0 ... ...Uzbekistan 6.7 -5.4 7.8 20.4 8.2 9.0 ... ...

Southeast AsiaCambodia 6.2 5.3 4.8 5.4 5.4 4.4 ... ...Indonesia 35.3 32.5 32.2 30.6 30.2 31.0 24.0 25.0Lao People’s Democratic Rep. ... ... ... ... ... ... ... ...Malaysia 36.5 37.7 38.8 39.5 42.6 43.8 42.0 42.5Myanmar 12.8 11.4 11.7 13.4 14.0 14.6 ... ...Philippines 17.0 15.2 17.0 16.8 18.8 19.2 17.0 19.0Thailand 35.2 35.6 36.0 33.6 33.7 31.0 31.4 32.0Viet Nam 16.9 17.4 16.9 17.0 16.7 17.7 16.0 18.0

South AsiaBangladesh 5.8 7.0 13.4 12.8 7.5 9.0 8.6 8.8Bhutan 16.1 26.8 28.4 27.0 29.0 30.0 ... ...India 22.5 21.1 23.0 24.4 25.6 25.5 25.6 27.1Maldives ... ... ... ... ... ... ... ...Nepal 12.7 15.5 16.5 15.2 10.3 12.5 13.1 13.0Pakistan 16.9 13.5 15.6 14.2 11.6 11.4 12.5 13.5Sri Lanka 15.0 16.0 15.2 15.3 15.5 16.5 17.5 18.0

Pacific IslandsCook Islands ... ... ... ... ... ... ... ...Fiji 9.3 10.3 11.2 11.0 12.7 ... ... ...Kiribati -50.4 ... ... ... ... ... ... ...Marshall Islands ... ... ... ... ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ... ... ...Papua New Guinea 19.7 ... ... ... ... ... ... ...Samoa ... ... ... ... ... ... ... ...Solomon Islands ... ... ... ... ... ... ... ...Tonga -24.8 ... ... ... ... ... ... ...Tuvalu ... ... ... ... ... ... ... ...Vanuatu 20.3 19.3 18.9 23.0 ... ... ... ...


Table A8 Gross Domestic Investment(percentage of GDP)

1992 1993 1994 1995 1996 1997 1998 1999



Central Asian RepublicsKazakstan ... ... 21.4 20.1 14.0 ... ... ...Kyrgyz Republic 19.9 11.7 9.0 18.3 23.5 19.0 ... ...Uzbekistan 13.1 3.0 5.7 20.9 16.1 15.0 ... ...

Southeast AsiaCambodia 9.8 17.8 18.5 21.6 20.9 17.6 ... ...Indonesia 32.4 29.5 32.5 31.9 30.8 31.6 25.0 27.0Lao People’s Democratic Rep. ... ... ... ... ... ... ... ...Malaysia 35.1 37.8 40.4 43.5 41.5 42.0 40.5 41.5Myanmar 13.5 12.4 12.4 14.3 14.8 16.8 ... ...Philippines 20.8 23.6 23.5 21.6 23.3 23.9 20.0 22.0Thailand 40.0 39.9 40.3 41.6 41.7 35.0 26.0 29.0Viet Nam 17.6 24.9 25.5 27.1 27.9 25.4 23.0 25.0

South AsiaBangladesh 12.1 14.3 18.1 19.1 17.0 17.4 17.2 18.0Bhutan 47.7 47.1 50.3 47.6 48.0 47.0 ... ...India 24.0 21.7 24.0 26.2 27.1 26.6 27.1 29.0Maldives ... ... ... ... ... ... ... ...Nepal 21.2 23.1 22.4 23.4 23.2 23.4 24.9 25.0Pakistan 19.9 20.5 19.4 18.3 18.7 18.4 20.0 22.0Sri Lanka 24.3 25.6 27.0 25.7 24.2 25.8 26.7 27.6

Pacific IslandsCook Islands ... ... ... ... ... ... ... ...Fiji 13.4 14.6 12.2 13.0 12.1 ... ... ...Kiribati 69.0 ... ... ... ... ... ... ...Marshall Islands ... ... ... ... ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ... ... ...Papua New Guinea 23.8 ... ... ... ... ... ... ...Samoa ... ... ... ... ... ... ... ...Solomon Islands 25.4 19.6 ... ... ... ... ... ...Tonga 33.8 ... ... ... ... ... ... ...Tuvalu 58.4 41.1 46.1 71.6 ... ... ... ...Vanuatu 26.2 25.5 26.5 30.5 ... ... ... ...


Table A9 Changes in Consumer Prices(percent per annum)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized Economies 5.8 4.6 5.6 4.6 4.3 3.5 6.1 4.9Hong Kong, China 9.3 8.5 8.1 8.6 6.0 5.7 4.5 5.0Korea, Rep. of 6.2 4.8 6.2 4.5 4.9 4.5 9.8 7.2Singapore 2.3 2.2 3.1 1.7 1.4 2.0 3.2 3.3Taipei,China 4.5 2.9 4.1 3.7 3.1 0.9 3.2 2.2

People’s Rep. of China and Mongolia 6.7 14.9 24.2 17.1 8.3 2.8 4.0 6.0China, People’s Rep. of 6.4 14.7 24.1 17.1 8.3 2.8 4.0 6.0Mongolia 153.8 268.4 87.6 56.8 49.6 20.0 ... ...

Central Asian Republics 987.1 1,277.3 782.5 83.6 36.5 24.8 ... ...Kazakstan 1,381.0 1,658.7 1,878.3 175.8 39.1 20.4 ... ...Kyrgyz Republic 854.6 1,208.7 278.1 42.8 30.3 25.5 ... ...Uzbekistan 906.1 880.4 1,281.4 116.9 64.4 30.0 ... ...

Southeast Asia 7.1 6.5 7.1 7.3 6.6 5.6 12.9 8.7Cambodia 112.5 41.0 17.9 3.5 9.0 9.1 ... ...Indonesia 7.6 9.6 8.5 9.5 7.9 6.6 20.0 15.0Lao People’s Democratic Rep. 9.8 6.3 6.8 19.6 13.0 19.5 ... ...Malaysia 4.7 3.6 3.7 3.4 3.5 4.0 5.0 4.5Myanmar 21.9 31.8 24.1 25.2 16.3 ... ... ...Philippines 8.9 7.6 9.0 8.1 8.4 5.1 10.0 8.0Thailand 4.1 3.3 5.2 5.8 5.9 5.6 15.0 9.0Viet Nam 17.6 5.2 14.4 12.7 4.5 3.2 4.0 4.0

South Asia ... 4.8 10.7 9.9 9.3 7.1 7.4 7.5Bangladesh 5.1 1.3 1.8 5.2 4.0 3.9 5.5 5.0Bhutan 15.9 11.2 7.0 9.5 8.8 7.0 ... ...India ... 3.8 11.8 10.0 9.2 6.5 7.0 7.2Maldives 16.8 20.2 16.5 5.4 6.2 8.0 ... ...Nepal 21.0 8.9 8.9 7.6 8.1 7.8 7.5 8.0Pakistan 9.6 9.8 11.2 13.0 10.8 11.6 10.0 10.2Sri Lanka 11.4 11.7 8.4 7.7 15.9 9.6 10.0 9.0

Pacific Islands 4.8 4.3 2.9 11.7 8.6 3.9 ... ...Cook Islands 3.5 7.3 2.6 0.9 -0.5 -2.0 ... ...Fiji 4.9 0.5 0.8 2.2 3.0 2.9 ... ...Kiribati 4.0 6.1 5.3 3.6 -0.6 2.0 ... ...Marshall Islands 10.3 5.0 5.6 7.3 6.0 4.0 ... ...Micronesia, Federated States of 5.0 6.0 4.0 4.0 3.0 3.0 ... ...Papua New Guinea 4.3 4.9 2.9 17.3 11.6 3.9 ... ...Samoa 9.0 1.7 18.4 1.0 7.1 8.0 ... ...Solomon Islands 10.7 14.3 7.3 9.8 15.8 12.0 ... ...Tonga 8.0 0.9 2.4 0.3 2.8 1.8 ... ...Tuvalu 2.2 2.3 1.4 5.0 0.0 0.6 ... ...Vanuatu 4.1 3.6 2.5 2.3 2.5 2.5 ... ...

Average for DMCs 5.6 8.0 11.3 9.4 6.7 4.3 6.9 6.5


Table A10 Growth Rate of Money Supply (M2)(percent per annum)

1992 1993 1994 1995 1996 1997 1998 1999



Central Asian RepublicsKazakstan 389.0 691.9 576.1 110.4 17.4 29.6 ... ...Kyrgyz Republic 428.2 179.9 117.8 77.8 22.2 17.0 ... ...Uzbekistan 468.2 782.2 680.0 158.1 113.7 24.0 ... ...

Southeast AsiaCambodia 214.0 34.4 34.9 44.3 40.4 16.6 ... ...Indonesia 20.2 22.0 20.2 27.6 29.6 27.7 25.0 26.1Lao People’s Democratic Rep. 49.0 64.6 31.9 16.4 26.7 68.8 ... ...Malaysia 19.1 22.1 14.7 24.0 20.9 18.5 18.0 20.0Myanmar 35.6 26.8 33.9 40.5 39.5 ... ... ...Philippines 11.0 24.6 26.8 25.2 15.8 20.5 17.0 17.0Thailand 15.6 18.4 12.9 17.0 12.6 16.4 6.8 7.5Viet Nam 33.7 19.0 33.2 22.6 22.7 24.0 15.0 15.0

South AsiaBangladesh 14.1 10.6 15.4 16.0 8.2 10.8 12.0 12.5Bhutan -2.3 16.2 21.5 29.9 30.4 20.0 ... ...India 15.7 18.4 22.3 13.7 15.9 16.5 16.7 15.0Maldives 12.9 36.4 24.2 15.6 24.0 20.0 ... ...Nepal 21.1 27.7 19.6 16.1 14.4 10.7 12.0 12.0Pakistan 30.3 18.0 16.9 16.6 14.9 13.1 14.2 15.0Sri Lanka 17.4 23.4 19.7 19.2 10.8 14.7 14.0 13.0

Pacific IslandsCook Islands 26.9 6.5 ... ... ... ... ... ...Fiji 15.0 17.9 0.2 7.5 15.4 ... ... ...Kiribati ... ... ... ... ... ... ... ...Marshall Islands ... ... ... ... ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ... ... ...Papua New Guinea 24.9 7.0 2.6 -12.5 8.1 ... ... ...Samoa 0.8 2.3 12.9 21.8 1.6 6.2 ... ...Solomon Islands 26.2 14.7 24.1 9.6 ... ... ... ...Tonga 22.5 4.1 8.8 17.1 2.6 9.3 ... ...Tuvalu ... ... ... ... ... ... ... ...Vanuatu -2.6 4.9 2.9 12.2 ... ... ... ...


Table A11 Growth Rate of Merchandise Exports(percent per annum)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized Economies 12.1 10.7 15.0 20.9 4.5 3.4 4.0 4.9Hong Kong, China 21.2 13.2 11.9 14.8 4.0 4.0 2.2 3.5Korea, Rep. of 8.0 7.7 15.7 31.5 4.1 7.2 5.8 5.6Singapore 8.5 17.0 25.8 21.0 6.4 -3.1 2.0 4.0Taipei,China 6.9 4.5 9.4 20.0 3.8 5.2 6.8 7.0

People’s Rep. of China and Mongolia 18.0 8.7 35.4 24.9 17.8 20.0 3.0 3.0China, People’s Rep. of 18.1 8.8 35.6 24.9 17.9 20.0 3.0 3.0Mongolia 2.7 2.8 0.3 32.3 -12.8 8.9 ... ...

Central Asian Republics -66.3 29.7 0.5 37.2 13.1 7.1 ... ...Kazakstan -65.1 0.7 -0.9 45.3 21.8 7.7 ... ...Kyrgyz Republic -93.1 31.7 0.1 20.3 29.9 13.7 ... ...Uzbekistan -88.0 102.0 2.2 29.4 -0.6 5.3 ... ...

Southeast Asia 14.7 13.3 19.3 24.3 6.0 8.7 8.2 10.4Cambodia 24.5 7.2 62.8 75.2 -18.5 -4.9 ... ...Indonesia 14.0 8.3 9.9 18.0 5.8 11.2 5.0 7.0Lao People’s Democratic Rep. 37.3 81.4 24.9 3.5 3.8 -1.0 ... ...Malaysia 18.1 16.1 23.1 26.6 7.3 6.0 8.0 10.0Myanmar 37.2 17.8 31.8 -2.8 4.6 7.5 ... ...Philippines 11.1 15.8 18.5 29.4 17.7 22.8 21.0 21.0Thailand 13.7 13.4 22.7 24.8 -1.9 3.2 5.0 8.0Viet Nam 21.2 20.6 35.8 28.2 41.0 22.2 15.0 16.0

South Asia 8.0 15.4 13.0 20.5 5.5 5.1 8.0 8.9Bangladesh 16.1 19.5 6.0 37.2 12.2 13.7 15.0 16.0Bhutan -9.6 4.9 -4.2 11.7 9.3 8.5 ... ...India 3.3 20.2 18.4 20.8 4.1 5.0 7.5 7.8Maldives 10.0 -19.0 43.1 12.7 8.0 5.8 ... ...Nepal 56.1 25.4 -2.7 -9.6 1.7 10.3 4.0 6.0Pakistan 14.6 0.3 -1.4 16.1 7.1 -2.7 6.0 9.0Sri Lanka 20.6 16.3 12.0 18.7 7.9 13.0 9.0 10.0

Pacific Islands 25.2 28.2 7.9 2.3 -1.3 -12.0 ... ...Cook Islands -41.4 21.9 7.7 9.5 ... ... ... ...Fiji -3.5 6.1 32.2 6.0 23.3 -11.4 ... ...Kiribati 64.8 -27.4 51.9 40.7 -31.1 ... ... ...Marshall Islands 9.1 -17.7 87.3 14.9 ... ... ... ...Micronesia, Federated States of 94.4 33.8 135.9 5.0 -1.6 2.0 ... ...Papua New Guinea 31.4 33.7 2.5 0.4 -5.6 -13.3 ... ...Samoa -10.1 10.5 -45.3 149.1 15.1 ... ... ...Solomon Islands 22.1 25.5 10.1 18.4 4.3 4.0 ... ...Tonga 78.2 -42.4 82.8 -11.8 -25.1 0.8 ... ...Tuvalu -40.5 4.5 4.3 -54.2 9.1 25.0 ... ...Vanuatu 30.2 -4.2 10.1 13.2 6.7 0.3 ... ...

Average for DMCs 13.2 11.3 18.3 22.1 6.8 7.2 5.0 6.0


Table A12 Direction of Exports(percent share)

AUSTRALIA/To DMCs JAPAN USA EU NEW ZEALAND OTHERS

From 1985 1996 1985 1996 1985 1996 1985 1996 1985 1996 1985 1996

Newly Industrialized EconomiesHong Kong, China 35.6 46.0 4.2 6.5 30.8 21.2 11.8 15.8 2.3 1.8 15.3 8.7Korea, Rep. of 12.9 38.4 15.0 12.3 35.6 16.8 10.4 13.3 1.3 1.4 24.7 17.8Singapore 36.7 48.4 9.4 8.2 21.2 18.4 10.1 13.4 4.4 2.4 18.1 9.2Taipei,China 15.6 . . . 11.3 . . . 15.5 . . . 5.5 . . . 2.4 . . . 49.7 . . .

PRC and MongoliaChina, People’s Rep. of 38.2 36.6 22.3 20.4 8.5 17.7 7.8 15.0 0.8 1.3 22.5 9.0Mongolia 3.1 38.5 11.2 21.5 5.5 8.0 20.5 ... 0.0 ... 59.6 32.0

Central Asian RepublicsKazakstan ... 15.1 ... 1.4 ... ... ... ... ... ... ... ...Kyrgyz Republic ... 53.8 ... 0.2 ... ... ... ... ... ... ... ...Uzbekistan ... 15.8 ... 2.1 ... ... ... ... ... ... ... ...

Southeast AsiaCambodia 67.9 52.1 7.0 1.8 ... 1.2 13.2 14.0 ... ... 11.9 30.9Indonesia 17.2 31.5 46.2 28.8 21.7 16.5 6.0 18.3 1.2 2.8 7.6 2.1Lao People’s Democratic Rep. 71.9 64.9 6.6 6.6 2.7 4.8 0.5 27.0 5.5 ... 12.7 -3.3Malaysia 38.1 45.9 24.6 13.4 12.8 18.2 13.6 14.8 1.9 1.7 9.1 6.0Myanmar 47.1 54.1 8.4 7.4 0.8 8.3 8.4 6.3 ... ... 35.4 23.9Philippines 19.5 25.1 19.0 17.1 35.9 32.6 13.8 18.6 2.1 1.1 9.7 5.5Thailand 27.1 34.0 13.4 16.8 19.7 18.0 17.8 15.7 1.9 1.4 20.1 14.1Viet Nam 50.4 24.6 17.4 26.4 ... 4.5 6.2 25.0 2.2 4.0 23.8 15.5

South AsiaBangladesh 14.5 7.6 7.2 3.1 18.1 31.0 13.0 45.0 1.8 0.6 45.5 12.7Bhutan ... ... ... ... ... ... ... ... ... ... ... ...India 8.9 24.1 11.1 7.4 18.9 17.3 16.7 29.4 1.4 1.3 43.0 20.5Maldives 50.8 41.9 10.1 7.0 24.3 8.5 4.0 38.0 ... ... 10.9 4.6Nepal 41.4 12.4 0.7 0.6 35.3 34.4 20.3 52.0 0.1 0.3 2.3 0.3Pakistan 16.0 21.4 11.3 6.5 10.0 16.7 20.9 30.1 1.1 1.3 40.6 24.0Sri Lanka 11.2 8.1 5.1 6.2 22.3 34.1 17.9 34.4 1.7 1.2 41.9 16.0

Pacific IslandsCook Islands ... ... ... ... ... ... ... ... ... ... ... ...Fiji 22.5 4.9 3.0 8.4 4.9 10.6 31.0 21.3 18.2 28.2 20.4 26.6Kiribati 7.2 . . . 4.3 . . . . . . . . . 44.5 . . . 0.5 . . . 43.5 100.0Marshall Islands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Micronesia, Federated States of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Papua New Guinea 9.9 19.0 22.1 21.5 4.0 0.4 46.5 21.0 12.0 . . . 5.6 38.1Samoa 0.3 2.7 0.9 0.3 59.4 1.7 5.8 1.6 29.7 . . . 3.9 93.7Solomon Islands 11.1 . . . 52.1 . . . 2.4 . . . 26.3 13.5 3.2 3.1 5.0 83.4Tonga 5.9 . . . 0.2 . . . 3.2 . . . 0.5 5.5 83.1 5.0 7.1 89.5Tuvalu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Vanuatu 1.4 . . . 6.7 . . . . . . . . . 25.4 42.9 1.6 15.1 65.0 42.0

Total for DMCs 25.6 39.2 16.5 12.9 26.3 16.4 10.7 15.8 2.1 2.0 18.8 13.1


Table A13 Growth Rate of Merchandise Imports(percent per annum)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized Economies 13.1 10.1 17.4 22.9 5.2 3.0 -0.4 8.1Hong Kong, China 23.0 12.3 16.7 19.1 3.0 5.1 1.0 6.0Korea, Rep. of 1.0 2.3 22.4 32.1 12.2 -2.3 -12.3 14.0Singapore 11.3 17.8 19.8 21.6 5.4 0.1 2.0 4.0Taipei,China 13.6 7.1 10.4 21.2 -0.1 10.1 9.5 10.0

People’s Rep. of China and Mongolia 27.9 33.8 10.3 15.6 19.5 2.5 12.0 12.0China, People’s Rep. of 28.3 34.1 10.4 15.5 19.5 2.5 12.0 12.0Mongolia -14.0 -10.5 -3.3 32.0 5.4 -1.5 ... ...

Central Asian Republics -55.5 32.6 -7.8 16.6 27.3 6.2 ... ...Kazakstan -65.0 9.9 -2.7 7.6 22.9 9.4 ... ...Kyrgyz Republic -91.4 34.7 -4.6 24.6 47.5 -9.4 ... ...Uzbekistan -85.1 96.3 -16.2 31.9 31.0 4.2 ... ...

Southeast Asia 8.9 14.4 21.8 29.7 6.3 2.4 -1.1 5.6Cambodia 43.1 34.3 56.5 64.6 -8.5 -8.5 ... ...Indonesia 7.8 6.0 13.9 26.6 8.1 4.8 -5.0 2.0Lao People’s Democratic Rep. 58.8 60.1 30.6 4.4 17.2 -14.7 ... ...Malaysia 10.1 17.8 28.1 30.4 1.7 7.0 6.0 7.0Myanmar 19.9 28.9 14.3 2.3 8.2 7.0 ... ...Philippines 20.5 21.2 21.2 23.7 20.8 14.0 9.0 10.0Thailand 6.0 12.2 18.1 31.9 0.6 -9.3 -15.0 3.0Viet Nam 20.4 39.3 48.5 43.8 39.0 -1.6 5.0 5.0

South Asia 9.2 14.5 18.1 25.7 7.7 5.6 8.3 10.7Bangladesh 0.5 15.5 -7.5 39.4 17.8 3.0 8.0 10.0Bhutan 14.0 50.4 -25.7 22.1 -8.2 25.0 ... ...India 10.3 15.1 34.3 28.0 5.1 8.2 9.9 11.2Maldives 18.4 5.9 9.7 20.9 12.6 12.0 ... ...Nepal 15.8 22.2 14.6 21.9 9.0 10.3 5.0 6.0Pakistan 7.3 11.7 -13.6 18.5 16.7 -5.0 0.5 10.0Sri Lanka 15.3 14.6 18.6 11.6 2.5 7.0 10.0 9.0

Pacific Islands 80.1 -1.8 11.6 1.3 7.2 -0.3 ... ...Cook Islands 34.5 4.4 -15.4 1.5 ... ... ... ...Fiji -1.9 21.2 10.3 5.8 8.0 -0.5 ... ...Kiribati 43.4 -25.1 -5.0 33.3 -6.4 ... ... ...Marshall Islands 7.5 1.3 11.1 8.5 ... ... ... ...Micronesia, Federated States of 0.8 11.2 16.6 2.8 -0.8 1.0 ... ...Papua New Guinea -5.8 -14.2 17.2 -4.5 19.3 8.0 ... ...Samoa 17.1 -6.7 -22.0 15.2 7.3 ... ... ...Solomon Islands -0.9 22.7 1.9 10.4 -4.4 8.7 ... ...Tonga 6.6 2.3 31.6 2.7 -9.1 -13.1 ... ...Tuvalu -2.5 33.3 4.0 32.1 4.1 2.7 ... ...Vanuatu 1.2 8.0 2.6 7.2 8.0 2.7 ... ...

Average for DMCs 13.6 14.0 17.4 23.6 7.3 3.0 1.7 8.3


Table A14 Balance of Trade($ million)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized Economies 4,421 6,836 -868 -10,040 -13,809 -11,767 13,520 -4,288Hong Kong, China -4,329 -3,808 -10,923 -19,594 -18,352 -21,121 -19,076 -25,025Korea, Rep. of -2,146 1,860 -3,146 -4,746 -15,306 -2,802 22,438 13,356Singapore -1,823 -2,724 1,354 1,065 2,281 -1,770 -1,806 -1,878Taipei,China 12,718 11,508 11,847 13,235 17,568 13,926 11,963 9,259

People’s Rep. of China and Mongolia 5,154 -10,633 7,324 18,017 19,448 46,354 35,647 23,119China, People’s Rep. of 5,183 -10,654 7,290 18,050 19,535 46,396 35,647 23,119Mongolia -29 21 34 -33 -87 -42 ... ...

Central Asian Republics -1,430 -2,047 -1,326 -136 -1,509 -1,499 ... ...Kazakstan -1,121 -1,561 -1,453 -222 -326 -465 ... ...Kyrgyz Republic -74 -107 -86 -122 -252 -106 ... ...Uzbekistan -235 -379 213 208 -931 -929 ... ...

Southeast Asia 1,033 -177 -3,493 -13,167 -14,587 -1,723 20,248 33,263Cambodia -86 -187 -275 -404 -450 -388 ... ...Indonesia 7,022 8,231 7,901 6,533 5,948 9,456 14,565 17,787Lao People’s Democratic Rep. -137 -191 -264 -278 -368 -269 ... ...Malaysia 3,150 3,037 1,577 -100 3,933 3,435 5,281 8,306Myanmar -419 -606 -571 -631 -715 -760 ... ...Philippines -4,695 -6,222 -7,850 -8,944 -11,342 -11,127 -9,100 -6,700Thailand -4,161 -4,297 -3,392 -7,629 -9,157 -1,472 10,032 13,295Viet Nam -60 -547 -1,190 -2,345 -3,151 -1,358 -530 576

South Asia -9,729 -10,859 -14,653 -20,464 -23,110 -24,657 -26,570 -30,424Bangladesh -1,532 -1,688 -1,240 -1,782 -2,296 -1,947 -1,794 -1,668Bhutan -20 -59 -30 -43 -27 -46 ... ...India -4,368 -4,056 -9,049 -13,516 -14,530 -16,802 -19,317 -22,776Maldives -103 -125 -120 -151 -174 -200 ... ...Nepal -427 -512 -655 -922 -1,031 -1,137 -1,198 -1,270Pakistan -2,236 -3,267 -2,000 -2,537 -3,704 -3,328 -2,900 -3,275Sri Lanka -1,043 -1,153 -1,559 -1,513 -1,348 -1,197 -1,363 -1,435

Pacific Islands 21 766 738 802 559 116 ... ...Cook Islands -51 -53 -44 -44 ... -34 ... ...Fiji -189 -282 -229 -242 -197 -266 ... ...Kiribati -32 -24 -21 -28 -28 ... ... ...Marshall Islands -51 -53 -53 -57 ... ... ... ...Micronesia, Federated States of -102 -109 -94 -95 -95 -95 ... ...Papua New Guinea 625 1,470 1,339 1,410 1,015 557 ... ...Samoa -104 -96 -77 -83 -89 ... ... ...Solomon Islands 10 15 26 40 53 49 ... ...Tonga -35 -44 -53 -57 -55 -46 ... ...Tuvalu -5 -7 -7 9 10 9 ... ...Vanuatu -44 -50 -50 -52 -56 -58 ... ...

Total for DMCs 900 -14,067 -10,952 -24,852 -31,499 8,324 42,845 21,671


Table A15 Balance of Payments on Current Account($ million)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized Economies 10,261 12,475 14,869 11,723 2,249 13,511 38,394 25,001Hong Kong, China ... ... ... ... ... ... ... ...Korea, Rep. of -3,939 1,016 -3,855 -8,250 -23,061 -8,840 21,138 11,356Singapore 5,653 4,417 12,226 14,499 14,283 14,630 13,160 11,430Taipei,China 8,547 7,042 6,498 5,474 11,027 7,721 4,096 2,215

People’s Rep. of China and Mongolia 6,345 -11,578 6,954 1,566 7,143 19,947 10,000 5,000China, People’s Rep. of 6,401 -11,609 6,908 1,618 7,243 20,000 10,000 5,000Mongolia -56 31 46 -52 -101 -53 ... ...

Central Asian Republics -1,384 -1,608 -1,308 -753 -2,214 -2,116 ... ...Kazakstan -1,073 -1,072 -1,367 -518 -752 -1,016 ... ...Kyrgyz Republic -74 -107 -59 -185 -388 -195 ... ...Uzbekistan -237 -429 118 -50 -1,075 -906 ... ...

Southeast Asia -12,339 -15,670 -19,943 -33,046 -34,309 -24,123 -6,138 -900Cambodia -50 -251 -329 -476 -487 -409 ... ...Indonesia -2,780 -1,944 -2,790 -6,431 -7,660 -5,713 -1,598 2,702Lao People’s Democratic Rep. -108 -143 -223 -235 -302 -207 ... ...Malaysia -2,167 -2,991 -4,520 -7,362 -4,964 -5,384 -4,860 -4,090Myanmar -275 -292 -195 -303 -386 -421 ... ...Philippines -858 -3,016 -2,950 -3,287 -3,914 -4,328 -2,619 -955Thailand -6,304 -6,364 -7,802 -13,207 -14,351 -6,272 4,590 3,211Viet Nam -72 -961 -1,329 -2,048 -2,631 -1,810 -1,651 -1,767

South Asia -6,746 -6,824 -7,374 -10,661 -11,277 -9,840 -11,436 -14,415Bangladesh -578 -618 -430 -1,040 -1,627 -875 -1,100 -1,000Bhutan -25 -69 -39 -57 -48 -79 ... ...India -3,889 -1,526 -3,785 -5,903 -3,700 -4,000 -5,700 -8,500Maldives -20 -54 -12 -16 -27 -28 ... ...Nepal -275 -314 -224 -343 -569 -354 -455 -501Pakistan -1,346 -3,688 -1,965 -2,484 -4,575 -4,187 -3,500 -3,700Sri Lanka -613 -556 -920 -818 -731 -317 -681 -714

Pacific Islands 46 485 473 694 234 -290 ... ...Cook Islands ... ... ... ... ... ... ... ...Fiji 11 -81 -69 -36 65 -24 ... ...Kiribati 4 3 14 2 -6 ... ... ...Marshall Islands -0 -1 0 -6 ... ... ... ...Micronesia, Federated States of 2 -2 13 16 9 8 ... ...Papua New Guinea 95 646 573 767 188 -305 ... ...Samoa -44 -52 -18 -16 -10 ...Solomon Islands -8 -7 -1 10 16 49 ... ...Tonga -3 -3 -21 -24 -8 -0 ... ...Tuvalu 6 1 2 ... ... ... ... ...Vanuatu -18 -18 -20 -19 -20 -19 ... ...

Total for DMCs -2,433 -21,111 -5,021 -29,724 -35,961 -796 30,819 14,687


Table A16 Balance of Payments on Current Account(percentage of GDP)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized Economies 1.5 1.7 1.8 1.2 0.2 1.4 4.5 2.7Hong Kong, China ... ... ... ... ... ... ... ...Korea, Rep. of -1.3 0.3 -1.0 -1.8 -4.8 -2.0 6.9 3.4Singapore 11.4 7.6 17.2 17.0 15.4 15.2 12.9 10.3Taipei,China 4.0 3.2 2.7 2.1 4.0 2.7 1.5 0.8

People’s Rep. of China and Mongolia 1.3 -1.9 1.3 0.2 0.9 2.2 0.9 0.4China, People’s Rep. of 1.3 -1.9 1.3 0.2 0.9 2.2 0.9 0.4Mongolia -5.0 5.3 6.7 -5.5 -10.0 -5.6 ... ...

Central Asian Republics -8.4 -9.4 -7.3 -10.8 -17.2 -8.5 ... ...Kazakstan -7.4 -9.5 -11.6 -3.1 -3.6 -4.6 ... ...Kyrgyz Republic -9.2 -9.5 -7.5 -15.6 -24.1 -10.5 ... ...Uzbekistan -6.4 -8.4 2.1 -0.5 -7.9 -6.0 ... ...

Southeast Asia -3.3 -3.7 -4.2 -5.9 -5.5 -4.1 -1.4 -0.2Cambodia -2.5 -12.5 -13.7 -16.2 -15.5 -13.2 ... ...Indonesia -2.0 -1.2 -1.6 -3.2 -3.4 -2.7 -1.6 2.5Lao People’s Democratic Rep. -9.2 -10.7 -14.4 -13.3 -16.1 -11.8 ... ...Malaysia -3.7 -4.7 -6.2 -8.4 -5.0 -5.3 -4.9 -3.8Myanmar -0.7 -0.5 -0.2 -0.3 -0.3 -0.3 ... ...Philippines -1.6 -5.5 -4.6 -4.4 -4.7 -5.2 -3.8 -1.3Thailand -5.7 -5.1 -5.4 -7.9 -7.9 -4.0 3.4 2.0Viet Nam -0.7 -7.5 -8.6 -10.1 -11.2 -7.7 -7.0 -7.0

South Asia -1.9 -2.0 -1.8 -2.4 -2.4 -2.0 -2.1 -2.4Bangladesh -2.5 -2.6 -1.2 -2.7 -5.2 -2.6 -3.1 -2.7Bhutan -10.5 -29.9 -14.9 -19.2 -15.0 -22.0 ... ...India -1.4 -0.6 -1.2 -1.8 -1.0 -1.2 -1.5 -2.0Maldives -10.2 -23.8 -4.3 -6.1 -9.2 -8.2 ... ...Nepal -7.9 -7.9 -5.5 -7.8 -12.8 -7.2 -8.7 -8.8Pakistan -2.8 -7.1 -3.8 -4.1 -7.1 -6.5 -5.1 -5.2Sri Lanka -6.3 -5.4 -7.9 -6.3 -5.3 -2.1 -4.2 -4.0

Pacific Islands 0.7 6.5 5.7 8.3 2.8 -3.9 ... ...Cook Islands ... ... ... ... ... ... ... ...Fiji 0.7 -5.8 -4.0 -2.4 0.8 0.8 ... ...Kiribati 14.3 11.4 43.6 6.3 -21.0 ... ... ...Marshall Islands -0.1 -1.3 ... -5.5 ... ... ... ...Micronesia, Federated States of -65.2 -64.2 -56.4 -54.6 -53.1 -56.4 ... ...Papua New Guinea 2.2 12.7 10.6 15.6 3.8 -6.2 ... ...Samoa -37.1 -42.6 -13.2 -10.3 -11.2 ... ... ...Solomon Islands -3.8 -2.8 -0.3 3.0 4.6 ... ... ...Tonga -4.2 -4.4 -28.0 -6.8 -6.3 -6.3 ... ...Tuvalu 57.6 8.6 16.4 ... ... ... ... ...Vanuatu -9.4 -9.0 -9.2 -8.5 -8.3 -7.6 ... ...

Average for DMCs -0.1 -1.0 -0.2 -1.1 -1.2 -0.0 1.1 0.5


Table A17 Foreign Direct Investment($ million)

1991 1992 1993 1994 1995 1996

Newly Industrialized Economies 7,876 5,861 7,858 9,664 12,347 15,650Hong Kong, China 538 2,051 1,667 2,000 2,100 2,500Korea, Rep. of 1,180 727 588 809 1,776 2,308Singapore 4,887 2,204 4,686 5,480 6,912 9,440Taipei, China 1,271 879 917 1,375 1,559 1,402

People’s Rep. of China and Mongolia 4,366 11,158 27,523 33,794 35,859 42,305China, People’s Republic of 4,366 11,156 27,515 33,787 35,849 42,300Mongolia ... 2 8 7 10 5

Central Asian Republics ... 140 195 245 430 381Kazakstan ... 100 150 185 280 310Kyrgyz Republic ... ... ... 10 30 16Uzbekistan ... 40 45 50 120 55

Southeast Asia 8,512 9,899 10,734 10,325 14,315 19,804Cambodia ... 33 54 69 151 350Indonesia 1,482 1,777 2,004 2,109 4,348 7,960Lao People's Democratic Rep. 7 8 30 59 88 104Malaysia 3,998 5,183 5,006 4,342 4,132 5,300Myanmar 238 171 149 91 115 100Philippines 544 228 1,238 1,591 1,478 1,408Thailand 2,014 2,114 1,730 1,322 2,003 2,426Viet Nam 229 385 523 742 2,000 2,156

South Asia 470 703 1,141 1,922 2,643 3,468Bangladesh 1 4 14 11 2 9Bhutan ... ... ... ... ... ...India 155 233 574 1,314 1,929 2,587Maldives 7 7 7 6 5 7Nepal 2 1 4 6 5 5Pakistan 257 335 347 419 639 690Sri Lanka 48 123 195 166 63 170

Pacific Islands 260 390 69 106 573 362Cook Islands ... ... ... ... ... ...Fiji 15 51 29 65 67 47Kiribati ... ... -1 ... ... 1Marshall Islands ... ... ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ...Papua New Guinea 203 294 -2 -5 453 230Samoa 3 4 2 3 2 4Solomon Islands 15 14 13 11 18 21Tonga ... 1 2 2 1 23Tuvalu ... ... ... ... ... ...Vanuatu 25 26 26 30 31 36

Total for DMCs 21,485 28,151 47,520 56,056 66,166 81,970


Table A18 External Debt Outstanding($ million)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized Economies ... ... ... ... ... ... ... ...Hong Kong, China ... ... ... ... ... ... ... ...Korea, Rep. of ... ... ... ... ... ... ... ...Singapore ... ... ... ... ... ... ... ...Taipei,China ... ... ... ... ... ... ... ...

People’s Rep. of China and Mongolia 72,726 86,294 100,931 118,594 128,571 134,008 140,000 145,000China, People’s Rep. of 72,428 85,928 100,457 118,090 128,015 133,415 140,000 145,000Mongolia 298 366 474 504 556 593 ... ...

Central Asian Republics 101 2,966 4,237 6,122 7,315 2,800 ... ...Kazakstan 35 1,724 2,669 3,712 4,397 ... ... ...Kyrgyz Republic 1 294 450 610 618 ... ... ...Uzbekistan 65 948 1,119 1,800 2,300 2,800 ... ...

Southeast Asia 194,116 211,735 235,559 270,785 265,903 291,792 293,897 217,818Cambodia 1,873 1,862 1,944 2,030 2,108 2,239 ... ...Indonesia 88,004 89,148 96,543 107,831 120,246 135,000 142,657 150,748Lao People’s Democratic Rep. 412 492 579 687 803 ... ... ...Malaysia 19,960 23,300 22,518 27,379 ... ... ... ...Myanmar 5,355 5,756 6,555 5,771 5,553 ... ... ...Philippines 30,934 34,282 37,079 37,778 38,300 49,500 50,000 53,000Thailand 43,621 52,107 64,869 82,568 90,536 94,900 89,240 ...Viet Nam 3,957 4,788 5,473 6,741 8,357 10,153 12,000 14,070

South Asia 132,068 138,909 150,612 148,384 149,254 145,740 151,299 159,529Bangladesh 13,200 14,100 15,700 16,500 17,600 18,700 19,800 20,800Bhutan 128 125 130 129 113 164 ... ...India 90,023 92,695 99,008 92,199 90,900 95,300 98,700 104,600Maldives 116 131 142 167 195 ... ... ...Nepal 1,802 2,004 2,320 2,399 2,413 2,576 2,799 3,129Pakistan 19,629 22,046 24,482 27,072 28,603 29,000 30,000 31,000Sri Lanka 7,171 7,809 8,830 9,919 9,429 ... ... ...

Pacific Islands 4,507 4,136 3,586 2,862 2,759 ... ... ...Cook Islands 108 126 ... ... ... ... ... ...Fiji 339 330 299 ... ... ... ... ...Kiribati 19 18 ... ... ... ... ... ...Marshall Islands ... ... ... ... ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ... ... ...Papua New Guinea 3,740 3,224 2,879 2,431 2,329 ... ... ...Samoa 118 194 154 162 164 ... ... ...Solomon Islands 94 151 155 157 152 ... ... ...Tonga 50 51 52 64 64 ... ... ...Tuvalu ... ... ... ... ... ... ... ...Vanuatu 40 42 47 48 50 ... ... ...

Total for DMCs 403,517 444,041 494,924 546,748 553,801 574,340 585,196 522,347


Table A19 Debt-Service Ratio(percentage of exports of goods and services)

1992 1993 1994 1995 1996 1997 1998 1999

Newly Industrialized EconomiesHong Kong, China ... ... ... ... ... ... ... ...Korea, Rep. of ... ... ... ... ... ... ... ...Singapore ... ... ... ... ... ... ... ...Taipei,China ... ... ... ... ... ... ... ...


Central Asian RepublicsKazakstan ... 0.2 1.7 4.0 5.6 ... ... ...Kyrgyz Republic ... 0.4 3.9 20.7 12.2 10.0 ... ...Uzbekistan 0.4 0.7 4.0 5.0 8.9 10.0 ... ...

Southeast AsiaCambodia 4.1 20.5 0.7 3.0 5.3 3.2 ... ...Indonesia 33.0 33.6 30.7 30.9 29.5 30.0 28.0 30.0Lao People’s Democratic Rep. 6.9 4.0 3.3 5.2 6.0 ... ... ...Malaysia 6.6 7.8 4.9 6.2 ... ... ... ...Myanmar 6.2 11.8 14.5 16.7 18.1 ... ... ...Philippines 17.0 17.1 17.4 15.8 12.0 10.4 11.4 11.0Thailand 13.7 18.5 11.3 11.4 12.2 25.0 15.0 15.0Viet Nam 11.3 10.7 5.7 6.3 8.7 11.0 12.0 12.0

South AsiaBangladesh 9.0 10.2 11.6 10.3 12.1 11.4 10.7 10.5Bhutan 6.7 18.0 20.5 14.8 24.0 12.0 ...India 28.6 26.9 27.5 37.3 41.9 31.8 29.9 28.9Maldives 3.9 4.8 3.7 3.6 3.6 ... ...Nepal 7.4 8.1 6.8 7.9 8.4 8.2 8.4 8.2Pakistan 24.9 27.4 33.4 34.9 33.9 37.0 35.0 34.0Sri Lanka 14.6 11.8 11.2 11.6 12.9 11.4 11.2 11.0

Pacific IslandsCook Islands ... ... ... ... ... ... ... ...Fiji 9.3 8.2 7.0 4.6 ... ... ... ...Kiribati 21.7 27.0 ... ... ... ... ... ...Marshall Islands ... ... ... ... ... ... ... ...Micronesia, Federated States of ... ... ... ... ... ... ... ...Papua New Guinea 28.2 28.7 30.4 20.8 17.5 ... ... ...Samoa 5.5 6.9 7.3 4.2 4.2 4.2 ... ...Solomon Islands 5.5 4.4 6.2 2.8 6.2 ... ... ...Tonga 3.0 3.0 4.5 5.5 9.5 ... ... ...Tuvalu ... ... ... ... ... ... ... ...Vanuatu 1.3 1.4 1.6 1.5 0.7 ... ... ...


Table A20 Exchange Rates to the Dollar(Annual Average)

Currency 1992 1993 1994 1995 1996 1997

Newly Industrialized EconomiesHong Kong, China HK$ 7.7 7.7 7.7 7.7 7.7 7.7Korea, Rep. of Won 780.7 802.7 803.5 771.3 804.5 951.4Singapore S$ 1.6 1.6 1.5 1.4 1.4 1.5Taipei,China NT$ 25.2 26.4 26.5 26.5 27.5 28.6

People’s Rep. of China and MongoliaChina, People’s Rep. of Yuan 5.5 5.8 8.6 8.4 8.3 8.3Mongolia Tugrik 42.6 283.0 412.7 448.7 548.4 793.7

Central Asian RepublicsKazakstan Tenge ... 2.6 35.6 61.0 67.3 75.4Kyrgyz Republic Som ... 5.8 10.9 10.8 12.8 ...Uzbekistan Sum ... ... 9.8 29.8 40.2 ...

Southeast AsiaCambodia Riel 1,266.6 2,689.0 2,545.0 2,450.8 2,624.0 2989.0Indonesia Rupiah 2,029.9 2,087.1 2,160.8 2,248.6 2,342.3 2946.0Lao People’s Democratic Rep. Kip 716.1 716.3 717.7 804.7 921.1 1256.7Malaysia Ringgit 2.5 2.6 2.6 2.5 2.5 2.7Myanmar Kyat 6.1 6.2 6.0 5.7 5.9 6.2Philippines Peso 25.5 27.1 26.4 25.7 26.2 29.5Thailand Baht 25.4 25.3 25.2 24.9 25.3 30.8Viet Nam Dong 11,179.0 10,640.0 10,978.0 11,037.0 11,032.0 12,500.0

South AsiaBangladesh Taka 39.0 39.6 40.2 40.3 41.8 42.6Bhutan Ngultrum 25.9 30.5 31.4 32.4 35.4 36.1India Rupee 25.9 31.4 31.4 33.5 35.5 37.8Maldives Rufiyaa 10.6 11.0 11.6 11.8 11.8 11.8Nepal Rupee 42.8 43.0 49.3 49.9 55.2 57.0Pakistan Rupee 24.8 26.0 30.2 30.9 33.6 39.0Sri Lanka Rupee 43.8 48.3 49.4 51.3 55.3 59.0

Pacific IslandsCook Islands NZ$ 1.9 1.8 1.7 1.5 1.6 1.7Fiji F$ 1.5 1.5 1.5 1.4 1.4 1.4Kiribati A$ 1.4 1.5 1.4 1.3 1.3 1.4Marshall Islands US$ ... ... ... ... ... ...Micronesia, Federated States of US$ ... ... ... ... ... ...Papua New Guinea Kina 1.0 1.0 1.0 1.3 1.3 1.3Samoa Taka 2.5 2.6 2.5 2.5 2.5 2.5Solomon Islands SI$ 2.9 3.2 3.3 3.4 3.6 3.7Tonga T$ 1.3 1.4 1.3 1.3 1.2 1.2Tuvalu A$ 1.4 1.5 1.4 1.3 1.3 ...Vanuatu Vatu 113.4 121.6 116.4 112.1 111.7 114.5


Table A21 Central Government Expenditure(percentage of GDP)

1992 1993 1994 1995 1996 1997

Newly Industrialized EconomiesHong Kong, China 14.5 16.4 16.2 17.0 15.3 14.9Korea, Rep. of 19.5 19.8 17.2 21.4 22.7 20.1Singapore 19.6 17.4 12.9 12.9 14.7 18.1Taipei,China 30.7 30.5 30.2 29.9 29.1 28.0

People’s Rep. of China and MongoliaChina, People’s Rep. of 14.0 13.4 12.4 11.7 11.6 12.5Mongolia 38.9 30.0 30.1 29.8 36.0 38.8

Central Asian RepublicsKazakstan 31.4 24.7 24.4 20.5 19.0 18.0Kyrgyz Republic 25.0 23.4 24.4 28.6 23.2 19.5Uzbekistan 43.7 38.7 33.3 37.6 36.2 35.5

Southeast AsiaCambodia 9.8 11.2 16.5 16.7 16.4 13.9Indonesia 17.2 16.3 16.4 15.4 15.1 14.3Lao People’s Democratic Rep. 20.7 18.1 42.7 41.2 22.3 20.7Malaysia 27.4 24.9 23.7 22.4 22.4 21.0Myanmar 10.5 9.0 9.3 9.5 6.6 ...Philippines 19.7 18.5 18.5 18.2 18.3 19.1Thailand 15.0 15.9 16.0 15.3 17.8 18.2Viet Nam 22.7 28.5 26.7 25.1 24.7 17.1

South AsiaBangladesh 16.9 17.8 13.5 14.2 17.8 17.6Bhutan 36.3 36.7 38.9 37.9 37.3 44.2India 17.4 17.5 16.9 16.4 15.8 16.0Maldives 59.5 58.3 48.8 52.2 47.8 45.2Nepal 17.7 18.0 16.9 17.6 18.9 18.3Pakistan 26.5 26.0 23.2 23.0 23.9 23.6Sri Lanka 27.5 28.1 29.0 30.0 27.9 24.0

Pacific IslandsCook Islands 48.3 52.8 60.8 45.6 ... ...Fiji 39.3 51.2 43.3 0.6 20.6 6.2Kiribati 144.1 119.3 120.6 168.3 155.9 168.0Marshall Islands 102.8 97.4 88.1 95.3 70.0 63.9Micronesia, Federated States of 91.7 84.8 79.1 77.5 73.8 71.8Papua New Guinea 32.9 32.3 29.7 27.2 28.4 32.5Samoa 70.7 79.9 62.7 65.7 57.5 31.6Solomon Islands 52.6 42.9 41.9 40.3 38.1 33.7Tonga 56.1 55.1 45.3 46.8 29.0 29.0Tuvalu 110.6 104.8 54.8 50.5 55.7 58.7Vanuatu 22.4 21.4 20.7 22.0 22.0 22.6


Table A22 Central Government Revenue(percentage of GDP)

1992 1993 1994 1995 1996 1997

Newly Industrialized EconomiesHong Kong, China 17.4 18.6 17.3 16.7 17.5 20.7Korea, Rep. of 19.2 19.9 17.8 21.9 22.8 21.0Singapore 32.9 35.7 21.9 20.5 21.4 21.4Taipei,China 25.3 25.3 24.5 22.5 21.7 22.3

People’s Rep. of China and MongoliaChina, People’s Rep. of 13.1 12.6 11.2 10.7 10.8 11.7Mongolia 23.9 31.2 29.3 30.6 27.8 30.2

Central Asian RepublicsKazakstan 24.6 23.3 17.2 18.5 16.5 13.8Kyrgyz Republic 15.9 16.1 16.7 17.0 17.6 15.0Uzbekistan 31.5 35.9 29.2 34.6 34.2 32.3

Southeast AsiaCambodia 6.2 5.4 9.6 8.9 9.1 9.2Indonesia 16.8 15.9 17.4 15.7 15.9 14.1Lao People’s Democratic Rep. 10.7 11.9 15.4 16.4 13.1 11.4Malaysia 26.4 25.2 26.0 23.3 23.3 23.1Myanmar 8.4 7.6 6.8 6.1 5.1 ...Philippines 18.0 17.7 19.9 18.9 18.7 19.2Thailand 17.7 17.9 18.7 18.6 18.6 17.3Viet Nam 18.3 21.7 24.0 23.2 22.9 21.8

South AsiaBangladesh 10.5 11.7 8.9 9.1 11.9 12.1Bhutan 19.5 23.6 20.4 19.5 18.7 18.3India 15.6 16.2 16.8 15.7 15.5 16.7Maldives 36.3 35.1 35.9 37.3 37.9 37.0Nepal 9.0 8.8 9.8 11.2 11.3 11.2Pakistan 19.1 18.0 17.3 17.4 17.5 17.3Sri Lanka 20.2 19.7 19.0 20.4 19.0 19.2

Pacific IslandsCook Islands 37.2 36.7 36.2 39.7 ... ...Fiji 67.7 43.0 39.2 30.6 29.1 28.1Kiribati 185.6 171.0 151.6 159.3 141.9 172.0Marshall Islands 84.4 83.6 74.9 73.9 72.1 61.8Micronesia, Federated States of 31.1 31.5 29.0 29.4 23.6 27.0Papua New Guinea 22.4 22.7 23.8 23.0 24.8 26.8Samoa 54.5 58.7 51.5 56.8 59.4 34.8Solomon Islands 33.0 26.7 28.7 27.7 27.4 30.3Tonga 47.8 52.8 58.2 60.0 63.3 63.4Tuvalu 126.6 101.3 47.5 41.8 47.0 47.0Vanuatu 22.8 20.8 23.0 23.1 22.8 24.0


Table A23 Overall Budget Surplus/Deficit of Central Government(percentage of GDP)

1992 1993 1994 1995 1996 1997

Newly Industrialized EconomiesHong Kong, China 2.8 2.1 1.1 -0.3 2.2 5.8Korea, Rep. of -0.3 0.1 0.6 0.5 0.0 -0.5Singapore 12.6 15.5 8.9 7.6 6.8 3.3Taipei,China -5.4 -5.2 -5.7 -7.4 -7.4 -5.7

People’s Rep. of China and MongoliaChina, People’s Rep. of -1.0 -0.8 -1.2 -1.0 -0.8 -0.8Mongolia -15.0 1.2 -6.5 -3.8 -8.2 -8.6

Central Asian RepublicsKazakstan -6.8 -1.4 -7.2 -2.0 -2.5 -4.2Kyrgyz Republic -17.4 -7.4 -7.7 -11.5 -5.6 -4.5Uzbekistan -18.5 -10.4 -6.1 -4.1 -3.3 -3.0

Southeast AsiaCambodia -3.6 -5.9 -6.8 -7.7 -7.2 -4.8Indonesia -0.4 -0.4 1.0 0.4 0.8 -0.2Lao People’s Democratic Rep. -10.0 -6.2 -27.3 -24.8 -9.1 -9.2Malaysia -0.8 0.2 2.3 0.9 0.7 1.8Myanmar -2.1 -1.4 -2.5 -3.4 -1.5 ...Philippines -1.2 -1.5 1.0 0.6 0.3 0.1Thailand 2.8 2.1 2.7 3.0 0.9 -0.9Viet Nam -2.5 -5.3 -1.8 -1.3 -1.2 -3.2

South AsiaBangladesh -6.4 -6.1 -4.6 -5.1 -5.9 -5.5Bhutan -8.5 -0.7 -2.3 -2.0 -0.6 -4.9India -5.7 -7.4 -6.1 -7.1 -7.0 -6.7Maldives -24.2 -23.2 -12.9 -14.9 -9.9 -8.2Nepal -7.5 -7.0 -5.8 -4.6 -5.6 -5.3Pakistan -7.4 -8.0 -5.9 -5.5 -6.3 -6.3Sri Lanka -7.3 -8.4 -10.0 -9.6 -8.9 -4.9

Pacific IslandsCook Islands -11.1 -16.1 -24.7 -5.9 ... ...Fiji 28.4 -8.1 -4.1 0.7 5.7 9.2Kiribati -29.4 1.8 -10.3 -66.8 -49.9 -52.8Marshall Islands -79.5 -65.0 -58.6 -61.7 -41.7 -40.2Micronesia, Federated States of -3.3 -1.2 1.7 3.4 -2.2 -1.3Papua New Guinea -10.4 -9.6 -5.9 -4.2 -3.6 -5.7Samoa -16.2 -21.2 -11.2 -8.9 1.9 3.2Solomon Islands -5.9 -10.9 -9.2 -8.5 -6.1 -6.1Tonga -9.8 -3.9 5.6 5.8 1.5 2.6Tuvalu 46.2 16.1 ... ... ... ...Vanuatu 0.4 -1.0 2.3 1.6 0.7 1.5

��

��

� ��!� ��

��B��"� ��

� ��

2�� %$

��

�� $��

��

"� ��

�� !� �� (�� !

��5��!

��

��!��

� �� &��

�� 1��2��

*, ��?54�I'��3��!�2� �E

3��E�$ ��E�� !2� �I��

0�<� �� 0� �� 0� �� !� ��

��

�� !� �� !� ��!� ��

��

��

��<�. �� 0� ��.�6��

$ ��

�� 5� ��

'�� 3��! 2� �!��

��

�� !��

��

�� (��"�

6��!��

��0�� 3��

�� ,��

�� E� ��

�� 0�

�� !2� �� !

1�� !��.�� 0�

#��

�� !� ��

�� :��

��;!�� (� ��

�� '��3��'��$�� 5��!

��$ ��$�� 5��!� ��

#� ��$��4��5��

@��!��

�� !� ��$��2�� 5��

��

3��!� �� !��

� �� =��

3�� <<��!��

#+<<��%$��#�!61.��%$ ��

��

�� !

��&��&�� !

��

�� !��

-�� B��"��

�� E

��!� ��

A.1 � �� @��

��3��&� ��

��5B>�

5� ��,�� !�3��

�� 5B>�� A6��

�� (� � ��

��

: ;� �� E� : ;� ��

�� (� �� 61� ��

66�� +E�: ;��*, ��

�� +� ��.��E� : �;� ��

�� *, E� ��

:�; �� 6��!� ��

��

�� =� /<�,��

B ��> ��