Country Profiles

Zambia

Zambia's transition to a multiparty democracy and market-based economy continues to progress slowly, but positively. During the 1990s, the Government of the Republic of Zambia (GRZ) implemented a sweeping program of liberalization and deregulation, eliminating most major market distortions in an attempt to arrest and reverse the economic decline. Unfortunately, these efforts have been impeded by the country's legacy of corruption and limited foreign and domestic investment. Until recently, this was accompanied by poor performance of the copper sector. As a result, per capita income plummeted from $752 in 1965 to $351 in 2002.

Since 1999, the economy has been experiencing a modest recovery with positive per capita GDP increases of 1.4% annually. Poverty reduction, however, remains a challenge due to a heavy debt burden, weak institutional capacity, and ineffective public spending. According to the GRZ's 2004 budget, the current government's top three priorities are the fight against corruption; promotion of economic growth, focusing in the areas of agriculture, tourism and small scale mining; and combating HIV/AIDS. Over the past decade, Zambia's performance has declined on the majority of the United Nations Development Program's Millennium Challenge Goals. In 2000, an estimated 73% of the population lived below the official poverty line, compared to 70% in the early 1990s. The impact of the HIV/AIDS pandemic further undermines steps to reduce poverty. Zambia ranked 163 out of 175 countries in the 2003 UNDP Human Development Index which is the same as its 2002 rating. The agricultural sector continues to be central to the Zambian economy, with more than 67% of the workforce in agriculture, forestry and fisheries. Constraints in agriculture include high transportation costs; weak market infrastructure; uneven production and inconsistent quality; lack of access to market information, inputs, and credit; and cyclical drought.

A heavy external debt burden slows Zambia's development even further, with $6.45 billion in external debt as of December 2003. The debt is owed primarily to multilateral institutions and bilateral creditors. Zambia was approved for debt relief under the World Bank's enhanced Heavily Indebted Poor Country Initiative (HIPC) in 2000. Under this initiative, the government expects to successfully implement and monitor the International Monetary Fund's Poverty Reduction Growth Facility (PRGF), helping it to reach the HIPC completion point in early 2005. Should the government attain the completion point, an estimated $3.8 billion of foreign debt, more than half the country's foreign debt, would be cancelled, allowing resources to be channeled to productive sectors.

The GRZ continues to implement the Poverty Reduction Strategy Plan (PRSP 2002-2004) and Transitional National Development Plan (TNDP 2003-2005), two comprehensive economic and social plans written with the participation of donors and other stakeholders. Implementation of the PRSP/TNDP programs has been slow due to GRZ budgetary constraints. With the PRSP coming to an end in 2004 and the TNDP in 2005, the GRZ plans to develop a National Development Plan (NDP) which will cover the period 2006-2010, linked to the GRZ Medium Term Expenditure Framework (MTEF).

In 2004, following the Parliament's approval of the Decentralization Policy, the GRZ took steps to decentralize its functions. One goal is to improve communications between government institutions and Zambian citizens. Zambia has many active non governmental organizations (NGOs) and civil society groups, several independent newspapers and radio stations, two state-owned newspapers and the government-owned Zambia National Broadcasting Corporation.

Zambia plays an important role in international relations by contributing to greater stability and prosperity in the southern Africa region. As a country with significant natural resources, a market-based economy, and a multi-party democracy, Zambia can play a constructive role in regional conflict resolution efforts and promote peace and stability in the region.

Bolivia

Yemen

Yemen, one of the poorest countries in the Arab world, has reported strong growth since 2000, but its economic fortunes depend mostly on oil. Yemen has embarked on an IMF-supported structural adjustment program designed to modernize and streamline the economy, which has led to substantial foreign debt relief and restructuring. Yemen has worked to maintain tight control over spending and to implement additional components of the IMF program, but a high population growth rate (3.45%) and internal political dissension complicate the government's task. National development plans include a diversification of the economy, encouragement of tourism, and more efficient use of scarce water resources.

Following the unification of Marxist South Yemen and North Yemen in 1990, the new Republic of Yemen Government (ROYG) made impressive progress with the establishment of a constitutional government, a parliamentary system with multiparty elections, and laws to strengthen non-governmental organizations. The new Government began to decentralize resource allocation decisions and local management of social services, and define development goals. The ROYG demonstrated a strong commitment to stabilization and reform through price and market liberalization, fiscal prudence, liberalization of foreign exchange and trade, and striving to cut foreign debt and increase foreign exchange reserves. Recently, economic reform has slowed, and Yemen's internal stability is threatened by a combination of forces challenging the Government's movement to increased democracy. These forces include extreme poverty, Islamic extremism, internal and international terrorism, and the alienation from the central Government by relatively independent tribal leaders in remote areas.

Despite progress made over the last decade, Yemen remains one of the least developed countries in the world and ranks 148 out of 175 countries on the United Nations Development Programme's Human Development Index (2003). It has a per capita gross domestic product of $460. Forty-two percent of the people live in poverty (45% in rural areas) and one in five is malnourished. Yemen's 18.5 million population, which is predominantly rural, faces enormous economic and social challenges. Among the major problems are limited access to basic services, a very high fertility rate (6.7%), high illiteracy rates especially among females (73.5%), high unemployment (40%), significant gender inequality, diminishing oil reserves, and a non-renewable water supply, which is dwindling at an alarming rate.

Thus, poverty reduction remains Yemen's most compelling challenge. To make a significant impact on poverty reduction, Yemen must increase its focus on rural communities, where 75% of the population resides. The rugged terrain, which has already been a significant challenge for agricultural development and service delivery, will present a challenge for this task as well.

Nepal

In 1951, the Nepalese monarch ended the century-old system of rule by hereditary premiers and instituted a cabinet system of government. Reforms in 1990 established a multiparty democracy within the framework of a constitutional monarchy. A Maoist insurgency, launched in 1996, has gained traction and is threatening to bring down the regime, especially after a negotiated cease-fire between the Maoists and government forces broke down in August 2003. In 2001, the crown prince massacred ten members of the royal family, including the king and queen, and then took his own life. In October 2002, the new king dismissed the prime minister and his cabinet for "incompetence" after they dissolved the parliament and were subsequently unable to hold elections because of the ongoing insurgency. While stopping short of reestablishing parliament, the king in June 2004 reinstated the most recently elected prime minister who formed a four-party coalition government, which the king subsequently tasked with paving the way for elections to be held in spring of 2005. Citing dissatisfaction with the government's lack of progress in addressing the Maoist insurgency, the king in February 2005 dissolved the government and assumed power.

Development progress has been notable. A substantial road infrastructure has been created; large decreases in child mortality and fertility rates have been achieved. There are functioning ministries in such important sectors as education, finance, and health; gains. Major gains have been made in agriculture, forestry, and literacy eradication while increasing access to basic services.

The most pressing problem facing the country today is a rebel insurgency and its profound impact on Nepal's political and economic development and overall security. The Maoist insurgency, which began in 1996, found fertile ground largely in response to Nepal's poor governance, poverty, and exclusion. The initial pro-people approach, which won the Maoists converts among the disenfranchised, has mutated into a campaign of violence, lawlessness, intimidation, and destruction. More than 10,000 people have been killed by the Maoists and security forces, with the bulk of these deaths, almost 9,000, occurring since 2001. While the Maoists have adopted terror as an instrument of policy, human rights abuses are committed by both parties to the conflict. In addition to the human toll, the continuing violence drains budget resources, restricts delivery of services and prospects for socioeconomic development, and stifles economic growth. The conflict has inflicted combined estimated costs to national property and the economy of over $1.5 billion in the already-impoverished country.

On the political front, there are new reasons for concern given the King's recent dismissal of multi-party democracy, declaration of a state of emergency, suspension of fundamental constitutional rights, and detention of politicians, journalists, and human rights activists. This serious setback for Nepalese democracy risks eroding even further the Nepalese Government's ability to resist the Maoist insurgency.

On the economic front, government measures to improve the business environment, encourage investment, reduce avenues for corrupt practices, and improve the service orientation of key government agencies are progressing. In addition, Nepal joined the World Trade Organization in 2004.

Absolute poverty declined from 42% to 30% between 1996 and 2002, attributable largely to increased remittances from Nepalis living abroad. Nonetheless, Nepal remains one of the poorest countries in the world, with an annual per capita income of $276 and 38% of the population living below the national poverty line. Life expectancy at birth has increased but at 59 years, is still lower than its neighboring South Asian countries. The literacy rate is 54% nationwide. Population growth has fragmented land holdings and depleted forest resources, negatively affecting the livelihoods of the 80% of Nepalis that depend on agriculture for their livelihood. Maternal mortality is amongst the highest in the region. One of 11 children dies before they reach their fifth birthday - the majority during their first year. Moreover, Nepal is in the midst of a concentrated HIV epidemic. The World Health Organization/UNAIDS estimate that 14 Nepalese adults become infected with HIV in Nepal every day.

Nepal serves as a geographic buffer between the world's two most populous nations in a volatile region. Therefore, the country can play a key role in promoting regional stability- and diminishing the likelihood of a humanitarian crisis.

Morocco

Morocco has a per capita income of $1,200, placing it in the lower tier of middle-income countries within the Near East. Its social indicators are among the lowest in the region. Approximately 49% of adults aged 15 and above were illiterate in 2002, placing Morocco at 20th among the 22 Arab League countries (surpassing only Mauritania and Yemen). Women are particularly affected, with female illiteracy rate at 62 percent, and significantly higher in rural areas.

Progress made in the early nineties in poverty alleviation has been lost: approximately 20% of the total population remains under the absolute poverty line (about one dollar per day), with two-thirds being located in rural areas (3.5 million, or more than 10% of the population). Moreover, about 55% of the rural population and 33% of the urban population were considered "economically vulnerable" in 2003. The country's economy remains overly dependant on rain, and adverse climatic conditions directly impact the level of rural poverty. Economic growth is further constrained by government policies that retard rapid modernization of the rural economy, diversification of cereal production, and efficient use of scarce water resources. Urban poverty is a direct consequence of unemployment, which is particularly high among youth (up to 35.4% in 15-24 year olds in 2004 alone). Such a high unemployment among youth contributes to insecurity and instability in urban areas.

In 2004, the government managed to maintain macro-economic stability, continue its investment program and advance the implementation of its reform agenda. At around 3.5% of the gross domestic product (GDP), the fiscal deficit will not exceed affordable levels and inflation will be contained around 2%. With regard to public investment and policy reform, achievements exceeded targets in many sectors. For example, the number of students enrolled in vocational training doubled as compared to the previous year. Social programs, including rural electrification, potable water and rural roads met or exceeded targets. A new family code -- Moudawana -- considered as one of the most progressive in the Arab region, was promulgated. Free trade agreements were signed with the U.S. and several countries in the region. The health coverage scheme began as planned and the liberalization of several sectors (air transportation, radio-TV, and telecommunications) met set deadlines.

The above progress was achieved despite several adverse exogenous events. In February, a violent earthquake hit the northern region of Al Hoceima. The disaster killed more than 1,000 people and damaged basic infrastructure and houses in an already poor, underserved region. Despite donor support, the country continues to carry a significant financial burden, and the living conditions in that region are still substandard. In February, locusts began to invade the south of the country. The government mobilized substantial equipment and resources to successfully stop the expansion of the swarms. Morocco also provided significant support to its neighboring countries (Mauritania, Senegal, and Mali) to contain the plague. Despite these efforts, locusts returned in large numbers in the fall, with swarms reaching the north-eastern region and spreading from the Canary Islands to the Middle-East. The unprecedented increase in oil prices was a significant shock that affected Morocco's economy as well. Unlike most countries in the region, Morocco imports almost 100% of its oil. The Government of Morocco's (GOM) policy to preserve the purchasing power of the poor requires keeping energy prices at a stable, affordable level. Thus, instead of raising the prices to keep up with imported oil levels, the government automatically reduces the level of taxes, which directly impacts its revenues and widens the fiscal deficit.

Morocco is a stable, democratizing, and liberalizing Arab Muslim nation. It is also a constructive force in the pursuit of Middle East peace and in responding to other regional security challenges. The key challenges for the country are creating jobs for a fast growing labor force and addressing the gaps in meeting the basic needs of the population.

Mongolia

Mongolia won its independence from China in 1921 with Soviet backing. A Communist regime was installed in 1924. During the early 1990s, the ex-Communist Mongolian People's Revolutionary Party (MPRP) gradually yielded its monopoly on power to the Democratic Union Coalition (DUC), which defeated the MPRP in a national election in 1996. Since then, parliamentary elections returned the MPRP overwhelmingly to power in 2000 and produced a coalition government in 2004.

Mongolia's harsh climate, small domestic market, land-locked status, and lack of infrastructure present formidable challenges. Yet the country provides an important example to others in East Asia, Central Asia, and elsewhere on how to manage an economic transition within a democratic political framework.

Mongolia's transition to democracy is a remarkable achievement with ramifications that go well beyond its frontiers. Ten elections have been held over the past decade, three each at the local and presidential levels and four at the parliamentary level. Governments have been chosen through elections that reflect the will of the people, and the transition from one government to the next has taken place in a largely positive and cooperative atmosphere. The most recent Parliamentary elections, held in June 2004, further demonstrated the country's progress toward democracy. In that election, the Motherland Democracy Coalition (MDC), which previously had held just four of the 76 seats in Parliament, won 34 seats against the 36 captured by the Mongolian People's Revolutionary Party (MPRP), the reformed Communists who had governed the country for all but four of the 14 years since the transition from socialism began in 1990. The MDC and MPRP now share power in a de facto coalition, with the MDC holding the Premiership and the MPRP the Speakership. Yet, important challenges remain. The judiciary and civil society remain weak, corruption remains high, public access to the decision-making process is limited or nonexistent, the Parliament has yet to emerge as an effective overseer of the executive branch, and the participation of women in the political process is strikingly low (women hold only five seats in Parliament, for example, and none of the 21 regional governorships).

The direction and pace of economic change also have been encouraging. Approximately 75% of the Mongolian economy is now in private hands, up from virtually nothing at the beginning of the 1990s. Total annual gross domestic product (GDP) is estimated at just over $1 billion and per capita income is estimated at around $500 per year. Tourism, construction, and light industry offer significant future potential, while international investor interest in mining increased significantly over the past year.

After several years of economic stagnation and decline, GDP growth rates reached 3.9% in 2002 and 5.6% in 2003. This encouraging development suggests that Mongolia's hard-won political stability is beginning to have an economic impact. A vibrant "underground" economy and informal remittances from the estimated 70,000 Mongolians working overseas may make the actual per capita income figure even higher, but the poverty rate remains high at 33%. The growing international debt burden--now approximately $1 billion--is cause for concern, as is the level of corruption. Similarly, while the new coalition government has verbally expressed its commitment to continue the reform process and to maintain macroeconomic discipline, it is not yet clear that it will be able to do so in the face of significant political pressure on both parties to carry out unaffordable campaign promises.

Mongolia plays a significant role in contributing to stability in a potentially volatile part of the world. It is an important example of democracy and respect for human rights.