INTERNATIONAL COUNTRY RISK GUIDE

Volume XXIV, Number 9 September 2003

Published Monthly by

The PRS Group Inc 6320 Fly Road, Suite 102, P.O.Box 248 East Syracuse, NY 13057-0248, USA Tel: +1 (315) 431 0511. Fax: +1 (315) 431 0200 http://www.prsgroup.com International Country Risk Guide September 2003

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- IN THIS ISSUE - Editor: Tom Sealy

Regional Editors: THE AMERICAS ...... 7 Jeremy P Sealy Benedict F McTernan Risk Ratings: David Thompson Current Assessments and Forecasts...... 8 Michael P Nunn Regional Survey: Statistics: Brazil ...... 9 Penelope J Appleby Costa Rica...... 13 Production Manager: Cuba...... 16 Patricia Redhead Haiti ...... 21 Honduras...... 26 General Information: Panama...... 29 Nora Ruthig United States of America...... 34 Fax: (315) 431-0200 Uruguay ...... 40

Editorial Inquiries: Email: [email protected] Fax: +44 (0) 870 137 0960

EUROPE (EUROPEAN UNION) ...... 43 ©2002, The PRS Group, Inc International Country Risk Guide ISSN: 0278-6680 Risk Ratings: Current Assessments and Forecasts...... 44 Printed in U.S.A. Manufactured by Dupli Envelope & Graphics Corporation. Regional Survey: Belgium ...... 45 Publications of The PRS Group are limited publications containing valuable market Denmark ...... 53 information provided to a select group of customers in response to orders and our customers Finland...... 58 acknowledge when ordering that the reports so Italy...... 64 ordered are for our customer's own internal use only and not for general publication or disclosure Portugal...... 72 to third parties. This report may not be copied or given, lent or sold to third parties without written Spain ...... 76 permission nor may its contents be disclosed to non-customers without written permission. All rights (including copyright) reserved to the copyright holder. The PRS Group’s publications are based on information believed by us to be reliable. No guarantee or warranty is made to users that the information is accurate or complete. The risk ratings are the result of study and analysis of information regarded as relevant EUROPE (NON EUROPEAN UNION) ...... 81 and represent our best judgment. These ratings are not our recommendations to make commercial decisions and should be regarded as only one factor by management in making such decisions in Risk Ratings: their own business judgment. No guarantee or Current Assessments and Forecasts...... 82 warranty is made to users that the ratings are accurate or reliable. The Service is offered to users AS IS with NO WARRANTIES, EXPRESS OR IMPLIED, including without Regional Survey: limitation the WARRANTIES OF Hungary ...... 83 MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSES. Romania...... 86 Ukraine ...... 91

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NORTH AFRICA, MIDDLE EAST, AND CENTRAL ASIA...... 95

Risk Ratings: Current Assessments and Forecasts ...... 96

Regional Survey: Armenia ...... 97 Iran...... 102 Iraq...... 109 Israel ...... 116 Kuwait...... 121 Sudan ...... 125 Tunisia ...... 129

SUB-SAHARAN AFRICA ...... 133

Risk Ratings: Current Assessments and Forecasts ...... 134

Regional Survey: Botswana...... 135 Congo, Republic ...... 140 Ghana...... 142 Liberia...... 147 South Africa...... 154 Zimbabwe ...... 157

ASIA AND THE PACIFIC ...... 163

Risk Ratings: Current Assessments and One-Year Forecasts ...... 164

Regional Survey: India ...... 165 Korea, Republic ...... 172 Papua New Guinea...... 176 Sri Lanka...... 182 Vietnam...... 187

INDEX OF COUNTRY REPORTS ...... 195

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STATISTICAL SECTION:...... S-1

Table 1: Country Risk Ranked by Composite Risk Rating...... S-3

Table 2A: Composite Risk Rating over the period October 2002 - September 2003 ...... S-7 Table 2B: Current Risk Ratings and One-Year Forecasts...... S-10 Table 2C: Composite Risk Rating Forecasts ...... S-13

Table 3A: Political Risk Ratings over the period October 2002 - September 2003...... S-16 Table 3B: Political Risk Points by Component - September 2003 ...... S-19 Table 3Ba: Political Risk Points by Subcomponent - September 2003 ...... S-23 Table 3C: Political Risk Rating Forecasts ...... S-26

Table 4A: Financial Risk Ratings over the period October 2002 – September 2003 ...... S-29 Table 4B: Financial Risk Points by Component – September 2003 ...... S-32 Table 4C: Financial Risk Rating Forecasts...... S-36

Table 5A: Economic Risk Ratings over the period September 2002 - September 2003...... S-39 Table 5B: Economic Risk Points by Component - September 2003...... S-42 Table 5C: Economic Risk Rating Forecasts...... S-46

Table 6A: Summary of Economic Risk Components – September 2003 ...... S-49 Table 6B: Summary of Financial Risk Components - September 2003...... S-52

Table 7: GDP per Head of Population...... S-56 Table 8: Real GDP Growth ...... S-59 Table 9: Annual Inflation Rate...... S-62 Table 10: Budget Balance as a Percentage of GDP ...... S-65 Table 11: Current Account as a Percentage of GDP ...... S-68 Table 12: Foreign Debt as a Percentage of GDP...... S-71 Table 13: Debt Service as a Percentage of Total Exports ...... S-74 Table 14: Current Account as a Percentage of Total Exports ...... S-77 Table 15: International Liquidity as Months of Import Cover...... S-80 Table 16: Exchange Rate Stability ...... S-83 Table 17: Foreign Exchange Rates...... S-86

BRIEF GUIDE TO THE RATINGS SYSTEM ...... A-1

The Political Risk Rating...... A-3 The Economic Risk Rating ...... A-9 The Financial Risk Rating ...... A-13 The Composite Risk Rating...... A-17 The Forecasting System...... A-18

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THE AMERICAS

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CURRENT RISK ASESSMENTS AND FORECASTS

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Argentina 64.0 29.5 36.5 49.3 65.0 58.5 67.5 60.5 77.0 Bahamas 84.0 37.5 36.0 76.0 78.8 75.0 79.5 70.5 81.0 Bolivia 63.5 37.0 33.0 65.8 66.8 62.5 70.0 63.0 74.5 Brazil 69.0 30.5 33.0 59.5 66.3 51.0 63.0 59.0 76.5 Canada 89.5 42.0 42.0 84.8 86.8 77.5 84.0 72.0 87.5 Chile 77.0 37.5 39.0 76.3 76.8 67.5 76.0 68.5 79.5 Colombia 55.0 39.5 32.5 61.0 63.5 57.5 66.5 53.0 69.5 Costa Rica 74.0 37.0 33.5 74.8 72.3 73.0 77.5 69.0 80.0 Cuba 58.5 28.5 33.5 64.3 60.3 50.5 63.0 45.0 71.0 Dominican Rep. 62.5 29.5 27.5 69.8 59.8 56.0 63.5 55.5 69.5 Ecuador 58.0 34.5 34.0 59.8 63.3 51.0 61.0 52.0 67.0 El Salvador 64.0 39.5 35.5 71.5 69.5 71.5 76.0 67.5 79.0 Guatemala 60.5 40.0 33.5 67.3 67.0 65.3 71.5 60.0 75.5 Guyana 68.0 29.5 27.5 62.0 62.5 59.8 66.0 58.5 69.5 Haiti 45.0 31.5 25.5 54.0 51.0 39.5 52.0 38.5 66.5 Honduras 60.5 36.0 28.0 63.8 62.3 57.5 66.0 56.5 72.0 Jamaica 70.5 36.0 32.5 68.3 69.5 66.5 73.0 65.0 78.0 Mexico 69.0 38.0 37.0 69.8 72.0 66.0 72.8 60.0 77.0 Nicaragua 57.5 25.0 22.0 54.8 52.3 44.5 52.0 43.5 60.0 Panama 72.0 35.0 36.0 71.0 71.5 65.0 74.5 59.0 78.5 Paraguay 57.0 39.0 29.0 60.3 62.5 56.3 65.0 42.5 70.5 Peru 62.5 37.5 36.5 68.3 68.3 59.5 71.3 55.0 72.5 Suriname 65.0 35.5 30.0 62.8 65.3 61.0 67.5 57.5 71.5 Trinidad & Tobago 67.0 45.0 41.0 72.5 76.5 74.0 78.8 71.5 80.5 United States 81.0 33.0 38.0 75.5 76.0 73.0 79.5 72.0 84.0 Uruguay 70.5 30.5 28.0 61.5 64.5 57.0 67.5 58.0 73.5 Venezuela 50.0 42.5 26.5 54.3 59.5 54.5 65.5 51.5 76.0

For historical risk ratings and key economic data on these and other countries in ICRG, please go to www.CountryData.com.

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BRAZIL RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 60.5 69.0 57.0 70.0 60.0 73.0 Financial Risk 26.5 30.5 20.0 28.0 28.0 40.0 Economic Risk 32.0 33.0 25.0 28.0 30.0 40.0 Composite Risk 59.5 66.3 51.0 63.0 59.0 76.5 Risk Band High Mod. High Mod. High Low

POLITICS Government Stability Pension Reforms Approved From the moment he entered office in early 2003, President Luis Inacio “Lula” da Silva has performed a delicate balancing act in order to maintain the backing of both his traditional base of support among members of the political left and the center-right parties upon whose votes the government depends for a congressional majority. The tension was evident throughout the 2002 election campaign, as Lula, the firebrand former union leader, preached the gospel of neo-liberalism, while listeners on the left and right remained hopeful and skeptical, respectively, both sides of the political spectrum convinced that it was all a campaign ruse.

Since winning election in a landslide, Lula has taken pains to prove that he is sincere in embracing the virtues of fiscal restraint and responsible debt management, to the delight of the domestic and international business communities and the horror of his Workers’ Party (PT). He made clear that the leftist social agenda would have to be put on the back burner until the government carried out structural reforms required to reduce the massive debt burden, thereby freeing up funds for increased spending on programs designed to improve conditions for Brazil’s poor and working class population.

Early on, then, the key question ceased to be whether Lula would adhere to the reform path, but rather how long the PT would continue to stick by its man. That question was answered - for the moment, anyway - on August 7, when the Congress gave initial approval to legislation aimed at reforming the country’s generous pension system.

Under a system enshrined in the 1988 constitution, civil servants are eligible to retire in their early 50s, with assurances of a lifetime pension equivalent to their salary at the time of retirement. Pension payments have consumed more than 5% of GDP annually, creating persistent large budget deficits that threaten to push the debt burden above $250 billion if the matter is not addressed.

Pension reform topped the legislative agenda of the previous center-right government, but political considerations deterred former President Fernando

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Henrique Cardoso’s administration from taking action during its eight years in power. Lula recognized that further delay would merely prolong the economic instability that is the chief impediment to fulfillment of his long-term social goals.

The reforms, which were approved by a vote of 358-125, include an increase in the retirement age, caps on future pensions, sharp cuts in current pension payments in excess of $800 per month, and a tax on pension income over $400 per month. All told, the changes are expected to save the government $18.6 billion over the next 20 years.

Unfinished Business In attacking the pension system head on, Lula effectively declared war on the country’s three million civil servants, a key source of support for the PT. In the weeks preceding the congressional vote on the reforms, public-sector workers showed that they were game for battle. Government workers and pensioners took to the streets, massing in the largest demonstrations Brazil has seen since the celebrations that followed Lula’s victory in the 2002 presidential election.

With Lula holding firm in the face of an intimidating display of public opposition, the PT faced a test of faith in their leader. In the end, they chose to trust Lula’s judgment, as only three of the PT’s legislators voted against the reforms. The three dissidents were promptly expelled from the party.

However, the fight to overhaul the pension system is far from over. Pension reform requires a revision of the constitution, and as such involves a more complicated process than a single vote in the Congress. However, by achieving victory in the first vote, particularly by such a large margin, Lula has taken a crucial step, as enraged opponents of the move are well aware.

In the immediate aftermath of the vote, an estimated 50,000 protestors took to the streets in the capital, Brasilia, resulting in violent confrontations between rock-wielding demonstrators and police that left several people injured. The Congress building itself was attacked; its windows broken by government workers.

Most Brazilians - including the country’s poor - are not terribly sympathetic to the plight of civil servants, whose income even with the approved cuts is far higher than that of the many millions who are unemployed or struggling to get by in low-wage jobs. But the battle over pensions has taken on a symbolic significance for many who, while not directly affected by the cuts in benefits, are frustrated at Lula’s apparent abandonment of his social agenda in favor of a program of neo-liberal reforms.

The early August demonstrations drew protesters from as far away as Rio de Janeiro, Salvador, and São Paulo. Some carried signs reading “Traitor, Get Out” and “The Government Is Kneeling Before Capitalism,” while one group carried a coffin with the president’s name on it.

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Despite signs of growing disillusionment in his traditional constituency, Lula remains broadly popular. However, the impact of the government’s reforms, particularly its harsh fiscal austerity program, is beginning to be felt. Economic activity continues to be choked by high interest rates, and unemployment has risen above 13%.

Although the central bank has begun lowering interest rates from the crippling level of 26.5% that held until mid-2003, the danger that a relaxation of monetary policy may spark damaging inflation cannot be discounted. Consequently, officials will remain cautious—a posture that in all likelihood means that there is no significant economic rebound on the horizon. As long as that remains the case, a popular backlash will remain a persistent threat.

Land Reform Pressures Beyond its potential effect on government finances, the approval of the pension reform measure is significant in that it provides conclusive evidence that Lula has managed to cobble together a rather sizeable majority in the legislature. In large part, that is attributable to the president’s success in gaining the qualified support of the center-right Democratic Movement Party (PMDB).

With the PMDB on board, Lula’s administration can claim a three-fifths majority in both houses of the legislature, which will be indispensable to obtaining approval of measures that require changes to the constitution. However, the inclusion of the PMDB in Lula’s camp is all but certain to lead to problems between the government and the Landless Workers’ Movement (MST).

The MST lent its support to Lula’s 2002 campaign in the expectation that as president he would rapidly pursue a program of land reform. MST leaders have demanded that land be provided to 120,000 families in 2003, and to a total of one million families by the end of Lula’s four-year term.

For its part, the PMDB is adamantly opposed to any substantial revision of the laws concerning land ownership. Sooner or later, the PMDB and the MST will find that Lula’s camp is not big enough for both of them, and given the fact that the MST has no significant representation in Congress, it is not difficult to guess which way Lula will turn if forced to choose.

The MST’s most important contribution to Lula’s election was its agreement to temporarily halt its campaign of land invasions, which might otherwise have been used by the center-right to paint the PT with the brush of radicalism. But as the months have passed without action on the land reform front, the MST is growing restive and the invasions have been resumed with a vengeance. The MST has carried out more land invasions in the five months since its moratorium was ended in March 2003 than were undertaken in all of 2002.

The tactic of taking over property owned by others is potentially explosive. The invasions often turn violent, and landowners have threatened to create their own militias to protect their assets if the government refuses to take action against the MST.

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Lula is scrambling to reach an agreement with MST leaders, but there is little chance that the government will be able to bear the cost of meeting their demands without jeopardizing the fulfillment of the fiscal goals outlined in Brazil’s agreement with the IMF. In the meantime, farmers are flexing their muscle in the Congress, which has launched an official investigation of the movement.

Outlook All indications are that the president will face growing pressure from both directions, and will ultimately be forced to restrain the MST, by force if necessary. In that event, Lula will be hard-pressed to persuade the country’s non-privileged classes that the campaign promises he made are not mutually exclusive. In short, the explosion of popular anger that greeted pension reform is likely to be repeated in the months to come.

Moreover, it is not even clear that he will be able to count on the support of his newfound allies on the center-right as he proceeds down the path of reform. Lula’s next project—tax reform—promises to be even more controversial than the pension reforms, and it is doubtful that it can win passage in its current form.

The key component of the tax reform plan is the introduction of a national goods and services tax to replace the current system under which individual states set their own tax level. In seeking investment, some states have attempted to increase their competitiveness by dropping their tax rates to the point of producing chronic revenue shortfalls.

Opposition to Lula’s plan is widespread. On the one hand, the tax measure faces resistance from business and local interests that contend that the tax burden- which has grown from about 26% of GDP in the mid-1980s to 37% of GDP currently-is already far too high. On the other hand, leaders from states whose attractiveness has enabled them to set high tax rates confront the uncomfortable prospect of being forced to make spending cuts if the lower federal rate is imposed.

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COSTA RICA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 76.0 74.0 78.0 82.0 78.0 84.0 Financial Risk 37.0 37.0 36.0 38.0 30.0 39.0 Economic Risk 36.5 33.5 32.0 35.0 30.0 37.0 Composite Risk 74.8 72.3 73.0 77.5 69.0 80.0 Risk Band Low Low Low Low Mod. V.Low

POLITICS Government Stability President Abel Pacheco’s Social Christian Unity Party (PUSC) administration has come under a barrage of protests from organized labor in recent months that pose a significant threat to the government’s plans to revitalize the economy through structural reforms and the pursuit of free-trade agreements, and he is clearly feeling the strain. In late June, the president was ordered by his doctor to take a week’s rest due to “stress and fatigue accumulation” caused by the many problems confronting his administration. Pacheco, who is 70 years old and a diabetic, has more recently been diagnosed with high blood pressure, presumably the result of more than a year of 14-hour workdays without a vacation.

Popular Support/Legislative Strength While Pacheco’s strenuous efforts have done little for his health, they have done even less for his popular support. The president won his office by garnering 58% support in a run-off contest against Rolando Araya, the candidate of the National Liberation Party (PLN), in April 2002. At the completion of his first 100 days in office in mid-August 2002, he commanded the approval of 63% of the country’s voters, the highest level by any president at that point in his term. However, the results of a poll conducted in early July of this year showed that only 39% of Costa Ricans rated his administration’s performance as “good” or “very good,” while 29% judged it to be “bad” or “very bad,” compared to figures of 46% and 22%, respectively, in a poll conducted three months earlier.

The president’s declining popular support can only serve to reinforce the weakness of his government, which controls just one-third of the 57 seats in the Legislative Assembly, making him all the more susceptible to pressure from non- governmental interest groups. The government’s capitulation in early June to the demands of striking workers at the Costa Rican Electricity Institute (ICE), the state-owned electric and telecommunications monopoly, has proved politically costly, as other labor groups, smelling blood in the water, have been encouraged to press their own demands.

Cabinet Instability In response, Pacheco has effectively ceded a substantial chunk of his presidential authority to his opponents, in the process compounding his political difficulties.

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In seeking resolution of the ICE strike, the president pledged to consult with a broad spectrum of public-sector unions on matters of policy, a concession that all but rules out any progress in the area of privatization, and presents a potentially insurmountable obstacle to Costa Rica’s inclusion in the anticipated Central American Free Trade Agreement (CAFTA) currently being negotiated between the US and five Central American governments.

Even more worrisome is the extent to which forces outside the government appear to have gained control over the president’s personnel decisions. In late May, Minister of the Presidency Rina Contreras was moved to a less visible post in the administration after a group of 28 legislators informed Pacheco they found her style abrasive and could not work with her. In early June, Education Minister Astrid Fischel stepped down under pressure from striking teachers.

In early July, Science and Technology Minister Rogelio Pardo resigned after being publicly rebuked by Pacheco over remarks that were interpreted by organized labor as suggesting that the government had plans to privatize ICE. Pardo claimed that his reference to “privatizing aggregate values” was not intended to apply to electricity and telecommunications, but rather to other services, such as call centers and Internet services.

However, when the labor unions complained, Pacheco sent a note to Pardo informing him that “by diverging from the [government’s] line of thought, you are threatening social peace,” and instructing him to declare publicly that he was speaking his own mind on the matter.

Given such obvious lack of support from the top, it is hardly surprising that Cabinet officials have been rushing to the exits throughout Pacheco’s first 15 months in office. Pardo’s departure brought to eight the number of ministers who have left the government since Pacheco took office in May 2002.

Corruption Adding to Pacheco’s troubles, the PLN and the Citizen Action Party (PAC), which have formed a majority opposition alliance in the Legislative Assembly, have launched an investigation into allegations of campaign financing irregularities by the PUSC.

According to the opposition, a total of $175,500 deposited into an account bearing Pacheco’s name during the 2002 campaign was not reported to the Supreme Election Tribunal (TSE), as required by law. In addition, the opposition claims that Pacheco’s campaign received a donation of $50,000 from a firm based in Panama. Donations from foreign sources are illegal under Costa Rican law.

Responding to the allegations, in early August, the president ordered that his private financial records, including a joint account shared with his wife, be made public. As for the allegedly unreported contributions, Pacheco claims to not have known of the account’s existence or how the money deposited in it was used.

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ECONOMY In something of a contrast to the unrelenting bad news Pacheco has received from the political front over the past few months, there have been some signs of improvement in the economic arena. According to official figures, both the trade and fiscal deficits were reduced during the first six months of 2003.

The central bank reported that the trade deficit narrowed to $658 million during January-June, compared to $1.02 billion in the same period in 2002, mainly owing to an increase in manufactured exports, especially semiconductors produced by the Intel Corporation. Exports for the first half of 2003 rose by 23% compared to the same period a year earlier, while imports rose by only 6% compared to 2002.

According to the Finance Ministry, the budget deficit stood at $222.5 million in late June, 12% lower than the level in June 2002, as tax revenues increased by 16%. Meanwhile, government spending grew by 10% compared to a year earlier.

Central Bank President Francisco de Paula Gutiérrez offered a positive assessment of the economy in late June, stating that economic figures from the first half of the year suggest a somewhat more dynamic economy than originally expected, and that real GDP growth would be higher than the 2.2% originally forecast, possibly even exceeding the 2.7% rate registered in 2002. Gutiérrez added that although the government was unlikely to achieve its goal of reducing the fiscal deficit to 3.1% of GDP, he was confident that the fiscal shortfall would be held under 4% of GDP.

Pacheco’s most senior economic advisor, Ronulfo Jiménez, echoed the positive government line, declaring in late June, “We are seeing more growth than we had estimated at the end of 2002, and significantly more growth than the economy showed during the first months of last year. The economy is showing strong signs of recovery.”

But not everyone agrees. Alberto Dent, who was named to replace Walter Bolaños as finance minister in late June, has offered a markedly less sanguine assessment of the country’s near-term economic prospects. Citing the negative impact of accounting discrepancies recently uncovered in ICE’s books and higher levels of programmed spending in the second half of the year, Dent has warned that the fiscal shortfall could expand to 5.2% of GDP in 2003. Speaking to reporters shortly after he was named as Bolaños’ replacement, Dent asserted, “It seems to me that we are running the risk of closing [the year] with an enormous fiscal deficit, and for that reason we will begin to close off spending on everything that is not absolutely necessary.”

That hardly sounds like a strategy likely to promote robust growth in the second half of the year. But given Pacheco’s political vulnerability, it is doubtful that Dent will be given a free hand to dispense harsh fiscal medicine when few others in the administration are even willing to admit that there is a disease.

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CUBA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 62.5 58.5 45.0 62.0 45.0 68.0 Financial Risk 31.0 28.5 27.0 30.0 20.0 36.0 Economic Risk 35.0 33.5 29.0 34.0 25.0 38.0 Composite Risk 64.3 60.3 50.5 63.0 45.0 71.0 Risk Band Mod. Mod. High Mod. V.High Low

POLITICS External Conflict European Union A decades-long friendly relationship between Europe and the Communist Party of Cuba (PCC) government headed by President Fidel Castro shows every sign of coming to an acrimonious end, following the EU’s imposition of diplomatic sanctions in response to the Cuban government’s crackdown on the Caribbean island’s tiny democracy movement in March 2003. Beyond the diplomatic consequences of the falling out with Europe, the souring of relations has potentially grave implications for a Cuban economy already in critical condition.

In the more than four decades since Castro came to power to in Cuba, the US has gone to extraordinary lengths to undermine the island’s Communist regime. In contrast, European nations have lauded the indisputable achievements of Castro’s revolution—particularly those in the areas of health care and education—and consistently condemned Washington’s economic embargo of the country, while ever so gently scolding the Cuban government for its failure to respect basic human rights.

However, all that changed with Castro’s crackdown, which began on March 18, just one day before US-UK forces launched their invasion of Iraq. Howls of protest went up within Europe’s corridors of power as dozens of internationally renowned dissidents and independent journalists were sentenced to lengthy prison terms—all in a matter of weeks. Even more disturbing were the summary trial and subsequent execution of three would-be hijackers who commandeered a ferry in hopes of making their way to the US coast.

Castro claimed the crackdown was provoked by the US, which openly funneled millions of dollars in funds to dissident groups through its diplomatic mission on the island. The Cuban leader further asserted that the dissidents’ acceptance of financial support from a foreign source was an act of treason, a position that has been upheld by the Supreme Tribunal, Cuba’s court of last resort, which by late June had confirmed the prison sentences of most of the jailed dissidents.

But European political leaders were having none of that. In late April, the EU indefinitely suspended consideration of Cuba’s application for preferential trade

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status and enhanced financial assistance under the Cotonou agreement, prompting Cuba to withdraw its application in May. Then, in early June, the 15- members states of the EU voted unanimously to stop high-level diplomatic visits, increase financial and other support for Cuban dissidents, and review the bloc’s overall relations with Cuba.

Castro, the Diplomat In the face of a major diplomatic crisis involving his country’s most important source of trade and tourism, Castro proceeded to pour fuel on the fire. Days after the EU announced its diplomatic sanctions and US Secretary of State Colin Powell hinted that the US and the EU were considering adoption of a joint policy toward Cuba, Castro delivered a televised address in which he vilified European leaders and called upon the Cuban people to participate in government- sponsored demonstrations against the sanctions.

The chief targets were Spain, whose prime minister, José María Aznar, was the driving force behind the diplomatic sanctions, and Italy, which cut off some $45 million in aid. Castro ridiculed Aznar as “the little fuehrer with the moustache,” and dismissed Italian Prime Minister Silvio Berlusconi as a “fascist” and a “clown.”

On July 26, in a speech commemorating the 50th anniversary of the assault on the Moncada barracks in Santiago, the opening clash in the country’s revolution, Castro continued his rhetorical attack, unleashing a stream of invective traditionally reserved for political leaders in Washington. Aznar once again received special consideration, as Castro vilified the Spanish premier as “an individual of markedly fascist lineage and ideology.”

Asserting that neither the US nor the EU would “have the final word on humanity’s fate,” Castro pointed to the ongoing struggle of developing nations to overcome the hobbling effects of centuries of European imperialism, and called on the leaders of Europe “to calmly reflect on your mistakes without getting carried away by an excess of rage or Euro-narcissistic drunkenness.” Then, beating the Europeans to the punch, he announced that Cuba would refuse all aid-including humanitarian assistance-from the EU.

Beyond the Rhetoric Despite the heated rhetoric, it remains an open question what impact the changing nature of relations with Europe will have on Cuba’s economy. The EU is Cuba’s most important trading partner and its largest source of foreign investment; during 1990-1998, European firms invested an estimated $640 million in the country, mostly in the tourism sector. Moreover, European travelers account for more than one-half of all business in the tourism sector, which is the island’s single most important source of hard currency. As such, any moves that pose a threat to commercial ties would hold the potential to devastate the Cuban economy.

But such moves have not as yet been undertaken, and despite some noise from Italy, none are expected in the foreseeable future. The EU member states have already ceased active promotion of investment and trade ties with Cuba in return

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for a promise from the US not to impose penalties on European companies doing business in Cuba as authorized by its controversial Helms-Burton law. But many European political leaders (and a sizeable minority of US lawmakers) believe that a policy of engagement is the more effective way to undermine Castro’s regime, and they are unlikely to introduce US-style restrictions on trade and investment, statements from Washington to the contrary notwithstanding.

Human rights organizations are hopeful that the EU’s official condemnation of Cuba’s rights record may lend force to their efforts to dissuade European travelers from visiting the island. However, the government’s tourism figures through the end of June indicate that the campaign is not having much effect. According to official data, tourist arrivals in the country reached one million on June 29, one day earlier than in 2001 (the best-ever year for the industry) and fully one month earlier than in 2002. According to Eric Peyre, Cuban sales director for the French hotel company, Accor, summer bookings from the UK and other European locations are well above expectations.

Debt Pressures Outside of the tourism sector, European businesses face growing disincentives to doing business in Cuba, but the cause has little to do with the recent diplomatic row. European firms have faced increasing delays in receiving payment for their goods and services since late 2001, in part owing to a loosening of US restrictions on direct sales of food. The US demands cash payment for all purchases made by Cuba, with the result that Havana is using lines of credit it secured in Europe to pay for goods received from the US.

In addition, Cuba’s foreign exchange reserves came under heavy pressure in 2002 as a result of a decline in the tourism sector and production losses arising from a wrenching restructuring of the vital sugar industry, as well as a substantial increase in the oil imports bill following the collapse of a preferential purchase arrangement with Venezuela.

The long-term impact of Cuba’s financial crunch was recently detailed by Dennis Flannery of the Inter-American Development Bank (IDB), who warned that the country’s debt has grown so rapidly in recent years that much of it will probably have to be forgiven in the post-Castro era. Quoting a US State Department report, Flannery asserted that Cuba’s hard currency debt reached $12.2 billion in 2002, and that the country has already accumulated $1 billion in commercial arrears.

The pressure on the country’s hard currency reserves has not eased, as became clear in July, when the central bank unexpectedly announced a significant tightening of foreign exchange controls that has substantially compounded the difficulties faced by foreign entities trying to conduct business on the island. On July 21, the central bank issued a decree ordering state-owned enterprises to surrender all foreign currency to the central bank and prohibiting the use of the US dollar for business transactions within Cuba. Under the decree, public-sector companies would be required to purchase dollars for import and debt payments through Cuban banks, subject to the approval of the central bank. The central bank has up to 30 days to respond to all requests for dollars.

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The announcement of the foreign exchange controls caused much consternation among the foreign business community, whose members were alarmed at the prospect of a further month-long delay in collection of payments and arrears from the cash-strapped state. Several foreign companies stated that they would cease to carry on business with state-owned enterprises until they were provided with details regarding how and when they would receive payment. Central Bank President Francisco Soberon Valdes sought to offer reassurances to foreign diplomats and business representatives by almost immediately scaling back some of the restrictions, including an exemption for joint ventures.

But business interests remain wary, particularly in light of recent pronouncements by Castro that there are too many dollars in circulation and the decentralization of trade has gone too far. Such statements, coming on the heels of the legal assault on democracy advocates, have fueled investors’ fears that Castro is having second thoughts about reform. It is that consideration, combined with cuts in European financial support that promise to prolong Cuba’s financial difficulties, that accounts for the potential for the crackdown to damage the country’s economy.

United States For its part, the US continues to exhibit marked ambivalence about its relations with Cuba. For the third consecutive year, a bipartisan group of lawmakers in both houses of the US Congress has introduced legislation calling for an easing of restrictions on travel to Cuba by US citizens. However, as in the past, a minority of influential congressional Republicans has managed to keep the measure in limbo. In any case, President George W. Bush insists that he will veto any legislation aimed at loosening the embargo.

In recent months, Bush has come under increasing criticism over his administration’s Cuba policy, not from those favoring a normalization of ties, but rather within the Cuban-American exile community in Florida, which has expressed frustration with Washington’s failure to follow through on the “get- tough” stance adopted by President Bush in mid-2002.

Particularly galling to the committed anti-Castro forces in the US is the Bush administration’s decision to uphold the so-called wet-foot/dry-foot law. Under a 1994 agreement, any Cuban refugees who come ashore in the US are permitted to stay, can obtain work permits, and are eligible to seek permanent resident status after one year. Those detained at sea are returned to Cuba, no doubt to face an unhappy fate.

The issue came to the fore in late July, when the US repatriated 12 Cuban refugees intercepted at sea. In early August, some 100 members of the Cuban American National Foundation (CANF), a strongly anti-Castro exile group, sent a letter to President Bush, warning that the Cuban community in Florida would have no choice but to reconsider its support for Bush’s Republican Party if the administration failed to turn up the pressure on Havana.

This is no idle threat. As was the case in his victory in 2000, Bush’s hopes for re-election in 2004 could well hinge on the outcome of the vote in Florida,

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particularly if prolonged economic troubles continue to erode the president’s popular support. There is no question that he cannot expect victory in Florida without the Cuban vote.

Among the demands outlined in the letter, whose signatories included numerous Republican officeholders, were an end to the repatriation of Cuban refugees; a substantial increase in financial support for Cuban dissidents; steps to overcome Cuba’s jamming of US government radio and television broadcasts tailored for a Cuban audience; and indictments against Castro and others responsible for the 1996 shoot-down of two private planes by Cuban fighter jets that resulted in the deaths of four Cuban-Americans.

The ultimatum from the CANF came just days after the US Senate finally confirmed Roger Noriega to the post of assistant secretary of state for western hemisphere affairs, officially filling the position for the first time since 1999. The early indications are that Noriega’s plans for the Bush administration’s Cuba policy mesh neatly—and not coincidentally—with the demands outlined by the Florida Cubans.

Noriega has stated unequivocally that a tightening of the embargo “is not an option,” but that no easing of restrictions will be considered in the absence of democratic and free-market reforms on the island, the stance enunciated by President Bush in May 2002. He has stated that his priority will be to shift the focus of debate from the embargo to conditions within Cuba, emphasizing support for domestic dissidents, enhanced dissemination of information, and greater coordination with Europe to promote democratic change on the island.

Although short on details, Noriega’s proposals have already drawn heat from critics who argue that by publicizing its support for Cuban dissidents, the US stands to undermine the legitimacy of democracy advocates by allowing Castro to paint them as agents of Washington. The Cuban leader has shown himself to be a master at manipulating fears of US interference in the island’s domestic affairs to strengthen his hold on power and limit the appeal of his opponents, and there is every reason to expect that he will continue to do so, with similar success. In the meantime, Cuban authorities can busy themselves preparing jail cells for those dissidents bold enough to take the US up on its offer.

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HAITI RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 45.5 45.0 30.0 45.0 30.0 60.0 Financial Risk 35.5 31.5 27.0 32.0 25.0 36.0 Economic Risk 27.0 25.5 22.0 27.0 22.0 37.0 Composite Risk 54.0 51.0 39.5 52.0 38.5 66.5 Risk Band High High V.High High V.High Mod.

POLITICS Internal Conflict In late May, the Haitian National Police (HNP) destroyed a number of illegal weapons seized during a year-long campaign to disarm the pro-government People’s Organizations, an apparent step toward fulfillment of a key condition set down by the Organization of American States (OAS) to secure the release of frozen international financial assistance. Jean-Claude Jean-Baptiste, at the time the acting director of the HNP, declared of the event, “It is a great day. It affirms the government’s will to end confrontation and violence as a way to resolve conflict.” Leaders of the opposition Democratic Convergence (CD) derided the destruction of the weapons as a “show for the OAS.”

The OAS has been attempting to broker a resolution of a crippling political conflict stemming from the disputed results of legislative elections held in May and November 2000, which gave President Jean-Bertrand Aristide’s Lavalas Family (FL) overwhelming majorities in both houses of the National Assembly. The opposition parties, who subsequently combined their forces in the Democratic Convergence (CD) bloc, contend, with most international observers concurring, that the voting was marred by serious irregularities. As a result, the international community, led by the US, has halted the flow of desperately needed foreign aid until the political stalemate is broken.

For his part, Aristide has expressed a willingness to meet the conditions outlined by the OAS in Resolution 822 (issued in September 2002), which, in addition to disarming the People’s Organizations, require the formation of a new Provisional Electoral Council (CEP) that includes members of the CD, in preparation for the holding of fresh elections by the end of 2003. However, the CD has refused to nominate any representatives to the CEP, claiming that the government has failed to meet its obligation under Resolution 822 to ensure a climate of security conducive to the holding of free and fair elections.

Attack on Opposition Meeting Support for the CD’s position came in mid-July, when a group of rock-wielding thugs attacked and broke up a meeting of the Group of 184 (G-184)—an anti- government umbrella organization that includes political parties, labor unions, student and church groups, and civic organizations—in Cite Soleil. Several

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dozen people were injured in the attack. According to eyewitness reports, the rock-throwers were chanting, “Aristide for life, Aristide is a king,” among other slogans, during the attack.

Far more damning evidence came from Johnny Occilius, a municipal employee in Cite Soleil, who after fleeing to the US alleged that Mayor Fritz Pierre, a member of the FL, had paid two local gang leaders a total of $12,500 to organize the attack on the meeting. The US embassy subsequently confirmed the involvement of the FL in the incident, citing information obtained from Occilius and its own sources.

Government Counterclaims The government has been giving as good as it gets, blaming the opposition for the assault on the G-184 meeting, as well as a host of other violent incidents before and since. As for the July rock-throwing incident, government officials charged that Aristide’s opponents had “provoked” local residents, who had spontaneously attacked the meeting.

Secretary of State for Public Security Jean Gerard Dubreuil likened the G-184 meeting in Cite Soleil to the white supremacist Ku Klux Klan organizing a rally in the largely black neighborhood of Harlem in the US city of New York.

When a fire broke out in Port-au-Prince’s McDonald Open Market a few days later, Prime Minister Yvon Neptune immediately pointed the finger of blame at the CD. Jonas Petit, the interim leader of the FL, labeled the fire an “act of sabotage” aimed at undermining the government’s efforts to improve conditions in the country.

In late July, four employees of the Interior Ministry were killed and one seriously wounded in an ambush while traveling in the Plateau Central region, an area in which the level of security has been particularly poor. Interior Minister Jocelerme Privert blamed the attack on the Force for Citizen Protection (FPC), a group that the Interior Ministry contends receives arms and financial support from the political opposition.

Conspiracy Allegations CD leader Evans Paul responded to the charges by claiming that the Interior Ministry had sent its personnel into an area known to be violent without providing adequate protection, in the expectation that their wholly expected deaths would provide the government with a pretext for cracking down on its opponents.

That position was backed up by Chavanne Jean-Baptiste, the leader of the Papaye Peasant Movement in Plateau Central, who claimed that much of the violence in the area stemmed from fighting between local FL factions over control of government funding to the area and smuggling operations that are carried out in the border region. Jean-Baptiste went on to claim that “the situation is being used as a pretext by the government to spread fear” and to blame the opposition.

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Law and Order Further evidence that the government is not pursuing fulfillment of its obligations under OAS Resolution 822 in good faith came in early June, when Jean-Robert Faveur, the newly installed head of the HNP, resigned his post after just two weeks on the job and went into hiding in the US. Faveur replaced the controversial Jean-Claude Jean-Baptiste, a longtime ally of Aristide, who was appointed as head of the HNP in late March, only to be forced to resign when his nomination provoked a storm of controversy and the Senate failed to confirm of his promotion.

In his letter of resignation, which was addressed to Aristide but also sent to a number of other officials and the press, Faveur alleged that the president had effectively stripped him of all of the authority. He claimed that he had been ordered to clear all of his decisions with Secretary of State for Public Security Jean Gerard Dubreuil, and that he had been instructed to rubber stamp a whole series of promotions and assignment orders signed by Jean-Baptiste just before he left office. According to Faveur, he was denied any control over the HNP’s budget, and had intentionally been left off the signature card for signing government checks.

The final straw for Faveur was when two of Aristide’s political allies, one of whom is a member of the Cabinet, presented him with a list of militants operating in the Plateau Central region who were to be integrated into the ranks of the HNP. Faveur interpreted the order as an attempt to bestow legitimacy on the violent actions of the government’s supporters, and decided that he could not retain his post.

Predictably, Aristide’s government wasted no time launching a campaign to smear Faveur. Foreign Minister Joseph Philippe Antonio claimed that Faveur was a tool of foreign interests (i.e., the US) who had used him to destabilize the government. Justice Minister Calixte Delatour accused Faveur of deserting his post, and compared him to a mad dog.

Faveur has been replaced by Jocelyne Pierre, a judge who previously headed the civil court in Port-au-Prince. Pierre’s appointment drew immediate and heavy criticism from the CD and rights groups. Opposition spokesman Mischa Gaillard warned that the “appointment is not conducive to establishing a secure environment for the electoral process.” The National Coalition for Haitian Rights (NCHR) charged that Pierre’s judicial record as indicating subservience to the FL, and warned that her appointment would only serve to further politicize the HNP.

The HNP’s ability to provide the necessary security for the holding of credible elections was further cast into doubt in early August, when Jean-Dady Simeon, the former spokesman for the HNP, went into exile in Canada, claiming that he received a death threat in a phone call that was traced back to a police station. Simeon contended that his superiors had assured him that an investigation would be conducted, but no results were ever reported to him.

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External Conflict United States Given the obvious mistrust between the government and the opposition, and the continuing high level of insecurity that makes it increasingly unlikely that elections can be held by the end of the year, the OAS has begun to consider it options. At a meeting of the OAS General Assembly in early June, US Secretary of State Colin Powell proposed that Haiti be given until the end of September to create conditions favorable to the formation of a functioning CEP and the organization of elections. In the absence of concrete progress by that time, Powell suggested that the OAS should re-evaluate its role in Haiti.

The meaning of Powell’s proposal is not entirely clear. On the one hand, it could be interpreted as nothing more than a suggestion that the OAS withdraw from an active role in seeking a political resolution, effectively leaving the government with no avenue to access the frozen international financial support. But Powell may have been alluding to (or attempting to leave the impression that he was alluding to) the Inter-American Democratic Charter (IADC), which empowers the OAS to take action, including military intervention, “when situations arise in a member state that may affect the development of its democratic political institutional process or the legitimate exercise of power.”

Haitian officials downplayed the threat posed by Powell’s proposal, noting that the US was but one of 34 members of the OAS, and reiterating the position that Aristide’s regime had fully done its part to comply with the conditions of Resolution 822.

However, Himler Rebu, a former colonel in the now defunct Haitian army, warned that the FL would do well to take Powell’s remarks seriously, noting that the penchant of the current administration in Washington for taking unilateral action on the international front meant that Haiti could not depend upon the opposition of other OAS members to forestall a military response from the US. Rebu added that many of the military personnel who were responsible for the intervention that restored Aristide to power in 1994 remain in decision-making positions today.

What the US government might have in store for Haiti became all the more difficult to discern in July, when CD leader Evans Paul publicly complained that Washington was sending incoherent and contradictory signals to the opposition. According to Paul, some elements of the US government have been urging the opposition to seek a compromise with Aristide, while other agencies in Washington have told the CD not to bother with negotiations “because other things are going to be done.”

Meanwhile, US officials continue to heap criticism on (and to convey veiled threats to) Aristide’s government. At a US Senate Foreign Relations Committee hearing in mid-July, Mark Grossman, US undersecretary of state for political affairs, stated, “The government of Haiti has not complied with many of its most important commitments under Resolution 822, particularly those that would contribute to a climate of security,” before adding, “Hemispheric patience is running out.”

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Senate Foreign Relations Committee Chairman Richard Lugar added that unstable conditions in Haiti posed a danger to US national security, stating, “Corruption, drug trafficking, and illegal migration are areas of deep concern for our two countries. Mass migration has the potential to create instability in the region and undermine efforts to improve border control.”

ECONOMY On the economic front, the government recently bought itself economic breathing space by paying off some $32 million in arrears to the Inter-American Development Bank (IDB) and reaching an agreement with the IMF, clearing the way for the release of nearly $200 million of the more than $500 million in foreign funds that have been frozen since 2000.

In an effort to encourage greater cooperation from Aristide’s government, the OAS gave the green light for the partial lifting of the freeze on international financial assistance in 2002, requesting that the IDB move to resume normal relations with Haiti. However, as the organization is prohibited from making new loans to countries in arrears on previous debt, the Haitian government first had to come up with the funds to bring its accounts up to date.

In early July, the government used a bridge loan from the central bank to pay off its arrears to the IDB, practically wiping out the country’s foreign exchange reserves in the process. The payment secured the release of a $35 million budget support loan that will be used, in part, to pay back the central bank for the bridge loan.

At the US Senate Foreign Relations Committee meeting held in mid-July, US Deputy Secretary of the Treasury for International Affairs John Taylor stated, “The government of Haiti has taken important actions to strengthen public finances and create conditions for greater macroeconomic stability. With arrears…cleared, the IDB can now move forward with a number of projects already in train, and re-engage with Haiti to discuss future lending.”

Further progress toward gaining additional international financial support came in August 2003, when the government reached an agreement with the IMF for a 12-month staff-monitored program (SMP), under which it is committed to trimming the budget deficit from 5.5% of GDP for the period October 2002- March 2003 to just 2.7% of GDP in April 2003-September 2003. During the same period, the government has targeted a reduction of inflation from 13% to 10%. A revised budget for 2003/2004 includes a series of revenue measures and deep cuts in discretionary spending.

If the government meets the targets agreed under the SMP, it would become eligible for up to $150 million in poverty reduction and economic development loans from the IMF over the next year. While the fresh lending will help to prevent an economic implosion that might contribute to even greater domestic instability, loans from other sources, particularly the World Bank, the US, and the EU, will remain frozen until a political settlement is reached.

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HONDURAS RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 60.5 60.5 60.0 66.0 58.0 68.0 Financial Risk 34.5 36.0 30.0 36.0 30.0 38.0 Economic Risk 32.5 28.0 25.0 30.0 25.0 38.0 Composite Risk 63.8 62.3 57.5 66.0 56.5 72.0 Risk Band Mod. Mod. High Mod. High Low

POLITICS Hell hath no Fury... On top of his many other problems, President Maduro has become embroiled in a personal soap opera that has created some instability within his government. The root of the messy affair lies in animosity between Maduro's wife, Aguas Ocaña, a former Spanish diplomat, and Mireya Batres, the president's former love interest and his current minister of culture, arts, and sports.

In a statement to the press, Ocaña asserted that Maduro felt he had made a “big mistake” by appointing Batres to her Cabinet post, and that he was “terribly embarrassed by the way she has behaved.” Ocaña’s statements offended César Batres, Mireya's father, who resigned in protest from his job as senior presidential adviser. The elder Batres, a former foreign minister, was part of the team of attorneys that successfully held off an attempt by the opposition to disqualify Maduro from standing for the presidency in 2001.

The flap may be creating problems for Maduro on the home front, as well. On the heels of César Batres' resignation, Ocaña returned to her native Spain for “pressing personal reasons.” The scuttlebutt on the ground in Honduras is that Ocaña is fuming over her husband's refusal to sack his old girlfriend, and that a divorce announcement might be around the corner for the newlyweds, who were only married in October 2002.

Law and Order Drug Scandals Drug trafficking seems to be prevalent not only on the streets of Honduras, but also at various levels of government, including the national legislature. Congressman Avila Panchame, a member of the ruling National Party (PN), was arrested by police in July on drug-trafficking charges. Panchame's arrest occurred just two weeks after Cesar Diaz Flores, a Honduran representative in the Central American Parliament, was taken into custody on similar charges.

Panchame has maintained his innocence, although he will have a difficult time reconciling that position with reports that he attempted to run over two police officers who ordered him to stop his vehicle. For his part, Flores continues to insist that he is protected by diplomatic and/or legislative immunity.

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The two cases are symptomatic of the increasingly apparent involvement of members of officialdom-government, judiciary, and police-in the activities of drug cartels. According to one government official, the investigation of such cases is hampered by the deep roots of corruption in the country's political culture.

President Ricardo Maduro has stated that his administration will not tolerate illegal practices by officials, whether lawmakers or law enforcers. In late June, the president announced plans for a "purification" of the police force. Under legislation currently being drawn up by the government, authorities would be permitted to immediately discharge any police personnel credibly accused of corruption and provide for their trial before the Court of Justice. Currently, the authorities have no legal recourse for dealing with police officials accused of corruption.

Youth Gang Violence Maduro won the presidency largely on an anti-crime platform and, since coming to office, the focus of his government's law-and-order policies has been the activities of youth gangs—the Mara. The administration has designed a youth rehabilitation program, but Maduro acknowledges that the economic resources needed to reform young gang members are limited. As such, his government's priority has been locking up as many Mara members as possible.

That strategy appears to have made barely a dent in the level of crime actually taking place on the streets. But if the allegations of rights groups are accurate, it has made it much easier for authorities to eradicate the perpetrators of violent criminal activity through extra-judicial means.

In April 2003, 69 people were killed in El Porvenir prison in La Ceiba as the authorities reclaimed control of the prison following a bloody riot. Most of those killed were Mara 18 gang members. The government has promised a full investigation into the circumstances surrounding the killings, which have been condemned by human rights groups and a local bishop, who charge that most of the dead prisoners had already surrendered before they were shot. Initial findings appear to confirm the accusations, and many are describing the incident as a purging of gang members.

The similarity between the El Provenir killings and an incident earlier in 2003 involving the death of seven gang members at San Pedro Sula Prison points to the possibility that a disturbing policy is being implemented among authorities within the prison system.

However, the government is not likely to face widespread public pressure either to investigate the claims of abuse or to punish any alleged wrong-doers among law enforcement officials. With street violence soaring and unlikely to subside in a climate of persistently high unemployment, frustrated, law-abiding Hondurans have little sympathy for gang members.

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ECONOMY Trouble with the IMF As his administration continues its seemingly futile effort to combat crime, Maduro continues to battle as well with the IMF. In early June, responding to the IMF's demand that the government cut the public-sector wage bill, Maduro announced that he would forego an agreement with the IMF if it did not relax its conditions, declaring, "I am not going to subordinate the necessities of the Honduran people to anyone."

The conclusion of a loan agreement with the IMF is required to win the release of millions of dollars in additional multilateral assistance and forgiveness of as much as one-third of the country’s foreign debt under the Heavily Indebted Poor Countries (HIPC) initiative. Maduro stated that his government could seek efficiencies, but asserted, "We cannot reduce the number of people who work in health care, education or security." The submission of a Letter of Intent by the government has been postponed until September, ruling out any chance of a new agreement before the end of the year.

Investment and Trade Efforts Despite the handicaps arising from the lack of an agreement with the IMF, President Maduro has been working hard to convince Spanish business leaders to invest in his country, highlighting opportunities in tourism, agriculture, and infrastructure. He travelled to Madrid in June to sign an $80 million cooperation agreement under the auspices of Spain’s bilateral aid program. Honduras, in cooperation with Guatemala, El Salvador, Costa Rica, and Nicaragua, also continues to pursue separate negotiations for free trade agreements with the US and Canada.

Maduro is especially keen to maintain good relations with the US, as he made evident in late May, when he pushed a bill through Congress authorizing the deployment of Honduran troops to Iraq for peacekeeping and reconstruction duties. Responding to vocal criticism of the deployment plan from his opponents, Maduro defended the decision as befitting Honduras' “friendship and solidarity” with the US. Perhaps, but opponents were quick to point out that Maduro's show of support for US policy in Iraq came just two days after US President George W. Bush approved a fourth extension of temporary protected status (TPS) for illegal Honduran immigrants currently employed in the US.

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PANAMA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 72.0 72.0 65.0 75.0 58.0 78.0 Financial Risk 34.5 35.0 31.0 36.0 30.0 39.0 Economic Risk 35.5 36.0 34.0 38.0 30.0 40.0 Composite Risk 71.0 71.5 65.0 74.5 59.0 78.5 Risk Band Low Low Mod. Low High Low

POLITICS Government Stability Presidential Campaign Guillermo Endara, a dissident member of the governing Arnulfista Party (PA) who will stand as the candidate of the Solidarity Party (PS) in the May 2004 presidential election, won the formal backing of another renegade Arnulfista, banker Alberto Vallarino, in early June. The endorsement promises to provide a substantial boost for Endara, who in recent months has been polling second behind Martin Torrijos, the candidate of the opposition Democratic Revolutionary Party (PRD).

Vallarino, a nephew of Arnulfo Arias, the PA’s namesake, broke with the PA in 1999 to run an independent campaign, finishing third with over 17% of the vote. In 2002, he attempted to regain membership in the PA in hopes of standing as the party’s candidate in the 2004 election. However, the effort was blocked by the party’s leader, President Mireya Moscoso, and Vallarino abandoned his bid for the presidency in January 2003, despite running neck-and-neck with Torrijos in polls conducted at the time.

Backing from Vallarino stands to benefit Endara’s campaign on at least three counts. The wealthy banker has very deep pockets, and can be expected to share a goodly portion of his ample financial resources with the PS candidate. In addition, had Vallarino been allowed to stand for the PA nomination, internal party polls indicated he would have won by a landslide. As such, his support for Endara is likely to transform the already steady flow of rank-and-file support out of the PA toward the PS into a veritable flood. Finally, and perhaps most important, Endara can also expect to gain the support of large numbers of non- PA voters who backed Vallarino’s independent campaign in 1999.

Torrijos in Front So what does any of this mean for the likely outcome of the 2004 presidential race? Probably not much, as Torrijos continues to enjoy a double-digit lead over Endara, his nearest competitor, in pre-election polls. Of course, Torrijos held a similar lead over Moscoso a year ahead of the 1999 election, only to see it eroded as the election approached.

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But in 1999, Torrijos bore the burden of the fact that his party was in power, and Moscoso gained ground by highlighting the perceived failings of Ernesto Perez Balladares’ government. Even more significant, Vallarino staged a viable “third way” campaign that had a real impact on the balance of support for the two main parties.

This time around, Torrijos will be able to campaign as an alternative to a thoroughly discredited PA administration. Although Endara is running on the PS ticket, his PA roots—not to mention the rather dismal record he built during his stint in the presidency in the immediate post-Noreiga period—are well known to the country’s voters, and he may have a hard time fully avoiding the taint of Moscoso’s failures.

Moreover, so catastrophic has been the decline of the PA that Endara has little reason to hope that a third force—either the PA’s candidate, José Miguel Alemán, or business magnate Ricardo Martinelli—will help his chances by drawing support away from Torrijos.

In short, the election appears to be Torrijos’s to lose, and so far the PRD leader has sought to avoid that possibility by saying little, and letting popular hostility toward Moscoso do his talking for him. He has come out in opposition to some of the current government’s most unpopular moves, particularly a regulation that requires ordinary citizens to prove a direct interest in a matter—such as how much the government spends on political junkets—in order to obtain information about it. But, in general, his campaign platform has been notably short on details, which he has promised to provide after he has had a chance to get out among the people and hear their ideas about what the country needs.

Corruption The need to root out a spreading rot of corruption that has permeated Moscoso’s administration will no doubt figure prominently in the platforms of both Torrijos and Endara. Torrijos has referred to the incumbent government as “a nightmare,” while the PS candidate claims he is still “an Arnulfista in his heart,” but that the PA has “gone bad.”

For their part, the president and her party seem to be almost pathologically driven to provide as much ammunition as any anti-corruption crusader could possibly want.

At the close of the regular legislative session in late June, the government- controlled Assembly voted to end all investigations into allegations that bribes were paid to numerous political figures to obtain the approval of the CEMIS multimodal airport, container handling, and industrial park project in Colon. The proposal was introduced by a PA deputy, Jacobo Salas, shortly before midnight on June 29, and passed by a 39-14 vote at 3 a.m. on June 30.

The CEMIS corruption scandal first erupted in January 2002, when Congressman Carlos Afú claimed that several of his colleagues in the PRD had accepted payments ranging from $20,000-$150,000 to approve a 40-year, $400 million contract to build a multimodal logistics center in the Colon Free Zone.

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However, Afú only came forward with the allegations after being expelled from the PRD by the party’s ethics committee over accusations that he accepted $1.5 million in exchange for his support for the appointment of two Supreme Court justices belonging to President Moscoso’s PA.

In order to remove the cloud of suspicion, the PRD’s members in the Legislative Assembly voluntarily waived their immunity from prosecution and invited an investigation. Much to the chagrin of the PA, the ensuing investigation focused not only on those accused by Afú, but every member of the Legislative Assembly.

In mid-2002, Attorney-General José Antonio Sossa—a member of the Popular Party, the PRD’s ally in opposition—subpoenaed the bank records of all members of the Assembly, a move that provoked a howl of protest from the PA’s ranks. Salas accused Sossa of abusing his power by investigating legislative members against whom no formal charges had been lodged, and sought to have criminal charges brought against Sossa.

The Supreme Court finally ruled on the matter in mid-August 2003, deciding that Salas’s argument lacked a legal foundation. However, any investigation will remain in limbo until the courts decide on the constitutionality of the maneuver pulled off by the Legislative Assembly in late June.

Meanwhile, Afú, whose break with the PRD was instrumental in enabling the PA to gain control of both the Supreme Court and the Legislative Assembly, has announced that he will stand for re-election as a PA candidate. Given the fact that Afú remains under a cloud of suspicion related to the accusations that he sold his vote, the PA’s willingness to welcome him to the fold can only reinforce the widespread view that the party is rotten to the core.

Internal Conflict In late May, university students in the capital waged a two-day battle with anti- riot police sent in to break up demonstrations organized to protest the government’s tax reforms and electricity price hikes that were scheduled to take effect in July. In early June, facing widespread opposition to the rate hikes, Moscoso reached an agreement with the Public Utilities Regulating Board, which is largely controlled by the electric companies, to shelve the price increases.

The exact terms of the agreement were not disclosed. However, the El Panama America newspaper reported that in exchange for canceling the rate hike, the electric companies, in which the government owns a 49% stake, will be permitted to keep up to $40 million in dividends owed to the state.

The students were at it again in late June, this time joined by the National Association of Social Security Fund Administrative Employees (ANFACSS), which launched a 10-day strike on June 24 to back their demand for the extension of a $29.9 million loan to the Social Security System (CSS) to pay for contractually mandated wage increases for which no provision was made in the 2003 budget.

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Social Security Conflict The conflict at CSS in part reflects a protracted battle between members of Moscoso’s administration, particularly Comptroller-General Alvin Weeden, and CSS director Juan Jované. The personal feud first spilled into the streets in mid- 2003, when kidney patients blocked roads to protest Weeden’s refusal to approve the purchase of cyclosporin by CSS. (Perhaps coincidentally, Moscoso’s adviser, Alvaro Antadillas, owns a private kidney dialysis clinic, which stood to gain from the lack of inexpensive access to the drug.) To end the disruptive protests, Moscoso finally ordered Weeden to sign the purchase order.

As the labor and student protests gained momentum in late June, the CSS board voted to extend a $25.9 million credit, an offer that was rejected by the unions. At that point, unions representing doctors, nurses, and technicians employed at CSS hospitals threatened to walk off the job if the board did not come up with the full amount.

The conflict reached a climax on July 1, with the Chamber of Commerce calling on the government to discharge all striking workers, Weeden making unsubstantiated allegations that Jované falsified CSS financial data, and the government accusing students and union members of seeking to foment political instability.

Two days later, the government, the CSS board of directors, and ANFACSS reached agreement on a deal to ensure that CSS workers will receive the pay raises due under their contract. Weeden stressed that the government’s move should not be interpreted as a retreat, although it is difficult to see how it might otherwise be viewed.

Although the agreement appears to address the financial needs of CSS in the short term, the long-term viability of the system remains a subject of some doubt. The government had been engaged in negotiations with business and labor representatives to develop a plan for shoring up CSS, but withdrew from the discussions in mid-August, with officials stating that the administration will formulate its own plan to submit to the legislature.

Any government plan that is put forward will probably include an increase in the minimum number of years individuals must pay into the system to qualify for a pension to 15 and the sale of some CSS assets. However, any moves in this direction are likely to stir organized labor to action, and so no plan is expected to be unveiled before the elections are held in May 2004.

Foreign Relations United States At home, Moscoso’s party is in decline and her government in retreat, but she has enjoyed somewhat better success on the diplomatic front. In late June, she met with US President George W. Bush and gained the American leader’s tentative agreement to beginning negotiations for a free trade agreement (FTA). Panama is looking to an FTA to address the worrisome imbalance in bilateral trade; the US purchases just $335 million worth of Panamanian goods each year, while annual US exports to Panama are in the neighborhood of $1 billion.

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The Panamanian government has been seeking an FTA with the US since the early 1990s. Washington rejected a suggestion to include Panama in a regional trade deal with five Central American nations that is currently well into the negotiations process, stating the Panama represents a special case that warrants a bilateral agreement. However, until June, there had been precious little progress toward achieving that goal.

It appears that at least a partial explanation for Washington’s more accommodating recent stance is the current government’s wholehearted support for the Bush administration’s war on terrorism, including the move to oust Iraqi leader Saddam Hussein. Commenting on the meeting between Bush and Moscoso, Commerce and Industry Minister Joaquin Jacome enthused, “The meeting could not have gone better. It is evidence that bilateral relations are at an excellent level, in terms of both security and trade issues.”

But Panamanian officials need not celebrate just yet. An anonymous US source told La Prensa that while Bush had given a green light to an FTA with Panama, it would be an overstatement to characterize the US leader’s gesture as a “commitment.” Moreover, during a White House press conference held following the meeting, US Press Secretary Ari Fleischer commented positively about Panama, but failed to mention anything about an FTA.

In any case, the conclusion of an FTA will be a long and involved process, and if ever concluded, it will happen long after Moscoso is out of office. Nonetheless, even the qualified indication of Bush’s support for a trade deal has been interpreted as an important achievement among members of the administration, a view that will likely be shared by members of the business community.

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UNITED STATES OF AMERICA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 75.5 81.0 76.0 83.0 78.0 88.0 Financial Risk 35.0 33.0 34.0 36.0 30.0 38.0 Economic Risk 40.5 38.0 36.0 40.0 36.0 42.0 Composite Risk 75.5 76.0 73.0 79.5 72.0 84.0 Risk Band Low Low Low Low Low V.Low

POLITICS Government Stability Popular Support The clear evidence that the war in Iraq is far from over—a point that has been driven home by a series of deadly bombings carried out against international targets and vital infrastructure—and dire warnings that a prolonged US-led occupation will carry a massive financial cost have given President George W. Bush much to ponder with the approach of presidential and legislative elections in November 2004.

The difficulties encountered in Iraq, the failure of US authorities to apprehend either Saddam Hussein or Osama bin Laden, the still tentative economic recovery, and questions about the Bush administration’s honesty in making the case for war against Iraq have combined to undercut the president’s popularity in recent months, providing the opposition Democratic Party with a glimmer of hope for a resurgence in 2004.

The results of a poll conducted by the Pew Research Center in early August showed the president’s popularity rating at 53%, close to the level he enjoyed prior to the September 2001 terrorist attacks on the US. The poll numbers indicated a continuing slide in Bush’s popular support, which stood at 86% immediately after the September 2001 attacks, and, following a decline, rose to 74% during the height of the war in Iraq in April 2003.

The primary source of the president’s sagging poll numbers appears to be dissatisfaction with his handling of the economy. Fully 57% of those surveyed in the August poll believed the President Bush should focus greater attention on the economy and less on the war on terrorism, compared to just 27% who expressed that opinion in a poll conducted in July.

The president’s declining support comes as good news for the Democrats, but the poll revealed that a hypothetical challenger from the opposition party would still lose to Bush in a presidential election by a margin of 43% to 38%. Even so, that represents a net gain of nine percentage point by the Democrats since April, when a Pew poll conducted shortly after the fall of Baghdad projected that Bush would defeat a Democratic challenger by 48% to 34%.

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Likewise, a July poll commissioned by the Wall Street Journal and NBC News suggested that Bush would likely defeat any of his potential Democratic rivals in the next election. However, the survey found that Democrats received higher marks on most domestic issues, which the August poll conducted by Pew indicates are increasingly becoming a priority for voters.

External Conflict Iraq That is not to say that developments in Iraq will not be a significant factor in determining the outcome of the next elections, especially as the financial costs of the post-war occupation mount, posing a direct threat to hopes for an economic rebound in the near term. Moreover, the mounting death toll among US military forces—more soldiers have been killed since the president announced the cessation of major hostilities on May 1 than died during the period of heavy combat—represents another cost that Americans may not be prepared to bear.

Negative perceptions of the war among the population back home, no doubt fueled by news media’s focus on what has gone wrong since early May, have also been reinforced by the government’s own missteps. A prime example is the government’s notification that troops from the 3rd Infantry Division were to be rotated home, only to then cancel the order at the last minute—a gaffe that officials committed not once, but three times. The result was a large group of angry and demoralized soldiers and their families, many of whom were only too happy to share their feelings with the news media.

Family members of soldiers deployed in Iraq have become more vocal in their criticism of the war as the death toll mounts, and the Bush administration shows little indication of knowing how to bring an end to the fighting. The president merely aggravated the situation with a completely thoughtless taunt of “bring it on” in response to threats from anti-US elements in Iraq that they would wage a persistent guerrilla campaign against US occupation forces.

If the human cost of the occupation has turned out to be greater than Americans were led to expect, the same can be said of the financial burden of post-war construction. In early July, the Defense Department announced that the bill for post-war operations was running at about $4 billion per month—nearly double the government’s initial forecast—and that the total cost will greatly exceed previous estimates.

Before the war, military officials estimated the need for an occupation force of 40,000-60,000 troops, but the greater-than-anticipated resistance by Iraqi fighters has forced an upward revision of estimates for both the size and duration of the occupation. Recent statements indicate that the current force of some 150,000 troops is likely to remain in place at least until fiscal 2004.

Looking to the UN Facing a financial commitment it cannot afford as the country’s budget deficit continues to grow by leaps and bounds, the Bush administration has energetically sought assistance, in terms of both manpower and money, from the international community. That strategy has placed the government in the rather

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awkward position of requesting help from the UN, which some top officials in the administration, notably Secretary of Defense Donald Rumsfeld, had all but dismissed as irrelevant back in March, when the UN Security Council refused to give the US and the UK its blessing to invade Iraq.

In late August, Deputy Secretary of State Richard Armitage announced that the US was open to the creation of a UN-sponsored multinational force under US command, a move aimed at convincing reluctant potential allies to contribute troops to the reconstruction effort. Anticipating likely resistance from key members of the Security Council, notably France and Russia, officials also indicated that they would be willing to draw up a concrete timetable for the transition to rule by a democratically elected Iraqi regime.

In a television interview in early September, Republican Senator John McCain called the administration’s request for help “a tacit admission that we don’t have the forces there to get the job done,” and warned, “If we don’t turn things around in the next few months, we are facing a very serious long-term problem.”

Such considerations will not be lost on France and Russia, which will no doubt use their leverage to wrest as much as they can from the US. Along with a voice in shaping the post-Saddam regime, they will no doubt be looking for access to potentially lucrative investment contracts that have so far been the private domain of companies with close connections to the Bush administration.

Internal Conflict Beyond the problems they are encountering in their efforts to lay the foundation for a friendly, democratic regime in Iraq, administration officials have run into a hail of criticism over alleged falsehoods in the arguments they put forward to justify going into Iraq in the first place.

The key reasons presented by the Bush administration to support its policy of regime change in Baghdad were claims that Iraq was aggressively pursuing development of weapons of mass destructions (WMD) and that Saddam Hussein’s regime had ties to Osama bin Laden’s al-Qaida terrorist network. In the four months since Bush declared effective victory in Iraq, investigators have failed to turn up a shred of evidence to support either allegation.

The flap erupted over a statement made by the president during his State of the Union address in January 2003, in which he quoted British intelligence sources as indicating that Saddam Hussein’s government had attempted to obtain quantities of uranium from the African nation of Niger. It has since come to light that the source of the information was dismissed as fraudulent by US intelligence personnel no later than November 2002. The crux of the controversy involves who knew that and when they knew it.

Joseph Wilson, a former ambassador to Gabon who was dispatched by the CIA to investigate the uranium claims in February 2002, stated in a television interview in early July that it did not take long to conclude that the reported transaction had never taken place, and that his doubts about the truth of the claims had reached the office of Vice President Dick Cheney.

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On that basis, Wilson stated, “Either the administration has some information that it has not shared with the public, or, yes, they were using the selective use of facts and intelligence to bolster a decision in a case that had already been made, a decision that had been made to go to war.”

Wilson’s charges were corroborated by Gregory Thielmann, a former official with the State Department’s Bureau of Intelligence, who had access to the classified documents used to make the administration’s case for war. In a July press conference, Thielmann stated his opinion bluntly, declaring, “I believe the Bush administration did not provide an accurate picture to the American people of the military threat posed by Iraq.”

Congressmen from both parties, some under pressure from constituents, demanded investigations into both the accuracy of US intelligence on Iraq’s possession of WMD and whether that intelligence was manipulated by the administration to bolster its case for war. In early June, the Senate announced that both the Intelligence and Armed Services committees would hold hearings after the summer recess that began in August. The House Intelligence Committee also plans to schedule hearings on the issue.

For its part, the Bush administration has admitted that the information about the attempt to purchase uranium from Niger was of questionable veracity, but the president and his top officials insist that they were not aware of the CIA’s doubts about the information when Bush delivered the State of the Union address. The Bush administration put the matter to rest (to its satisfaction, anyway) when CIA Director George Tenet publicly accepted blame for not flagging the statement during his review of the speech.

On one level, the controversy is insignificant in terms of voter perceptions. A poll conducted in late July showed that 47% of respondents believed that the government had exaggerated the extent of Iraq’s program of weapons of mass destruction (WMD) and Iraqi regimes links to Osama bin Laden’s al-Qaida terrorist network. Even so, fully 69% of those surveyed believed that the war was justified.

However, the Democrats are not about to let matters stand there, especially as the controversy has provided an opening for broader criticism of the Bush administration’s handling of the war, and pointed to a potential point of weakness in the area of foreign policy, the president’s strongest front.

Opposition Ammunition In fact, the furor over the questionable intelligence data has been a godsend for Democratic presidential hopefuls such as Senator John Kerry and Senator Joseph Lieberman, both of whom voted in September 2002 to authorize the use force against Iraq. That left them in a difficult position when Howard Dean, the former governor of Vermont, built a commanding lead in polls of Democratic voters by making opposition to the war a central plank of his campaign platform.

In early July, Kerry called on President Bush to “tell the truth” about Iraq, implicitly disavowing his own vote in favor of war on the grounds that he had

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been lied to. Kerry attempted to link the controversy over the suspect intelligence data with the administration’s overall record in Iraq, demanding that Bush admit that “the war is continuing and so are the casualties” and that “we lack sufficient forces to do the job of reconstruction in Iraq” and need more help from allies.

To a degree, Bush has made such an admission in seeking assistance from the UN. As to whether that will damage his hopes for re-election, it is still far too early too tell.

On the one hand, should continuing investigations turn up concrete evidence of an Iraqi WMD program, the issue will cease to have relevance. On the other hand, in the absence of such a development, should congressional inquiries indicate that president or any of his closest advisors deliberately manipulated data to justify a costly war of questionable necessity, Bush’s re-election hopes could be significantly deflated.

ECONOMY Of course, the Democrats will have virtually no hope of defeating Bush if the economy shows clear signs of recovery by the time of the election. The key phrase here is “clear signs,” meaning that all of the positive data in the world will matter little if the situation continues to feel like a recession to the average American.

This is a hard lesson that Bush’s father learned in 1992, when he lost his own re- election bid to Bill Clinton as the economy was undergoing a “jobless” recovery.

In that regard, the economic news has been mixed for the Bush administration. Although Federal Reserve Board Chairman Alan Greenspan has declared that the economic is poised for a “fairly marked turnaround,” and the danger of deflation appears to have evaporated (thanks in large part to continued high fuel prices), many economists have become much more reserved in their forecasts, predicting both a later and less robust recovery that previously anticipated.

In a positive vein, the index of leading economic indicators rose for a third consecutive month in June, leading analysts to confidently assert that the worst was over. Official economic figures released in late July revealed that the economy expanded by 2.4% in the April-June quarter, well above the expected 1.5% and a significant improvement on the previous quarter, when real GDP growth registered just 1.4%. Second quarter statistics also indicated that businesses are spending more on investment and depletion of inventories points to sustained business spending throughout the remainder of the year.

Meanwhile, the manufacturing index rose from 49.8 in June to 51.8 in July, indicating an expansion of manufacturing activity for the first time since February. The general improvement in the economy was also reflected in more favorable financial reports from major US firms in such diverse industries as telecommunications, chemicals, and pharmaceuticals, which helped to push up stock prices on Wall Street.

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Socioeconomic Conditions But one indicator of particular significance to the voting public-and, for that reason, to politicians-is unemployment, and there the news has not been so favorable. The unemployment rate rose to a nine-year high of 6.4% in June, before easing to 6.2% in July. However, according to many analysts, much of the improvement reflected some 500,000 discouraged job seekers who left the labor market.

The unemployment figures have served to undermine consumer confidence, a critically important factor, as consumer spending accounts for as much as two- thirds of economic growth. The consumer confidence index fell to 87.2 in June from 92.1 in May, the first decline since March and the largest monthly decline in 2003. In July, the index rose to 90.1 and jobless claims fell below the 400,000 level that is taken as an indicator of a weak job market.

However, analysts have warned that even if the economy should begin to show strong signs of recovery later in the year, the rate of job growth will not be sufficient to absorb new entrants into the job market, and the unemployment rate will remain uncomfortably high as political campaigning begins in earnest.

Another factor that will likely cause concerns for Bush’s re-election team is the prospect of a sharp rise in prices for natural gas. In early June, Fed Chairman Greenspan singled out high gas prices, which have doubled since 2002, pose a very real threat to an economic recovery. Rising demand for natural gas has outstripped supply, including imports, and shortages have begun to affect the productivity of some manufacturing firms.

Under the circumstances, a particularly cold winter could result in an energy crisis. Few new domestic sources are being explored, at least in part due to environmental concerns, and investment in the construction of liquefied natural gas (LNG) terminals has not kept up with current needs. If forecasts of higher natural gas prices this winter (some estimates suggest that prices could be as much as 19% higher) prove accurate, that development would impact both manufacturing activity and consumer spending, seriously dampening hopes for a strong economic recovery.

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URUGUAY RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 71.5 70.5 65.0 76.0 65.0 77.0 Financial Risk 26.5 30.5 22.0 28.0 25.0 32.0 Economic Risk 25.0 28.0 27.0 31.0 26.0 38.0 Composite Risk 61.5 64.5 57.0 67.5 58.0 73.5 Risk Band Mod. Mod. High Mod. High Low

POLITICS Economy Minister Resigns President Jorge Batlle dropped something of a bombshell on August 19, announcing that Alejandro Atchugarry, his economy minister and loyal ally, had resigned from his post. The president immediately named Isaac Alfie, a US trained economist who had served as a close aide to Atchugarry, to fill the vacant post.

A Job Well Done Atchugarry, who assumed his post in late July 2002, played a key role in helping the government weather the economic crisis that engulfed the country beginning in mid-2002. The origins of that crisis lay in neighboring Argentina, where an economic meltdown contributed to a collapse of cross-border trade. A sharp drop in export revenues created tremendous pressure on Uruguay's hard currency reserves, touching off a run on private deposits that provoked the closure of the country’s banks and forced the central bank to abandon its managed float of the currency.

An emergency loan package from the IMF and other multilateral lenders prevented a complete collapse, but the economy contracted by 10.8%, year-end inflation rose above 25%, and the sharp slide of the currency significantly increased the foreign debt burden, raising concerns about the possibility of a default.

In May 2003, Atchugarry supervised a successful restructuring of $5.4 billion in private debt to bondholders (including $3.3 billion issued overseas). By the closing date of the debt swap offer on May 21, more than 90% of investors holding bonds scheduled to mature over the next nine years had agreed to a voluntary extension of maturities by five years at existing interest rates, and the government announced plans to go ahead with the swap on May 29. The arrangement figures to cut the government’s immediate debt obligations by an estimated 15%.

More recently, Atchugarry reached a new agreement with the IMF in June that lowered the target for the primary fiscal surplus to 3% of GDP (from 3.2%), while also revising the 2003 forecast for year-end inflation downward from 27% to 19% and reducing the forecast contraction of the economy to 1% from 2%.

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IMF Praise In July, the IMF pointed to several positive signs indicating that the worst was over for Uruguay. According to officials from the Fund, the economy registered real GDP growth of 0.5% (quarter-on-quarter, seasonally adjusted) amid indications of stronger growth moving ahead, led by an improvement in exports. The IMF also noted that private sector bank deposits had nearly recovered to the levels in July 2002, when a bank holiday was declared, and that gross official reserves had more than doubled since March 2003, to $1 billion, sufficient for about six months of import coverage.

Against that backdrop, Atchugarry attempted to put a positive spin on his resignation, stating, “A political time comes to an end, and a technical time begins,” implying that the return of some semblance of stability had left the Economy Ministry more in need of a technocrat than a power broker. He added that he had expected from the start to bow out once economic stability had been restored.

Internal Conflict Reassuring though those sentiments might be, the truth is that Atchugarry’s departure did not take place in an atmosphere of unmitigated optimism. In fact, the government will be hard-pressed to achieve the agreed-upon fiscal target without the cooperation of both the legislative opposition and organized labor, and Atchugarry’s final month in office featured rough going on both fronts.

In July, he failed to win majority support for a tax package that includes an extension of VAT coverage and the expansion of the income tax base, after the National Party (Blancos) insisted that tax cuts be included. Moreover, Uruguayan workers, who have seen their purchasing power cut by 25% owing to currency depreciation, are more inclined to demand wage increases than to endure belt-tightening and an expansion of tax coverage.

In June, the powerful Inter-Trade Unions Workers Plenary-National Workers Convention (PIT-CNT) labor federation organized a 24-hour general strike to protest the government’s economic policies and to demand higher wages. According to officials from the PIT-CNT, the action drew the support of as much as 80% of the work force nationwide. A repeat performance appeared to be on the cards for late August, after the PIT-CNT voted by a two-to-one margin early in the month to stage another general strike on August 28.

Meanwhile, 4,200 public health doctors initiated a 96-hour strike on August 11, at the same time that 15,000 Health Ministry employees began a walkout of indefinite duration. While the health workers union bemoaned a “profound crisis” in the public health system that is depriving Uruguayans of adequate health care, the issue at the center of the strike is wages.

Clearly, the “political” component of efforts to repair the country’s financial and economic damage is far from over, but Atchugarry’s ineffectual attempts to persuade either the legislative opposition or the unions to willingly accept his harsh fiscal medicine indicated that he had outlasted his usefulness. He apparently reinforced that feeling when, during a press interview held shortly

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before he stepped down, Atchugarry bluntly stated that “the financial crisis is far from over,” a pronouncement that set off alarm bells within the business community. He sought to deflect criticism by accusing the press of misinterpreting his remarks, but to no avail.

Outlook Alfie has pledged to remain true to the policies of his predecessor, declaring, “The course will be maintained.” However, as noted, that course had placed Atchugarry in direct conflict with both the legislature and organized labor, and there is little reason to expect that Alfie will prove any more adept at making his way through the political minefield he must cross before there can be any hope of fulfilling the IMF’s conditions and restoring the long-term health of the economy.

In dealing with the legislature, the Blancos will be the least of Alfie’s worries. The center-left Progressive Encounter-Broad Front (EP-FA) bloc, which holds 40 seats in the Chamber of Deputies, is intent on exploiting the Batlle government’s vulnerability to boost its chances of gaining power following the elections scheduled for October 2004.

The EP-FA has already succeeded in forcing the government to hold a referendum on a controversial bill that permits ANCAP, the state-owned oil monopoly, to enter into association agreements with foreign firms. The vote is scheduled for December 2003.

The government’s efforts to privatize public services and state-owned energy companies have met with consistent public opposition, and the legislation permitting association agreements was pursued as a compromise measure. However, the EP-FA maintains that rather than being a halfway measure, the new legislation in reality reflects an attempt to privatize the company through the back door.

Marina Arismendi, an EP-FA senator and the secretary-general of the Communist Party of Uruguay, explained the purpose of the referendum, stating, “We are fighting…to stop ANCAP’s covert privatization, as its refinery pumps enough oil to feed the internal market and even export the surplus.” On the prospects for success in the referendum, she added, “As the company has been built up thanks to local taxpayers, we are sure the citizens will vote against privatization.”

Arismendi is probably correct, although recent polls indicate that the percentage of voters intending to vote against the bill is somewhat less than the 50% required to quash the legislation. In an effort to crystallize the issues in the public mind, and thereby swell the ranks of the “no” camp, opposition leader Tabaré Ramon Vázquez Rosas challenged President Batlle in July to debate him on the issue.

Not surprisingly, Batlle declined, stating, “I believe that ANCAP's issues are much more important than public debates. The main discussion is whether our country wants to be part of the world or not.”

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EUROPE (EUROPEAN UNION)

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CURRENT RISK ASSESSMENTS AND FORECASTS

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Austria 90.0 42.0 40.0 86.0 86.0 79.5 88.0 78.5 92.5 Belgium 86.5 41.5 42.5 84.5 85.3 78.5 85.5 75.5 89.0 Denmark* 87.5 42.0 42.0 87.8 85.8 83.0 86.5 77.5 90.0 Finland 93.5 36.0 44.0 89.5 86.8 79.0 89.5 75.5 89.5 France 78.0 40.0 40.0 82.0 79.0 78.0 85.5 75.0 90.0 Germany 83.0 41.5 39.0 83.5 81.8 78.0 83.8 75.0 91.0 Greece 78.0 36.5 37.5 74.8 76.0 73.5 80.0 72.5 85.0 Ireland 92.0 41.5 41.0 89.0 87.3 80.5 89.5 76.0 91.0 Italy 78.0 43.0 39.0 80.5 80.0 73.5 81.0 71.0 84.5 Luxembourg 94.5 43.0 44.5 91.3 91.0 89.0 91.5 83.0 91.5 Netherlands 90.5 39.5 41.0 85.5 85.5 82.0 88.0 80.5 88.5 Portugal 86.0 36.5 34.5 79.3 78.5 73.0 80.5 70.0 83.5 Spain 82.0 39.0 39.0 80.8 80.0 74.5 83.5 74.5 89.0 Sweden* 90.5 40.0 43.0 84.0 86.8 81.0 86.0 73.5 88.0 United Kingdom* 86.0 42.5 39.0 82.5 83.8 77.5 85.5 76.5 89.0 *-Non-euro Countries

For historical risk ratings and key economic data on these and other countries in ICRG, please go to www.CountryData.com.

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BELGIUM RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 86.5 86.5 79.0 87.0 75.0 90.0 Financial Risk 39.5 41.5 38.0 40.0 38.0 42.0 Economic Risk 43.0 42.5 40.0 44.0 38.0 46.0 Composite Risk 84.5 85.3 78.5 85.5 75.5 89.0 Risk Band V.Low V.Low Low V.Low Low V.Low

POLITICS Government Stability New Government Formed After some 50 days of protracted negotiations a new government, nicknamed “Verhofstadt II,” was eventually ratified on July 16. A vote of confidence in the new 'Purple' socialist/free-market liberal five-party coalition led by the reappointed Flemish Liberal-Democratic (VLD) Prime Minister Guy Verhofstadt was passed in the Chamber of Representative (lower house of the bicameral Federal Parliament) by 96 votes in favor and 49 against.

The multi-dimensional structure of Belgian politics, underpinned by a close co- operation between the federal government, regional governments, employers and other stakeholders, was described, along with the results of the parliamentary elections held on May 18, in ICRG No 6, 2003.

As expected at that time, the new government has been formed of the socialist parties and the right-of-center liberals from both the Flemish and Francophone cultural-linguistic groupings. On the left, these are: the alliance between the Flemish Social Progressive Alternative (SP.A) and SPIRIT (an acronym for the Flemish “Social, Progressive, International, Regional Integrally-Democratic and Future-Oriented” party) and the French-speaking Socialist Party (PS). These three parties together hold 49 of the 150 seats in the lower house.

They are joined form the right by the francophone Reform Movement (MR) and the Flemish Liberal Democrats (VLD), which together hold 48 seats. The combined holding of the five coalition parties totals 97 seats, giving the government a majority of 44.

Chamber of Representatives (Lower House ) § Seats Total Lower House Seats 150 Government Parties Flemish Liberal Democrats VLD Fl 25 Socialist Party PS Fr 25 Social Progressive Alternative-SPIRIT * SP.A-SPI Fl 23 Reform Movement * MR Fr 24 Total Government Seats 97

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Chamber of Representatives (Lower House ) § Seats Opposition Parties Christian Democratic & Flemish Party * CD&V Fl 21 Vlaams Blok VB Fl 18 Humanist Democratic Center* CDH Fr 8 Ecolo Fr 4 New Flemish Alliance * NVA Fl 1 National Front FN Fr 1 Total Opposition Seats 53

Government Majority 44 Note: In the column headed §, Fr denotes Francophone parties, Fl denotes Flemish speakers; * indicates a renamed or new party or alliance.

New Cabinet The coalition compact was announced on July 8 after 14 hours of all-night haggling. Soon after all five party congresses sealed the deal, and on July 14 the new government was sworn in by King Albert II.

Most notable among the new executive was Belgium's first black minister, Anita Temsamani of the SPA, who is of North African descent. She will deputize for Minister for Labor and Pensions Frank Vandenbrucke, and have her own brief as Secretary of State for the organization of work and well-being at work.

Among the key ministerial appointments, announced on July 14, are the retention of political heavyweight Louis Michel as foreign minister, Didier Reynders at Finance and André Flahaut as minister of defense.

The unfortunate Louis Michel has attracted internal and external criticism of ineptitude as the 'genocide law' scenario unfolded (see External Conflict, below). On top of that Michel, who enjoys his epicurean delights (see ICRG Nos 6 and 12, 2002), has suffered further health setbacks: during the coalition-building negotiations on June 29-30 he was hospitalized again with stomach pains. It has also been said that he has been suffering from fatigue.

Office Office Holder Party Prime Minister Guy Verhofstadt VLD

Deputy Prime Ministers: Justice Mrs Laurette Onkelinx PS Foreign Affairs Louis Michel PRL Budget and Public Enterprises Johan Vande Lanotte SP.A Home Department Patrick Dewael

Ministers: Employment Frank Vandenbroucke SP.A Defense André Flahaut PS Development Cooperation Mark Verwilghen VLD Finance Didier Reynders MR

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Office Office Holder Party Social Affairs & Public Health Rudy Demotte Economy, Energy, Foreign Trade Mrs Fientje Moerman and Scientific Research Mobility and Social Economy Bert Anciaux Civil Service, Social Integration Mrs Maria Arena and Larger Towns Policy Self-Employed and Agriculture Ms Sabine Laruelle Environment, Consumer Affairs Ms Freya Van Den Bossche and Sustainable Development

In addition to the deputy prime ministers and ministers there are six secretaries of state.

Legislative Program Verhofstadt was quick off the mark to announce the hard-won legislative program approved by his coalition partners before parliament took its summer break. With concessions to both the socialist and center-right interests, the key proposals include:

· Reforms of the judicial system; · Further tax reforms (see Economics, below); · Refinancing of health care with increased funding of between 4% and 5%; · Environmental commitments, including honoring Belgium's obligations under the Kyoto Protocol; · Tightening of security; · Cuts in bureaucracy and corporate costs and combating social security fraud; · The creation of an extra 200,000 jobs (in a nation with a population of some 10 million).

This last point is critical to Verhofstadt. In his inaugural speech on July 14, he said, “Labor will be the central issue of the current [government] agreement." With one of the highest unemployment rates and lowest productivity rates in Europe, he is right to be concerned.

Tax Policy Among the economic measures announced by the new government is a hike in excise duties on fuel, coupled with higher levies, tempered by some tax reductions, on energy and electricity. The fuel increases will neutralize recent falls in price of diesel and gasoline, but they will be partly offset by the gradual phasing-out of the duty on diesel automobiles by 2008.

Both domestic and commercial users alike will also benefit from reductions in tax bills. The diesel duty will see a loss to government coffers of some €270 million ($302 million) annually, as well as the €83 million ($93 million) revenue from abolishing the €62 (around $70) levy on new vehicle license plates.

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The legacy of the Green parties' service in the previous coalition government has not been ignored. Commenting on the environmental implications of the tax cuts, Finance Minister Reynders said on July 14 that, along with tax breaks for domestic energy-saving, the “four measures will cut taxes by almost €400 million (some $450 million) [and will] also be instrumental in achieving Kyoto- imposed standards.”

Doubts The government proposals sound fine, but some doubters point to the apparent disparity between the longer-term objectives of the plan and the shorter-term, political, objectives of the government. Under Belgian legislation both houses are elected for a four-year term. Whilst some commentators have some confidence in the new administration, others are concerned that Verhofstadt and his coalition partners might be looking only as far ahead as the Flemish regional and European elections slated for the summer of next year.

Others have noted that the coalition negotiations took the best part of two months, and suggest that the protracted horse-trading indicated disparity in the political, legislative, and economic demands of the eventual coalition partners. This disparity, it is felt, could lead to a disintegration of the coalition before its full course is run. On the other hand, others have pointed up Verhofstadt's ability as a skilled administrator and peace-broker between warring factions (see ICRG No 3, 2003).

External Conflict Genocide Law The long-drawn-out saga of Belgium's Law of Universal Competence of 1993, known as the “genocide law,” has been a thorn in the side of government for some time now (see ICRG No 6, 2003). On August 1, the law took a further lurch towards total oblivion when the Senate (upper house) ratified a proposal to restrict its implementation by 39 votes to four, with 20 abstentions.

The proposal had already been passed by the lower house on July 29 by 89 votes to three. The two centrist Democratic parties, the francophone Human Democratic Center (CDH) and the Christian Democratic and Flemish Party (CD&V), abstained, as did the Flemish far-right Vlaams Blok (VB). The two Green parties, Ecolo and Agalev, opposed the proposal outright.

The main provisions and implications of the reform are:

· Only cases involving Belgians, or those who had lived in Belgium for three years at the time of the alleged offense, can be prosecuted or pursue claims; · Allegations against non-Belgians will no longer automatically instigate formal investigation, and no there will be no right of appeal against the decision of the public prosecutor whether to proceed or not; · The recently-established International Court of Justice in The Hague, Netherlands is a more suitable tribunal for such cases;

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· Full diplomatic immunity is guaranteed for government leaders and other politicians when visiting Belgium.

Sighs of relief could be heard within Belgium and indeed in many nations worldwide, despite concerns that the reform may not be sufficient to halt several ongoing cases. Opposition Christian Democratic and Flemish Party (CD&V) legislator Pieter Dee Crem criticized the reform, which Verhofstadt was keen to push through parliament before the summer recess, as “bad legislation with a lot of loopholes.”

He went on to complain: “The problem is not fixed. It is useless and senseless because it's not applicable to solve the more important pending cases.” Official sources are said to have confirmed that some 29 cases, including those cited against Fidel Castro of Cuba and Palestinian leader Yasser Arafat, are still in progress.

US Pressure What is fervently hoped by all and sundry as the notorious law’s last gasp was not, however, achieved solely by Belgian initiatives of good will. Charges relating to the recent UK/US-led attack on Iraq had been lodged under the law against, among others, US President George W Bush, US Defense Secretary Donald H Rumsfeld, US General Tommy Franks, US Secretary of State Colin Powell, and UK Prime Minister Tony Blair.

Belgian-US relations had already been strained by the Belgian condemnation of the Iraqi situation. By June 12, not long after the latest charges against US leaders were registered, Defense Secretary Rumsfeld had had enough. He announced his doubts that Belgium “can currently be regarded as a hospitable place” and felt that the genocide law (as it then stood) was “absurd.” Rumsfeld added that Washington could withhold funding for the construction of NATO's future headquarters in Belgium.

This, and the other ensuing condemnations, put Belgium's business community into a panic about a prospective embargo and the loss of valuable trade contacts with US firms. Coupled with those pressures, the Justice Ministry responded within 24 hours of the charges against US and British leaders being laid that the cases should be referred to the USA and to the UK in the light of the April modifications to the law. These, which came into force on May 7, allow suits that are considered to be “propaganda” or politically-motivated to be referred to the domicile state of the defendants.

The costs of the threatened NATO pull-out were estimated in June at over 50,000 jobs and in excess of €5 billion ($5.62 billion), according to Belgian English-language weekly newspaper The Bulletin. That was not all—US supply aircraft for the troops in Iraq, which had thitherto called in at Belgium's Ostend airport suddenly began refueling at Amsterdam's Schipol airport in the neighboring Netherlands.

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Foreign Minister Louis Michel was “a bit astonished” at the American reaction. He wasn't, of course—he was squirming with embarrassment and knew the score perfectly well. So he, Prime Minister Verhofstadt and their advisors straightway got to work on a package of further reforms to the act which, ironically, has seen a Flemish delegate issue a writ against Michel because he had authorized the sale of Belgian arms to conflict-torn Nepal (see ICRG No 12, 2002). The writ was dismissed on July 5.

By July 12, the day the new government was installed, the newly-reappointed Prime Minister announced that its first major legislative initiative would be to modify the law. “Changing the universal jurisdiction law is a priority of this government,” he said. When asked about the view of US President Bush, he replied, “He should no longer be concerned. Belgium, the site of international institutions, has adopted the same law as other European countries.”

Despite these reassuring sentiments, Verhofstadt was clear in his denial that US irritation had precipitated the changes. “No, the genocide law has not been changed under American pressure…We are changing [it] only because there have been so many abuses of it over the last few weeks,” he had said on June 22. By sheer coincidence, the US resumed the Ostend refueling stopovers had been resumed three days earlier.

Terror Scares A number of packages containing toxic substances was sent to a range of addressees in early June, resulting in the hospitalization of five police officers and several civilians. An unnamed Iraqi national, aged 45, was promptly arrested and charged with premeditated assault.

The ten letters, all seemingly posted in and around the town of Deinz, contained a pesticide derivative phenarsazine, a rocket propellant, and hydrazine, an arsenic product. They were intercepted or discovered between June 2 and 6 having been through the major sorting office at Ghent. Each envelope reportedly contained a card container enclosing the toxins, and some are said to have contained items linking the packs with the Islamic International Society, and bore the message “Set our brothers free. Bastards.”

This message is believed to be related to the 23 Muslims alleged to belong to al- Qaida, who were put on trial in Belgium on May 22 on terror charges. Items removed from one of the premises of one of the chief suspects in the trial are said to include recipes for bombs, including the substances in the envelopes.

Among those to whom the packets were sent were:

· Prime Minister Guy Verhofstadt; · The Court of Cassation (Belgium's highest court of appeal) in Brussels; · Antwerp Port Authority; · British, American and Saudi Arabian embassies; · Ostend airport;

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When items were collected from the house of the arrested suspect, police at Brussels' judicial police headquarters were evacuated after five officers were hospitalized with suspected symptoms of poisoning identical to those caused by the packaged toxins.

United Nations Belgium was put uncomfortably under the spotlight by a critical report from the United Nations Committee against Torture, detailed by state broadcaster RTBF Radio 1 on June 12. The report highlighted several areas of concern:

Prison system: prison inmates should be “granted a whole series of elementary human rights.” An urgent scheme of modernization was needed, and an independent external watchdog should be established. Police: concerns were noted about an increase of police violence at public demonstrations, and about the detention of minors and the elderly. Status and treatment of aliens: the report was critical of the conditions under which deportations were made, and the holding of immigrants in secure centers.

The report had been compiled from April of this year using evidence from various non-governmental agencies such as the International Prison Watch Organization (Observatoire International des Prisons, OIP), the Human Rights League (HRL), and the Movement against Racism, Anti-Semitism and Xenophobia (MRAX). Commenting on the report's findings, HRL's Legal Advisor Julien Pieret said, “The [UN] Convention on Torture is a convention which contains a whole series of provisions, and Belgium does not in fact fully respect all these provisions in a rather wide range of fields.”

He went on to note that some of the concerns had arisen over “degrading treatment.” As an example, he explained that, “A demonstrator who is stripped naked, searched, held for many hours without any possibility of informing anybody, that's degrading treatment.”

Ethnic Tensions Immigration Protest Another unwelcome blaze of publicity put the government on the spot over the summer when a group of around 350 Afghani refugees went on hunger strike in the Church of the Sainte-Croix (Holy Cross), in Brussels on July24.

Their grievance was that of the 1,100 or so Afghanis who had applied for asylum on the grounds that was still unsafe to return to their domicile, some two thirds had had their requests denied the previous week by the Commissioner General for Refugees, Pascal Smet.

Smet had ruled that only those who had applied before January 1, 2003, would be allowed to remain until early next year, and those with children could stay till the end of the academic year in 2004.

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Four days later some of the strikers began refusing water, and by July 29 six had been hospitalized. The Red Cross, along with local residents’ groups and other support agencies, were assisting those 200 or so still in the church and were feeding the children, said to account for one third of the total and who were not participating in the hunger strike.

The gesture caused much heated debate within the government alongside sharp criticism from human rights organizations. But Verhofstadt was not to be moved: “A hunger strike and organizing the occupation of a church is not acceptable and … will not lead to results,” he told parliament on July 31.

But, of course, it will. After three mediators failed to resolve the situation, Federal Ombudsman Pierre-Yves Monette was commissioned on August 10 to attempt to broker a solution.

Human Trafficking On a brighter note, 23 Albanians were imprisoned for terms of between three and eight years on August 12 for people-trafficking offenses involving between 10,000 and 20,000 Iraqis and Albanians traveling on to the United Kingdom.

Speaking at a seminar run by the King Baudouin Foundation on August 1, Prime Minister Verhofstadt said, “The Purple government intends to tighten and enhance the efficiency of its actions against people trafficking.”

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DENMARK RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 90.5 87.5 88.0 91.0 85.0 96.0 Financial Risk 42.0 42.0 37.0 39.0 35.0 40.0 Economic Risk 43.0 42.0 41.0 43.0 35.0 44.0 Composite Risk 87.8 85.8 83.0 86.5 77.5 90.0 Risk Band V.Low V.Low V.Low V.Low Low V.Low

POLITICS Government Stability The baleful influence of the far-right Danish People's Party (DF) on Prime Minister Anders Fogh Rasmussen's two-party coalition government has gotten tighter over recent months.

Fogh Rasmussen's conservative Liberal Party (Vp) and the Conservative People's Party (KF) only hold 72 seats (56 and 16 respectively) in the 179-seat unicameral parliament, so the government must rely on the DF's holding of 22 seats to obtain the majority required in order to pursue its legislative program. Consequently, the DF has used this pressure to squeeze the government on its favorite issue—immigrants and refugees (see Ethnic Tensions below).

Popular Support But whilst the DF’s machinations have given the government a somewhat bumpy summer, the Danish people seem generally happy with the present state of affairs. An opinion poll by Green's Institute, and published in the financial daily newspaper Borsen on August 8, showed the Vp with 30.2% support, and the main opposition party, the Social Democrats (SD), in second place at 29.1%.

These levels compare with the 34.3% the Vp achieved in January (see ICRG No 3, 2003), and is a drop from Greens' earlier survey of June 12 when the Vp scored 33.2%.

Support for the DF has returned to previous levels at 12.5% in the August poll, up from 9.4% in the June poll, and even further up on the 9.1% showing in January.

Further, Fogh Rasmussen can also find solace in the Greens' June poll, which put his performance rating at 60% of those polled who thought his performance at the helm was “good” or “very good.” whilst only 20% felt he had done “poorly”, or “very poorly.” This level of approval was well in excess of the roughly 33% apiece awarded to the other party leaders, namely government coalition partner Bendt Bendtsen of the KF, Ms Pia Kjærsgaard (DF), Mogens Lykketoft (SD), and Holger K Neilsen of the Socialist People's Party (SF).

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Ethnic Tensions The xenophobic influence of the DF has been evident over the summer as the debate about immigration and repatriation, unlike other matters of state, has refused to take a vacation.

DF leader Pia Kjærsgaard, no doubt exhilarated by her party's recent climb in the polls, said that repatriation of refugees had to be stepped up. “We have had a number of discussions with the government about repatriation but our patience in running out,” she told a party congress on August 8.

There were some 2,700 refugees in Denmark at the end of July whose applications for residence have been declined, according to data from the Danish police. Threatening to withhold support for the government's budget for next year, Kjærsgaard complained that “despite what the Minister of Integration [Bertel Haarder] claims, the government just has not been effective enough.”

Bringing in economics to support her rhetoric and adding an international dimension to the situation, she added, “Unless he [Haarder] puts the thumbscrews on governments that receive millions of krone in Danish aid, these countries will continue to dictate to us how and whey they will accept their own citizens.”

Making the threat to the government crystal clear, DF economics spokesperson Kristian Thulessen Dahl warned, “It is difficult to imagine a budget being passed without an agreement with us on future repatriation policy.” Referring to the DF's successful bargaining for extra benefits for the elderly as part of a package of tax reforms earlier this year, he added, “The tax issue proved that we are the only party to deal with and we intend to utilize our influence.”

Haarder had earlier justified his government's efforts on June 19 when he told the Parliamentary Finance Committee (PFC) that numbers of family reunifications and asylum seekers coming to Denmark had halved, and that “when fewer arrive it costs less.” He told the PFC that savings from the reduced levels of immigrants could reach DKr400 million ($61 million),

Another concession to toleration was closed up on July 15 when the Danish Immigration Service (DIS) withdrew the exemption allowing IT firms to recruit foreign workers to meet skills gaps.

Criticism But Denmark's stricter legislation has not gone uncriticized. Just one of many critics, UNICEF, the United Nation’s fund for children, has said that current proposals for restricting family reunions were in contravention of the UN's Convention on Children, which stipulates that every child should be able to remain with its parents till the age of 18. “Denmark has signed the convention, so we should comply with it,” said UNICEF's Danish Director, Steen Andersen, on June 17.

On August 8 the chairman of the National Association of Headmasters of Teacher's Colleges, Nils-Georg Lundberg, called for more teachers from the

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immigrant community. “Relative to the number of foreign-born students, foreign teachers are clearly under-represented,” he said. Urging the government to target recruitment into the profession at the immigrant community, he added, “It would clearly be in everybody's interests to change this…I think we need to reach out to the [immigrant] communities and the networks representing their young people.”

Another expert, Christian Horst of the Teachers' College Institute for Educational Anthropology, said of foreign teachers: “The Ministry of Education could really make use of their expertise…We know we are going to need teachers in the coming years, And that is yet another argument for focusing on the problem.”

Further positive debate came on July 12 when a report from Catinét Research Institute noted that a majority of immigrants are more satisfied with their life in Denmark that was the case five years ago. No feelings of discrimination were recorded by 66% of those surveyed.

Ålborg University's expert on immigration, Flemming Mikkelsen, pointed up that the responses showed a disparity between the “reality of everyday life” for the average immigrant, and the ongoing political debate on the matter.

External Conflict Iraq After much debate on the matter, Prime Minister Fogh Rasmussen has decided not to hold an independent inquiry into the basis for Danish involvement in the war in Iraq. Despite opposition calls, the premier announced on June 23: “I cannot see that there is any basis for a study of what basis the war had in international law.”

Further confidence about his position came on August 7 when he said that the war was justified by the removal of Saddam Hussein from power. “You cannot repeatedly ignore it when a dictator disregards the UN's warnings. There must be consequences,” he said, following the line of the US and UK governments.

Denmark had been alone among the Nordic countries in supporting the war on Iraq, despite parliamentary and public opposition. And its support has not only been vocal. Some Danish 400 soldiers were dispatched to Iraq in late May and, coming from radically cooler climes, found the temperature and other conditions in Iraq very difficult, not least since they were among the first foreign troops to enter Iraq after the overthrow of Saddam.

It was widely predicted that this level of support for the US-UK action would push Denmark towards the front of the line for commercial involvement as the rebuilding of Iraq progresses. This seemed to be confirmed when the allies appointed Denmark’s ambassador to Syria, Ole Wøhlers Olsen to a supervisory role in the reconstruction of the southern Iraqi city of Basra in April (see ICRG No 6, 2003), effectively putting him in charge of one of the four administrative regions established by the allies.

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The move did not go well, however. On June 23, a frustrated Olsen delivered some stinging criticism of the US-led central command in Iraq, complaining about lack of support from the Iraqi capital, Baghdad.

He commented, “My people in the administration office have no security guards with them as they move around either—and I am not happy about that.” At the same time he also stated that he did not intend to extend his contract as administrator beyond the six-month period he begun in April.

But there was clearly more going on behind the scenes. On July 2, Olsen resigned after only two-and-a-half months in office. Putting a gloss on the situation, he said, “It is convenient now [to stand aside] when troops are being replaced and other countries are taking over military tasks involving security, law and order, and when the administration in Iraq is being reorganized.”

Some commentators have seen less chartable reasons for the move. Olsen was immediately replaced by Britain's Sir Hillary Synnott, and will return to his former post in Damascus.

European Union The new Constitution of the European Union (EU), produced under the aegis of former French president Valéry Giscard d'Estaing, is to be put to a plebiscite for approval by the Danish people next year. After expressing his satisfaction with the proposals to date, Prime Minister Fogh Rasmussen said on August 7, “This will be the dominant topic over the next 12 to 18 months because we will have a referendum on the new EU Constitution.”

It has not yet been made clear whether the referendum will solely involve the Constitution, or whether voters will be able to decide about Denmark's four opt- outs from the EU's Maastricht Treaty. These are: the common EU defense policy, judicial cooperation, economic union (membership of the euro, the currency of 12 of the present 15 states), and European citizenship.

There are worries from a variety of quarters that the Constitution will result in a loss of Danish sovereignty and the ceding of more control to Brussels. Referring to the proposed European President and the rotation of 15 voting commissioners, one voice from the business community cited only one of many such concerns.

“It is against the principle of equality that underwrites the EU, and that would require a change in the Danish Constitution,” said EU Legal Adviser to the European Association of Craft, Small and Medium-sized Enterprises, Peter Vesterdof.

On the other hand, various polls over recent months have seen a rise in support for Denmark to sign up to the euro. One poll, from Danske Bank and published on August 3 in the Copenhagen Post, showed that support for monetary union was almost two-thirds for, a significant about-turn from similar numbers against when Denmark rejected the euro in a referendum in 2000.

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Law and Order The Danish Maritime Authority (DMA) announced a tranche of new security regulations for the country's numerous ferry operators on July 7. These include: risk assessments, evaluating the dangers from terrorism, required from ferry firms; and detailed plans for improving operators’ security arrangements.

The new provisions must be in place by July 1, 2004, and come as part of the international “war on terror” and on the heels of a warning of potential bomb attacks from Danish Police Intelligence (DPI) last November. The new rules will mean that instead of lining up just before the ferry sails, cars and passengers may be subjected to searches if the DPI deems it necessary.

Socioeconomic Conditions Unemployment hit a five-year high in June at 6.2%, or 173,000 of the total population of some 5.25 million, according to figures from Statistics Denmark (SD) published on July 7. This represented a rise from the 6% recorded in May.

Attributing the rise to global economic slowdown, SD pointed up that the level of some 5% unemployment early in 2001 was also something of a record - one of the lowest levels for over two decades.

ECONOMY Liberalization The privatization of two radio stations FM5 and FM6 (see ICRG No 6, 2003) was completed on June 19, with the final offers well above the government’s and private analysts' expectations. Rupert Murdoch's Sky Radio bought FM5 for DKr54 million ($8.2 million), pipping favorite bidders TV2's offer of DKr50 million ($7.6 million). Talpa Radio International acquired FM6 for rather less at KDr22.5 million ($3.4 million).

Public Expenditure A warning about levels of government spending came from Statistics Denmark (SD) on July 10 when it emerged that public expenditure had risen by 0.4 percentage points in the first quarter of 2003. Extrapolated for the whole year, that would give a rise of 1.4%, exactly twice the budgeted amount.

Concerns were quickly voiced. “There has been a gradual tendency for spending to rise more than planned, so if the government is going to reach its goal, it's going to take real political action,” said Steen Bocian, an analyst from Danske Bank.

Economic Growth But as the second wealthiest nation in Europe, Denmark has weathered recent financial and economic problems better than many other EU states. GDP growth was 2.1% in 2002. Although some private commentators predict a drop to 1.2% this year after a decline in domestic demand during the first quarter of 2003, the expectation is that former levels will quickly be resumed, with a growth of 2.1% again expected for 2004.

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FINLAND RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 95.0 93.5 85.0 94.0 83.0 95.0 Financial Risk 39.0 36.0 34.0 39.0 33.0 40.0 Economic Risk 45.0 44.0 39.0 46.0 35.0 44.0 Composite Risk 89.5 86.8 79.0 89.5 75.5 89.5 Risk Band V.Low V.Low Low V.Low Low V.Low

POLITICS Government Stability Politics in Finland have long been a quiet, workmanlike and sedate affair; some would even say dull. On the other hand, recent economic success and stability in Finland bear witness to a long-honored prevailing ethos of cooperation and consensus. Furthermore, Finland has in the past several years scored near or at the top of the league of the least corrupt nations in the world.

Prime Minister Resigns So it was with some surprise all round that the 63-day reign of new Center Party (KESK) Prime Minister Anneli Jäätteenmäki came to an abrupt and messy end on June 18 when she resigned as the result of mounting pressures from a scandal involving leaked documents concerning relations with the USA in the run-up to the invasion of Iraq.

But the brief spell of political Scandinavian midsummer madness soon evaporated as order was swiftly restored. Within a few days, the leaders of the three parties in the government coalition agreed on the then defense minister, Matti Vanhanen, as the new prime minister. On June 24, parliament confirmed him in the post by 109 votes to 67, and the new government, led by Vanhanen, presented itself to the President.

Ms Jäätteenmäki, still confident that she would be found innocent of the charges laid against her, nevertheless apologized to President Halonen and thanked her for her personal support. At the same time she resigned as leader of KESK.

The three-party 'red soil' coalition government, is formed of the moderate Center Party (KESK), which has a rural, agrarian tradition, the small and liberal Swedish People's Party in Finland (SFP), which represents the Swedish-speaking minority of the population, and the left-of-center Social Democratic Party of Finland (SDP).

Apart from the change at the top, personnel and policies (see ICRG No 6, 2003) are the same as before the debacle.

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Paper Waving The drama began to unfold during the campaign leading up to the general election of March 16. During a televised debate on March 6, between the then SDP Prime Minister Paavo Lipponen and KESK party leader Jäätteenmäki, the challenger attacked Lipponen on his positive pro-US stance during the build-up to the invasion of Iraq.

Accusing him of abandoning the traditional Nordic neutrality, she was seen brandishing a sheaf of papers—confidential documents—which were said to have involved Lipponen in secretive dealings with the US.

Ten days later Jäätteenmäki romped to victory, unseating Prime Minister Lipponen by a narrow margin (see ICRG No 6, 2003).

Press Revelations The waving documents caught the eyes of reporters; or their eyes were drawn to them by someone not a million miles away from the former prime minister’s office. Either way, on May 9 the commercial television channel MTV3 broke a news story alleging that Jäätteenmäki had used leaked secret memos of a discussion between Prime Minister Lipponen and US President George W Bush, and of a briefing in the USA by State Undersecretary Marc Grossman.

Both documents were said to relate to Finland's—or Lipponen's—stance on actively aligning with the anti-Saddam coalition. Excerpts from the reports were subsequently published in the Finnish tabloid press.

Jäätteenmäki's Denials On May 10, Jäätteenmäki denied that she had seen the two documents referred to by the media, but the police had already launched an investigation into the alleged leakage.

Despite parliamentary questions and accusations that she had used confidential information to further her electoral campaign at the expense of Lipponen, Jäätteenmäki denied yet again on June 6 that she had seen the papers.

She also said she had no knowledge of the source of the leak. But evening tabloid newspaper, Ilta-Sanomat, claimed on June 6 to have seen notes of a KESK meeting which allegedly confirmed that Jäätteenmäki did indeed have the documents but would not reveal her source.

An internal KESK investigation began straightway, and Ms Jäätteenmäki was by now being questioned by the police. Tempers rose, questions were asked in parliament, and the other coalition parties, as well as many in her own KESK, lost patience.

By mid-June the leak had been traced to a KESK aide, Martti Mannin who worked in President Tarja Halonen’s office. Mannin was suspended, taken away for questioning by the police, and his office sealed. On June 18 Jäätteenmäki finally admitted to parliament that she had seen faxed excerpts of the documents, but had not requested them.

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In the face of accusations of cover-ups, deceit, and illicit handling of confidential documents, and with a frenzied media bun-fight enjoying every minute of the whole affair, by now termed “Iraqgate,” there was only one option left for the beleaguered Jäätteenmäki—her June 18 resignation.

So it was that on that day, June 18, she gave into the pressures and submitted her resignation as prime minister. Finance Minister Antii Kalliomäki accompanied the President to the Thessaloniki Summit that weekend in Jäätteenmäki's stead.

New Prime Minister Prime Minister Vanhanen, 47 and, significant in Finland, a teetotaler, has worked as a political scientist and as a journalist, and been in parliament since 1991. Said by some commentators to be dependable, intelligent but actually rather dull, he is said to have much in common with his predecessor-but-one, Paavo Lipponen, though he is of a similar age to Jäätteenmäki.

After the more engaging and outgoing style of Ms Jäätteenmäki, many have welcomed the return of a more somber approach at the helm. Vanhanen is not without ability, though: he is said by some to be something of an expert on European matters, strategy, and economics. On top of that, he is well liked, trusted, and respected within his party.

Vanhanen's portfolio at Defense has been taken up by the former Deputy Speaker, KESK's Dr Seppo Kääriäinen, who has ministerial service with previous administrations. A special KESK party conference on October 4 has been convened to elect a new leader.

The Fallout Fortunately parliament was dissolved for the summer recess shortly after the new administration was in place—no doubt much to the relief of all concerned. However, the police investigation is continuing; on August 7, Risto Volanen, a secretary of state, was questioned by the police about his involvement with the case.

So, it remains to be seen whether whole affair will blow over quietly during the summer vacation and when life resumes in the fall, or whether the investigation will uncover further revelations to discomfit KESK, or even the new government.

Popular Support The damage inflicted by Iraqgate on the Jäätteenmäki administration and KESK generally was already evident in a Gallup opinion poll published on June 16. This showed that the SDP had pushed KESK into second place in the approval rankings, with 25.1% support, up from 22.9% at the March 16 general election.

KESK saw its level of support drop from 24.7% to 23.0%. The Green League, which pulled out of the SDP-led coalition in 2002, saw its support jump by a fifth, from 8% to 10%. There was little change in the support for the other parties.

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As most Finns—even newspapers, pollsters and particularly politicians— vacation during the month of July, no further surveys have been noted. More telling indicators will no doubt come when Vanhanen gets into his stride as parliamentary business resumes in the fall.

Socioeconomic Conditions Population Concerns Prime Minister Vanhanen might have been heeding the advice of the International Monetary Fund (IMF) (see Economy, below) to expand the workforce when he urged Finns to have more children and raise the birth-rate.

Vanhanen, himself the father of two young teenagers, also pointed up on August 10 the need for more immigration. “I am quite certain that in 20 to 30 years, we will be more multicultural than today,” he said. His line in this difficult and often vexed area contrasts sharply with that of its fellow Nordic nation Denmark (see Denmark report in this issue).

The premier also noted that with the baby-boomer generation due to start retiring after the present government's term of office, the number of those over 65 will increase by over 50%, from 8.5 million now to 13.5 million in 2023.

As with most other European nations, pensions’ reform is an issue that needs facing now, rather than leaving rapidly-ticking demographic time bomb for subsequent administrations and future generations.

Alcohol and Tobacco Duty Cuts Another move proposed by the prime minister to stimulate the economy was to cut taxes on alcohol and tobacco by as much as 20%. Finland is one of the highest-taxed nations in Europe and beyond, and the move was intended to combat the flow of cheaper imports from neighboring states, such as Estonia and Latvia, which are set to join the EU in 2004.

The announcement of tax cuts on alcohol came at the same time as the call to produce more babies, which might say something about the Finnish libido.

Of course, the usual suspects were on hand to pour cold water on the impending party. On August 8 Archbishop Jukka Paarma, of the (protestant) Evangelical Lutheran Church of Finland, called for an “appeal to health reasons and people's sense of responsibility instead of relying solely on legal or fiscal measures as the means of alcohol policy.”

On the other hand, Finland has an impressive record of moderation with both smoking and drinking. Along with Britain, Finland leads the world in reducing smoking deaths, according to data from the UK's University of Oxford's Professor Richard Peto who was speaking at the World Conference on Smoking and Health at Helsinki on August 6.

A couple of days earlier, data from the World Health Organization (WHO) noted that Finland had the lowest per-capita consumption of tobacco in Europe, with only 16% of over-16s smoking.

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As for booze, a study from Statistics Finland published on June 17 showed that only the Sedes drank less alcohol per head in the EU than the Finns during 2001, consuming a mere five liters of 100% alcohol per head per year.

Accurate levels of consumption of tobacco and alcohol are notoriously difficult to measure, but the fact remains that mortality, lung cancer and other similar rates tend to confirm that the average Finns have a generally much healthier lifestyle than many of their European counterparts.

Which leaves the sex.

Politicians’ Pay Although the prime minister may be heeding the remarks by the IMF on the need for public sector pay restraint, those who fix the levels of politicians’ salaries were not. On August 5, an independent board recommended an increase of 9.4% for parliamentary delegates, up €400 ($455) to €4,970 ($5,648) per month for the basic rate, and €5,340 ($6,069) for longer-serving legislators. This year’s inflation rate is targeted at about 1.2%.

The board argues that the above-inflation settlements are needed because politicians have not had a pay rise since 2000. The rises are to take effect from September. However, as they may wish to lead by example, the politicians do of course have the opportunity to take less than the board's recommended amounts…

Investment Climate Nordic Money-Maker Finland became a beneficiary of adjacent Norway's liberalization program on June 30 when that country sold its National Mint to the Mint of Finland and Norwegian coin specialists Samlerhurst. The deal raised NKr44 million (€5.3 million) for Norway. Finland has also owned the Swedish Royal Mint since 2001.

ECONOMY Growth The economy outperformed most European nations last year, coming in fourth with a real GDP growth of 1.6%, trailing only Ireland, Greece, and Spain, according to data from the EU's statistics arm, Eurostat. This shaped up well against an average of 1% for the while EU, and 0.8% for the 12 eurozone states.

The economy had started sluggishly earlier this year, with unemployment still stubbornly high at 9.4% during the spring. But signs of a revival came as inflation eased from 1.6% in the spring to an expected 1.2% for the whole year, according to preliminary data from the Ministry of Finance, published on July 30, just as preparations for the 2004 budget kicked off.

But the Ministry has cautiously revised its GDP growth forecast for 2003 downwards from 1.8% to 1.2%, and predicted a rally to 2.4% in 2004.

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IMF Assessment The International Monetary Fund (IMF) also has some lukewarm predictions for Finland when it issued a preliminary study of the economy in June. The report approved Finland's recovery from the 1990s’ crisis, praising “private sector initiative and solid macroeconomic management,” along with “excellent physical and social infrastructure (including education) and a well-developed welfare state.”

But there were caveats as well as commendations. Among the Fund's main reservations were:

· “High rate of unemployment [is an] indication of the need for further reform efforts.” · “The Finnish population is ageing rapidly. The old-age dependency ratio will rise to 40% in 2020 and 50% in 2030, almost double the ratio today and among the highest in the EU during that time.”

These downside risks, along with “business investment weakness,” dropped the Fund's GDP growth prediction for 2003 down to 1.3%, with a revival to 2.6% for 2004.

The Fund's prescriptions focused on labor market reform, together with other suitable related initiatives. Its five point plan was as follows:

1. Raise the unemployment rate, by increasing work incentives for all age and skill groups. 2. Cut taxes, notably on labor, as an important component of raising employment, safeguarding competitiveness, and enhancing growth. 3. Establish and maintain a record of expenditure discipline, to make room for credible tax cuts without compromising public finances. 4. Introduce further pension reforms to make a longer working life more attractive. 5. Reform the product market to enhance the economy's efficiency and generate employment.

Whilst Vanhanen has made a start on some of the items on this agenda, as noted above, there is still clearly much for him and his government to do.

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ITALY RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 81.0 78.0 73.0 78.0 70.0 80.0 Financial Risk 40.5 43.0 38.0 43.0 37.0 45.0 Economic Risk 39.5 39.0 36.0 41.0 35.0 44.0 Composite Risk 80.5 80.0 73.5 81.0 71.0 84.5 Risk Band V.Low V.Low Low V.Low Low V.Low

POLITICS Government Stability Prime Minster Silvio Berlusconi’s center-right coalition government is looking increasingly fraught on a number of fronts. First, there are deepening differences between the four coalition parties over a range of both long-term issues and of recent events.

Second, whilst Berlusconi is holding the tiller at the head of the European Union (EU) since Italy took on the rotating Presidency on July 1, many are concerned that domestic issues, such as unemployment, structural reforms, and economic boosts, will be sidelined to a greater extent than the scant attention they have received since Berlusconi came to power in 2001.

Third, Italy's economy has “officially” moved into recession, with data from Istat, the national statistics agency showing two successive quarters of negative growth at 0.1% shrinkage between January and June this year. On top of that, a report from the International Monetary Fund (IMF), published in July, noted that “over the last decade [economic] growth in Italy has been slower than in any euro-area country (except for Germany).”

Fourth, there is the multitude of allegations of sleaze, topped off by the immunity legislation, which many feel was custom-crafted to enable Berlusconi to evade due legal process.

Fifth, Berlusconi’s diplomatic ineptitude. Berlusconi’s unfortunate propensity to speak before his brain is fully engaged is well known, and many commentators were banking on him saying something stupid at some point during his presidency of the European Union (EU). No one, though, thought he would do it in his very first speech to the European parliament.

European Parliament Row When Prime Minister Berlusconi began his address to the parliament on July 2 he was heckled by left-wing and Green members of the parliament (MEPs) about the legal procedures put forward by his government to enable him to evade the various trials against him and the apparent conflict of interest between his political office and his extensive media interests. A group of ecologist

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lawmakers held up placards in Italian declaring “La legge e uguale per tutti” (The law is equal for all) and “No godfathers.” Berlusconi finally lost his cool when a German Socialist MEP, Martin Schulz, questioned him about his media interests.

Berlusconi responded: “Mr. Schulz, I know there is in Italy a man producing a film on the Nazi concentration camps. I would like to suggest you for the role of leader. You would be perfect.” The remark stunned the parliament. Schultz, who could clearly teach Berlusconi a thing or too about reasoned debate, replied: “My respect for the victims of fascism will not permit me to deal with that kind of claim. But it is very hard for me accept that a politician should be exercising the role of president of the European Council if he comes out with this kind of statement when he encounters the slightest contradiction.”

European parliament President Pat Cox expressed regret at the offence caused to Schulz and invited Berlusconi to apologize, saying it would be appropriate “to correct the record in this regard.” Berlusconi refused, claiming that his words were intended as an “ironic” joke.

Germany was mightily offended: Chancellor Gerhard Schröder demanded an apology and cancelled a planned holiday in Italy. Italy eventually came up with a grudging form of words that Germany was able to accept as an apology, while Berlusconi continued to claim that it was not. The matter was finally resolved on August 23 when Schröder met Berlusconi in Verona and the pair indulged in some public handshaking.

Berlusconi’s taste in irony was widely condemned throughout Europe and in the bulk of the Italian press. But not by Italian television broadcasters. The state (RAI) television channels and the three private channels owned by the Mediaset group, which cover about 90% of Italian TV broadcasting, criticized Schultz and played down, or completely ignored, the international condemnation of Berlusconi’s remarks. By pure happenstance Prime Minister Berlusconi owns nearly 50% Mediaset and indirectly controls RAI through his government’s majority in parliament. It was this potential conflict of interest that led to the exchanges in the European parliament in the first place.

But Prime Minister Berlusconi is not without friends abroad. Outside of Europe, President George W. Bush had nothing but praise for him. Recognizing Berlusconi’s forceful, but exclusively rhetorical, support for the war against Iraq, the US president received Berlusconi at his ranch in Texas on July 22, noting that he was “pleased that Prime Minister Berlusconi is now serving as the President [of the EU].

Democratic Accountability Immunity Law The prize of full immunity from prosecution that Berlusconi had proposed to his government in April fell into his lap with surprising ease and exquisite timing, coming into force less than 24 hours before Italy assumed the presidency of the EU on July 1.

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Parliamentary immunity was abolished in the early 1990s after the “clean hands” corruption trials which purged Italy's old political and business classes. Its reintroduction, as proposed by Berlusconi, would provide immunity from prosecution while in office for state's top five executives—the president, the prime minister, the chief of the constitutional court, and the leaders of both houses of parliament.

Given the drawn-out progress of much legislation in Italy, the Berlusconi’s legal lifeboat moved through parliament with surprising speed: on June 4, the Senate passed the draft legislation by 146 votes to 101, out of a total of 326 seats; on June 18 the lower house followed suite, but with a massive 302 votes in favor and only 17 against, out of a total of 630 seats; and on June 21 President Carlo Azeglio Ciampi signed the approved draft into law.

The reason the draft passed so easily through the lower house was that many of the opposition legislators felt it was better to have the law in place than risk a constitutional crisis should the prime minister be convicted during Italy's six- month EU presidency. Consequently, although they could not bring themselves to vote for it, they abstained. However, as the voting figures show, if the opposition deputies had united against the draft they might have brought it down.

Corruption Trials The new law brought an immediate suspension of the prime minister's own corruption trial, in which he is accused of paying judges to decide in his favor in a 1980s take-over battle for a state-owned food group SME, and raised the very real prospect that it will never be resumed. Berlusconi’s current term is not due to end until May 2006, by which time the statute of limitations would mean that the case against him would have expired.

Berlusconi’s second, and last, appearance before the court in Milan on June 17 was a good deal less dramatic than his initial testimony on May 5 (see ICRG No 6, 2003). He spent only 70 minutes in front of his accusers. Pleading, again, the pressures of his office, he invited the bench to continue their questioning in Rome. The justices politely declined, and he was back at his premier's desk by the afternoon.

So, Berlusconi has been spared from potentially sharing the fate of his co- defendant Cesare Previti, a former lawyer, former Defense Minister, and currently deputy of Berlusconi’s Forza Italia party. In April this year, Previti was sentenced to 11 years imprisonment for bribery in a separate case (see ICRG No 6, 2003).

The written judicial ruling on that case, published on August 6, accuses Previti and the others convicted of choosing “the corruption of judicial decisions as a true and proper life system, a method to obtain, as easily and also as sordidly as possible, material wealth that clearly was never sufficient.” Of course, Berlusconi was also a co-accused in the trial, but the case against him was dropped under the statute of limitations.

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Berlusconi Bites Back During his second court appearance on June 17, Berlusconi said: “In a court of law one cannot say all the things that one might like to say.” However, he felt no such inhibitions once he was outside the court, and quickly resumed his attacks on the judiciary and claims of a left-wing vendetta and general persecution. To back this up he complained that over the years he had been subjected to harassment, including such actions as:

· Over 500 visits to his firms "to seize documents." · The collection of information on his business dealings “from 50 Italian banks and 30 foreign lenders.” · The forcing of his executive to attend “more than 1,600 hearings and 82 legal procedures.”

Defending his position, and demonstrating his literary skill, Berlusconi paraphrased George Orwell's Animal Farm, noting that, “One citizen is equal to another [under the law], but perhaps this one [Berlusconi] is slightly more equal than the rest, given that 50% of Italians have given him the responsibility of governing the country.”

Strange logic from a supposedly democratic leader.

Media Deregulation Law On July 22, the Senate addressed the problem that provoked Prime Minister Berlusconi’s “ironic” retort in the European parliament on July 2—his extensive media interests. These include:

· Publishing: Mondadori (over 50 magazines and around one-third of the entire Italian book market) · Advertising sales: Publitalia · Telecoms: Albacom (a stake of some 20%) · Newspapers: daily broadsheet Il Giornale is controlled by Berlusconi’s brother Paolo · Television: Terrestrial channels—Canale 5, Italia 1, Retequattro, and La 7 (not a majority stake)

On top of this, in his capacity as prime minister and head of government he effectively controls all the state broadcasting outlets too.

Whereas, the overwhelming majority of people in the EU at large, and not a few in Italy itself, are of the view that this gives the prime minister a tad too much control over Italy’s media, the Senate, in which the government parties have a 39-vote majority, clearly felt it was more than a tad too little. To set things aright it passed what a media “deregulation” bill that, among other things, allows Mediaset to:

· keep all three free-to-air channels despite a ruling from the country's highest court that one channel should go onto satellite transmission; · increase its advertising revenue to a maximum of 20% of the whole

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advertising market, said to be worth some €25 billion ($27.6 billion); · integrate its broadcasting interests horizontally into the newspaper business; · dispense with existing restrictions on lucrative promotional activities.

The bill was passed—with over 4,000 amendments—against the advice of President Ciampi, who was keen to retain some independence, impartiality, and fair competition in the Italian media market.

Of course, the opposition members of parliament jumped up and down in outrage, with one describing the bill as “A symbol of, and metaphor for, the sickness of our democracy.” The Secretary of the Italian National Press Federation felt it would be to “the detriment of RAI and the written press” and “a license to kill off newspapers.”

A more dramatic protest came on the very night the bill got through the Senate when Lucia Annunziata, head of RAI, announced her resignation. Berlusconi has had difficulties with the management at RAI before, and the present RAI board is to be abolished under the new bill. The Italian media, she said, were “distorted by conflict of interest.”

As for Mediaset, its first-quarter sales were up by almost one-quarter to €777 million ($860 million), with a reported 11% rise in pre-tax profits to €191 million ($211 million).

Challenges to the Immunity Law In a rebuttal to both the immunity law and Berlusconi’s interpretation of his position in democratic Italy, the chief public prosecutor in Berlusconi’s trial, Ilda Boccassini, said on June 25 that the new law “clearly and totally violates the principle that everyone is equal in front of the law.” She was backed up by all the prosecutors in the case, who agreed on June 30 to submit the law to the constitutional court on the grounds that it is “unconstitutional” in that it violates several fundamental principles, including equality among citizens.

The court is expected to take at least six months to reach its verdict on the complaint, which would safely see Italy through its EU presidential term. What happens thereafter is anybody’s guess, though on current form it is unlikely that the court would overturn legislation that has secured convincing majorities in both houses of parliament.

That does not mean Berlusconi’s opponents have given up. In particular, a former public prosecutor, Antonio di Pietro is touring the country in an attempt to collect 500,000 signatures for a petition which would force a referendum on the immunity law. This is a tremendous task as all of the signatures have to be presented by the end of September; failure to meet the deadline will mean the end of the initiative.

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Such a campaign by a lone individual could be laughed off, but Pietro isn’t just any old troublemaker. It was he who led the campaign against political corruption that ultimately brought about the collapse of the Christian Democrat and Socialist parties in 1992-93, and the transformation of Italy’s political scene.

The other risk for Berlusconi is the premature collapse of his government. It is already looking shaky. If, through internal disagreement or pressure from the opposition, one of the coalition parties should decide to quit well ahead of the next general election—some time over the next 12 months for instance— Berlusconi would lose his immunity by virtue of losing his office; and the trial could be resumed.

That risk probably means that from now on Berlusconi will be taking extra special care to keep his coalition partners sweet. It will be interesting to see what that will mean for divisive issues within the coalition, like the north-south divide and greater devolution.

Meanwhile, Berlusconi has gone onto the attack in an attempt to discredit the prosecutors. On July 23 Ilda Boccassini and Gherardo Colombo, another prosecutor in the SME trial, were placed under formal examination for alleged “abuse of office”. The complaint was raised by a previously unknown association of lawyers, who allege that that the two prosecutors withheld a file of papers, No. 9520/95, which could have helped the defense of Cesare Previti, Berlusconi’s co-defendant in the SME trial.

Mediaset Scam What looked suspiciously like another government fix took place the next day, July 24, when Justice Minister Roberto Castelli blocked a probe into another alleged scam, this time at Mediaset. The Milan prosecutors had requested permission to seek information from the United States over allegations that Berlusconi was involved in fraudulent deals to acquire television rights for US films in 1994 and 1995 through two offshore firms. There are persistent rumors that offshore subsidiaries were pivotal to massive tax fraud and false accounting within Mediaset in the 1990s, with a loss to the Italian exchequer of some €80 million ($88.5 million).

Mediaset, owned by Berlusconi’s umbrella group, Finninvest, claims the accusations are “groundless.” Whilst the Milan prosecutors have not yet said much about the case, several leading foreigners are alleged to be involved, including a UK lawyer, David Mills, whose wife is the British Minister of Culture Theresa Jowell, alongside other Mediaset executives.

In rejecting the request, the Justice Ministry cited the immunity legislation passed into law in June. However, as critics were quick to point out, the legislation grants immunity only in the case of prosecutions and does not cover investigations.

In a robust reaction, the Chief prosecutor in Milan, Armando Spataro, declared: “We are at one of the most serious junctures in the war on the courts declared by a section of the political classes which is in government …We are dealing with a

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minister [Castelli] who, ignorant of the letter and the meaning off the law, is attempting to take the place of the judge.” The opposition parties immediately launched a no-confidence motion against Castelli in parliament.

Coalition Unity Justice Minister Castelli’s blatant misapplication of the immunity law over the Mediaset investigation provoked another row within the government coalition. The centrist Union of Christian Democrats (UDC), which has been at loggerheads with both the post-Fascist National Alliance (AN) and the Northern league (LN) threatened to leave the coalition unless the Mediaset investigation was allowed to proceed.

The UDC’s departure would have meant the collapse of the coalition, a new election, and the risk of Berlusconi losing the premiership, and his immunity. So, just before the no-confidence vote on July 29, Deputy Prime Minister and AN leader Gianfranco Fini announced in the Senate that the Mediaset investigation would be approved. The UDC stayed with the coalition and the no- confidence motion against Castelli was defeated by 166 votes to 121.

However, Fini made it clear where the pressure for the U-turn had come from. He told the Senate, “In order to stop this vulgar political exploitation and delegitimization, it was the prime minister himself who said to go ahead with the investigation.” It was clearly against Castelli’s wishes, who said after the vote: “I did not reject an investigation; I simply asked for an evaluation...If I had wanted to block such things, I could have done.”

The petulance of those remarks tends to underline the fact that strains between the coalition parties persist. Fini has often made veiled threats to resign over recent months and well before this particular row LN leader Umberto Bossi noted, in reference to Berlusconi’s conduct as president of the EU, “If captain Berlusconi doesn't set the course, the ship will crash against the rocks,” inadvertently promoting the prime minister from the role of cruise-ship crooner he once held.

However, possibly the most telling remark came from a senior LN party member, Alessandro Ce, who in early July said, “There is no way we can stay in this government the way things currently stand....There is a really poisonous air in the government and the parliamentary majority these days.”

Popular Support After the mid-term judgment delivered by the electorate at the local elections, further indicators regarding the government's performance and the electorate's concerns emerged on June 26. A poll published in Milanese daily newspaper Corriere della Sera carried out by Ispo/Cra Nielsen on June 15 showed that the chief concerns of the electorate were not the same as those of the many critics abroad who have been keen to give voice to their concerns in recent months.

Percentage responses from all of those polled on the “priorities that the government needs to address” in descending order, were as follows:

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Ranking Priority Percentage Share 1 Struggle against unemployment 15 2 Cutting taxes 11 2 Boosting country's economy 11 4 Immigration (as source of crime) 8 5 Conflict of interests 6 5 Struggle against crime 6 7 Laws for greater job flexibility 5 8 Pension reform 4 8 Struggle against terrorism 4 10 More efficient legal system 3 11 Immigration (boosting integration) 2 11 Fighting public sector corruption 2 11 Bringing down public debt 2 11 Parliamentary immunity 2

The percentage of “other/don't know” in fact achieved the highest score. As many as 19% of those questioned had either no view or maybe did not find their preferences on the list.

The ranking makes for an interesting comparison with what the present government has actually achieved in two years against the matters that really bother the electorate. Some would argue that the traditional Italian attitude of laissez-faire implies tacit rather than explicit support for the government.

Others, though, could reasonably argue that the government has actually done little to cut the jobless and lower taxes, boost the economy, or implement pensions’ reforms.

Yet others would perhaps be anxious that the seeming concerns that immigrants are a “source of crime” comes so high on the list, whilst integration pulls up at joint bottom, along with worries about the parliamentary immunity issue which has generated so much debate both in the government and elsewhere.

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PORTUGAL RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 87.5 86.0 79.0 86.0 78.0 90.0 Financial Risk 35.0 36.5 33.0 36.0 30.0 38.0 Economic Risk 36.0 34.5 34.0 39.0 32.0 39.0 Composite Risk 79.3 78.5 73.0 80.5 70.0 83.5 Risk Band Low Low Low V.Low Low V.Low

POLITICS Opposition Involvement in Pedophile Case Life just continues to get worse for the opposition Socialist Party (PS), and its unfortunate leader Eduardo Ferro Rodrigues. Just a year after losing the March 2002 general election to the center-right Social Democratic Party (PSD), the PS was shaken in May and June when some of its key officers were implicated in an inquiry into an alleged child sex ring.

The inquiry centers on the Casa Pia network of 10 state-run orphanages and 4,600 children in its care. In November 2002 a driver employed at one of the orphanages admitted publicly that he had procured young boys for the sexual delectation of politicians and celebrities. The driver, Carlos Silvino, was instantly arrested and charged and the investigation immediately commenced. What particularly shocked the nation was that it quickly became clear that the authorities had known of the allegations since the 1980s.

Suspicion fell, in particular on Paulo Pedroso, who, as PS Secretary of State for Labor and Training from 1999 to 2001, was responsible for the Casa Pia homes. On May 21 , Pedroso was arrested and detained, but not charged, on suspicion 15 counts of sex with children between 1999 and 2000. |He strenuously denies all the allegations.

Also under investigation is former ambassador to South Africa, 67-year old Jorge Ritto, who also denies any wrongdoing. However, it has transpired that Ritto had been suspected in 1981 of sex with children supplied by Carlos Silvino, and the police even allegedly had photographs implicating Ritto. However, the case never proceeded, and the photographs went missing.

when Silvino was arrested, scores of former Casa Pia children came forward to give evidence and the German authorities revealed that Ritto had been removed from the Consul’s office in Stuttgart after an alleged sexual act with a young boy in a public park.

Widening Allegations These arrests added further fuel the raging press speculation, which dragged the name of just about every leading PS politician and supporter into the case,

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including that of party leader Ferro Rodrigues. In an effort to stem the tide of innuendo, Ferro Rodriques claimed on May 25 that he and the PS had become victims of a deliberate smear campaign over the case. He said that he had no idea why his name had cropped up in the investigations, and affirmed that he was not a suspect. He added that the PS should also seek to ascertain from the Attorney General Jose Souto de Moura, who was trying to disgrace the party— and why.

Souto de Moura had already encountered an initial foray by the PS into the investigation, or to be more precise, into allegations by Ferro Rodrigues that he and other PS party members had their telephones tapped by security services in the lead up to the investigation. On May 23 Rodrigues complained, “From the precise moment the Attorney General says that I am not a suspect in any crime, and since I am a member of the Council of State and the Secretary General of the Socialist Party, and after being confronted with the very serious reports that, for several days at least, my phone and that of our parliamentary leader Antonio Costa were tapped, I expect the Attorney General to say…that these claims are not true.”

Souto de Moura hit back, saying that any wiretapping had to be undertaken under a magistrate’s order, and any evidence destroyed if not applicable to the case under investigation. He said that if the politicians did not trust the magistracy, the courts may as well be shut down and the country revert to the law of the jungle. Moreover, he was deeply disturbed that PS politicians had openly admitted receiving leaked information about the wiretapping and the investigation.

He concluded somewhat naively, “It is clear to me that any attempts to turn this investigation—in my view artificially—into some kind of political earthquake, will have no effect as far as the judiciary is concerned.”

In yet another attempt to stop the rumormongers, Ferro Rodrigues asked the head of the inquiry, Assistant Attorney-General Joao Guerra, if he could make a presentation in the belief, as he put it, that by giving evidence, the identity of the true culprits would be ultimately be revealed.

Thus it was that the SP leader spent six hour before the inquiry on June 4. However, far form dampening down the rumors, it led to further speculation in the media that he was somehow involved. After presenting his case Ferro Rodrigues said on leaving the inquiry, “I went in to testify with total confidence that the truth will be ascertained, and I left with the strengthened certainty that the truth will be fully established.”

He continued Ferro Rodrigues said, “I went in convinced of the innocence of the parliamentary deputy Paulo Pedroso, and I came out with the same absolute and unswerving conviction. I went in determined to lay criminal charges against the author or authors of such an infamous slander once the case is no longer sub judice. I came out more determined than ever to do so. I stand by everything I have said regarding this case.”

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Government Reaction Naturally enough the government parties were eager, not only to condemn pedophilia in the strongest possible terms, but also to put as much distance between themselves and the allegations as possible. On May 29 Prime Minister Jose Manuel Durao Barroso, of the PSD, publicly voiced his concern over the allegations of pedophilia, wiretappings, leaks, and arrests of key public figures. He insisted the government was fully behind the judicial inquiry and that he would ensure it would be thorough “In the name of the government and of the parliamentary majority supporting the government.”

Naturally, the issue of phone wiretapping of politicians was a matter of some concern to, well, all the politicians, some of whom called for a parliamentary review of the regulations. Durao Barroso was for none of it, saying that this was not the time to change the law, but to apply it. He declared, “For my part I have confidence in the justice system. The Portuguese have confidence in the justice system. Let us render unto the judiciary that which belongs to the judiciary, and to politics that which belongs to politics. I have no wish to mix up the two.”

Given the propensity for politicians to be mixed up in any manner of peccadilloes, perversions, and priapic proclivities, his words may yet come back to haunt him.

Outlook The allegations of sexual abuse have stirred up more than just political tensions in the deeply Catholic state. Years of hidden sexual abuse in public life and in private family life went unreported and uninvestigated because of the social stigma attached to the victims.

In some ways, the social awakening to the issue may soften the political impact on the PS, but in the short term the impact has been clear. A July 3 opinion poll showed that Durao Barroso had overtaken Ferro Rodrigues in the popularity stakes, even though the PS would receive 44.9% of the vote (37.9% in the 2002 general election) and the PSD just 34% (40.1% in the general election).

It is obvious that the mud has stuck to Ferro Rodrigues, even though the PS is increasingly popular. However, if Pedroso and Ferro Rodrigues continue to be linked to the investigation, it is just a matter of time before the PS suffers. The party may well decide that with the sharks continuing to scent blood, it would be better to encourage Ferro Rodrigues to walk the political plank than suffer a critical loss of public support.

The real danger for the politicians of all political stripes is that the can of worms has been well and truly opened, and that there will be a grand moral catharsis in which their personal activities are displayed for all to see.

Socioeconomic Conditions Large areas of Portugal’s forests, especially in the Algarve and Silves regions, were engulfed by fire through late July and well into August. Although the unusually high temperatures in Europe this summer created the ideal conditions for forest fires, many of the blazes, which began on July 19, have been attributed

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to arsonists. By mid-August, police had arrested 60 alleged arsonists. In one arrest on August 11, Four youths, aged 18 to 21 were caught red-handed in an isolated spot in the outskirts of Guarda, after having allegedly set fire to an area of woodland and grass. In another arrest, police detained a 76-year old woman.

Parts of Portugal are experiencing the strongest heat wave since records began. In some southern and interior regions of the country temperatures have remained persistently above 40o Centigrade (C) or 104o Fahrenheit (F), since July28, and many cities have hit all-time record temperatures. The highest temperatures were recorded were 47.2o C (117o F) in the village of Amareleja in Alentejo province, south of Lisbon.

In mid-August, the Forestry General-Directorate upped its estimate for the overall woodland area destroyed so far this year to some 215,000 hectares (approximately 531,000 acres), almost all of it since the blazes began in July. However, independent forestry experts, who have studied satellite imagery of the affected areas, have said the total burnt area is at least 300,000 hectares. If this figure is confirmed, 2003 will see the worst level of damage in 23 years—well above the area burnt in 1990, the worst year recorded as yet.

The physical costs of the disaster have not yet been compiled. However, at an earlier stage, when the damaged acreage was estimated at 162,000 hectares, the government estimated the cost of the damage at €925million ($1.03 billion. On that basis, the overall bill will come to something in excess of €1.7 billion ($1.9 billion).

Corruption On May 7, the Judicial Police arrested 15 finance officials on allegations of corruption. Those detained included a local finance department official suspected of corruption in fiscal administration, as well as a number of managers. Newspaper reports suggested that the alleged crimes involve hundreds of companies.

Little more has been reported, but if the reports are true, Portugal’s financial community, and possibly the government, should be bracing itself for a major scandal.

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SPAIN RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 82.5 82.0 75.0 85.0 74.0 90.0 Financial Risk 39.5 39.0 36.0 40.0 38.0 44.0 Economic Risk 39.5 39.0 38.0 42.0 37.0 44.0 Composite Risk 80.8 80.0 74.5 83.5 74.5 89.0 Risk Band V.Low V.Low Low V.Low Low V.Low

POLITICS Government Stability Opposition in Disarray At the regional elections on May 25 (see ICRG No 6, 2003), Prime Minister Jose Maria Aznar's Popular Party (PP) won the mayoral race in the capital, Madrid, but failed to retain its overall majority in the Madrid regional legislature. That opened the way for the opposition Spanish Socialist Workers Party (PSOE) to seize control. It was just about the biggest success for the PSOE in the elections, but depended on the party being able to cut a cooperation deal with the far-left United Left (IU) party.

Heads-down discussions between PSOE leader Jose Luis Rodriguez Zapatero and his IU opposite number finally came up with a pact and all that remained was for the two parties to combine their votes to elect the head of the legislature. However, two PSOE regional deputies, Eduardo Tamayo and Maria Teresa Saez, deliberately missed the vote because of their opposition to a coalition with the IU. Without those two votes the PSOE and IU no longer held a majority and the PSOE candidate failed to be approved.

Uproar ensued. The PSOE not only expelled the two dissidents for disloyalty, but accused them of being involved in corrupt real estate deals. Threats of legal action came from all sides, including one of the deserters, the head of the PP and Zapatero himself.

Naturally, the PP moved to take full advantage of the disorder in the opposition ranks by calling for a re-run of the legislative election. Given the chaotic state of the PSOE and the damaging accusations being exchanged, a re-run of the election was the last thing the PSOE wanted. Instead, it argued that as the two defectors were no longer members of the party their seats should be filled by other PSOE candidates drawn from the party’s electoral list.

An inquiry on August 21 led only to reciprocal accusations flying across the regional assembly chamber, as the PP attempted to smear the whole PSOE, and the PSOE in turn accused the PP of political subterfuge. In fairness the PP had, on August 20, tried to review the voting bar placed on the two regional deputies, thus incurring the wrath of the befuddled PSOE group.

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The problem for the PSOE is that it needed a landslide victory in the municipal elections to use as a springboard for the general election next spring. Now, with its only notable success at those elections mired in controversy, it has not only lost its springboard, but also strengthened criticisms inside and outside the party of Zapatero’s leadership qualities. These had already been called into question by his failure to translate the strong anti-Iraq war into support for the in the May municipal elections.

Even though Prime Minister Aznar will not be leading the PP into that election, the PSOE still appears unable to persuade the voters that Zapatero is a credible alternative.

Aznar appoints Successor Prime Minister Aznar had announced his intention not to lead his party into the 2004 election a year ago, but failed to say who would succeed him. This should have worked to the advantage of the PSOE by enabling it to pin a “lame duck” label on the prime minister. Instead, it seems to have thrown the party into confusion by depriving it of a target in the form of the new PP leader.

Aznar finally put the PSOE, and his own party, out of its misery on August 31 by announcing that the new PP leader at next year’s elections would be his current deputy prime minister Mariano Rajoy. The appointment was “rubber-stamped” by the PP with 503 votes in favor and one against.

Never one to miss a political trick, Aznar made the announcement just as the PSOE was holding a “historic” conference to relaunch the party for the March elections. In order to garner as much publicity for its event as possible, the party signaled that the conference would lay particular emphasis on plans to devolve more power to the regions. However, the PP leadership change pushed the PSOE conference off the front pages of every newspaper and made the lead item in every television news report.

Once the leadership announcement had been made, the choice seemed obvious. But that is not how it looked prior to August 31, with feverish speculation over the appointment stretching back months, with both finance minister, Rodrigo Rato, and the former interior minister, Jaime Mayor Oreja tipped as hot favorites.

The popular initial reaction to the appointment was positive, but the reality is that very little is known about Rajoy. The bare facts are that he is 48 years old, a former property registrar, and is expected to continue the pro-US, free-market policies spearheaded by his boss. However, he has played a loyal, but background role as deputy prime minister, and there are many on the political scene who are unsure about his ability to lead from the front.

That is a potential weakness the PSOE will want to exploit. Coming out fighting after the announcement, party leader Zapatero declared, with more than a little relief, “Now the race really begins. Until now, to be where he is, [Rajoy] has only had one condition— saying ‘yes’' to Aznar. But...to be prime minister, 40 million Spaniards are going to have to decide.”

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Unfortunately for Zapatero it looks like many already have. Two opinion polls, by the state pollster CIS and the leftwing Cadena Ser radio chain, give the PP a six and three-point lead, respectively.

External Conflict Iraq Having seen off the PSOE in the municipal elections, it was inevitable that the issue of the actual threat posed by Iraq would, like US President George Bush and UK Prime Minister Tony Blair, come back to haunt Aznar.

Media reports on August 11 said that during the pre-war debate on whether Spain should be involved in backing the US and UK in Iraq, the Defense Ministry had sent a communiqué to the Chiefs of the General Staff in February, instructing them to take the line that Saddam had weapons of mass destruction and was a threat to Spain.

In other words, the politicians were pre-empting the advice they should have received from the military about military matters. Aznar subsequently told parliament on February 5 that the information he had received from the UN Arms Inspectors was that, “The Iraqi regime has weapons of mass destruction.”

Moreover, at a meeting of the UN Security Council on March 7, Foreign Minister Ana Palacio had said, “The progress being made by the UN weapons inspectors is making us deviate from the objective—the disarmament of Saddam Hussein’s regime.”

Troops Sent to Iraq Efforts by the PSOE leader Zapatero to instigate a public inquiry into the issue have thus far failed, but as troops left for Iraq, questions were asked what remit the government had to send out troops that would be under the command of the US and UK coalition forces.

The situation was not eased when on August 9 Aznar refused to hold a public inquiry into the military airplane crash in Turkey on May 26, in which 62 Spanish soldiers returning from duty in Afghanistan were killed.

The whole issue of the crash became a huge headache for Aznar when it became clear there was more to it than a tragic accident.

The grieving relatives formed a support group on June 29 to press for further information about leaked information that Aznar and Minister of Defense Federico Trillo-Figueroa had known the Russian-built transport aircraft were unsafe. It transpired that some of the soldiers about to embark on the aircraft that crashed had told their wives by e-mail that they were concerned about its air-worthiness. Furthermore, it became known that the Finnish and Norwegian governments had previously cancelled contracts for the aircraft because they felt it did not meet international safety standards. Trillo-Figueroa subsequently cancelled a contract for more of the planes.

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When the soldier’s bodies were eventually returned to Spain on May 28 they were met by King Juan Carlos and Queen Sofia, and Aznar and Trillo-Figueroa. The royal couple greeted each relative solemnly and kissed them twice. However, when Aznar and Trillo approached they were subjected to shouts from the relatives that they were murderers and assassins. It later transpired that the relatives had been informed by the Ministry of Defense prior to the ceremony that the bodies would in fact be flown in and immediately buried—at night, in order to avoid the media circus.

The whole episode did more to undermine Aznar and Trillo than anything the PSOE managed to do, bringing to mind the old adage that political parties don’t win elections—they just lose them.

Internal Conflict Basque Region The ongoing problems with the Basque terrorist separatist group ETA and the principles of regional devolution took a backward step in August when a “road map” floated by the leader of the Basque Nationalist Party (PNV) Juan José Ibarretxe, was dismissed out of hand by Aznar.

It was unclear who had leaked the draft plan to the media but the result was never in doubt. Ibarretxe’s plan, to share sovereignty with Spain while having regional autonomy for the economy and judiciary, was never really likely to find favor. Aznar, whose harsh clampdown on ETA has been relatively effective, would in any event have seen little need to give ground to further Basque claims for autonomy. When it became clear that Ibarretxe’s plan also included an option for a regional referendum on independence, it was rejected out of hand.

Aznar pulled no punches saying, “The aims of nationalism and of terrorism are identical, and the plan is utterly incompatible with the constitution”. Justice Minister José María Michavila agreed saying that the Constitutional Court would annul the move, and that parliament would refuse the plan anyway. Ibarretxe said the plan had been turned into a phony debate by people who wanted to present the proposal as secessionist, when he preferred to think of it as a free associated community.

Whatever the semantics, the plan or any alternative will simply not be considered by Aznar or the PSOE, which also made its opposition clear.

Terrorism Meanwhile, ETA has again stepped up its attacks on the vital tourist industry. Bombs planted in the resorts of Alicante and Benidorm on July 23 injured 12 people. Further parcel bombs quickly followed throughout the Basque region.

On August 4, ETA followed up its actions by issuing a statement that said, “In 2003 ETA will once again strike hard against the Spanish tourist industry and it cannot guarantee that anyone who enters the war zone will not be injured.” It then blamed the police for reacting too slowly to telephone warnings to prevent injuries to tourists.

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Arrests Meanwhile, the government’s utilization of the new international effort against terrorism secured further success in Mexico where ten members of ETA’s financial and logistical network were arrested on July 19. Six of those arrested were on the run from Spanish Police.

On July 30 a further three ETA suspects, including the most wanted Jose Candido Sagarzazu Gomez—a member of the Donosti commando—were arrested in France with a large amount of explosives in their possession.

The arrests were certainly a big blow to ETA, but its campaign is unlikely to cease. Moreover, its campaign of attacking tourist destinations could be counterproductive in that its ability to extort funds from local businesses will eventually be affected as those businesses lose the tourists who provide the bulk of their earnings.

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EUROPE (NON-EUROPEAN UNION)

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CURRENT RISK ASSESSMENTS AND FORECASTS

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Albania 68.5 33.5 32.0 66.5 67.0 55.5 70.0 58.0 71.0 Belarus 62.0 38.0 30.5 61.3 65.3 52.0 58.0 50.5 62.0 Bulgaria 71.0 36.5 36.0 71.5 71.8 67.5 78.0 64.5 80.5 Croatia 72.5 37.0 35.0 72.8 72.3 66.5 73.5 64.0 75.0 Cyprus 83.0 43.5 41.0 80.8 83.8 68.5 76.5 69.5 79.5 Czech Republic 78.5 41.0 37.0 76.3 78.3 73.0 77.0 72.5 80.5 Estonia 75.0 37.0 38.0 75.3 75.0 70.5 77.0 66.5 80.0 Hungary 84.5 34.5 34.5 77.5 76.8 71.0 79.0 70.0 81.0 Iceland 90.0 31.5 39.0 79.3 80.3 75.0 82.5 73.0 84.0 Latvia 78.5 39.5 38.5 75.0 78.3 73.5 80.0 71.5 86.5 Lithuania 78.5 37.0 37.5 74.0 76.5 70.0 76.0 65.5 79.5 Malta 86.5 37.5 35.5 79.8 79.8 77.0 81.5 73.5 81.0 Moldova 68.5 31.0 29.5 64.0 64.5 48.5 54.0 50.0 67.0 Norway 88.5 47.5 46.0 91.3 91.0 85.5 91.0 79.0 94.0 Poland 76.5 39.0 35.5 76.0 75.5 70.5 80.0 70.0 80.5 Romania 71.0 38.5 31.5 68.3 70.5 64.5 74.0 57.5 78.5 Russian Federation. 67.5 43.0 39.5 70.8 75.0 71.3 78.5 64.5 83.5 Serbia & Montenegro 62.0 26.0 22.5 50.8 55.3 32.5 60.5 32.5 69.5 Slovak Republic 78.5 37.5 35.0 75.8 75.5 69.5 78.0 69.5 81.5 Slovenia 80.0 41.5 38.0 79.8 79.8 73.0 82.5 70.5 84.0 Switzerland 91.0 47.5 43.5 92.0 91.0 88.3 92.0 81.5 94.0 Ukraine 59.5 40.5 37.5 68.0 68.8 62.5 70.5 58.5 76.5

For historical risk ratings and key economic data on these and other countries in ICRG, please go to www.CountryData.com.

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HUNGARY RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 81.0 84.5 78.0 86.0 78.0 86.0 Financial Risk 38.0 34.5 33.0 37.0 30.0 38.0 Economic Risk 36.0 34.5 31.0 35.0 32.0 38.0 Composite Risk 77.5 76.8 71.0 79.0 70.0 81.0 Risk Band Low Low Low Low Low V.Low

POLITICS Government Stability Opinion polls Just over a year into the government of Prime Minister Peter Medgyessy, and the opinion polls still have his Hungarian Socialist Party (MSzP) and the minor coalition Alliance of Free Democrats (SzDSz), way ahead.

A May 23 poll showed the MSzP on 35% and the opposition Fidesz of former prime minister and current leader Viktor Orban, lagging behind on 27%. The figures for the June polls barely changed, despite the status law debacle (see below). Although the MSzP popularity dipped a little, it remained constant among those who actually turn out to vote, and among its own party supporters. The poll revealed that five out of ten voters would support the MSzP, four would back Fidesz, and just one would back the other parties.

External Conflict As an aspiring member of the European Union (EU), Hungary is supposedly signed up to the rights and responsibilities of membership. One of the key tenets of the EU is that no nation has the right to interfere in another nation’s policies or government.

Unfortunately, the April 2002 general election that saw the MSzP/SzDSz coalition take power from former Prime Minister Viktor Orban’s FIDESZ party, also inherited his Status Law policy.

The Status Law The Status Law was an attempt to pre-empt EU controls on cross-border recognition of ethnic groups, by giving ethnic Hungarians living outside of Hungary greater rights and support from their home country. The support would enable them to have easier access in and out of Hungary, and a range of healthcare grants and sweeteners to help them retain their ethnic identity.

This did not go down well with countries like Romania, Slovakia and others with significant ethnic Hungarian minorities as it appeared to offer greater benefits and rights to those minorities than were enjoyed by the countries’ own citizens. The countries affected promptly complained, loud and long to the EU.

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Their case was that the Status Law was divisive and that it cut the EU’s policy on fairness and equality in cross-border movements, and in governmental financial backing for particular businesses or ethnic groups, over other EU member states.

The issue was due to come to a head at the Parliamentary Assembly of the Council of Europe (PACE) on June 25, when a Dutch member of parliament, Erik Juergens, was due to present a report on the impact and implications of the Status Law that was expected to be damning.

Status Law Amended In an eleventh-hour attempt to avoid this condemnation, the government moved an amendment to the Status Law in the Hungarian National Assembly on June 23, removing references to a “Unified Hungarian Nation” and to other contentious issues. In its amended form, the Status Law conformed to EU guidelines by offering little other than grants and benefits to encourage cultural education and exchanges.

Foreign Minister Laszlo Kovacs said the amendment was introduced to ease tension with neighboring countries and to help it conform to EU guidelines. In addition, although Hungary would implement the Schengen agreement (facilitating easier cross-border movement between EU member states) fully, ethnic Hungarians would be offered visas on the most preferential terms possible.

OSCE Concerns However, opposition to the Law had already built up a head of steam in European institutions. On June 24, immediately following the amendment to the status law and just prior to the PACE meeting, Rolf Ekeus, the High Commissioner on National Minorities at the Organization for Security and Cooperation in Europe (OSCE), said the Status Law would still cause problems because it needed secondary legislation.

Ekeus said, “… it is a basic principle of international law that a State may only act within its jurisdiction, which extends to its territory and citizenry. At the same time, the State of territorial jurisdiction should be positively disposed to agree to arrangements within the framework of its obligations to ensure full respect for the rights of persons belonging to national minorities. One can conclude that the deliberations in relation to the Act have demonstrated the importance of the principle that protection of human rights and fundamental freedoms, including for persons belonging to national minorities, is the responsibility of the State having jurisdiction with regard to the persons concerned.”

In other words, even with the amended status law, it would be useless without the agreement of the governments of Slovakia, Romania, Slovenia, Ukraine, Croatia, and Serbia Montenegro, in which most of the three million ethnic Hungarians outside Hungary’s borders live.

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Amendment Ignored But worse was to come. When Juergens presented his verbal report to the PACE meeting on June 25, it made no reference to the amendment. Speaking to his report, Juergens said, “In my opinion, Hungary must be very cautious. If they act unilaterally, they fan up old tensions in the region.”

Although based almost entirely on the original Status Law, the final proposal reached by the PACE did make veiled references to the amended version, but was not exactly fulsome in its praise. It rebuked Hungary for attempting to interfere in the sovereignty of neighboring states by not agreeing the law with the nations concerned prior to its implementation, and suggested that further amendments would be necessary.

Hungarian Fury It was clear that not all members of the PACE had grasped the depth of the amendments introduced to the original Law. Consequently, the Hungarians were livid, and the PACE members increasingly bemused and puzzled.

Speaking on the PACE decision, Csaba Tabajdi, the head of the Hungarian group at the PACE, said that it was a nonsense that Juergens had insisted on completing his presentation when the amendment complied with the demands of the Venice Committee—the PACE’s own legal advisory group. Moreover, the members of PACE were seemingly unaware of the government’s amendment of the Status Law, despite Hungarian efforts to have the discussion deferred until the situation was clarified for all member states. Both Tabajdi and Foreign Minister Kovacs rejected calls to further amend the Law.

OSCE All Clear Matters began to clear on July 1 when Commissioner Ekeus, obviously having taken the trouble to read the new Law, declared that it was no longer discriminatory, and that neighboring countries would probably reach agreement soon.

So with Europe finally at ease with the Status Law, all that needed to be done was for all the neighboring countries to sign up. Romania and Croatia did just that, but Slovakia remains obstinately opposed and has even threatened to introduce a counter Act to the law.

EU Accession Of course, this sort of row does not help the government to argue its case for accession to the EU. The April referendum on membership struggled to raise the turnout above 50%, so the public jury is still out on the benefits of EU membership.

Nevertheless, Prime Minister Peter Medgyessy is determined to push through EU membership and gain as many benefits as possible. On July 1, Finance Minister Csaba Laszlo announced his belief that the euro will have replaced the forint by 2007, assuming the budget deficit could be reduced to below 3% of GDP by then. * * *

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ROMANIA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 69.0 71.0 67.0 74.0 60.0 78.0 Financial Risk 36.5 38.5 35.0 39.0 30.0 41.0 Economic Risk 31.0 31.5 27.0 35.0 25.0 38.0 Composite Risk 68.3 70.5 64.5 74.0 57.5 78.5 Risk Band Mod. Low Mod. Low High Low

POLITICS Government Stability Cabinet Reshuffle In order to meet the requirements for membership of the European Union (EU), Prime Minister Adrian Nastase pledged to reduce bureaucracy in government, and reduced the size of his cabinet on June 16.

In a whirlwind of changes some ministers were simply fired for being inefficient, while others were relocated, or moved sideways. Nastase said the cuts were necessary to prepare Romania for the outset of EU membership discussions in 2004. One of the key changes was the merger of the Interior and Public Administration ministries.

The new cabinet is:

Ministerial Post Minister Prime Minister Adrian Nastase Foreign Affairs Mircea Geoana European Integration Hildegard Puwak Finance Mihai Tanasescu Defense Ioan Mircea Pascu Public Administration and Interior Ioan Rus Justice Roadica Stanoiu Labor, Social Solidarity and Family Elena Dumitru Economy and Trade Dan Ioan Popescu Agriculture, Waters, Forests, and Ilie Sarbu Environment Transport, Constructions and Tourism Miron Mitrea Education, Youth and Research Alexandru Athanasiu Culture Razvan Teodorescu Health Mircea Beuran Communication Dan Nica Government Coordination Serban Mihaileascu

In addition, Nastase appointed six Delegate Ministers, giving a grand total of 22 ministers compared with the previous grand total of 27.

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Delegate Ministerial Posts Delegate Minister Coordination of Control Activities Ionel Blanculeascu EU Chief Negotiator Vasile Puscas Parliament Axinte Gaspar Public Administration Gabriel Oprea Social Activities Marian Sarbu Trade Eugen Dijmarescu

Apart from achieving a modest decrease in the number of ministers, the reshuffle also gave Nastase the opportunity to address problem areas like health, where cutbacks in spending have left many hospitals completely unable to meet the most basic levels of hygiene and care.

Popular Support Although the government’s failings in health, and other areas, have attracted a good deal of criticism, they do not seem to have damaged its overall public standing to any great extent. An opinion poll released on June 27 showed that Nastase’s Social Democratic Party (PSD) enjoyed 43% of public support, with the opposition National Liberal Party (PNL) on 22%, and the opposition Democratic Party (PD) on 11%.

In addition, on July 7 the PSD gained more voter support when it merged with the much smaller Socialist Party of Labor (PSM) and the National Socialist Renewal Party (PSRM). The rationale behind the merger was given by PSD Vice-President Ioan Mircea Pascu, who said, “There cannot exist several Social Democratic parties in a member state of the European Social Democratic family and this is also valid for other political families.”

Coalition Divisions With a general election due in the fall of 2004, Pascu’s consolidation message was not lost on the other parliamentary parties, including the junior party in the government coalition, the Romanian Humanist Party (PUR). It could, it seems, lead to the party leaving the coalition altogether.

The problem appears to be that the PUR is beginning to re-identify itself as a Christian-Democratic party within the broader EU political scene, that is, on the center-right, a positioning that would make it increasingly difficult for the party to be allied to the PSD, which, while moving towards the center, is doing so very much from the left. This had led some country-level PUR organizations to break regional cooperation agreements with the PSD, most notably in Bacau County, and speculation that the PUR would find itself more comfortable in alliance with the opposition National Liberal Party (PNL).

On August 12, the PSD leadership called on PUR president Dan Voiculescu to make his position clear. As PSD Secretary-General Matei Agathon Dan commented, “If the PUR changes its doctrine, and joins the right-wing PNL, it is hard to believe we can still make a deal.” As the PUR only has six seats in the Chamber of Deputies and four in the Senate its departure would not collapse the government. But it could be a setback so close to the election.

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Opposition Divisions While the PUR may, or may not, be toying with the idea of an alliance with the PNL, the PNL is certainly looking for a linkup with PD. On July 9 the Executive Bureau of the PNL announced that it would consider an electoral alliance with the PD, with suggestions by some party members that the two parties could merge after the election.

Unfortunately for the PNL its proposal met with a firm rebuttal from PD leader Traian Basescu, who said the idea was born of intoxication, and may even have started within the PSD, because Nastase had recently referred to a PNL-PD alliance. So will it happen? Basescu’s comments suggest not, but then it is not entirely unknown for a politician to say one thing and do another.

Corruption Fleet File Life has been decidedly uncomfortable for Basescu of late. Having fended off the advances of the PNL, he was then placed under formal investigation on August 8 by the National Corruption Prosecution Office (PNA), and accused of abuse, embezzlement, forgery, and use of fraud. The charges related to his period as one of three transportation ministers in the 1993-1996 government of Prime Minister Nicolae Vacaroiu, and the privatization of the Romanian shipping fleet.

Clearly believing the case is politically motivated, Basescu said, “Romania has now a privately-owned fleet. If I am not wrong, the State Ownership Fund [FPS] was set up with the view to privatization: the incumbent officials will lose the elections, despite this frame-up.”

It looks like being a long and damaging case, but not only for the PD. The likelihood is that both the PD and PSD will not only be at each other’s throats for the duration of the investigation, raising the likelihood that a prolonged spate of allegation and counter-allegation will only serve to diminish the standing of both parties in the opinion polls.

External Conflict EU Membership While the rest of Europe went happily about its business during the EU summit in Thessaloniki on June 20, Nastase and his team were pouring over every utterance, trying desperately to impress the key players with their enthusiasm and looking for a signal that they were accepted into the locker room.

Having been knocked back for full EU membership in 2004 at the Copenhagen summit in November 2002, the European Council expressed its support for Romania in its efforts to achieve the objective of membership in 2007. In doing so, the EC set up a roadmap for accession for both Romania and Bulgaria.

Nastase said on June 20, “We expect this signal together with the one to be sent at the end of the Italian presidency in late December to be benchmarks, together with the EU progress report that should enable us to conclude negotiations next year.”

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He added that there would be many discussions on the shape of the new Europe over the next few years and that he wanted Romania to be an active participant in the debate; but to do so Romania would have to be on track for membership.

Emphasizing his desire to be a full player, Nastase said of the Thessaloniki discussions, “These issues will be important for us in the period ahead. It will be important to participate in these discussions and not be a spectator of debates, especially since they will be important for the Romanians' future as well, starting in 2007. We cannot enter a formula prepared by others without having the possibility of expressing our opinion in this pre-accession period.”

Socioeconomic Conditions IMF Letter of Intent There is a downside to EU membership, not least in the need to have an economy suited to the job. On August 4 the International Monetary Fund (IMF) and government officials reached agreement on a supplementary letter of intent, in particular over salaries paid in state-run industries.

Neven Mates, chief IMF negotiator for Romania said, “In the first half of 2003, the macroeconomic trends continued to be favorable, with GDP growth powerful and with the inflation's decrease more rapid than anticipated. The rapid rise of salaries over the level justified by the labor's productiveness and by the credit expansion to the private sector also induced more powerful demand from the private sector and applied pressure upon imports. As a result, the deficit of current account increased in comparison with the forecasts. The impact of the powerful increase in real salary upon the external competitiveness remains a preoccupation.”

It remains a preoccupation for Nastase too, especially in the auto and coal mining sectors, where industrial unrest has already been rife. The imprisonment of the leader of the miners’ union, Miron Cozma, following his arrest during a protest march, led to calls from the trades unions on July 31 for a presidential pardon.

In addition, auto plant workers at ARO Campulung went on strike and on hunger strike in late July because they had not received their salaries. Hardly perfect conditions for encouraging the supposedly imminent privatization of the plant.

EU Pre-Accession Program The government approved its Pre-accession Economic Program 2003 (PEP) on August 14. The aim of the program is to set the economy on track to meet the EU convergence criteria as set down by the Maastricht Treaty, through:

· boosting economic growth; · significantly increasing investments; · improving the sustainability of the public finances by the strict control of the budget deficit and improving the collection of public revenues; and · significantly reducing inflation.

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The PEP also aims to accelerate the structural reform process, enhance wages policies, significantly improve the business environment, and optimize legislation regarding bankruptcy and its implementation, further develop the financial sector, and improve the access to financing of small and middle-sized enterprises (IMMs).

The key targets set by the PEP for the 2003-2006 period include:

· a real GDP growth of 5.2%; · industrial output growth of 5%, especially due to the increase of the output of processing industry's branches; · a gradual reduction of the inflation rate to 4% by 2006; · the budget deficit to rise to 3.3% of GDP over 2003-2006, and the government to continue the policy of reducing the taxation rate on social insurance contributions; · maintaining a high growth level for exports of goods and services at a higher level than for import growth, and maintaining the current account within sustainable limits; · completing the privatization of commercial companies, the restructuring of the labor force and the development of the finance and banking sector.

Black Economy With the need to maximize revenue collection in mind, the government launched (yet) another crackdown on “illegal” workers in mid-August. Announcing on August 18 that he had asked the National Oversight Authority and the Labor Inspection to present a report to government on the situation, Prime Minister Nastase said that data obtained so far reveal that there are several hundreds of thousands persons working illegally in the underground economy, who consequently neither pay taxes on their income nor benefit from state social protection.

The government is concerned on both counts. As Nastase put it, “The existence of illegal labor creates us problems on short term, through the non-taxation of some of these activities, and on long term, because these persons need additional social protection when they reach the retirement age.”

The prime minister went on to say that checkups on illegal workers would be tightened through a monthly monitoring of the growth of the tax-paying employees and state benefit beneficiaries.

Nastase also announced that the Ministry of Public Finances would present to the government, twice a month, the situation of the budget debts of the 500 large taxpayers and the revenues achieved from arrears, as well as a report regarding the sum of approximately 27 trillion lei ($825 million) representing the unpaid receivables to the National Health Insurance Fund.

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UKRAINE RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 59.5 59.5 57.0 63.0 57.0 70.0 Financial Risk 39.5 40.5 35.0 40.0 30.0 43.0 Economic Risk 37.0 37.5 33.0 38.0 30.0 40.0 Composite Risk 68.0 68.8 62.5 70.5 58.5 76.5 Risk Band Mod. Mod. Mod. Low High Low

POLITICS Democratic Accountability Constitutional Changes President Leonid Kuchma suffered a major setback in his efforts to hang on to office beyond the constitutional two-term presidential limit in early July when parliament (the unicameral Supreme Council) failed to vote on his proposed constitutional changes.

The saga began in March this year when Kuchma announced he was sending a Bill to the 450-seat Supreme Council (parliament), setting out a new constitution (see ICRG No 6, 2003). If approved by parliament, the new constitution would then have to be approved by the people in a referendum.

The new proposals didn’t actually provide for an extension of Kuchma’s current term or for the two-term limit to be extended. However, one of the proposals was that the presidential, parliamentary, and local elections should be realigned. This would have the effect of shifting the presidential election, due in 2004, to 2005 or even 2006, giving Kuchma up to an additional two years in power. On top of that, he could try to legitimize an additional term in office by declaring he was standing under a new constitution.

The opposition members of parliament had no intention of falling into so obvious a trap. The storm of protest the draft constitution produced in parliament was so intense that Kuchma was forced to withdraw it. But, desperate to get it through, he resubmitted it to parliament on June 19 with some amendments agreed with his supporters, but with the key clauses he needed still included.

The concessions he made were the removal of the proposals to:

· establish a bicameral parliament; · reduce the number of legislators (currently 450); and · allow the direct passage of laws by means of a nationwide referendum.

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In return, Kuchma said he expected parliament to compromise on his other proposals, including the presidential right to appoint the Foreign Minister, the Defense Minister and the Interior Minister, as well as the heads of the Security Service of Ukraine, the State Customs Service, the State Tax Administration, and the State Committee for the Defense of the State Border. He also stressed the need to align the dates of elections for president, parliament, and local government, and that each should run for five years.

In submitting the amended constitution to parliament, Kuchma said, “I hope that parliamentarians are aware of their responsibility for the fate of Ukraine. I am confident that we have much more in common, compared to what separates us. On the scales of discussion, ‘yes’ outweighs ‘no’ by far. I look at the distance that lies ahead with optimism, because I know how much has already been overcome. I am confident that we will manage to create a formula of governance which will enable our state to be not just democratic and strong but also satisfying for its every citizen.”

Some hope.

Opposition When the bill went to parliament on July 3, Speaker Volodymyr Lytvyn struggled to keep order, as opposition legislators shouted and argued. A fistfight developed and opposition legislators mobbed the speaker’s rostrum. Unable to proceed, Lytvyn brought the session to a close.

The leader of the Our Ukraine (NU) opposition party, former prime minister and leading opposition contender for the presidency, Viktor Yushchenko, said that Kuchma’s proposals were not political reform but a revision of the constitution whose sole objective was to prolong power rather than ensure real democratic changes in the state. He summed up with the words, “We understand the regime will use these amendments to prolong its term and completely stifle democracy.”

Communist Party of Ukraine (KPU) leader Petro Symonenko simply said the general election should be held in 2004 “as required by the constitution.” He added that if parliament supported the principle of simultaneous elections, the presidential election could still be held as currently scheduled in 2004, and another held alongside the general election in 2006. There was no reason to extend the current presidency.

But, while the opposition from these and the other opposition parties was expected, the failure of the ostensibly pro-Kuchma majority to support the amended Bill was not—and it drove Kuchma to fury. Responding to the failure of parliament to pass his amendments, Kuchma said on July 7, “This was a typical example of absolute political irresponsibility. Not only on the part of the minority, that is the opposition, which has been recently quite often guided by the principle ‘the worse the better.’ but also on the part of the majority, which assumed responsibility, but was equally not up to the task.”

In other words, his proposals had not only rallied the opposition parties against him, but also failed to garner the support of his allies.

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Constitutional Court Option Desperate to find a way out for his master, the parliamentary majority coordinator, Anatoliy Tolstoukhov, said that it would be possible for parliament to vote to send the proposals to the Constitutional Court for a final decision.

Yushchenko was not averse to the proposal, but insisted that he would only support the Constitutional Court route if no preference was given to any individual proposal. In other words, the Court would have to decide whether Kuchma’s constitutional Bill was constitutional as a whole, not whether individual clauses had any political validity or practical application.

As Yushchenko knew full well this was of no use at all to Kuchma, as the individual clauses in the amended Bill would still have to be returned to parliament for debate.

With nowhere left to go, President Kuchma finally threw in the towel on July 15. He accused parliament of dumping the issue on the Constructional Court rather than fulfilling its duty to make a decision itself, and announced that he would withdraw his draft constitutional amendments from both parliament and the Constitutional Court.

He refused to accept that it was an opposition victory. However, the leader of the opposition Our Ukraine (NU) bloc, Viktor Yushchenko, welcomed Kuchma’s decision.

Kuchma’s Position It now looks very much as if the whole affair has left Kuchma high and dry. From an unassailable position just 18 months ago, he appears to have dug his own political grave through a mixture of bad management, bad judgment, and bad luck.

His crude attempt to extend the presidency at any cost has effectively handed it over to Yushchenko on a plate. The fact that Kuchma’s supporters seem to be deserting him may lead some of the key protagonists to jump ship early. Overall, it seems that the writing is on the wall for Kuchma, and, unless he very quickly cuts an immunity deal with Yushchenko, he could well reap a legal whirlwind in the post-presidential period could that could see him locked up in jail for a very long time.

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NORTH AFRICA MIDDLE EAST AND CENTRAL ASIA

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CURRENT RISK ASSESSMENTS AND FORECASTS

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Algeria 45.5 43.5 43.5 61.3 66.3 60.5 69.5 59.0 76.5 Armenia 61.0 31.0 32.5 60.3 62.3 57.5 63.0 55.5 71.5 Azerbaijan 64.0 38.5 35.0 67.3 68.8 58.0 69.0 54.0 70.5 Bahrain 77.0 44.0 38.5 80.3 79.8 76.0 81.0 67.0 79.5 Egypt 64.0 34.0 33.5 66.8 65.8 60.5 72.5 55.0 70.5 Iran 58.0 46.5 36.5 63.8 70.5 37.5 68.5 39.0 75.0 Iraq 41.5 22.5 20.0 45.5 42.0 39.0 53.3 37.5 72.5 Israel 67.5 39.5 38.0 65.3 72.5 60.0 72.0 58.0 77.5 Jordan 69.5 36.5 36.0 70.0 71.0 69.0 74.0 66.5 77.5 Kazakhstan 70.5 37.0 37.0 72.3 72.3 68.5 73.0 61.5 74.5 Kuwait 78.0 47.5 47.0 81.5 86.3 74.5 87.0 67.5 88.0 Lebanon 60.0 25.0 26.0 55.5 55.5 48.5 57.0 45.0 63.5 Libya 62.0 44.0 41.5 69.5 73.8 71.5 78.3 56.5 78.3 Morocco 73.5 40.0 37.0 72.5 75.3 69.0 76.0 62.5 77.5 Oman 75.5 42.0 42.0 79.8 79.8 70.5 74.0 65.5 74.5 Qatar 73.0 36.5 47.5 79.3 78.5 60.0 64.5 57.5 68.5 Saudi Arabia 67.0 45.5 41.0 73.0 76.8 61.0 72.5 60.0 78.0 Sudan 45.0 29.5 34.0 54.3 54.3 41.0 59.0 39.0 67.0 Syria 64.5 39.0 37.5 70.3 70.5 62.0 71.0 57.5 71.0 Tunisia 73.0 36.0 36.5 72.0 72.8 58.5 73.5 55.0 75.5 Turkey 65.5 31.5 26.5 57.3 61.8 57.5 65.5 60.5 73.0 United Arab Emir’s 78.0 45.0 46.0 82.0 84.5 79.5 85.5 71.5 86.5 Yemen, Republic 62.5 35.0 36.5 66.0 67.0 62.0 66.0 57.5 71.5

For historical risk ratings and key economic data on these and other countries in ICRG, please go to www.CountryData.com.

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ARMENIA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 59.0 61.0 55.0 62.0 55.0 70.0 Financial Risk 31.0 31.0 30.0 32.0 28.0 36.0 Economic Risk 30.5 32.5 30.0 32.0 28.0 37.0 Composite Risk 60.3 62.3 57.5 63.0 55.5 71.5 Risk Band Mod. Mod. High Mod. High Low

POLITICS Democratic Accountability The general election on May 25 produced a slight surprise in the makeup of the government coalition, but no surprise at all in the actual management of state power, which remains firmly in the hands of President Robert Sedraki Kocharyan and his Armenian Republican Party (HHK). Unfortunately, it is unlikely that the power was given by the electors, with all the evidence indicating yet another electoral coup by Kocharyan and the HHK.

The official turnout for the election was 61.2% and the full results were:

Party % of Vote Seats Republican Party of Armenia HHK 23.5 31 Justice A 13.6 14 Rule of Law Country, centrist OE 12.3 19 Armenian Revolutionary Federation Dashnak 11.4 11 National Unity NU 8.8 9 United Labor Party HZhAM 5.7 6 All Armenian Labor Party ALLP 1 Republic H 1 Independents 36 Undecided 3 Total Seats 131

The other parties that contested the election, but failed to cross the 5% of the vote threshold were:

Party % of Vote Liberal Democratic Union of Armenia HRAK 4.6 Mighty Fatherland HH 3.3 Armenian Democratic Liberal Party ARP 2.9 Dignity, Democracy, Motherland DDM 2.8 Union of Industrialists and Women UIW 2.0 Communist Party of Armenia HKK 2.0 People's Party of Armenia HZhK 1.1 Labor Law Unity LLU 1.0

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Opposition Disappointment For the opposition parties, including the Justice coalition, the result was devastating, especially after the rigged March 5 presidential elections when Justice leader Stepan Demirchyan failed to beat Kocharyan.

Speaking on June 2 Demirchyan said that the general election had been a continuation of the presidential election, and that the low turnout showed a gap between the authorities and the people where disappointment and hopelessness had become deeper.

He said the party had been set up at the demand of the people and had played an important role in the political life of the country for five years. The party, he said, had not forgotten its roots and had stuck to its principles, which is why it was in opposition.

Election Fraud The Organization for Security and Cooperation in Europe (OSCE) was unhappy with the election although it did say it was a significant improvement on the March 5 presidential election.

Infractions noticed by the OSCE on election day included:

· A fatal shooting at a polling station in Shahumian; · Isolated incidents of violence; · The withdrawal of the Chairman of the Parliament's Foreign Affairs Committee on Election Day, alleging intimidation; · One instance of vote buying; · Intimidation; · The presence of unauthorized persons in polling stations; · Compromised secrecy of voting by the military; · Procedures were poorly followed; · International observers experienced serious intimidation in their work and threats to their security.

The OSCE also found significant problems during the counting process in over 30% of polling stations, including:

· Falsification of protocols; · Ballot stuffing; · Removal of uncounted ballot papers; · Inconsistent application of criteria for invalidating ballots; · Proxies and observers were denied a clear view of the process; · Counting procedures were confused, even chaotic; · Intimidation of proxies was observed in a number of polling stations, including a serious incident

The head of the Parliamentary Assembly of the Council of Europe (PACE), Lord Russell-Johnston, said, “There was undoubted progress towards meeting international standards despite a limited number of reported incidents of a very

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serious nature. I hope that those responsible will be held accountable and that there will be no return to the sense of impunity evident in the recent presidential election.”

Well, hope springs eternal, and if PACE honestly believes that Kocharyan will take any further steps to improve the electoral process, it will need to spring for at least the next four years. However, PACE seem prepared to play the long game as far as Armenia is concerned.

Even Artak Sagradyan, the head of the Central Electoral Commission of Armenia was removed to remark, “I think we still have a long way to go before we can meet international standards.”

Government Stability Perhaps the biggest clue to the election’s outcome came from President Kocharyan who said on election day that the next government would be a coalition. We can only assume that Kocharyan’s predictive skills will one day enable him to foresee his own demise.

Both the HHK and the other leading pro-Kocharyan party, the Armenian Revolutionary Federation (Dashnak) did well in the election, with the HHK increasing its seats in parliament from 23 in the 1999 election to 31 and the Dashnak from nine to 11.

Even so, the HHK did not do as well as its leadership had hoped, partly due to the very poor turnout in urban areas and partly because of the vituperative slanging match between the HHK and Dashnak during the election campaign. As a result, the rurally-based Rule of Law Country (OE) was able to slip through to emerge as the second largest party.

Not that this outcome worried Kocharyan unduly—the OE is staunchly pro- Kocharyan as well. As a result a new coalition government comprising the HHK, OE, and Dashnak was formed with relative ease, with the three parties signing their coalition agreement at the president’s residence on June 11.

New Government Under the agreement, Dashnak and the OE received three ministerial appointments each, with all the other posts taken by the HHK. In addition, OE leader Artur Bagdasaryan was appointed to the post of speaker of the National Assembly, with Tigran Torosyan of the HHK and Vahan Ovanesyan of Dashnak appointed deputy speakers.

In order to make way for the new entrants from the OE and Dashnak, President Kocharyan carried out a reshuffle of the government on June 11 as follows:

From Dashnak, David Lokyan (formerly town planning minister) replaced David Zadoyan as agriculture minister, Agvan Vardanyan replaced Razmik Martirosyan as social security minister, and Norayr Davidyan replaced Ararat Mkrtchyan as health minister.

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From the OE, the party’s deputy chairman Sergo Yeritsyan replaced Levon Mkrtchyan as education and science minister, the chairwoman of the party’s Women’s Union, Tamara Pogosyan, replaced Roland Sharoyan as culture and youth affairs minister, and Ara Aramyan was appointed as Town Planning Minister to fill the vacancy left by David Lokyan.

All the other ministers—all members of the HHK—retained their posts, including Prime Minister Andranik Markaryan. The full government lineup is as follows:

Office Minister Prime Minister Andranik Markaryan Culture and Youth Affairs Tamara Pogosyan Agriculture David Lokyan Social Security Agvan Vardanyan Health Norayr Davidyan Education and Science Sergo Yeritsyan Town Planning Ara Aramyan Foreign Affairs Vardan Oskanyan, Defense Serzh Sarkisyan Justice David Arutyunyan Finance and Economy Vardan Khachatryan, Trade and Economic Development Karen Chshmarityan Transport and Communications Andranik Manukyan Energy Armen Movsisyan Coordinating Territorial Administration and Ovik Abramyan Production Infrastructures Ecology Vardan Ayvazyan Head of Government Staff Manuk Topuzyan

Bagdasaryan was duly elected by parliament on June 12. Aged only 35, he is the youngest parliamentary speaker in Armenia’s history.

Unstable Coalition? The new makeup may not be a happy one. The HHK and Dashnak might find it difficult to put behind them the bitterness of their attacks on each other during the election campaign, raising the risk not only of a fractious government, but also that this could strengthen the OE by making it the peacemaker.

This could encourage President Kocharyan to bring one or more parties into the coalition as a makeweight. That could bring the spotlight onto the National Unity party (NU). The party faded quite badly in the polls and its leader, Artashes Gegamyan, will now be under some pressure to make way for someone else. If Kocharyan brought Gegamyan into the Cabinet, it would not only help to offset the OE’s influence, but would also earn Gegamyan’s gratitude.

New Parliament There is general concern that the new members of parliament may not be as committed to the concept of democratic accountability as they might be. This is

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a particular problem for the HHK whose new government ministers must give up their parliamentary mandate to those lower down the party roll – usually wealthy businessmen who have bought their way onto the list. This may of course be merely coincidental, and just an indication of their eagerness for public service. Unfortunately experience in other former Soviet states suggests the process subverts the democratic process, embeds corruption, and spurs the growth of organized crime.

As yet, there have been no indications that this will happen (although Armenia is not exactly the most lawful state in the world anyway) and crime statistics seem relatively stable. No doubt the world’s police forces will be watching closely to see how the situation develops, especially given that the Caucuses region is a major route to Western Europe for heroin from Afghanistan and Pakistan.

Constitutional Referendum If there was a shred of good news for opposition forces on May 25 it was that President Kocharyan’s referendum on amendments to the constitution held on the same day as the general election did not gain sufficient support to be enacted.

The key elements of the referendum proposals were to:

· reduce the National Assembly from 131 members to 101 · lift the ban on dual citizenship, · specify a limited number of instances in which the president can dissolve parliament · remove the president’s power to appoint the government, enabling him only to appoint the prime minister, who in turn would appoint the other government ministers, and submit to parliament the government's program · retain the power of the president to dismiss the defense and foreign ministers, without requiring the consent of the prime minister.

President Robert Kocharyan said in March, “The success of the referendum will be a sign of irrefutable progress in reforming the state system, establishing the legal authorities, developing democracy and protecting human rights. It would be an unforgivable mistake to miss such an opportunity.”

Sadly for Kocharyan, the low turnout that made it easy to swing his friendly coalition into government also prevented the legitimization through referendum of his control over that government. Still, he can’t complain—one out of two is pretty good going, and a compliant government may just introduce the changes one by one anyway.

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IRAN RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 59.5 58.0 25.0 60.0 25.0 65.0 Financial Risk 29.5 46.5 25.0 38.0 25.0 42.0 Economic Risk 38.5 36.5 25.0 39.0 28.0 43.0 Composite Risk 63.8 70.5 37.5 68.5 39.0 75.0 Risk Band Mod. Low V.High Mod. V.High Low

POLITICS Government Stability Life remains plenty difficult for President Mohammad Khatami, who confronts continued resistance from the conservative clerical establishment to his efforts to promote political and social, as well as economic, reforms. Two pieces of legislation aimed at curbing the powers of the non-elected Guardian Council and enhancing the powers of the elected president, respectively, have been rejected by the same Guardian Council as inconsistent with the teachings of Islam.

The dominant reformist bloc in the parliament is now left with few options other than calling the conservatives’ bluff—although exactly how that should be done is not entirely clear—or folding and leaving the game to the hard-liners. The reformists generally appear to be still prepared to fight. However, President Khatami has reverted to form, and once again seems wary of further antagonizing the conservatives now that his controversial legislative effort has hit a roadblock.

As a result, discontent is growing within the ranks of the reformist camp, and could open divisions among religious moderates if Khatami does not assert himself. At the same time, student protesters, who have little use for clerical leaders of either the conservative or the reformist stripe, have stepped up their activities, bringing reprisals from the security services and praise from the US. Concerned reformists have pressed the president to distance himself fully from the conservative power structure, even if that means resigning, as the president offered to do in mid-July.

Finally, the government has become embroiled in simultaneous diplomatic flaps with the US over the country’s nuclear program, with Canada over the death in police custody of an Iranian-Canadian journalist, and with the UK over the arrest of a former Iranian diplomat, wanted in Argentina.

All in all, it seems that Khatami can count on rough going in the months ahead, assuming he remains in the presidency. Providing a glimmer of hope amid the gloom, the conservatives reportedly have floated a compromise on the legislative bill that, although rejected by the president, provides some indication that his decision to hold on just might end up paying dividends.

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Internal Conflict The month of June got off to a bad start for the government, as large protests spearheaded by student activists erupted in Tehran and descended into rioting that spread to several other cities. A crackdown by security forces brought a restoration of order within a few days, and some 4,000 people were arrested in connection with the riots.

The protests were sparked by the proposal to privatize the universities, but that cause quickly receded into the background as other groups joined in the demonstrations to voice their frustration with the failure of the reformists to implement promised political reforms and the obstructionist activities of the conservative clerics who dominate the judiciary, the military, and legislative review bodies.

The June protests provided evidence that public anger has risen sharply, and that anti-government forces are becoming increasingly bold. According to some reports, demonstrators were heard to chant “Death to Khamenei,” a reference to Ayatollah Ali Khamenei, who as Supreme Leader holds the highest office of state power, exceeding that of the head of state and government, President Khatami.

Shortly after the riots were contained, a group of nearly 250 reformist intellectuals and writers submitted an open letter, published in the Yas-e-nou newspaper, calling for Khamenei to resign. In the letter, the reform advocates asserted that the Iranian people had “the right to fully supervise the action of their rulers” and that placing “individuals…in the position of divine and absolute power is a clear heresy towards God.” Worthy as those statements may be, they run counter to the constitution bequeathed by the leader of the Islamic revolution in Iran, Ayatollah Khomeini, which specifies, in terms, that the Supreme Leader can only be supervised by God.

In early July, five reformist legislators issued an appeal to student groups to call off scheduled demonstrations to mark the anniversary of bloody student protests on July 9, 1999. The Interior Ministry had previously announced that all requests for permission to hold rallies had been rejected.

A key element of the planned protests was a sit-in by students from Tehran University at the UN headquarters in the capital. However, the students announced the cancellation of the event on the morning of July 9.

Several members of the Central Council of Allameh faction of the Office for Fostering Unity (the leading reformist student organization) held a news conference stating that they had submitted a letter to UN Secretary-General Kofi Annan detailing instances of human rights violations by the government and calling on the international community to exert pressure to bring an end to the unjust treatment of opponents of the clerical establishment.

According to Reza Amerinasab, a spokesperson for the Central Council of Allameh, the sit-in was called off after the students received a positive response from the UN.

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However, other representatives of the Office for Fostering Unity claimed that the protests were cancelled in response to a massive security clampdown in which hundreds of police and security personnel ringed the university campus, accompanied by dozens of the club-wielding vigilantes who make a habit of violently disrupting anti-government demonstrations. The decision to call off the sit-in came shortly after the arrest of three student leaders who held a press conference that morning.

But violence was not entirely averted, as the abduction of students by vigilantes touched off three-way street battles as police moved to intervene. Overall, sporadic demonstrations were reported in six areas of Tehran, as well as several other cities.

Reformist Resignations The student-led unrest, which has drawn the rhetorical support (and, according to some reports, financial assistance) from the US, has increased pressure on reformists in the government to lead from the front. Reformists and conservatives alike are mindful of the US role in the downfall of the government headed by President Mohammad Mosaddeq in 1953, and in light of recent events in neighboring Afghanistan and Iraq, have become understandably sensitive about any hint of US interest in the country’s domestic political situation.

The added danger for the reformists is that the mere threat of US intervention holds the potential to stir nationalist sentiment that could push the population into the embrace of the hard-liners, who maintain a dogmatically anti-US posture.

The limits on the reformists’ freedom of action were made clear in mid-July, when Khatami suggested that he would resign if that is what the Iranian people desire. The president has frequently hinted at resigning over his inability to push through the democratic reforms he promised during the 1997 election campaign, this marked the first time he had publicly raised the possibility.

Although Khatami has so far not made good on his threat/offer to resign, another high-profile reformist, Minister of Science, Research, and Technology Mostafa Moin, submitted his resignation to the president in late July. In his letter of resignation, which Khatami finally accepted in August, Moin decried the “poisoned political climate” created by the hard-liners and expressed his displeasure with the mass arrests of students in the wake of the June riots.

Moin had previously handed in his resignation following the crackdown on students in 1999, but Khatami refused to accept it.

Moin’s resignation has fueled speculation that other reformists will follow suit. Although none has yet done so, the press reported on August 21 that Abdollah Ramezanzadeh, the chief presidential spokesperson, planned to step down as a protest move. The rumors were subsequently denied by Ramezanzadeh, who remains in his post, although some suspect that he did submit his resignation, but withdrew it when Khatami refused to accept it.

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Democratic Accountability That is not to say that the reformists are merely biding their time as they choose an opportune moment to jump ship. Interior Minister Abdolvahed Musavi-Lari, for one, has already begun laying the ground for the next round of confrontation with the conservatives.

Two legislative measures submitted by Khatami in late 2002 and approved by parliament earlier this year call for the abolition of the Guardian Council to vet candidates for public office on the basis of their adherence to Islamic beliefs and loyalty to Ayatollah Khamenei and authorize the president to overturn court verdicts viewed to be in violation of the constitution. The Guardian Council rejected both bills, but Musavi-Lari has taken it upon himself (presumably with Khatami’s blessing) to assert the government’s control of electoral lists by other means.

In August, the interior minister issued a dire warning about the future of democracy in Iran, noting that turnout for city council elections held in late February drew a turnout as low as 12% in some districts. Musavi-Lari proposed that the troubling level of voter apathy resulted directly from the Guardian Council’s disqualification of many reformist candidates, which left voters with no real choice in elections. As such, he proclaimed that it was his ministry’s duty to the nation to revise the election lists to include qualified candidates rejected on purely political grounds, and that he was prepared to do so.

The Guardian Council objecting, pointing out that the Interior Ministry had no constitutional authority to take the action proposed by Musavi-Lari, and should he carry out his threat, the interior minister would be in violation of the law. However, Musavi-Lari is undeterred. In August, he ordered the closure of local offices set up by the Guardian Council to screen candidates for the 2004 legislative elections, claiming that the establishment of the supervisory offices, which are intended to help the Guardian Council get a read on the views of prospective candidates, have not been approved by either the Supreme Administrative Council or parliament, and so are illegal.

Conservatives Propose a Compromise The interior minister’s bold move appears to have at least partially achieved its goal, as the Guardian Council was reported to have offered a compromise to President Khatami in early September. According to Vice President Mohammad Ali Abtahi, Guardian Council leader Ayatollah Ahmad Jannati agreed to approve the bill on presidential powers if the bill regarding the approval of candidates was withdrawn.

Khatami, who in August stated that the survival of the Islamic republic at a minimum depended upon the implementation of both pieces of legislation, rejected the offer. According to sources close to the president, Khatami views the election reform as the more important of the two, and is not willing to give ground on the issue.

The fact that the hard-liners even considered a compromise is important for a number of reasons. First, the decisions of the Guardian Council are theoretically

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based on the conformity of legislation with Islamic teaching. Having rejected the election bill on that basis, the subsequent offer to put the measure back on the table raises questions about the theological validity of the Guardian Council’s initial action.

Second, the offer may encourage parliament to go over the Guardian Council’s head, appealing the matter to the Expediency Council and, if not satisfied with the outcome, to Khamenei himself. Although justifiably lumped in with the hard-liners, Khamenei has in the past exhibited a pragmatic streak when it comes to political disputes that threaten general stability. If the issue of the electoral reform is thrown in his lap, he could prove more flexible on the matter than the Guardian Council, which, after all, can hardly be expected to take the broader view when dealing with a direct threat to its own power.

Finally, the Guardian Council’s offer indicates that the hard-liners recognize that the reformists cannot simply be ignored, suggesting that the weakness of Khatami and his allies may be more apparent than real. In that regard, pressure from the US and other international quarters is a factor. While the threat of US intervention poses special near-term political difficulties for the reformists, the conservatives know full well that in the event that the threat becomes reality, their chances of survival would be better if the reformists were at their side, rather than on the sidelines.

External Conflict United States The chances of direct intervention by the US in the foreseeable future are slim, not least because of the many difficulties that the coalition forces led by the US and the UK are encountering in Iraq. That said, officials in Washington have kept up a steady barrage of accusations against the Iranian government, ranging from charges that Tehran is supporting the anti-coalition insurgency in Iraq to claims that the government is seeking to develop nuclear weapons, allegations that in the current international climate can accurately be described as fighting words.

Of all the charges, the accusation that Iran is developing nuclear weapons holds the greatest potential for becoming a rationale for military action. In July, the British newspaper, The Guardian, reported poll data indicating that a majority of Americans would support a war against Iran in necessary to prevent Tehran’s development of nuclear military capacity.

For its part, Iran claims its nuclear program is intended purely for non-military purposes. However, officials in the Bush administration contend that such assertions are a smokescreen for a weapons program that is fairly far along in development.

The nuclear issue took on a new sense of urgency following the publication of a report in the Los Angeles Times in early August that asserted Iran is in the final stages of developing a nuclear weapon. According to the article, based on a three-month investigation of sources that included previously secret documents, international officials, independent experts, and Iranian exiles, uranium samples

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taken by weapons inspectors in June tested positive for enrichment levels consistent with use in a nuclear weapon. Simultaneously, a team of lawyers from the International Atomic Energy Agency (IAEA) began talks with Iranian officials aimed at securing Tehran’s signature on the Additional Protocol to the Nuclear Non-proliferation Treaty, which would authorize snap inspections. Iran agreed to sign the protocol and allow unfettered access to its nuclear program, but only after the lifting of sanctions that block its access to advanced nuclear technology.

Responding to the allegations reported in the Los Angeles Times, White House Spokesman Scott McClellan announced that the US government is working with the International Atomic Energy Agency to “make sure that [Iran does] not continue on this course, which is unacceptable.” The US has been pressuring the IAEA to declare Iran in violation of the Nuclear Non-proliferation Treaty, but the nuclear watchdog has been resistant. An IAEA report released in June cited a number of failures in Tehran’s reporting of its nuclear activities, but stopped short of confirming the existence of a weapons program.

Iran shows little sign of backing down under pressure from the US. In mid- August, brushing aside the international criticism and suspicion, the country’s Supreme Nuclear Energy Council approved the construction of a second nuclear reactor. Meanwhile, the IAEA has ordered a full report of inspectors’ findings in preparation for meetings in September.

Iraq Another potential source of conflict with the US stems from charges by officials in Washington that Iran is actively working to undermine the efforts of coalition forces in Iraq to promote stability in the occupied country. However, the flip- side of Iran’s acknowledged capability to hinder US reconstruction plans is that Tehran’s influence with leaders of Iraq’s Shi’ite majority also could go a long way toward making the process unfold more smoothly.

In an apparent reflection of that fact, the US announced in mid-August that it had shut down the Washington offices of Mujahadeen e Khalq (MEK), an Iranian opposition group that until April 2003 had operated in Iraq under the protection of Saddam Hussein’s regime, and the National Council of Resistance of Iran, which the US State Department contends is little more than the MEK’s alias. The MEK has carried out terrorist attacks inside Iran and is included in the US State Department’s list of terrorist organizations.

The US move, which was praised a “positive” and “overdue” by Iran’s Foreign Ministry, came just two weeks after reports surfaced that US representatives were secretly meeting with Iranian officials to negotiate the handover of suspected al-Qaida members who the Iranian government claims to have in custody.

According to a report by NBC News in the US, the Bush administration even offered to exchange MEK suspects for the al-Qaida operatives, one of whom is reported to be Osama bin Laden’s son, Saad. The Bush administration has denied the reports of secret negotiations, and publicly has insisted that Iran turn

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over the suspected terrorists for questioning without conditions. However, Iran has refused to comply, citing the absence of an extradition treaty with the US.

In an obvious effort to foreclose any attempt by Washington to apply pressure by insinuating that the Iranian government is in reality harboring the al-Qaida operatives, officials in Tehran announced in mid-August that they had foiled an al-Qaida plot to carry out attacks on Iranian soil. Although the news was greeted with substantial skepticism in international quarters, the historical basis for animosity between Iran and al-Qaida is rock solid, given Tehran’s hostility toward the former Taliban regime in Afghanistan, which played host to bin Laden’s terrorist network for several years.

Outlook President Khatami and the reformists in parliament are effectively fighting a three-front battle for their political survival, domestically against both the hard- line clerics and advocates of secular democracy, and internationally against the US. In the reformists’ favor, the conservatives are in no position to make common cause with either the US or student-led activists, who would be even less enamored of a government fully dominated by the hard-liners.

In fact, as strange bedfellows' arrangements go, the most likely one to emerge is an alliance of the reformists and the conservatives to protect the authority of the clerical establishment from attacks by secular and foreign forces. Such an outcome, the probability of which rises in step with the pressure applied by the US, would seriously undermine the prospects for the peaceful introduction of the political and social liberalization that the Iranian people have been promised since 1997.

Avoiding that development will require a clear victory by the reformists over their hard-line rivals. The restoration of a general sense that change is possible would significantly reduce the chances that forces favoring secularization might be able to attract the broader following that would be necessary to carry out a social and political revolution.

At the same time, were the reformists able to bring the hard-liners to heel, the chances would be good that future elections would yield results similar to those in the 2000 parliamentary elections and the presidential elections in 1997 and 2001, when reformists scored landslide.

With legislative elections scheduled to be held in February 2004, time is running out for Khatami and his reformist allies.

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IRAQ RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 34.0 41.5 38.0 49.5 30.0 68.0 Financial Risk 31.0 22.5 20.0 27.0 25.0 40.0 Economic Risk 26.0 20.0 20.0 30.0 20.0 37.0 Composite Risk 45.5 42.0 39.0 53.3 37.5 72.5 Risk Band V.High V.High V.High High V.High Low

POLITICS The US-led coalition in Iraq has enjoyed only mixed success in its efforts to repair the country’s infrastructure, revive economic activity, and lay the foundation for the eventual transfer of political control to a democratically elected Iraqi government. The Coalition Provisional Authority (CPA) has made some tangible progress toward forming a viable democratic state from the ashes of Saddam Hussein’s autocratic regime, and conditions have remained fairly stable in the north and south of the country.

However, a continuing campaign of deadly harassment from guerrilla fighters and a series of bombings in recent weeks, which points to the emergence of a more coordinated effort to undermine reconstruction plans, have raised serious doubts about the ability of the occupying forces to maintain general stability without a significant increase in manpower, money, and supplies.

President George W. Bush, whose administration is facing political pressure at home over a mounting budget deficit, has as much as conceded that the US cannot afford its makeover of Iraq without substantial support from other world powers, and has approached the UN for help. Whether Washington’s appeals will receive a positive response from France, Russia, and Germany—all of which raised strenuous objections to US plans for war in early 2003—remains in doubt, raising important questions about the medium-term prospects for stability in Iraq.

Government Stability Under the leadership of the US Chief Administrator L. Paul Bremer, the CPA is laying the foundation for new political institutions and government structures. An Iraqi Governing Council (IGC) was established on July 13, and will oversee the post-war reconstruction as an interim government until conditions permit the holding of elections and the transfer of full political control to Iraqi nationals.

As originally envisioned, the IGC was to be nothing more than a toothless consultative group, but during negotiations for the creation of the body, Iraqi leaders and Sergio Vieira de Mello, the UN representative in Iraq, persuaded Bremer that the IGC needed some real power if it was to have any credibility. Bremer eventually agreed, and although he retained a veto on all of the Council’s actions, the IGC was given responsibility for choosing Cabinet ministers,

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approving the 2004 budget, and organizing an assembly to write the country’s new constitution. Once the constitution is written, the IGC will be responsible for organizing both a referendum to approve the document and, assuming the constitution is approved, national elections to choose a permanent representative government.

On September 1, Ibrahim Jafari, senior leader of the IGC, swore in the 25 members of the first post-Saddam Cabinet. Like the 25-member IGC, the Cabinet includes 13 Shiite Muslims, five Sunni Muslims, five Kurds, one ethnic Turk, and one Assyrian Christian, reflecting the composition of the Iraqi population. The full roster of Cabinet ministers, along with their religious/ethnic affiliation, is as follows:

Post Minister Affiliation Agriculture Abdul-Ameer Abboud Rahima Shiite Communications Haider al-Ebadi Shiite Construction and Housing Bayan Baqir Solagh Shiite Culture Mofeed Mohammed Jawad al- Shiite Jazaeri Education Alaudin Abdul-Saheb al-Alwan Shiite Electricity Ayham al-Samaraie Sunni Environment Abdul-Rahman Sidiq Kareem Kurd Finance Kamil Mubdir al-Gailani Sunni Foreign Affairs Hoshyar Zebari Kurd Health Khudayer Abbas Shiite Higher Education Zeyad Abdul-Razzaq Mohammed Sunni Aswad Human Rights Abdul-Basit Turki Sunni Immigration and Refugees Mohammed Jassem Khudair Shiite Industry and Minerals Mohammed Tawfik Raheem Kurd Interior Nori al-Badran Shiite Justice Hashim Abdul-Rahman al-Shibli Sunni Oil Ibrahim Mohamed Bahr al-Uloum Shiite Planning Mahdi al-Hafidh Shiite Public Works Nesreen Mustafa Sidiq Berwari Kurd Science and Technology Rashad Mandan Omar Turkoman Sport and Youth Ali Faik al-Ghadban Shiite Trade Ali Adbul-Amir Allawi Shiite Transport Behnam Zayya Polis Christian Water Resources Abdul-Latif Rashid Kurd Work and Social Affairs Sami Izara al-Majoun Shiite

Signs of Discord While the formation of the IGC and the Cabinet are undeniably positive steps, even here the potential for future problems is abundantly evident. Although the IGC had little trouble reaching agreement on its first official decision, which was to declare April 9, the anniversary of Saddam’s fall from power, a national holiday, other decisions have been delayed by deep divisions among the body’s members.

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When the IGC attempted to elect a president from among its members, it found it could not reach consensus, and instead it settled on a system of rotating the presidency among nine members. Likewise, the naming of the Cabinet was to have been one of the IGC’s first orders of business, but the process took six weeks.

Democratic Accountability Moreover, the IGC lacks credibility among the population on a number of counts, and some members have already begun to express frustration over that fact. Although the IGC has been granted some power, ultimate authority rests with Bremer. In response to criticism of the slow pace of decision-making, IGC member Mahmoud Othman complained, “[The Americans] have all the executive powers in this country. The budget belongs to them, security belongs to them, and then they ask us to deliver. How should we deliver?”

In addition, the majority of IGC members are former exiles who are favored by the US but have little or no base of support among Iraqis. A prime example is Ahmed Chalabi, the head of the formerly London-based Iraqi National Congress (INC), who has is apparently much admired by the US, which reportedly regards him as a possible candidate for Iraq’s first “democratically” elected president.

Unfortunately, Chalabi is a convicted crook and fraudster, having been sentenced in Jordan in 1992 to 22 years hard labor for embezzlement, fraud and currency- trading irregularities during his tenure as chairman of Petra Bank in the kingdom in the 1980s. Chalabi managed to skip the coutnry well before legal proceedings were opened against him. However, it was reported in August this year that mvoes were afoot in Jordan’s parliament to demand the government take legal steps to seek Chalabi's extradition.

Internal Conflict Concerns about political infighting and doubts about the popular support enjoyed by the IGC have so far taken a back seat to a more immediate and troubling problem, namely, the general success of efforts by armed opposition groups to disrupt reconstruction efforts, and thereby raise the financial and human costs of the US-led attempt to plant democracy in the inhospitable soil of the Middle Eastern desert.

Almost from the moment President Bush declared an end to major hostilities on May 1, guerrilla attacks on coalition forces have produced a steadily mounting death toll. In fact, more soldiers have been killed since the beginning of May than died in battle during the six-week war that began on March 19.

In military terms, the killing of a few dozen American soldiers does not make a significant dent in the 140,000-strong military force currently in Iraq. However, the purpose of the attacks is psychological, aimed at eroding morale among the coalition forces, undermining support for the war in the US, and creating such a level of uncertainty about exactly who is the enemy that tragic mistakes become inevitable, in the process destroying whatever trust exists between the occupiers and the occupied.

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Bombings It was initially believed that the attacks were the work of whatever remained of Saddam’s elite Republican Guard and Ba’ath Party, and the death of Saddam’s reviled sons, Uday and Qusay, at the hands of US forces on July 22, brought some hope that the attacks against military personnel would subside. Instead, the killings have continued with chilling regularity.

More recently, resistance efforts have expanded to include a second, more sophisticated, strategy of bombing attacks on vital infrastructure and high-profile international targets, including the Jordanian embassy and the UN headquarters in Baghdad. Small cells of fighters have bombed oil installations and water pipelines, creating delays in the promised economic improvement and exacerbating the hardship endured by a population dealing with the stifling heat of the Iraqi summer.

The August 13 attack on the UN headquarters, in particular, was clearly aimed at sending the message that the perpetrators can hit any target of their choosing at will, and seriously undermined confidence in the ability of the occupying forces to ensure the security of the population. In that regard, matters were not helped by INC leader Chalabi’s revelation that the IGC had received prior warning of the attack, and had passed the information on to the Americans.

As for exactly who is responsible for the deadly attacks, there remains substantial uncertainty. Following the UN bombing, Bremer named three groups as the likely culprits—Ba’athist supporters of Saddam Hussein, the Iraqi Ansar al-Islam organization, or foreign Islamist extremists. Some terrorism experts have claimed that the bombing bore the marks of al-Qaida.

Militant Islam Moreover, it is not clear whether the shootings, sabotage, and terrorist bombings are being carried out as part of a coordinated effort, or are the work of separate entities operating independently of one another. If they are connected, the level of coordination would indicate that the US-led forces are dealing with an enemy whose ranks are not limited to the holdouts from Saddam’s regime. If they are not connected, that raises the troubling proposition that the occupying forces face a battle against multiple enemies, possibly including secular nationalists, Iraqi fundamentalists, and foreign jihadists.

There are growing signs that Iraq has become the new battleground for jihadists from across the region. Extremist fighters have apparently responded to appeals from al-Qaida leaders to support the resistance to Western occupation of Iraq. Some 3,000 Saudi men have gone missing in recent weeks, and are believed to have made their way into Iraq to join the resistance. A coalition attack on a guerrilla training camp in mid-June left at least 70 non-Iraqi combatants dead. Among those killed were fighters from Saudi Arabia, Yemen, Syria, Sudan, and Afghanistan.

Religious Tensions The most troubling incident yet occurred in late August, when a car bomb was detonated at one of the holiest Shi’ite shrines in Iraq, the Imam Ali mosque in

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Najaf. The bombing killed more than 120 people, including Mohammed Baqer al-Hakim, a prominent Shi’ite cleric and the leader of the Supreme Council for Islamic Revolution in Iraq (SCIRI), a key player in the Iraqi political coalition. Al-Hakim’s brother, Abdel-Aziz al-Hakim, is a member of the IGC.

Shi’ite leaders immediately attributed the attack to Sunni extremists, but many in Najaf believe the bomb was planted by Saddam loyalists seeking to sow dissent among the country’s Muslims. Several days after the bombing of the Imam Ali mosque, gunmen opened fire inside a Sunni mosque in Baghdad. Again, the affiliation of the attackers was unclear, and alternative theories hold that the shooting was either carried out by Shi’ite militants in retaliation for the bombing or by Saddam loyalists seeking to give the appearance of a revenge attack.

According to foreign correspondents on the scene, tensions between Shi’ite and Sunni Muslims have been running high since the Najaf bombing, and there is widespread fear that the two groups are headed toward open warfare.

Moreover, there is a danger that religious hostility could be turned on the coalition forces, a threat that is reinforced by reports that Iraqi Shi’ite groups have armed themselves for defense purposes. Lebanon’s top Shi’ite cleric, Grand Ayatollah Sheikh Mohammed Hussein Fadlallah, has warned that Iraq’s Shi’ite population will join the resistance to the US-led occupation if it is not ended quickly, and there are reports that Iraqi Shi’ite groups have already begun arming themselves for defense purposes. One young Shi’ite cleric, Moqtada al- Sadr, has amassed a large and growing following with his fiery speeches against the occupation.

If the US-led military forces fail to provide improved security, an ever-larger section of the population could come to see their presence as the cause of the problem, rather than the source of a solution.

Economic Reconstruction As the US confronts the inescapable conclusion that conditions could run out of control without additional forces, the Bush administration has been warned that the cost of maintaining the current force may not be sustainable without outside help. In early August, the nonpartisan Congressional Budget Office (CBO) released a report stating that military operations in Iraq would cost between $8 billion and $29 billion, without taking into consideration reconstruction costs. According to Bremer, reconstruction costs stand to tack another $100 billion onto the total bill. Currently, overall US spending on Iraq is creeping close to $4 billion a month.

The Bush administration’s confident assertions that reconstruction could be financed with revenues from the sale of Iraqi oil have proven to be unfounded, largely owing to repeated sabotage of the country’s northern pipeline, which prior to the war was pumping about one million barrels of oil daily, and security concerns that have prompted foreign oil interests to adopt a cautious approach in Iraq.

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Since the northern pipeline was brought back on line after a four-month hiatus in July, oil flows from the fields around Kirkuk to the Turkish port of Ceyhan have been halted by four bombing attacks. The US is increasing security, but it is impossible to police every meter of pipeline.

Most of Iraq’s oil is still produced in the south, where production has resumed with only occasional interruptions due to looting of vital parts. However, quantities remain low; by early September, daily output was only about one-half of the pre-war level of two million barrels.

Given the difficulties, Bremer has estimated that output will probably not return to pre-war levels until late in 2004. That means that most of money to pay the steep price for Iraq’s reconstruction will continue to come out of the pocket of American taxpayers, making the project highly controversial back in the US, where the Bush administration is gearing up for a re-election campaign.

External Conflict Facing a financial commitment it cannot afford as the US budget deficit continues to grow by leaps and bounds, the Bush administration has sought assistance, in terms of both manpower and money, from the international community. In late August, US Deputy Secretary of State Richard Armitage announced that US officials were open to the creation of a UN-sponsored multinational force under unified (read US) command, a move aimed at convincing reluctant potential allies to contribute troops to the reconstruction effort.

In early September, the US submitted a draft resolution to the UN Security Council, calling for:

· a multinational force, under unified command, to contribute to “the maintenance of security and stability” in Iraq · UN endorsement of the IGC “as the principal body of an Iraqi interim administration” and support for its Cabinet appointees · the participation of delegates from the US and the UN to assist the IGC in developing “a timetable and program for the drafting of a new constitution for Iraq and of the holding of democratic elections” · assurances from the UN secretary-general that the resources of the UN will be made available, if requested by the IGC, to help establish an electoral process.

The draft resolution also reaffirms the “vital role” to be played by the UN in providing humanitarian relief, promoting economic reconstruction, and advancing efforts to restore and establish nations and local institutions in Iraq.

Early responses of the 15 Security Council members to the resolution were mixed, with the strongest reservations expressed by France, Germany, and Syria. However, even France—which strenuously resisted US efforts to win UN authorization to launch a war on Iraq and wields veto power as a permanent member of the Security Council—accepted the draft as a basis for negotiations.

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Those negotiations will not be easy for the US, which approaches the UN from a position of obvious weakness. The sticking points are likely to be Washington’s continued insistence on retaining administrative as well as military control, concerns among Security Council members about the implications of giving the UN’s stamp of approval to an interim government that was hand-picked by the US, and the absence of a specific time frame for the holding of elections and the end of the occupation.

Grumbling at the Top All indications are that the US does not have the luxury of time as it begins its negotiations with the UN. Evidence of growing tensions is everywhere in Iraq, including the highest levels of government. In early September, Mohammed Bahr al-Uloum, a senior member of the IGC, resigned to register his dissatisfaction with US efforts to establish order and security in the country. Another IGC member, Abdel-Aziz al-Hakim, made a public call for the US to end the occupation shortly before the funeral for his brother, former SCIRI leader Mohammed Baqer al-Hakim, who was killed in the Najaf bombing.

Meanwhile, Chalabi has publicly proclaimed his opposition to the expansion of the foreign military presence in Iraq, arguing (against all available evidence) that the current US-led force was sufficient to ensure stability. It is not difficult dismiss the conclusion that Chalabi’s real concern is that the internationalization of the post-war effort will dilute the authority of his benefactors in Washington, leaving his political future in the hands of leaders who are far less enamored of him than the hawks in the Bush administration.

Regardless of his motivation, the fact that outspoken opposition to US post-war strategy is coming even from Chalabi—a man who has no axe to grind with the Bush administration and whose political actions are to all appearances determined almost entirely by personal ambition—is a fairly good indication that anti-US sentiment is running fairly high throughout the interim administration.

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ISRAEL RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 60.0 67.5 56.0 68.0 54.0 75.0 Financial Risk 37.0 39.5 34.0 40.0 32.0 40.0 Economic Risk 33.5 38.0 30.0 36.0 30.0 40.0 Composite Risk 65.3 72.5 60.0 72.0 58.0 77.5 Risk Band Mod. Low Mod. Low High Low

POLITICS Internal Conflict The US-sponsored plan for peace between Israelis and Palestinians is in tatters following the collapse of a fragile truce in mid-August and the eruption of a power struggle among leaders on the Palestinian side. The faint hope that President George W. Bush’s roadmap for peace might produce a lasting resolution of the seemingly intractable conflict has been replaced by a widely felt fear of a new and even more deadly round of violence is in the offing.

The cease-fire demanded by Israel as the prerequisite for restarting the peace process held reasonably well for six weeks. While the Israeli government did not formally reciprocate the militants’ declaration of a cease-fire in late June, it had reduced its military presence in the West Bank and Gaza, and was in the process of negotiating the withdrawal of its military forces from key Palestinian towns when the truce was shattered.

But the violence never subsided completely, and tensions continued to run high throughout July and August. The level of acrimony between the two sides is such that even gestures intended as a sign of goodwill can become a new source of confrontation. Such was the case when Israel’s announcement that it would free several hundred Palestinian prisoners touched off street demonstrations protesting the detention of some 6,000 Palestinians in Israeli jails.

Another bone of contention is Israel’s construction of a security fence that in some places is routed deep into Palestinian territory, although not deep enough to satisfy some of the right-wing members of the Israeli government. The fence provides a semi-permanent marker of the government’s failure to comply with its obligation under the peace plan to dismantle all Jewish settlements constructed in the West Bank since 2001.

In July, US Secretary of State Colin Powell said of the fence, “we [the US administration] have problems with it.” Powell further intimated that failure to address Palestinian concerns over the issue might require the US to take punitive measures, such as withholding part of a package of $9 billion in guaranteed loans. Sharon agreed, at least in principle, to reroute the fence, but by mid- August there was little to indicate that Israel was complying.

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While such matters aggravated the situation, it was the Israeli government’s continued implementation of a policy of targeting the leaders of militant groups for assassination and sporadic terrorist attacks by members of Hamas and Islamic Jihad that ultimately proved decisive in the breakdown of the cease-fire.

Tit-for-Tat Murder The seemingly inexorable march away from peace began on August 8, when two Hamas commanders were killed in an Israeli raid on an alleged bomb-making facility in Nablus. The militants vowed revenge, which they exacted four days later by means of a bombing attack on soldiers near the West Bank settlement of Ariel. That same day, a renegade faction of Palestinian Authority (PA) President Yasser Arafat’s Fatah carried out a separate attack on a shopping mall in the town of Rosh Ha’ayin, in central Israel.

The Israelis showed commendable restraint following the two bombings, but further trouble became all but inevitable when Ahmed Sidr, the Islamic Jihad commander in Hebron, was killed on August 14 in a firefight with Israeli soldiers. Islamic Jihad threatened retribution “like an earthquake.”

The seismic event turned out to be the suicide bombing of a Jerusalem bus on August 19, in which 22 people, including six children, were killed, and more than 100 were injured. Although both Islamic Jihad and Hamas initially claimed responsibility for the attack, it appears to have been the work of Hamas.

In any case, Israeli opponents of the peace process on the political right pointed to the bombing as confirmation of their contention that the cease-fire was never more than a ruse by the militants to gain some political cover under which to regroup and rearm. Prime Minister Ariel Sharon, who has been viewed as a veritable dove compared to members of the right-wing parties on which his government depends for its majority, summed up the perspective bluntly, stating, “The Palestinians never weaned themselves from the basic desire to murder Jews. This was always Arafat’s policy—simultaneous negotiations and terrorism.”

In light of the prime minister’s expressed views, the official Israeli response to the Jerusalem bomb attack came as no real surprise. On August 20, the Israeli government announced that all contact with the militants would end. Meanwhile, Israeli military personnel were redeployed in force to the Palestinian territories in the West Bank and at checkpoints in the Gaza Strip, as the Israeli government issued a virtual declaration of war against the militants.

On August 21, following the assassination of Hamas co-founder Ismail Abu Shanab, who was widely viewed to be a moderate within the group and a proponent of peace, both Hamas and Islamic Jihad renounced the cease-fire, effectively putting the peace process on indefinite hold.

Palestinian Power Struggle Subsequent efforts by the PA to salvage the peace process merely underscored the powerlessness of Palestinian officials to rein in the militants. The Palestinian government ordered a crackdown on Hamas and Islamic Jihad, and

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Palestinian security forces conducted raids on suspected organizers of the Jerusalem bombing. However, sources reportedly close to Prime Minister Mahmoud Abbas’ inner circle expressed concern that a meaningful clampdown held the threat of provoking a civil war among the Palestinians.

US Secretary of State Colin Powell appealed to Abbas and Arafat to preserve the roadmap by persuading the militants to declare a new cease-fire. Arafat responded by asserting that the exercise would be pointless in the absence of reciprocal measures by Israel, including the cessation of its policy of assassinations and a formal cease-fire pledge.

When it became clear that Arafat was not about to strain himself in the interest of peace, Abbas called upon the president to surrender his control over Palestinian security forces, which Arafat partially retained in a government reorganization carried out in May 2003 that saw Abbas’ installed in the newly created post of prime minister. Arafat became more assertive in late August, calling on Hamas and Islamic Jihad to end their campaign of violence, but only after Abbas convened a special meeting of his Cabinet to formulate a plan to wrest authority from the president.

The struggle between the two leaders ultimately spelled the end of Abbas’ short- lived tenure in power in early September. Declaring that infighting was deterring progress toward peace, Abbas issued an ultimatum to the Palestinian legislature, demanding that they support him and grant him the authority required to fulfill the PA’s obligations under the roadmap, or strip him of his office.

Having forced the Palestinians to choose between him and Arafat, the outcome was not difficult to predict. The creation of the prime minister’s post and the choice of Abbas to fill it both reflected the desire of the US to devise a means of overcoming Israeli objections to negotiating directly with Arafat without actually courting heightened instability in the PA by removing the Palestinian leader from power. Under the circumstances, it should hardly have been surprising that Abbas was never able to shake the perception that he was a puppet of the US and, by proxy, of Israel.

On September 6, Abbas submitted his resignation to a closed session of the parliament. Expressing deep bitterness over Israel’s bad faith, he also took parting shots at the US, which he accused of failing to adequately pressure Israel to comply with the terms of the roadmap, and Arafat’s supporters, whom he criticized for sabotaging peace efforts in the name of narrow political interests.

Outlook Where things go from here is far from certain. Sharon has made clear that his government will not hold talks with Arafat or any prime minister controlled by him.

The problem is that it falls to Arafat to nominate Abbas’ replacement, and he is unlikely to choose someone who poses a threat to his authority, except under pressure from outside. Thus, there is a Catch-22 situation: a compliant prime

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minister will be unacceptable to Israel, while an independent premier will find it difficult, if not impossible, to dispel perceptions that he is subservient to the US and Israel.

The Israeli right-wing’s solution to this dilemma is to eliminate Arafat from the equation altogether. Members of the Israeli Cabinet have reportedly put forward proposals in that vein, ranging from deportation to a bombing strike on the PA president’s Ramallah headquarters, where he has been held in virtual imprisonment for the past 20 months. However, the US has issued an unambiguous warning that Israel is not to take any action against Arafat.

On the Israeli side, the government’s stepped up efforts against the militants point to a resumption of the incessant violence that Israelis and Palestinians alike have endured since the initiation of the second intifada in September 2000. Even as world leaders bemoaned the implications of Abbas’ resignation for peace hopes, Prime Minister Sharon shrugged it off as “an internal Palestinian matter,” before announcing that Hamas leaders are “marked for death” and will not be given a moment’s rest.

Meanwhile, an unsuccessful attempt to assassinate Hamas spiritual leader Sheikh Ahmed Yassin, who was slightly injured in an aerial strike on an apartment building in Gaza City, brought an ominous warning from Hamas, which declared that Israel had “opened the gates of hell” and that the attack would bring reprisals “of a kind Israel has not seen before.”

ECONOMY While Prime Minister Sharon grapples with the political repercussions of the collapse of the peace process, his chief rival in the governing Likud party, Finance Minister Binyamin Netanyahu, will be kept busy trying to minimize the damage to the country’s battered economy. In May, Netanyahu won approval of a package of reforms aimed at trimming a fiscal deficit that grew to 4% of GDP in 2002 and invigorating an economy that has contracted in each of the last two years as the climate of violence has constrained economic activity.

The reforms—which include a reduction in the top income tax rate from 60% to 49%, deep cuts to social programs, an increase in the retirement age, and a privatization program targeting utilities, banking, and other key sectors— represent a frontal assault on an expansive welfare state that is a vestige of Israel’s socialist roots. In response to widespread protests over the reforms, some of which were implemented as early as July, Netanyahu conceded that they will create significant short-term hardship, but that the economy will show signs of renewed vigor by the second half of 2004.

The market response came far more quickly, as the stock market climbed 50% in the first half of 2003, while the currency has gained in value by 10%. During the April-June quarter, investment in the pivotal high-tech industry, most of it from foreign sources, grew by 70%, indicating renewed interest in a sector that was battered by the near simultaneous bursting of the dot-com bubble and the eruption of the intifada.

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Unfortunately, it is highly doubtful that those signs of improvement can be sustained in a climate of surging violence, which is what appears to be in the offing. Although the economy is still expected to show positive growth for the first time in three years in 2003, there will be little momentum going into 2004, and further cuts—and more protests—are all but inevitable if the government intends to meet its target of reducing the budget deficit to 3% of GDP next year.

Israel: Selected Economic Indicators 1998 1999 2000 2001 2002 Domestic Economic Indicators GDP (Nominal, $bn) 102.82 103.10 113.92 111.78 102.70 Per Capita GDP ($) 17223 16902 18111 17330 15537 Real GDP Growth Rate (%) 3.0 2.7 7.4 -0.9 -1.0 Inflation Rate (%) 5.4 5.2 1.2 1.1 5.6

Budget Revenues ($bn) 46.72 45.71 52.15 49.22 51.80 Budget Expenditures ($bn) 48.17 47.81 51.17 53.33 55.86 Budget Balance ($bn) -1.45 -2.10 0.98 -4.11 -4.06 Budget Balance/GDP (%) -1.4 -2.0 0.9 -3.7 -4.0

Change in Real Wages (%) 4.6 2.8 5.1 7.4 -4.5 Unemployment Rate (%) 8.6 8.9 8.8 9.3 10.3

International Economic Indicators Current Account ($bn) -1.45 -2.04 -1.08 -2.29 -2.14 Current Account/GDP (%) -1.4 -2.0 -1.0 -2.1 -2.1

Total Foreign Debt ($bn) 41.60 43.40 61.79 55.67 56.70 Total Foreign Debt/GDP (%) 40.5 42.1 54.2 49.8 55.2 Debt Service $bn 6.74 7.55 8.87 7.80 7.51 Debt Service/XGS (%) 16.2 16.1 15.5 15.6 15.6 Liquidity (months import cover) 10.4 9.0 8.2 9.1 9.3

Currency Exchange Rate 3.800 4.140 4.077 4.206 4.738 Currency Change (%) -10.2 -8.9 1.5 -3.2 -12.6

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KUWAIT RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 72.5 78.0 68.0 78.0 60.0 80.0 Financial Risk 48.0 47.5 43.0 48.0 45.0 48.0 Economic Risk 42.5 47.0 38.0 48.0 30.0 48.0 Composite Risk 81.5 86.3 74.5 87.0 67.5 88.0 Risk Band V.Low V.Low Low V.Low Mod. V.Low

POLITICS Democratic Accountability Parliamentary elections held on July 5 produced some changes in the composition of the National Assembly, although not of the variety that had been anticipated. Prior to the election, groups opposing the tight political control exerted by the ruling Al Sabah family controlled a majority in the 50-member National Assembly, with secularist liberals holding 14 seats and Islamic fundamentalists claiming 20 seats.

As the elections were held on the heels of the overthrow of Iraqi leader Saddam Hussein by US-UK military forces, the expectation was that either or both of those groups might make significant gains. The government’s unabashed cooperation with the US-led effort provided a convenient issue over which both liberals and Islamists might engage in some exuberant monarchy bashing.

Moreover, the outcome of the war appeared to carry additional benefits for liberals and Islamists, although in different ways. On the one hand, the very real threat that Saddam’s regime had posed to Kuwait’s sovereignty had served as a key justification for the maintenance of tight control by the monarchy, and the removal of that threat seemed likely to provide a boost to the liberals’ arguments in favor of greater democracy. On the other hand, the prospect of a long-term military occupation of a neighboring Islamic country by Western military forces provided Islamists with an especially meaty campaign issue.

In fact, the liberals suffered a staggering defeat at the polls, as their parliamentary ranks were reduced to just three members, while the Islamists gained only a single seat to bring their total to 21. Thus, the anti-monarchy forces saw their numbers reduced to a total of 24 seats, two short of an outright majority.

Meanwhile, candidates running on an overtly pro-monarchy platform won 14 seats, and independent candidates representing tribal and local interests won the remaining 12 National Assembly posts.

Predictably, government officials proclaimed the elections an indication of the genuine democracy enjoyed by the Kuwaiti people—that is, the 15% of the

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Kuwaiti people who are actually allowed to vote. Barred from participating in elections are women, anyone under the age of 21, and members of the police force. Among those eligible to vote, turnout was quite high, estimated at about 80%.

But the government’s opponents charged that the outcome had less to do with the will of the people than it did with the wealth of the monarchy. According to reports in the media, the elections were marred by vote buying and vote transfers. One newspaper published a story claiming that the government established a secret fund to support pro-monarchy candidates.

Government Stability New Government Following the election, Emir Jaber Al-Ahmad Al-Jaber Al-Sabah appointed his brother, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, previously deputy prime minister and minister of foreign affairs, to head the new government. As is traditional, the Cabinet is dominated by Al-Sabah family members, although several key posts, including Commerce and Industry, Justice, and Public Works, are held by individuals from outside the royal family.

The full Cabinet is as follows:

Post Minister Prime Minister Sabah Al-Ahmad Al-Jaber Al-Sabah Deputy Prime ministers Interior Nawaf Al-Ahmad Al-Jaber Al-Sabah Cabinet Affairs Muhammad Dayfallah Al-Sharar Defense Jaber Al-Mubarak Al-Hamad Al-Sabah Ministers Awqaf & Islamic Affairs Abdullah Maatouq Al-Maatouq Commerce & Industry Abdullah Abdelrahman Al-Taweel Education Rashid Hamad Muhammad Al-Hamad Energy Ahmad Al-Fahad Al-Ahmad Al-Sabah Finance Mahmoud Abdelkhaliq Al-Nouri Foreign Affairs, Labor & Social Muhammad Al-Sabah Al-Salem Al-Sabah Affairs Health Muhammad Ahmad Al-Jarallah Information Muhammad Abdullah Abu Al-Hassan Justice Ahmad Yaacoub Baqer Al-Abdullah Public Works Bader Nasser Al-Humaidi Transport & Planning Ahmad Abdullah Al-Ahmad Al-Sabah

Important changes include the elevation of Sheikh Muhammad Al-Sabah Al- Salem Al-Sabah to the post of minister of foreign affairs. Muhammad had previously served as minister of state for foreign affairs under Sabah. He was also named as the acting minister of labor and social affairs.

Another key change was the appointment of Sheikh Ahmad Fahd Al-Ahmad Al- Sabah to head the Ministry of Energy. Ahmad, who served as information

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minister in the previous government, took on the energy portfolio in 2002, supposedly on a temporary basis, after a scandal involving a deadly explosion at the Al-Shuaiba oil refinery forced the resignation of Adel Al-Subeih, and several prospective replacements turned down the job.

Break with Tradition Without doubt, the most important change was Sabah’s appointment as prime minister. Traditionally, Kuwait’s head of government has been the crown prince, a position currently held by Saad Al-Abdullah Al-Salem Al-Sabah. However, like Emir Jaber, his cousin, Saad is of advanced age (both are in their 70s) and in poor health, reportedly suffering from colon cancer. Saad has been out of the country receiving medical treatment almost continuously since 1997, and Sabah, as first deputy prime minister, served as acting prime minister for much of that time.

Thus, the importance of Sabah’s appointment is mostly symbolic, in that he has now been granted the authority to go along with the responsibilities of prime minister. To that extent, the move should help to remove the perception of a power vacuum at the top, a factor that played an important role in the trouble Sabah encountered when trying to fill the energy minister’s post back in 2002.

Nevertheless, the separation of the posts of crown prince and prime minister is a potentially historic event in the country’s political evolution. For years, democracy advocates have demanded such a move, contending that the heir to the throne was too powerful to hold a post that is theoretically accountable to the National Assembly. While Sabah is currently second in the line of royal succession, his chances of actually becoming emir are rather slim, and so he can be expected to be less immune that was Saad to criticism from within the legislative chamber.

Moreover, Sabah is generally perceived to be more supportive than either Jaber or Saad of an enhanced political role for the elected parliament. Having been granted legitimate claim to both the title and the powers of the prime minister, he will now be in a position to do something about it.

Succession At the same time, the elevation of Sabah to the prime minister’s post is certain to reinvigorate debate, both within and outside the royal family, over the issue of succession. By tradition, the emirship alternates between the Al-Salem and Al- Jaber branches of the family. On that basis, were Jaber and Saad to expire in fairly rapid succession, Sabah could find himself on the throne, and his stint as prime minister would no doubt make for greater stability under those circumstances.

However, there is pressure growing among members of the Al-Salem line, currently headed by Saad, to have one of its younger members succeed Jaber, a move that would all but destroy Sabah’s chances of ever gaining the throne. That said, Sabah’s resentment and appetite for palace intrigue might both be dampened by the consolation prize of the premiership, and such considerations probably played a role in the decision to name Jaber’s brother to the post.

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Government Program Laying out his government’s program, Sabah declared that his main objectives would be the strengthening of national unity and improving cooperation between the legislative and executive branches of government. With those goals in mind, he promised to work with the National Assembly to win approval for a privatization program that has been dormant since it was first proposed in 1992 and to revive the North Kuwait Project (NKP), a program aimed at attracting $7 billion in foreign investment to revamp the country’s five northern oil fields. He also pledged to “concentrate on fighting corruption in [public] administration, including the military establishment.”

Female Suffrage Another item on the government’s agenda, albeit a late addition, is the issue of extending the vote to women. Although women are granted equal status with men under the 1962 constitution, an electoral law from that same year limits the right to vote and hold public office to men over the age of 21. In 1999, Jaber issued a decree granting women the vote, but the measure was rejected by Islamists and conservative tribal leaders in the National Assembly. Subsequent efforts to challenge the unequal treatment of women as unconstitutional met with failure, as the high court threw out the cases on jurisdictional grounds.

Prior to the July elections, Sabah was quoted as saying that the new Assembly would approve a law permitting women to vote and hold political office. However, that was before the liberals took their beating at the ballot box.

When Sabah initially presented his government’s program, no mention was made of voting rights for women, no doubt in recognition of the strengthened position in parliament of the reform’s opponents. In response to protests from liberals and women’s groups, Sabah announced in late July that his government will seek a revision of the country’s electoral law. However, he faces an uphill battle on that score, and it is doubtful that he will embrace women’s right to vote as a project conducive to the strengthening of national unity.

In mid August, some 50 former government ministers, parliamentarians, businessmen, university graduates and political activists signed a petition asking for constitutional reform in Kuwait. The petition called for greater freedom and extended right to vote for women.

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SUDAN RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 44.5 45.0 30.0 50.0 28.0 60.0 Financial Risk 30.5 29.5 25.0 32.0 25.0 36.0 Economic Risk 33.5 34.0 27.0 36.0 25.0 38.0 Composite Risk 54.3 54.3 41.0 59.0 39.0 67.0 Risk Band High High V.High High V.High Mod.

POLITICS Internal Conflict A seventh round of peace talks between representatives from President Omar al- Bashir’s National Congress Party (NCP) government and the rebel Sudan People’s Liberation Movement (SPLM) under a framework agreement signed in Machakos, Kenya in 2002 ended on August 24, with plans to resume negotiations in mid-September. As the round of talks concluded, local media reports indicated that the two sides had made progress toward an agreement on some secondary issues concerning the future division of political power within a proposed national unity government. However, the SPLM played down the extent of any progress that had been made, and instead accused the government of attempting to derail the process by retreating on agreements reached during earlier rounds of talks.

Machakos Protocol The Machakos Protocol signed in July 2002 represents the broad outline of an agreement aimed at ending two decades of civil war between the northern Muslim government and rebel forces that have been fighting to win greater autonomy for the mainly Christian and animist people of the south.

The agreement provides for the separation of state and religion in the south, while permitting the continued application of Islamic law in the north, and a more equitable distribution of the country’s oil wealth (which is primarily located in the south but has disproportionately benefited the north). In addition, the two sides have agreed to share power at the national level for a period of six years, after which the people of southern Sudan will hold a referendum on self- determination.

Negotiators have since sought to put flesh on the skeleton represented by the Machakos Protocol, with key areas of focus including the division of the wealth and power, and the maintenance of security during the six-year transition period. Progress has been made on the division of revenue, but the two sides have failed to present mutually acceptable terms for a range of important issues, particularly security-related matters, and peace talks showed every sign of approaching an impasse when the fifth round of talks concluded in May.

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Nakuru Document In an effort to jump-start the process, the Inter-governmental Authority on Development (IGAD), the international body mediating the peace talks, sought to redirect negotiations away from the previous issue-by-issue format toward a more comprehensive approach. With that goal in mind, mediators presented a draft agreement—the so-called Nakuru document—to both sides in early July. According to IGAD mediators, the proposals represented the best opportunity for a just and lasting peace.

Several elements of the Nakuru document drew immediate, and forceful, resistance from the Sudanese government. The first was the proposal that Khartoum be a place where all citizens enjoy equal status, implying that Islamic law could not be enforced there as elsewhere in the north under the terms of the Machakos Protocol.

Just as controversially, IGAD proposed that the regions of Abyei, the Nuba Mountains, and Southern Blue Nile—all of which are located in the north, but whose populations are in the main more closely aligned to the south in terms of religion and ethnicity—be organized as special administrative regions enjoying relative autonomy from either the north or the south. The government argued that both of these proposals directly conflicted with central principles of the Machakos Protocol, namely, the division of political control according to region, and the establishment of Islamic law in the north and secular law in the south.

Other offending proposals included the draft agreement’s support for separate northern and southern military forces, and, or so Khartoum has inferred, the establishment of separate central banks in each of the main regions. Government officials contend that both proposals merely prepare the ground for eventual southern secession, rather than promoting the maintenance of national integrity.

In addition, Khartoum voiced objections to proposals that the vice president, who will represent the southern region, be given an effective veto over the president’s decisions on some matters.

Not surprisingly, the government flatly rejected the document. President Omar Hassan al-Bashir delivered a fiery speech in which he told international mediators they could “go to hell” if they insisted in imposing the proposals as a basis for negotiations, and government officials openly suggested that the peace process might be better served if mediated by the African Union or the Arab League, rather than IGAD. Even more troubling, in rejecting the Nakuru document, the government implied its refusal to honor previously concluded agreements on less controversial matters, effectively setting the entire process back at the starting line.

For their part, the rebels were more accepting of the draft agreement, as might have been expected given the fact that on just about every contentious issue, the Nakuru document appears to come down in favor of the southern position. On August 9, the umbrella Southern Political Parties Inside Sudan, which includes members of the SPLM and other rebel organizations, as well as representatives of southern church, student, and labor organizations, issued a press release in

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which they accused President Bashir of misrepresenting both the content and the intent of the Nakuru document in an effort to undermine the credibility of IGAD and thwart the peace process.

The signatories to the release asserted that the Nakuru document does not call for—nor does the south necessarily desire—a separate banking and/or currency system, while the government itself has previously supported the existence of separate regional armies, which in any case are provided for in the current constitution. As for the veto power wielded by the vice president, the southern parties pointed out that the approval of the vice president is required only in three areas—the declaration of a state of emergency, the proroguing of the legislature, and the filling of positions created as a direct result of the peace agreement—all of which are central to the success of any peace agreement and so, they argued, must be handled in collegial fashion.

On this last point, the release succinctly summarized the chief sticking point to progress in the overall negotiations, stating, “It is inconceivable that decisions that will surely affect the proper implementation of the Peace Agreement can be left in the hands of one party to the Agreement. This is more so, given the gulf of lack of confidence between the parties.” It is precisely that lack of confidence, or trust, between the two sides that stands as the chief impediment to further progress.

US Intervention Risks As negotiations continue to drag, pressure is growing for the US to push the process along by threatening to impose penalties authorized under the Sudan Peace Act. Approved by the US Congress in October 2002, the Act requires the Bush administration to determine every six months if the Sudanese government is negotiating in good faith.

If officials in Washington determine that Bashir’s government is obstructing progress toward peace, the Bush administration is authorized to increase financial support for the SPLM and its military arm, the Sudan People’s Liberation Army (SPLA), and to propose to Congress the imposition of further sanctions against Khartoum. In addition, other possible steps include the introduction of a UN arms embargo, the blocking of Sudan’s access to World Bank and IMF funds, and measures designed to limit Khartoum’s ability to use proceeds from oil exports to prosecute its war against the rebels.

So far, the Bush administration’s actions related to the Sudan Peace Act indicate that Washington favors a gentle approach toward Bashir’s government. The first report issued under the Act, which was presented in April 2003, noted that the talks were progressing, albeit imperfectly, and that the peace process governed by the Machakos Protocol still represented the best opportunity for bringing an end to the armed conflict. The report further concluded that while the government’s cooperation with humanitarian efforts remained poor, some improvement was evident, as Khartoum had reduced its overt obstruction of relief efforts. With IGAD concurring in those assessments, the US chose not to take action against the government.

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The Bush administration’s action met with significant protests from some quarters of the US Congress, and it is an open question whether President Bush will be able (or inclined) to give the government another pass when the issue comes up again in October, unless there are concrete signs of progress. As its stands now, progress will be measured on the basis of acceptance of the Nakuru document, which Bashir continues to reject outright.

Events over the next two months are likely to figure significantly in the long- term prospects for peace. When negotiations resume in September, IGAD may choose to simply impose the rejected draft agreement on both sides, and threaten to give up its role in negotiations if it is not accepted. If the government fails to accept IGAD’s terms, the US would have no excuse to refrain from exercising its options under the Sudan Peace Act, a move as likely to produce a resumption of armed conflict as to force concessions from Khartoum.

Economic Considerations The best hope that the government will soften its position rests on Khartoum’s clear desire to avoid undermining the economic progress that has been achieved through Sudan’s closer integration into the global economy. In July, government officials confirmed their commitment to setting economic policy within the framework of an IMF-sponsored reform program that was initiated in 1997. At the same time, Sudanese representatives opened discussions in Geneva regarding the country’s efforts to win membership in the WTO, a goal that Bashir’s government has been pursuing for more than a decade.

In contrast to developing countries in sub-Saharan Africa and Latin America, whose political leaders have begun to openly question the merits of following the economic prescriptions of multilateral organizations, Sudan has flourished under the IMF’s guidance. In the most recent edition of its annual publication, African Development Indicators, the World Bank pointed to Sudan, along with Uganda, Tanzania, and Ethiopia, as models for other countries in the region.

The country’s economic success is undeniable. Since seeking the support of the IMF in 1997, Sudan’s economy has grown by an annual average of nearly 6%, second only to Botswana among African countries and more than double the 2.7% average for the continent as a whole during the same period. Economic progress has had some positive social consequences, with life expectancy rising to 56 years from 50 years in the early 1990s, and other indicators of development, such as access to health care, literacy, and school enrolment ratios, also showing significant improvement.

Much of this progress has occurred despite the civil war, but the government is well aware that it cannot count on continued success if armed conflict resumes. The international climate has changed dramatically since the onset of the war on terrorism in late 2001, and the potentially hobbling effect of sanctions and other measures that might be imposed under the Sudan Peace Act will undoubtedly give officials in Khartoum pause. Consequently, the government is expected to adopt a more conciliatory posture come September. Its failure to do so could force the US to enforce the Sudan Peace Act in order to preserve its credibility in mediation efforts—a move that would in itself hamper the peace process.

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TUNISIA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 71.5 73.0 50.0 73.0 50.0 76.0 Financial Risk 36.5 36.0 33.0 37.0 30.0 38.0 Economic Risk 36.0 36.5 34.0 37.0 30.0 37.0 Composite Risk 72.0 72.8 58.5 73.5 55.0 75.5 Risk Band Low Low High Low High Low

POLITICS Democratic Accountability President Zine El Abidine Ben Ali ended months of speculation in late July, when he formally announced at the party congress of the governing Democratic Constitutional Rally (RCD) that he will stand for a fourth term in 2004. The announcement came just weeks after Tunisian government spokespeople were forced to deny a report by the French daily Liberation that the 66-year-old president has been suffering from serious health problems. According to the report, based on information obtained from an unnamed source within the RCD, the president is battling prostate cancer, and has doctors living at his residence.

Apart from the rumors of ill health, there appeared to be little reason to expect that Ben Ali might choose to forego a re-election bid. His supporters have been stumping for a constitutional amendment to allow him to seek a fourth term, and as the RCD fully dominates the legislative process, and Ben Ali fully dominates the RCD, the constitutional revision, which was approved in a referendum in mid-2002 and formally instituted in mid-May 2003, was a done deal from the start.

Cosmetic Political Reforms In addition to the amendment freeing Ben Ali to seek a fourth term, another constitutional change allows up to five opposition parties to nominate candidates for the presidency. Given that the two challengers who went up against Ben Ali in 1999 won a combined 0.5% of the vote, moves to crowd the field of also-rans can only be characterized as a step in the direction of greater democracy in a theoretical sense.

While the opposition looks to have little chance of gaining any kind of political foothold in the foreseeable future, prospects for politically ambitious women are somewhat better, particularly if they happen to be members of the RCD. In late July, Ben Ali announced that 25% of the party’s nominations for the next round of legislative and municipal elections will be reserved for women, who currently hold 11% of the seats in the Chamber of Deputies and 21% of positions on municipal councils. In addition, women are to make up 25% of the delegates to future party congresses and hold one-quarter of the seats on the RCD Central Committee.

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Human Rights Charges Persist In early June, human rights watchdog Amnesty International (AI) published its first major report on Tunisia since 1998. The report accused Tunisia of systematic human rights abuses and being in violation of international norms and laws. Kate Allen, AI’s director for the UK, stated, “In Tunisia, opponents or perceived opponents of the government are subjected to abuse within a justice system resembling one from a Kafka novel.”

That assessment was echoed by the chairman of Tunisian League for the Defense of Human Rights (LTDH), Mokhtar Trifi, who reported in mid-July that progress on improving human rights had “stagnated” since 2002. Trifi noted that there remain 500-600 political prisoners or prisoners of conscience detained in the country’s jails. (For their part, government officials insist that all detainees are convicted criminals.) In addition, the LTDH leader asserted that despite government pledges to improve conditions in prisons, the situation remains “catastrophic,” and authorities continue to prevent human rights advocates from visiting detention centers.

In a related development, the media advocacy group, Reporters Without Borders (RSF) honored Zouhair Yahyaoui, a Tunisian journalist jailed after establishing an opposition web site, with their first Cyber-Freedom Prize in July. Yahyaoui was arrested in June 2002, and sentenced to two years imprisonment for “spreading false news” on his Tunezine.com site.

Yahyaoui came under scrutiny from the authorities after he posted an open letter to Ben Ali written by his uncle, former high court judge Mokhtar Yahyaoui, in July 2001, in which the justice decried “the total absence of independence in the judiciary,” adding the charge that the nation’s judges “are forced to issue verdicts determined in advance, which they cannot discuss and which in no way reflect what the law says.”

According to RSF, Tunisian authorities use a wide range of sophisticated techniques to thwart the free flow of information via the Internet, including barring public access to non-approved web sites, intercepting e-mail, regulating the activities of Internet service providers, monitoring Internet cafes, and even sending computer viruses to political dissidents.

ECONOMY Despite a dismal human rights record, the vast majority of Tunisians will remain silent on the matter and will undoubtedly carry Ben Ali to a fourth consecutive term in the presidency in 2004, largely owing to the general sense of contentment fostered by the continued health of the economy. Even in 2002, when the economy suffered the simultaneous (and potentially devastating) shocks of a deadly terrorist attack, weak demand in key external markets, and a fourth consecutive year of drought, the economy registered positive growth of 1.7% and the high unemployment rate actually fell slightly, despite a tightening of fiscal and monetary policies.

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An annual review of the country’s economy published by the IMF in August included much praise for the government’s success in the economic realm since the mid-1990s, which Fund representatives attributed to “appropriate macroeconomic policies, a forward-thinking but gradual opening of the economy, and well-targeted social policies.” The IMF noted significant progress in reducing poverty, improving Tunisia’s external position, and containing inflation.

The IMF presented a promising picture of developments in 2003, forecasting real GDP growth in excess of 5%, while noting that the as yet uncertain recovery of the tourism sector will pose a key risk to the outlook. There is little sign of inflation, despite some easing of monetary policy since the beginning of the year, and the IMF foresees a narrowing of the current account deficit and steady levels of international reserves. Fund directors noted that further market reforms will be necessary to reduce the still worrisome unemployment rate, which remains close to 15%, and to cut the level of public debt.

Figures provided by the Ministry of Development and International Cooperation in mid-2003 paint an even rosier picture for the economy this year, with growth projected to reach 5.5% on the back of improving exports, which grew by 19% during January—May compared to the same period last year. The government’s growth forecast is based largely on the expected rebound in agricultural exports, which have benefited from ample rains during the most recent growing season.

It is likely that both the IMF and the government are too optimistic in their growth projections, given the dim prospects for a significant increase in demand from the EU, the destination of some 80% of Tunisia’s exports. Moreover, as noted by the IMF, the potential for further terrorism-related setbacks for the tourism sector is a source of concern.

Tunisia: Selected Economic and Financial Indicators, 1998-2003 1998 1999 2000 2001 2002 2003 Est. Proj. Production and income (percent change) Real GDP 4.8 6.1 4.7 4.9 1.7 5.5 GDP deflator 3.0 3.1 3.3 2.7 2.3 2.1 Consumer price index (CPI), average 3.1 2.7 3.0 1.9 2.8 2.5 Gross national savings 23.5 24.1 23.1 23.5 21.8 22.3 (in percent of GDP) Gross investment (in percent of GDP) 26.9 26.3 27.3 27.8 25.3 25.5

External sector (percent change) Exports of goods, f.o.b. (in US$) 3.1 2.3 -0.4 13.2 3.8 22.1 Imports of goods, f.o.b. (in US$) 4.9 1.6 1.0 11.3 -0.2 19.6 Trade balance (in percent of GDP) -10.9 -10.3 -11.6 -12.0 -10.1 -9.2 Current account, excl. grants -3.4 -2.2 -4.2 -4.3 -3.5 -3.1 (in percent of GDP) Real effective exchange rate 1 -0.1 1.0 -1.7 -2.4 -1.2 ...

Central government (percent of GDP) 2 Total revenue, excluding grants 24.3 23.9 24.0 24.4 24.4 24.0

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Tunisia: Selected Economic and Financial Indicators, 1998-2003 1998 1999 2000 2001 2002 2003 Est. Proj. Total expenditure and net lending 27.9 27.8 27.8 28.1 27.9 27.1 Central government balance, -3.6 -3.9 -3.8 -3.8 -3.5 -3.1 excluding grants and privatization Central government balance, including -3.2 -3.5 -3.7 -3.5 -3.1 -2.8 grants, excluding privatization Total government debt 56.3 60.0 60.7 62.4 61.6 59.2 (foreign and domestic)

Money and credit (percent change) Credit to the economy 8.7 8.5 8.0 10.3 5.4 7.4 Broad money (M3) 6.0 18.6 13.2 11.3 5.2 8.4 Velocity of circulation (GDP/M3) 1.9 1.79 1.71 1.65 1.63 1.62 Liquidity aggregate (M4) 9.3 9.42 4.47 6.42 4.00 8.17 Interest rate (money market rate, in 6.9 5.88 5.88 5.94 5.91 ... percent, end of period)

Official reserves Gross official reserves 1.9 2.3 1.8 2.0 2.3 2.6 (US$ billions, end of period) In months of imports of goods, c.i.f. 2.7 3.2 2.6 2.5 2.9 2.8

Total external debt (Short, medium and long term) External debt (in percent of GDP) 56.5 60.1 59.7 60.2 61.0 57.2 Debt service ratio 19.2 18.5 22.6 15.6 17.2 16.4 (percent of exports of GNFS) Source: IMF, August 2003. 1-IMF Information Notice System (average). 2- Excludes the social security accounts.

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SUB-SAHARAN AFRICA

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CURRENT RISK ASSESSMENTS AND FORECASTS

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Angola 58.5 25.5 26.0 53.3 55.0 44.0 54.0 46.5 63.0 Botswana 76.5 44.0 38.5 79.8 79.5 73.5 80.0 69.5 82.5 Burkina Faso 63.5 23.5 29.5 58.8 58.3 53.5 62.3 52.5 66.5 Cameroon 54.0 33.5 36.5 63.0 62.0 57.5 65.0 54.0 66.0 Congo, Dem. Rep. 38.5 24.5 30.0 41.5 46.5 47.0 56.5 41.5 66.5 Congo, Rep. 56.5 23.0 18.0 61.0 48.8 53.0 62.0 49.0 64.5 Cote d'Ivoire 46.5 30.5 34.0 56.3 55.5 58.0 67.3 57.0 69.0 Ethiopia 54.0 31.5 33.0 59.3 59.3 51.5 60.5 52.5 67.0 Gabon 60.5 34.0 38.0 66.5 66.3 61.5 72.0 58.0 75.0 Gambia 69.5 29.0 35.5 66.3 67.0 65.0 72.5 61.0 76.0 Ghana 61.5 33.5 31.0 60.8 63.0 59.0 65.5 57.5 67.5 Guinea 53.5 35.5 35.0 62.5 62.0 58.5 64.5 54.0 66.5 Guinea-Bissau 47.5 21.5 26.0 48.3 47.5 46.5 53.5 50.5 63.5 Kenya 62.5 36.5 32.5 58.0 65.8 62.5 68.0 54.0 71.5 Liberia 32.5 18.5 21.0 45.3 36.0 35.0 44.5 35.0 53.0 Madagascar 60.0 32.0 28.0 58.8 60.0 63.5 69.5 60.0 71.0 Malawi 56.5 25.5 26.0 54.0 54.0 49.0 57.5 49.0 63.0 Mali 61.5 31.5 24.0 58.8 58.5 58.5 68.5 54.0 71.0 Mozambique 63.0 34.0 25.5 61.0 61.3 54.5 63.5 48.0 65.0 Namibia 76.0 41.0 35.5 76.5 76.3 70.5 77.8 68.0 79.5 Niger 58.5 25.5 31.0 57.5 57.5 57.5 64.5 53.0 67.5 Nigeria 44.0 39.0 31.0 51.0 57.0 49.5 65.5 49.0 71.5 Senegal 59.0 35.5 35.0 66.0 64.8 60.0 64.0 52.5 66.0 Sierra Leone 56.0 21.0 25.5 52.3 51.3 45.0 55.5 37.5 60.0 Somalia 27.0 35.5 28.5 43.0 45.5 33.0 43.5 32.0 55.5 South Africa 65.5 36.0 35.5 67.5 68.5 61.5 71.0 56.5 73.0 Tanzania 60.5 21.0 34.5 57.5 58.0 55.0 62.0 52.5 66.5 Togo 51.0 34.0 31.5 59.8 58.3 54.0 62.0 54.0 68.0 Uganda 56.5 34.0 33.5 63.0 62.0 58.0 64.0 54.0 67.5 Zambia 57.5 25.0 23.0 49.0 52.8 55.0 58.0 52.0 64.0 Zimbabwe 38.0 21.0 9.5 37.3 34.3 27.5 55.0 34.0 66.0

For historical risk ratings and key economic data on these and other countries in ICRG, please go to www.CountryData.com.

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BOTSWANA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 75.5 76.5 71.0 76.0 65.0 77.0 Financial Risk 45.0 44.0 40.0 45.0 38.0 47.0 Economic Risk 39.0 38.5 36.0 39.0 36.0 41.0 Composite Risk 79.8 79.5 73.5 80.0 69.5 82.5 Risk Band Low Low Low V.Low Mod. V.Low

POLITICS Government Stability BDP Disunity? With just over a year to go before Botswana holds its next general elections, President Festus Gontebanye Mogae’s governing Botswana Democratic Party (BDP) faces possible divisions following election of Vice President Ian Khama to the party chairmanship on July 21.

In truth, the BDP has suffered from simmering factionalism since Mogae came to office following the retirement of Ketumile Masire from the presidency in 1998. That switch led to divisions between the pro-Masire old guard of the party and the more reform minded faction headed up by Mogae.

One of the key figures within the old guard was the party’s chairman, Ponatshego Kedikilwe, who Mogae subsequently appointed as finance and development minister in a bid to placate that faction of the BDP. However, Mogae also appointed Khama to the vice presidency, in order to consolidate his own power base and counter that of the Kedikilwe camp.

Ian Khama Khama is the son of Botswana’s founding president, Seretse Khama, and prior to his appointment as vice president, was commander of the Botswana Defense Force (BDF). As such, he is highly respected within the country at large for his family connections, and continues to command considerable influence within the armed forces.

By appointing Khama as vice president, and therefore his constitutional successor in the event of him having to give up the presidency, Mogae effectively clipped the wings of the Kedikilwe faction of the BDP by aligning himself with a virtually unassailable political figure. That is how the situation has remained during Mogae’s term, with Kedikilwe’s ability to wield the unarguable influence he has within the BDP constrained by the fact that Khama has more.

Mogae has indicated he wants a second successive term. As the president is elected by parliament immediately after each parliamentary election, the strength

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of the factions within the BDP is critical. Hence, it appears that Mogae now wants to further consolidate his hold over the party at the expense of Kedikilwe and his supporters.

That desire became apparent ahead of the party chairmanship elections, when Mogae publicly declared his preference for Khama. Such overt presidential pressure on what was supposed to be a democratic process drew howls of criticism from the opposition Botswana National Front (BNF) and a goodly proportion of the country’s media, who argued that it smacked of political patronage in the extreme and undermined Botswana’s reputation—virtually unmatched in sub-Saharan Africa—for democratic transparency.

Party Chairmanship Results In the event, those arguments failed to sway sufficient numbers of BDP delegates to the party congress in late July. In fact, Khama won a handsome victory, polling some 512 votes to Kedikilwe’s 218. Meanwhile, Kedikilwe also failed to be elected to the central committee of the party.

Kedikilwe remained stoic in the face of his defeat, saying that it would not mark the end of his political career. He called on his supporters to “defend and enhance” Botswana’s democratic principles, regardless of the degree of political power available to them.

Outlook On the face of it, the magnitude of Khama’s victory would tend to suggest that the BDP will be a deal more cohesive under his chairmanship and, insofar as the Mogae/Khama camp is concerned, that is likely.

However, for all his mild-mannered acceptance of defeat, Kedikilwe has been humiliated. His assertion that his political career will continue raises the obvious question; in what capacity? One possible answer is that he might spend the rest of the time between now and the election building up support within the party to challenge Mogae for the presidency. Given that he was able to command the support of nearly a third of delegates to the party congress, such a challenge could have an outside chance of succeeding. And, even if it failed, it could have serious implications for the stability of the BDP as a whole.

Given that, it is perhaps surprising that the BNF opposed Mogae’s support of Khama so vociferously, as ultimately it might prove to have been the catalyst for a formal split that will improve its own electoral chances come October next year.

New Health Minister President Mogae appointed a new health minister on July 30 following the departure of Mrs. Joy Phumaphi from the post to take up her new appointment as assistant director general at the World Health Organization (WHO) in Geneva. Her replacement was named as Mrs. Lesogo Mosomi, whose former position as assistant minister of labor and home affairs was taken by government newcomer, Major-General Moeng Pheto, who was elected as the member of parliament (MP) for Lentsweletau last year.

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Although not connected, Mrs. Phumaphi’s departure to the WHO came just as the HIV/AIDS vaccine trials approved by her ministry have come under fire. The trials, conducted by the Botswana Harvard AIDS Partnership for HIV Research and Education, began earlier this year after successful tests on animals. The study is scheduled to last 18 months and will involve 42 HIV-negative volunteers from Botswana and the United States.

In order to safeguard the rights of participants in the trials, the Partnership established a Community Advisory Board (CAB) with responsibility for ensuring that the trials respect the human rights, dignity, and safety the participants. However, one of the Board’s members, the Botswana Center for Human Rights (BCHR), has criticized it for having no legal standing and for offering little legal protection for those taking part in the trials.

BCHR Director Alice Mogwe pointed out in early August that board cannot sue or be sued if anything adverse happens to trial participants. She called on the government to enforce the principles of the International Covenant on Civil and Political Rights, which it has ratified. The covenant stipulates that no one shall be subjected to scientific experimentation.

The government claims that no additional protection is needed as the interests of participants in the trials are protected by the Drugs and Related Substances Act. Dismissing Ms. Mogwe’s complaint, the government’s director of health services, Dr. Patson Mazonde, noted, “There is also the Health Research and Development Committee, whose job it is to look after all health-related research taking place in Botswana, to make sure it is done in a scientific manner.”

External Conflict USA In the meantime, the BNF has been concentrating its criticism on Botswana’s relations with the USA, which although traditionally good, look to have strengthened further of late.

The most obvious indication of that strengthening came on July 10, when US President George W. Bush visited the country as part of his whistle-stop tour of Africa. Aside from expressing some disappointment at the failure of Botswana and its fellow South African Development Council (SADC) nations to pressure Zimbabwean President Robert Mugabe into stepping down, Bush had all but unqualified praise for the country, lauding its “sound governance,” along with the strength of its democracy and vigor of its economy.

All that is music to the ears of Mogae, who is keen to encourage greater US investment in Botswana, and to give a boost to the tourist sector, which has suffered from the knock-on effects of the crisis in Zimbabwe. Similarly, he welcomed Bush’s assertion that on the subject of HIV/AIDS, Botswana had made an important start to combating the disease and would receive US help in continuing that fight.

However, outside of warm words, President Bush promised little in the way of concrete help, and so far there has been little movement in the US Congress on

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his January pledge to provide Africa with some $15 billion in AIDS aid over the next five years. That Botswana could use a significant proportion of that funding is undeniable. Despite the “vigor” of its economy, it is one of Africa’s AIDS’ hotspots, with some 38% of the adult population infected by its precursor, HIV.

BNF Opposition Away from the AIDS issue, the BNF was highly critical of Bush’s visit. It regards the USA as a terrorist state that has illegally overthrown governments throughout the world, most recently of course, that of Iraq.

Aside from that general loathing, the BNF voiced some rather more specific concerns regarding Botswana’s recent ties to the USA. Not least of those was the allegation, which surfaced in early July, that US Central Intelligence Agency (CIA) operatives had used Botswana as a conduit through which to transport several suspected al-Qaida members to the USA after they had been kidnapped in Malawi. Both the Botswana government and the CIA deny those claims.

International Criminal Court Row Rather more substantially, the BNF came out strongly in mid-July against the government’s agreement with the USA over the controversial issue of the International Criminal Court (ICC).

The USA has famously refused to sign up to the court, for fear that US soldiers and other government personnel taking part in the country’s various policing/intervention operations around the world could be subjected to war crimes’ prosecutions.

Shortly ahead of Bush’s visit, the government approved a deal with the USA under which Botswana will not surrender US nationals to the ICC, be they “current or former government officials, employees (including contractors) or military personnel.” The only exceptions are that US nationals would be handed over to a tribunal established under the auspices of the UN Security Council (UNSC), or to the ICC if the USA gave its consent.

The BNF argues first that as a permanent member of the UNSC, the USA could always veto the establishment of a tribunal to look into alleged criminality on the part of its citizens, and that second; consent for US nationals to face the ICC is unlikely ever to be given by the USA itself.

Consequently, the BDP has, according to the BNF, become an apologist for US excesses around the globe and, in so doing, has weakened Botswana’s own judicial system.

Whether or not US relations will remain an issue in the run-up to the elections is unclear, but the possibility cannot be ruled out, particularly as the ICC issue has the potential to cast Mogae and his government as weak puppets of the US administration.

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Internal Conflict Strikes’ Threat President Mogae also faces the discomfiting prospect of widespread strike action ahead of the elections. Generally, Botswana’s trade unions are a fairly quiescent lot, but have begun to kick up a bit of a fuss of late. The most recent trouble was in September and November 2002, with teachers and local authority employees organized a wave of strikes for better pay. The strikes stopped after President Festus Mogae intervened and promised the trade unions he would appoint a salary commission to look into their grievances.

The salary commission published its recommendations for a new public sector salary structure on August 11. In essence, it calls for hefty salary increases for top public servants, but reduced rises for middle management on the basis in order to “align local salaries with best international practice.”

The recommendations produced howls of outrage from the trade unions. The chairman of Botswana Unified Local Government Services Association, Galetsoswe Lebitsa, said, “We are very, very unhappy with the recommendations of the commission. If (government) implements them, there will be a lot of chaos…We hope that all unions will come together and draw up a strategy to address this problem.” He added, “We had hoped the commission would bridge the gap between the top and middle management but...they have now made things worse and the salary ratio is now 1:49.”

The same line was taken by Samuel Molaodi, the administrative secretary of the biggest and most radical union, the Manual Workers Union, who said his union “rejected the recommendation of the commission” and launched a blistering attack on the government'. “We do not believe that the recommendations of the commission should be imposed on the public service and we would like to negotiate salaries of our members with government. The problem that we are facing is that this government is stubborn and does not want to negotiate and it never takes the unions' concerns into consideration.”

The unions’ biggest complaint is their inability to participate in wage bargaining, leaving them with only two options—acceptance or confrontation. As Molaodi noted, “The labor laws…should be amended to allow a collective bargaining process, which is in line with International Labor Organization standards.”

So, the stage seems set for confrontation. Unless, of course, President Mogae feels that compromise is preferable, given the proximity of the general election.

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CONGO, REPUBLIC RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 55.0 56.5 50.0 58.0 48.0 58.0 Financial Risk 30.5 23.0 29.0 31.0 25.0 34.0 Economic Risk 36.5 18.0 27.0 35.0 25.0 37.0 Composite Risk 61.0 48.8 53.0 62.0 49.0 64.5 Risk Band Mod. V.High High Mod. V.High Mod.

POLITICS Internal/External Conflict Since the signing of a peace agreement in mid-March this year between President Dennis Sassou-Nguesso’s government and the rebel Ninja forces that had been operating in the Pool region, Congo has enjoyed a period of relative internal stability that has seen several thousand former rebel fighters disarm and allowed the focus of government to shift away from the conflict.

Beach Case Ruling However, that focus looks set to return over the coming weeks following a mid- June ruling by the International Court of Justice (ICJ) at The Hague that rejected Congo’s bid to prevent a French investigation into alleged war crimes committed by the Sassou-Nguesso regime during that conflict. The investigation centers on what is known as the “Beach Case,” in which human rights groups, including Amnesty International (AI), allege that some 350 people were the victims of extrajudicial killings in May 1999.

Those people were part of a group of several thousand that had previously fled the fighting in and around the Pool region and were returning to the country from the neighboring Democratic Republic of Congo following the establishment of a humanitarian corridor by the UN High Commissioner for Refugees (UNHCR). The alleged victims disappeared from a port on the Congo River known as Le Beach.

Moves to bring senior members of the government to book over the affair began in December 2001 when human rights groups filed a case at the High Court in the French town of Meaux alleging that Sassou-Nguesso, Interior Minister Pierre Oba, inspector-general of the armed forces General Norbert Dabira, Commander of the Republican Guard Blaise Adoua, and others were guilty of crimes against humanity and torture in relation to the disappearances.

Similar charges have been laid before Belgian courts, but it is the French investigation that stemmed from the Meaux case that lay at the center of the ICJ ruling. The Congolese government had called on the ICJ to order France to drop its proceedings because they were in violation of the country’s sovereignty and ignored Sassou-Nguesso’s presidential immunity from prosecution.

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However, in making its ruling, the ICJ concurred with the argument put forward by the human rights groups that as Dabira has a home close to the French capital, Paris, the alleged crimes can be investigated in the French courts despite having been committed outside of the country. The Congolese government made no immediate official response to this argument, but what is certain is that it will not willingly allow Sassou-Nguesso and his cronies to be hauled before a French court to answer the charges laid against them.

High Court of Justice Inaugurated Rather, the likelihood now is that the Republic of Congo will argue that any investigation should be carried out by its own judicial system. Up until recently, that argument would have been difficult to support because Congo had no court empowered to try figures as senior as those accused.

That situation changed on August 13 this year, when the High Court of Justice (HCJ) was inaugurated in the capital, Brazzaville, with the swearing in of its 35 members before parliament. The court president is Placide Lenga, while the chief prosecutor is Georges Akiera. As well as judges, the full HCJ complement includes members of both legislative Houses.

The creation of the HCJ has been on the cards since January 2002, when a referendum approved the country’s new constitution, which provides for the establishment of such a court. Under Article 153 of that constitution, the court is empowered to prosecute the country’s highest authorities, including members of both houses of parliament (the National Assembly and the Senate), judges, and the president, for crimes committed during the conduct of their official duties.

Given those powers, the government will doubtless now attempt to block the French (and Belgian) investigations by claiming that the Beach Case provides an ideal opportunity for the country to confirm its judicial credentials by having the HCJ carry out its own probe. Needless to say, any such probe is unlikely to turn up sufficient evidence to indict any of the main players, but could well find a sacrificial lamb or two.

French Relations Meanwhile, Congo’s broader relations with its former colonial power, major trading partner, and main provider of bilateral aid, France, do not yet appear to have been unduly damaged by the Beach Case.

On July 31, French Foreign Minister Dominique de Villepin made a brief visit to Brazzaville during which he held talks with Sassou-Nguesso. Whether or not the Beach Case came up for discussion was not apparent, but Villepin did praise the government for its efforts at securing peace in the neighboring countries of the Central African Republic and Sao Tome and Principe.

In addition, he pledged France’s support for Congo in its bid to secure financial aid and debt relief from international donor institutions such as the World Bank and International Monetary Fund (IMF). According to those institutions, Congo’s debt stands at some $6.4 billion.

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GHANA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 62.5 61.5 58.0 67.0 60.0 68.0 Financial Risk 30.0 33.5 30.0 32.0 28.0 33.0 Economic Risk 29.0 31.0 30.0 32.0 27.0 34.0 Composite Risk 60.8 63.0 59.0 65.5 57.5 67.5 Risk Band Mod. Mod. High Mod. High Mod.

POLITICS President John Kufuor’s New Patriotic Party (NPP) government is doubtless in a self congratulatory mood following Ghana’s recent hosting of talks to end the conflict taking place in nearby Liberia. Those talks resulted in the mid-August departure into exile of Liberian President Charles Taylor and a subsequent peace agreement between the main rebel groups operating in the country, which includes plans for a transitional government to be established later this year (see Liberia report in this issue).

Domestically however, Ghana’s political situation remains as fraught with intrigue as ever, and looks set to remain that way through to the next presidential and legislative elections, scheduled for December 2004. That is of course provided that Kufuor’s administration neither collapses, nor is forcibly removed in the meantime.

Internal Conflict Coup Attempt? The latest rumors of Machiavellian plots to destabilize the country surfaced in early August, when The Independent newspaper reported the government’s apparent foiling of a coup attempt that was to have been mounted on August 4.

The report appeared to backed up by Defense Minister Kwame Addo-Kufuor who said that the security services were conducting investigations into a “possible bid to destabilize the country,” but that the situation was under control. In addit6ion, the Information Ministry issued a statement explaining that during “routine investigations into matters of state security” on August 2, the security services had detained “three serving military officers, a retired soldier, and a civilian” for questioning.

However, it then transpired that all five of the detainees were released immediately after being interviewed by the police, suggesting that the possibility of a coup might have been overplayed.

Opposition Reaction That was certainly the view of the main opposition National Democratic Congress (NDC), which accused the government of orchestrating the affair in a

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deliberate bid to deflect attention away from its shortcomings in terms of the economy and its failure to address the mounting problem of corruption within its ranks.

Describing the coup rumor as baseless and “a sign of desperation” on the part of the government, NDC Director of Communications John Mahama warned of its dangers in terms of creating tensions within the military that could in turn lead to the country being “caught off-guard by (any) real miscreants who may attempt to sabotage our democratic process.”

In addition, he claimed that the government’s manufacturing of the coup report was made in order to justify a campaign of intimidation against NDC members and supporters of the opposition in general: “It is likely that the allegations of a coup plot may be a convenient smoke screen to clamp down on the rising tide of public criticism and agitation against the incompetence and corruption of the NPP government and its inability to deliver on its campaign promises.” As to the “democratic process,” Mahama reaffirmed the NDC’s “irrevocable commitment to upholding the constitutional order, to sustaining multiparty democracy, and (to the) preservation of the country’s peace and stability.”

Mahama could have a point. The Kufuor administration does indeed have a number of issues from which it might seek to deflect attention, and not all of them center on policy failures. However, by the same token, so does the NDC, and his robust description of the party as the defender of Ghana’s constitution would appear at least in part to be at odds with reality.

Shortly ahead of the coup rumor surfacing, the Accra Daily Mail reported on an NDC rally that took place at the home of the former president, Jerry Rawlings, at which party supporters apparently chanted “another coup, another coup,” in reference to his 1981 seizure of power.

Rawlings’s tenure as president came to an end at the December 2000 elections, at which he did not stand. Rather, the NDC standard was carried by John Atta Mills, who lost to Kufuor. That was swiftly followed by final voting in the legislative elections, which saw the NPP assume power over the former ruling NDC.

Since then, the NDC has regularly accused the NPP of using its supposed anti- corruption drive to carry out a witch-hunt against members of the former administration. Given Rawlings’s close links to some within the military, the possibility of a coup attempt has been a constant factor lurking in the shadows of what has been a bitter political struggle.

Murder Allegations Just how bitter was again underlined shortly ahead of the coup rumor surfacing, when allegations emerged, from which both sides would doubtless like to see attention deflected.

The affair began in late May with evidence given to the country’s National Reconciliation Committee (NRC) by a former army corporal, Matthew Adabuga,

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in which he claimed that Rawlings had ordered the murders of three judges and a retired army officer in 1982. Predictably, Rawlings vehemently denied the allegations and offered to submit himself to lie detection methods to prove his innocence.

However, in a further illustration of how no issue in Ghana can avoid becoming part of the wider political struggle between the NDC and NPP, Rawlings’ willingness to face veracity testing was conditional; he insisted that he would only take the tests if 15 members of the current government, whom he did not name, also took them. The reason, he claimed, was that the 15 were responsible for masterminding the murders of no fewer than 34 women in a serial killing spate that lasted from 1997 to 2000.

Responding to the allegations, the police asked Rawlings in mid-June to help them in their investigations into the murders. Although Rawlings presented himself for interview, he refused to name the 15, claiming that he lacked faith in the police and that to present the evidence in his possession too early would allow the allegedly guilty parties time to organize their defense.

With the police expressing “profound disappointment” at that stance, the matter appeared to be at a standstill. However, in early August, it returned to the headlines when the government claimed that the accusations were an elaborate plot aimed at bringing it down.

Conspiracy? According to Information Minister Nana Akomea, two of Rawlings’ former ministers, Kwame Peprah (finance) and Ibrahim Adam (food and agriculture), who are now serving jail terms in the Nsawam medium security prison, were caught, along with an unidentified female visitor, coaching a convicted murderer, Charles Quansah, into implicating several current government ministers in the killings. Akomea said that the trio had been showing Quansah photographs of the ministers so that he would be able to identify them.

Peprah and Adam, it may be recalled, became akin to NDC martyrs back in April this year when they were sentenced to jail time in connection with an alleged $21 million rice production scam. The pair vehemently denied any wrongdoing, and their case became a centerpiece of the NDC’s claims of a government witch- hunt against its members.

On August 1, the High Court rejected their appeals against conviction, making it at least feasible that they might have wanted to wreak revenge on the government. However, the veracity—or otherwise—of Akomea’s assertions is secondary to the fact that at best, claims and counter claims of murderers at the very highest levels of government are likely to continue in the run-up to next year’s elections. At worst, the possibility that the discovery of the jail conspiracy did indeed lead some within the military to contemplate a more direct method of removing the current government cannot be entirely discounted. If that was the case, the alleged coup attempt foiled just days after it might yet prove only to have been the first.

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Bureaucracy Quality In an apparent bid to increase efficiency, some 71 top civil servants were reassigned in mid-June this year in the first major reshuffle to take place in the service for the last 20 years.

Those affected were 22 directors and 49 deputy directors, most of which had been in place in excess of 15 years. Announcing the move, the head of the civil service, Alex Glover-Quartey, described that situation as “unacceptable,” and added that less senior staff would also be reassigned over the coming months.

ECONOMY PRGF Aid On the economic front, on May 12 the International Monetary Fund (IMF) approved a $258 million three year aid package under its Poverty Reduction and Growth Facility (PRGF). The money is to support the government’s economic program during 2003-2005, with some $37 million becoming available immediately. The IMF also approved additional interim assistance of $22 million to Ghana under the Highly Indebted Poor Countries (HIPC) initiative.

In making its decisions, the Fund said that targets for 2003 include a real GDP growth rate of 4.7%, and an inflation rate of 22%, revised upwards from the government’s previous 9.9% figure as a result of the effects of gasoline price increases introduced earlier this year.

In addition, gross foreign reserves are forecast to increase to a level equivalent to 2.3 months worth of imports.

Ghana: Selected Economic and Financial Indicators, 1999-2003 1999 2000 2001 2002 2003 Nominal GDP (in billions of cedis) 20,580 27,153 38,071 48,862 65,262 (Annual Percentage change, unless otherwise specified) National income and prices Real GDP 4.4 3.7 4.2 4.5 4.7 Real GDP per capita 1.8 1.2 1.6 1.9 2.1 Nominal GDP 19.0 31.9 40.2 28.3 33.6 GDP deflator 13.9 27.2 34.6 22.8 27.6 Consumer price index (annual average) 12.4 25.2 32.9 14.8 26.9 Consumer price index (end of period) 11.8 40.5 21.3 15.2 22.0

External sector Exports, f.o.b. -4.1 -3.5 -3.6 10.6 12.1 Imports, f.o.b. 11.4 -15.2 2.6 -4.1 16.8 Export volume 8.9 1.0 -1.3 -1.5 2.7 Import volume 9.6 -26.0 10.0 -6.8 7.6 Terms of trade -13.4 -16.6 4.8 9.1 0.7 Nominal effective exchange rate (avg.) -9.3 -46.3 -24.0 -11.7 ... Real effective exchange rate (avg.) 0.5 -35.5 0.7 -0.6 ... Cedis per US dollar (avg.) 2,669 5,431 7,179 7,947 ...

Government budget Domestic revenue (excluding grants) 6.0 42.9 43.5 27.5 60.3

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Ghana: Selected Economic and Financial Indicators, 1999-2003 1999 2000 2001 2002 2003 Total expenditure 9.0 39.6 65.5 2.4 50.0 Current expenditure 13.1 48.9 50.5 28.8 33.5 Capital expenditure and net lending 4.1 24.1 95.7 -38.7 104.1

Money and credit Net domestic assets 1 46.0 49.1 13.5 14.0 -1.7 Credit to government 1 38.2 57.7 0.0 32.6 0.0 Credit to pubic enterprises 1, 2 9.0 19.2 9.7 -9.0 1.5 Credit to the private sector 1, 2 24.9 34.4 12.0 17.7 18.8 Broad money (excluding foreign 19.8 33.4 48.4 50.0 25.0 currency deposits) Reserve money (excluding foreign 35.8 52.6 31.3 42.6 24.5 currency deposits) Velocity 5.2 5.1 4.8 4.1 4.4 (GDP/end-of-period broad money) Treasury bill yield 34.2 42.0 28.9 28.2 ... (in percent; end of period)

(In percent of GDP, unless otherwise specified) Government budget Total revenue 16.4 17.7 18.1 18.0 21.6 Grants 1.7 2.1 6.9 3.1 4.6 Total expenditure 26.2 27.7 32.7 26.1 29.3 Overall balance (excluding grants) 3 -9.8 -10.0 -14.6 -8.1 -7.7 Overall balance (including grants) 4 -8.0 -9.7 -9.0 -6.8 -3.9 Domestic primary balance 0.4 2.6 3.8 2.0 2.9 Divestiture receipts 0.3 1.2 0.0 0.0 0.7 Net Domestic Financing 6.3 8.5 2.3 4.8 0.0

External sector Current account balance 5 -11.6 -8.4 -5.3 0.6 -1.8 External debt outstanding 109.9 169.7 131.5 112.3 96.4 External debt service, including to the 6.8 11.2 8.5 7.8 6.3 Fund (in percent of exports of goods and 21.1 23.0 18.9 18.4 15.6 nonfactor services) (in percent of government revenue) 37.5 56.5 34.1 37.1 24.2

(In millions of US dollars, unless otherwise specified) Current account balance 5 -895 -419 -283 38 -131 Overall balance of payments -266 -123 -2 39 -77 Change in external arrears 62 27 61 -61 0 Gross international reserves 317 264 344 631 811 (end of period) (in months of imports of goods and 1.0 0.9 1.2 1.9 2.3 services) Source: IMF, May 2003. 1-In percent of broad money at the beginning of the period. 2-Credit from deposit money banks to public enterprises and the private sector respectively. 3-Before domestic arrears clearance. 4-After domestic arrears clearance. 5-Including official grants.

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LIBERIA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 43.0 32.5 30.0 45.0 30.0 55.0 Financial Risk 19.0 18.5 18.0 21.0 20.0 25.0 Economic Risk 28.5 21.0 22.0 23.0 20.0 26.0 Composite Risk 45.3 36.0 35.0 44.5 35.0 53.0 Risk Band V.High V.High V.High V.High V.High High

POLITICS Government Stability/Internal Conflict With US warships visible off of the coastline and the first contingents of Nigerian peacekeepers arriving in the capital, Monrovia, President Charles Taylor finally left Liberia for exile in Nigeria on August 11. He was replaced by Vice President Moses Blah, who will lead the country until the establishment of an interim administration takes place later this year.

The hope now is that Taylor’s departure will signal the end of a string of conflicts within the country and the region that have been the defining feature of his career.

Civil and Regional Wars Those conflicts began back in 1989 when he led the rebel campaign that ultimately resulted in the execution of the then dictator, Samuel Doe, in 1990. However, the overthrowing of Doe did not halt the violence. In its wake, internecine fighting broke out between various rebel factions and Liberia suffered a further six years of civil war in the run-up to Taylor’s victory in the 1997 presidential election.

During those years of war, an estimated 200,000 people died at the hands of the various rebel forces, whose ranks were swelled by hundreds of children, drugged, armed, and forced into committing atrocities that included rape and the dismemberment of their victims.

Despite having won power, Taylor’s bloodlust continued. He subsequently orchestrated the civil war in neighboring Sierra Leone and later became involved in fomenting rebel insurgency in both Cote d’Ivoire and Guinea.

It was the Guinean situation that was to ultimately lead to his fall from power. Beginning in 2000, that conflict saw pro-Taylor forces pitted against supporters of other Liberian warlords who had fled the country following his rise to power.

Taylor claimed that the rebel attacks in the north of Liberia were being carried out with the active support of the Guinean government. In part at least, the likelihood is that such support did exist, despite Guinea’s vehement denials.

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LURD Insurgency By early 2002, the rebels, under the banner of Liberians United for Reconciliation and Democracy (LURD), had made significant territorial gains in the north, forcing Taylor to implement a state of emergency there. However, by September of that year, Taylor’s government claimed that the situation had stabilized and the state of emergency was lifted.

By the end of 2002, it was clear that the previous reduction in rebel activity had been akin to the lull before the storm. In early 2003, rebel forces, including those belonging to the newly formed Movement for Democracy in Liberia (Model), made further gains and by mid-year had effectively encircled the capital, Monrovia.

Ceasefire Taylor was besieged, and on June 17 his government signed a ceasefire agreement with the rebels that was intended to pave the way for negotiations on his departure from office. However, by that time the situation had been complicated by Taylor’s indictment by a UN-backed war crimes court in Sierra Leone on charges related to his orchestration of that country’s civil war.

Eager to avoid facing his accusers, Taylor initially rejected the idea of standing down, saying that he would serve out his presidential term—due to end in January next year—and that he reserved the right to stand again. The move brought an outraged response from the rebel forces, who mounted fresh assaults on the capital in which hundreds of people were killed.

By early July those attacks, mounting international pressure, and Nigeria’s offer of a quiet retirement in exile, looked to have made up Taylor’s mind. On July 11, he told his supporters of his decision to be “the sacrificial lamb that you people should live,” adding that he would quit office on August 11 and leave the country shortly thereafter.

However, Taylor’s offer was not without conditions. As a prerequisite for his departure, he demanded that an international peacekeeping force be deployed in the country to avoid the resumption of war. In fairness, that demand was well founded. Having heard of their boss’s decision to go, the various pro-Taylor factions in Monrovia became nervous, threatening to turn the city into a bloodbath.

US Involvement In particular, Taylor was keen to see US forces intervene. Although not the former colonial power, the USA has close historical links to Liberia, which was originally established as a homeland for freed American slaves.

However, US president George W. Bush remained cautious. Memories of the USA’s disastrous peacekeeping efforts in Somalia are still fresh in the minds of many Americans. That, coupled with US forces already being committed in large numbers in Iraq, as well as numerous other countries as part of the “war on terrorism” left Bush uneasy about becoming embroiled in yet another conflict in a far-away place that many Americans would find it difficult to locate on a map.

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Ecowas Rather, Bush favored the establishment of a regional peacekeeping force with UN-backing. To that end, the Economic Community of West African States (Ecowas) set about plans for deploying such a force. By mid-July Ecowas had agreed to an initial deployment of around 1,500—mainly Nigerian—troops, and subsequent deployments to bring the total number of peacekeeping soldiers in the country up to some 5,000. Their task was to police the ceasefire until such time as a UN force could be deployed to undertake the processes of disarmament and reintegration of rebel fighters. That force is expected to be in place by the end of this year.

However, for those deployments to take place, Ecowas noted that US help, in the form of transport and equipment, would be required. For his part, Bush accepted that necessity, but warned that US troops would not enter Liberia ahead of their Ecowas counterparts, if at all.

By late July, the situation on the ground in Liberia had deteriorated further, with rebel attacks on the capital becoming more severe and the rebels’ seizure of the strategic port and second city of Buchanan.

As the death toll mounted, so did the pressure on the USA to facilitate the entry of the Ecowas force and, on July 26, Bush announced the deployment of US warships to the Liberian coastline. However, he stressed that the forces aboard those ships would not go into Liberia until Taylor had left the country and that even then, they would have a limited role in peacekeeping operations and a clear exit strategy.

Peacekeepers Deployed From there, events moved rapidly. On August 2, the UN approved the Ecowas deployment and two days later, the first Nigerian peacekeepers landed in Monrovia. Despite sporadic fighting continuing in some parts of the capital, their arrival marked the beginning of a tense calm.

That calm became a deal less tense the following week, when Taylor made good on his pledge to stand down and go into exile.

Peace Agreement With Blah, himself a brutal former fighter and close ally of Taylor, in place, further encouragement came on August 18 with the signing of a peace deal between his government, LURD, and Model.

Under the terms of the deal, Blah will leave the presidency on October 14 this year in order to make way for an interim power-sharing administration that will lead the country for two years. In addition, the deal provides for:

· The immediate disengagement of armed groups. · The deployment of Ecowas forces to maintain the ceasefire and then become part of an International Stabilization Force (ISF) to carry out disarmament.

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· The disbandment of all irregular forces and the restructuring of the Armed Forces of Liberia to include rebel fighters. · The immediate and unconditional release of all political prisoners and prisoners of war. · The establishment of a Truth and Reconciliation Commission (TRC). · The appointment of a new Supreme Court.

On elections, the agreement calls for an independent national electoral commission to be established in order that elections can be held in the presence of foreign monitors no later than 2005.

As to the new administration, neither the rebels, nor existing government members will assume the top posts, which will instead be held by non- combatants. The legislature will consist of 76 seats, with 12 going to each of the three main protagonists and the remainder divided between the civilian political parties and representatives from each of the country’s 15 counties.

In the immediate aftermath of the signing, all sides expressed cautious optimism as aid agencies rushed in desperately needed food supplies for the 1.3 million inhabitants and refugees believed to be in Monrovia.

However, by late August the situation was less encouraging outside of the capital. On August 26, the government claimed that rebel forces had captured to towns of Gbatala and Bong Mines, which lie some 65 miles north of Monrovia. According to the government, which later retracted the claims, the attacks were part of a campaign by the rebels to seize control of government held areas ahead of the arrival of Ecowas forces.

Despite the government’s retraction, by the end of August it was clear that fighting was still taking place in the north of the country.

Outlook Despite the difficulties in the north of the country, the outlook for Liberia should be one of cautious optimism. That Taylor has left is a major factor in the country’s hopes for peace. However, the reality is that Blah and the rebel leaders are cut from the same cloth as he was. They are all vicious warlords who have been responsible for the most dreadful atrocities and, while the current mood of compromise is to be welcomed, the possibility of a return to conflict remains high.

For that reason, the peacekeeping force is essential. However, the ability of the Ecowas troops to establish and maintain order is open to some question. During the Sierra Leone conflict, Ecowas got itself horribly bogged down in what was essentially a similar situation. That conflict, in which Taylor pulled the strings from afar, was eventually overcome only by the insertion of UK troops.

Also, Taylor’s physical absence from Liberia does not necessarily mean that he will cease to wield considerable influence, particularly while Blah remains in charge.

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A further concern is the kind of interim administration that is finally established. Despite their agreement to allow non-combatants to take the leading roles, the rebels will be seeking a substantial voice in government, raising the prospect of inter-rebel rivalries coming to the surface at a time when the disarmament and demobilization processes remain incomplete.

The worst case scenario is that with Taylor overseeing events from Nigeria, a poorly equipped Ecowas force will find itself unable to contain rebel forces that regard their military victory as being replaced by political defeat. In the absence of a firm commitment in terms of troops and time from the USA, that means that the speed with which the UN force can be deployed and complete its disarmament role may prove crucial to the overall success of the peace deal.

ECONOMY Growth The Liberian economy had jut begun to consolidate its recovery from the 1989- 1996 civil war, when the renewed insurgency began in 2000. In that year, the GDP had recovered to about half of its pre-civil war level, largely due to the rubber and forestry sectors. There was also growth has continued in the informal and services sectors, including mobile telephones.

However, the small manufacturing sector has continued to suffer from an unreliable supply of domestic utilities and a virtual absence of foreign investment. Even more critically, there was no resumption of activity in the minerals sector. Prior to the civil war iron ore extraction had accounted for 10% of GDP and 50% of exports.

GDP growth slowed markedly from 2000 on, as LURD incursions in the north and west of the country disrupted local rubber, logging, and farming activity.

Inflation Despite some appreciation of the exchange rate during the last quarters of 2001 and 2002, the Liberian dollar has been on a steep downwards trend, declining by 34% in terms of the US dollar in the two years to end-December 2002. With many prices denominated in US dollars, which is legal tender in Liberia alongside the Liberian dollar, consumer prices have risen sharply and the 12- month inflation rate spiked above 20% in March 2002.

Government Controls The government has retained a strong influence on key domestic markets, including the imposition of maximum retail prices on the three products that dominate the monetized part of the domestic economy: rice, petroleum products, and cement. Rice and petroleum prices, net of tax, are substantially higher than in neighboring countries; petroleum imports are restricted to a single supplier; de facto restrictions still seem to have limited entry to the rice market; and the single cement producer has benefited from a range of tax concessions and restrictions on imports.

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However, the government has recently issued press advertisements confirming the freedom of rice importation from government restriction and has removed the derogation against the goods and services tax for domestically produced cement.

Banking Sector The profitability and asset quality of the commercial banks continued to be under pressure as the deteriorating economic environment caused some rise in nonperforming loans, the government failed to pay interest due, and new restrictions were placed on banks' lending rates. The central bank set a limit of 10 percentage points on the spread that could be earned on the interest rates charged on lending above the weighted average cost of funds, with an absolute ceiling on lending rates of 18%.

In December 2002, the CBL reimbursed L$55 million to depositors at the Liberian United Bank (LUBI), which had been seized in April 2000, and simultaneously issued certificates of deposit (CDs) of equivalent value to four private companies. The three-month CDs will not accrue interest, but they will be repayable in US dollars at a fixed rate substantially more beneficial than that ruling at the issue date, thus providing a guaranteed annualized rate of return in US dollars, which the CBL estimates at 33%. The CDs give rise to a multiple currency practice subject to IMF approval.

Budget Balance The fiscal position has continued to deteriorate. Total government revenue (including grants) is estimated to have declined by around 13% in fiscal year 2001/02, to US$72 million. No grant income was received by the government, and the only buoyant areas of revenue were stumpage fees on timber production and (in the first half of 2002) transfers from the maritime agency. The slowing economy and tax derogations appear to have substantially depleted other tax receipts. In order to ensure a fiscal outcome near to balance in cash terms in 2001/02, nonmilitary expenditure was heavily reduced, and further domestic and external arrears were accumulated.

The adverse revenue trends continued through the remainder of 2002, resulting in a further pruning of spending on health, education, and other social services. For calendar year 2002, total government revenue fell to 12.9% of GDP from 15.8% in 2000, and current expenditure dropped to 4.6% of GDP from 9.8% over the same period. Wage and salary payments to government employees were eight months in arrears in December 2002.

Monetary Policy The adverse fiscal position of the central government and central bank has continued to dominate monetary developments. Liberian currency in circulation rose by 14% in the 12 months to September 2002 and total reserve money grew by 10%. The Liberian dollar component of the broad money supply rose by17 %. Total broad money M2 (which includes bank deposits denominated in US dollars, but excludes US banknotes) rose by 33%, reflecting in part the depreciation of the Liberian dollar by 29% in terms of the US dollar through the period. Holdings of foreign currency by the Central Bank of Liberia (CBL) remained in the range of US$1.5 million-2 million.

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Current Account Balance The external current account balance (including grants) improved substantially in 2002, to an estimated deficit of 5.1% of GDP, compared with a deficit of 20.6% of GDP in 2001. Merchandise exports rose by some 3.6% of GDP, owing to a higher rubber price and the substantial increase in timber production. In contrast, the deterioration in the security situation and border closures led to a sharp decline in goods imports of an estimated 4.5% of GDP.

Liberia has also been subject to UN sanctions, which prohibit arms imports and diamond exports, since May 2001.

Foreign Debt Liberia's external debt amounted to close to US$2.8 billion at end-2002 (498% of GDP), of which US$2.5 billion was in arrears, including US$681 million to the IMF.

Liberia: Selected Economic Indicators 2000 2001 2002 Nominal GDP (In millions of US dollars) 541.5 534.4 561.8 Official exchange rate (Liberian dollars per US dollar, 42.8 49.5 65.0 end of period)

Output and Prices (Annual percentage change) Real GDP 22.4 4.9 3.3 Consumer prices (annual average) 5.3 12.1 14.2

Central government (In percent of GDP) Total revenue and grants 15.8 13.0 12.9 Of which : tax revenue 13.7 11.4 12.5 Total expenditure and net lending (cash basis) 15.4 13.7 14.2 Of which : current expenditure 9.8 7.6 4.6 capital expenditure 6.6 6.1 9.6 Overall fiscal balance (cash basis) -0.6 -0.7 -1.3

External sector Current account balance, including grants -15.9 -20.6 -5.1 Current account balance, excluding grants -28.6 -28.7 -15.1 Trade balance -12.0 -12.9 -4.5 Exports, f.o.b. 22.2 23.9 26.2 Imports, c.i.f. -34.2 -36.9 -30.7 Public sector external debt outstanding 473.8 486.4 497.6

(In millions of US dollars) Current account balance including grants -86.2 -110.3 -28.7 Trade balance -64.9 -69.0 -25.6 Source: IMF, September 2003.

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SOUTH AFRICA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 61.5 65.5 58.0 66.0 55.0 70.0 Financial Risk 37.5 36.0 35.0 38.0 30.0 38.0 Economic Risk 36.0 35.5 30.0 38.0 28.0 38.0 Composite Risk 67.5 68.5 61.5 71.0 56.5 73.0 Risk Band Mod. Mod. Mod. Low High Low

POLITICS Corruption The Zuma Affair In a move that will do little to enhance the reputation of the governing African National Congress (ANC) in the run up to elections scheduled for mid-2004, late August saw a messy end to the probe into corruption allegations against Deputy President Jacob Zuma.

That investigation centered on media allegations that Zuma had tried to secure an annual payment of some $60,000 from a French arms company, Thales, in return for it wining a $5 billion arms deal in 1999.

Now, it would appear that Zuma will be spared the indignity of facing trial for his alleged role in the affair, but his political reputation looks to be in tatters. The reason is that, according to the chief prosecutor, Bulelani Ngcuka, the investigation carried out by the elite Scorpions unit found “prima facie evidence of corruption” on Zuma’s part, but that any legal proceedings were likely to be unwinnable.

On the face of it, those two statements are wholly contradictory, but in the absence of Ngcuka giving any further details, the strength of the “evidence” and the “winnability” of any prosecution are impossible to verify.

That leaves Zuma is facing the second to worst case scenario. Commenting after Ngcuka’s findings were made known, he pointed out quite correctly: “The statement is equivalent to a judgment against me.”

Resignation Calls The reality of that situation lost on the opposition parties. The main opposition Democratic Alliance (DA), which holds 66 seats in the 400-member parliament as against the ANC’s 266, immediately called on Zuma to stand down, describing him as “fatally wounded.”

That sentiment was echoed by the far smaller United Democratic Party (UDP), which issued a statement saying that Zuma would now be regarded “as a corrupt official.”

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And worse is likely to come. Although Zuma is not going to be charged, his financial adviser, Schabir Schaik, is, leaving him facing the prospect of a trial in which although he is not a defendant, he will doubtless be viewed as such by the population at large.

For the ANC, that is only slightly less unfortunate than if Zuma had been prosecuted. It has already suffered a series of high profile corruption scandals, including the convictions for fraud of the party’s former chief whip, Tony Yengeni, and the former wife of ex-president Nelson Mandela, Winnie Madikizela.

Oil Impropriety? Meanwhile, in late July, the government was forced to issue a denial of any wrongdoing in response to newspaper claims that a lucrative Nigerian oil deal— lobbied for personally by President Thabo Mbeki—ultimately brought financial benefits only to an offshore Cayman Islands company whose sister company boasted a number of close relatives of senior ANC figures among its list of shareholders.

While there appears to be little direct evidence of any impropriety on Mbeki’s part, the reality is that graft—added to widespread disillusionment at the government’s failure to tackle crime, socioeconomic inequalities, and the HIV/AIDS crisis facing the country—is yet another issue that is likely to have a deleterious impact on the ANC’s electoral showing come next year.

Government Stability Presidential Power Struggle? Aside from its possible electoral consequences, the Zuma affair could yet prove to be the start of a major power struggle within the ANC hierarchy.

Despite the myriad problems facing it, it is inconceivable that the ANC will not win next year’s elections. Consequently, Mbeki, incidentally a close ally of Zuma’s, is all but assured of a second term in office. However, that is his constitutional lot.

That means that provided Mbeki does not move to amend the constitution—an issue that has itself been the subject of some speculation of late—South Africa is due for a new president in just over five years time.

Before these latest developments, Zuma was a fair bet for securing that position, while his most likely rival was the former ANC secretary general turned businessman, Cyril Ramaphosa.

Ramaphosa, it may be recalled, was a leading light in the ANC under Mandela, and was widely tipped as his potential successor until he quit politics for business when it became clear that Mbeki was to be anointed. His return to top flight politics was confirmed in December last, when he was elected to the ANC executive committee.

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Now, with Zuma all but certainly out of the running, Ramaphosa must be regarded as the most likely successor to Mbeki.

Interestingly, in the latter stages of the Scorpions’ investigation, Ramaphosa was called upon by the ANC to “mediate” the situation. However, in mid-August, he declined that role. Commenting on his decision, he said: “When I was initially approached I indicated that I needed to understand what the issues are and the terms of the process before agreeing to get involved…I have had a discussion with Mr. (Bulelani) Ngcuka and have decided not to play any role in this matter as I believe that the mechanisms, legal and otherwise, to resolve the various issues are in place.”

Outside of that, Ramaphosa refused to elaborate on the discussions between himself and Ngcuka.

While it would be pure speculation to suggest that anything underhand took place, it is noteworthy that the findings that spared the ANC the embarrassment of Zuma being tried while simultaneously wrecking his chances of succeeding Mbeki were delivered by Ngcuka just a week later.

* * *

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ZIMBABWE RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 33.5 38.0 25.0 60.0 25.0 70.0 Financial Risk 29.5 21.0 20.0 25.0 18.0 30.0 Economic Risk 11.5 9.5 10.0 25.0 25.0 32.0 Composite Risk 37.3 34.3 27.5 55.0 34.0 66.0 Risk Band V.Low V.Low V.Low High V.Low Mod.

POLITICS Internal Conflict Just when it appeared that the dire political situation in Zimbabwe might be headed towards improvement, President Robert Mugabe’s Zimbabwe African National Union–Patriotic Front (Zanu-PF) government issued a ruling that could not only scupper the nascent political reconciliation that has taken place of late, but endanger the food aid that around five million Zimbabweans currently depend upon.

Food Aid Row The ruling in question, announced by Social Welfare Minister July Moyo on August 19, effectively reverses the government’s policy of allowing the UN World Food Program (WFP) and other international charities to distribute food aid directly to those in need. Instead, aid agencies were informed that they are to hand over food supplies to rural government officials and village chiefs, who will then decide on distribution priorities.

On the face of it, that move could be viewed simply as a means of ensuring that those with good local knowledge take on the responsibility of getting aid to the most needy within their locales.

Local Election Manipulation However, the real motivation for the change is likely to be more sinister. Zimbabwe is due to hold local elections at the start of September and Zanu-PF is keen to make sure that it wins handsomely.

Hence the food aid decision. In the March 2002 presidential election that resulted in Mugabe’s now infamous re-election, government food stocks were given only to Zanu-PF supporters. In countless well documented instances, supporters of the main opposition Movement for Democratic Change (MDC) were chased away from food queues by Zanu-PF thugs, often literally leaving them to starve.

This time around, as a result of the dismal failure of Mugabe’s forced land redistribution policy to lead to any appreciable agricultural output, the government has no food stocks of its own with which to bribe voters.

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Consequently, it wants to take charge of the aid being donated by the international community. However, as at August 25, it was far from clear that the new arrangement would go ahead, after the WFP threatened to halt all deliveries of food aid into the country unless it retained the power to distribute the aid through its own officials.

Given the tragic consequences that would follow such a cessation of supply, it must be hoped that Mugabe will capitulate. However, his reputation is one of total disregard for human life, and an obsessive belligerence towards anything he regards as external interference to his rule.

If that attitude holds sway again, not only do millions of the world’s most impoverished people face a period of even greater desperation, but the recent faint glimmers of progress on the political front look set to be extinguished.

Political Progress? Those glimmers began to show in late July when, for the first time in three years, MDC members of parliament (MPs) chose not to boycott Mugabe’s speech to the opening legislative session.

The move followed weeks of bitter clashes as Mugabe sent his security forces onto the streets to crack down on striking protestors who had brought what little remains of the country’s economy to a standstill. Among those arrested was the MDC leader, Morgan Tsvangirai, who was charged with treason for trying to overthrow Mugabe and remanded in custody on June 10.

Treacherous Tsvangirai That was Tsvangirai’s second treason indictment, as he already stands accused, along with two other senior MDC members, of plotting to assassinate Mugabe in what is regarded internationally as a farcical invention of the Mugabe regime.

At the time of his arrest for the second treason charge, he was on bail from his trial in the first. In mid-June, that trial heard that one of the main prosecution witnesses, the Canadian-based political consultant Ari Ben-Menashe, received a government contract after supplying videotaped evidence that allegedly shows Tsvangirai arranging Mugabe’s assassination. What the trial also heard was that the contract made no mention of a $200,000 fee paid to Ben-Menashe in advance of it being signed.

In the light of that evidence, Tsvangirai’s lawyers appealed to the High Court to have the charges against him dismissed. However, in late August, the court deferred its ruling on the issue.

Meanwhile, Tsvangirai was bailed on his second treason charge on June 21, on the condition that he desists from calling for the removal of Mugabe. When, or if, he will face trial on those charges remains unclear.

However, with him back on the streets, the MDC’s stance appeared to soften, as was underlined by its failure to boycott Mugabe’s speech. Commenting on the decision, MDC information department chief Paul Themba Nyathi said: “We

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believe we owe it to the nation and all the people who elected us to take bold steps in creating a political environment conducive to successful dialogue.” In addition, he expressed his hope that the move would lead to “amicable negotiations” on Mugabe’s retirement; something that the great man has ruled out.

Shortly after making those comments, Nyathi was briefly detained by the police in relation to MDC campaign posters depicting Mugabe as a thief running away from an angry crowd.

As to the goodwill gesture made by the MDC in attending the opening of parliament, Mugabe initially ignored it, using his speech to warn those who would destabilize the country that they will face “the full wrath of the law.” However, he did not call the opposition legislators present any disparaging names (something of a first), and at a later banquet for legislators, he described their presence at the opening as a forward move.

Talks? From there, things really did appear to progress. By late July, church leaders were expressing confidence that their efforts, aided by those of other African states, including Nigeria, South Africa, and Malawi, to bring the two sides to the negotiating table would soon bear fruit.

Mugabe Then, on July 31, Mugabe ordered top Zanu-PF officials who grabbed more than one farm during the land seizure program to return their excess lands for redistribution to lower ranking members. In part, the move was simply an exercise in keeping the lower orders in line, but that Mugabe felt confident enough to order the higher echelons, including some ministers, to hand over all but one of their farms is indicative of the power he still commands within Zanu- PF.

Rather more surprising was that, at the same time, the government published a list of some 418 farmers whose land had been confiscated under the land seizure program, inviting them to apply for compensation. Not that there is any compensation available, of course. Mugabe maintains that that is the responsibility of the former colonial power, the UK.

MDC Offer That move coincided with another encouraging development when the MDC announced that it would consider suspending its legal challenge to Mugabe’s 2002 re-election if the government were to open negotiations that would lead to concrete political progress.

The dropping of that challenge, which is due to be heard in November this year, has long been a government pre-requisite for the holding of talks with the MDC. Consequently, the MDC’s offer did not break the deadlock entirely, as it requires the talks to get underway first, and only offers suspension pending their final resolution, but it did indicate that the gap between the two sides had started to narrow.

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Cash Crunch Helping to drive that narrowing is Zimbabwe’s dire economic situation. Unemployment is running at around 70%, while inflation is in excess of 350%. Rapid price increases have led to a shortage of banknotes so severe that early August saw riots in the capital, Harare, as those lucky enough to have jobs tried to withdraw their paychecks from banks without any notes.

In response to the crisis, the government imposed limits on the amount of cash individuals are allowed to have, and the central bank announced that it is to issue travelers checks for local use until the government succeeds in raising sufficient funds to pay for banknotes to be printed abroad.

Needless to say, any additional funds in the form of international aid are unlikely to resume until a solution to the political crisis is at least in prospect. So, the idea of negotiation with the MDC is becoming increasingly attractive to the government. However, if it goes ahead with its food aid plans in order to manipulate the outcome of the local elections, the chances of the MDC being prepared to meet it halfway will doubtless diminish markedly.

ECONOMY IMF Assessment The International Monetary Fund (IMF) completed its latest assessment of the economy in early June this year. Suspending Zimbabwe’s voting and related rights with the organization for failing to make payment arrears or implement policy agreements, it painted a grim picture of the last four years, noting that real output has dropped by a third over that period, that capital and labor flight has been substantial, and that little in the way of investment has been made, despite the government’s expansionary fiscal policy.

The overall budget deficit declined to 5% in 2002 from 10% of GDP in 2001. However, quasi-fiscal operations related to support schemes for gold and tobacco producers through the Reserve Bank amounted to more than 5% of GDP. Meanwhile, the external position has become increasingly constrained. Pervasive shortages of foreign exchange in the official market, partly owing to a 35% plunge in exports since 2000, have resulted in a compression of non-food imports of 15%.

At end-2002, gross usable reserves stood at US$15 million, equivalent to three days of imports, and arrears to external creditors amounted to US$1.5 billion, or 29% of total external debt, including to the IMF. The government responded to these pressures in November 2002 by tightening exchange controls, increasing surrender requirements, and closing exchange bureaus. These actions resulted in a slowdown of foreign exchange flows to the official market and an appreciation of the parallel market exchange rate in early 2003.

NERP In response to the deteriorating economic situation, the government adopted a National Economic Revival Program (NERP) at end-February 2003, after consultation with business and labor under the auspices of the Tripartite

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Negotiating Forum (TNF). Immediate actions included a massive devaluation of the exchange rate from Z$55 per US$1 to Z$824 per US$1 (although the government will still purchase foreign exchange at the old rate), a doubling, on average, of fuel prices, and sectoral policies to stimulate production.

These actions were followed by some rise in interest rates, an increase in the producer prices of grain in March, and another doubling of fuel prices in April. In early May, controls on most prices were removed. Prices of five basic food items remain controlled, but were increased by substantial amounts.

Zimbabwe: Selected Economic Indicators, 1999-2002 1999 2000 20011 20021 Real economy (percentage change) Real GDP (market prices) -4.1 -6.8 -8.8 -12.8 Consumer prices (end of period) 56.9 55.2 112.1 198.9

Government finances (percent of GDP) Revenue, excluding grants 26.4 28.2 26.8 28.3 Expenditure and net lending 36.2 51.2 37.3 33.1 Overall balance, -9.8 -23.0 -10.4 -4.8 excluding grants and arrears Primary balance, excluding grants 0.0 -5.4 0.0 -0.1

Money and interest rates Broad money 29.8 59.9 102.7 164.8 (M3, end of period; percentage change) 91-day treasury bills (annualized yield) 89.7 71.6 25.9 26.6

Balance of payments (billions of US dollars; unless otherwise indicated) Exports 1.93 2.19 1.61 1.42 Imports -1.68 -1.85 -1.78 -1.82 Current account balance 0.01 0.04 -0.39 -0.48 (excluding official transfers) (In percent of GDP at the official 0.3 0.6 -4.2 -2.5 exchange rate) 2 (In percent of GDP at world prices) 3 0.2 0.5 -4.9 -6.7 Overall balance -0.03 -0.21 -0.42 -0.42

Reserves and Debt Usable reserves 46.7 22.1 20.0 15.1 (millions of U.S. dollars; end of period) (months of imports of goods and 0.2 0.1 0.1 0.1 services) Total external debt (percent of GDP at 86.5 73.0 55.8 26.8 official exchange rate; end of period) 2 Total external debt (percent of GDP at 55.8 59.3 64.0 72.8 world prices; end of period) 3 Debt service (percent of exports of goods 22.8 24.3 29.5 31.0 and services) Source: IMF, July 2003. 1-IMF estimate. 2- Foreign currency units are converted into Zimbabwe dollars at the official exchange rate. 3- GDP at world prices using real GDP growth and trading partner countries' inflation (base year is 1996).

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ASIA AND THE PACIFIC

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CURRENT RISK ASSESSMENTS AND FORECASTS

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Australia 85.5 35.5 41.0 83.0 81.0 77.5 83.0 73.0 87.0 Bangladesh 48.0 39.5 38.5 60.8 63.0 60.5 69.5 54.5 71.0 Brunei 82.0 50.0 44.5 88.3 88.3 76.5 81.5 74.5 83.0 China, Peoples' Rep. 70.5 45.5 38.5 74.8 77.3 74.5 78.5 67.0 80.5 Hong Kong 75.5 44.0 43.5 84.3 81.5 71.5 77.5 65.5 81.5 India 59.0 44.0 35.0 65.8 69.0 59.5 69.0 56.0 73.5 Indonesia 51.5 34.5 36.5 58.0 61.3 45.0 59.0 46.5 68.5 Japan 85.5 50.0 37.5 85.0 86.5 82.0 88.0 78.0 92.0 Korea, DPR 50.5 26.5 30.0 46.8 53.5 25.0 44.0 26.5 61.5 Korea, Rep 79.0 42.0 40.5 80.0 80.8 64.5 83.3 61.5 86.5 Malaysia 71.5 41.0 39.0 76.8 75.8 69.0 77.5 64.0 79.0 Mongolia 71.0 31.5 25.0 64.0 63.8 60.5 67.0 54.0 69.5 Myanmar 47.5 39.5 32.5 62.3 59.8 51.0 57.5 42.5 63.0 New Zealand 91.0 30.5 41.5 79.5 81.5 79.3 83.8 75.5 88.0 Pakistan 49.0 40.5 37.5 58.5 63.5 49.5 60.0 46.5 64.0 Papua New Guinea 53.5 35.0 30.0 62.0 59.3 52.5 61.5 51.5 66.0 Philippines 68.0 36.5 35.5 71.0 70.0 60.5 71.0 61.5 74.5 Singapore 86.5 45.5 44.5 90.0 88.3 81.0 85.0 64.5 85.5 Sri Lanka 59.0 37.0 31.0 63.3 63.5 50.5 70.0 50.0 74.0 Taiwan 76.0 47.0 43.0 82.5 83.0 77.5 89.5 67.5 86.5 Thailand 71.5 39.5 40.0 76.3 75.5 66.0 73.5 58.0 75.5 Vietnam 65.5 38.5 35.5 70.3 69.8 66.0 71.5 62.5 75.0

For historical risk ratings and key economic data on these and other countries in ICRG, please go to www.CountryData.com.

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INDIA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 56.0 59.0 50.0 63.0 50.0 67.0 Financial Risk 41.0 44.0 40.0 44.0 34.0 45.0 Economic Risk 34.5 35.0 29.0 31.0 28.0 35.0 Composite Risk 65.8 69.0 59.5 69.0 56.0 73.5 Risk Band Mod. Mod. High Mod. High Low

POLITICS Government Stability With a series of state elections due in November this year, Sonia Gandhi’s opposition Congress Party tabled a motion of no confidence in Prime Minister Atal Behari Vajpayee’s Bharatiya Janata Party (BJP)-led government in mid- August.

According to Gandhi, the motion was driven by the government’s “brazen corruption,” and “arrogance,” which “is a danger to the basic tenet of our constitution.”

The corruption to which she was referring centers on a scandal that first emerged in 2001, when an internet news site released video footage in which bribes were apparently received by a host of officials in connection with a fake arms deal. The affair led to the resignation of the then BJP president, Bangaru Laxman, along with four senior defense officials.

One of those to resign was George Fernandes, who later rejoined the government and is currently the minister for defense.

The no-confidence motion followed the Defense Ministry’s refusal to publish the findings of a report into the arms allegations on the grounds of national security. However, according to Congress, the publication was blocked by Fernandez as part of a deliberate cover-up by the government.

In the event, the no-confidence motion was easily defeated by the governing 24- member National Democratic Alliance (NDA), which controls 323 of the 543 seats in the Lower House, as against the 140 held by Congress. The final vote was 312 to 186 against the motion.

State Elections Loom In truth, the degree to which that alleged cover-up was the real driving force behind the no-confidence motion is open to some question. The greater likelihood is that that issue was simply a convenient peg on which to hang a vote that Congress hopes will have embarrassed the BJP as it prepares for forthcoming state elections.

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All of those elections are to take place in Congress-held states: Rajasthan; Chattisgarh; New Delhi, and Madhya Pradesh. If the BJP were to fare well in these contests, the likelihood is that Vajpayee would bring the national elections scheduled for November next year forward by several months in a bid to capitalize on the party’s electoral momentum.

In order for that to happen, the BJP would probably have to unseat Congress in at least two of the state elections; an achievement that would run counter to its electoral form over the last year or so, during which it has lost out to Congress on several occasions, most recently in February this year, when the opposition took control of Himachal Pradesh state.

That said, there are those within the BJP that point to India’s stable economic growth rate, low inflation, and handsome foreign reserve position as favoring an early election. Consequently, the debate on the timing of the general election has been taking place within the party since June this year.

A further debate has centered on the possibility of the party standing alone in the next national election, although given its weak run of state election results thus far, the likelihood must be that that option will be shelved in favor of another NDA pre-poll coalition.

Congress looking for Friends Congress also now appears to recognize the potential benefits of such coalitions. Addressing a party meeting in the northern town of Shimla in early July, Gandhi said: “Taking into account the present political scenario, Congress would be prepared to enter into appropriate coalition or alignment with secular parties on the basis of mutual understanding.”

The likelihood of such a secular alliance being formed remains unclear. Most opposition parties reacted to her statement with caution, with the only firm response coming from the Communist Party of India (CPI)—and that was a rejection.

That said, Congress now has considerable experience in coalition building at the state level, and if it retains control of the four states in the forthcoming elections by a handsome margin, several opposition parties might see the idea of joining forces with it for the national contest in a positive light.

One drawback to that eventuality is that Gandhi is not Indian-born; a factor already highlighted by the Samajwadi Party, which has previously said that it would support Congress provided that she was not the prime ministerial candidate of any alliance.

Not surprisingly, the staunchly nationalist BJP looks set to exploit that issue in its state election campaigns. Kicking off those campaigns in late July, the party unveiled a 25-point platform aimed at highlighting its economic achievements. However, the party also launched a personal attack on the Italian-born Gandhi, who was described as “an inexperienced leader of foreign origin, who has [made] no contribution towards the nation worth mentioning.”

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In tandem with those comments, the BJP also committed itself to pursuing another highly nationalistic—and divisive—issue: the building of a Hindu temple at Ayodhya, in the northern state of Uttar Pradesh.

Taken together, those issues tend to negate BJP President Venkaiah Naidu’s assertions that the party “can return to power on the basis of the government’s performance.” Rather, they suggest that the BJP is gearing itself up for a bitter series of electoral battles.

Internal Conflict Religious Tensions In those terms, the Ayodhya temple issue is of particular significance in that the BJP’s blatant exploitation of it led to the party’s re-election in the December 2002 elections in Gujarat state.

At the heart of the Ayodhya row is the demolition of the city’s 16th century Babri mosque by Hindu zealots in 1992. The justification for that act was that, according to many Hindus—not least members of the BJP and its even more hardline ally, the World Hindu Council (Vishwa Hindu Parishad-VHP)—the Ayodhya site was originally home to a temple marking the birthplace of the Hindu God, Ram, which they claim was razed by Muslim invaders who then built the mosque in its place.

The sectarian violence that followed the destruction of the mosque led to some 3,000 deaths.

Ayodhya-related violence returned to in early 2002 when a train carrying Hindu pilgrims back from the city to Gujarat was set on fire, killing 59. Muslims were blamed and at least 1,000 people, mostly Muslims, died in the ensuing riots before the government finally stepped in to halt the carnage. It just so happened that this outbreak of violence preceded elections in Gujarat state, raising accusations that The BJP supported the VHP’s action in order stoke up nationalist passions among its Hindu support base.

The violence in 2002 led the central government to pass the problem of the religious origins of the Ayodhya site to the Supreme Court. Earlier this year the Court ruled that no religious activities could take place on the disputed site until archaeological excavations had been carried out to determine the site’s religious antecedents. That ruling has stayed any further outbreaks of violence so far, but the sectarian situation in the state remained tense.

Unfortunately for the BJP and VHP the initial findings of the archeological investigations, which were widely reported in early June, showed no evidence of any Hindu temple on the site. The High Court allowed an extension of the excavation timeframe so that further excavations could be carried out. Later evidence of an ancient structure emerged, but there was no still confirmation that the remains were those of an ancient Hindu temple.

Despite that the BJP had already committed itself to pressing ahead with the construction of a Hindu temple on the site; a decision confirmed by Vajpayee

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himself on August 1 when he expressed his confidence that obstacles to the passage of a law allowing the “construction of the temple will be removed and the temple will be built.”

Finally, on August 25, the archaeological survey of India (ASI) came up with the answer the BJP had been waiting for. It reported that an ancient Hindu temple did indeed exist on the disputed Ayodhya site long before the mosque was built. However, that finding is by no means the end of the matter. Secular historians are likely to dispute the ASI's conclusions, and the High Court still has to rule on whether a new Hindu temple can be constructed on the ruins of the old mosque.

Just to add fuel to the flames of incipient Muslim protest, at the very time the ASI’s report was released the Uttar Pradesh chief minister, Mayawati, announced her resignation. Mayawati, who only goes by one name, heads the Bahujan Samaj Party (BSP), to which the BJP gave its support as a junior coalition partner following inconclusive results in the state’s 2002 elections.

Announcing her decision, Mayawati cited a row with her BJP colleagues as the reason for her resignation. Now that she is going, the likelihood is that Uttar Pradesh will hold fresh elections, which will doubtless be accompanied by still greater levels of nationalistic tub-thumping over the Ayodhya issue by the BJP— and the strong possibility of another round of inter-religious violence.

Terrorism On August 25, shortly after the ASI’s report, two car bombs exploded at separate sites in the city of Mumbai (Bombay), India's financial capital. At least 51 people were killed and around 156 injured, many seriously.

The first bomb exploded shortly after 1pm local time in the Zaveri bazaar, a famous gold and jewellery market in the south of the city. The second bomb was detonated a few minutes later outside the Gateway of India—the city's most famous tourist attraction. Both bombs were hidden in taxis.

That same night police claimed they had also discovered a large amount of explosive concealed near a railway tunnel on the outskirts of Bombay. Around 100 detonators had been hidden along a busy commuter line at Igatpuri.

As always in India the finger of suspicion after incidents such as these turns immediately to Pakistan, or rather to Pakistan's Inter-Services Intelligence (ISI), which is accused by India of training, equipping, and directing the various Islamic terrorist groups operating in Indian-controlled Kashmir and beyond. When gunmen open fire in India's parliament complex in December 2001, following a suicide bomb attacks on the Kashmir assembly building the previous October, India immediately put the blame on groups it claimed were supported by the ISI. The rapid deterioration in relations following the attack saw both countries put their formidable armies on a war footing.

Pakistan was quick to distance itself from the Bombay outrage. Speaking only hours after the incident, Pakistan Foreign Ministry spokesman Masood Khan told reporters: “We deplore these attacks...We condemn all acts of terrorism and

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I think that such wanton targeting of civilians should be condemned in the strongest possible terms.”

Within hours, the Indian authorities had fingered two Islamic organizations as being responsible for the attacks, the Students Islamic Movement of India (SIMI) and Lashkar-e-Taiba (LeT). Formed in 1977 in Uttar Pradesh, SIMI is a home- grown militant Islamist group that aims to “liberate” India through forced conversion to Islam. LeT, on the other hand, is the largest Pakistan-based group operating in divided Kashmir region. It draws many of its fighters from Pakistanis who formerly fought the Russians in Afghanistan and has been fighting Indian security forces in Indian-controlled Kashmir since 1989. India accuses LeT and another Pakistan-based militant group of being responsible for the December 2001 attack on India's Parliament.

On top of that, the police quickly determined that the explosive used in the Bombay bombings was RDX. Indian security officials say RDX is almost always used by Islamic militants in Kashmir; it was also used in a wave of explosions that shook Bombay in 1993, killing 250 people.

The BJP was, of course, quick to play up the implied role of Pakistan in the killings and to downplay any contribution played by its own strident Hindu nationalism. When Deputy Prime Minister L.K. Advani toured the site of the explosions on August 26, he claimed that the police had recovered the bodies of two Pakistani nationals involved in the 1993 bomb attacks and accused Pakistan of sheltering them. He also implied that Pakistan was now involved in a wider campaign to destabilize India, saying: “I would say our neighbor’s war of terrorism against us is not directed only against Jammu and Kashmir.”

A Pakistani foreign ministry statement called Mr Advani's comments “baseless and irresponsible” and added, “It serves no purpose to point accusing fingers towards Pakistan and even worse to try to make domestic political capital from such a gruesome tragedy.”

Indeed, the Pakistani government might be right to feel aggrieved over such accusations, as the real causal factors of the bomb attacks are probably rather closer to home than Pakistan. Although the attacks probably came too quickly after the release of the ASI’s finding's to be directly related, they do follow a bomb attack on a Bombay commuter train in March this year, which killed 12 people and wounded 75, which many see as linked to the Ayodhya dispute.

Also, only two days before the blasts the man widely held to be responsible for the carnage in 2002, Gujarat's BJP chief minister Narendra Modi, paraded the ashes of an obscure Hindu nationalist freedom fighter through the streets of Bombay. While the gesture delighted the Hindu nationalist Shiv Sena, Bombay’s former ruling party, it caused a good deal of discontent within the city’s large Muslim community.

In short, the BJP and its allied Hindu nationalists had provided more than a little provocation for the Islamist terror groups to strike the city. The difficulty for Pakistan is that because it is responsible for training and supplying these groups

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to fight for the “liberation” of Kashmir, it inevitably has to share part of the blame when they carry out attacks which the Pakistani government has not approved and might even see as counterproductive.

External Conflict Pakistan The wider concern about the Bombay outrage is its possible effect on Indo- Pakistani relations, which had been making steady progress since Vajpayee’s surprise mid-April call for an improvement in ties.

The degree to which that call has been heeded in Islamabad was again underlined in mid-August, when Pakistan’s president, Pervez Musharraf, offered an immediate ceasefire along the so-called line of control (LoC) that separates the Indian and Pakistani controlled portions of the disputed state of Kashmir.

Addressing a group of Indian members of parliament (MPs) taking part in a peace mission to Pakistan, Musharraf said: “We are fighting each other daily. Daily there are casualties on both sides. There has got to be a ceasefire.” He added that he could give the orders for such a ceasefire “today,” and that India should follow suit.

For the time being at least, that is not going to happen, but the fact that Musharraf has raised the idea of a cessation of hostilities across the LoC suggests that talks between the two countries over Kashmir, ownership of which has caused two wars between them in the past and almost led to a third in 2002, are now closer than has been the case for some considerable time.

India too insists that a peaceful solution must be found. In a statement read out to the same peace conference addressed by Musharraf, he said: “Violence and bloodshed cannot provide any solutions. We can live together only if we let each other live…Cooperation, rather than confrontation, is the answer to our common problems.”

And it isn’t just talk. In late June, Pakistan’s new ambassador to India took up his post, a move that was reciprocated in mid July and formalized the restoration of diplomatic ties, agreed between the pair back in May this year.

Meanwhile, mid-July also saw the resumption of bus services between Delhi and Lahore. Like diplomatic ties, transport links between the two countries were suspended in late 2001 after an attack on the New Delhi parliament by Pakistani- backed militants, which in turn led to the 2002 standoff. Now, talks are underway on the resumption of air and railroad links, and were expected to bear fruit in the fairly near future.

Even so, the major stumbling block to substantive talks on a solution to the Kashmir problem remains the terrorist attacks carried out by the militant Muslim groups inside India. India maintains that these groups are supplied and trained from within Pakistan, and that a complete cessation of terrorist attacks is an absolute prerequisite to bilateral negotiations; a position that Prime Minister Vajpayee reiterated in response to Musharraf’s ceasefire call.

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ECONOMY The International Monetary Fund completed its latest assessment of India’s economy in July this year. It estimates that real GDP growth in 2002/03 slowed to 4.3% from 5.5% in 2001/02. The primary reason for the slowdown was a decline in agricultural output as a result of drought. The effects of that drought on edible oil prices was also cited, along with higher global oil prices, as a factor behind the increase in inflation experienced during the first half of 2003, although overall, consumer price inflation in 2002/03 is estimated to have been 4%, down from the 4.3% registered in 2001/02. For 2003/04, GDP growth is expected to rebound to around 5.5% on the back of a recovery in agriculture, while inflation is forecast to post around 4.5%.

India: Selected Economic Indicators 1 1998/99 1999/00 2000/01 2001/02 2002/03 Domestic economy (In percent) Change in real GDP at factor 6.5 6.1 4.4 5.6 4.3 cost Change in industrial production 4.1 6.6 5.0 2.7 5.8 Change in wholesale prices 6.0 3.4 7.1 3.4 3.6 Change in consumer prices 13.1 3.4 3.8 4.3 4.0 External economy (In billions of US dollars) Merchandise exports 2 34.3 37.5 44.9 44.9 53.0 Merchandise imports 2 47.5 55.4 59.3 57.6 65.5 Current account balance -4.0 -4.7 -3.6 0.8 3.7 (In percent of GDP) -1.0 -1.1 -0.8 0.2 0.7 Direct investment, net 3 2.4 2.1 3.3 4.7 3.6 Portfolio investment, net -0.1 3.0 2.6 2.0 0.9 Capital account balance 8.4 10.4 10.0 10.6 12.6 Gross official reserves 4 32.5 38.0 42.3 54.1 75.4 (In months of imports) 5 5.8 6.0 6.9 7.7 9.2 External debt (in percent of 23.4 22.0 21.9 20.5 20.1 GDP) 4 Short-term debt (in percent of 2.7 2.8 2.3 3.0 3.0 GDP) 4 7 Debt service ratio (in percent of 19.1 17.8 15.3 9.5 14.1 current account receipts) Change in real effective -4.6 1.1 6.2 1.7 -5.6 exchange rate (in percent) 4 Financial variables (In percent) Central government balance (in -5.5 -5.5 -5.7 -6.3 -6.0 percent of GDP) 8 General government balance (in -8.8 -9.9 -9.9 -10.5 -10.0 percent of GDP) 8 Change in bank credit to 14.5 18.3 15.8 11.3 19.6 commercial sector Change in broad money 4 19.4 14.6 16.8 14.2 15.0 Interest rate 4 9 8.7 9.2 8.7 6.1 5.9 Source: IMF, August 2003. 1- Data are for April-March fiscal years. 2- Balance of payments basis. 3- Net foreign direct investment in India less net foreign investment abroad. 4- End of period. 5- Imports of goods and services projected over the following twelve months. 6-/ IMF estimates for 2002/03. 7- Residual maturity basis, except contracted maturity basis for medium- and long-term nonresident Indian accounts. 8-/ Excluding divestment receipts from revenue and onlending of small saving collections from expenditure and net lending. 9-91-day Treasury Bill rate.

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KOREA, REPUBLIC RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 76.5 79.0 62.0 80.0 65.0 82.0 Financial Risk 40.0 42.0 37.0 42.5 30.0 45.0 Economic Risk 43.5 40.5 30.0 44.0 28.0 46.0 Composite Risk 80.0 80.8 64.5 83.3 61.5 86.5 Risk Band V.Low V.Low Mod. V.Low Mod. V.Low

POLITICS External Conflict North Korea After the latest round of shuttle diplomacy aimed at resolving the issues surrounding the Democratic People’s Republic of Korea’s nuclear weapons program, late August saw a six-way meeting take place in the Chinese capital, Beijing. Present were delegations from both the Democratic People’s Republic (DPRK or North Korea) and its southern neighbor, the Republic of Korea (South Korea), as well as from China, Japan, Russia, and the USA.

However, it quickly became clear that the positions of the main protagonists, North Korea and the USA, were unchanged.

The standoff between the two began in October last year when the US government claimed that North Korea had admitted to having nuclear weapons and a secret uranium enrichment plant. That claim was apparently confirmed by the North Korean government when initial talks between it and its US counterpart took place in April this year.

Those talks resulted in little progress, with North Korea demanding that the USA sign a non-aggression pact and normalize political and diplomatic relations with it. For its part, the US administration refused to undertake such steps ahead of North Korea’s “verifiable and irreversible” abolition of its weapons program.

Six Way Talks At the latest talks, North Korea put forward a blueprint for solving the crisis, under which it would pledge not to manufacture nuclear weapons, allow UN inspectors access to its nuclear sites, end missile developments, and ultimately dismantle its nuclear facilities.

However, as its prerequisite for taking those actions, North Korea again called on the USA to sign a non-aggression treaty, arguing that its nuclear program is a necessary deterrent in the light of US President George Bush’s now infamous description of it as part an “axis of evil” and the US-led preemptive attack on another country in that axis, Saddam Hussein’s Iraq. In addition, Pyongyang called for guarantees of economic cooperation with Japan and South Korea.

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Predictably, the USA ruled out any major moves ahead of North Korea getting rid of the weapons it is believed to possess, which in turn led Pyongyang to reportedly threatening to carry out a full nuclear test and declare its nuclear arsenal officially.

As the talks came to an end, North Korea accused the USA of intransigence and initially ruled out a further round of discussions that were expected to take place in October this year. However, on September 2, Pyongyang changed its view to and said that it remained committed to solving its problems with the USA “through dialogue.”

In part at least, the DPRK’s willingness to keep open the door to negotiation has been driven by pressure from China, which although its closest ally, has publicly stated its opposition to North Korea becoming a nuclear power. However, it is not clear how far China is prepared to go in restraining its neighbor. Although wary of the regional consequences of a nuclear North Korea and the USA’s likely reaction to it, rumors of China considering sanctions such as the suspension of oil supplies are for the time being just that; rumors.

Piggy in the Middle Meanwhile, South Korea finds itself in the position of flotsam, being tossed on the tides of powers that are beyond its control. For President Roh Moo-hyun, that presents considerable difficulties.

On coming to office in February this year, he pledged to continue the so-called “Sunshine Policy” of improving relations with the north that was established under his predecessor, Kim Dae-jung. However, doing so in the midst of the current crisis has proved extremely difficult, especially given that South Korea is home to a US military force of some 37,000 troops.

US Troops Currently, those troops are mainly concentrated in the border region between the two Koreas, which are still technically at war as a result of the armistice that ended their 1950-1953 conflict. However, back in June this year, the USA announced plans for the withdrawal of its forces from the border region to more central locations.

On one hand, such a pullback can be seen as a positive move in that it will make the presence of US forces less obvious to both North Korea and the large number of South Koreans who are concerned at their country’s close relationship with the USA.

However, it can equally be seen as an early sign of Washington’s pessimism regarding the wider situation. Deployed along the border, US troops would be in the front line of any attack launched by North Korea, which keeps some two- thirds of its 1.1 million strong army (the fifth largest in the world) in the border region. In that situation, US casualties would likely be high, leading to a forced retreat to more southern positions before mounting a counter attack.

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Consequently, the withdrawal of US forces from the demilitarized zone (DMZ) that separates the two Koreas could be construed as a deliberate preparation for a possible conflict by situating troops in positions from which they could mount a counter attack without first having to suffer heavy losses.

That is certainly the view Pyongyang has taken of the plan, which also includes sweeping improvements to intelligence collecting, wholesale weapons upgrades, and the deployment of special US rapid reaction forces.

From North Korea’s point of view, allowing a foreign army to prepare for war against it is a long way from pursuing Kim’s “Sunshine Policy.” Meanwhile, the situation also has domestic political implications for Roh, whose own Millennium Democratic Party (MDP) is a deal less enthusiastic about US involvement than the unashamedly pro-American opposition Grand National Party (GNP), which holds a majority, 151 seats, in the 272-member legislature.

That leaves Roh in a position in which his acceptance of US moves alienates him from his MDP constituency, while the GNP’s harsher attitude towards North Korea severely constricts his ability to pursue “engagement” policies.

In short, despite his claim to be able to act as a mediator between the USA and North Korea, Roh actually finds himself at the mercy of those two nations and without a firm political support base at home.

Little wonder then, that he is particularly keen to see China play a more prominent role in reining in the DPRK before the tit-for-tat saber rattling by Pyongyang and Washington reaches the point at which some kind of conflict becomes inevitable. If that was to happen, Roh’s continuation of Kim’s “Sunshine Policy” would be in tatters, as would his career.

The unfortunate reality of Roh’s position is that outside of browbeating the USA and China, there is little he can do to influence the situation. Consequently, he will doubtless be hoping that if the October meeting does take place, the intervening period will have thrown up at least some avenues for compromise.

Internal Conflict Labor Unrest Meanwhile, the possibility of a fresh round of industrial action was raised in late August when the legislature approved a labor bill reducing the working week from 44 hours to 40, effectively ending the practice of working half days on Saturdays. On the face of it, such a move might be expected to draw support from trade unions. However, responding to it, the Federation of Korea Trade Unions (FKTU) described it as “malicious.”

The reason for the FKTU’s anger is that in addition to cutting the working week, the legislation also reduces the number of public holidays. According to the federation, the law reflects only the wishes of big business, and it warned in a statement: “It will be the trigger of a fresh round of labor disputes. We will wage an all-out battle against the managers and lawmakers.”

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That could spell serious trouble for the economy, which has already suffered from the effects of a series of work stoppages this year.

Rail Strike Ends The most recent of those stoppages came to an end on July 1, when railroad workers protesting the government’s privatization plans for the industry returned to work. The move came after the government toughened it stance towards the strike, deeming it to be illegal and refusing to enter into talks with the railroad unions.

In addition, the government pushed through an amended rail privatization bill. Although a watered down version of the original legislation, unions fear that thousands of jobs will be lost as private companies are allowed to take over some of the state-controlled railroad’s operations.

Despite those concerns, railroad union chief, Chun Hwan-kyu, announced the end of the strike on July 1 and apologized to people for the inconvenience it had caused them. The move followed late June warnings from the government that workers who did not report back to work would face disciplinary proceedings and possible dismissal.

From the government’s point of view, breaking the rail strike was an important indicator to the business community of its commitment to reform. That commitment had previously been brought into question back in April, when the government narrowly averted a rail strike by backing down on its initial privatization plans.

Now, it would seem that the government has tried to use the momentum built up by beating the railroad unions to press ahead with the working week changes. The potential problem that raises is that South Korea’s unions are powerful beasts that are unlikely to allow themselves to be steamrollered. Consequently, the outlook for labor relations over the coming months is at best unsettled and at worst potentially destabilizing.

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PAPUA NEW GUINEA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 57.0 53.5 48.0 55.0 48.0 58.0 Financial Risk 36.5 35.0 28.0 35.0 27.0 38.0 Economic Risk 30.5 30.0 29.0 33.0 28.0 36.0 Composite Risk 62.0 59.3 52.5 61.5 51.5 66.0 Risk Band Mod. High High Mod. High Mod.

POLITICS Government Stability Cabinet Reshuffle Prime Minister Michael Somare marked the eve of his first anniversary in office by carrying out a long-expected cabinet reshuffle on August 2, in which seven new ministers were appointed.

Papua New Guinea (PNG) has a multitude of political parties, many of which are simply vehicles for one or more individuals, and a multitude of independents whose support, basically, is open to the highest bidder. At the mid-2002 elections that saw Somare win the premiership, his National Alliance Party (NAP) won just 19 of the 109 seats in parliament, making it necessary for him to fashion a coalition government. In doing so, he made certain promises in terms of ministerial positions to the main parties that agreed to join forces with the NAP.

Coalition Tensions However, tensions within the coalition began building at the beginning of this year over Somare’s tardiness in fulfilling those promises. More recently, even some members of his own party have been openly critical of his leadership. Back in late June, the governor of Madang province, James Yali, who is a leading member of the NAP, openly said that he would be one of the first to vote against Somare in the event of a no-confidence motion being tabled. In making his comments, Yali explained that aside from failing to honor the “major commitments” made to coalition partners, Somare had allowed “a number of senior government ministers to politically bully and control him.”

Yali was not alone in his criticisms, which were swiftly supported by the Governor Bani Hoivo of Oro and Governor Carlos Yuni of Sandaun. Both are also NAP members and pledged to back any move by Yali against Somare’s premiership.

Partnership Pact With the NAP facing possible collapse, Somare received something of a boost on June 27 when two of the main parties in the coalition; the People’s Action Party (PAP), and the People’s Progress Party (PPP) signed a declaration of partnership

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with him in a bid to stabilize the government as a whole. Commenting on the pact, the parties’ founders, Ted Diro and Julius Chan respectively, urged their members of parliament (MPs) to remain united and to avoid “personalizing” issues because, in the words of Chan, “politics is like a snake in the grass that turns its skin overnight.”

On the face of it, Chan and Diro’s support looked to have the makings of a back- room deal between the pair and Somare. However, any suspicions of that being the case looked to have been scotched—at least insofar as Chan was concerned—when the PPP did not receive any new posts in the reshuffle that followed.

The New Appointments That shakeup saw the NAP lose four ministries, bringing its total tally down to eight. Internal Security Minister Yawa Silupa and Environment Minister Sasa Zibe were among those to lose their jobs, being replaced by the United Party (UP) leader Bire Kimisopa, and William Duma from the United Resources Party (URP) respectively.

The remaining changes saw the PAP’s Roy Biyama take on the higher education, research, science, and technology portfolio, and Nick Kuman of the People’s National Congress (PNC) go to culture and tourism. The Privatization Ministry now goes under the name of the State Enterprises and Information Ministry and is headed up by Arthur Somare.

Meanwhile, the People’s Labor Party (PLP) leader, Peter Yama, finally saw Somare’s commitment to reward his support realized when he was offered the labor and industrial relations portfolio. He replaced Peter O’Neill, who took on the previously vacant post of public services minister. O’Neill also retained his position as leader of government business. As to the PPP, Robert Kopaol was dropped as lands and physical planning minister in favor of his party colleague, Michael Nali.

Those changes leave the party tally of ministerial positions as follows: The NAP has eight, including the premiership; the PPP and PAP have four each; the PNC has three; the Melanesia Alliance, the PLP, and the URP two each; and the Papua and Niugini Unity Party (PNUP), the UP, and the National Party (NP) one each.

In a further personnel change, Mari Kapi was named as the country’s new chief justice on August 14. He replaces Arnold Amet, under whom he served as deputy. Amet’s ten-year tenure came to an end on August 16.

Commenting on the reshuffle, Somare said that it had been made in the interests of stability and that he does not expect to be making any further alterations “for a long while yet.”

Democratic Accountability Now that Somare’s reshuffle has fulfilled his pledges to coalition member parties, he will doubtless be eager to press ahead with his plans for altering the

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rules that govern elections and political party memberships. Somare contends that the PNG’s use of a first-past-the-post voting system, coupled with its large number of tiny parties and independent legislators, makes election to parliament something of a lottery that in turn leads to an inherently unstable political entity.

So, he proposes that when the next elections are held in 2007 a preferential voting system is used in order to give a more balanced view of the wishes of the electorate. In addition, the changes would prevent successful independent candidates from joining political parties unless they do so within a few weeks of being elected. Under the current system, independents have the potential to play kingmakers through patronage of a given party.

Somare believes the changes will bring greater stability to the political system. However, perhaps understandably, they are viewed with suspicion by many of those who might lose out as a result. Prior to the reshuffle, Somare’s hopes of rallying sufficient legislative support to force through the changes were faint, but now that he has fulfilled his end of the deal with regard to his coalition member parties, the prospects look a deal brighter.

That said, the constitutional nature of the changes means that they will require a two-thirds majority in the legislature to become law; something that still appears to be out of reach without the support of the very independents that are most likely to suffer.

Internal Conflict Bougainville Meanwhile, the peace process on the island of Bougainville continues to progress. Earlier this year, Australia and New Zealand announced their intention to withdraw the peacekeeping troops they had deployed in Bougainville, following the signing of the 2001 peace agreement between the government and most of the rebel groups by the end of June. This forced the government to redouble its efforts to ensure that the disarmament process provided for under the peace agreement was completed ahead of those withdrawals.

In the event, the peacekeepers did withdraw on time, to be replaced by a civilian- only body; the Bougainville Transition Team (BTT), which is charged with overseeing the establishment of an autonomous government for the province.

UN Arms Verification As for the disarmament the UN verified in late July that it had reached stage two of the process, with over 1,800 weapons collected. That UN certification has opened the way for the BTT to begin its work on elections to the island’s new government, although the timing of those elections remains unclear.

What does appear clear is that the government has now dropped its insistence that the weapons issue be thoroughly resolved ahead of the formation of the new government.

In fact, the UN certification represents something of a fudge. Back in May this year, Acting Bougainville Affairs Minister Sam Akoitai cited the figure of 1,800

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weapons as equivalent to around 80% of those believed to be in circulation. However, even before that assessment, the government had indicated that rather than hold fast to its earlier demand that all weapons must be handed in prior to the establishment of the new administration, the figure of 80% would be sufficient for the disarmament process to move on to stage three; the disposal of the said weapons.

The UN concurred, saying that the level of security rather than the number of weapons declared should be the determining factor in moving the process forward. Now it would seem that that is to be the case. No decision on the future of the weapons, which are being held in secure containers under UN supervision, is now expected until some months after the new government is in place. Meanwhile, the issue of the remaining 20% of weapons, numbering some 400, looks to have been dropped.

Rebel Intransigence For all of the encouraging signs coming out of Bougainville, that could yet prove to be a dangerous oversight. Just a day after the withdrawal of the peacekeeping forces, hard-line Me’ekamui fighters under the control of Francis Ona, the leader of the guerrilla Bougainville Revolutionary Army (BRA), issued a statement saying that they will remain outside of the peace process until the government is prepared to negotiate on independence.

Ona’s forces still control much of central Bougainville, which is effectively a no- go zone. Given that, and the likelihood that the weapons that have not been handed in are in the hands of that group, the outlook for peace in Bougainville is a deal less certain than the UN certification might suggest.

The Solomons That uncertainty is further compounded by the fact that the PNG has given its support, and some 90 troops, to Australia’s new peacekeeping effort in the Solomon Islands, which lie to the east of the PNG and border Bougainville. That effort began in early August.

Throughout the Bougainville conflict, links between separatist forces there and on the Solomon Islands have been rumored to exist, with both sides apparently seeking shelter and storing weapons in each others’ territory. Since Australian troops left Bougainville, rumors have been rife that the Solomon Islands warlord, Harold Keke, has visited the island with the aim of building up resources of weapons and men with the help of BRA dissidents.

Bougainville’s governor, John Momis, refutes those allegations, but the possibility that, under pressure from the Australian led force deployed on the Solomon Islands, Keke and his rebels might choose to stage a tactical retreat into Bougainville—and in the process spark fresh conflict there—cannot be ruled out.

Despite Momis’s assertions, the government’s decision to send PNG troops to the Solomons was at least in part in recognition of that possibility, and those forces are likely to spend much of their time monitoring traffic between the islands.

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ECONOMY Meanwhile, the PNG’s fiscal relations with Australia look set to undergo a deterioration if Canberra makes good on its early August threat to reassess it’s A$300 million (US$198 million) a year aid program to the country.

According to Australian Foreign Minister Alexander Downer, the review will examine the manner in which the money is being spent, and whether or not it could be better directed towards ameliorating service delivery and law and order problems. Downer added that Australia was not considering reducing the overall amount of aid it supplies.

Somare, who lambasted Downer’s comments as tantamount to blackmail, will doubtless be hoping that there is indeed no overall reduction in Australian aid.

Budget Deficit The reason is that the PNG’s finances are in dire straits after three straight years of real GDP contractions.

However, that has not been the only difficulty. Last year saw the budget deficit miss its 3.4% of GDP target as a result of overspends on wages and the elections. According to the government, the final deficit for 2002 stood at 4.1% of GDP. However, in its most recent assessment of the state of play, carried out in June this year, the International Monetary Fund put the figure at 5.5% of GDP.

Meanwhile, the outlook for this year is hardly less gloomy. Commenting in the wake of the Australian review threat, Finance and Treasury Minister Bart Philemon conceded that a further tightening of expenditure will in any case be necessary this year if the government is to meet its budget deficit target of 2% of GDP.

He explained that the primary reason is that some PNGk200 million ($59 million) in privatization receipts, and a further PNGk140 million ($41 million) in public sector reform aid from the Asian Development Bank (ADB) have not been realized, leaving a PNGk340 million ($100 million) shortfall in revenues.

Accordingly, Philemon said that he will table an amendment to the 2003 finance bill during September, which will sharply reduce expenditure across the board.

Papua New Guinea: Selected Economic Indicators, 1998-2002 1998 1999 2000 2001 2002 Real sector (percent change) Real GDP growth -3.8 7.6 -1.3 -3.4 -3.1 Mineral 16.8 10.0 -4.0 -0.6 -9.6 Non-mineral -8.1 6.9 -0.5 -4.2 -1.3 CPI (annual average) 13.6 14.9 15.6 9.3 11.8 CPI (12 months) 21.8 13.2 10.0 10.3 14.8

Central government budget (percent of GDP) Revenue and grants 29.2 29.3 31.3 30.6 29.6

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Papua New Guinea: Selected Economic Indicators, 1998-2002 1998 1999 2000 2001 2002 Expenditure and net lending 31.0 32.4 32.8 34.5 33.7 Overall balance, cash basis -0.4 -4.3 -1.4 -4.1 -5.5 (including grants) 1 Domestic financing, net 2 1.4 2.0 0.9 0.9 4.9 Of which: Banking system 1.7 1.2 -1.4 -2.5 5.3 External financing, net -1.2 2.0 0.2 3.2 -1.3 Privatization, net 0.2 0.3 0.3 0.0 1.8

Money and credit (end-period percentage change) Domestic credit 17.1 4.0 -4.5 -12.3 20.9 Net credit to government 15.4 11.2 -12.5 -26.1 82.0 Credit to the private sector 29.0 10.5 3.0 -1.2 -6.3 Broad money 2.5 8.8 5.4 1.9 4.2 Interest rate 23.9 20.4 14.9 10.2 13.5 (182-day T-bills, end-period)

Balance of payments (US$ millions) Exports, f.o.b. 1,848 2,019 2,214 1,878 1,624 Imports, c.i.f. -1,425 -1,525 -1,503 -1,269 -1,225 Current account (including grants) 22 53 232 174 -74 (In percent of GDP) 0.6 1.5 6.7 6.0 -2.7 Overall balance -190 -36 8 66 -96

Reserves and external debt (end-period, US$ million) Gross international reserves 187 206 304 440 343 (In months of non-mining imports, cif) 1.8 2.2 4.2 6.1 4.5 Public external debt-to-GDP ratio 35.6 42.2 41.8 51.4 54.4 (in percent) 3 Public external debt-service ratio 7.3 7.5 6.7 7.1 7.4 (percent of GNFS exports) Exchange rates US$/kina (period average) 0.4856 0.3922 0.3624 0.2965 0.2490 US$/kina (end-period) 0.4770 0.3710 0.3255 0.2658 0.2488 Source: IMF, June 2003. 1-Measured from below the line in the fiscal accounts. 2-Includes changes in check float. 3-Central government and Bank of Papua New Guinea.

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SRI LANKA RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 61.0 59.0 45.0 68.0 45.0 72.0 Financial Risk 35.5 37.0 28.0 38.0 27.0 38.0 Economic Risk 30.0 31.0 28.0 34.0 28.0 38.0 Composite Risk 63.3 63.5 50.5 70.0 50.0 74.0 Risk Band Mod. Mod. High Low High Low

POLITICS Internal Conflict The Peace Process For all concerned, the fragile peace process between Prime Minister Ranil Wickramesinghe’s government and the rebel Liberation Tigers of Tamil Eelam (LTTE) entered a crucial phase in late August, when rebel delegates traveled to France to begin discussions on the government’s latest proposals for the governance of the Tamil-dominated north and east of the country.

The rebels, who have been engaged in a 19 year old conflict that is estimated to have cost some 65,000 lives, are not expected to make a formal response to those proposals until mid-September, after which it is hoped negotiations with the government will resume.

Talks between the two sides last broke down in April this year, after the rebels accused the government of failing to devote sufficient resources to the regeneration of Tamil areas and rejected Wickramesinghe’s proposal for the establishment of a development council to oversee that process. Rather, the rebels argued, the task of rehabilitation should fall to a provincial administration in which the LTTE would hold the balance of power.

Wickramesinghe ruled out such a body as unconstitutional; a move that led the LTTE to boycott an early June meeting of international donors in Tokyo that was intended to raise funds to support the peace process and implement poverty alleviation programs.

Donors’ Meeting Despite the LTTE’s non-attendance, the meeting took place as scheduled and resulted in aid pledges of some $4.5 billion over three years, the largest of which came from Japan and the Asian Development Bank (ADB), which pitched in with $1 billion each.

The total figure raised exceeded earlier expectations of around $3 billion in pledges, but was in line with a World Bank report that estimates that $1.5 billion is needed for the reconstruction of Tamil areas and that poverty reduction measures will require a further $3 billion.

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Commenting on the largesse of the donors, Wickramesinghe said: “I must confess that even the most optimistic among us would not have expected this…It will lay the foundation for the realization of our goal of a peaceful Sri Lanka in which all its people could live in harmony, safety, and dignity.”

However, without fresh peace talks, neither that goal, nor the aid money, will be forthcoming. All aid pledges were made conditional on concrete progress towards peace taking place, which will be under the close monitoring of those countries stumping up the funds.

For its part, the LTTE made no public response to the funding pledges, but Sri Lankan peace groups drew cautious parallels with Afghanistan, which was promised a similar amount of money at a similar Tokyo meeting, but has yet to receive more than a fraction of it.

Provisional Administrative Council Despite those qualms, the success of the meeting gave fresh impetus to Wickramesinghe’s efforts to lure the LTTE back to the negotiating table.

To that end, he indicated to the donors’ meeting that his government was prepared to reverse its earlier position and allow amendments to the constitution that would permit the establishment of a provincial administration in the north and east in which the LTTE would have “a significant role.”

However, the rebels remained unimpressed, accusing Wickramesinghe of using the international community to pressurize them into submission and refusing to re-enter talks until “a clearly defined draft framework” for the proposed administration was presented.

In its June 10 statement, the LTTE added that the vague nature of the plans made them indistinguishable from the government’s previous position, with the only exception being an alteration in the terminology used to describe what it maintained was the government’s originally proposed development council.

Ceasefire Violations Within days, the situation had taken a further turn for the worse. On June 14, a rebel vessel exploded during a confrontation with a Sri Lankan navy patrol off the northeastern port town of Trincomalee. According to the navy, only warning shots had been fired, but the rebels claimed that the ship had been attacked, in violation of the ceasefire that was agreed between the two sides back in February 2002. All 12 people aboard the vessel were killed.

Also on June 14, a senior member of the anti-LTTE Eelam People’s Liberation Front (EPLF) was shot dead by a sniper. Despite being a Tamil organization, the EPLF has been outspoken in its criticism of the rebels, as has the Eelam People’s Democratic Party (EPDP), which saw one of its number, Ponniah Ramachandran, gunned down on the following day.

The LTTE was blamed for both killings, and for the later murder June 23 of a policeman in the capital, Colombo.

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Norwegian Mediation At that point, the outlook for the ceasefire, let alone a resumption of talks, appeared bleak. However, behind the scenes, negotiators from Norway, which has been mediating the conflict since early 2002, were said to have been facilitating secret discussions between government and LTTE representatives.

The fruits of those talks began to emerge in mid-July, when the government put forward a draft proposal for the administrative council “for discussion.” According to the draft, the Provisional Administrative Council (PAC) would consist of government and opposition members, with the majority of posts being held by nominees of the LTTE. Significantly, the council would have political and administrative control over the distribution of funding for reconstruction and resettlement in Tamil areas—a key rebel demand—but would not be responsible for security or land, and would have no revenue raising powers.

Commenting on the draft, government spokesman G.L. Peiris said that he was confident that final details could be worked out “face to face” with the rebels and that talks would resume “within weeks.”

Despite that confidence, the process suffered further hiccups in late July when the Norwegian team again accused the rebels of violating the ceasefire by refusing to dismantle a camp in a government-held area, and in mid-August when a Tamil informant was shot dead; presumable by the LTTE.

Those setbacks, and a series of fatal attacks against Muslims living in the northeast (see Ethnic Tensions below), aside, hopes for a positive outcome to the government’s efforts were raised when the rebel delegation, headed up by the group’s political leader, S.P. Thamilselvan, left for France on August 20 to meet with constitutional experts to discuss the draft proposals.

Outlook The obvious question now is whether or not the LTTE will go for the PAC as outlined in those proposals. Unfortunately, the answer is difficult to gauge, given the lack of firm details available. On the face of it, the LTTE’s earlier claims that the PAC is little more than a revamped version of the development council that it has already rejected still look to be valid.

That would tend to suggest that another setback is in the offing. However, despite claiming to be the sole voice of Sri Lanka’s 3.2 million Tamils, the LTTE is not. Now that the offers of international aid are firmly on the table, if the rebels jeopardize that aid by walking out on a deal that appears to give them the leading role in the dispersal of that aid, the LTTE’s standing in the Tamil community will doubtless be dented, to the likely benefit of politically more mainstream groups like the EPLF and EPDP.

That would tend to suggest that there will now a resumption of formal talks between the government and rebels.

However, whichever way the LTTE jumps, wider difficulties that will doubtless figure in the LTTE’s calculations lie ahead.

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Government Stability Not least of those is the position of President Chandrika Kumaratunga. She heads up the People’s Alliance (PA) and as such is in opposition to Wickramesinghe’s government. The most ardent aspect of that opposition centers on the peace process, which Kumaratunga has long regarded as too heavily skewed towards the demands of the LTTE.

The real difficulty facing Wickramesinghe is that Kumaratunga has the power to dissolve his government and call fresh elections if she so chooses. Thus far, she has shied away from such a move, and has publicly ruled it out. However, that restraint has been driven more by a desire to avoid being cast as spoiler of the peace than any acceptance of what is taking place.

As to the latest developments, she has limited herself to dark pronouncements; accusing the LTTE of preparing imminent attacks and covertly gearing itself up for a return to war. The latest allegation to emerge from her PA camp came on August 21 when her spokesman, Harim Peiris, claimed that Black Tiger (the LTTE’s suicide fighters) squads had infiltrated Colombo and were planning to assassinate her.

In fairness to Kumaratunga, such a plot is not beyond the bounds of possibility. Back in 1999, she lost an eye in an LTTE assassination attempt that left 19 people dead. Currently, the rebels doubtless regard her as an impediment to them achieving their autonomy goals, while Wickramesinghe doubtless sees her as an impediment to peace.

That perception is not without foundation. Aside from an understandable personal hostility towards the rebels, Kumaratunga and her supporters have little time for the mediation efforts undertaken by Norway. In late May this year, one of her senior aides, Samaraweera, described Norway as “a nation of salmon- eaters who turned into international busybodies.” Kumaratunga made no comment.

Her failure to castigate Samaraweera for his indelicate remarks underlined the degree to which Kumaratunga was unhappy with the state of play at that point. Now, Norwegian mediators are on the brink of brokering a fresh deal that is likely to sit even less well with her. If the LTTE rejects it, she might decide that the peace process is irretrievable and initiate moves towards a military solution to the problem. On the other hand, if the LTTE agrees to the PAC, she might easily decide that its formation is a step too far and, notwithstanding her earlier pledges, that Wickramesinghe’s government must go.

Ethnic and Religious Tensions Meanwhile, a further potential problem centers on Sri Lanka’s Muslim population. Although only accounting for some 8% of the total population, Muslims make up around a third of those living in the north and east of the country and are hugely wary of their predominantly Hindu Tamil neighbors.

Consequently, the government’s PAC proposals include representation for both the Muslim and the majority Sinhalese communities. Back in early July, Muslim

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members of parliament (MPs) gave the government’s plans provisional support. However, since then, concerns within the Muslim community about the potential power that the PAC will give to the LTTE have been on the rise, fuelled by a string of attacks against Muslims apparently carried out by the rebels.

Because of those concerns, the Norwegian mediators want to see a Muslim delegation take part in any talks on the PAC that might now take place between the government and the LTTE. However, given that any final agreement will of necessity give the LTTE the dominant role in the PAC, that is unlikely to prove sufficient to reassure the Muslim community.

The potential dangers of that situation have increasingly come to the fore, with late August seeing open discussions within the Muslim community about the possibility of taking up arms to counter what it sees as the government’s abandonment of it in the pursuance of peace with the rebels.

Consequently, if the LTTE does agree a deal that gives it political pre-eminence within the north and east of the country, a Muslim backlash cannot be discounted.

Government Stability In addition, Wickramesinghe’s government might again be destabilized. Led by his United National Party (UNP), that government has a legislative majority of just two seats. Within its overall representation, the government enjoys the support of the Sri Lanka Muslim Congress’s (SLMC), which holds 12 legislative seats. Commenting on Muslim concerns over the PAC in mid-August, SLMC Secretary General Hashan Ali said “…we want to use all our means to convince the government that it should never sacrifice the interest of the Muslims.”

The implicit threat is that if the Muslim community finds itself forced to accept governance by the LTTE, the SLMC might withdraw its support for the central government and, in doing so, bring it down.

Consequently, while the overall thrust of the peace process continues to move forwards, substantial problems remain. If the worst case scenarios that flow from those problems are to be avoided, all sides will now need to be prepared to accept serious compromises. Whether or not the lure of $4.5 billion in aid will be sufficient to secure those compromises is by no means certain.

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VIETNAM RISK ASSESSMENTS One Year Five Years Ahead Ahead Risk Category Year Current Worst Best Worst Best Ago 09/03 Case Case Case Case Political Risk 67.5 65.5 63.0 67.0 60.0 69.0 Financial Risk 36.0 38.5 36.0 39.0 35.0 43.0 Economic Risk 37.0 35.5 33.0 37.0 30.0 38.0 Composite Risk 70.3 69.8 66.0 71.5 62.5 75.0 Risk Band Low Mod. Mod. Low Mod. Low

POLITICS Law and Order/Corruption Nam Cam Trial The issues of crime and graft returned to the fore in early June when the trial of Truong Van Cam (better known as Nam Cam) came to a close with him being convicted of masterminding a vast criminal organization and the murder of a rival gang member. He received two death sentences, although as at mid-August those sentences, and the numerous years in jail handed down to him for other crimes, were awaiting appeal, as were his convictions. Similar appeals have been lodged by the other five Nam Cam gang members, who were also sentenced to death. None of the appeals is expected to succeed.

Meanwhile, the wider significance of the trial, which was the largest in Vietnam’s history, was that no fewer than 154 other people stood accused of aiding and abetting Nam Cam’s activities, including several senior police officers, prosecutors, and members of the ruling Communist Party of Vietnam (CPV), all of whom were alleged to have protected his racketeering network, which centered on gambling, prostitution, and protection.

CPV Convictions The most senior CPV figures to be convicted were the former head of state radio, Tran Mai Hanh, who was sentenced to 10 years in jail, and the former deputy national chief prosecutor, Pham Sy Chien, who was sentenced to six years. Both were found guilty of accepting bribes from Nam Cam to secure his early release from a labor camp in the mid-1990s. In addition, the former vice minister of public security, Bui Quoc Huy, received four years imprisonment for ignoring Nam Cam’s activities while he was the police chief of Ho Chi Minh City.

All three were also banned from taking government jobs for five years after release.

The convictions of those three, and a host of other lower-ranking officials who received various jail terms, underlined the degree to which the CPV was subverted by the activities of Nam Cam’s operations. Now, the government hopes that the trial’s outcomes will send a clear signal that corruption will not be tolerated and that much of it has been cleared away.

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That is particularly important in terms of Vietnam’s international standing, which the government has been keen to enhance in order to draw in foreign investment and aid.

However, as with any crime, for every criminal convicted several more go unpunished. Consequently, while Nam Cam has gone, the likelihood is that there remain a significant number of officials who escaped censure and might again be tempted to indulge in corrupt practices.

Anti-Drug Crackdown Aside from graft, another issue that the government is keen to crack down on is that of drug-related crime. To that end, early June saw the launch of a major anti-drug campaign dubbed the “Month of Action for Drug Control.” As part of the campaign, the Public Security Ministry, Defense Ministry, and Customs Office were ordered to coordinate the activities of border guards and marine police in a bid to prevent trafficking into the country, while the domestic police force was told to redouble its efforts to detain drug dealers and to set about the eradication of opium poppies throughout the country.

As to users, the government has adopted a slightly softer line, pledging more funds for drug detoxification and rehabilitation programs, to be coordinated by the Ministry of Labor, War Invalids, and Social Affairs.

The crackdown on trafficking has enjoyed some early successes. In mid-June, police in Quang Tri Province announced the country’s biggest ever heroin seizure, when some 128 bricks of the drug (weighing around 40kg) were found hidden in a freight truck. According to the police, the discovery, which resulted in six arrests, including that of the truck driver, marked the destruction of a major trafficking network that had been importing heroin from neighboring Laos.

Later in June three Australians of Vietnamese descent were arrested after being discovered trying to smuggle heroin into Australia. The men were caught packing the drug into the loudspeakers at the factory at which they worked.

Those arrests followed the June 12 sentencing of two Vietnamese-born Australian women on trafficking charges. Phan Thi Kim Phuong was sentenced to life imprisonment, while her 14-year old sister, Phan Thi Ngoc Phi, received a four-year sentence. The pair had been hired to work as “mules,” transporting just over half a kilogram (approximately one pound) of heroin inside their bodies.

External/Internal Conflict Human Rights Aside from graft and drugs, a further issue that is of at least passing concern to the government because of its impact on Vietnam’s international reputation is that of human rights.

There, the government has fared rather less well of late.

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Back in May, the European parliament passed a motion calling on Vietnam to honor its commitments under the international treaty on civil and political rights, which it signed some 20 years ago. In doing so, the parliament demanded that Vietnam stop its oppression of ethnic minorities and followers of unauthorized religious groups, as well as putting an end to controls on the use of the internet to watch foreign satellite broadcasts, the arbitrary arrest of journalists, and detentions without trial—all of which are carried out in the name of national security.

The motion was significant in that aid and trade between the EU and Vietnam is worth some $5 billion a year. However, the government remained intransigent, trotting out its oft-repeated claim that Vietnam has no political prisoners, only criminals, and that allegations of human rights abuses are the work of those who seek to undermine national unity.

Buddhist Groups Supporting that position, the state-controlled daily newspaper, Nhan Dan, responded to the European motion by pointing to the celebrations held to mark Buddha’s birthday on May 15, and the conferring by President Tran Duc Luong of the country’s highest civil honor; the Independence Order, First Class, on the Chairman of the Vietnamese Buddhist Church (VBC), Thich Tam Tich. According to Nhan Dan the move confirmed the “traditionally close relations between Buddhism and the Vietnamese population.”

To a degree, that assertion appears reasonable. However, the VBC is the only officially sanctioned Buddhist organization in Vietnam. Several others also exist and it is those groups that the European parliament accuses the government of repressing.

Not least of those groups is the Unified Buddhist Church of Vietnam (UBCV), whose leader, Thich Huyen Quang, has been under effective house arrest since the group was outlawed in 1981.

The oppression of UBVC priests was again highlighted in mid-August over the case of a monk, Thich Tri Luc, who had been granted UN refugee status while in Cambodia, but was apparently forcibly returned to Vietnam where he is to face trial.

According to the US-based group, Human Rights Watch (HRW), which has long been a leading critic of the Vietnamese regime, Luc was spirited out of Cambodia on July 25 by “an unidentified Vietnamese man.” His trial was originally set for August 1, but was later postponed for an indefinite period.

The revelations regarding Luc were particularly unfortunate for the government because despite its outward irritation over the European parliament motion, it had appeared to be adopting a softer line towards the UBCV. In early May, Thich Huyen Quang was allowed to meet with his deputy, Thich Quang Do for only the third time since the UBVC’s proscription. Then, in late June, Do was exempted from house arrest. According to the government, he was released ahead of schedule in order to further “national unity and humanitarian policy.”

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Commenting on Luc’s predicament, Do subsequently said that he had committed no crime and was “a victim of gross injustice and arbitrary detention.” The government made no official comment.

The Central Highlands Aside from Buddhists, another group that falls foul of the government and is the subject of international human rights concerns is the Montagnard Christian movement, which predominates in the Central Highlands province.

Tensions in the province have been high since early 2001, when peaceful demonstrations calling for religious freedoms and land redistribution were brutally suppressed by the military. Since then, the situation inside the Central Highlands has been difficult to asses, because the government has effectively placed the area under martial law and prevented independent monitors and journalists from entering it.

However, according to information smuggled out of the region in early July, the government has been involved in mass human rights abuses. Included within the allegations made is the claim that upwards of 1,000 women have been subjected to forced sterilization procedures as part of a campaign of ethnic and religious cleansing.

The government vehemently denies these claims. In mid-May, Deputy Prime Minister Nguyen Tan Dung praised the government’s reconstruction efforts in the province, saying that during the first quarter of this year some 10,000 jobs had been created and that numerous social projects were underway, including house building and the construction of a major hydroelectric plant.

Meanwhile, in mid-August, the government announced plans for the Central Highlands to receive wider access to television and radio services broadcast in a number of ethnic languages. The services will of course be run by the state- controlled broadcaster.

Because of the lack of independent monitoring of the situation in the Central Highlands, which the European parliament also demanded be addressed, the conflicting claims of the government and the groups claiming to speak for the Highlanders are impossible to verify. However, the government’s refusal to allow such monitoring tends to suggest that all is not as rosy as Dung would have people believe.

Internet Dissident Jailed Aside from exhibiting religious and ethnic intolerance, the government is far from pleased about the opportunities for the dissemination of information presented by the internet.

Those concerns were again highlighted in mid-June, when a doctor, Pham Hong Son, was sentenced to 13 years in jail for emailing documents deemed to be “against the CPV and the state” to fellow pro-democracy activists overseas. According to the US State Department, which “strongly” condemned the “harsh sentence given to Pham Hong Son for merely expressing his views on the

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Internet,” the documents in question were Vietnamese translations of an article entitled “What is Democracy?” that was posted on the State Department’s website.

According to human rights groups, Son is the fifth so-called “cyber-dissident” to be punished by the authorities. Around one million of Vietnam’s 80-million- strong population is estimated to access the web, mainly through internet cafés.

ECONOMY According to figures released by the government in early July, GDP growth during the first six months of this year posted 6.9%, despite the impact of the Severe Acute Respiratory Syndrome (SARS) virus and the weakened global economic situation.

In separate figures released in early June, the government said that industrial production value increased by 15.6% during the first five months of the year compared to the same period in 2002, with substantial increases in all economic sectors; the state-owned sector grew 11.9%, the non-state sector, 18.6%, and the foreign-invested sector, 17.4%.

Meanwhile, imports and exports maintained high growth rates in the first five months, with export value rising by 31.3% year on year, representing 44.4% of the government’s full year target. Within that figure, rice exports increased by 47.4%, crude oil exports by 40%, and garments and textiles, by 69.5%.

Import values over the first five months rose by 38.9% year on year, equivalent to 48.8% of the full year target.

On foreign direct investment (FDI), the government said some 235 projects, capitalized at $633 million were attracted during the first five months, representing a year on year capital increase of over 30%.

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INDEX OF COUNTRY REPORTS

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INDEX OF COUNTRY REPORTS AUGUST 2003 - SEPTEMBER 2002

This is a moving index covering the 12 months prior to the current issue. The column headings indicate the month and year of the issue, with the most recent issue in the left-hand column. Country reports within an issue are indicated by they symbol ‘X’. The symbol ‘-’ indicates no report in the issue.

Country 08/ 07/ 06/ 05/ 04/ 03/ 02/ 01/ 12/ 11/ 10/ 09/ 03 03 03 03 03 03 03 03 02 02 02 02 Albania - - - - X - - - - - X - Algeria X - - X - - X - - X - - Angola - X - - X - - X - - X - Argentina - X - X - - - X - - X - Armenia ------X ------Australia - X - - X - - X - - X - Austria - X - - X - - X - - X - Azerbaijan - - - X - - X - - X - - Bahamas X ------Bahrain ------X Bangladesh X - - X - - X - - X - - Belarus - - - X - - X - - - - - Belgium - - X - - X - - X - - X Bolivia - X - X - - - X - - X - Botswana - - X - - X - - X - - X Brazil - X - - X - - - X - - X Brunei ------X Bulgaria X - - X - - X - - X - - Burkina Faso X ------Cameroon X - - X - - X - - X - - Canada - X - - X - - X - - X - Chile - X - - X - - X - - X - China, P.R. X - - X - - X - - X - - Colombia X - - X - - X - - X - - Congo D.R. X - - X - - X - - X - - Congo, Rep - - X - - X - - X - - X Costa Rica - X - - X - - - X - - X Cote d’Ivoire - X - - X - - X - - X - Croatia - X ------X - - Cuba - - X - - X - - X - - X Cyprus - - - - X - - - X - - - Czech Republic - X - - X - - X - - X - Denmark - - X - - X - - X - - X Dominican Rep. X - - X - X - - - X - - Ecuador - X - - X - - X - - X - Egypt - X - - - - - X - - X - El Salvador - X - - X - - X - - X - Estonia X - - - - X - - - - - X Ethiopia ------X X - - Finland - - X - - X - - X - - X

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Country 08/ 07/ 06/ 05/ 04/ 03/ 02/ 01/ 12/ 11/ 10/ 09/ 03 03 03 03 03 03 03 03 02 02 02 02 France X - - X - - X - - X - - Gabon - X - - X - - X - - X - Gambia ------X - Germany X - - X - - X - - X - - Ghana - - X - - X - - X - - X Greece X - - X - - X - - X - - Guatemala X - - X - - X - - X - - Guinea X - - X - - X - - X - - Guinea-Bissau ------X - - Guyana X - - X - - X - - X - - Haiti - - X - - X - - X - - X Honduras - - X - X - - - X - - X Hong Kong - X - - X - - X - - X - Hungary - - X - - X - - X - - X Iceland - - X - - X - - - - - X India - - X - - X - - X - - X Indonesia - X - - X - - X - - X - Iran - X - - - X - - X - - X Iraq - X ------X - - X Ireland - X - - X - - X - - X - Israel - X - - X - - - X - - X Italy - - X - - X - - X - - X Jamaica X - - X - - X - - X - - Japan X - - X - - X - - X - - Jordan X ------X Kazakhstan X - - X - - X - - X - - Kenya X - - X - - X - - X - - Korea, D.P.R. X ------Korea, Rep. - - X - - X - - X - - X Kuwait - - X - - X - - X - - X Latvia - - X - - - - - X - - X Lebanon - - - X ------Liberia ------X - Libya X - - X - X - - - X - - Lithuania - X - - - - - X - - - X Luxembourg ------X - - - - - Madagascar ------X Malawi - - X ------Malaysia X - - X - - X - - X - - Mali ------X Malta - X - - - - - X - - - - Mexico X - - X - X - - - X - - Moldova - - - - X - - - - - X - Mongolia X ------Morocco X - - X - X - - - X - - Mozambique - - X ------Myanmar - X - - X - - X - - X - Namibia X ------Netherlands - X - - X - - X - - X - New Zealand X - - X - - X - - X - - Nicaragua - X - - X - - X - - X - Niger X ------

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Country 08/ 07/ 06/ 05/ 04/ 03/ 02/ 01/ 12/ 11/ 10/ 09/ 03 03 03 03 03 03 03 03 02 02 02 02 Nigeria X - - X - - X - - X - - Norway - X - - X - - X - - X - Oman - X - - X - - X - - X - Pakistan - X - - X - - X - - X - Panama - - X - X - - - X - - X Papua N Guinea - - X ------X Paraguay X - - X - - X - - X - - Peru X - - X - X - - - X - - Philippines - X - - X - - X - - X - Poland - X - - X - - X - - X - Portugal - - X - - X - - X - - X Qatar ------X Romania - - X - - X - - X - - X Russian Fed. X - - X - - X - - X - - Saudi Arabia - X - - X - - X - - X - Senegal ------X - - Serbia-Montenegro - - X ------X Sierra Leone - - X ------Singapore - X - - X - - X - - X - Slovak Rep. - X - - X - - X - - X - Slovenia ------X - - - - Somalia - X ------South Africa - - X - - X - - X - - X Spain - - X - - X - - X - - X Sri Lanka - - X - - X - - X - - X Sudan - - X - X - - - X - - X Suriname X - - X - - X - - X - - Sweden - X - - X - - X - - X - Switzerland ------X - - X - - Syria - X - - X - - X - - X - Taiwan X - - X - - X - - X - - Tanzania - - X ------Thailand - X - - X - - X - - X - Togo - X ------X - Trinidad & Tob. X - - X - - X - - X - - Tunisia - - X - - X - - X - - - Turkey - X - - X - - X - - X - Uganda - X - - - - - X - - - - Ukraine - - X - - X - - X - - X United Arab Emir’s X - - X - - X------United Kingdom X - - X - - X - - X - - United States - - X - - X - - X - - X Uruguay - - X - - X - - X - - X Venezuela - X - X - - - X - - X - Vietnam - - X - - X - - X - - X Yemen, Rep. - - - X ------X Zambia - X - - X - - X - - X - Zimbabwe - - X - - X - - - - - X

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STATISTICAL SECTION

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TABLE 1

COUNTRY RISK, RANKED BY COMPOSITE RISK RATING (September 2003 versus October 2002)

Composite Composite 09/03 Rank in Risk Rating Risk Rating versus Rank in 09/03 Country 09/03 10/02 10/02 10/02 Very Low Risk 1 Luxembourg 91.0 91.3 -0.3 2 1 Norway 91.0 91.3 -0.3 2 1 Switzerland 91.0 92.0 -1.0 1 4 Brunei 88.3 88.3 0.0 7 4 Singapore 88.3 90.0 -1.8 4 6 Ireland 87.3 89.0 -1.8 6 7 Canada 86.8 84.8 2.0 12 7 Finland 86.8 89.5 -2.8 5 7 Sweden 86.8 84.0 2.8 15 10 Japan 86.5 85.0 1.5 11 11 Kuwait 86.3 81.5 4.8 22 12 Austria 86.0 86.0 0.0 9 13 Denmark 85.8 87.8 -2.0 8 14 Netherlands 85.5 85.5 0.0 10 15 Belgium 85.3 84.5 0.8 13 16 United Arab Emirates 84.5 82.0 2.5 20 17 Cyprus 83.8 80.8 3.0 23 17 United Kingdom 83.8 82.5 1.3 18 19 Taiwan 83.0 82.5 0.5 18 20 Germany 81.8 83.5 -1.8 16 21 Hong Kong 81.5 84.3 -2.8 14 21 New Zealand 81.5 79.5 2.0 32 23 Australia 81.0 83.0 -2.0 17 24 Korea, Republic 80.8 80.0 0.8 27 25 Iceland 80.3 79.3 1.0 33 26 Italy 80.0 80.5 -0.5 25 26 Spain 80.0 80.8 -0.8 23 Low Risk 28 Bahrain 79.8 80.3 -0.5 26 28 Malta 79.8 79.8 0.0 28 28 Oman 79.8 79.8 0.0 28 28 Slovenia 79.8 79.8 0.0 28 32 Botswana 79.5 79.8 -0.3 28 33 France 79.0 82.0 -3.0 20 34 Bahamas 78.8 76.0 2.8 42 35 Portugal 78.5 79.3 -0.8 33 35 Qatar 78.5 79.3 -0.8 33 37 Czech Republic 78.3 76.3 2.0 39 37 Latvia 78.3 75.0 3.3 47 39 China, Peoples' Rep. 77.3 74.8 2.5 48 40 Chile 76.8 76.3 0.5 39

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Composite Composite 09/03 Rank in Risk Rating Risk Rating versus Rank in 09/03 Country 09/03 10/02 10/02 10/02 40 Hungary 76.8 77.5 -0.8 36 40 Saudi Arabia 76.8 73.0 3.8 52 43 Lithuania 76.5 74.0 2.5 51 43 Trinidad & Tobago 76.5 72.5 4.0 54 45 Namibia 76.3 76.5 -0.3 38 46 Greece 76.0 74.8 1.3 48 46 United States 76.0 75.5 0.5 45 48 Malaysia 75.8 76.8 -1.0 37 49 Poland 75.5 76.0 -0.5 42 49 Slovak Republic 75.5 75.8 -0.3 44 49 Thailand 75.5 76.3 -0.8 39 52 Morocco 75.3 72.5 2.8 54 53 Estonia 75.0 75.3 -0.3 46 53 Russian Federation. 75.0 70.8 4.3 62 55 Libya 73.8 69.5 4.3 68 56 Tunisia 72.8 72.0 0.8 57 57 Israel 72.5 65.3 7.3 84 58 Costa Rica 72.3 74.8 -2.5 48 58 Croatia 72.3 72.8 -0.5 53 58 Kazakhstan 72.3 72.3 0.0 56 61 Mexico 72.0 69.8 2.3 66 62 Bulgaria 71.8 71.5 0.3 58 63 Panama 71.5 71.0 0.5 60 64 Jordan 71.0 70.0 1.0 65 65 Iran 70.5 63.8 6.8 88 65 Romania 70.5 68.3 2.3 69 65 Syria 70.5 70.3 0.3 63 68 Philippines 70.0 71.0 -1.0 60 Moderate Risk 69 Vietnam 69.8 70.3 -0.5 63 70 El Salvador 69.5 71.5 -2.0 58 70 Jamaica 69.5 68.3 1.3 69 72 India 69.0 65.8 3.3 82 73 Azerbaijan 68.8 67.3 1.5 74 73 Ukraine 68.8 68.0 0.8 72 75 South Africa 68.5 67.5 1.0 73 76 Peru 68.3 68.3 0.0 69 77 Albania 67.0 66.5 0.5 77 77 Gambia 67.0 66.3 0.8 79 77 Guatemala 67.0 67.3 -0.3 74 77 Yemen, Republic 67.0 66.0 1.0 80 81 Bolivia 66.8 65.8 1.0 82 82 Algeria 66.3 61.3 5.0 99 82 Brazil 66.3 59.5 6.8 110 82 Gabon 66.3 66.5 -0.3 77 85 Egypt 65.8 66.8 -1.0 76 85 Kenya 65.8 58.0 7.8 116

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Composite Composite 09/03 Rank in Risk Rating Risk Rating versus Rank in 09/03 Country 09/03 10/02 10/02 10/02 87 Belarus 65.3 61.3 4.0 99 87 Suriname 65.3 62.8 2.5 93 89 Argentina 65.0 49.3 15.8 132 90 Senegal 64.8 66.0 -1.3 80 91 Moldova 64.5 64.0 0.5 86 91 Uruguay 64.5 61.5 3.0 98 93 Mongolia 63.8 64.0 -0.3 86 94 Colombia 63.5 61.0 2.5 101 94 Pakistan 63.5 58.5 5.0 115 94 Sri Lanka 63.5 63.3 0.3 90 97 Ecuador 63.3 59.8 3.5 108 98 Bangladesh 63.0 60.8 2.3 104 98 Ghana 63.0 60.8 2.3 104 100 Guyana 62.5 62.0 0.5 96 100 Paraguay 62.5 60.3 2.3 106 100 Armenia 62.3 60.3 2.0 106 100 Honduras 62.3 63.8 -1.5 88 104 Cameroon 62.0 63.0 -1.0 91 104 Guinea 62.0 62.5 -0.5 94 106 Uganda 62.0 63.0 -1.0 91 107 Turkey 61.8 57.3 4.5 120 108 Indonesia 61.3 58.0 3.3 116 108 Mozambique 61.3 61.0 0.3 101 110 Cuba 60.3 64.3 -4.0 85 111 Madagascar 60.0 58.8 1.3 112 High Risk 112 Dominican Republic 59.8 69.8 -10.0 66 112 Myanmar 59.8 62.3 -2.5 95 114 Venezuela 59.5 54.3 5.3 124 115 Ethiopia 59.3 59.3 0.0 111 115 Papua New Guinea 59.3 62.0 -2.8 96 117 Mali 58.5 58.8 -0.3 112 118 Burkina Faso 58.3 58.8 -0.5 112 118 Togo 58.3 59.8 -1.5 108 120 Tanzania 58.0 57.5 0.5 118 121 Niger 57.5 57.5 0.0 118 122 Nigeria 57.0 51.0 6.0 130 123 Cote d'Ivoire 55.5 56.3 -0.8 121 123 Lebanon 55.5 55.5 0.0 122 125 Serbia & Montenegro 55.3 50.8 4.5 131 126 Angola 55.0 53.3 1.8 128 127 Sudan 54.3 54.3 0.0 124 128 Malawi 54.0 54.0 0.0 126 129 Korea, D.P.R. 53.5 46.8 6.8 135 130 Zambia 52.8 49.0 3.8 133 131 Nicaragua 52.3 54.8 -2.5 123 132 Sierra Leone 51.3 52.3 -1.0 129

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Composite Composite 09/03 Rank in Risk Rating Risk Rating versus Rank in 09/03 Country 09/03 10/02 10/02 10/02 133 Haiti 51.0 54.0 -3.0 126 Very High Risk 124 Congo, Republic 48.8 61.0 -12.3 101 125 Guinea-Bissau 47.5 48.3 -0.8 134 126 Congo, Dem. Republic 46.5 41.5 5.0 139 137 Somalia 45.5 43.0 2.5 138 128 Iraq 42.0 45.5 -3.5 136 129 Liberia 36.0 45.3 -9.3 137 140 Zimbabwe 34.3 37.3 -3.0 140

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TABLE 2A

COMPOSITE RISK RATINGS OVER THE PERIOD OCTOBER 2002 THROUGH SEPTEMBER 2003

Country 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Albania 66.5 66.5 67.3 67.5 67.3 66.8 66.8 67.0 66.8 67.0 67.0 67.0 Algeria 61.3 63.8 63.8 63.8 65.8 65.5 65.5 65.0 65.0 65.0 66.3 66.3 Angola 53.3 53.5 53.8 55.0 54.8 54.3 54.3 56.8 56.8 55.0 55.0 55.0 Argentina 49.3 48.8 48.0 50.5 51.0 51.0 56.3 56.3 57.0 64.3 64.3 65.0 Armenia 60.3 60.0 60.3 60.3 60.3 60.0 60.0 60.0 59.8 59.8 59.8 62.3 Australia 83.0 82.5 82.5 82.0 81.8 81.0 80.3 81.5 81.3 81.3 81.3 81.0 Austria 86.0 86.5 86.8 86.3 85.8 87.0 87.0 86.0 86.3 85.8 85.8 86.0 Azerbaijan 67.3 66.5 67.3 67.3 68.5 68.5 68.5 68.5 68.5 68.5 68.8 68.8 Bahamas 76.0 76.0 76.0 76.0 75.8 75.8 75.8 75.8 75.8 75.8 78.8 78.8 Bahrain 80.3 80.8 81.0 80.8 81.0 80.8 80.3 80.0 79.8 79.8 79.8 79.8 Bangladesh 60.8 61.5 61.3 61.0 63.3 62.5 62.5 60.5 60.5 60.5 63.0 63.0 Belarus 61.3 61.3 61.5 63.0 63.0 63.3 63.8 64.8 65.3 65.0 65.3 65.3 Belgium 84.5 84.8 84.3 84.0 84.0 83.0 83.3 82.8 84.0 85.3 85.3 85.3 Bolivia 65.8 65.8 65.8 67.0 66.8 66.3 65.8 66.0 67.5 67.0 67.0 66.8 Botswana 79.8 80.0 79.3 79.0 79.3 79.5 79.8 79.5 79.3 79.3 79.0 79.5 Brazil 59.5 62.0 62.3 62.8 63.0 62.8 63.5 64.0 65.5 65.8 66.0 66.3 Brunei 88.3 88.3 88.3 87.5 87.5 87.5 87.5 85.8 88.3 88.3 88.3 88.3 Bulgaria 71.5 71.3 70.8 70.8 71.8 71.8 71.5 71.5 71.8 71.8 71.8 71.8 Burkina Faso 58.8 59.0 58.3 57.8 57.8 57.8 58.0 58.0 58.0 58.3 58.3 58.3 Cameroon 63.0 62.5 62.0 61.8 62.5 62.5 62.5 62.3 62.3 62.5 62.5 62.0 Canada 84.8 84.8 84.8 84.8 84.8 84.8 85.0 86.0 85.8 86.3 86.3 86.8 Chile 76.3 76.3 76.8 76.8 75.8 75.8 74.8 75.5 76.0 77.0 77.0 76.8 China, Peoples' Rep. 74.8 75.0 75.0 75.0 76.3 75.8 76.5 76.5 76.5 77.0 77.3 77.3 Colombia 61.0 60.5 60.8 60.3 60.3 60.3 60.0 60.3 60.8 61.8 63.0 63.5 Congo, Dem. Rep. 41.5 47.5 47.3 50.0 46.3 45.8 45.5 44.3 43.8 46.0 46.3 46.5 Congo, Republic 61.0 61.0 60.8 60.5 60.5 60.0 60.5 60.5 60.8 61.0 61.0 48.8 Costa Rica 74.8 75.0 73.5 73.8 73.5 73.3 72.8 72.5 72.5 72.5 72.5 72.3 Cote d'Ivoire 56.3 55.3 51.8 53.8 53.3 53.0 55.0 55.5 56.3 56.0 56.0 55.5 Croatia 72.8 72.5 72.3 72.0 72.0 72.0 72.3 72.8 72.5 72.0 72.0 72.3 Cuba 64.3 64.0 62.5 62.5 62.5 61.3 61.3 61.0 61.0 61.3 61.3 60.3 Cyprus 80.8 80.5 80.5 82.0 82.0 81.8 82.3 83.3 83.3 83.5 83.5 83.8 Czech Republic 76.3 76.3 76.3 77.0 77.0 76.8 78.0 77.5 77.5 78.3 78.0 78.3 Denmark 87.8 88.0 87.8 87.5 87.5 87.0 87.0 87.0 87.0 87.3 87.0 85.8 Dominican Rep. 69.8 69.0 67.3 68.0 68.3 68.3 68.3 68.3 67.0 67.0 59.8 59.8 Ecuador 59.8 59.8 60.8 61.5 60.5 60.5 60.5 62.0 61.8 63.3 63.3 63.3 Egypt 66.8 67.0 67.5 68.3 68.5 67.0 66.0 65.5 65.5 66.0 65.8 65.8 El Salvador 71.5 71.8 71.8 69.8 69.8 69.8 70.0 70.0 70.0 69.8 69.8 69.5 Estonia 75.3 75.3 74.8 74.5 74.3 73.5 73.5 75.0 74.8 75.0 75.0 75.0 Ethiopia 59.3 58.3 57.0 58.5 57.8 57.8 57.8 58.8 58.8 58.8 58.8 59.3 Finland 89.5 89.0 89.0 88.8 89.0 89.8 88.3 88.8 87.3 88.3 88.8 86.8 France 82.0 81.5 81.3 80.0 80.5 81.0 80.8 80.0 79.0 79.0 79.0 79.0 Gabon 66.5 66.5 66.3 66.0 66.0 66.0 65.8 65.8 65.8 66.3 66.3 66.3 Gambia 66.3 66.3 66.3 66.5 66.3 66.0 66.5 66.8 67.0 66.8 67.3 67.0 Germany 83.5 83.5 82.8 81.8 82.8 82.0 82.0 81.8 82.0 82.3 81.8 81.8 Ghana 60.8 60.3 59.8 60.3 60.3 61.5 62.3 62.0 63.3 63.5 63.8 63.0 Greece 74.8 74.8 74.5 74.5 76.0 76.0 76.5 75.5 75.5 75.8 76.0 76.0 Guatemala 67.3 67.3 67.0 67.0 68.3 68.0 68.0 67.5 67.5 67.5 67.0 67.0 Guinea 62.5 63.0 63.0 64.3 62.5 62.8 62.8 61.8 61.8 61.8 62.0 62.0

Reproduction without permission of the Publisher is strictly forbidden S-7 International Country Risk Guide September 2003

Country 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Guinea-Bissau 48.3 48.0 47.3 47.0 47.0 47.0 47.3 46.8 46.8 47.0 47.0 47.5 Guyana 62.0 61.5 61.5 61.5 61.5 61.5 61.5 61.5 61.5 61.5 62.5 62.5 Haiti 54.0 53.8 51.5 51.8 51.3 50.0 51.0 51.3 50.8 51.5 50.5 51.0 Honduras 63.8 63.8 63.5 63.8 63.8 64.0 62.0 61.8 62.0 62.0 62.0 62.3 Hong Kong 84.3 84.3 84.3 84.0 83.5 83.3 83.3 82.8 82.8 81.5 81.5 81.5 Hungary 77.5 77.3 78.0 77.8 77.8 76.3 76.3 76.3 76.8 77.3 77.3 76.8 Iceland 79.3 79.5 79.5 79.3 79.3 78.8 79.3 78.5 79.8 80.0 80.3 80.3 India 65.8 66.0 66.3 66.3 66.8 66.8 67.5 67.8 67.8 67.8 67.8 69.0 Indonesia 58.0 58.0 58.3 59.5 59.5 59.5 59.8 61.3 61.0 61.3 61.0 61.3 Iran 63.8 63.5 63.3 63.5 63.8 66.0 66.0 66.0 66.0 65.5 65.5 70.5 Iraq 45.5 45.0 44.0 44.3 44.3 41.5 30.0 38.5 40.8 41.3 41.3 42.0 Ireland 89.0 89.0 88.8 87.0 87.0 87.0 87.0 87.3 87.3 87.5 87.5 87.3 Israel 65.3 65.5 65.3 65.5 66.0 66.8 68.0 68.0 69.0 71.0 70.8 72.5 Italy 80.5 80.5 79.3 79.8 79.5 80.5 80.5 80.0 79.8 80.0 79.8 80.0 Jamaica 68.3 69.8 69.8 69.5 69.8 69.3 68.5 66.5 65.5 66.3 69.3 69.5 Japan 85.0 85.3 85.3 85.3 85.8 86.5 86.8 85.5 85.5 85.5 86.0 86.5 Jordan 70.0 70.5 70.5 70.3 70.3 70.3 69.8 70.8 70.5 70.5 71.0 71.0 Kazakhstan 72.3 71.8 71.8 72.0 71.8 71.8 71.8 71.8 71.8 71.8 72.3 72.3 Kenya 58.0 58.3 57.5 60.8 64.0 64.3 65.5 65.0 66.0 66.0 65.8 65.8 Korea, D.P.R. 46.8 46.0 46.0 55.5 55.5 55.5 55.5 55.5 55.0 55.0 53.5 53.5 Korea, Republic 80.0 79.8 79.8 80.8 80.3 80.5 80.5 80.5 80.8 80.8 80.8 80.8 Kuwait 81.5 81.3 81.0 81.5 81.8 81.8 82.3 85.8 85.3 85.3 85.3 86.3 Latvia 75.0 75.0 76.5 76.5 76.5 76.5 76.3 76.3 78.3 78.3 78.3 78.3 Lebanon 55.5 54.3 55.5 54.8 54.5 54.5 54.8 55.5 55.5 55.5 55.5 55.5 Liberia 45.3 45.3 45.3 45.3 44.8 44.8 43.2 43.2 40.8 33.5 35.8 36.0 Libya 69.5 70.0 70.0 75.5 76.3 75.5 75.5 75.5 75.5 75.5 74.8 73.8 Lithuania 74.0 74.0 74.0 75.5 76.0 76.3 76.3 76.3 76.3 76.5 76.5 76.5 Luxembourg 91.3 91.3 91.0 90.8 90.8 90.8 90.8 90.8 90.8 91.0 91.0 91.0 Madagascar 58.8 59.0 58.8 61.5 61.5 60.8 60.5 60.3 60.3 60.3 60.0 60.0 Malawi 54.0 54.0 53.5 53.5 54.3 54.0 54.3 54.5 54.0 54.3 54.3 54.0 Malaysia 76.8 77.5 77.5 77.8 76.3 76.3 76.5 75.8 75.8 75.8 75.8 75.8 Mali 58.8 58.8 58.3 58.0 58.0 58.3 58.3 58.3 58.3 58.5 58.5 58.5 Malta 79.8 79.8 79.8 79.5 79.5 79.5 79.5 79.5 79.3 79.5 79.5 79.8 Mexico 69.8 70.8 70.8 70.3 71.0 70.5 71.0 71.5 72.0 71.5 71.8 72.0 Moldova 64.0 64.0 64.0 64.0 63.8 63.5 64.5 63.8 64.3 64.3 64.3 64.5 Mongolia 64.0 64.0 64.0 64.0 64.0 64.0 64.0 64.0 64.0 64.0 64.0 63.8 Morocco 72.5 72.8 72.8 72.5 72.5 73.8 74.0 74.5 74.0 74.8 75.0 75.3 Mozambique 61.0 61.3 61.3 61.5 61.5 61.5 61.5 61.5 61.3 61.3 61.3 61.3 Myanmar 62.3 62.3 62.3 62.0 62.0 61.8 61.8 60.5 59.8 59.8 59.8 59.8 Namibia 76.5 77.8 76.5 76.5 76.8 76.3 76.8 76.8 77.0 77.3 76.5 76.3 Netherlands 85.5 83.8 83.5 83.0 83.0 83.0 83.0 83.3 84.0 85.5 85.5 85.5 New Zealand 79.5 81.0 80.8 80.5 80.3 80.3 80.8 80.8 80.8 80.8 81.8 81.5 Nicaragua 54.8 53.5 53.8 53.0 53.0 53.0 52.8 53.0 53.0 52.5 52.5 52.3 Niger 57.5 57.8 57.5 57.3 57.3 57.3 57.3 57.3 57.3 57.5 57.5 57.5 Nigeria 51.0 51.0 51.0 51.3 52.5 52.8 52.3 54.3 55.8 56.5 57.0 57.0 Norway 91.3 91.3 91.3 90.8 91.0 91.0 91.3 91.5 91.3 91.0 91.0 91.0 Oman 79.8 79.8 79.8 80.3 80.3 80.3 80.3 80.0 80.0 79.8 79.8 79.8 Pakistan 58.5 58.0 58.5 59.0 59.0 58.5 60.0 60.5 60.5 63.3 63.0 63.5 Panama 71.0 71.3 71.0 71.0 71.3 71.3 71.5 71.5 71.8 71.3 71.3 71.5 Papua N. G. 62.0 62.3 63.0 63.8 63.8 64.0 62.8 61.0 59.5 59.3 59.3 59.3 Paraguay 60.3 60.3 56.5 57.8 57.3 55.0 54.8 60.0 61.8 62.8 62.5 62.5 Peru 68.3 67.3 68.8 69.3 69.0 68.5 68.5 68.8 68.8 68.5 68.3 68.3 Philippines 71.0 71.0 71.0 70.3 70.5 70.3 70.0 71.5 72.0 70.0 70.3 70.0 Poland 76.0 76.0 76.3 76.8 76.8 75.8 75.8 75.3 75.5 75.5 75.5 75.5

S-8 Reproduction without permission of the Publisher is strictly forbidden International Country Risk Guide September 2003

Country 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Portugal 79.3 79.3 78.3 78.0 78.0 77.5 78.8 78.8 78.8 79.0 79.0 78.5 Qatar 79.3 79.3 79.3 78.8 78.8 78.8 78.8 78.5 78.5 78.5 78.5 78.5 Romania 68.3 68.5 69.5 69.8 69.8 69.8 71.3 71.5 72.0 72.0 72.0 70.5 Russian Fed. 70.8 70.0 70.0 70.3 71.5 71.5 72.5 71.0 71.5 71.8 75.0 75.0 Saudi Arabia 73.0 73.0 72.5 76.3 76.3 76.3 76.5 76.5 77.3 76.8 76.8 76.8 Senegal 66.0 64.8 65.5 65.0 65.0 65.0 65.0 65.0 65.0 65.3 65.3 64.8 Serbia & Montenegro 50.8 50.5 50.0 50.0 51.3 51.3 52.3 52.3 55.3 55.5 55.5 55.3 Sierra Leone 52.3 52.3 52.3 52.3 52.0 52.3 51.8 51.5 51.8 51.8 51.3 51.3 Singapore 90.0 90.0 90.0 89.8 89.8 89.3 89.3 88.5 88.5 88.3 88.3 88.3 Slovak Rep. 75.8 75.8 75.8 74.8 74.8 74.5 75.0 75.0 74.3 75.0 75.0 75.5 Slovenia 79.8 79.8 80.3 80.0 79.8 79.8 80.0 80.3 79.3 79.5 79.5 79.8 Somalia 43.0 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 45.5 45.5 45.5 South Africa 67.5 69.8 68.8 68.3 68.8 68.3 68.5 68.8 69.0 69.3 68.5 68.5 Spain 80.8 80.8 80.8 80.8 80.8 80.3 80.3 80.0 81.0 81.0 81.0 80.0 Sri Lanka 63.3 63.5 63.3 63.3 63.3 64.0 63.8 63.5 64.0 63.8 63.8 63.5 Sudan 54.3 54.3 54.3 54.3 54.3 54.5 55.3 55.3 55.3 55.0 55.0 54.3 Suriname 62.8 62.8 61.8 66.8 61.5 61.5 60.3 65.5 65.5 65.5 65.3 65.3 Sweden 84.0 84.5 84.5 86.8 86.8 86.8 86.5 85.8 85.8 86.5 86.8 86.8 Switzerland 92.0 92.0 91.5 91.5 91.3 91.3 91.3 91.8 91.5 92.0 91.0 91.0 Syria 70.3 70.5 69.8 71.5 71.5 71.3 70.8 70.5 70.5 70.5 70.5 70.5 Taiwan 82.5 82.5 82.0 82.0 83.3 83.3 83.3 83.3 83.3 83.3 83.0 83.0 Tanzania 57.5 58.0 58.0 58.3 58.3 57.8 58.0 57.8 57.8 57.8 57.8 58.0 Thailand 76.3 76.3 76.3 75.0 75.0 73.5 73.3 74.0 74.0 75.5 75.5 75.5 Togo 59.8 59.3 59.3 58.5 58.8 57.8 58.8 58.5 58.5 58.8 58.8 58.3 Trinidad & Tob. 72.5 72.5 73.3 73.3 75.0 75.0 75.0 75.0 75.0 75.0 76.5 76.5 Tunisia 72.0 72.0 72.0 72.3 72.3 72.8 72.8 72.8 72.8 72.5 72.5 72.8 Turkey 57.3 58.8 59.8 56.8 57.0 56.5 56.3 58.0 59.5 59.3 61.8 61.8 Uganda 63.0 62.8 62.5 62.5 62.5 62.3 62.8 62.0 62.0 62.0 62.0 62.0 Ukraine 68.0 67.8 67.5 67.5 67.5 68.3 68.5 68.5 68.3 68.3 68.3 68.8 United Arab Em’tes 82.0 81.8 81.8 81.5 83.3 83.3 83.3 84.0 84.0 84.0 84.5 84.5 United Kingdom 82.5 82.3 82.0 82.0 85.0 83.3 84.5 85.5 85.3 85.0 83.8 83.8 United States 75.5 75.8 77.5 76.3 76.8 73.8 75.5 76.8 77.0 75.8 75.8 76.0 Uruguay 61.5 61.8 61.5 63.3 63.5 60.8 60.5 60.8 62.0 65.0 66.0 64.5 Venezuela 54.3 54.3 53.8 56.8 56.8 57.3 59.3 57.0 58.0 57.5 58.8 59.5 Vietnam 70.3 70.3 70.3 70.3 70.3 70.3 70.8 70.5 70.8 70.5 70.5 69.8 Yemen, Republic 66.0 66.0 66.0 66.0 66.0 66.5 66.5 67.0 67.0 67.0 67.0 67.0 Zambia 49.0 50.0 48.0 50.8 51.0 49.5 50.3 51.3 52.3 52.5 52.5 52.8 Zimbabwe 37.3 37.3 37.0 36.8 37.0 37.0 32.8 32.8 34.5 35.5 35.5 34.3

Reproduction without permission of the Publisher is strictly forbidden S-9 International Country Risk Guide September 2003

TABLE 2B

CURRENT RISK RATINGS AND COMPOSITE RISK FORECASTS

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Albania 68.5 33.5 32.0 66.5 67.0 55.5 70.0 58.0 71.0 Algeria 45.5 43.5 43.5 61.3 66.3 60.5 69.5 59.0 76.5 Angola 58.5 25.5 26.0 53.3 55.0 44.0 54.0 46.5 63.0 Argentina 64.0 29.5 36.5 49.3 65.0 58.5 67.5 60.5 77.0 Armenia 61.0 31.0 32.5 60.3 62.3 57.5 63.0 55.5 71.5 Australia 85.5 35.5 41.0 83.0 81.0 77.5 83.0 73.0 87.0 Austria 90.0 42.0 40.0 86.0 86.0 79.5 88.0 78.5 92.5 Azerbaijan 64.0 38.5 35.0 67.3 68.8 58.0 69.0 54.0 70.5 Bahamas 84.0 37.5 36.0 76.0 78.8 75.0 79.5 70.5 81.0 Bahrain 77.0 44.0 38.5 80.3 79.8 76.0 81.0 67.0 79.5 Bangladesh 48.0 39.5 38.5 60.8 63.0 60.5 69.5 54.5 71.0 Belarus 62.0 38.0 30.5 61.3 65.3 52.0 58.0 50.5 62.0 Belgium 86.5 41.5 42.5 84.5 85.3 78.5 85.5 75.5 89.0 Bolivia 63.5 37.0 33.0 65.8 66.8 62.5 70.0 63.0 74.5 Botswana 76.5 44.0 38.5 79.8 79.5 73.5 80.0 69.5 82.5 Brazil 69.0 30.5 33.0 59.5 66.3 51.0 63.0 59.0 76.5 Brunei 82.0 50.0 44.5 88.3 88.3 76.5 81.5 74.5 83.0 Bulgaria 71.0 36.5 36.0 71.5 71.8 67.5 78.0 64.5 80.5 Burkina Faso 63.5 23.5 29.5 58.8 58.3 53.5 62.3 52.5 66.5 Cameroon 54.0 33.5 36.5 63.0 62.0 57.5 65.0 54.0 66.0 Canada 89.5 42.0 42.0 84.8 86.8 77.5 84.0 72.0 87.5 Chile 77.0 37.5 39.0 76.3 76.8 67.5 76.0 68.5 79.5 China, Peoples' Rep. 70.5 45.5 38.5 74.8 77.3 74.5 78.5 67.0 80.5 Colombia 55.0 39.5 32.5 61.0 63.5 57.5 66.5 53.0 69.5 Congo, DR 38.5 24.5 30.0 41.5 46.5 47.0 56.5 41.5 66.5 Congo, Rep. 56.5 23.0 18.0 61.0 48.8 53.0 62.0 49.0 64.5 Costa Rica 74.0 37.0 33.5 74.8 72.3 73.0 77.5 69.0 80.0 Cote d'Ivoire 46.5 30.5 34.0 56.3 55.5 58.0 67.3 57.0 69.0 Croatia 72.5 37.0 35.0 72.8 72.3 66.5 73.5 64.0 75.0 Cuba 58.5 28.5 33.5 64.3 60.3 50.5 63.0 45.0 71.0 Cyprus 83.0 43.5 41.0 80.8 83.8 68.5 76.5 69.5 79.5 Czech Republic 78.5 41.0 37.0 76.3 78.3 73.0 77.0 72.5 80.5 Denmark 87.5 42.0 42.0 87.8 85.8 83.0 86.5 77.5 90.0 Dominican Rep. 62.5 29.5 27.5 69.8 59.8 56.0 63.5 55.5 69.5 Ecuador 58.0 34.5 34.0 59.8 63.3 51.0 61.0 52.0 67.0 Egypt 64.0 34.0 33.5 66.8 65.8 60.5 72.5 55.0 70.5 El Salvador 64.0 39.5 35.5 71.5 69.5 71.5 76.0 67.5 79.0 Estonia 75.0 37.0 38.0 75.3 75.0 70.5 77.0 66.5 80.0 Ethiopia 54.0 31.5 33.0 59.3 59.3 51.5 60.5 52.5 67.0 Finland 93.5 36.0 44.0 89.5 86.8 79.0 89.5 75.5 89.5 France 78.0 40.0 40.0 82.0 79.0 78.0 85.5 75.0 90.0 Gabon 60.5 34.0 38.0 66.5 66.3 61.5 72.0 58.0 75.0 Gambia 69.5 29.0 35.5 66.3 67.0 65.0 72.5 61.0 76.0 Germany 83.0 41.5 39.0 83.5 81.8 78.0 83.8 75.0 91.0 Ghana 61.5 33.5 31.0 60.8 63.0 59.0 65.5 57.5 67.5 Greece 78.0 36.5 37.5 74.8 76.0 73.5 80.0 72.5 85.0

S-10 Reproduction without permission of the Publisher is strictly forbidden International Country Risk Guide September 2003

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Guatemala 60.5 40.0 33.5 67.3 67.0 65.3 71.5 60.0 75.5 Guinea 53.5 35.5 35.0 62.5 62.0 58.5 64.5 54.0 66.5 Guinea-Bissau 47.5 21.5 26.0 48.3 47.5 46.5 53.5 50.5 63.5 Guyana 68.0 29.5 27.5 62.0 62.5 59.8 66.0 58.5 69.5 Haiti 45.0 31.5 25.5 54.0 51.0 39.5 52.0 38.5 66.5 Honduras 60.5 36.0 28.0 63.8 62.3 57.5 66.0 56.5 72.0 Hong Kong 75.5 44.0 43.5 84.3 81.5 71.5 77.5 65.5 81.5 Hungary 84.5 34.5 34.5 77.5 76.8 71.0 79.0 70.0 81.0 Iceland 90.0 31.5 39.0 79.3 80.3 75.0 82.5 73.0 84.0 India 59.0 44.0 35.0 65.8 69.0 59.5 69.0 56.0 73.5 Indonesia 51.5 34.5 36.5 58.0 61.3 45.0 59.0 46.5 68.5 Iran 58.0 46.5 36.5 63.8 70.5 37.5 68.5 39.0 75.0 Iraq 41.5 22.5 20.0 45.5 42.0 39.0 53.3 37.5 72.5 Ireland 92.0 41.5 41.0 89.0 87.3 80.5 89.5 76.0 91.0 Israel 67.5 39.5 38.0 65.3 72.5 60.0 72.0 58.0 77.5 Italy 78.0 43.0 39.0 80.5 80.0 73.5 81.0 71.0 84.5 Jamaica 70.5 36.0 32.5 68.3 69.5 66.5 73.0 65.0 78.0 Japan 85.5 50.0 37.5 85.0 86.5 82.0 88.0 78.0 92.0 Jordan 69.5 36.5 36.0 70.0 71.0 69.0 74.0 66.5 77.5 Kazakhstan 70.5 37.0 37.0 72.3 72.3 68.5 73.0 61.5 74.5 Kenya 62.5 36.5 32.5 58.0 65.8 62.5 68.0 54.0 71.5 Korea, DPR 50.5 26.5 30.0 46.8 53.5 25.0 44.0 26.5 61.5 Korea, Rep 79.0 42.0 40.5 80.0 80.8 64.5 83.3 61.5 86.5 Kuwait 78.0 47.5 47.0 81.5 86.3 74.5 87.0 67.5 88.0 Latvia 78.5 39.5 38.5 75.0 78.3 73.5 80.0 71.5 86.5 Lebanon 60.0 25.0 26.0 55.5 55.5 48.5 57.0 45.0 63.5 Liberia 32.5 18.5 21.0 45.3 36.0 35.0 44.5 35.0 53.0 Libya 62.0 44.0 41.5 69.5 73.8 71.5 78.3 56.5 78.3 Lithuania 78.5 37.0 37.5 74.0 76.5 70.0 76.0 65.5 79.5 Luxembourg 94.5 43.0 44.5 91.3 91.0 89.0 91.5 83.0 91.5 Madagascar 60.0 32.0 28.0 58.8 60.0 63.5 69.5 60.0 71.0 Malawi 56.5 25.5 26.0 54.0 54.0 49.0 57.5 49.0 63.0 Malaysia 71.5 41.0 39.0 76.8 75.8 69.0 77.5 64.0 79.0 Mali 61.5 31.5 24.0 58.8 58.5 58.5 68.5 54.0 71.0 Malta 86.5 37.5 35.5 79.8 79.8 77.0 81.5 73.5 81.0 Mexico 69.0 38.0 37.0 69.8 72.0 66.0 72.8 60.0 77.0 Moldova 68.5 31.0 29.5 64.0 64.5 48.5 54.0 50.0 67.0 Mongolia 71.0 31.5 25.0 64.0 63.8 60.5 67.0 54.0 69.5 Morocco 73.5 40.0 37.0 72.5 75.3 69.0 76.0 62.5 77.5 Mozambique 63.0 34.0 25.5 61.0 61.3 54.5 63.5 48.0 65.0 Myanmar 47.5 39.5 32.5 62.3 59.8 51.0 57.5 42.5 63.0 Namibia 76.0 41.0 35.5 76.5 76.3 70.5 77.8 68.0 79.5 Netherlands 90.5 39.5 41.0 85.5 85.5 82.0 88.0 80.5 88.5 New Zealand 91.0 30.5 41.5 79.5 81.5 79.3 83.8 75.5 88.0 Nicaragua 57.5 25.0 22.0 54.8 52.3 44.5 52.0 43.5 60.0 Niger 58.5 25.5 31.0 57.5 57.5 57.5 64.5 53.0 67.5 Nigeria 44.0 39.0 31.0 51.0 57.0 49.5 65.5 49.0 71.5 Norway 88.5 47.5 46.0 91.3 91.0 85.5 91.0 79.0 94.0 Oman 75.5 42.0 42.0 79.8 79.8 70.5 74.0 65.5 74.5 Pakistan 49.0 40.5 37.5 58.5 63.5 49.5 60.0 46.5 64.0 Panama 72.0 35.0 36.0 71.0 71.5 65.0 74.5 59.0 78.5

Reproduction without permission of the Publisher is strictly forbidden S-11 International Country Risk Guide September 2003

CURRENT RATINGS COMPOSITE RATINGS Political Financial Economic Year Current Forecasts COUNTRY Risk Risk Risk Ago Rating One Year Five Year 09/03 09/03 09/03 10/02 09/03 WC BC WC BC Papua New Guinea 53.5 35.0 30.0 62.0 59.3 52.5 61.5 51.5 66.0 Paraguay 57.0 39.0 29.0 60.3 62.5 56.3 65.0 42.5 70.5 Peru 62.5 37.5 36.5 68.3 68.3 59.5 71.3 55.0 72.5 Philippines 68.0 36.5 35.5 71.0 70.0 60.5 71.0 61.5 74.5 Poland 76.5 39.0 35.5 76.0 75.5 70.5 80.0 70.0 80.5 Portugal 86.0 36.5 34.5 79.3 78.5 73.0 80.5 70.0 83.5 Qatar 73.0 36.5 47.5 79.3 78.5 60.0 64.5 57.5 68.5 Romania 71.0 38.5 31.5 68.3 70.5 64.5 74.0 57.5 78.5 Russian Federation 67.5 43.0 39.5 70.8 75.0 71.3 78.5 64.5 83.5 Saudi Arabia 67.0 45.5 41.0 73.0 76.8 61.0 72.5 60.0 78.0 Senegal 59.0 35.5 35.0 66.0 64.8 60.0 64.0 52.5 66.0 Serbia & Montenegro 62.0 26.0 22.5 50.8 55.3 32.5 60.5 32.5 69.5 Sierra Leone 56.0 21.0 25.5 52.3 51.3 45.0 55.5 37.5 60.0 Singapore 86.5 45.5 44.5 90.0 88.3 81.0 85.0 64.5 85.5 Slovak Republic 78.5 37.5 35.0 75.8 75.5 69.5 78.0 69.5 81.5 Slovenia 80.0 41.5 38.0 79.8 79.8 73.0 82.5 70.5 84.0 Somalia 27.0 35.5 28.5 43.0 45.5 33.0 43.5 32.0 55.5 South Africa 65.5 36.0 35.5 67.5 68.5 61.5 71.0 56.5 73.0 Spain 82.0 39.0 39.0 80.8 80.0 74.5 83.5 74.5 89.0 Sri Lanka 59.0 37.0 31.0 63.3 63.5 50.5 70.0 50.0 74.0 Sudan 45.0 29.5 34.0 54.3 54.3 41.0 59.0 39.0 67.0 Suriname 65.0 35.5 30.0 62.8 65.3 61.0 67.5 57.5 71.5 Sweden 90.5 40.0 43.0 84.0 86.8 81.0 86.0 73.5 88.0 Switzerland 91.0 47.5 43.5 92.0 91.0 88.3 92.0 81.5 94.0 Syria 64.5 39.0 37.5 70.3 70.5 62.0 71.0 57.5 71.0 Taiwan 76.0 47.0 43.0 82.5 83.0 77.5 89.5 67.5 86.5 Tanzania 60.5 21.0 34.5 57.5 58.0 55.0 62.0 52.5 66.5 Thailand 71.5 39.5 40.0 76.3 75.5 66.0 73.5 58.0 75.5 Togo 51.0 34.0 31.5 59.8 58.3 54.0 62.0 54.0 68.0 Trinidad & Tobago 67.0 45.0 41.0 72.5 76.5 74.0 78.8 71.5 80.5 Tunisia 73.0 36.0 36.5 72.0 72.8 58.5 73.5 55.0 75.5 Turkey 65.5 31.5 26.5 57.3 61.8 57.5 65.5 60.5 73.0 Uganda 56.5 34.0 33.5 63.0 62.0 58.0 64.0 54.0 67.5 Ukraine 59.5 40.5 37.5 68.0 68.8 62.5 70.5 58.5 76.5 United Arab Emir’s 78.0 45.0 46.0 82.0 84.5 79.5 85.5 71.5 86.5 United Kingdom 86.0 42.5 39.0 82.5 83.8 77.5 85.5 76.5 89.0 United States 81.0 33.0 38.0 75.5 76.0 73.0 79.5 72.0 84.0 Uruguay 70.5 30.5 28.0 61.5 64.5 57.0 67.5 58.0 73.5 Venezuela 50.0 42.5 26.5 54.3 59.5 54.5 65.5 51.5 76.0 Vietnam 65.5 38.5 35.5 70.3 69.8 66.0 71.5 62.5 75.0 Yemen, Republic 62.5 35.0 36.5 66.0 67.0 62.0 66.0 57.5 71.5 Zambia 57.5 25.0 23.0 49.0 52.8 55.0 58.0 52.0 64.0 Zimbabwe 38.0 21.0 9.5 37.3 34.3 27.5 55.0 34.0 66.0

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TABLE 2C

COMPOSITE RISK FORECASTS

One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Albania 67.0 55.5 70.0 14.5 58.0 71.0 13.0 Algeria 66.3 60.5 69.5 9.0 59.0 76.5 17.5 Angola 55.0 44.0 54.0 10.0 46.5 63.0 16.5 Argentina 65.0 58.5 67.5 9.0 60.5 77.0 16.5 Armenia 62.3 57.5 63.0 5.5 55.5 71.5 16.0 Australia 81.0 77.5 83.0 5.5 73.0 87.0 14.0 Austria 86.0 79.5 88.0 8.5 78.5 92.5 14.0 Azerbaijan 68.8 58.0 69.0 11.0 54.0 70.5 16.5 Bahamas 78.8 75.0 79.5 4.5 70.5 81.0 10.5 Bahrain 79.8 76.0 81.0 5.0 67.0 79.5 12.5 Bangladesh 63.0 60.5 69.5 9.0 54.5 71.0 16.5 Belarus 65.3 52.0 58.0 6.0 50.5 62.0 11.5 Belgium 85.3 78.5 85.5 7.0 75.5 89.0 13.5 Bolivia 66.8 62.5 70.0 7.5 63.0 74.5 11.5 Botswana 79.5 73.5 80.0 6.5 69.5 82.5 13.0 Brazil 66.3 51.0 63.0 12.0 59.0 76.5 17.5 Brunei 88.3 76.5 81.5 5.0 74.5 83.0 8.5 Bulgaria 71.8 67.5 78.0 10.5 64.5 80.5 16.0 Burkina Faso 58.3 53.5 62.3 8.8 52.5 66.5 14.0 Cameroon 62.0 57.5 65.0 7.5 54.0 66.0 12.0 Canada 86.8 77.5 84.0 6.5 72.0 87.5 15.5 Chile 76.8 67.5 76.0 8.5 68.5 79.5 11.0 China, Peoples' Rep. 77.3 74.5 78.5 4.0 67.0 80.5 13.5 Colombia 63.5 57.5 66.5 9.0 53.0 69.5 16.5 Congo, Dem. Republic 46.5 47.0 56.5 9.5 41.5 66.5 25.0 Congo, Republic 48.8 53.0 62.0 9.0 49.0 64.5 15.5 Costa Rica 72.3 73.0 77.5 4.5 69.0 80.0 11.0 Cote d'Ivoire 55.5 58.0 67.3 9.3 57.0 69.0 12.0 Croatia 72.3 66.5 73.5 7.0 64.0 75.0 11.0 Cuba 60.3 50.5 63.0 12.5 45.0 71.0 26.0 Cyprus 83.8 68.5 76.5 8.0 69.5 79.5 10.0 Czech Republic 78.3 73.0 77.0 4.0 72.5 80.5 8.0 Denmark 85.8 83.0 86.5 3.5 77.5 90.0 12.5 Dominican Republic 59.8 56.0 63.5 7.5 55.5 69.5 14.0 Ecuador 63.3 51.0 61.0 10.0 52.0 67.0 15.0 Egypt 65.8 60.5 72.5 12.0 55.0 70.5 15.5 El Salvador 69.5 71.5 76.0 4.5 67.5 79.0 11.5 Estonia 75.0 70.5 77.0 6.5 66.5 80.0 13.5 Ethiopia 59.3 51.5 60.5 9.0 52.5 67.0 14.5 Finland 86.8 79.0 89.5 10.5 75.5 89.5 14.0 France 79.0 78.0 85.5 7.5 75.0 90.0 15.0 Gabon 66.3 61.5 72.0 10.5 58.0 75.0 17.0 Gambia 67.0 65.0 72.5 7.5 61.0 76.0 15.0 Germany 81.8 78.0 83.8 5.8 75.0 91.0 16.0 Ghana 63.0 59.0 65.5 6.5 57.5 67.5 10.0 Greece 76.0 73.5 80.0 6.5 72.5 85.0 12.5

Reproduction without permission of the Publisher is strictly forbidden S-13 International Country Risk Guide September 2003

One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Guatemala 67.0 65.3 71.5 6.3 60.0 75.5 15.5 Guinea 62.0 58.5 64.5 6.0 54.0 66.5 12.5 Guinea-Bissau 47.5 46.5 53.5 7.0 50.5 63.5 13.0 Guyana 62.5 59.8 66.0 6.3 58.5 69.5 11.0 Haiti 51.0 39.5 52.0 12.5 38.5 66.5 28.0 Honduras 62.3 57.5 66.0 8.5 56.5 72.0 15.5 Hong Kong 81.5 71.5 77.5 6.0 65.5 81.5 16.0 Hungary 76.8 71.0 79.0 8.0 70.0 81.0 11.0 Iceland 80.3 75.0 82.5 7.5 73.0 84.0 11.0 India 69.0 59.5 69.0 9.5 56.0 73.5 17.5 Indonesia 61.3 45.0 59.0 14.0 46.5 68.5 22.0 Iran 70.5 37.5 68.5 31.0 39.0 75.0 36.0 Iraq 42.0 39.0 53.3 14.3 37.5 72.5 35.0 Ireland 87.3 80.5 89.5 9.0 76.0 91.0 15.0 Israel 72.5 60.0 72.0 12.0 58.0 77.5 19.5 Italy 80.0 73.5 81.0 7.5 71.0 84.5 13.5 Jamaica 69.5 66.5 73.0 6.5 65.0 78.0 13.0 Japan 86.5 82.0 88.0 6.0 78.0 92.0 14.0 Jordan 71.0 69.0 74.0 5.0 66.5 77.5 11.0 Kazakhstan 72.3 68.5 73.0 4.5 61.5 74.5 13.0 Kenya 65.8 62.5 68.0 5.5 54.0 71.5 17.5 Korea, D.P.R. 53.5 25.0 44.0 19.0 26.5 61.5 35.0 Korea, Republic 80.8 64.5 83.3 18.8 61.5 86.5 25.0 Kuwait 86.3 74.5 87.0 12.5 67.5 88.0 20.5 Latvia 78.3 73.5 80.0 6.5 71.5 86.5 15.0 Lebanon 55.5 48.5 57.0 8.5 45.0 63.5 18.5 Liberia 36.0 35.0 44.5 9.5 35.0 53.0 18.0 Libya 73.8 71.5 78.3 6.8 56.5 78.3 21.8 Lithuania 76.5 70.0 76.0 6.0 65.5 79.5 14.0 Luxembourg 91.0 89.0 91.5 2.5 83.0 91.5 8.5 Madagascar 60.0 63.5 69.5 6.0 60.0 71.0 11.0 Malawi 54.0 49.0 57.5 8.5 49.0 63.0 14.0 Malaysia 75.8 69.0 77.5 8.5 64.0 79.0 15.0 Mali 58.5 58.5 68.5 10.0 54.0 71.0 17.0 Malta 79.8 77.0 81.5 4.5 73.5 81.0 7.5 Mexico 72.0 66.0 72.8 6.8 60.0 77.0 17.0 Moldova 64.5 48.5 54.0 5.5 50.0 67.0 17.0 Mongolia 63.8 60.5 67.0 6.5 54.0 69.5 15.5 Morocco 75.3 69.0 76.0 7.0 62.5 77.5 15.0 Mozambique 61.3 54.5 63.5 9.0 48.0 65.0 17.0 Myanmar 59.8 51.0 57.5 6.5 42.5 63.0 20.5 Namibia 76.3 70.5 77.8 7.3 68.0 79.5 11.5 Netherlands 85.5 82.0 88.0 6.0 80.5 88.5 8.0 New Zealand 81.5 79.3 83.8 4.5 75.5 88.0 12.5 Nicaragua 52.3 44.5 52.0 7.5 43.5 60.0 16.5 Niger 57.5 57.5 64.5 7.0 53.0 67.5 14.5 Nigeria 57.0 49.5 65.5 16.0 49.0 71.5 22.5 Norway 91.0 85.5 91.0 5.5 79.0 94.0 15.0 Oman 79.8 70.5 74.0 3.5 65.5 74.5 9.0 Pakistan 63.5 49.5 60.0 10.5 46.5 64.0 17.5 Panama 71.5 65.0 74.5 9.5 59.0 78.5 19.5 Papua New Guinea 59.3 52.5 61.5 9.0 51.5 66.0 14.5

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One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Paraguay 62.5 56.3 65.0 8.8 42.5 70.5 28.0 Peru 68.3 59.5 71.3 11.8 55.0 72.5 17.5 Philippines 70.0 60.5 71.0 10.5 61.5 74.5 13.0 Poland 75.5 70.5 80.0 9.5 70.0 80.5 10.5 Portugal 78.5 73.0 80.5 7.5 70.0 83.5 13.5 Qatar 78.5 60.0 64.5 4.5 57.5 68.5 11.0 Romania 70.5 64.5 74.0 9.5 57.5 78.5 21.0 Russian Federation. 75.0 71.3 78.5 7.3 64.5 83.5 19.0 Saudi Arabia 76.8 61.0 72.5 11.5 60.0 78.0 18.0 Senegal 64.8 60.0 64.0 4.0 52.5 66.0 13.5 Serbia & Montenegro 55.3 32.5 60.5 28.0 32.5 69.5 37.0 Sierra Leone 51.3 45.0 55.5 10.5 37.5 60.0 22.5 Singapore 88.3 81.0 85.0 4.0 64.5 85.5 21.0 Slovak Republic 75.5 69.5 78.0 8.5 69.5 81.5 12.0 Slovenia 79.8 73.0 82.5 9.5 70.5 84.0 13.5 Somalia 45.5 33.0 43.5 10.5 32.0 55.5 23.5 South Africa 68.5 61.5 71.0 9.5 56.5 73.0 16.5 Spain 80.0 74.5 83.5 9.0 74.5 89.0 14.5 Sri Lanka 63.5 50.5 70.0 19.5 50.0 74.0 24.0 Sudan 54.3 41.0 59.0 18.0 39.0 67.0 28.0 Suriname 65.3 61.0 67.5 6.5 57.5 71.5 14.0 Sweden 86.8 81.0 86.0 5.0 73.5 88.0 14.5 Switzerland 91.0 88.3 92.0 3.8 81.5 94.0 12.5 Syria 70.5 62.0 71.0 9.0 57.5 71.0 13.5 Taiwan 83.0 77.5 89.5 12.0 67.5 86.5 19.0 Tanzania 58.0 55.0 62.0 7.0 52.5 66.5 14.0 Thailand 75.5 66.0 73.5 7.5 58.0 75.5 17.5 Togo 58.3 54.0 62.0 8.0 54.0 68.0 14.0 Trinidad & Tobago 76.5 74.0 78.8 4.8 71.5 80.5 9.0 Tunisia 72.8 58.5 73.5 15.0 55.0 75.5 20.5 Turkey 61.8 57.5 65.5 8.0 60.5 73.0 12.5 Uganda 62.0 58.0 64.0 6.0 54.0 67.5 13.5 Ukraine 68.8 62.5 70.5 8.0 58.5 76.5 18.0 United Arab Emirates 84.5 79.5 85.5 6.0 71.5 86.5 15.0 United Kingdom 83.8 77.5 85.5 8.0 76.5 89.0 12.5 United States 76.0 73.0 79.5 6.5 72.0 84.0 12.0 Uruguay 64.5 57.0 67.5 10.5 58.0 73.5 15.5 Venezuela 59.5 54.5 65.5 11.0 51.5 76.0 24.5 Vietnam 69.8 66.0 71.5 5.5 62.5 75.0 12.5 Yemen, Republic 67.0 62.0 66.0 4.0 57.5 71.5 14.0 Zambia 52.8 55.0 58.0 3.0 52.0 64.0 12.0 Zimbabwe 34.3 27.5 55.0 27.5 34.0 66.0 32.0

Reproduction without permission of the Publisher is strictly forbidden S-15 International Country Risk Guide September 2003

TABLE 3A

POLITICAL RISK RATINGS OVER THE PERIOD OCTOBER 2002 THROUGH SEPTEMBER 2003

COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Albania 66.5 66.5 68.0 68.0 68.0 68.0 68.5 68.5 68.5 68.5 68.5 68.5 Algeria 46.0 46.0 46.0 46.0 46.0 45.5 45.5 44.5 44.5 44.5 45.5 45.5 Angola 54.0 54.0 54.5 55.5 54.5 54.0 54.0 58.5 58.5 58.5 58.5 58.5 Argentina 57.0 56.0 54.5 55.5 55.5 56.0 59.0 59.0 61.5 62.5 63.0 64.0 Armenia 59.0 58.5 59.0 59.0 59.0 58.5 58.5 58.5 58.0 58.0 58.0 61.0 Australia 88.0 87.0 87.0 86.5 86.5 85.0 83.0 85.5 85.5 86.0 86.0 85.5 Austria 88.5 89.5 90.5 90.5 89.5 92.0 92.0 90.5 91.0 89.5 89.5 90.0 Azerbaijan 58.5 57.5 59.0 59.0 61.5 61.5 61.5 63.0 63.0 63.0 64.0 64.0 Bahamas 84.5 84.5 84.5 84.5 84.0 84.0 84.0 84.0 84.0 84.0 84.0 84.0 Bahrain 78.0 79.0 79.5 79.0 79.5 79.0 78.0 77.5 77.0 77.0 77.0 77.0 Bangladesh 51.5 51.5 51.0 50.5 51.0 49.5 49.5 47.5 47.5 47.5 48.0 48.0 Belarus 59.0 59.0 59.0 61.0 61.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 Belgium 86.5 87.0 87.0 87.0 87.0 85.0 85.5 84.5 84.5 86.5 86.5 86.5 Bolivia 64.5 64.5 64.5 63.5 63.0 62.0 61.0 61.5 64.0 64.0 64.0 63.5 Botswana 75.5 76.0 76.0 76.0 76.0 76.0 76.0 76.0 75.0 75.0 75.0 76.5 Brazil 60.5 68.0 69.0 69.0 69.0 69.0 69.0 69.0 69.0 68.5 69.0 69.0 Brunei 80.5 80.5 80.5 80.5 80.5 80.5 80.5 80.5 82.0 82.0 82.0 82.0 Bulgaria 73.5 73.0 72.5 73.0 73.5 73.5 73.0 72.5 73.0 72.5 71.0 71.0 Burkina Faso 63.5 64.0 63.0 62.5 62.5 62.5 63.0 63.0 63.0 63.0 63.5 63.5 Cameroon 55.5 55.0 55.0 55.0 55.5 55.5 55.5 55.0 55.0 55.0 55.0 54.0 Canada 86.0 86.0 86.0 85.5 85.5 85.5 86.0 86.0 86.0 88.5 88.5 89.5 Chile 77.0 77.5 77.5 77.0 75.5 76.0 75.5 76.5 76.5 77.5 77.5 77.0 China, P. Rep. 66.0 66.0 66.0 66.0 68.5 68.5 70.0 69.5 69.5 70.5 70.5 70.5 Colombia 53.5 53.0 53.0 53.0 53.5 53.5 53.5 53.5 53.5 53.5 55.0 55.0 Congo, D. Rep 39.5 40.5 40.5 41.5 41.5 40.5 40.5 39.5 37.5 38.5 38.5 38.5 Congo, Rep. 55.0 55.0 55.0 55.0 55.0 55.0 56.0 56.0 56.0 56.0 56.0 56.5 Costa Rica 76.0 76.5 76.0 76.0 76.0 76.0 75.0 75.0 75.0 74.5 74.5 74.0 Cote d'Ivoire 52.0 50.0 43.5 43.5 42.5 42.0 46.0 47.0 48.5 47.5 47.5 46.5 Croatia 73.5 73.0 73.0 73.0 73.0 73.0 73.0 74.0 74.0 72.5 72.5 72.5 Cuba 62.5 62.0 61.5 61.5 61.5 60.0 60.0 59.5 59.5 59.5 59.5 58.5 Cyprus 77.0 77.0 77.0 80.5 80.5 80.0 81.0 82.5 83.0 83.0 83.0 83.0 Czech Rep. 79.0 79.0 79.0 79.0 79.0 79.0 79.0 78.0 78.5 78.5 78.5 78.5 Denmark 90.5 91.0 91.0 91.0 91.0 90.0 90.0 90.0 90.0 90.0 89.5 87.5 Dominican R. 66.0 66.0 66.5 66.5 66.5 66.5 66.5 66.0 66.0 66.0 62.5 62.5 Ecuador 55.5 55.5 57.5 59.0 57.0 57.0 57.0 57.0 56.5 58.0 58.0 58.0 Egypt 62.5 63.0 63.0 63.0 63.5 63.5 63.5 63.0 63.0 64.0 64.0 64.0 El Salvador 65.0 65.5 65.5 64.5 64.5 64.5 65.0 65.0 65.0 64.5 64.5 64.0 Estonia 75.0 75.0 74.5 74.5 74.0 72.5 72.5 75.5 75.0 75.0 75.0 75.0 Ethiopia 55.0 54.5 52.0 52.5 51.0 51.0 51.0 53.0 53.0 53.0 53.0 54.0 Finland 95.0 94.0 94.0 94.0 94.5 94.5 91.5 92.5 93.5 93.0 94.0 93.5 France 81.5 81.0 81.0 79.0 80.5 81.5 81.0 81.0 79.0 78.5 78.0 78.0 Gabon 61.0 61.0 61.0 60.5 60.5 60.5 60.0 60.0 60.0 60.5 60.5 60.5 Gambia 68.0 68.0 68.0 68.0 68.0 68.0 68.5 69.5 69.5 69.5 69.5 69.5 Germany 87.0 87.0 86.0 84.5 84.5 83.0 83.0 82.5 83.0 83.0 83.0 83.0 Ghana 62.5 62.5 62.5 62.5 62.0 62.0 63.0 62.5 62.5 62.5 62.5 61.5 Greece 77.5 77.5 77.5 77.5 77.5 77.5 78.5 78.5 78.5 78.5 78.0 78.0 Guatemala 63.0 63.0 63.0 63.0 63.0 62.5 62.5 61.5 61.5 61.5 60.5 60.5

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COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Guinea 51.0 52.0 52.0 54.5 53.5 54.0 54.0 53.0 53.0 53.0 53.5 53.5 Guinea-Bissau 48.5 48.0 47.0 47.0 47.0 47.0 47.5 46.5 46.5 46.5 46.5 47.5 Guyana 67.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 68.0 68.0 Haiti 45.5 45.5 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 Honduras 60.5 60.5 60.0 60.5 60.5 61.0 60.5 60.0 60.5 60.5 60.5 60.5 Hong Kong 78.5 78.5 78.5 78.5 77.5 77.0 77.0 77.0 77.0 75.5 75.5 75.5 Hungary 81.0 81.0 82.5 82.5 82.5 82.5 82.5 82.5 84.5 84.5 84.5 84.5 Iceland 91.5 92.0 92.0 92.0 92.0 91.5 91.5 90.0 90.0 90.0 90.0 90.0 India 56.0 56.5 57.0 57.0 58.0 58.0 58.0 58.5 58.5 58.5 58.5 59.0 Indonesia 48.0 48.0 48.5 49.0 49.0 49.0 49.0 50.5 50.0 51.5 51.0 51.5 Iran 59.5 59.0 58.5 59.0 59.5 58.5 58.5 58.5 58.5 58.0 58.0 58.0 Iraq 34.0 33.0 31.0 31.5 31.5 26.0 17.5 34.5 39.0 38.0 38.0 41.5 Ireland 92.5 92.5 92.5 92.0 92.0 92.0 92.0 92.5 92.5 92.5 92.5 92.0 Israel 60.0 60.5 60.5 60.0 61.5 63.0 63.0 63.0 65.0 68.0 67.5 67.5 Italy 81.0 81.0 81.0 81.0 80.5 79.0 79.0 78.0 78.5 78.5 78.0 78.0 Jamaica 68.5 71.5 71.5 71.0 71.0 71.0 70.0 70.0 70.0 70.0 70.5 70.5 Japan 86.0 87.0 87.0 86.5 86.5 86.5 87.0 85.0 85.0 85.0 84.5 85.5 Jordan 67.5 68.5 68.5 68.0 68.0 68.0 67.0 69.0 68.5 68.5 69.5 69.5 Kazakhstan 69.0 69.0 69.0 69.5 69.5 69.5 69.5 69.5 69.5 69.5 70.5 70.5 Kenya 48.5 49.0 47.5 54.0 59.0 59.5 62.0 61.0 63.0 63.0 62.5 62.5 Korea, D.P.R. 57.0 55.5 55.0 54.5 54.5 54.5 54.5 54.5 53.5 53.5 50.5 50.5 Korea, Rep. 76.5 76.0 76.0 78.0 77.5 77.5 77.5 77.5 79.0 79.0 79.0 79.0 Kuwait 72.5 72.0 71.5 71.0 71.0 69.5 70.5 77.5 77.5 77.5 77.5 78.0 Latvia 74.0 74.0 77.0 77.0 77.0 77.0 76.5 76.5 78.5 78.5 78.5 78.5 Lebanon 60.0 60.0 60.0 58.5 58.0 58.0 58.5 60.0 60.0 60.0 60.0 60.0 Liberia 43.0 43.0 43.0 43.0 42.0 42.0 38.9 38.9 34.0 25.0 29.5 32.5 Libya 62.0 62.0 62.0 63.5 63.5 63.0 63.0 63.0 63.0 63.0 62.0 62.0 Lithuania 73.5 73.5 73.5 77.0 78.0 78.5 78.5 78.5 78.5 78.5 78.5 78.5 Luxembourg 94.5 94.5 94.5 94.5 94.5 94.5 94.5 94.5 94.5 94.5 94.5 94.5 Madagascar 57.5 58.0 57.5 63.0 63.0 61.5 61.5 60.5 60.5 60.5 60.5 60.0 Malawi 56.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 56.5 Malaysia 71.0 72.0 72.0 72.5 72.5 72.5 73.0 72.5 72.5 72.5 71.5 71.5 Mali 61.5 61.5 61.0 61.0 61.0 61.5 61.5 61.5 61.5 61.5 61.5 61.5 Malta 86.5 86.5 86.5 86.5 86.5 86.5 86.5 86.5 86.5 86.5 86.5 86.5 Mexico 69.0 70.0 70.0 69.5 69.5 69.0 69.0 69.5 69.5 69.0 69.0 69.0 Moldova 68.0 68.0 68.0 68.0 67.5 67.5 69.0 68.0 68.0 68.0 68.0 68.5 Mongolia 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.5 71.0 Morocco 71.5 71.5 71.5 71.5 71.5 72.5 72.5 73.5 73.0 74.0 73.5 73.5 Mozambique 63.0 63.0 63.0 63.5 63.5 63.5 63.5 63.5 63.0 63.0 63.0 63.0 Myanmar 49.5 49.5 49.5 49.5 49.5 49.0 49.0 49.0 47.5 47.5 47.5 47.5 Namibia 75.5 75.5 75.5 75.5 75.0 75.0 76.0 76.0 76.0 76.0 76.0 76.0 Netherlands 92.0 88.5 88.5 88.5 88.5 88.5 88.5 89.0 90.5 90.5 90.5 90.5 New Zealand 90.5 91.0 91.0 91.0 91.0 91.0 91.0 91.0 91.0 91.0 91.0 91.0 Nicaragua 61.5 59.5 60.0 60.0 60.0 60.0 59.0 58.0 58.0 57.5 57.5 57.5 Niger 58.0 58.5 58.5 58.5 58.5 58.5 58.5 58.5 58.5 58.5 58.5 58.5 Nigeria 37.5 36.5 37.0 37.0 37.0 37.0 37.0 41.0 44.0 44.5 44.0 44.0 Norway 90.0 90.0 90.0 89.5 89.5 89.5 89.0 89.0 88.5 88.5 88.5 88.5 Oman 75.0 75.0 75.0 76.0 76.0 76.0 76.0 75.5 75.5 75.5 75.5 75.5 Pakistan 49.0 48.0 49.0 49.0 49.0 48.0 48.0 49.0 49.0 48.5 48.0 49.0 Panama 72.0 72.5 72.0 72.0 72.5 72.5 72.0 72.0 72.5 72.5 72.5 72.0 Papua N. G. 57.0 57.0 57.0 57.0 57.0 57.0 56.0 53.0 53.0 53.0 53.0 53.5 Paraguay 55.0 55.0 53.0 53.0 53.0 53.0 52.5 57.5 57.5 57.5 57.0 57.0 Peru 62.5 61.0 61.0 61.5 61.5 63.5 63.5 63.5 63.5 63.0 62.5 62.5 Philippines 67.0 67.0 67.0 67.0 67.5 67.5 67.5 67.5 68.0 68.0 68.0 68.0

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COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Poland 79.0 79.0 79.5 79.0 79.0 77.0 77.0 76.0 76.5 76.5 76.5 76.5 Portugal 87.5 87.5 87.5 87.5 87.5 86.5 86.0 86.0 86.0 86.0 86.0 86.0 Qatar 74.5 74.5 74.5 73.5 73.5 73.5 73.5 73.0 73.0 73.0 73.0 73.0 Romania 69.0 69.0 71.0 71.0 71.0 71.0 70.5 71.0 71.5 71.5 71.5 71.0 Russian Fed. 64.0 62.5 62.5 62.5 62.5 62.5 64.5 64.5 65.5 66.0 67.5 67.5 Saudi Arabia 68.0 68.0 67.0 67.0 67.0 67.0 66.5 66.5 68.0 67.0 67.0 67.0 Senegal 61.0 58.5 60.5 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 59.0 Serbia & Montenegro 52.5 52.0 51.0 52.0 54.5 54.5 56.5 56.5 62.5 62.5 62.5 62.0 Sierra Leone 55.5 55.5 56.0 56.0 55.5 55.5 55.5 56.0 56.0 56.0 56.0 56.0 Singapore 88.5 88.5 88.5 88.0 88.0 87.0 87.0 86.5 86.5 86.5 86.5 86.5 Slovak Rep. 79.5 79.5 79.5 79.0 79.0 79.0 79.0 79.0 79.0 78.5 78.5 78.5 Slovenia 80.0 80.0 81.0 81.0 81.0 81.0 81.5 81.5 80.0 80.0 80.0 80.0 Somalia 22.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 27.0 27.0 27.0 South Africa 61.5 63.5 64.0 63.0 63.0 63.0 63.5 63.5 64.0 64.0 64.0 65.5 Spain 82.5 82.5 83.0 83.5 83.5 82.5 82.5 82.0 83.5 83.5 83.5 82.0 Sri Lanka 61.0 61.0 60.5 60.5 60.5 61.0 60.5 60.0 60.0 59.5 59.5 59.0 Sudan 44.5 44.5 44.5 44.5 44.5 45.0 45.5 45.5 45.5 45.0 45.0 45.0 Suriname 65.0 65.0 65.0 65.0 65.5 65.5 65.5 65.5 65.5 65.5 65.0 65.0 Sweden 90.5 91.5 91.5 91.5 91.5 91.5 91.0 90.0 90.0 91.0 91.0 90.5 Switzerland 93.0 93.0 92.5 93.0 92.5 92.5 92.5 92.5 92.5 92.5 91.0 91.0 Syria 65.0 65.5 65.5 65.5 65.5 65.5 65.0 65.0 65.0 65.0 64.5 64.5 Taiwan 77.0 77.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 76.0 Tanzania 60.0 60.5 60.5 60.5 60.5 60.5 60.5 60.0 60.5 60.5 60.5 60.5 Thailand 72.5 72.5 72.5 72.5 72.5 69.5 69.0 69.5 69.5 71.5 71.5 71.5 Togo 53.5 52.5 53.0 52.0 52.5 52.5 52.5 52.0 52.0 52.0 52.0 51.0 Trinidad & T. 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 67.0 67.0 Tunisia 71.5 71.5 71.5 72.0 72.0 72.0 72.0 71.5 72.0 72.0 72.0 73.0 Turkey 54.0 58.5 60.0 59.0 59.0 57.5 57.0 60.0 60.5 60.5 65.5 65.5 Uganda 57.0 57.0 57.0 57.0 57.0 56.5 57.0 56.0 56.5 56.5 56.5 56.5 Ukraine 59.5 59.0 58.5 58.5 58.5 60.0 60.0 60.0 60.0 60.0 60.0 59.5 United Arab E. 77.0 77.0 77.0 76.5 76.5 76.5 76.5 78.0 78.0 78.0 78.0 78.0 United K’dom 87.5 87.5 87.0 87.5 86.5 83.0 85.0 87.5 87.0 86.5 86.0 86.0 United States 75.5 76.5 80.0 79.5 79.0 77.5 78.5 81.0 81.5 81.0 81.0 81.0 Uruguay 71.5 71.0 71.0 71.0 72.0 72.0 70.5 70.5 71.0 71.0 71.0 70.5 Venezuela 48.5 48.0 46.5 44.5 45.5 45.5 49.5 51.5 51.0 49.5 49.5 50.0 Vietnam 67.5 67.5 67.5 67.5 67.5 67.5 67.5 67.0 67.0 66.5 66.5 65.5 Yemen, Rep. 60.5 60.5 60.5 60.5 60.5 61.5 61.5 62.5 62.5 62.5 62.5 62.5 Zambia 54.5 55.5 54.0 54.0 54.5 54.0 56.5 56.5 57.5 57.5 57.5 57.5 Zimbabwe 33.5 33.5 34.0 33.5 34.0 34.0 36.0 36.0 37.0 39.0 39.0 38.0

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TABLE 3B

POLITICAL RISK POINTS BY COMPONENT – SEPTEMBER 2003

This table lists the total points for each of the following political risk components out of the maximum points indicated. The symbol > indicates a rise in the points awarded to that specific risk component from the previous month (an improving risk), while the symbo < indicates a decrease (deteriorating risk). The final columns in the table show the overall political risk rating (the sum of the points awarded to each component) and the change from the preceding month.

A Government Stability 12 E External Conflict 12 J Ethnic Tensions 6 B Socioeconomic 12 F Corruption 6 K Democratic 6 Conditions G Military in Politics 6 Accountability C Investment Profile 12 H Religious Tensions 6 L Bureaucracy Quality 4 D Internal Conflict 12 I Law and Order 6

COUNTRY A B C D E F G H I J K L Political Risk Rating Albania 9.5 4.0 8.0 11.0 11.0 2.0 5.0 5.0 2.0 5.0 4.0 2.0 68.5 0.0 Algeria 8.5 4.0 8.0 4.5 11.0 1.5 0.0 0.0 2.0 2.0 2.0 2.0 45.5 0.0 Angola 10.0 2.0 8.5 9.5 10.5 2.0 2.0 4.0 3.0 3.0 3.0 1.0 58.5 0.0 Argentina >9.0 2.5 >5.5 9.5 10.0 2.5 4.0 6.0 1.5 6.0 4.5 3.0 64.0 1.0 Armenia >9.0 5.0 8.0 >9.5 7.5 1.5 3.5 5.0 3.0 5.5 >2.5 1.0 61.0 3.0 Australia 10.0 9.5 10.0 9.5 <10.5 4.5 6.0 6.0 6.0 3.5 6.0 4.0 85.5 -0.5 Austria >9.0 10.0 12.0 11.5 11.5 5.0 6.0 6.0 6.0 4.0 5.0 4.0 90.0 0.5 Azerbaijan 8.5 7.5 9.0 9.5 7.5 2.0 4.0 5.0 4.0 4.0 2.0 1.0 64.0 0.0 Bahamas 11.0 7.0 11.5 10.5 12.0 4.0 6.0 6.0 4.0 5.0 4.0 3.0 84.0 0.0 Bahrain 11.0 8.0 11.5 9.5 11.0 2.0 3.0 4.5 5.0 5.0 4.5 2.0 77.0 0.0 Bangladesh 10.5 2.5 6.0 7.0 8.0 1.0 2.5 2.5 1.0 2.5 2.5 2.0 48.0 0.0 Belarus 10.0 2.5 5.5 10.0 10.5 2.0 5.0 4.5 4.0 5.0 2.0 1.0 62.0 0.0 Belgium 9.5 9.5 11.5 11.5 11.5 4.0 6.0 5.0 5.0 3.0 6.0 4.0 86.5 0.0 Bolivia <5.0 5.0 9.5 10.0 11.0 2.0 3.0 6.0 3.0 3.0 4.0 2.0 63.5 -0.5 Botswana 10.0 5.5 11.5 10.5 11.0 3.0 6.0 5.0 3.5 >4.5 >4.0 2.0 76.5 1.5 Brazil 9.0 5.5 7.5 10.5 11.0 4.0 4.0 6.0 1.5 3.0 5.0 2.0 69.0 0.0 Brunei 11.5 10.5 11.5 12.0 11.0 2.5 5.0 4.0 6.0 5.0 0.0 3.0 82.0 0.0 Bulgaria 7.0 4.0 11.5 11.0 10.0 2.0 5.0 5.0 4.0 4.5 5.0 2.0 71.0 0.0 Burkina Faso 8.5 3.5 9.0 10.5 9.0 2.0 3.0 5.0 3.5 4.0 4.5 1.0 63.5 0.0 Cameroon 9.5 3.0 6.5 8.5 <10.0 2.0 4.0 4.0 2.0 1.5 2.0 1.0 54.0 -1.0 Canada >9.5 8.5 12.0 12.0 11.0 5.0 6.0 6.0 6.0 3.5 6.0 4.0 89.5 1.0 Chile 7.5 7.5 11.0 <10.5 11.0 2.5 4.0 6.0 5.0 5.0 4.0 3.0 77.0 -0.5 China, P. Rep. 11.0 7.0 7.5 11.5 11.0 2.0 3.0 5.0 4.5 5.0 1.0 2.0 70.5 0.0 Colombia 9.0 4.0 9.0 3.5 8.5 3.0 2.0 5.0 1.0 5.0 3.0 2.0 55.0 0.0 Congo, D. Rep. 8.0 1.0 6.0 7.0 8.5 1.0 0.0 4.0 1.0 1.0 1.0 0.0 38.5 0.0 Congo, Rep. 11.0 2.5 8.0 >10.0 10.0 2.0 0.0 3.0 2.0 4.0 3.0 1.0 56.5 0.5 Costa Rica 6.5 6.5 8.5 <10.5 11.0 2.5 6.0 5.0 4.0 6.0 5.5 2.0 74.0 -0.5 Cote d'Ivoire 8.0 2.0 6.0 <8.5 9.5 3.0 1.0 2.0 2.5 2.0 2.0 0.0 46.5 -1.0 Croatia 7.0 5.5 9.0 10.5 9.5 3.0 5.0 5.0 5.0 5.0 5.0 3.0 72.5 0.0 Cuba 9.5 5.5 <3.5 9.0 9.5 2.5 3.0 4.0 4.0 6.0 0.0 2.0 58.5 -1.0 Cyprus 10.0 10.5 12.0 10.0 10.0 4.0 5.0 4.0 5.0 2.5 6.0 4.0 83.0 0.0 Czech Rep. 7.0 7.5 12.0 10.5 11.0 2.5 6.0 6.0 5.0 3.0 5.0 3.0 78.5 0.0

Reproduction without permission of the Publisher is strictly forbidden S-19 International Country Risk Guide September 2003

A Government Stability 12 E External Conflict 12 J Ethnic Tensions 6 B Socioeconomic 12 F Corruption 6 K Democratic 6 Conditions G Military in Politics 6 Accountability C Investment Profile 12 H Religious Tensions 6 L Bureaucracy Quality 4 D Internal Conflict 12 I Law and Order 6

COUNTRY A B C D E F G H I J K L Political Risk Rating Denmark 9.5 9.5 11.5 <10.0 <9.5 5.5 6.0 6.0 6.0 4.0 6.0 4.0 87.5 -2.0 Dominican R. 7.5 4.5 8.5 9.5 10.5 2.0 3.0 5.0 2.0 4.0 5.0 1.0 62.5 0.0 Ecuador 6.5 4.5 6.0 8.0 11.0 3.0 1.5 5.0 3.0 3.5 4.0 2.0 58.0 0.0 Egypt 10.0 5.5 6.5 10.0 10.5 1.5 3.0 3.0 4.0 6.0 2.0 2.0 64.0 0.0 El Salvador 7.5 4.5 6.0 9.5 <10.5 2.5 3.0 6.0 2.5 6.0 4.0 2.0 64.0 -0.5 Estonia 8.5 7.0 10.0 11.5 11.0 3.0 5.0 5.0 4.0 2.5 5.0 2.5 75.0 0.0 Ethiopia 7.0 2.0 7.0 >9.0 8.5 2.0 1.0 5.0 5.0 2.5 4.0 1.0 54.0 1.0 Finland <9.5 9.5 12.0 11.0 11.5 6.0 6.0 6.0 6.0 6.0 6.0 4.0 93.5 -0.5 France 10.5 8.0 12.0 10.5 9.0 3.0 5.0 4.0 4.5 3.5 5.0 3.0 78.0 0.0 Gabon 9.0 4.5 7.5 9.5 11.0 1.0 2.0 5.0 3.0 3.0 3.0 2.0 60.5 0.0 Gambia 10.0 4.5 8.5 10.0 11.0 3.0 2.0 5.0 4.0 5.0 4.5 2.0 69.5 0.0 Germany 8.5 7.5 12.0 11.0 9.5 4.5 6.0 6.0 5.0 4.0 5.0 4.0 83.0 0.0 Ghana 10.0 <5.0 7.0 <8.5 11.5 2.5 2.5 6.0 2.0 1.5 3.0 2.0 61.5 -1.0 Greece 9.0 7.5 11.0 11.0 10.5 2.5 4.5 5.0 3.0 5.0 6.0 3.0 78.0 0.0 Guatemala 7.0 5.0 11.0 8.5 9.5 1.5 2.0 6.0 1.5 3.0 3.5 2.0 60.5 0.0 Guinea 9.0 4.5 6.5 8.5 9.0 3.0 1.5 3.0 2.5 2.0 2.0 2.0 53.5 0.0 Guinea-Bissau 6.5 3.5 7.0 6.5 8.0 2.0 1.0 5.0 1.0 3.0 >3.0 1.0 47.5 1.0 Guyana 9.0 5.0 7.0 9.5 10.0 3.0 6.0 6.0 2.5 2.0 5.0 3.0 68.0 0.0 Haiti 10.0 0.5 5.0 5.0 8.0 1.0 1.5 6.0 2.0 4.0 2.0 0.0 45.0 0.0 Honduras 8.5 1.5 8.0 10.5 10.0 2.5 3.0 4.0 1.5 5.0 4.0 2.0 60.5 0.0 Hong Kong 8.5 7.0 11.5 10.5 11.0 4.0 3.0 5.0 4.5 5.0 2.5 3.0 75.5 0.0 Hungary 10.0 7.5 12.0 11.5 11.5 3.0 6.0 5.0 4.0 4.0 6.0 4.0 84.5 0.0 Iceland 9.0 9.5 11.0 11.5 11.0 4.5 6.0 5.5 6.0 6.0 6.0 4.0 90.0 0.0 India 8.5 3.5 >8.5 8.0 9.0 1.5 4.0 1.0 4.0 2.0 6.0 3.0 59.0 0.5 Indonesia 9.0 3.5 6.0 >7.5 11.0 1.0 2.5 1.0 2.0 2.0 4.0 2.0 51.5 0.5 Iran 7.0 5.5 6.0 8.5 8.5 2.0 5.0 2.0 4.0 4.5 3.0 2.0 58.0 0.0 Iraq >9.5 0.5 8.0 5.5 7.0 4.0 0.0 2.5 1.5 2.5 0.5 0.0 41.5 3.5 Ireland <10.5 11.0 12.0 11.5 11.0 3.5 6.0 5.0 6.0 5.5 6.0 4.0 92.0 -0.5 Israel 10.0 7.0 9.0 7.5 8.0 4.0 2.5 2.5 5.0 2.0 6.0 4.0 67.5 0.0 Italy 8.5 8.5 12.0 11.0 11.0 2.5 6.0 4.0 3.0 5.0 4.0 2.5 78.0 0.0 Jamaica 8.5 5.5 9.5 9.0 11.5 1.5 6.0 6.0 1.0 5.0 4.0 3.0 70.5 0.0 Japan 10.5 >8.0 11.5 11.5 9.5 3.5 6.0 5.5 5.0 5.5 5.0 4.0 85.5 1.0 Jordan 10.0 4.5 9.5 9.0 10.0 3.0 5.0 3.0 4.0 5.0 4.5 2.0 69.5 0.0 Kazakhstan 11.0 6.5 7.5 11.0 11.0 1.5 5.0 5.0 4.0 5.0 1.0 2.0 70.5 0.0 Kenya 9.5 2.0 9.5 9.0 10.5 3.5 4.0 3.0 2.0 2.5 5.0 2.0 62.5 0.0 Korea, D.P.R. 8.5 1.5 5.5 10.0 6.0 1.0 1.0 6.0 5.0 6.0 0.0 0.0 50.5 0.0 Korea, Rep. 8.0 9.5 9.5 10.0 8.0 3.0 5.0 6.0 5.0 6.0 6.0 3.0 79.0 0.0 Kuwait >10.5 11.0 11.0 10.5 11.0 2.0 5.0 2.0 5.0 5.0 3.0 2.0 78.0 0.5 Latvia 10.0 6.0 11.0 11.5 11.5 2.0 5.0 5.0 5.0 4.0 5.0 2.5 78.5 0.0 Lebanon 8.5 6.0 9.0 8.0 7.0 1.0 2.0 2.5 4.0 5.0 5.0 2.0 60.0 0.0 Liberia 6.0 0.0 0.0 >6.5 7.0 >2.0 1.0 >4.0 2.0 3.0 1.0 0.0 32.5 3.0 Libya 10.0 4.5 9.0 11.5 10.0 2.0 3.0 4.0 4.0 2.0 1.0 1.0 62.0 0.0 Lithuania 9.5 7.0 11.0 11.5 10.5 2.5 5.0 5.5 4.0 4.0 5.5 2.5 78.5 0.0 Luxembourg 11.0 11.0 12.0 12.0 11.5 5.0 6.0 6.0 6.0 5.0 5.0 4.0 94.5 0.0 Madagascar 9.0 4.0 8.0 <6.0 12.0 4.0 1.0 5.0 2.5 2.5 5.0 1.0 60.0 -0.5 Malawi >7.0 2.5 8.0 7.0 11.0 2.0 4.0 2.5 3.0 3.5 4.0 2.0 56.5 1.5

S-20 Reproduction without permission of the Publisher is strictly forbidden International Country Risk Guide September 2003

A Government Stability 12 E External Conflict 12 J Ethnic Tensions 6 B Socioeconomic 12 F Corruption 6 K Democratic 6 Conditions G Military in Politics 6 Accountability C Investment Profile 12 H Religious Tensions 6 L Bureaucracy Quality 4 D Internal Conflict 12 I Law and Order 6

COUNTRY A B C D E F G H I J K L Political Risk Rating Malaysia 10.0 8.0 8.5 10.5 11.0 2.5 5.0 4.0 3.0 4.0 2.0 3.0 71.5 0.0 Mali 8.5 4.5 7.5 10.5 10.0 3.0 3.5 4.0 3.0 4.0 3.0 0.0 61.5 0.0 Malta 10.5 8.5 11.5 11.0 12.0 3.0 6.0 4.0 5.0 6.0 6.0 3.0 86.5 0.0 Mexico 6.5 8.0 11.5 8.5 11.0 2.0 3.0 5.0 2.0 2.5 6.0 3.0 69.0 0.0 Moldova 11.0 4.0 6.5 >9.0 10.5 1.5 4.0 6.0 5.0 4.0 5.0 2.0 68.5 0.5 Mongolia 11.0 2.5 8.0 11.0 <11.5 2.0 5.0 5.0 4.0 5.0 4.0 2.0 71.0 -0.5 Morocco 10.5 4.5 9.0 9.5 11.0 3.0 4.0 5.0 5.0 5.0 5.0 2.0 73.5 0.0 Mozambique 9.5 3.0 8.5 9.5 12.0 1.5 2.0 6.0 3.0 4.0 3.0 1.0 63.0 0.0 Myanmar 9.0 4.0 3.5 8.0 8.5 1.0 0.0 6.0 3.0 3.0 0.5 1.0 47.5 0.0 Namibia 10.0 6.0 10.0 9.5 10.5 1.5 6.0 6.0 6.0 4.5 4.0 2.0 76.0 0.0 Netherlands 8.5 10.5 12.0 11.0 12.0 5.0 6.0 5.0 6.0 4.5 6.0 4.0 90.5 0.0 New Zealand 9.0 10.0 11.5 11.5 11.5 5.5 6.0 6.0 6.0 4.0 6.0 4.0 91.0 0.0 Nicaragua 5.0 3.5 6.0 9.0 9.5 2.5 2.0 4.0 4.0 5.0 6.0 1.0 57.5 0.0 Niger 9.0 3.0 7.5 11.0 11.0 1.0 3.0 2.0 2.0 3.0 5.0 1.0 58.5 0.0 Nigeria 8.5 1.5 4.5 7.0 10.0 1.0 2.0 2.0 1.5 2.0 3.0 1.0 44.0 0.0 Norway 7.5 10.0 11.5 11.5 11.5 5.0 6.0 5.0 6.0 4.5 6.0 4.0 88.5 0.0 Oman 11.0 9.0 11.5 9.5 10.0 2.5 5.0 4.0 5.0 5.0 1.0 2.0 75.5 0.0 Pakistan 9.5 6.5 4.0 >7.5 8.0 1.5 0.0 1.0 3.0 5.0 1.0 2.0 49.0 1.0 Panama 6.5 6.5 10.0 <10.0 11.0 2.0 5.0 5.0 3.0 5.0 6.0 2.0 72.0 -0.5 Papua N. G. >7.5 1.5 8.0 9.0 9.5 1.0 3.0 5.0 2.0 2.0 3.0 2.0 53.5 0.5 Paraguay 7.5 3.5 8.5 8.0 11.0 1.0 1.5 6.0 2.0 5.0 2.0 1.0 57.0 0.0 Peru 5.0 6.0 8.0 6.5 10.5 2.5 5.0 6.0 3.0 3.0 5.0 2.0 62.5 0.0 Philippines 9.0 5.0 10.0 9.0 11.0 2.0 4.0 3.0 2.0 5.0 5.0 3.0 68.0 0.0 Poland 7.5 5.0 11.0 9.5 11.5 2.0 6.0 5.0 4.0 6.0 6.0 3.0 76.5 0.0 Portugal >8.0 8.5 12.0 11.0 <11.0 3.5 6.0 6.0 5.0 6.0 6.0 3.0 86.0 0.0 Qatar 11.5 8.5 10.0 9.5 8.5 2.0 4.0 4.0 5.0 6.0 2.0 2.0 73.0 0.0 Romania 9.5 4.0 8.5 10.5 <11.0 2.5 5.0 5.0 4.0 4.0 6.0 1.0 71.0 -0.5 Russian Fed. 11.5 6.5 9.0 8.5 9.5 1.5 4.5 5.5 4.0 2.0 4.0 1.0 67.5 0.0 Saudi Arabia 9.5 6.0 11.0 8.5 10.0 2.0 5.0 3.0 5.0 5.0 0.0 2.0 67.0 0.0 Senegal <9.0 4.5 8.0 8.0 11.0 2.5 2.0 3.0 3.0 3.0 4.0 1.0 59.0 -1.0 Serbia & Montenegro 8.0 2.5 8.0 <9.0 11.0 2.0 4.0 5.0 3.5 3.0 4.0 2.0 62.0 -0.5 Sierra Leone 11.0 2.0 6.5 9.5 10.0 2.5 2.5 4.0 3.0 2.0 3.0 0.0 56.0 0.0 Singapore 11.0 9.0 12.0 11.0 11.5 4.5 6.0 4.5 5.0 6.0 2.0 4.0 86.5 0.0 Slovak Rep. 8.0 6.0 12.0 11.0 11.5 2.5 6.0 5.0 4.0 3.5 6.0 3.0 78.5 0.0 Slovenia 10.5 7.0 10.0 11.5 11.5 3.0 5.0 5.0 4.5 4.0 5.0 3.0 80.0 0.0 Somalia 5.0 1.0 2.5 4.5 4.0 1.0 1.0 3.0 2.0 2.0 1.0 0.0 27.0 0.0 South Africa >9.0 4.0 10.5 9.0 10.5 <2.0 4.5 5.0 >2.5 3.0 3.5 2.0 65.5 1.5 Spain >10.0 8.5 12.0 9.5 <10.5 3.5 5.0 5.5 4.5 4.0 <5.0 4.0 82.0 -1.5 Sri Lanka 8.0 4.5 8.0 8.0 12.0 3.0 2.0 2.0 3.0 1.5 5.0 2.0 59.0 -0.5 Sudan 10.0 2.0 6.0 7.5 9.5 1.0 0.0 1.0 2.5 1.0 3.5 1.0 45.0 0.0 Suriname 9.5 5.0 5.5 10.0 10.0 2.0 3.0 6.0 3.0 4.0 5.0 2.0 65.0 0.0 Sweden <8.0 10.0 12.0 11.0 11.5 5.5 5.5 6.0 6.0 5.0 6.0 4.0 90.5 -0.5 Switzerland 10.0 10.5 11.5 12.0 11.5 4.5 6.0 6.0 5.0 4.0 6.0 4.0 91.0 0.0 Syria 10.5 5.5 6.5 11.5 8.5 2.0 2.0 5.0 5.0 6.0 1.0 1.0 64.5 0.0 Taiwan 7.0 8.0 11.5 11.0 8.5 3.0 4.0 6.0 4.0 5.0 5.0 3.0 76.0 0.0

Reproduction without permission of the Publisher is strictly forbidden S-21 International Country Risk Guide September 2003

A Government Stability 12 E External Conflict 12 J Ethnic Tensions 6 B Socioeconomic 12 F Corruption 6 K Democratic 6 Conditions G Military in Politics 6 Accountability C Investment Profile 12 H Religious Tensions 6 L Bureaucracy Quality 4 D Internal Conflict 12 I Law and Order 6

COUNTRY A B C D E F G H I J K L Political Risk Rating Tanzania 10.0 3.0 7.5 8.5 9.5 2.0 4.0 2.0 5.0 4.0 4.0 1.0 60.5 0.0 Thailand 10.0 8.5 8.5 9.5 11.0 1.5 4.0 5.0 2.5 5.0 4.0 2.0 71.5 0.0 Togo <7.5 3.0 7.5 8.5 10.0 1.5 1.0 5.0 3.0 2.0 2.0 0.0 51.0 -1.0 Trinidad & T. 8.5 6.5 11.5 6.5 12.0 2.0 5.0 5.0 2.5 0.5 4.0 3.0 67.0 0.0 Tunisia 11.0 5.5 >9.0 10.5 11.5 2.0 4.0 5.5 5.0 5.0 2.0 2.0 73.0 1.0 Turkey 9.5 5.5 7.5 9.5 8.5 2.5 4.0 5.0 4.5 2.0 5.0 2.0 65.5 0.0 Uganda 9.0 4.0 8.5 7.0 10.0 2.0 2.0 2.5 4.0 3.0 2.5 2.0 56.5 0.0 Ukraine 7.5 5.0 6.0 9.5 <9.5 1.0 5.0 5.0 4.0 4.0 2.0 1.0 59.5 -0.5 United Arab E. 10.5 10.0 11.5 11.0 11.0 2.0 5.0 4.0 4.0 4.0 2.0 3.0 78.0 0.0 United K’dom 9.0 10.0 12.0 10.0 8.5 4.5 6.0 6.0 6.0 4.0 6.0 4.0 86.0 0.0 United States 10.5 7.5 11.5 10.5 8.0 4.0 5.0 4.5 5.0 5.0 5.5 4.0 81.0 0.0 Uruguay 7.0 4.5 <8.5 10.0 12.0 3.0 5.0 5.0 2.5 6.0 5.0 2.0 70.5 -0.5 Venezuela >8.0 3.0 4.0 7.5 9.5 1.5 0.5 5.0 1.0 5.0 4.0 1.0 50.0 0.5 Vietnam 10.5 5.5 <7.0 >10.5 11.5 1.5 2.0 <5.0 4.0 5.0 1.0 2.0 65.5 -1.0 Yemen, Rep. 10.5 5.0 8.0 9.0 10.0 2.0 4.0 4.0 2.0 3.0 4.0 1.0 62.5 0.0 Zambia 7.0 2.5 6.0 8.0 9.0 2.0 5.0 4.0 4.0 5.0 4.0 1.0 57.5 0.0 Zimbabwe 8.0 1.0 <1.5 6.0 8.0 0.0 3.0 4.0 0.5 3.0 1.0 2.0 38.0 -1.0

S-22 Reproduction without permission of the Publisher is strictly forbidden International Country Risk Guide September 2003

TABLE 3Ba

POLITICAL RISK SUBCOMPONENTS – SEPTEMBER 2003

The table presents the subcomponents that make up the first five Political Risk Components in Table 3B. Each subcomponent has a maximum risk point score of 4 and a minimum of 0, with 4 Risk Points indicating Very Low risk and 0 Risk Points indicating Very High Risk. The sum of the subcomponents within each Political Risk component is the Risk Point Score of that component as entered in Table 3B.

The subcomponents are:

Government Stability Socioeconomic Conditions Investment Profile Internal Conflict External Conflict Col. Subcomponent Col. Subcomponent Col. Subcomponent Col. Subcomponent Col. Subcomponent 1-Government Unity 1-Unemployment 1-Contract Viability 1-Civil War 1-War 2-Legislative Strength 2-Consumer Confidence 2-Profits Repatriation 2-Terrorism 2-Cross-border Conflict 3-Popular Support 3-Poverty 3-Payments Delays 3-Civil Disorder 3-Foreign Pressures

Government Socioeconomic Investment Internal External Stability Conditions Profile Conflict Conflict COUNTRY 1 2 3 A 1 2 3 B 1 2 3 C 1 2 3 D 1 2 3 E Albania 3.5 3.5 2.5 9.5 1.5 2.0 0.5 4.0 3.0 3.0 2.0 8.0 4.0 3.5 3.5 11.0 4.0 3.5 3.5 11.0 Algeria 3.0 3.5 2.0 8.5 0.0 2.5 1.5 4.0 2.5 3.0 2.5 8.0 2.0 0.0 2.5 4.5 4.0 3.5 3.5 11.0 Angola 3.5 4.0 2.5 10.0 1.0 1.0 0.0 2.0 3.0 3.0 2.5 8.5 3.5 3.0 3.0 9.5 3.5 3.5 3.5 10.5 Argentina 3.5 2.5 3.0 9.0 1.0 1.0 0.5 2.5 3.0 1.5 1.0 5.5 4.0 3.5 2.0 9.5 4.0 3.5 2.5 10.0 Armenia 3.5 3.5 2.0 9.0 2.0 2.0 1.0 5.0 2.5 3.0 2.5 8.0 4.0 3.5 2.0 9.5 2.5 2.5 2.5 7.5 Australia 4.0 3.0 3.0 10.0 2.5 3.0 4.0 9.5 3.5 3.0 3.5 10.0 4.0 2.5 3.0 9.5 4.0 3.0 3.5 10.5 Austria 3.5 3.0 2.5 9.0 3.5 2.5 4.0 10.0 4.0 4.0 4.0 12.0 4.0 4.0 3.5 11.5 4.0 4.0 3.5 11.5 Azerbaijan 3.5 3.0 2.0 8.5 4.0 2.5 1.0 7.5 3.5 2.5 3.0 9.0 3.5 3.5 2.5 9.5 2.5 2.5 2.5 7.5 Bahamas 4.0 4.0 3.0 11.0 3.0 2.0 2.0 7.0 4.0 4.0 3.5 11.5 4.0 3.5 3.0 10.5 4.0 4.0 4.0 12.0 Bahrain 4.0 4.0 3.0 11.0 2.5 3.0 2.5 8.0 4.0 4.0 3.5 11.5 4.0 2.5 3.0 9.5 4.0 3.5 3.5 11.0 Bangladesh 4.0 4.0 2.5 10.5 0.0 2.5 0.0 2.5 2.0 2.0 2.0 6.0 4.0 1.5 1.5 7.0 4.0 2.0 2.0 8.0 Belarus 4.0 3.5 2.5 10.0 1.0 1.5 0.0 2.5 2.0 2.0 1.5 5.5 4.0 3.5 2.5 10.0 4.0 4.0 2.5 10.5 Belgium 3.5 3.0 3.0 9.5 2.5 3.0 4.0 9.5 3.5 4.0 4.0 11.5 4.0 4.0 3.5 11.5 4.0 4.0 3.5 11.5 Bolivia 2.0 2.0 1.0 5.0 2.0 2.5 0.5 5.0 4.0 3.0 2.5 9.5 4.0 3.0 3.0 10.0 4.0 3.5 3.5 11.0 Botswana 3.5 4.0 2.5 10.0 0.5 3.0 2.0 5.5 4.0 3.5 4.0 11.5 4.0 4.0 2.5 10.5 4.0 4.0 3.0 11.0 Brazil 3.0 3.0 3.0 9.0 2.5 1.5 1.5 5.5 3.5 2.0 2.0 7.5 4.0 3.5 3.0 10.5 4.0 4.0 3.0 11.0 Brunei 4.0 4.0 3.5 11.5 3.0 3.5 4.0 10.5 4.0 4.0 3.5 11.5 4.0 4.0 4.0 12.0 4.0 3.5 3.5 11.0 Bulgaria 2.5 3.0 1.5 7.0 1.0 2.0 1.0 4.0 3.5 4.0 4.0 11.5 4.0 3.5 3.5 11.0 3.5 3.5 3.0 10.0 Burkina Faso 3.5 3.0 2.0 8.5 1.5 2.0 0.0 3.5 3.0 3.5 2.5 9.0 4.0 3.5 3.0 10.5 3.5 3.0 2.5 9.0 Cameroon 3.5 4.0 2.0 9.5 0.5 2.5 0.0 3.0 2.5 2.0 2.0 6.5 3.5 3.0 2.0 8.5 4.0 3.0 3.0 10.0 Canada 3.0 4.0 2.5 9.5 2.5 2.0 4.0 8.5 4.0 4.0 4.0 12.0 4.0 4.0 4.0 12.0 4.0 3.5 3.5 11.0 Chile 2.5 2.5 2.5 7.5 2.5 2.5 2.5 7.5 3.5 4.0 3.5 11.0 4.0 3.5 3.0 10.5 4.0 3.5 3.5 11.0 China, P. Rep. 4.0 4.0 3.0 11.0 3.0 3.0 1.0 7.0 3.0 2.0 2.5 7.5 4.0 4.0 3.5 11.5 4.0 3.5 3.5 11.0 Colombia 4.0 2.0 3.0 9.0 1.0 2.0 1.0 4.0 3.0 3.5 2.5 9.0 1.0 0.5 2.0 3.5 4.0 2.5 2.0 8.5 Congo, D. Rep. 2.5 3.0 2.5 8.0 0.0 1.0 0.0 1.0 2.0 2.0 2.0 6.0 3.0 2.0 2.0 7.0 3.5 3.0 2.0 8.5 Congo, Rep. 4.0 4.0 3.0 11.0 0.0 2.0 0.5 2.5 2.5 3.0 2.5 8.0 3.5 3.5 3.0 10.0 4.0 3.0 3.0 10.0 Costa Rica 3.0 1.5 2.0 6.5 2.5 2.0 2.0 6.5 3.0 2.5 3.0 8.5 4.0 4.0 2.5 10.5 4.0 3.5 3.5 11.0 Cote d'Ivoire 3.0 2.5 2.5 8.0 0.0 1.0 1.0 2.0 2.0 2.5 1.5 6.0 2.5 3.0 3.0 8.5 4.0 3.0 2.5 9.5 Croatia 2.5 2.5 2.0 7.0 1.5 2.0 2.0 5.5 3.0 3.5 2.5 9.0 4.0 3.5 3.0 10.5 4.0 2.5 3.0 9.5 Cuba 4.0 4.0 1.5 9.5 3.5 1.0 1.0 5.5 2.0 0.5 1.0 3.5 4.0 3.0 2.0 9.0 4.0 3.5 2.0 9.5 Cyprus 3.5 3.0 3.5 10.0 4.0 3.0 3.5 10.5 4.0 4.0 4.0 12.0 2.5 4.0 3.5 10.0 4.0 3.5 2.5 10.0 Czech Rep. 2.5 2.0 2.5 7.0 2.5 2.5 2.5 7.5 4.0 4.0 4.0 12.0 4.0 3.0 3.5 10.5 4.0 3.5 3.5 11.0 Denmark 3.5 3.0 3.0 9.5 2.5 3.0 4.0 9.5 3.5 4.0 4.0 11.5 4.0 3.0 3.0 10.0 3.5 2.5 3.5 9.5 Dominican R. 2.5 3.0 2.0 7.5 1.0 2.0 1.5 4.5 3.0 3.0 2.5 8.5 4.0 3.0 2.5 9.5 4.0 3.0 3.5 10.5 Ecuador 2.5 2.0 2.0 6.5 2.0 1.5 1.0 4.5 2.5 2.0 1.5 6.0 4.0 2.0 2.0 8.0 4.0 3.5 3.5 11.0 Egypt 4.0 4.0 2.0 10.0 2.5 2.5 0.5 5.5 2.5 2.0 2.0 6.5 4.0 2.5 3.5 10.0 4.0 3.5 3.0 10.5 El Salvador 3.0 2.5 2.0 7.5 2.5 1.0 1.0 4.5 1.5 2.0 2.5 6.0 4.0 3.5 2.0 9.5 4.0 3.5 3.0 10.5 Estonia 3.0 3.0 2.5 8.5 2.0 2.5 2.5 7.0 3.0 4.0 3.0 10.0 4.0 4.0 3.5 11.5 4.0 4.0 3.0 11.0 Ethiopia 2.5 2.5 2.0 7.0 1.5 0.5 0.0 2.0 2.5 3.0 1.5 7.0 3.5 3.0 2.5 9.0 3.0 2.5 3.0 8.5

Reproduction without permission of the Publisher is strictly forbidden S-23 International Country Risk Guide September 2003

Government Stability Socioeconomic Conditions Investment Profile Internal Conflict External Conflict Col. Subcomponent Col. Subcomponent Col. Subcomponent Col. Subcomponent Col. Subcomponent 1-Government Unity 1-Unemployment 1-Contract Viability 1-Civil War 1-War 2-Legislative Strength 2-Consumer Confidence 2-Profits Repatriation 2-Terrorism 2-Cross-border Conflict 3-Popular Support 3-Poverty 3-Payments Delays 3-Civil Disorder 3-Foreign Pressures

Government Socioeconomic Investment Internal External Stability Conditions Profile Conflict Conflict COUNTRY 1 2 3 A 1 2 3 B 1 2 3 C 1 2 3 D 1 2 3 E Finland 3.5 3.0 3.0 9.5 2.5 3.0 4.0 9.5 4.0 4.0 4.0 12.0 4.0 3.0 4.0 11.0 4.0 4.0 3.5 11.5 France 4.0 3.0 3.5 10.5 2.5 2.0 3.5 8.0 4.0 4.0 4.0 12.0 4.0 3.5 3.0 10.5 4.0 2.5 2.5 9.0 Gabon 3.5 3.5 2.0 9.0 0.5 2.0 2.0 4.5 3.0 2.0 2.5 7.5 4.0 3.5 2.0 9.5 4.0 3.5 3.5 11.0 Gambia 4.0 4.0 2.0 10.0 2.0 2.5 0.0 4.5 3.0 3.0 2.5 8.5 4.0 2.5 3.5 10.0 4.0 3.5 3.5 11.0 Germany 3.0 3.0 2.5 8.5 2.0 2.0 3.5 7.5 4.0 4.0 4.0 12.0 4.0 4.0 3.0 11.0 4.0 3.5 2.0 9.5 Ghana 3.5 3.5 3.0 10.0 2.0 3.0 0.0 5.0 3.5 1.5 2.0 7.0 3.0 3.0 2.5 8.5 4.0 3.5 4.0 11.5 Greece 3.5 3.5 2.0 9.0 2.0 2.5 3.0 7.5 3.5 4.0 3.5 11.0 4.0 3.5 3.5 11.0 4.0 3.5 3.0 10.5 Guatemala 3.0 3.0 1.0 7.0 2.5 1.5 1.0 5.0 3.5 4.0 3.5 11.0 4.0 3.5 1.0 8.5 4.0 2.5 3.0 9.5 Guinea 3.0 4.0 2.0 9.0 2.0 2.0 0.5 4.5 3.0 2.0 1.5 6.5 3.5 3.5 1.5 8.5 3.0 2.5 3.5 9.0 Guinea-Bissau 3.0 2.0 1.5 6.5 1.5 2.0 0.0 3.5 2.0 3.0 2.0 7.0 3.0 2.0 1.5 6.5 4.0 2.0 2.0 8.0 Guyana 3.5 3.0 2.5 9.0 2.0 2.5 0.5 5.0 2.5 2.5 2.0 7.0 4.0 3.0 2.5 9.5 4.0 3.0 3.0 10.0 Haiti 4.0 4.0 2.0 10.0 0.0 0.5 0.0 0.5 2.0 1.5 1.5 5.0 3.5 1.0 1.0 5.0 4.0 3.0 1.0 8.0 Honduras 4.0 3.0 1.5 8.5 0.0 1.0 0.5 1.5 3.0 2.5 2.5 8.0 4.0 3.5 3.0 10.5 4.0 3.0 3.0 10.0 Hong Kong 3.0 3.5 2.0 8.5 2.5 1.5 3.0 7.0 3.5 4.0 4.0 11.5 4.0 4.0 2.5 10.5 4.0 4.0 3.0 11.0 Hungary 3.5 3.0 3.5 10.0 2.5 2.5 2.5 7.5 4.0 4.0 4.0 12.0 4.0 4.0 3.5 11.5 4.0 4.0 3.5 11.5 Iceland 3.5 2.5 3.0 9.0 3.5 2.0 4.0 9.5 4.0 4.0 3.0 11.0 4.0 4.0 3.5 11.5 4.0 3.5 3.5 11.0 India 3.0 3.0 2.5 8.5 0.5 3.0 0.0 3.5 3.5 3.0 2.0 8.5 4.0 1.5 2.5 8.0 3.5 3.0 2.5 9.0 Indonesia 3.0 3.0 3.0 9.0 1.5 1.5 0.5 3.5 3.0 1.5 1.5 6.0 3.0 2.0 2.5 7.5 4.0 4.0 3.0 11.0 Iran 2.0 3.0 2.0 7.0 1.0 2.0 2.5 5.5 2.0 2.0 2.0 6.0 3.5 3.0 2.0 8.5 3.5 3.0 2.0 8.5 Iraq 3.5 3.5 2.5 9.5 0.0 0.5 0.0 0.5 3.0 3.0 2.0 8.0 2.5 2.0 1.0 5.5 4.0 3.0 0.0 7.0 Ireland 4.0 3.5 3.0 10.5 3.5 3.5 4.0 11.0 4.0 4.0 4.0 12.0 4.0 3.5 4.0 11.5 4.0 3.5 3.5 11.0 Israel 3.5 3.0 3.5 10.0 2.0 2.0 3.0 7.0 2.5 3.5 3.0 9.0 3.0 2.0 2.5 7.5 3.5 2.5 2.0 8.0 Italy 2.5 3.0 3.0 8.5 2.5 2.0 4.0 8.5 4.0 4.0 4.0 12.0 4.0 3.5 3.5 11.0 4.0 3.5 3.5 11.0 Jamaica 3.5 3.0 2.0 8.5 1.5 2.5 1.5 5.5 3.5 3.0 3.0 9.5 4.0 3.0 2.0 9.0 4.0 4.0 3.5 11.5 Japan 3.5 4.0 3.0 10.5 3.0 2.0 3.0 8.0 4.0 4.0 3.5 11.5 4.0 4.0 3.5 11.5 4.0 2.5 3.0 9.5 Jordan 4.0 3.5 2.5 10.0 2.0 2.0 0.5 4.5 3.0 3.5 3.0 9.5 4.0 2.5 2.5 9.0 3.5 3.0 3.5 10.0 Kazakhstan 4.0 4.0 3.0 11.0 4.0 2.0 0.5 6.5 2.5 2.5 2.5 7.5 4.0 3.5 3.5 11.0 4.0 4.0 3.0 11.0 Kenya 3.0 3.5 3.0 9.5 0.0 2.0 0.0 2.0 3.5 3.0 3.0 9.5 4.0 2.0 3.0 9.0 4.0 3.5 3.0 10.5 Korea, D.P.R. 3.0 4.0 1.5 8.5 1.0 0.5 0.0 1.5 2.0 2.5 1.0 5.5 2.5 4.0 3.5 10.0 3.0 2.0 1.0 6.0 Korea, Rep. 3.0 2.0 3.0 8.0 3.5 3.0 3.0 9.5 3.5 3.0 3.0 9.5 4.0 4.0 2.0 10.0 3.5 2.0 2.5 8.0 Kuwait 3.5 3.5 3.5 10.5 4.0 3.5 3.5 11.0 3.0 4.0 4.0 11.0 4.0 2.5 4.0 10.5 4.0 4.0 3.0 11.0 Latvia 3.5 3.5 3.0 10.0 2.5 2.0 1.5 6.0 4.0 4.0 3.0 11.0 4.0 4.0 3.5 11.5 4.0 4.0 3.5 11.5 Lebanon 3.0 3.0 2.5 8.5 2.0 2.0 2.0 6.0 2.5 3.5 3.0 9.0 3.0 2.5 2.5 8.0 3.0 2.0 2.0 7.0 Liberia 2.5 1.0 2.5 6.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 2.0 2.5 6.5 4.0 2.5 0.5 7.0 Libya 4.0 3.5 2.5 10.0 0.0 2.0 2.5 4.5 2.5 3.5 3.0 9.0 4.0 3.5 4.0 11.5 4.0 3.5 2.5 10.0 Lithuania 3.5 3.0 3.0 9.5 2.5 2.5 2.0 7.0 4.0 3.5 3.5 11.0 4.0 4.0 3.5 11.5 4.0 3.5 3.0 10.5 Luxembourg 4.0 4.0 3.0 11.0 4.0 3.0 4.0 11.0 4.0 4.0 4.0 12.0 4.0 4.0 4.0 12.0 4.0 4.0 3.5 11.5 Madagascar 3.5 3.0 2.5 9.0 2.0 2.0 0.0 4.0 3.0 3.0 2.0 8.0 3.0 1.5 1.5 6.0 4.0 4.0 4.0 12.0 Malawi 2.5 2.5 2.0 7.0 1.5 1.0 0.0 2.5 3.0 3.0 2.0 8.0 4.0 2.0 1.0 7.0 4.0 4.0 3.0 11.0 Malaysia 3.0 4.0 3.0 10.0 3.5 2.0 2.5 8.0 3.0 2.5 3.0 8.5 4.0 3.5 3.0 10.5 4.0 3.5 3.5 11.0 Mali 3.0 3.5 2.0 8.5 2.0 2.5 0.0 4.5 2.5 2.5 2.5 7.5 4.0 4.0 2.5 10.5 4.0 3.0 3.0 10.0 Malta 4.0 3.0 3.5 10.5 3.0 3.5 2.0 8.5 4.0 4.0 3.5 11.5 4.0 4.0 3.0 11.0 4.0 4.0 4.0 12.0 Mexico 3.0 2.0 1.5 6.5 4.0 2.0 2.0 8.0 4.0 4.0 3.5 11.5 4.0 3.0 1.5 8.5 4.0 4.0 3.0 11.0 Moldova 4.0 4.0 3.0 11.0 2.0 2.0 0.0 4.0 2.5 2.5 1.5 6.5 3.0 3.5 2.5 9.0 4.0 3.5 3.0 10.5 Mongolia 3.5 4.0 3.5 11.0 0.5 1.0 1.0 2.5 3.0 3.0 2.0 8.0 4.0 4.0 3.0 11.0 4.0 3.5 4.0 11.5 Morocco 4.0 3.5 3.0 10.5 1.0 2.5 1.0 4.5 3.5 3.0 2.5 9.0 3.5 3.0 3.0 9.5 4.0 3.5 3.5 11.0 Mozambique 4.0 3.0 2.5 9.5 1.0 2.0 0.0 3.0 3.0 3.5 2.0 8.5 4.0 3.0 2.5 9.5 4.0 4.0 4.0 12.0 Myanmar 3.5 4.0 1.5 9.0 1.0 1.5 1.5 4.0 1.5 1.5 0.5 3.5 2.5 2.5 3.0 8.0 4.0 3.0 1.5 8.5 Namibia 3.5 3.5 3.0 10.0 2.0 2.0 2.0 6.0 3.5 3.5 3.0 10.0 4.0 3.0 2.5 9.5 3.5 3.0 4.0 10.5 Netherlands 3.5 2.5 2.5 8.5 3.5 3.0 4.0 10.5 4.0 4.0 4.0 12.0 4.0 3.5 3.5 11.0 4.0 4.0 4.0 12.0 New Zealand 3.5 2.5 3.0 9.0 3.5 2.5 4.0 10.0 4.0 3.5 4.0 11.5 4.0 4.0 3.5 11.5 4.0 4.0 3.5 11.5 Nicaragua 1.5 1.5 2.0 5.0 2.0 1.5 0.0 3.5 3.0 1.5 1.5 6.0 4.0 3.0 2.0 9.0 4.0 2.5 3.0 9.5 Niger 3.5 3.0 2.5 9.0 1.0 2.0 0.0 3.0 2.5 2.5 2.5 7.5 4.0 3.5 3.5 11.0 4.0 3.0 4.0 11.0 Nigeria 3.5 3.0 2.0 8.5 0.0 1.5 0.0 1.5 3.0 1.0 0.5 4.5 3.0 2.5 1.5 7.0 4.0 2.5 3.5 10.0 Norway 3.0 2.5 2.0 7.5 3.5 2.5 4.0 10.0 3.5 4.0 4.0 11.5 4.0 4.0 3.5 11.5 4.0 4.0 3.5 11.5 Oman 4.0 4.0 3.0 11.0 4.0 2.5 2.5 9.0 4.0 3.5 4.0 11.5 4.0 2.5 3.0 9.5 4.0 3.0 3.0 10.0

S-24 Reproduction without permission of the Publisher is strictly forbidden International Country Risk Guide September 2003

Government Stability Socioeconomic Conditions Investment Profile Internal Conflict External Conflict Col. Subcomponent Col. Subcomponent Col. Subcomponent Col. Subcomponent Col. Subcomponent 1-Government Unity 1-Unemployment 1-Contract Viability 1-Civil War 1-War 2-Legislative Strength 2-Consumer Confidence 2-Profits Repatriation 2-Terrorism 2-Cross-border Conflict 3-Popular Support 3-Poverty 3-Payments Delays 3-Civil Disorder 3-Foreign Pressures

Government Socioeconomic Investment Internal External Stability Conditions Profile Conflict Conflict COUNTRY 1 2 3 A 1 2 3 B 1 2 3 C 1 2 3 D 1 2 3 E Pakistan 3.5 3.5 2.5 9.5 2.5 2.0 2.0 6.5 2.5 0.5 1.0 4.0 3.0 2.0 2.5 7.5 3.5 2.5 2.0 8.0 Panama 2.5 2.5 1.5 6.5 2.0 2.5 2.0 6.5 3.5 3.5 3.0 10.0 4.0 3.5 2.5 10.0 4.0 3.5 3.5 11.0 Papua N. G. 3.0 2.5 2.0 7.5 0.0 0.0 1.5 1.5 3.0 2.5 2.5 8.0 3.5 3.0 2.5 9.0 4.0 3.0 2.5 9.5 Paraguay 3.0 2.0 2.5 7.5 1.0 2.0 0.5 3.5 3.0 3.5 2.0 8.5 3.5 2.5 2.0 8.0 4.0 4.0 3.0 11.0 Peru 1.5 2.0 1.5 5.0 2.5 2.5 1.0 6.0 3.5 2.5 2.0 8.0 3.5 2.0 1.0 6.5 4.0 3.0 3.5 10.5 Philippines 3.0 3.0 3.0 9.0 2.0 2.5 0.5 5.0 3.5 3.0 3.5 10.0 3.5 2.5 3.0 9.0 4.0 3.5 3.5 11.0 Poland 2.5 2.0 3.0 7.5 1.0 1.5 2.5 5.0 4.0 3.0 4.0 11.0 4.0 3.0 2.5 9.5 4.0 4.0 3.5 11.5 Portugal 3.5 2.5 2.0 8.0 2.5 2.5 3.5 8.5 4.0 4.0 4.0 12.0 4.0 4.0 3.0 11.0 4.0 3.5 3.5 11.0 Qatar 4.0 4.0 3.5 11.5 2.5 2.5 3.5 8.5 3.5 3.5 3.0 10.0 4.0 2.5 3.0 9.5 3.0 3.0 2.5 8.5 Romania 3.0 3.5 3.0 9.5 2.0 1.5 0.5 4.0 3.5 2.5 2.5 8.5 4.0 3.0 3.5 10.5 4.0 3.5 3.5 11.0 Russian Fed. 4.0 4.0 3.5 11.5 2.0 3.0 1.5 6.5 2.5 3.0 3.5 9.0 3.0 1.5 4.0 8.5 4.0 2.5 3.0 9.5 Saudi Arabia 3.5 4.0 2.0 9.5 0.0 3.0 3.0 6.0 3.5 3.5 4.0 11.0 4.0 2.0 2.5 8.5 4.0 4.0 2.0 10.0 Senegal 3.0 4.0 2.0 9.0 2.0 2.5 0.0 4.5 2.5 3.0 2.5 8.0 3.0 2.0 3.0 8.0 4.0 3.0 4.0 11.0 Serbia & Montenegro 3.0 3.0 2.0 8.0 0.0 2.0 0.5 2.5 3.0 3.0 2.0 8.0 3.5 3.0 2.5 9.0 4.0 4.0 3.0 11.0 Sierra Leone 4.0 4.0 3.0 11.0 0.0 2.0 0.0 2.0 2.0 3.0 1.5 6.5 3.5 3.0 3.0 9.5 3.5 3.5 3.0 10.0 Singapore 4.0 4.0 3.0 11.0 3.5 2.5 3.0 9.0 4.0 4.0 4.0 12.0 4.0 4.0 3.0 11.0 4.0 4.0 3.5 11.5 Slovak Rep. 2.5 2.5 3.0 8.0 1.0 2.5 2.5 6.0 4.0 4.0 4.0 12.0 4.0 3.5 3.5 11.0 4.0 4.0 3.5 11.5 Slovenia 3.5 4.0 3.0 10.5 2.5 2.5 2.0 7.0 3.5 3.5 3.0 10.0 4.0 4.0 3.5 11.5 4.0 4.0 3.5 11.5 Somalia 2.0 1.0 2.0 5.0 0.0 1.0 0.0 1.0 0.5 1.0 1.0 2.5 1.5 0.0 3.0 4.5 3.0 1.0 0.0 4.0 South Africa 3.0 4.0 2.0 9.0 0.0 2.0 2.0 4.0 3.5 3.5 3.5 10.5 4.0 2.5 2.5 9.0 4.0 3.5 3.0 10.5 Spain 4.0 3.0 3.0 10.0 2.0 3.0 3.5 8.5 4.0 4.0 4.0 12.0 4.0 2.0 3.5 9.5 4.0 3.0 3.5 10.5 Sri Lanka 2.5 3.0 2.5 8.0 2.0 2.0 0.5 4.5 3.5 2.0 2.5 8.0 2.5 3.0 2.5 8.0 4.0 4.0 4.0 12.0 Sudan 3.5 3.5 3.0 10.0 0.0 2.0 0.0 2.0 2.5 2.0 1.5 6.0 2.0 2.5 3.0 7.5 4.0 3.0 2.5 9.5 Suriname 3.5 4.0 2.0 9.5 1.5 2.5 1.0 5.0 2.0 1.5 2.0 5.5 4.0 3.0 3.0 10.0 4.0 3.0 3.0 10.0 Sweden 3.0 2.5 2.5 8.0 3.5 2.5 4.0 10.0 4.0 4.0 4.0 12.0 4.0 4.0 3.0 11.0 4.0 4.0 3.5 11.5 Switzerland 3.0 4.0 3.0 10.0 4.0 2.5 4.0 10.5 3.5 4.0 4.0 11.5 4.0 4.0 4.0 12.0 4.0 4.0 3.5 11.5 Syria 3.5 4.0 3.0 10.5 1.0 2.5 2.0 5.5 2.0 2.5 2.0 6.5 4.0 4.0 3.5 11.5 4.0 2.5 2.0 8.5 Taiwan 2.5 2.5 2.0 7.0 3.0 2.0 3.0 8.0 3.5 4.0 4.0 11.5 4.0 4.0 3.0 11.0 3.5 3.0 2.0 8.5 Tanzania 4.0 4.0 2.0 10.0 0.5 2.5 0.0 3.0 2.5 3.0 2.0 7.5 4.0 2.0 2.5 8.5 4.0 3.5 2.0 9.5 Thailand 3.5 3.5 3.0 10.0 4.0 3.0 1.5 8.5 3.0 2.5 3.0 8.5 4.0 2.5 3.0 9.5 4.0 3.5 3.5 11.0 Togo 3.0 3.0 1.5 7.5 0.5 2.5 0.0 3.0 2.5 3.0 2.0 7.5 4.0 3.0 1.5 8.5 4.0 3.0 3.0 10.0 Trinidad & T. 3.0 3.0 2.5 8.5 2.0 2.5 2.0 6.5 3.5 4.0 4.0 11.5 4.0 2.0 0.5 6.5 4.0 4.0 4.0 12.0 Tunisia 4.0 4.0 3.0 11.0 1.5 2.5 1.5 5.5 3.0 3.0 3.0 9.0 4.0 3.0 3.5 10.5 4.0 4.0 3.5 11.5 Turkey 3.5 3.0 3.0 9.5 2.5 1.0 2.0 5.5 3.0 2.5 2.0 7.5 4.0 3.0 2.5 9.5 3.5 2.5 2.5 8.5 Uganda 3.0 4.0 2.0 9.0 1.0 3.0 0.0 4.0 3.0 3.5 2.0 8.5 3.5 1.5 2.0 7.0 3.5 3.0 3.5 10.0 Ukraine 3.0 2.5 2.0 7.5 3.0 1.5 0.5 5.0 3.0 1.5 1.5 6.0 4.0 3.0 2.5 9.5 4.0 3.5 2.0 9.5 United Arab E. 3.5 4.0 3.0 10.5 4.0 2.5 3.5 10.0 3.5 4.0 4.0 11.5 4.0 3.5 3.5 11.0 4.0 4.0 3.0 11.0 United K’dom 3.0 3.5 2.5 9.0 3.5 3.0 3.5 10.0 4.0 4.0 4.0 12.0 4.0 2.5 3.5 10.0 3.0 2.5 3.0 8.5 United States 4.0 3.5 3.0 10.5 2.5 1.5 3.5 7.5 4.0 3.5 4.0 11.5 4.0 2.5 4.0 10.5 3.5 2.0 2.5 8.0 Uruguay 2.5 3.5 1.0 7.0 1.0 1.0 2.5 4.5 3.5 2.5 2.5 8.5 4.0 4.0 2.0 10.0 4.0 4.0 4.0 12.0 Venezuela 3.5 2.5 2.0 8.0 1.0 1.0 1.0 3.0 2.0 1.0 1.0 4.0 3.0 2.5 2.0 7.5 4.0 3.0 2.5 9.5 Vietnam 4.0 4.0 2.5 10.5 0.5 3.0 2.0 5.5 2.5 2.0 2.5 7.0 4.0 3.5 3.0 10.5 4.0 4.0 3.5 11.5 Yemen, Rep. 4.0 4.0 2.5 10.5 1.0 2.5 1.5 5.0 2.5 3.5 2.0 8.0 4.0 2.0 3.0 9.0 4.0 3.5 2.5 10.0 Zambia 2.5 2.5 2.0 7.0 0.0 2.5 0.0 2.5 3.0 1.5 1.5 6.0 4.0 3.0 1.0 8.0 3.5 2.5 3.0 9.0 Zimbabwe 2.5 4.0 1.5 8.0 0.0 1.0 0.0 1.0 1.0 0.0 0.5 1.5 2.5 2.5 1.0 6.0 4.0 3.0 1.0 8.0

Reproduction without permission of the Publisher is strictly forbidden S-25 International Country Risk Guide September 2003

TABLE 3C

POLITICAL RISK FORECASTS

One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Albania 68.5 58.0 68.0 10.0 58.0 70.0 12.0 Algeria 45.5 39.0 50.0 11.0 38.0 63.0 25.0 Angola 58.5 50.0 60.0 10.0 50.0 66.0 16.0 Argentina 64.0 58.0 64.0 6.0 58.0 75.0 17.0 Armenia 61.0 55.0 62.0 7.0 55.0 70.0 15.0 Australia 85.5 85.0 90.0 5.0 79.0 90.0 11.0 Austria 90.0 79.0 92.0 13.0 81.0 92.0 11.0 Azerbaijan 64.0 48.0 62.0 14.0 48.0 63.0 15.0 Bahamas 84.0 80.0 84.0 4.0 78.0 85.0 7.0 Bahrain 77.0 73.0 78.0 5.0 58.0 73.0 15.0 Bangladesh 48.0 49.0 60.0 11.0 49.0 63.0 14.0 Belarus 62.0 54.0 62.0 8.0 56.0 64.0 8.0 Belgium 86.5 79.0 87.0 8.0 75.0 90.0 15.0 Bolivia 63.5 63.0 72.0 9.0 68.0 75.0 7.0 Botswana 76.5 71.0 76.0 5.0 65.0 77.0 12.0 Brazil 69.0 57.0 70.0 13.0 60.0 73.0 13.0 Brunei 82.0 70.0 75.0 5.0 70.0 78.0 8.0 Bulgaria 71.0 65.0 78.0 13.0 65.0 82.0 17.0 Burkina Faso 63.5 55.0 66.0 11.0 55.0 68.0 13.0 Cameroon 54.0 50.0 58.0 8.0 50.0 58.0 8.0 Canada 89.5 82.0 90.0 8.0 75.0 92.0 17.0 Chile 77.0 65.0 76.0 11.0 70.0 79.0 9.0 China, Peoples' Rep. 70.5 68.0 71.0 3.0 63.0 72.0 9.0 Colombia 55.0 50.0 60.0 10.0 48.0 62.0 14.0 Congo, Dem. Republic 38.5 40.0 48.0 8.0 35.0 58.0 23.0 Congo, Republic 56.5 50.0 58.0 8.0 48.0 58.0 10.0 Costa Rica 74.0 78.0 82.0 4.0 78.0 84.0 6.0 Cote d'Ivoire 46.5 50.0 65.0 15.0 50.0 65.0 15.0 Croatia 72.5 62.0 72.0 10.0 65.0 75.0 10.0 Cuba 58.5 45.0 62.0 17.0 45.0 68.0 23.0 Cyprus 83.0 60.0 72.0 12.0 70.0 78.0 8.0 Czech Republic 78.5 78.0 82.0 4.0 78.0 84.0 6.0 Denmark 87.5 88.0 91.0 3.0 85.0 96.0 11.0 Dominican Republic 62.5 60.0 68.0 8.0 60.0 70.0 10.0 Ecuador 58.0 53.0 65.0 12.0 58.0 68.0 10.0 Egypt 64.0 50.0 70.0 20.0 50.0 68.0 18.0 El Salvador 64.0 65.0 70.0 5.0 68.0 75.0 7.0 Estonia 75.0 70.0 78.0 8.0 70.0 80.0 10.0 Ethiopia 54.0 55.0 66.0 11.0 55.0 70.0 15.0 Finland 93.5 85.0 94.0 9.0 83.0 95.0 12.0 France 78.0 79.0 88.0 9.0 79.0 93.0 14.0 Gabon 60.5 50.0 65.0 15.0 50.0 67.0 17.0 Gambia 69.5 65.0 75.0 10.0 65.0 77.0 12.0 Germany 83.0 78.0 85.0 7.0 78.0 92.0 14.0 Ghana 61.5 58.0 67.0 9.0 60.0 68.0 8.0 Greece 78.0 76.0 84.0 8.0 78.0 90.0 12.0

S-26 Reproduction without permission of the Publisher is strictly forbidden International Country Risk Guide September 2003

One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Guatemala 60.5 60.5 68.0 7.5 60.0 72.0 12.0 Guinea 53.5 50.0 57.0 7.0 50.0 59.0 9.0 Guinea-Bissau 47.5 48.0 56.0 8.0 50.0 60.0 10.0 Guyana 68.0 65.0 70.0 5.0 65.0 72.0 7.0 Haiti 45.0 30.0 45.0 15.0 30.0 60.0 30.0 Honduras 60.5 60.0 66.0 6.0 58.0 68.0 10.0 Hong Kong 75.5 70.0 74.0 4.0 65.0 80.0 15.0 Hungary 84.5 78.0 86.0 8.0 78.0 86.0 8.0 Iceland 90.0 80.0 90.0 10.0 83.0 90.0 7.0 India 59.0 50.0 63.0 13.0 50.0 67.0 17.0 Indonesia 51.5 40.0 58.0 18.0 40.0 64.0 24.0 Iran 58.0 25.0 60.0 35.0 25.0 65.0 40.0 Iraq 41.5 38.0 49.5 11.5 30.0 68.0 38.0 Ireland 92.0 80.0 90.0 10.0 77.0 92.0 15.0 Israel 67.5 56.0 68.0 12.0 54.0 75.0 21.0 Italy 78.0 73.0 78.0 5.0 70.0 80.0 10.0 Jamaica 70.5 68.0 76.0 8.0 70.0 79.0 9.0 Japan 85.5 80.0 88.0 8.0 76.0 92.0 16.0 Jordan 69.5 68.0 74.0 6.0 68.0 78.0 10.0 Kazakhstan 70.5 66.0 70.0 4.0 60.0 70.0 10.0 Kenya 62.5 58.0 64.0 6.0 50.0 68.0 18.0 Korea, D.P.R. 50.5 25.0 60.0 35.0 25.0 65.0 40.0 Korea, Republic 79.0 62.0 80.0 18.0 65.0 82.0 17.0 Kuwait 78.0 68.0 78.0 10.0 60.0 80.0 20.0 Latvia 78.5 75.0 81.0 6.0 75.0 85.0 10.0 Lebanon 60.0 50.0 60.0 10.0 45.0 62.0 17.0 Liberia 32.5 30.0 45.0 15.0 30.0 55.0 25.0 Libya 62.0 60.0 66.0 6.0 35.0 65.0 30.0 Lithuania 78.5 63.0 69.0 6.0 63.0 74.0 11.0 Luxembourg 94.5 91.0 93.0 2.0 88.0 93.0 5.0 Madagascar 60.0 61.0 67.0 6.0 60.0 68.0 8.0 Malawi 56.5 50.0 60.0 10.0 50.0 67.0 17.0 Malaysia 71.5 60.0 73.0 13.0 58.0 75.0 17.0 Mali 61.5 55.0 66.0 11.0 50.0 67.0 17.0 Malta 86.5 82.0 88.0 6.0 80.0 87.0 7.0 Mexico 69.0 62.0 70.0 8.0 60.0 75.0 15.0 Moldova 68.5 58.0 68.0 10.0 60.0 70.0 10.0 Mongolia 71.0 60.0 69.0 9.0 55.0 70.0 15.0 Morocco 73.5 65.0 74.0 9.0 60.0 76.0 16.0 Mozambique 63.0 56.0 65.0 9.0 50.0 67.0 17.0 Myanmar 47.5 40.0 48.0 8.0 30.0 55.0 25.0 Namibia 76.0 68.0 77.0 9.0 68.0 78.0 10.0 Netherlands 90.5 84.0 94.0 10.0 88.0 94.0 6.0 New Zealand 91.0 88.0 92.0 4.0 85.0 95.0 10.0 Nicaragua 57.5 56.0 63.0 7.0 48.0 64.0 16.0 Niger 58.5 53.0 65.0 12.0 50.0 63.0 13.0 Nigeria 44.0 35.0 60.0 25.0 45.0 67.0 22.0 Norway 88.5 83.0 92.0 9.0 80.0 95.0 15.0 Oman 75.5 76.0 78.0 2.0 68.0 74.0 6.0 Pakistan 49.0 40.0 57.0 17.0 40.0 62.0 22.0 Panama 72.0 65.0 75.0 10.0 58.0 78.0 20.0 Papua New Guinea 53.5 48.0 55.0 7.0 48.0 58.0 10.0

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One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Paraguay 57.0 48.0 60.0 12.0 30.0 65.0 35.0 Peru 62.5 50.0 68.0 18.0 50.0 69.0 19.0 Philippines 68.0 55.0 72.0 17.0 65.0 74.0 9.0 Poland 76.5 70.0 85.0 15.0 76.0 86.0 10.0 Portugal 86.0 79.0 86.0 7.0 78.0 90.0 12.0 Qatar 73.0 73.0 77.0 4.0 70.0 78.0 8.0 Romania 71.0 67.0 74.0 7.0 60.0 78.0 18.0 Russian Federation. 67.5 65.0 71.5 6.5 59.0 78.0 19.0 Saudi Arabia 67.0 55.0 72.0 17.0 55.0 73.0 18.0 Senegal 59.0 53.0 58.0 5.0 50.0 58.0 8.0 Serbia & Montenegro 62.0 25.0 65.0 40.0 25.0 68.0 43.0 Sierra Leone 56.0 50.0 60.0 10.0 25.0 62.0 37.0 Singapore 86.5 84.0 88.0 4.0 65.0 88.0 23.0 Slovak Republic 78.5 73.0 85.0 12.0 76.0 85.0 9.0 Slovenia 80.0 78.0 87.0 9.0 76.0 92.0 16.0 Somalia 27.0 28.0 45.0 17.0 28.0 56.0 28.0 South Africa 65.5 58.0 66.0 8.0 55.0 70.0 15.0 Spain 82.0 75.0 85.0 10.0 74.0 90.0 16.0 Sri Lanka 59.0 45.0 68.0 23.0 45.0 72.0 27.0 Sudan 45.0 30.0 50.0 20.0 28.0 60.0 32.0 Suriname 65.0 60.0 68.0 8.0 55.0 68.0 13.0 Sweden 90.5 84.0 90.0 6.0 80.0 92.0 12.0 Switzerland 91.0 88.0 92.0 4.0 80.0 92.0 12.0 Syria 64.5 55.0 69.0 14.0 48.0 70.0 22.0 Taiwan 76.0 70.0 87.0 17.0 60.0 80.0 20.0 Tanzania 60.5 60.0 65.0 5.0 58.0 68.0 10.0 Thailand 71.5 64.0 75.0 11.0 60.0 75.0 15.0 Togo 51.0 48.0 55.0 7.0 48.0 63.0 15.0 Trinidad & Tobago 67.0 65.0 70.0 5.0 65.0 70.0 5.0 Tunisia 73.0 50.0 73.0 23.0 50.0 76.0 26.0 Turkey 65.5 57.0 68.0 11.0 63.0 70.0 7.0 Uganda 56.5 50.0 58.0 8.0 50.0 63.0 13.0 Ukraine 59.5 57.0 63.0 6.0 57.0 70.0 13.0 United Arab Emirates 78.0 70.0 78.0 8.0 65.0 78.0 13.0 United Kingdom 86.0 78.0 89.0 11.0 78.0 92.0 14.0 United States 81.0 76.0 83.0 7.0 78.0 88.0 10.0 Uruguay 70.5 65.0 76.0 11.0 65.0 77.0 12.0 Venezuela 50.0 50.0 67.0 17.0 50.0 74.0 24.0 Vietnam 65.5 63.0 67.0 4.0 60.0 69.0 9.0 Yemen, Republic 62.5 60.0 64.0 4.0 55.0 69.0 14.0 Zambia 57.5 68.0 70.0 2.0 65.0 73.0 8.0 Zimbabwe 38.0 25.0 60.0 35.0 25.0 70.0 45.0

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TABLE 4A

FINANCIAL RISK RATINGS OVER THE PERIOD OCTOBER 2002 THROUGH SEPTEMBER 2003

COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Albania 35.0 35.0 35.0 35.0 35.0 34.0 33.5 33.5 33.0 33.5 33.5 33.5 Algeria 38.5 41.0 41.0 41.0 42.0 42.0 42.0 42.0 42.0 42.0 43.5 43.5 Angola 22.5 23.0 23.0 25.0 25.5 25.0 25.0 25.5 25.5 25.5 25.5 25.5 Argentina 17.5 17.5 17.5 16.0 17.0 16.5 24.0 24.0 23.0 29.5 29.0 29.5 Armenia 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 Australia 36.5 36.5 36.5 36.5 36.0 36.0 36.5 36.5 36.0 35.5 35.5 35.5 Austria 43.5 43.5 43.0 42.5 42.5 42.5 42.5 41.5 41.5 42.0 42.0 42.0 Azerbaijan 40.0 40.0 40.0 40.0 40.0 40.0 40.0 39.0 39.0 39.0 38.5 38.5 Bahamas 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 37.5 37.5 Bahrain 44.0 44.0 44.0 44.0 44.0 44.0 44.0 44.0 44.0 44.0 44.0 44.0 Bangladesh 35.5 36.0 36.0 36.0 40.5 40.5 40.5 39.5 39.5 39.5 39.5 39.5 Belarus 33.5 33.5 34.0 35.0 35.0 34.5 35.5 37.5 37.5 37.5 38.0 38.0 Belgium 39.5 39.5 39.0 38.5 38.5 38.5 38.5 38.5 40.5 41.0 41.0 41.5 Bolivia 34.0 34.0 34.0 36.0 36.0 36.0 36.0 36.0 36.5 37.0 37.0 37.0 Botswana 45.0 45.0 43.5 43.5 44.0 44.0 44.5 44.5 45.0 45.0 44.5 44.0 Brazil 26.5 24.0 23.5 24.5 25.0 24.5 25.5 27.0 30.5 31.5 31.5 30.5 Brunei 49.5 49.5 49.5 50.0 50.0 50.0 50.0 46.5 50.0 50.0 50.0 50.0 Bulgaria 36.0 36.0 35.5 35.0 35.5 35.5 35.5 35.5 35.5 36.0 36.5 36.5 Burkina Faso 25.5 25.5 25.0 24.5 24.5 24.5 24.5 24.5 24.5 25.0 23.5 23.5 Cameroon 32.5 32.5 32.0 31.5 33.0 33.0 33.0 33.0 33.0 33.5 33.5 33.5 Canada 40.0 40.0 40.0 40.0 40.0 40.0 40.0 42.5 42.0 42.0 42.0 42.0 Chile 37.5 37.0 38.0 37.5 37.0 36.5 35.5 36.0 37.0 37.5 37.5 37.5 China, Peoples' Rep. 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.5 45.5 Colombia 35.5 35.0 35.5 34.5 34.0 34.0 33.5 34.0 35.0 37.0 38.5 39.5 Congo, Dem. Republic 25.0 27.5 27.0 30.0 21.5 21.5 21.0 20.0 21.0 24.5 24.0 24.5 Congo, Republic 30.5 30.5 30.0 29.5 29.5 30.5 30.5 30.5 31.0 31.5 31.5 23.0 Costa Rica 37.0 37.0 36.0 36.5 36.0 36.0 36.0 35.5 35.5 36.0 36.0 37.0 Cote d'Ivoire 28.0 28.0 27.5 30.0 30.0 30.0 30.0 30.0 30.0 30.5 30.5 30.5 Croatia 37.0 37.0 36.5 36.0 36.0 36.0 36.5 36.5 36.0 36.5 36.5 37.0 Cuba 31.0 31.0 30.5 30.5 30.5 29.5 29.5 29.5 29.5 29.5 29.5 28.5 Cyprus 43.5 43.0 43.0 42.5 42.5 42.5 42.5 43.0 42.5 43.0 43.0 43.5 Czech Republic 38.0 38.0 38.0 38.5 38.5 38.0 39.5 39.5 39.0 41.0 40.5 41.0 Denmark 42.0 42.0 41.5 41.0 41.0 41.0 41.0 41.0 41.5 42.0 42.0 42.0 Dominican Republic 37.0 35.5 32.0 33.5 33.5 33.5 33.5 34.0 31.5 31.5 29.5 29.5 Ecuador 31.0 31.0 31.0 31.0 31.0 31.0 31.0 34.5 34.5 34.5 34.5 34.5 Egypt 38.5 38.5 39.5 39.0 39.0 36.0 34.5 34.0 34.0 34.5 34.0 34.0 El Salvador 42.0 42.0 42.0 39.5 39.5 39.5 39.5 39.5 39.5 39.5 39.5 39.5 Estonia 37.5 37.5 37.0 36.5 36.5 36.5 36.5 36.5 36.5 37.0 37.0 37.0 Ethiopia 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 Finland 39.0 39.0 38.5 38.0 38.0 38.0 38.0 38.0 36.0 39.0 39.0 36.0 France 40.0 40.0 39.5 39.0 39.0 39.0 39.0 39.0 39.0 39.5 40.0 40.0 Gabon 35.5 35.5 35.0 33.5 33.5 33.5 33.5 33.5 33.5 34.0 34.0 34.0 Gambia 29.0 29.0 29.0 29.5 29.0 28.5 29.0 28.5 29.0 28.5 29.5 29.0 Germany 40.5 40.5 40.0 39.5 41.0 41.0 41.0 41.0 41.0 41.5 41.5 41.5 Ghana 30.0 29.0 29.5 29.5 30.0 30.0 30.5 30.5 32.0 32.5 33.0 33.5 Greece 33.5 33.5 33.0 32.5 35.5 35.5 35.5 35.5 35.5 36.0 36.5 36.5 Guatemala 38.5 38.5 38.5 38.5 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0

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COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Guinea 40.0 40.0 40.0 40.0 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 Guinea-Bissau 22.0 22.0 21.5 21.0 21.0 21.0 21.0 21.0 21.0 21.5 21.5 21.5 Guyana 30.0 30.0 30.0 30.0 29.5 29.5 29.5 29.5 29.5 29.5 29.5 29.5 Haiti 35.5 35.0 31.0 31.5 30.5 28.0 30.0 30.5 31.0 32.5 30.5 31.5 Honduras 34.5 34.5 34.5 34.5 34.5 34.5 35.5 35.5 35.5 35.5 35.5 36.0 Hong Kong 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.0 44.0 44.0 Hungary 38.0 37.5 37.5 37.0 37.0 35.0 35.0 35.0 34.0 35.0 35.0 34.5 Iceland 31.0 31.0 31.0 30.5 30.5 30.0 31.0 31.0 30.5 31.0 31.5 31.5 India 41.0 41.0 41.0 41.0 41.0 41.0 43.0 43.0 43.0 43.0 43.0 44.0 Indonesia 34.0 34.0 34.0 35.5 35.5 35.5 36.0 36.0 36.0 34.5 34.5 34.5 Iran 29.5 29.5 29.5 29.5 29.5 36.0 36.0 36.0 36.0 36.5 36.5 46.5 Iraq 31.0 31.0 31.0 31.0 31.0 31.0 25.0 25.0 25.0 25.5 25.5 22.5 Ireland 42.0 42.0 41.5 40.5 40.5 40.5 40.5 40.5 40.5 41.5 41.5 41.5 Israel 37.0 37.0 37.5 38.5 38.0 38.0 38.5 38.5 38.5 38.5 38.5 39.5 Italy 40.5 40.5 40.0 39.5 39.5 42.5 42.5 42.5 42.0 42.5 42.5 43.0 Jamaica 36.0 36.0 36.0 36.0 37.5 36.5 36.0 34.0 32.0 33.5 35.5 36.0 Japan 47.5 47.5 47.5 47.0 47.5 49.0 49.0 49.0 49.0 49.0 50.0 50.0 Jordan 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 Kazakhstan 37.5 37.0 37.0 37.0 38.0 38.0 38.0 37.0 37.0 37.0 37.0 37.0 Kenya 35.0 35.0 35.0 35.0 36.0 36.0 36.0 36.5 36.5 36.5 36.5 36.5 Korea, D.P.R. 19.5 19.5 19.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 Korea, Republic 40.0 40.0 40.0 40.0 39.5 40.0 41.5 41.5 41.5 41.5 41.5 42.0 Kuwait 48.0 48.0 48.0 48.0 48.0 47.5 47.5 47.5 47.0 47.0 47.0 47.5 Latvia 39.5 39.5 39.5 39.5 39.5 39.5 39.5 39.5 39.5 39.5 39.5 39.5 Lebanon 25.0 22.5 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 Liberia 19.0 19.0 19.0 19.0 19.0 19.0 19.0 19.0 19.0 19.0 19.0 18.5 Libya 36.5 36.5 36.5 46.0 46.5 46.0 46.0 46.0 46.0 46.0 46.0 44.0 Lithuania 37.0 37.0 37.0 36.5 36.5 36.5 36.5 36.5 36.5 37.0 37.0 37.0 Luxembourg 43.5 43.5 43.0 42.5 42.5 42.5 42.5 42.5 42.5 43.0 43.0 43.0 Madagascar 32.0 32.0 32.0 32.0 32.0 32.0 31.5 32.0 32.0 32.0 31.5 32.0 Malawi 26.0 27.0 26.0 26.0 27.5 27.0 27.5 28.0 27.0 27.5 27.5 25.5 Malaysia 42.0 42.0 42.0 42.0 40.0 40.0 40.0 40.0 40.0 40.0 41.0 41.0 Mali 32.0 32.0 31.5 31.0 31.0 31.0 31.0 31.0 31.0 31.5 31.5 31.5 Malta 37.5 37.5 37.5 37.0 37.0 37.0 37.0 37.0 36.5 37.0 37.0 37.5 Mexico 34.5 35.5 35.0 34.5 34.5 34.5 35.5 36.5 37.5 37.0 37.5 38.0 Moldova 30.5 30.5 30.5 30.5 30.5 30.0 30.5 30.0 31.0 31.0 31.0 31.0 Mongolia 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 Morocco 37.5 37.5 37.5 37.0 37.5 38.0 38.5 38.5 38.0 38.5 39.5 40.0 Mozambique 33.5 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 Myanmar 38.5 38.5 38.5 39.0 39.0 39.0 39.0 39.5 39.5 39.5 39.5 39.5 Namibia 42.0 44.5 42.0 42.0 43.0 42.0 42.0 42.0 42.5 43.0 41.5 41.0 Netherlands 38.0 38.0 37.5 39.0 39.0 39.0 39.0 39.0 39.0 39.5 39.5 39.5 New Zealand 29.5 30.5 30.0 29.5 29.0 28.5 29.5 29.5 29.5 29.5 31.0 30.5 Nicaragua 23.0 22.5 22.5 23.0 23.0 23.0 23.5 25.5 25.5 25.5 25.5 25.0 Niger 26.0 26.0 25.5 25.0 25.0 25.0 25.0 25.0 25.0 25.5 25.5 25.5 Nigeria 35.5 37.0 36.5 37.0 37.0 37.5 36.5 36.5 36.5 37.5 39.0 39.0 Norway 45.5 45.5 45.5 45.0 45.5 45.5 47.0 47.5 47.5 47.5 47.5 47.5 Oman 42.5 42.5 42.5 42.5 42.5 42.5 42.5 42.5 42.5 42.0 42.0 42.0 Pakistan 33.5 33.5 33.5 33.5 33.5 33.5 36.5 36.5 36.5 40.5 40.5 40.5 Panama 34.5 34.5 34.5 34.5 34.5 34.5 35.0 35.0 35.0 35.0 35.0 35.0 Papua New Guinea 36.5 37.0 38.5 38.0 38.0 38.5 38.5 38.5 35.5 35.0 35.0 35.0 Paraguay 35.5 35.5 33.5 33.5 31.5 31.5 31.5 33.5 37.0 39.0 39.0 39.0 Peru 37.5 37.0 38.5 38.5 38.5 37.0 37.0 37.5 37.5 37.5 37.5 37.5 Philippines 38.0 38.0 38.0 37.0 37.0 36.5 36.0 37.5 38.0 36.5 37.0 36.5

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COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Poland 39.0 39.0 39.0 39.5 39.5 39.5 39.5 39.5 39.5 39.0 39.0 39.0 Portugal 35.0 35.0 34.5 34.0 34.0 34.0 35.0 35.0 35.5 36.0 36.0 36.5 Qatar 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 Romania 36.5 37.0 37.0 37.5 37.5 37.5 39.0 39.0 39.0 39.0 39.0 38.5 Russian Federation. 39.0 39.0 39.0 39.5 42.5 42.5 42.5 42.5 42.5 42.5 43.0 43.0 Saudi Arabia 43.5 43.5 43.5 45.0 45.0 45.0 45.5 45.5 45.5 45.5 45.5 45.5 Senegal 36.0 36.0 35.5 35.0 35.0 35.0 35.0 35.0 35.0 35.5 35.5 35.5 Serbia & Montenegro 26.0 26.0 26.0 25.5 25.5 23.5 25.5 25.5 25.5 26.0 26.0 26.0 Sierra Leone 23.5 23.5 23.0 23.0 23.0 45.5 22.5 21.5 22.0 22.0 21.0 21.0 Singapore 45.5 45.5 45.5 45.5 45.5 36.0 45.5 45.5 45.5 45.5 45.5 45.5 Slovak Republic 37.0 37.0 37.0 36.5 36.5 40.5 37.0 37.0 35.5 37.0 37.0 37.5 Slovenia 41.5 41.5 41.5 41.0 40.5 35.5 40.5 41.0 40.5 41.0 41.0 41.5 Somalia 35.5 35.5 35.5 35.5 35.5 37.5 35.5 35.5 35.5 35.5 35.5 35.5 South Africa 37.5 40.0 37.5 37.5 38.5 38.5 37.5 38.0 37.5 38.0 36.5 36.0 Spain 39.5 39.5 39.0 38.5 38.5 36.5 38.5 38.5 38.5 39.0 39.0 39.0 Sri Lanka 35.5 36.0 36.0 36.0 36.0 30.5 36.5 36.5 36.5 36.5 36.5 37.0 Sudan 30.5 30.5 30.5 30.5 30.5 34.5 30.5 30.5 30.5 30.5 30.5 29.5 Suriname 27.5 27.5 27.0 37.0 34.5 38.5 32.0 35.5 35.5 35.5 35.5 35.5 Sweden 36.5 36.5 36.5 38.5 38.5 46.0 38.5 38.5 38.5 39.0 39.5 40.0 Switzerland 46.5 46.5 46.0 45.5 46.0 39.0 46.0 47.0 46.5 47.5 47.5 47.5 Syria 38.0 38.0 36.5 39.5 39.5 47.5 39.0 38.5 38.5 38.5 39.0 39.0 Taiwan 46.0 46.0 46.0 46.0 47.5 20.5 47.5 47.5 47.5 47.5 47.0 47.0 Tanzania 20.5 21.0 21.0 21.5 21.5 39.5 21.0 21.0 20.5 20.5 20.5 21.0 Thailand 40.0 40.0 40.0 39.5 39.5 31.5 39.5 39.5 39.5 39.5 39.5 39.5 Togo 34.5 34.5 34.0 33.5 33.5 43.0 33.5 33.5 33.5 34.0 34.0 34.0 Trinidad & Tobago 40.0 40.0 40.5 40.5 43.0 36.5 43.0 43.5 43.5 43.5 45.0 45.0 Tunisia 36.5 36.5 36.5 36.0 36.0 28.5 36.5 37.0 36.5 36.5 36.5 36.0 Turkey 33.5 32.0 32.5 27.5 28.0 34.5 28.5 29.5 32.0 31.5 31.5 31.5 Uganda 35.5 35.0 34.5 34.5 34.5 39.5 35.0 34.5 34.0 34.0 34.0 34.0 Ukraine 39.5 39.5 39.5 39.5 39.5 44.0 39.5 39.5 39.5 39.5 39.5 40.5 United Arab Emirates 43.0 43.0 43.0 43.0 44.0 42.0 44.0 44.0 44.0 44.0 45.0 45.0 United Kingdom 37.0 36.5 36.5 36.0 42.0 31.5 42.5 42.5 42.5 42.5 42.5 42.5 United States 35.0 34.5 34.5 32.5 34.0 21.5 34.0 34.0 34.5 32.5 32.5 33.0 Uruguay 26.5 27.5 27.0 27.5 27.0 34.5 22.5 23.0 24.0 30.5 32.5 30.5 Venezuela 33.0 33.5 34.0 34.5 33.5 36.0 34.5 36.0 38.5 39.0 41.5 42.5 Vietnam 36.0 36.0 36.0 36.0 36.0 35.0 38.5 38.5 38.5 38.5 38.5 38.5 Yemen, Republic 35.0 35.0 35.0 35.0 35.0 25.5 35.0 35.0 35.0 35.0 35.0 35.0 Zambia 20.5 21.5 19.0 24.5 24.5 22.0 21.0 23.0 24.0 24.5 24.5 25.0 Zimbabwe 29.5 29.5 29.5 29.5 29.5 29.5 20.0 20.0 22.5 22.5 22.5 21.0

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TABLE 4B

FINANCIAL RISK POINTS BY COMPONENT – SEPTEMBER 2003

This table lists the total points for each of the following financial risk indicators out of the maximum points indicated in parentheses. The final columns in the table show the overall financial risk rating (the sum of the points awarded to each component) and the change from the preceding month. Changes in the points awarded to the individual risk components are shown in Tables 12 through 16.

Current Debt Service Account as Inter- Total Foreign as percent of percent of national Exchange COUNTRY Debt as Exports of Exports of Liquidity as Rate Stability percent of Goods and Goods and months of as percentage GDP Services Services import cover change Financial (10 points) (10 points) (15 points) (5 points) (10 points) Risk Rating Albania 4.5 6.5 10.0 3.0 9.5 33.5 0.0 Algeria 5.5 8.0 15.0 5.0 10.0 43.5 0.0 Angola 2.0 9.0 11.5 1.0 2.0 25.5 0.0 Argentina 5.5 1.0 14.5 0.0 8.5 29.5 0.5 Armenia 5.5 7.0 7.0 1.5 10.0 31.0 0.0 Australia 5.0 9.0 10.5 2.0 9.0 35.5 0.0 Austria 9.0 10.0 12.0 1.5 9.5 42.0 0.0 Azerbaijan 8.0 9.5 9.5 1.5 10.0 38.5 0.0 Bahamas 6.5 9.5 9.5 2.0 10.0 37.5 0.0 Bahrain 10.0 9.0 12.0 3.0 10.0 44.0 0.0 Bangladesh 6.5 9.0 12.5 1.5 10.0 39.5 0.0 Belarus 9.5 9.0 11.0 0.0 8.5 38.0 0.0 Belgium 8.5 10.0 12.5 1.0 9.5 41.5 0.5 Bolivia 5.5 8.5 11.0 2.5 9.5 37.0 0.0 Botswana 7.5 10.0 13.5 5.0 8.0 44.0 -0.5 Brazil 5.0 3.5 12.0 1.0 9.0 30.5 -1.0 Brunei 10.0 10.0 15.0 5.0 10.0 50.0 0.0 Bulgaria 4.5 8.0 11.5 3.0 9.5 36.5 0.0 Burkina Faso 4.5 7.5 0.0 2.0 9.5 23.5 0.0 Cameroon 4.5 7.0 11.0 1.5 9.5 33.5 0.0 Canada 8.5 10.0 12.5 1.5 9.5 42.0 0.0 Chile 4.5 7.0 12.0 4.0 10.0 37.5 0.0 China, Peoples' Rep. 9.0 9.5 12.5 4.5 10.0 45.5 0.0 Colombia 6.0 8.0 11.5 4.0 10.0 39.5 1.0 Congo, Dem. Rep. 0.0 9.5 8.0 0.0 7.0 24.5 0.5 Congo, Republic 0.5 7.5 5.5 0.0 9.5 23.0 -8.5 Costa Rica 6.5 9.0 11.5 1.0 9.0 37.0 1.0 Cote d'Ivoire 1.0 5.5 12.0 2.5 9.5 30.5 0.0 Croatia 5.5 9.0 10.0 2.5 10.0 37.0 0.5 Cuba 5.5 5.5 7.5 0.0 10.0 28.5 -1.0 Cyprus 10.0 8.5 12.0 3.0 10.0 43.5 0.5 Czech Republic 7.0 9.0 11.5 3.5 10.0 41.0 0.5 Denmark 8.0 8.5 12.5 3.5 9.5 42.0 0.0 Dominican Republic 7.5 9.5 11.5 0.0 1.0 29.5 0.0 Ecuador 4.0 8.0 11.5 1.0 10.0 34.5 0.0 Egypt 6.5 9.0 12.0 1.5 5.0 34.0 0.0

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Current Debt Service Account as Inter- Total Foreign as percent of percent of national Exchange COUNTRY Debt as Exports of Exports of Liquidity as Rate Stability percent of Goods and Goods and months of as percentage GDP Services Services import cover change Financial (10 points) (10 points) (15 points) (5 points) (10 points) Risk Rating El Salvador 7.0 9.0 11.5 2.0 10.0 39.5 0.0 Estonia 9.0 6.0 11.0 1.5 9.5 37.0 0.0 Ethiopia 2.5 7.5 10.0 1.5 10.0 31.5 0.0 Finland 2.5 8.5 13.5 2.0 9.5 36.0 -3.0 France 8.0 8.0 13.0 1.5 9.5 40.0 0.0 Gabon 4.5 9.0 11.0 0.0 9.5 34.0 0.0 Gambia 1.0 9.0 11.0 3.0 5.0 29.0 -0.5 Germany 9.0 9.5 12.5 1.0 9.5 41.5 0.0 Ghana 2.5 8.0 12.0 1.0 10.0 33.5 0.5 Greece 7.0 8.0 10.0 2.0 9.5 36.5 0.0 Guatemala 8.5 8.5 10.0 3.0 10.0 40.0 0.0 Guinea 5.0 8.0 11.5 1.0 10.0 35.5 0.0 Guinea-Bissau 0.0 8.0 4.0 0.0 9.5 21.5 0.0 Guyana 0.0 9.0 10.5 0.0 10.0 29.5 0.0 Haiti 7.0 9.5 10.5 0.0 4.5 31.5 1.0 Honduras 4.0 8.5 11.0 2.5 10.0 36.0 0.5 Hong Kong 8.0 10.0 12.5 3.5 10.0 44.0 0.0 Hungary 5.0 8.0 10.5 1.0 10.0 34.5 -0.5 Iceland 1.5 8.0 9.5 2.5 10.0 31.5 0.0 India 8.0 9.0 12.5 4.5 10.0 44.0 1.0 Indonesia 3.0 6.5 11.5 3.5 10.0 34.5 0.0 Iran 10.0 9.5 13.5 3.5 10.0 46.5 10.0 Iraq 0.0 0.0 12.5 0.0 10.0 22.5 -3.0 Ireland 9.0 10.0 12.0 1.0 9.5 41.5 0.0 Israel 5.0 8.5 12.0 4.0 10.0 39.5 1.0 Italy 9.5 10.0 12.5 1.5 9.5 43.0 0.5 Jamaica 5.5 8.0 12.0 3.5 7.0 36.0 0.5 Japan 10.0 10.0 15.0 5.0 10.0 50.0 0.0 Jordan 3.5 8.0 11.5 3.5 10.0 36.5 0.0 Kazakhstan 4.0 8.5 11.5 3.0 10.0 37.0 0.0 Kenya 5.0 8.0 11.5 2.0 10.0 36.5 0.0 Korea, D.P.R. 2.5 3.0 11.0 0.0 10.0 26.5 0.0 Korea, Republic 7.0 9.0 12.5 3.5 10.0 42.0 0.5 Kuwait 8.0 10.0 15.0 4.5 10.0 47.5 0.5 Latvia 7.5 9.5 10.5 2.0 10.0 39.5 0.0 Lebanon 0.5 9.5 0.0 5.0 10.0 25.0 0.0 Liberia 0.0 2.0 7.0 0.0 9.5 18.5 -0.5 Libya 7.5 9.5 14.0 5.0 8.0 44.0 -2.0 Lithuania 6.0 8.5 11.0 2.0 9.5 37.0 0.0 Luxembourg 10.0 10.0 12.5 1.0 9.5 43.0 0.0 Madagascar 3.0 8.5 9.5 1.0 10.0 32.0 0.5 Malawi 0.5 8.0 10.0 2.0 5.0 25.5 -2.0 Malaysia 6.0 9.5 12.5 3.0 10.0 41.0 0.0 Mali 2.0 9.0 9.0 2.0 9.5 31.5 0.0 Malta 3.5 9.0 11.5 3.5 10.0 37.5 0.5 Mexico 8.0 6.5 11.5 2.0 10.0 38.0 0.5 Moldova 4.5 5.5 11.0 0.0 10.0 31.0 0.0 Mongolia 3.5 8.5 9.5 0.0 10.0 31.5 0.0

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Current Debt Service Account as Inter- Total Foreign as percent of percent of national Exchange COUNTRY Debt as Exports of Exports of Liquidity as Rate Stability percent of Goods and Goods and months of as percentage GDP Services Services import cover change Financial (10 points) (10 points) (15 points) (5 points) (10 points) Risk Rating Morocco 5.5 8.0 12.5 4.0 10.0 40.0 0.5 Mozambique 3.0 9.5 8.5 3.0 10.0 34.0 0.0 Myanmar 9.5 8.5 11.5 0.0 10.0 39.5 0.0 Namibia 9.5 10.0 13.5 1.5 6.5 41.0 -0.5 Netherlands 7.0 9.5 12.5 1.0 9.5 39.5 0.0 New Zealand 3.0 6.0 11.5 1.5 8.5 30.5 -0.5 Nicaragua 0.0 7.0 8.5 0.0 9.5 25.0 -0.5 Niger 3.5 6.0 6.5 0.0 9.5 25.5 0.0 Nigeria 4.5 9.5 11.5 3.5 10.0 39.0 0.0 Norway 10.0 9.5 14.5 3.5 10.0 47.5 0.0 Oman 7.0 9.0 13.0 3.0 10.0 42.0 0.0 Pakistan 5.0 7.0 15.0 3.5 10.0 40.5 0.0 Panama 5.0 7.0 12.0 1.0 10.0 35.0 0.0 Papua New Guinea 5.0 8.5 12.5 0.0 9.0 35.0 0.0 Paraguay 6.0 9.0 12.5 1.5 10.0 39.0 0.0 Peru 5.5 6.0 11.5 4.5 10.0 37.5 0.0 Philippines 4.5 8.5 13.0 1.0 9.5 36.5 -0.5 Poland 6.0 8.5 11.0 3.5 10.0 39.0 0.0 Portugal 5.0 8.5 11.0 2.5 9.5 36.5 0.5 Qatar 3.0 7.5 14.5 1.5 10.0 36.5 0.0 Romania 7.0 7.5 11.0 3.0 10.0 38.5 -0.5 Russian Federation. 6.0 9.0 14.5 3.5 10.0 43.0 0.0 Saudi Arabia 9.0 9.5 13.5 3.5 10.0 45.5 0.0 Senegal 4.5 9.5 11.0 1.0 9.5 35.5 0.0 Serbia & Montenegro 5.0 4.5 6.5 0.0 10.0 26.0 0.0 Sierra Leone 8.0 3.5 2.0 0.0 7.5 21.0 0.0 Singapore 9.0 10.0 13.0 3.5 10.0 45.5 0.0 Slovak Republic 5.0 8.5 11.5 3.0 9.5 37.5 0.5 Slovenia 9.0 9.0 11.5 2.0 10.0 41.5 0.5 Somalia 4.5 9.0 12.0 0.0 10.0 35.5 0.0 South Africa 7.0 9.0 12.0 1.5 6.5 36.0 -0.5 Spain 8.5 8.0 11.5 1.5 9.5 39.0 0.0 Sri Lanka 5.0 9.0 11.5 1.5 10.0 37.0 0.5 Sudan 0.5 9.0 10.0 0.0 10.0 29.5 -1.0 Suriname 6.0 9.0 12.0 1.0 7.5 35.5 0.0 Sweden 7.0 8.5 13.0 1.5 10.0 40.0 0.5 Switzerland 10.0 10.0 14.0 3.5 10.0 47.5 0.0 Syria 7.0 10.0 12.0 0.0 10.0 39.0 0.0 Taiwan 8.5 10.0 13.5 5.0 10.0 47.0 0.0 Tanzania 0.0 6.5 4.5 0.5 9.5 21.0 0.5 Thailand 5.5 8.5 12.5 3.0 10.0 39.5 0.0 Togo 3.5 9.0 11.0 1.0 9.5 34.0 0.0 Trinidad & Tobago 8.5 10.0 13.0 3.5 10.0 45.0 0.0 Tunisia 5.0 8.0 11.5 1.5 10.0 36.0 -0.5 Turkey 5.0 6.0 11.5 0.0 9.0 31.5 0.0 Uganda 5.0 9.0 10.0 1.5 8.5 34.0 0.0 Ukraine 7.0 9.5 13.0 1.0 10.0 40.5 1.0 United Arab Emirates 8.0 10.0 14.0 3.0 10.0 45.0 0.0

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Current Debt Service Account as Inter- Total Foreign as percent of percent of national Exchange COUNTRY Debt as Exports of Exports of Liquidity as Rate Stability percent of Goods and Goods and months of as percentage GDP Services Services import cover change Financial (10 points) (10 points) (15 points) (5 points) (10 points) Risk Rating United Kingdom 9.5 10.0 12.0 1.0 10.0 42.5 0.0 United States 9.5 7.0 8.0 0.5 8.0 33.0 0.5 Uruguay 3.5 4.5 12.5 0.0 10.0 30.5 -2.0 Venezuela 7.0 8.0 15.0 3.5 9.0 42.5 1.0 Vietnam 6.5 8.5 12.0 1.5 10.0 38.5 0.0 Yemen, Republic 4.5 7.0 12.5 1.0 10.0 35.0 0.0 Zambia 0.5 8.5 6.0 0.0 10.0 25.0 0.5 Zimbabwe 1.5 9.5 10.0 0.0 0.0 21.0 -1.5

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TABLE 4C

FINANCIAL RISK FORECASTS

One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Albania 33.5 23.0 36.0 13.0 30.0 36.0 6.0 Algeria 43.5 40.0 45.0 5.0 40.0 45.0 5.0 Angola 25.5 20.0 27.0 7.0 25.0 32.0 7.0 Argentina 29.5 30.0 35.0 5.0 30.0 39.0 9.0 Armenia 31.0 30.0 32.0 2.0 28.0 36.0 8.0 Australia 35.5 33.0 36.0 3.0 32.0 41.0 9.0 Austria 42.0 42.0 44.0 2.0 39.0 48.0 9.0 Azerbaijan 38.5 35.0 40.0 5.0 30.0 42.0 12.0 Bahamas 37.5 35.0 38.0 3.0 33.0 38.0 5.0 Bahrain 44.0 42.0 45.0 3.0 40.0 46.0 6.0 Bangladesh 39.5 35.0 40.0 5.0 30.0 39.0 9.0 Belarus 38.0 27.0 29.0 2.0 25.0 31.0 6.0 Belgium 41.5 38.0 40.0 2.0 38.0 42.0 4.0 Bolivia 37.0 32.0 35.0 3.0 30.0 37.0 7.0 Botswana 44.0 40.0 45.0 5.0 38.0 47.0 9.0 Brazil 30.5 20.0 28.0 8.0 28.0 40.0 12.0 Brunei 50.0 44.0 46.0 2.0 44.0 48.0 4.0 Bulgaria 36.5 35.0 37.0 2.0 34.0 39.0 5.0 Burkina Faso 23.5 22.0 27.0 5.0 22.0 30.0 8.0 Cameroon 33.5 30.0 35.0 5.0 28.0 37.0 9.0 Canada 42.0 36.0 38.0 2.0 33.0 41.0 8.0 Chile 37.5 34.0 38.0 4.0 34.0 40.0 6.0 China, Peoples' Rep. 45.5 43.0 46.0 3.0 38.0 47.0 9.0 Colombia 39.5 35.0 39.0 4.0 30.0 39.0 9.0 Congo, Dem. Republic 24.5 26.0 30.0 4.0 24.0 37.0 13.0 Congo, Republic 23.0 29.0 31.0 2.0 25.0 34.0 9.0 Costa Rica 37.0 36.0 38.0 2.0 30.0 39.0 9.0 Cote d'Ivoire 30.5 29.0 30.5 1.5 29.0 34.0 5.0 Croatia 37.0 35.0 37.0 2.0 30.0 38.0 8.0 Cuba 28.5 27.0 30.0 3.0 20.0 36.0 16.0 Cyprus 43.5 42.0 44.0 2.0 39.0 44.0 5.0 Czech Republic 41.0 38.0 40.0 2.0 37.0 40.0 3.0 Denmark 42.0 37.0 39.0 2.0 35.0 40.0 5.0 Dominican Republic 29.5 27.0 30.0 3.0 26.0 34.0 8.0 Ecuador 34.5 24.0 28.0 4.0 23.0 33.0 10.0 Egypt 34.0 37.0 38.0 1.0 30.0 37.0 7.0 El Salvador 39.5 41.0 43.0 2.0 37.0 42.0 5.0 Estonia 37.0 35.0 38.0 3.0 33.0 40.0 7.0 Ethiopia 31.5 20.0 23.0 3.0 22.0 27.0 5.0 Finland 36.0 34.0 39.0 5.0 33.0 40.0 7.0 France 40.0 38.0 40.0 2.0 36.0 42.0 6.0 Gabon 34.0 33.0 37.0 4.0 30.0 40.0 10.0 Gambia 29.0 33.0 34.0 1.0 30.0 38.0 8.0 Germany 41.5 40.0 42.5 2.5 38.0 46.0 8.0 Ghana 33.5 30.0 32.0 2.0 28.0 33.0 5.0 Greece 36.5 34.0 37.0 3.0 32.0 40.0 8.0

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One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Guatemala 40.0 38.0 41.0 3.0 30.0 42.0 12.0 Guinea 35.5 34.0 36.0 2.0 30.0 36.0 6.0 Guinea-Bissau 21.5 20.0 24.0 4.0 26.0 32.0 6.0 Guyana 29.5 27.5 30.0 2.5 25.0 31.0 6.0 Haiti 31.5 27.0 32.0 5.0 25.0 36.0 11.0 Honduras 36.0 30.0 36.0 6.0 30.0 38.0 8.0 Hong Kong 44.0 39.0 44.0 5.0 36.0 44.0 8.0 Hungary 34.5 33.0 37.0 4.0 30.0 38.0 8.0 Iceland 31.5 30.0 33.0 3.0 28.0 35.0 7.0 India 44.0 40.0 44.0 4.0 34.0 45.0 11.0 Indonesia 34.5 30.0 35.0 5.0 25.0 38.0 13.0 Iran 46.5 25.0 38.0 13.0 25.0 42.0 17.0 Iraq 22.5 20.0 27.0 7.0 25.0 40.0 15.0 Ireland 41.5 41.0 43.0 2.0 37.0 43.0 6.0 Israel 39.5 34.0 40.0 6.0 32.0 40.0 8.0 Italy 43.0 38.0 43.0 5.0 37.0 45.0 8.0 Jamaica 36.0 35.0 37.0 2.0 32.0 39.0 7.0 Japan 50.0 49.0 50.0 1.0 45.0 50.0 5.0 Jordan 36.5 35.0 37.0 2.0 35.0 40.0 5.0 Kazakhstan 37.0 36.0 38.0 2.0 33.0 41.0 8.0 Kenya 36.5 35.0 37.0 2.0 30.0 38.0 8.0 Korea, D.P.R. 26.5 18.0 18.0 0.0 18.0 28.0 10.0 Korea, Republic 42.0 37.0 42.5 5.5 30.0 45.0 15.0 Kuwait 47.5 43.0 48.0 5.0 45.0 48.0 3.0 Latvia 39.5 36.0 40.0 4.0 30.0 42.0 12.0 Lebanon 25.0 27.0 30.0 3.0 25.0 35.0 10.0 Liberia 18.5 18.0 21.0 3.0 20.0 25.0 5.0 Libya 44.0 43.0 47.0 4.0 40.0 47.0 7.0 Lithuania 37.0 38.0 40.0 2.0 33.0 41.0 8.0 Luxembourg 43.0 43.0 44.0 1.0 40.0 44.0 4.0 Madagascar 32.0 32.0 35.0 3.0 30.0 36.0 6.0 Malawi 25.5 25.0 27.0 2.0 25.0 27.0 2.0 Malaysia 41.0 40.0 42.5 2.5 37.0 43.0 6.0 Mali 31.5 32.0 34.0 2.0 28.0 37.0 9.0 Malta 37.5 37.0 38.0 1.0 34.0 38.0 4.0 Mexico 38.0 35.0 38.0 3.0 30.0 39.0 9.0 Moldova 31.0 22.0 22.0 0.0 20.0 30.0 10.0 Mongolia 31.5 34.0 36.0 2.0 30.0 37.0 7.0 Morocco 40.0 37.0 40.0 3.0 35.0 41.0 6.0 Mozambique 34.0 30.0 35.0 5.0 26.0 35.0 9.0 Myanmar 39.5 37.0 39.0 2.0 30.0 38.0 8.0 Namibia 41.0 39.0 42.0 3.0 36.0 43.0 7.0 Netherlands 39.5 38.0 39.0 1.0 36.0 39.0 3.0 New Zealand 30.5 30.0 33.0 3.0 28.0 38.0 10.0 Nicaragua 25.0 15.0 19.0 4.0 17.0 24.0 7.0 Niger 25.5 30.0 31.0 1.0 28.0 35.0 7.0 Nigeria 39.0 36.0 39.0 3.0 30.0 39.0 9.0 Norway 47.5 45.0 46.0 1.0 40.0 47.0 7.0 Oman 42.0 35.0 38.0 3.0 33.0 38.0 5.0 Pakistan 40.5 28.0 30.0 2.0 25.0 30.0 5.0 Panama 35.0 31.0 36.0 5.0 30.0 39.0 9.0 Papua New Guinea 35.0 28.0 35.0 7.0 27.0 38.0 11.0

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One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Paraguay 39.0 37.0 39.0 2.0 30.0 39.0 9.0 Peru 37.5 34.0 37.0 3.0 30.0 38.0 8.0 Philippines 36.5 35.0 37.0 2.0 30.0 37.0 7.0 Poland 39.0 37.0 39.0 2.0 34.0 38.0 4.0 Portugal 36.5 33.0 36.0 3.0 30.0 38.0 8.0 Qatar 36.5 25.0 27.0 2.0 23.0 30.0 7.0 Romania 38.5 35.0 39.0 4.0 30.0 41.0 11.0 Russian Federation. 43.0 40.0 45.0 5.0 40.0 46.0 6.0 Saudi Arabia 45.5 38.0 41.0 3.0 36.0 45.0 9.0 Senegal 35.5 32.0 34.0 2.0 25.0 36.0 11.0 Serbia & Montenegro 26.0 20.0 28.0 8.0 20.0 36.0 16.0 Sierra Leone 21.0 20.0 24.0 4.0 25.0 28.0 3.0 Singapore 45.5 43.0 45.0 2.0 38.0 47.0 9.0 Slovak Republic 37.5 36.0 38.0 2.0 33.0 40.0 7.0 Slovenia 41.5 38.0 42.0 4.0 35.0 39.0 4.0 Somalia 35.5 18.0 20.0 2.0 18.0 27.0 9.0 South Africa 36.0 35.0 38.0 3.0 30.0 38.0 8.0 Spain 39.0 36.0 40.0 4.0 38.0 44.0 6.0 Sri Lanka 37.0 28.0 38.0 10.0 27.0 38.0 11.0 Sudan 29.5 25.0 32.0 7.0 25.0 36.0 11.0 Suriname 35.5 34.0 36.0 2.0 32.0 38.0 6.0 Sweden 40.0 34.0 36.0 2.0 30.0 37.0 7.0 Switzerland 47.5 46.5 48.0 1.5 45.0 48.0 3.0 Syria 39.0 32.0 34.0 2.0 33.0 36.0 3.0 Taiwan 47.0 45.0 48.0 3.0 40.0 48.0 8.0 Tanzania 21.0 20.0 24.0 4.0 20.0 28.0 8.0 Thailand 39.5 35.0 37.0 2.0 28.0 37.0 9.0 Togo 34.0 30.0 34.0 4.0 30.0 36.0 6.0 Trinidad & Tobago 45.0 43.0 45.5 2.5 40.0 47.0 7.0 Tunisia 36.0 33.0 37.0 4.0 30.0 38.0 8.0 Turkey 31.5 30.0 32.0 2.0 30.0 37.0 7.0 Uganda 34.0 31.0 33.0 2.0 28.0 35.0 7.0 Ukraine 40.5 35.0 40.0 5.0 30.0 43.0 13.0 United Arab Emirates 45.0 44.0 46.0 2.0 40.0 47.0 7.0 United Kingdom 42.5 40.0 43.0 3.0 39.0 44.0 5.0 United States 33.0 34.0 36.0 2.0 30.0 38.0 8.0 Uruguay 30.5 22.0 28.0 6.0 25.0 32.0 7.0 Venezuela 42.5 33.0 36.0 3.0 30.0 39.0 9.0 Vietnam 38.5 36.0 39.0 3.0 35.0 43.0 8.0 Yemen, Republic 35.0 31.0 33.0 2.0 30.0 36.0 6.0 Zambia 25.0 16.0 18.0 2.0 16.0 25.0 9.0 Zimbabwe 21.0 20.0 25.0 5.0 18.0 30.0 12.0

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TABLE 5A

ECONOMIC RISK RATINGS OVER THE PERIOD OCTOBER 2002 THROUGH SEPTEMBER 2003

COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Albania 31.5 31.5 31.5 32.0 31.5 31.5 31.5 32.0 32.0 32.0 32.0 32.0 Algeria 38.0 40.5 40.5 40.5 43.5 43.5 43.5 43.5 43.5 43.5 43.5 43.5 Angola 30.0 30.0 30.0 29.5 29.5 29.5 29.5 29.5 29.5 26.0 26.0 26.0 Argentina 24.0 24.0 24.0 29.5 29.5 29.5 29.5 29.5 29.5 36.5 36.5 36.5 Armenia 30.5 30.5 30.5 30.5 30.5 30.5 30.5 30.5 30.5 30.5 30.5 32.5 Australia 41.5 41.5 41.5 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 Austria 40.0 40.0 40.0 39.5 39.5 39.5 39.5 40.0 40.0 40.0 40.0 40.0 Azerbaijan 36.0 35.5 35.5 35.5 35.5 35.5 35.5 35.0 35.0 35.0 35.0 35.0 Bahamas 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.0 36.0 Bahrain 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 Bangladesh 34.5 35.5 35.5 35.5 35.0 35.0 35.0 34.0 34.0 34.0 38.5 38.5 Belarus 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 31.0 30.5 30.5 30.5 Belgium 43.0 43.0 42.5 42.5 42.5 42.5 42.5 42.5 43.0 43.0 43.0 42.5 Bolivia 33.0 33.0 33.0 34.5 34.5 34.5 34.5 34.5 34.5 33.0 33.0 33.0 Botswana 39.0 39.0 39.0 38.5 38.5 39.0 39.0 38.5 38.5 38.5 38.5 38.5 Brazil 32.0 32.0 32.0 32.0 32.0 32.0 32.5 32.0 31.5 31.5 31.5 33.0 Brunei 46.5 46.5 46.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 Bulgaria 33.5 33.5 33.5 33.5 34.5 34.5 34.5 35.0 35.0 35.0 36.0 36.0 Burkina Faso 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 29.5 29.5 Cameroon 38.0 37.5 37.0 37.0 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 Canada 43.5 43.5 43.5 44.0 44.0 44.0 44.0 43.5 43.5 42.0 42.0 42.0 Chile 38.0 38.0 38.0 39.0 39.0 39.0 38.5 38.5 38.5 39.0 39.0 39.0 China, P. Rep. 38.5 39.0 39.0 39.0 39.0 38.0 38.0 38.5 38.5 38.5 38.5 38.5 Colombia 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 32.5 32.5 Congo, D. Rep 18.5 27.0 27.0 28.5 29.5 29.5 29.5 29.0 29.0 29.0 30.0 30.0 Congo, Rep. 36.5 36.5 36.5 36.5 36.5 34.5 34.5 34.5 34.5 34.5 34.5 18.0 Costa Rica 36.5 36.5 35.0 35.0 35.0 34.5 34.5 34.5 34.5 34.5 34.5 33.5 Cote d'Ivoire 32.5 32.5 32.5 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 Croatia 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 Cuba 35.0 35.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.5 33.5 33.5 Cyprus 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 Czech Rep. 35.5 35.5 35.5 36.5 36.5 36.5 37.5 37.5 37.5 37.0 37.0 37.0 Denmark 43.0 43.0 43.0 43.0 43.0 43.0 43.0 43.0 42.5 42.5 42.5 42.0 Dominican R. 36.5 36.5 36.0 36.0 36.5 36.5 36.5 36.5 36.5 36.5 27.5 27.5 Ecuador 33.0 33.0 33.0 33.0 33.0 33.0 33.0 32.5 32.5 34.0 34.0 34.0 Egypt 32.5 32.5 32.5 34.5 34.5 34.5 34.0 34.0 34.0 33.5 33.5 33.5 El Salvador 36.0 36.0 36.0 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 Estonia 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 Ethiopia 32.0 30.5 30.5 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 Finland 45.0 45.0 45.5 45.5 45.5 47.0 47.0 47.0 45.0 44.5 44.5 44.0 France 42.5 42.0 42.0 42.0 41.5 41.5 41.5 40.0 40.0 40.0 40.0 40.0 Gabon 36.5 36.5 36.5 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 Gambia 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 Germany 39.5 39.5 39.5 39.5 40.0 40.0 40.0 40.0 40.0 40.0 39.0 39.0 Ghana 29.0 29.0 27.5 28.5 28.5 31.0 31.0 31.0 32.0 32.0 32.0 31.0 Greece 38.5 38.5 38.5 39.0 39.0 39.0 39.0 37.0 37.0 37.0 37.5 37.5

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COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Guatemala 33.0 33.0 32.5 32.5 33.5 33.5 33.5 33.5 33.5 33.5 33.5 33.5 Guinea 34.0 34.0 34.0 34.0 36.0 36.0 36.0 35.0 35.0 35.0 35.0 35.0 Guinea-Bissau 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 Guyana 27.0 27.0 27.0 27.0 27.5 27.5 27.5 27.5 27.5 27.5 27.5 27.5 Haiti 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 25.5 25.5 25.5 25.5 Honduras 32.5 32.5 32.5 32.5 32.5 32.5 28.0 28.0 28.0 28.0 28.0 28.0 Hong Kong 45.5 45.5 45.5 45.0 45.0 45.0 45.0 44.0 44.0 43.5 43.5 43.5 Hungary 36.0 36.0 36.0 36.0 36.0 35.0 35.0 35.0 35.0 35.0 35.0 34.5 Iceland 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 39.0 39.0 39.0 39.0 India 34.5 34.5 34.5 34.5 34.5 34.5 34.0 34.0 34.0 34.0 34.0 35.0 Indonesia 34.0 34.0 34.0 34.5 34.5 34.5 34.5 36.0 36.0 36.5 36.5 36.5 Iran 38.5 38.5 38.5 38.5 38.5 37.5 37.5 37.5 37.5 36.5 36.5 36.5 Iraq 26.0 26.0 26.0 26.0 26.0 26.0 17.5 17.5 17.5 19.0 19.0 20.0 Ireland 43.5 43.5 43.5 41.5 41.5 41.5 41.5 41.5 41.5 41.0 41.0 41.0 Israel 33.5 33.5 32.5 32.5 32.5 32.5 34.5 34.5 34.5 35.5 35.5 38.0 Italy 39.5 39.5 37.5 39.0 39.0 39.5 39.5 39.5 39.0 39.0 39.0 39.0 Jamaica 32.0 32.0 32.0 32.0 31.0 31.0 31.0 29.0 29.0 29.0 32.5 32.5 Japan 36.5 36.0 36.0 37.0 37.5 37.5 37.5 37.0 37.0 37.0 37.5 37.5 Jordan 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 Kazakhstan 38.0 37.5 37.5 37.5 36.0 36.0 36.0 37.0 37.0 37.0 37.0 37.0 Kenya 32.5 32.5 32.5 32.5 33.0 33.0 33.0 32.5 32.5 32.5 32.5 32.5 Korea, D.P.R. 17.0 17.0 17.5 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 Korea, Rep. 43.5 43.5 43.5 43.5 43.5 43.5 42.0 42.0 41.0 41.0 41.0 40.5 Kuwait 42.5 42.5 42.5 44.0 44.5 46.5 46.5 46.5 46.0 46.0 46.0 47.0 Latvia 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 38.5 38.5 38.5 38.5 Lebanon 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 Liberia 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 23.0 23.0 21.0 Libya 40.5 41.5 41.5 41.5 42.5 42.0 42.0 42.0 42.0 42.0 41.5 41.5 Lithuania 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 Luxembourg 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 44.5 Madagascar 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 Malawi 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 Malaysia 40.5 41.0 41.0 41.0 40.0 40.0 40.0 39.0 39.0 39.0 39.0 39.0 Mali 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 Malta 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 Mexico 36.0 36.0 36.5 36.5 38.0 37.5 37.5 37.0 37.0 37.0 37.0 37.0 Moldova 29.5 29.5 29.5 29.5 29.5 29.5 29.5 29.5 29.5 29.5 29.5 29.5 Mongolia 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 Morocco 36.0 36.5 36.5 36.5 36.0 37.0 37.0 37.0 37.0 37.0 37.0 37.0 Mozambique 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 Myanmar 36.5 36.5 36.5 35.5 35.5 35.5 35.5 32.5 32.5 32.5 32.5 32.5 Namibia 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 35.5 Netherlands 41.0 41.0 41.0 38.5 38.5 38.5 38.5 38.5 38.5 41.0 41.0 41.0 New Zealand 39.0 40.5 40.5 40.5 40.5 41.0 41.0 41.0 41.0 41.0 41.5 41.5 Nicaragua 25.0 25.0 25.0 23.0 23.0 23.0 23.0 22.5 22.5 22.0 22.0 22.0 Niger 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 Nigeria 29.0 28.5 28.5 28.5 31.0 31.0 31.0 31.0 31.0 31.0 31.0 31.0 Norway 47.0 47.0 47.0 47.0 47.0 47.0 46.5 46.5 46.5 46.0 46.0 46.0 Oman 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 Pakistan 34.5 34.5 34.5 35.5 35.5 35.5 35.5 35.5 35.5 37.5 37.5 37.5 Panama 35.5 35.5 35.5 35.5 35.5 35.5 36.0 36.0 36.0 35.0 35.0 36.0 Papua N.G. 30.5 30.5 30.5 32.5 32.5 32.5 31.0 30.5 30.5 30.5 30.5 30.0 Paraguay 30.0 30.0 26.5 29.0 30.0 25.5 25.5 29.0 29.0 29.0 29.0 29.0 Peru 36.5 36.5 38.0 38.5 38.0 36.5 36.5 36.5 36.5 36.5 36.5 36.5

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COUNTRY 10/02 11/02 12/02 01/03 02/03 03/03 04/03 05/03 06/03 07/03 08/03 09/03 Philippines 37.0 37.0 37.0 36.5 36.5 36.5 36.5 38.0 38.0 35.5 35.5 35.5 Poland 34.0 34.0 34.0 35.0 35.0 35.0 35.0 35.0 35.0 35.5 35.5 35.5 Portugal 36.0 36.0 34.5 34.5 34.5 34.5 36.5 36.5 36.0 36.0 36.0 34.5 Qatar 47.5 47.5 47.5 47.5 47.5 47.5 47.5 47.5 47.5 47.5 47.5 47.5 Romania 31.0 31.0 31.0 31.0 31.0 31.0 33.0 33.0 33.5 33.5 33.5 31.5 Russian Fed. 38.5 38.5 38.5 38.5 38.0 38.0 38.0 35.0 35.0 35.0 39.5 39.5 Saudi Arabia 34.5 34.5 34.5 40.5 40.5 40.5 41.0 41.0 41.0 41.0 41.0 41.0 Senegal 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 Serbia & Montenegro 23.0 23.0 23.0 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 22.5 Sierra Leone 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 Singapore 46.0 46.0 46.0 46.0 46.0 46.0 46.0 45.0 45.0 44.5 44.5 44.5 Slovak Rep. 35.0 35.0 35.0 34.0 34.0 34.0 34.0 34.0 34.0 34.5 34.5 35.0 Slovenia 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 38.0 Somalia 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 28.5 South Africa 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.5 36.5 36.5 35.5 Spain 39.5 39.5 39.5 39.5 39.5 39.5 39.5 39.5 40.0 39.5 39.5 39.0 Sri Lanka 30.0 30.0 30.0 30.0 30.0 30.5 30.5 30.5 31.5 31.5 31.5 31.0 Sudan 33.5 33.5 33.5 33.5 33.5 33.5 34.5 34.5 34.5 34.5 34.5 34.0 Suriname 33.0 33.0 31.5 31.5 23.0 23.0 23.0 30.0 30.0 30.0 30.0 30.0 Sweden 41.0 41.0 41.0 43.5 43.5 43.5 43.5 43.0 43.0 43.0 43.0 43.0 Switzerland 44.5 44.5 44.5 44.5 44.0 44.0 44.0 44.0 44.0 44.0 43.5 43.5 Syria 37.5 37.5 37.5 38.0 38.0 38.0 37.5 37.5 37.5 37.5 37.5 37.5 Taiwan 42.0 42.0 42.0 42.0 43.0 43.0 43.0 43.0 43.0 43.0 43.0 43.0 Tanzania 34.5 34.5 34.5 34.5 34.5 34.5 34.5 34.5 34.5 34.5 34.5 34.5 Thailand 40.0 40.0 40.0 38.0 38.0 38.0 38.0 39.0 39.0 40.0 40.0 40.0 Togo 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 31.5 Trinidad & T. 39.0 39.0 40.0 40.0 41.0 41.0 41.0 40.5 40.5 40.5 41.0 41.0 Tunisia 36.0 36.0 36.0 36.5 36.5 37.0 37.0 37.0 37.0 36.5 36.5 36.5 Turkey 27.0 27.0 27.0 27.0 27.0 27.0 27.0 26.5 26.5 26.5 26.5 26.5 Uganda 33.5 33.5 33.5 33.5 33.5 33.5 33.5 33.5 33.5 33.5 33.5 33.5 Ukraine 37.0 37.0 37.0 37.0 37.0 37.0 37.5 37.5 37.0 37.0 37.0 37.5 United Arab E. 44.0 43.5 43.5 43.5 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 United K’dom 40.5 40.5 40.5 40.5 41.5 41.5 41.5 41.0 41.0 41.0 39.0 39.0 United States 40.5 40.5 40.5 40.5 40.5 38.5 38.5 38.5 38.0 38.0 38.0 38.0 Uruguay 25.0 25.0 25.0 28.0 28.0 28.0 28.0 28.0 29.0 28.5 28.5 28.0 Venezuela 27.0 27.0 27.0 34.5 34.5 34.5 34.5 26.5 26.5 26.5 26.5 26.5 Vietnam 37.0 37.0 37.0 37.0 37.0 37.0 35.5 35.5 36.0 36.0 36.0 35.5 Yemen, Rep. 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 36.5 Zambia 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 Zimbabwe 11.5 11.5 10.5 10.5 10.5 10.5 9.5 9.5 9.5 9.5 9.5 9.5

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TABLE 5B

ECONOMIC RISK POINTS BY COMPONENT – SEPTEMBER 2003

This table lists the risk points awarded to each of the Economic Risk components. The maximum points available for each component are given in parentheses in the column heading. The final columns in the table show the overall economic risk rating (the sum of the points awarded to each component) and the change from the preceding month. Changes in the points awarded to the individual risk components are shown in Tables 7 through 11.

GDP Real Annual Budget Current per head Annual Inflation Balance as Account as COUNTRY of GDP Rate percent of percent of Economic Population Growth (10) GDP GDP Risk (5) (10) (10) (15) Rating Albania 1.0 9.0 8.5 4.0 9.5 32.0 0.0 Algeria 1.0 10.0 9.5 8.0 15.0 43.5 0.0 Angola 0.0 10.0 0.5 5.5 10.0 26.0 0.0 Argentina 3.0 8.5 5.0 7.0 13.0 36.5 0.0 Armenia 0.0 10.0 9.0 7.5 6.0 32.5 2.0 Australia 5.0 8.5 9.5 8.0 10.0 41.0 0.0 Austria 5.0 6.0 10.0 7.5 11.5 40.0 0.0 Azerbaijan 0.5 10.0 9.0 7.5 8.0 35.0 0.0 Bahamas 4.0 7.5 9.5 6.5 8.5 36.0 0.0 Bahrain 3.5 9.0 9.5 6.0 10.5 38.5 0.0 Bangladesh 0.0 9.5 8.5 5.5 15.0 38.5 0.0 Belarus 0.5 9.0 4.0 6.5 10.5 30.5 0.0 Belgium 5.0 6.0 10.0 8.0 13.5 42.5 -0.5 Bolivia 0.5 8.0 10.0 4.5 10.0 33.0 0.0 Botswana 2.0 8.5 7.5 6.5 14.0 38.5 0.0 Brazil 1.5 7.0 7.0 6.0 11.5 33.0 1.5 Brunei 4.5 8.5 10.0 6.5 15.0 44.5 0.0 Bulgaria 1.0 9.0 9.0 7.0 10.0 36.0 0.0 Burkina Faso 0.0 8.0 8.5 5.5 7.5 29.5 0.0 Cameroon 0.0 9.0 8.5 8.5 10.5 36.5 0.0 Canada 5.0 7.5 9.0 8.0 12.5 42.0 0.0 Chile 2.5 8.5 9.5 7.0 11.5 39.0 0.0 China, Peoples' Rep. 0.5 10.0 10.0 6.0 12.0 38.5 0.0 Colombia 1.0 8.0 8.0 5.0 10.5 32.5 0.0 Congo, Dem. Republic 0.0 9.0 6.0 6.0 9.0 30.0 0.0 Congo, Republic 0.5 4.5 8.5 4.5 0.0 18.0 -16.5 Costa Rica 2.5 7.5 8.0 5.5 10.0 33.5 -1.0 Cote d'Ivoire 0.0 6.5 8.5 8.0 11.0 34.0 0.0 Croatia 2.5 8.5 9.0 4.5 10.5 35.0 0.0 Cuba 1.5 6.0 9.5 6.0 10.5 33.5 0.0 Cyprus 4.0 8.0 9.5 6.5 13.0 41.0 0.0 Czech Republic 3.0 8.0 9.5 6.5 10.0 37.0 0.0 Denmark 5.0 6.5 9.5 8.0 13.0 42.0 -0.5 Dominican Republic 1.5 3.0 5.0 7.5 10.5 27.5 0.0 Ecuador 0.5 8.0 7.0 8.0 10.5 34.0 0.0 Egypt 0.5 7.0 8.5 6.5 11.0 33.5 0.0

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GDP Real Annual Budget Current per head Annual Inflation Balance as Account as COUNTRY of GDP Rate percent of percent of Economic Population Growth (10) GDP GDP Risk (5) (10) (10) (15) Rating El Salvador 1.0 8.0 9.5 6.5 10.5 35.5 0.0 Estonia 2.5 9.0 9.0 8.0 9.5 38.0 0.0 Ethiopia 0.0 10.0 10.0 3.5 9.5 33.0 0.0 Finland 5.0 7.0 10.0 8.0 14.0 44.0 -0.5 France 5.0 6.5 10.0 6.0 12.5 40.0 0.0 Gabon 2.5 7.0 9.5 9.0 10.0 38.0 0.0 Gambia 0.0 10.0 9.0 6.5 10.0 35.5 0.0 Germany 5.0 5.5 10.0 6.0 12.5 39.0 0.0 Ghana 0.0 9.0 6.0 5.5 10.5 31.0 -1.0 Greece 4.0 8.5 9.5 6.0 9.5 37.5 0.0 Guatemala 1.0 8.0 7.5 7.0 10.0 33.5 0.0 Guinea 0.5 9.0 8.0 6.5 11.0 35.0 0.0 Guinea-Bissau 0.0 10.0 9.0 1.0 6.0 26.0 0.0 Guyana 0.5 7.0 8.5 4.5 7.0 27.5 0.0 Haiti 0.0 4.5 5.5 6.0 9.5 25.5 0.0 Honduras 0.5 4.5 8.0 5.5 9.5 28.0 0.0 Hong Kong 5.0 7.5 10.0 6.5 14.5 43.5 0.0 Hungary 3.0 8.5 8.5 4.5 10.0 34.5 -0.5 Iceland 5.0 7.5 8.5 7.5 10.5 39.0 0.0 India 0.0 9.5 8.5 5.0 12.0 35.0 1.0 Indonesia 0.5 8.5 7.5 7.0 13.0 36.5 0.0 Iran 3.0 9.0 6.5 6.0 12.0 36.5 0.0 Iraq 0.5 2.0 2.5 2.5 12.5 20.0 1.0 Ireland 5.0 8.5 8.5 7.5 11.5 41.0 0.0 Israel 4.5 6.0 10.0 6.0 11.5 38.0 2.5 Italy 5.0 6.0 9.5 6.5 12.0 39.0 0.0 Jamaica 2.0 7.0 7.5 5.0 11.0 32.5 0.0 Japan 5.0 6.0 10.0 3.5 13.0 37.5 0.0 Jordan 0.5 9.5 9.0 5.5 11.5 36.0 0.0 Kazakhstan 1.0 10.0 8.0 7.5 10.5 37.0 0.0 Kenya 0.0 7.5 8.5 6.0 10.5 32.5 0.0 Korea, D.P.R. 0.5 7.0 8.5 2.5 11.5 30.0 0.0 Korea, Republic 3.5 8.0 8.5 8.5 12.0 40.5 -0.5 Kuwait 4.5 8.0 9.5 10.0 15.0 47.0 1.0 Latvia 2.5 10.0 10.0 6.5 9.5 38.5 0.0 Lebanon 2.5 8.5 9.0 2.0 4.0 26.0 0.0 Liberia 0.0 3.0 5.0 5.0 8.0 21.0 -2.0 Libya 2.0 8.5 8.0 9.0 14.0 41.5 0.0 Lithuania 2.0 9.0 9.5 7.0 10.0 37.5 0.0 Luxembourg 5.0 8.0 9.5 8.5 13.5 44.5 0.0 Madagascar 0.0 6.5 7.5 4.5 9.5 28.0 0.0 Malawi 0.0 6.5 4.0 6.0 9.5 26.0 0.0 Malaysia 2.5 8.5 9.5 5.0 13.5 39.0 0.0 Mali 0.0 5.5 8.5 2.0 8.0 24.0 0.0 Malta 3.5 8.5 9.0 4.5 10.0 35.5 0.0 Mexico 3.0 7.5 8.5 7.0 11.0 37.0 0.0 Moldova 0.0 9.0 4.5 6.5 9.5 29.5 0.0 Mongolia 0.0 6.5 7.5 4.0 7.0 25.0 0.0 Morocco 0.5 9.0 9.5 5.5 12.5 37.0 0.0

Reproduction without permission of the Publisher is strictly forbidden S-43 International Country Risk Guide September 2003

GDP Real Annual Budget Current per head Annual Inflation Balance as Account as COUNTRY of GDP Rate percent of percent of Economic Population Growth (10) GDP GDP Risk (5) (10) (10) (15) Rating Mozambique 0.0 10.0 8.0 1.5 6.0 25.5 0.0 Myanmar 3.5 7.5 3.0 7.0 11.5 32.5 0.0 Namibia 1.0 8.0 7.5 5.5 13.5 35.5 0.0 Netherlands 5.0 6.0 9.5 7.5 13.0 41.0 0.0 New Zealand 4.5 8.0 10.0 8.5 10.5 41.5 0.0 Nicaragua 0.0 7.5 8.5 2.5 3.5 22.0 0.0 Niger 0.0 9.0 9.0 4.0 9.0 31.0 0.0 Nigeria 0.0 8.5 6.5 5.5 10.5 31.0 0.0 Norway 5.0 6.5 9.5 10.0 15.0 46.0 0.0 Oman 3.5 7.0 10.0 8.0 13.5 42.0 0.0 Pakistan 0.0 9.0 8.5 6.0 14.0 37.5 0.0 Panama 2.0 6.5 10.0 7.0 10.5 36.0 1.0 Papua New Guinea 0.0 5.5 6.5 6.0 12.0 30.0 -0.5 Paraguay 0.5 4.0 5.5 6.0 13.0 29.0 0.0 Peru 1.0 8.5 9.5 6.5 11.0 36.5 0.0 Philippines 0.5 8.5 8.5 5.0 13.0 35.5 0.0 Poland 2.5 8.0 9.5 5.0 10.5 35.5 0.0 Portugal 4.0 5.0 9.0 6.5 10.0 34.5 -1.5 Qatar 5.0 10.0 9.5 8.0 15.0 47.5 0.0 Romania 1.0 9.0 5.5 6.0 10.0 31.5 -2.0 Russian Federation. 1.5 9.5 6.0 8.5 14.0 39.5 0.0 Saudi Arabia 3.5 8.0 10.0 6.0 13.5 41.0 0.0 Senegal 0.0 9.5 9.5 6.5 9.5 35.0 0.0 Serbia & Montenegro 0.5 9.5 1.5 4.5 6.5 22.5 0.0 Sierra Leone 0.0 9.5 4.0 2.5 9.5 25.5 0.0 Singapore 5.0 7.0 10.0 7.5 15.0 44.5 0.0 Slovak Republic 3.0 9.0 7.5 5.5 10.0 35.0 0.5 Slovenia 3.5 8.0 8.5 6.5 11.5 38.0 0.0 Somalia 0.0 5.5 4.0 8.0 11.0 28.5 0.0 South Africa 1.5 7.5 8.5 7.0 11.0 35.5 -1.0 Spain 4.5 7.0 9.0 8.0 10.5 39.0 -0.5 Sri Lanka 0.5 9.5 7.5 3.0 10.5 31.0 -0.5 Sudan 0.0 10.0 7.5 6.5 10.0 34.0 -0.5 Suriname 1.0 7.0 6.0 5.5 10.5 30.0 0.0 Sweden 5.0 7.0 9.5 8.5 13.0 43.0 0.0 Switzerland 5.0 5.5 10.0 8.0 15.0 43.5 0.0 Syria 2.5 7.5 9.5 6.5 11.5 37.5 0.0 Taiwan 4.0 8.5 10.0 6.5 14.0 43.0 0.0 Tanzania 0.0 9.5 8.5 8.0 8.5 34.5 0.0 Thailand 1.0 9.0 10.0 7.0 13.0 40.0 0.0 Togo 0.0 8.5 10.0 5.5 7.5 31.5 0.0 Trinidad & Tobago 3.0 9.0 8.5 7.5 13.0 41.0 0.0 Tunisia 1.0 9.0 9.5 6.5 10.5 36.5 0.0 Turkey 1.5 8.5 4.0 2.0 10.5 26.5 0.0 Uganda 0.0 10.0 8.0 6.5 9.0 33.5 0.0 Ukraine 0.5 9.5 8.0 6.5 13.0 37.5 0.5 United Arab Emirates 5.0 8.5 9.5 8.0 15.0 46.0 0.0 United Kingdom 5.0 7.0 9.5 6.5 11.0 39.0 0.0 United States 5.0 7.5 9.5 6.0 10.0 38.0 0.0

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GDP Real Annual Budget Current per head Annual Inflation Balance as Account as COUNTRY of GDP Rate percent of percent of Economic Population Growth (10) GDP GDP Risk (5) (10) (10) (15) Rating Uruguay 2.0 3.0 5.0 5.5 12.5 28.0 -0.5 Venezuela 2.0 0.0 3.5 6.0 15.0 26.5 0.0 Vietnam 0.0 10.0 8.5 6.5 10.5 35.5 -0.5 Yemen, Republic 0.0 9.0 6.0 8.0 13.5 36.5 0.0 Zambia 0.0 8.5 5.0 4.0 5.5 23.0 0.0 Zimbabwe 0.0 0.0 0.0 0.5 9.0 9.5 0.0

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TABLE 5C

ECONOMIC RISK FORECASTS

One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Albania 32.0 30.0 36.0 6.0 28.0 36.0 8.0 Algeria 43.5 42.0 44.0 2.0 40.0 45.0 5.0 Angola 26.0 18.0 21.0 3.0 18.0 28.0 10.0 Argentina 36.5 29.0 36.0 7.0 33.0 40.0 7.0 Armenia 32.5 30.0 32.0 2.0 28.0 37.0 9.0 Australia 41.0 37.0 41.0 4.0 35.0 43.0 8.0 Austria 40.0 38.0 40.0 2.0 37.0 45.0 8.0 Azerbaijan 35.0 33.0 36.0 3.0 30.0 36.0 6.0 Bahamas 36.0 35.0 37.0 2.0 30.0 39.0 9.0 Bahrain 38.5 37.0 39.0 2.0 36.0 40.0 4.0 Bangladesh 38.5 37.0 39.0 2.0 30.0 40.0 10.0 Belarus 30.5 23.0 25.0 2.0 20.0 29.0 9.0 Belgium 42.5 40.0 44.0 4.0 38.0 46.0 8.0 Bolivia 33.0 30.0 33.0 3.0 28.0 37.0 9.0 Botswana 38.5 36.0 39.0 3.0 36.0 41.0 5.0 Brazil 33.0 25.0 28.0 3.0 30.0 40.0 10.0 Brunei 44.5 39.0 42.0 3.0 35.0 40.0 5.0 Bulgaria 36.0 35.0 37.0 2.0 30.0 40.0 10.0 Burkina Faso 29.5 30.0 31.5 1.5 28.0 35.0 7.0 Cameroon 36.5 35.0 37.0 2.0 30.0 37.0 7.0 Canada 42.0 37.0 40.0 3.0 36.0 42.0 6.0 Chile 39.0 36.0 38.0 2.0 33.0 40.0 7.0 China, Peoples' Rep. 38.5 38.0 40.0 2.0 33.0 42.0 9.0 Colombia 32.5 30.0 34.0 4.0 28.0 38.0 10.0 Congo, Dem. Republic 30.0 28.0 35.0 7.0 24.0 38.0 14.0 Congo, Republic 18.0 27.0 35.0 8.0 25.0 37.0 12.0 Costa Rica 33.5 32.0 35.0 3.0 30.0 37.0 7.0 Cote d'Ivoire 34.0 37.0 39.0 2.0 35.0 39.0 4.0 Croatia 35.0 36.0 38.0 2.0 33.0 37.0 4.0 Cuba 33.5 29.0 34.0 5.0 25.0 38.0 13.0 Cyprus 41.0 35.0 37.0 2.0 30.0 37.0 7.0 Czech Republic 37.0 30.0 32.0 2.0 30.0 37.0 7.0 Denmark 42.0 41.0 43.0 2.0 35.0 44.0 9.0 Dominican Republic 27.5 25.0 29.0 4.0 25.0 35.0 10.0 Ecuador 34.0 25.0 29.0 4.0 23.0 33.0 10.0 Egypt 33.5 34.0 37.0 3.0 30.0 36.0 6.0 El Salvador 35.5 37.0 39.0 2.0 30.0 41.0 11.0 Estonia 38.0 36.0 38.0 2.0 30.0 40.0 10.0 Ethiopia 33.0 28.0 32.0 4.0 28.0 37.0 9.0 Finland 44.0 39.0 46.0 7.0 35.0 44.0 9.0 France 40.0 39.0 43.0 4.0 35.0 45.0 10.0 Gabon 38.0 40.0 42.0 2.0 36.0 43.0 7.0 Gambia 35.5 32.0 36.0 4.0 27.0 37.0 10.0 Germany 39.0 38.0 40.0 2.0 34.0 44.0 10.0 Ghana 31.0 30.0 32.0 2.0 27.0 34.0 7.0 Greece 37.5 37.0 39.0 2.0 35.0 40.0 5.0

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One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Guatemala 33.5 32.0 34.0 2.0 30.0 37.0 7.0 Guinea 35.0 33.0 36.0 3.0 28.0 38.0 10.0 Guinea-Bissau 26.0 25.0 27.0 2.0 25.0 35.0 10.0 Guyana 27.5 27.0 32.0 5.0 27.0 36.0 9.0 Haiti 25.5 22.0 27.0 5.0 22.0 37.0 15.0 Honduras 28.0 25.0 30.0 5.0 25.0 38.0 13.0 Hong Kong 43.5 34.0 37.0 3.0 30.0 39.0 9.0 Hungary 34.5 31.0 35.0 4.0 32.0 38.0 6.0 Iceland 39.0 40.0 42.0 2.0 35.0 43.0 8.0 India 35.0 29.0 31.0 2.0 28.0 35.0 7.0 Indonesia 36.5 20.0 25.0 5.0 28.0 35.0 7.0 Iran 36.5 25.0 39.0 14.0 28.0 43.0 15.0 Iraq 20.0 20.0 30.0 10.0 20.0 37.0 17.0 Ireland 41.0 40.0 46.0 6.0 38.0 47.0 9.0 Israel 38.0 30.0 36.0 6.0 30.0 40.0 10.0 Italy 39.0 36.0 41.0 5.0 35.0 44.0 9.0 Jamaica 32.5 30.0 33.0 3.0 28.0 38.0 10.0 Japan 37.5 35.0 38.0 3.0 35.0 42.0 7.0 Jordan 36.0 35.0 37.0 2.0 30.0 37.0 7.0 Kazakhstan 37.0 35.0 38.0 3.0 30.0 38.0 8.0 Kenya 32.5 32.0 35.0 3.0 28.0 37.0 9.0 Korea, D.P.R. 30.0 7.0 10.0 3.0 10.0 30.0 20.0 Korea, Republic 40.5 30.0 44.0 14.0 28.0 46.0 18.0 Kuwait 47.0 38.0 48.0 10.0 30.0 48.0 18.0 Latvia 38.5 36.0 39.0 3.0 38.0 46.0 8.0 Lebanon 26.0 20.0 24.0 4.0 20.0 30.0 10.0 Liberia 21.0 22.0 23.0 1.0 20.0 26.0 6.0 Libya 41.5 40.0 43.5 3.5 38.0 44.5 6.5 Lithuania 37.5 39.0 43.0 4.0 35.0 44.0 9.0 Luxembourg 44.5 44.0 46.0 2.0 38.0 46.0 8.0 Madagascar 28.0 34.0 37.0 3.0 30.0 38.0 8.0 Malawi 26.0 23.0 28.0 5.0 23.0 32.0 9.0 Malaysia 39.0 38.0 39.5 1.5 33.0 40.0 7.0 Mali 24.0 30.0 37.0 7.0 30.0 38.0 8.0 Malta 35.5 35.0 37.0 2.0 33.0 37.0 4.0 Mexico 37.0 35.0 37.5 2.5 30.0 40.0 10.0 Moldova 29.5 17.0 18.0 1.0 20.0 34.0 14.0 Mongolia 25.0 27.0 29.0 2.0 23.0 32.0 9.0 Morocco 37.0 36.0 38.0 2.0 30.0 38.0 8.0 Mozambique 25.5 23.0 27.0 4.0 20.0 28.0 8.0 Myanmar 32.5 25.0 28.0 3.0 25.0 33.0 8.0 Namibia 35.5 34.0 36.5 2.5 32.0 38.0 6.0 Netherlands 41.0 42.0 43.0 1.0 37.0 44.0 7.0 New Zealand 41.5 40.5 42.5 2.0 38.0 43.0 5.0 Nicaragua 22.0 18.0 22.0 4.0 22.0 32.0 10.0 Niger 31.0 32.0 33.0 1.0 28.0 37.0 9.0 Nigeria 31.0 28.0 32.0 4.0 23.0 37.0 14.0 Norway 46.0 43.0 44.0 1.0 38.0 46.0 8.0 Oman 42.0 30.0 32.0 2.0 30.0 37.0 7.0 Pakistan 37.5 31.0 33.0 2.0 28.0 36.0 8.0 Panama 36.0 34.0 38.0 4.0 30.0 40.0 10.0 Papua New Guinea 30.0 29.0 33.0 4.0 28.0 36.0 8.0

Reproduction without permission of the Publisher is strictly forbidden S-47 International Country Risk Guide September 2003

One Year Forecast Five Year Forecast Country Current Worst Best Risk Worst Best Risk Rating Case Case Stability Case Case Stability Paraguay 29.0 27.5 31.0 3.5 25.0 37.0 12.0 Peru 36.5 35.0 37.5 2.5 30.0 38.0 8.0 Philippines 35.5 31.0 33.0 2.0 28.0 38.0 10.0 Poland 35.5 34.0 36.0 2.0 30.0 37.0 7.0 Portugal 34.5 34.0 39.0 5.0 32.0 39.0 7.0 Qatar 47.5 22.0 25.0 3.0 22.0 29.0 7.0 Romania 31.5 27.0 35.0 8.0 25.0 38.0 13.0 Russian Federation. 39.5 37.5 40.5 3.0 30.0 43.0 13.0 Saudi Arabia 41.0 29.0 32.0 3.0 29.0 38.0 9.0 Senegal 35.0 35.0 36.0 1.0 30.0 38.0 8.0 Serbia & Montenegro 22.5 20.0 28.0 8.0 20.0 35.0 15.0 Sierra Leone 25.5 20.0 27.0 7.0 25.0 30.0 5.0 Singapore 44.5 35.0 37.0 2.0 26.0 36.0 10.0 Slovak Republic 35.0 30.0 33.0 3.0 30.0 38.0 8.0 Slovenia 38.0 30.0 36.0 6.0 30.0 37.0 7.0 Somalia 28.5 20.0 22.0 2.0 18.0 28.0 10.0 South Africa 35.5 30.0 38.0 8.0 28.0 38.0 10.0 Spain 39.0 38.0 42.0 4.0 37.0 44.0 7.0 Sri Lanka 31.0 28.0 34.0 6.0 28.0 38.0 10.0 Sudan 34.0 27.0 36.0 9.0 25.0 38.0 13.0 Suriname 30.0 28.0 31.0 3.0 28.0 37.0 9.0 Sweden 43.0 44.0 46.0 2.0 37.0 47.0 10.0 Switzerland 43.5 42.0 44.0 2.0 38.0 48.0 10.0 Syria 37.5 37.0 39.0 2.0 34.0 36.0 2.0 Taiwan 43.0 40.0 44.0 4.0 35.0 45.0 10.0 Tanzania 34.5 30.0 35.0 5.0 27.0 37.0 10.0 Thailand 40.0 33.0 35.0 2.0 28.0 39.0 11.0 Togo 31.5 30.0 35.0 5.0 30.0 37.0 7.0 Trinidad & Tobago 41.0 40.0 42.0 2.0 38.0 44.0 6.0 Tunisia 36.5 34.0 37.0 3.0 30.0 37.0 7.0 Turkey 26.5 28.0 31.0 3.0 28.0 39.0 11.0 Uganda 33.5 35.0 37.0 2.0 30.0 37.0 7.0 Ukraine 37.5 33.0 38.0 5.0 30.0 40.0 10.0 United Arab Emirates 46.0 45.0 47.0 2.0 38.0 48.0 10.0 United Kingdom 39.0 37.0 39.0 2.0 36.0 42.0 6.0 United States 38.0 36.0 40.0 4.0 36.0 42.0 6.0 Uruguay 28.0 27.0 31.0 4.0 26.0 38.0 12.0 Venezuela 26.5 26.0 28.0 2.0 23.0 39.0 16.0 Vietnam 35.5 33.0 37.0 4.0 30.0 38.0 8.0 Yemen, Republic 36.5 33.0 35.0 2.0 30.0 38.0 8.0 Zambia 23.0 26.0 28.0 2.0 23.0 30.0 7.0 Zimbabwe 9.5 10.0 25.0 15.0 25.0 32.0 7.0

S-48 Reproduction without permission of the Publisher is strictly forbidden International Country Risk Guide September 2003

TABLE 6A

SUMMARY OF ECONOMIC RISK COMPONENTS – SEPTEMBER 2003 This table summarizes the economic data on which the Economic Risk Points in Table 5B are based. For a detailed breakdown of the data, the risk points assigned, and comparison with previous periods, see the tables indicated in the column headings.

Real Annual Annual GDP Growth, Inflation Rate, Budget Current GDP per Head as percentage as percentage Balance, as Account as COUNTRY of Population change on change on percent of percent of in US$ previous year previous year GDP GDP (Table 7) (Table 8) (Table 9) (Table 10) (Table 11) Albania 1523 4.3 5.3 -7.0 -7.7 Algeria 1865 6.8 2.9 0.5 12.1 Angola 737 6.0 125.0 -4.0 -5.2 Argentina 7072 3.5 20.0 -1.9 3.4 Armenia 661 10.0 3.5 -0.3 -18.9 Australia 20388 3.0 2.7 0.5 -4.3 Austria 25535 0.9 1.4 -0.9 -0.2 Azerbaijan 807 9.0 3.0 -0.5 -12.8 Bahamas 12561 2.0 2.0 -2.8 -10.9 Bahrain 10204 4.0 2.1 -3.0 -2.7 Bangladesh 336 5.0 5.1 -4.2 0.1 Belarus 1491 4.0 30.0 -2.0 -2.0 Belgium 24099 0.9 1.3 0.2 4.9 Bolivia 974 2.5 1.7 -6.5 -4.0 Botswana 3337 3.5 8.5 -2.0 7.4 Brazil 2530 1.6 11.9 -3.8 -0.5 Brunei 15808 3.8 1.0 0.1 29.7 Bulgaria 2096 4.2 3.9 -1.0 -4.8 Burkina Faso 303 2.6 4.5 -4.5 -14.2 Cameroon 578 4.5 4.5 1.5 -3.3 Canada 23512 2.4 3.0 0.3 1.9 Chile 4348 3.2 2.9 -1.0 -0.2 China, Peoples' Rep. 1013 6.9 0.2 -3.0 0.5 Colombia 1898 2.8 7.5 -5.0 -2.0 Congo, Dem. Republic 93 4.2 15.0 -3.0 -9.6 Congo, Republic 963 -0.5 4.9 -6.0 -53.6 Costa Rica 4363 2.0 7.5 -4.0 -4.9 Cote d'Ivoire 526 1.0 4.7 0.5 -1.9 Croatia 4742 3.5 3.0 -6.6 -2.8 Cuba 2313 0.5 2.5 -3.8 -2.6 Cyprus 11368 2.5 2.5 -2.2 -3.1 Czech Republic 6910 2.7 2.0 -2.2 -4.4 Denmark 32761 1.3 2.0 0.5 2.4 Dominican Republic 2374 -2.0 20.3 -0.5 -3.1 Ecuador 1434 2.8 10.5 0.6 -3.1 Egypt 1187 1.8 5.1 -2.5 -1.0 El Salvador 2195 2.5 2.1 -2.8 -2.7 Estonia 3819 4.1 3.0 0.0 -6.8 Ethiopia 100 6.0 -2.0 -8.2 -4.9 Finland 25683 1.8 1.5 0.2 6.6 France 23979 1.1 1.6 -3.5 1.8 Gabon 4160 1.5 2.8 2.0 -5.9

Reproduction without permission of the Publisher is strictly forbidden S-49 International Country Risk Guide September 2003

Real Annual Annual GDP Growth, Inflation Rate, Budget Current GDP per Head as percentage as percentage Balance, as Account as COUNTRY of Population change on change on percent of percent of in US$ previous year previous year GDP GDP (Table 7) (Table 8) (Table 9) (Table 10) (Table 11) Gambia 370 6.0 3.0 -2.2 -5.0 Germany 24053 0.1 0.9 -3.0 1.8 Ghana 313 4.7 15.0 -4.5 -2.3 Greece 13710 3.7 2.8 -3.2 -6.5 Guatemala 1942 2.5 8.0 -1.0 -4.6 Guinea 854 4.0 7.5 -2.9 -1.2 Guinea-Bissau 217 8.2 3.5 -20.9 -18.9 Guyana 1046 1.9 5.5 -6.5 -16.6 Haiti 369 -0.5 18.0 -3.0 -6.4 Honduras 987 2.0 7.5 -4.0 -6.7 Hong Kong 24408 2.1 -1.5 -2.5 8.4 Hungary 6996 3.3 5.3 -6.0 -4.3 Iceland 31068 2.1 5.2 -0.5 -2.0 India 517 5.5 4.2 -5.9 0.1 Indonesia 791 3.4 8.0 -1.5 3.7 Iran 6324 4.6 13.0 -3.0 0.8 Iraq 1166 -3.0 55.0 -10.0 1.4 Ireland 31686 3.5 4.6 -0.3 -0.5 Israel 15231 0.5 1.8 -3.0 -0.5 Italy 20428 0.6 2.5 -2.8 0.1 Jamaica 3128 1.5 8.5 -5.0 -1.0 Japan 32481 0.9 -0.3 -8.0 2.8 Jordan 1363 5.1 3.2 -4.1 -0.4 Kazakhstan 1795 7.8 6.0 -0.4 -2.3 Kenya 364 2.0 5.3 -3.0 -2.1 Korea, D.P.R. 798 1.8 4.1 -10.0 -0.3 Korea, Republic 10239 2.7 4.0 1.5 0.2 Kuwait 17238 2.5 2.3 25.0 22.1 Latvia 3810 6.0 1.5 -2.5 -7.0 Lebanon 5088 3.3 3.5 -14.7 -22.0 Liberia 174 -2.0 20.0 -5.0 -12.0 Libya 3244 3.0 6.0 2.0 7.6 Lithuania 3542 4.3 2.2 -1.4 -5.8 Luxembourg 45644 2.7 2.0 1.0 4.1 Madagascar 266 1.0 8.0 -6.0 -6.5 Malawi 141 1.0 25.0 -3.0 -7.7 Malaysia 4482 3.9 2.2 -5.0 5.6 Mali 206 0.0 4.5 -13.0 -13.0 Malta 10091 3.5 3.0 -6.0 -4.5 Mexico 6224 2.4 4.3 -1.8 -1.9 Moldova 487 4.8 23.2 -2.3 -7.0 Mongolia 385 3.0 8.8 -7.4 -16.7 Morocco 1311 4.1 2.4 -4.0 1.5 Mozambique 208 6.0 7.0 -17.7 -18.8 Myanmar 7719 2.0 50.0 -1.0 -0.1 Namibia 1780 2.8 8.0 -4.0 4.6 Netherlands 25807 0.5 2.5 -0.5 2.9 New Zealand 15448 2.6 1.8 1.3 -3.2 Nicaragua 467 2.2 5.0 -10.0 -23.3

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Real Annual Annual GDP Growth, Inflation Rate, Budget Current GDP per Head as percentage as percentage Balance, as Account as COUNTRY of Population change on change on percent of percent of in US$ previous year previous year GDP GDP (Table 7) (Table 8) (Table 9) (Table 10) (Table 11) Niger 173 4.0 3.4 -7.9 -8.1 Nigeria 421 3.1 13.5 -4.9 -2.0 Norway 42571 1.0 2.5 8.0 11.4 Oman 8084 1.7 1.0 0.9 4.9 Pakistan 406 4.9 4.5 -3.5 6.9 Panama 3552 1.3 1.7 -1.5 -2.7 Papua New Guinea 535 0.2 13.5 -3.0 0.7 Paraguay 899 -1.2 17.8 -3.5 2.3 Peru 2135 3.6 2.8 -2.0 -1.9 Philippines 1015 3.8 4.0 -5.0 3.5 Poland 5002 2.5 1.1 -5.0 -3.8 Portugal 12107 -0.1 3.0 -2.3 -5.8 Qatar 31523 6.0 2.5 0.8 12.4 Romania 2144 4.8 18.0 -3.0 -4.1 Russian Federation. 2558 5.1 14.5 1.0 7.1 Saudi Arabia 9023 2.5 1.3 -3.0 5.6 Senegal 494 5.0 2.3 -2.6 -6.7 Serbia & Montenegro 1442 5.0 87.0 -6.0 -17.7 Sierra Leone 245 5.0 30.0 -10.0 -6.0 Singapore 21380 1.8 0.6 -0.9 17.5 Slovak Republic 4571 4.2 8.4 -4.0 -5.7 Slovenia 9738 2.5 5.8 -2.6 -0.3 Somalia 100 0.0 30.0 0.0 -1.0 South Africa 2337 2.4 5.0 -1.0 -1.0 Spain 15877 1.9 3.0 0.2 -3.0 Sri Lanka 912 5.1 8.3 -9.0 -2.8 Sudan 421 6.0 9.0 -2.0 -5.4 Suriname 2089 1.9 15.0 -4.9 -2.4 Sweden 27750 1.5 2.2 1.8 3.6 Switzerland 36455 0.2 0.8 0.3 11.5 Syria 4950 2.1 2.7 -2.5 -0.1 Taiwan 12841 3.0 0.5 -2.5 7.7 Tanzania 273 5.0 5.8 0.8 -11.0 Thailand 2054 4.1 1.4 -1.5 2.8 Togo 302 3.0 1.0 -4.0 -14.5 Trinidad & Tobago 7278 4.0 4.0 -0.5 3.6 Tunisia 2219 4.5 2.8 -2.8 -3.1 Turkey 2661 3.5 26.0 -12.0 -2.5 Uganda 277 6.0 6.0 -2.0 -8.0 Ukraine 900 5.3 7.4 -2.0 3.9 United Arab Emirates 26977 3.8 2.6 0.0 10.2 United Kingdom 26730 1.8 2.6 -2.0 -1.3 United States 35333 2.2 2.1 -3.0 -5.2 Uruguay 3550 -2.0 21.0 -4.0 1.2 Venezuela 3304 -12.0 32.0 -3.8 12.4 Vietnam 452 6.5 4.2 -2.7 -2.7 Yemen, Republic 571 4.1 15.8 0.4 4.0 Zambia 343 3.4 20.5 -7.0 -19.3 Zimbabwe 327 -15.5 380.0 -29.0 -9.7

Reproduction without permission of the Publisher is strictly forbidden S-51 International Country Risk Guide September 2003

TABLE 6B

SUMMARY OF FINANCIAL RISK COMPONENTS – SEPTEMBER 2003

This table summarizes the financial data on which the Financial Risk Points in Table 4B are based. For a detailed breakdown of the data, the risk points assigned, and comparison with previous periods, see the tables indicated in the column headings.

Foreign Debt Current Service as Account as International Exchange Rate Foreign Debt percent of percent of Liquidity Stability COUNTRY as percent of Exports of Exports of as Months of as percent GDP Goods and Goods and Import Cover change (Table12) Services Services (Table 15) (Table 16) (Table 13) (Table 14) Albania 64.5 30.0 -21.1 5.6 14.3 Algeria 45.4 20.0 33.7 24.2 2.6 Angola 114.0 12.0 -6.9 0.9 -65.6 Argentina 45.0 77.0 23.6 0.0 20.7 Armenia 46.3 25.0 -53.0 2.8 0.0 Australia 55.0 10.0 -18.8 3.5 17.8 Austria 10.2 1.9 -0.4 2.1 11.5 Azerbaijan 22.6 6.8 -28.8 3.2 -0.6 Bahamas 37.0 5.5 -29.0 3.8 0.0 Bahrain 3.5 12.0 -4.0 5.0 0.0 Bangladesh 35.2 9.1 0.7 2.3 -1.0 Belarus 7.5 12.5 -14.0 0.4 -12.1 Belgium 16.1 2.8 4.2 1.0 11.5 Bolivia 47.0 15.0 -14.5 4.5 -5.2 Botswana 26.0 3.2 11.9 30.8 22.8 Brazil 50.5 53.3 -2.8 1.7 15.3 Brunei 2.0 0.0 59.9 16.0 5.3 Bulgaria 69.8 18.8 -7.8 5.0 11.6 Burkina Faso 63.0 24.8 -150.4 3.2 11.5 Cameroon 67.0 28.0 -11.3 2.1 11.5 Canada 16.0 3.0 3.9 2.0 11.5 Chile 60.0 28.0 -0.7 10.0 6.4 China, Peoples' Rep. 13.6 8.7 1.6 12.3 -0.1 Colombia 43.0 20.0 -9.4 10.0 -2.5 Congo, Dem. Republic 250.0 5.0 -41.7 -7.4 -19.5 Congo, Republic 195.6 22.4 -68.0 -0.2 11.5 Costa Rica 39.8 12.5 -9.8 1.4 -9.9 Cote d'Ivoire 140.0 38.0 -3.5 4.0 11.5 Croatia 49.3 12.0 -20.0 4.3 9.5 Cuba 45.7 40.5 -45.3 0.0 0.0 Cyprus 1.0 14.0 -4.0 5.8 9.7 Czech Republic 33.0 10.0 -6.3 7.1 5.4 Denmark 20.4 14.4 4.3 6.7 11.5 Dominican Republic 28.5 6.0 -5.9 -0.2 -83.6 Ecuador 75.0 19.0 -7.7 1.0 0.0 Egypt 35.0 12.0 -4.1 2.6 -32.6 El Salvador 32.0 10.0 -6.2 3.5 -0.1 Estonia 13.5 33.0 -10.0 2.5 11.5

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Foreign Debt Current Service as Account as International Exchange Rate Foreign Debt percent of percent of Liquidity Stability COUNTRY as percent of Exports of Exports of as Months of as percent GDP Goods and Goods and Import Cover change (Table12) Services Services (Table 15) (Table 16) (Table 13) (Table 14) Ethiopia 102.3 22.4 -21.0 2.1 -1.0 Finland 101.3 16.1 14.2 3.5 11.5 France 23.2 19.8 5.2 2.4 11.5 Gabon 65.0 12.0 -10.0 0.0 11.5 Gambia 130.7 11.9 -12.5 5.0 -32.6 Germany 13.5 8.5 4.2 1.9 11.5 Ghana 107.3 18.1 -4.5 1.0 -5.8 Greece 32.0 20.0 -24.9 3.4 11.5 Guatemala 18.0 16.0 -21.7 5.2 -1.3 Guinea 56.0 19.0 -8.2 1.0 -1.2 Guinea-Bissau 320.0 20.0 -80.0 0.0 11.5 Guyana 212.0 11.0 -15.9 0.5 0.0 Haiti 34.0 8.0 -15.9 0.5 -37.9 Honduras 78.0 15.0 -14.6 4.2 -4.4 Hong Kong 20.0 1.5 4.6 6.0 0.0 Hungary 53.7 17.7 -6.2 1.7 5.6 Iceland 120.0 19.0 -25.0 1.4 7.8 India 21.0 12.8 0.5 14.0 5.3 Indonesia 93.0 30.0 9.7 6.0 7.2 Iran 2.0 6.7 10.7 6.3 -4.6 Iraq 501.1 117.6 4.7 0.0 0.0 Ireland 14.4 3.4 -0.4 1.2 11.5 Israel 55.2 16.3 -1.0 9.0 8.1 Italy 7.4 4.2 0.3 2.6 11.5 Jamaica 49.0 18.4 -1.7 6.0 -19.6 Japan 0.2 0.1 19.9 15.0 4.4 Jordan 78.5 20.0 -6.7 6.0 0.0 Kazakhstan 75.0 15.0 -5.0 5.0 5.3 Kenya 50.0 20.4 -6.0 3.5 2.9 Korea, D.P.R. 100.0 60.0 -10.5 0.0 0.0 Korea, Republic 34.3 10.7 0.5 8.9 3.7 Kuwait 23.8 2.7 32.7 14.1 0.9 Latvia 27.0 8.0 -19.0 3.4 5.0 Lebanon 189.0 8.0 -422.2 12.0 0.0 Liberia 535.7 70.0 -50.0 0.0 -5.2 Libya 25.0 5.0 15.1 30.0 -12.5 Lithuania 44.8 13.5 -10.5 3.0 11.5 Luxembourg 1.0 1.0 4.0 1.0 11.5 Madagascar 92.0 16.0 -28.4 1.0 8.0 Malawi 180.4 20.0 -22.0 3.0 -34.8 Malaysia 41.6 7.1 4.9 5.4 0.0 Mali 114.0 9.8 -30.0 3.2 11.5 Malta 81.0 12.0 -5.0 6.0 8.8 Mexico 21.5 32.0 -6.5 3.6 -4.6 Moldova 66.5 37.0 -10.5 0.5 -3.0 Mongolia 89.4 13.0 -26.0 0.0 -0.9 Morocco 48.0 17.0 3.5 11.4 9.1 Mozambique 91.0 8.2 -38.0 5.5 -0.2

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Foreign Debt Current Service as Account as International Exchange Rate Foreign Debt percent of percent of Liquidity Stability COUNTRY as percent of Exports of Exports of as Months of as percent GDP Goods and Goods and Import Cover change (Table12) Services Services (Table 15) (Table 16) (Table 13) (Table 14) Myanmar 7.0 15.0 -9.6 0.0 3.9 Namibia 6.5 4.0 10.9 2.5 31.0 Netherlands 31.0 5.0 4.0 1.5 11.5 New Zealand 94.9 36.9 -8.9 2.6 20.5 Nicaragua 280.0 25.0 -35.3 0.0 -5.1 Niger 85.0 36.4 -57.1 0.0 11.5 Nigeria 60.0 7.0 -5.1 6.5 -1.3 Norway 0.0 5.0 23.7 7.0 0.3 Oman 30.0 10.0 8.3 5.5 0.0 Pakistan 59.0 28.9 25.3 6.0 2.3 Panama 57.3 27.1 -3.2 1.5 0.0 Papua New Guinea 57.5 15.9 0.9 -0.2 15.3 Paraguay 42.5 9.0 3.5 2.3 2.9 Peru 48.0 35.0 -9.8 13.0 4.2 Philippines 66.0 13.8 5.8 1.6 -5.4 Poland 42.0 13.8 -11.6 6.0 5.2 Portugal 56.3 16.8 -14.5 4.6 11.5 Qatar 93.0 23.0 20.7 2.5 0.0 Romania 32.7 20.6 -10.0 5.0 -0.4 Russian Federation. 42.5 11.7 20.0 7.0 4.2 Saudi Arabia 14.0 5.0 11.3 7.5 0.0 Senegal 61.0 7.2 -10.0 1.0 11.5 Serbia & Montenegro 56.0 45.0 -58.0 0.0 5.6 Sierra Leone 200.0 56.0 -100.0 0.0 -15.0 Singapore 13.5 1.5 8.7 8.0 1.9 Slovak Republic 56.0 15.0 -7.4 5.0 13.2 Slovenia 10.0 10.0 -9.0 3.7 8.8 Somalia 60.0 10.0 -1.0 0.0 0.0 South Africa 31.9 11.9 -2.9 2.1 31.0 Spain 15.1 20.4 -8.8 2.8 11.5 Sri Lanka 58.2 12.7 -6.1 2.6 -0.6 Sudan 164.1 9.0 -22.6 -13.0 -1.0 Suriname 43.6 9.3 -3.5 1.0 -15.4 Sweden 32.0 14.5 6.8 3.0 9.9 Switzerland 0.2 2.0 16.7 7.0 6.8 Syria 32.0 4.0 -1.0 0.0 5.8 Taiwan 15.0 2.0 12.9 18.0 1.6 Tanzania 425.0 30.0 -75.0 0.8 -6.7 Thailand 46.0 16.3 4.2 5.0 4.0 Togo 82.0 11.0 -12.0 1.4 11.5 Trinidad & Tobago 16.6 4.3 7.2 6.6 -1.3 Tunisia 58.7 17.1 -6.1 2.9 6.3 Turkey 55.0 33.5 -7.6 0.0 15.9 Uganda 57.0 12.4 -20.0 2.3 -10.3 Ukraine 31.0 5.6 6.3 1.5 0.0 United Arab Emirates 20.0 3.5 15.2 5.0 0.0 United Kingdom 5.4 3.0 -3.4 1.1 2.1 United States 8.6 26.0 -42.3 0.8 -13.0

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Foreign Debt Current Service as Account as International Exchange Rate Foreign Debt percent of percent of Liquidity Stability COUNTRY as percent of Exports of Exports of as Months of as percent GDP Goods and Goods and Import Cover change (Table12) Services Services (Table 15) (Table 16) (Table 13) (Table 14) Uruguay 85.3 48.6 4.2 -10.9 2.9 Venezuela 33.0 18.8 31.8 8.0 -9.3 Vietnam 37.9 13.7 -4.6 2.2 -1.2 Yemen, Republic 66.8 27.0 2.0 1.7 -0.9 Zambia 172.9 13.9 -63.6 0.0 -4.4 Zimbabwe 124.9 5.4 -21.1 -1.5 -1386.0

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TABLE 7

GDP PER HEAD OF POPULATION

This table shows the estimated annual GDP per head of population for the current month and for the preceding five years in US dollars. Risk points are awarded on the basis of the share of the national GDP per head as a percentage of the current average GDP per head of all the countries covered. The final column in the table shows the risk points assessed for the current estimated GDP per head and the change, if any, from the previous month’s risk points.

Current COUNTRY Current Percent of Risk 1998 1999 2000 2001 2002 09/03 Average Points Albania 807 1175 1199 1306 1490 1523 20.2 1.0 0.0 Algeria 1621 1612 1749 1774 1746 1865 24.7 1.0 0.0 Angola 519 477 675 664 715 737 9.8 0.0 0.0 Argentina 8277 7751 7675 7419 8838 7072 93.7 3.0 0.0 Armenia 499 523 547 589 623 661 8.7 0.0 0.0 Australia 19379 20682 19821 18351 20131 20388 270.0 5.0 0.0 Austria 26141 25946 23553 23457 25308 25535 338.2 5.0 0.0 Azerbaijan 491 571 655 705 745 807 10.7 0.5 0.0 Bahamas 12227 12950 12945 12687 12561 12561 166.4 4.0 0.0 Bahrain 9636 9854 9812 10056 10135 10204 135.1 3.5 0.0 Bangladesh 324 333 331 324 327 336 4.5 0.0 0.0 Belarus 1436 1211 1042 1239 1433 1491 19.7 0.5 0.0 Belgium 24524 24568 22210 22143 23907 24099 319.2 5.0 0.0 Bolivia 1069 1018 1004 964 950 974 12.9 0.5 0.0 Botswana 3038 2888 2964 3168 3244 3337 44.2 2.0 0.0 Brazil 4867 3245 3588 2952 2553 2530 33.5 1.5 0.5 Brunei 14879 15000 14770 14613 15808 16564 219.4 4.5 0.0 Bulgaria 1542 1579 1585 1728 1997 2096 27.8 1.0 0.0 Burkina Faso 235 212 213 221 240 303 4.0 0.0 0.0 Cameroon 654 671 623 580 565 578 7.7 0.0 0.0 Canada 20089 21518 23307 22688 23190 23512 311.4 5.0 0.0 Chile 5356 4864 4965 4315 4264 4348 57.6 2.5 0.0 China, Peoples' Rep. 761 790 846 927 955 1013 13.4 0.5 0.0 Colombia 2413 2075 1979 1909 1866 1898 25.1 1.0 0.0 Congo, Dem. Republic 128 260 301 143 92 93 1.2 0.0 0.0 Congo, Republic 684 802 1066 961 997 963 12.7 0.5 0.0 Costa Rica 3992 4401 4167 4233 4320 4363 57.8 2.5 0.0 Cote d'Ivoire 747 707 571 544 536 526 7.0 0.0 0.0 Croatia 4834 4504 4234 4441 4582 4742 62.8 2.5 0.0 Cuba 2021 2146 2222 2293 2311 2313 30.6 1.5 0.0 Cyprus 11961 11577 10905 11068 11263 11368 150.5 4.0 0.0 Czech Republic 5536 5353 5007 5558 6742 6910 91.5 3.0 0.0 Denmark 32532 32480 29674 29874 32340 32761 433.9 5.0 0.0 Dominican Republic 1957 2087 2333 2501 2458 2374 31.4 1.5 0.0 Ecuador 1620 1103 1101 1329 1420 1434 19.0 0.5 0.0 Egypt 1338 1416 1435 1187 1196 1187 15.7 0.5 0.0 El Salvador 1990 2026 2091 2147 2183 2195 29.1 1.0 0.0 Estonia 3587 3611 3398 3558 3669 3819 50.6 2.5 0.0 Ethiopia 106 96 98 98 98 100 1.3 0.0 0.0 Finland 25054 24710 23172 23403 25279 25683 340.1 5.0 0.0

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Current COUNTRY Current Percent of Risk 1998 1999 2000 2001 2002 09/03 Average Points France 24666 24404 22175 22119 23813 23979 317.6 5.0 0.0 Gabon 3896 3907 4190 4306 4197 4160 55.1 2.5 0.0 Gambia 288 311 323 338 347 370 4.9 0.0 0.0 Germany 26115 25548 22767 22494 24077 24053 318.5 5.0 0.0 Ghana 404 408 272 269 305 313 4.1 0.0 0.0 Greece 11593 11878 11321 11685 13234 13710 181.6 4.0 0.0 Guatemala 1795 1652 1694 1795 1943 1942 25.7 1.0 0.0 Guinea 663 670 692 790 833 854 11.3 0.5 0.0 Guinea-Bissau 177 183 186 194 206 217 2.9 0.0 0.0 Guyana 935 883 909 974 1027 1046 13.9 0.5 0.0 Haiti 492 524 460 431 380 369 4.9 0.0 0.0 Honduras 851 848 938 973 973 987 13.1 0.5 0.0 Hong Kong 25271 24298 24786 24405 24072 24408 323.3 5.0 0.0 Hungary 4654 4771 4659 5225 6705 6996 92.6 3.0 0.0 Iceland 29625 29948 29905 27281 30446 31068 411.4 5.0 0.0 India 435 454 467 478 497 517 6.8 0.0 0.0 Indonesia 467 675 723 676 782 791 10.5 0.5 0.0 Iran 3038 3969 5163 5883 6131 6324 83.8 3.0 0.0 Iraq 2185 2157 2142 2146 2107 1166 15.4 0.5 -0.5 Ireland 23357 25493 25026 26667 31008 31686 419.6 5.0 0.0 Israel 17223 16902 18111 17330 15537 15231 201.7 4.5 0.0 Italy 20777 20468 18614 18832 20367 20428 270.5 5.0 0.0 Jamaica 2922 2941 2932 2992 3082 3128 41.4 2.0 0.0 Japan 31171 35478 37559 32522 32320 32481 430.2 5.0 0.0 Jordan 1157 1149 1167 1203 1327 1363 18.1 0.5 0.0 Kazakhstan 1401 1176 1230 1439 1657 1795 23.8 1.0 0.0 Kenya 390 351 341 364 364 364 4.8 0.0 0.0 Korea, D.P.R. 765 677 682 716 760 798 10.6 0.5 0.0 Korea, Republic 6829 8666 9761 9025 10059 10239 135.6 3.5 0.0 Kuwait 12365 13848 16890 17355 17314 17238 228.3 4.5 0.0 Latvia 2484 2741 2941 3120 3265 3810 50.5 2.5 0.0 Lebanon 2710 3330 3555 4985 5000 5088 67.4 2.5 0.0 Liberia 150 137 181 173 178 174 2.3 0.0 0.0 Libya 5597 5907 6089 4991 3219 3244 43.0 2.0 0.0 Lithuania 2905 2914 3077 3256 3396 3542 46.9 2.0 0.0 Luxembourg 42650 45838 43134 44409 45514 45644 604.5 5.0 0.0 Madagascar 248 240 249 274 269 266 3.5 0.0 0.0 Malawi 252 178 167 161 146 141 1.9 0.0 0.0 Malaysia 3254 3485 3875 3888 4314 4482 59.4 2.5 0.0 Mali 246 242 217 216 211 206 2.7 0.0 0.0 Malta 9238 9347 9141 9263 9738 10091 133.6 3.5 0.0 Mexico 4356 4897 5793 6132 6170 6224 82.4 3.0 0.0 Moldova 529 358 396 442 473 487 6.4 0.0 0.0 Mongolia 445 405 345 366 379 385 5.1 0.0 0.0 Morocco 1289 1248 1161 1161 1280 1311 17.4 0.5 0.0 Mozambique 213 230 233 218 200 208 2.8 0.0 0.0 Myanmar 5464 7396 7443 7570 7666 7719 102.2 3.5 0.0 Namibia 2309 2043 2014 1982 1771 1780 23.6 1.0 0.0 Netherlands 24085 25186 23322 23934 25883 25807 341.8 5.0 0.0 New Zealand 14251 14559 13206 13106 15132 15448 204.6 4.5 0.0 Nicaragua 431 447 479 491 470 467 6.2 0.0 0.0 Niger 167 206 194 167 173 173 2.3 0.0 0.0

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Current COUNTRY Current Percent of Risk 1998 1999 2000 2001 2002 09/03 Average Points Nigeria 435 325 418 438 414 421 5.6 0.0 0.0 Norway 33871 35448 37171 37643 42336 42571 563.8 5.0 0.0 Oman 6153 6386 8279 8139 8108 8084 107.1 3.5 0.0 Pakistan 453 445 427 381 408 406 5.4 0.0 0.0 Panama 3707 3754 3904 3864 3567 3552 47.0 2.0 0.0 Papua New Guinea 822 736 707 589 545 535 7.1 0.0 0.0 Paraguay 1648 1444 1404 1215 933 899 11.9 0.5 0.0 Peru 2292 2047 2085 2057 2102 2135 28.3 1.0 0.0 Philippines 867 1019 981 925 988 1015 13.4 0.5 0.0 Poland 4119 4012 4241 4737 4880 5002 66.3 2.5 0.0 Portugal 10718 11633 10638 10985 12131 12107 160.3 4.0 0.0 Qatar 18991 21780 29409 28540 29739 31523 417.5 5.0 0.0 Romania 1872 1585 1650 1793 2043 2144 28.4 1.0 0.0 Russian Federation. 1896 1330 1785 2146 2417 2558 33.9 1.5 0.0 Saudi Arabia 7711 8099 9051 8868 8882 9023 119.5 3.5 0.0 Senegal 501 512 462 465 480 494 6.5 0.0 0.0 Serbia & Montenegro 1500 1500 1400 1442 1442 1442 19.1 0.5 0.0 Sierra Leone 188 145 144 163 231 245 3.2 0.0 0.0 Singapore 20972 20922 22148 20547 21053 21380 283.2 5.0 0.0 Slovak Republic 4082 3741 3656 3789 4387 4571 60.5 3.0 0.5 Slovenia 9892 10086 8354 8877 9499 9738 129.0 3.5 0.0 Somalia 100 100 100 100 100 100 1.3 0.0 0.0 South Africa 3173 3045 2929 2576 2317 2337 31.0 1.5 0.0 Spain 14935 15264 14221 14482 15893 15877 210.3 4.5 0.0 Sri Lanka 841 822 843 820 868 912 12.1 0.5 0.0 Sudan 364 325 354 376 406 421 5.6 0.0 0.0 Suriname 2000 2047 1932 1881 2050 2089 27.7 1.0 0.0 Sweden 28054 28395 27032 24852 27340 27750 367.5 5.0 0.0 Switzerland 36859 36278 33484 33996 36674 36455 482.8 5.0 0.0 Syria 4514 4529 4895 4873 4969 4950 65.6 2.5 0.0 Taiwan 12200 13026 13874 12551 12517 12841 170.1 4.0 0.0 Tanzania 257 261 264 262 267 273 3.6 0.0 0.0 Thailand 1829 1992 1967 1833 1991 2054 27.2 1.0 0.0 Togo 322 315 269 295 297 302 4.0 0.0 0.0 Trinidad & Tobago 4772 5054 6256 6885 7107 7278 96.4 3.0 0.0 Tunisia 2123 2199 2036 2069 2148 2219 29.4 1.0 0.0 Turkey 3160 2873 2957 2122 2617 2661 35.2 1.5 0.0 Uganda 330 299 278 271 268 277 3.7 0.0 0.0 Ukraine 829 614 631 774 851 900 11.9 0.5 0.0 United Arab Emirates 16716 18687 26912 26117 26379 26977 357.3 5.0 0.0 United Kingdom 24018 24543 24202 24034 26284 26730 354.0 5.0 0.0 United States 32488 34010 35692 35401 35436 35333 467.9 5.0 0.0 Uruguay 6799 6317 6012 5524 3645 3550 47.0 2.0 0.0 Venezuela 4089 4357 5017 5124 3825 3304 43.8 2.0 0.0 Vietnam 358 372 404 416 432 452 6.0 0.0 0.0 Yemen, Republic 344 380 420 353 357 571 7.6 0.0 0.0 Zambia 332 324 332 346 332 343 4.5 0.0 0.0 Zimbabwe 500 429 435 356 384 327 4.3 0.0 0.0 Average 6950 7133 7180 7112 7472 7551

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TABLE 8

REAL GDP GROWTH

This table shows the estimated annual GDP growth at constant 1990 prices for the current month and for the preceding five years. Risk points are awarded in proportion to the rate of growth as outlined in the Guide to ICRG. The final column in the table shows the risk points assessed for the current estimated real GDP growth and the change, if any, from the previous month’s risk points.

Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania 8.0 7.3 7.8 6.5 4.7 4.3 9.0 0.0 Algeria 5.1 3.2 2.4 2.1 2.3 6.8 10.0 0.0 Angola 5.5 2.7 3.5 5.2 8.5 6.0 10.0 0.0 Argentina 3.9 -3.4 -0.8 -4.4 -11.0 3.5 8.5 0.0 Armenia 7.3 3.3 6.0 6.5 6.0 10.0 10.0 0.0 Australia 5.3 4.7 8.0 2.3 3.8 3.0 8.5 0.0 Austria 3.2 3.7 3.5 0.7 1.0 0.9 6.0 0.0 Azerbaijan 10.0 7.4 11.1 9.9 10.6 9.0 10.0 0.0 Bahamas 3.0 5.9 4.9 -2.0 0.7 2.0 7.5 0.0 Bahrain 4.8 2.3 4.0 4.0 4.0 4.0 9.0 0.0 Bangladesh 5.2 4.9 5.9 5.3 4.8 5.0 9.5 0.0 Belarus 8.4 3.4 5.8 4.7 4.7 4.0 9.0 0.0 Belgium 2.0 3.2 3.7 0.8 0.6 0.9 6.0 -0.5 Bolivia 5.0 0.4 2.4 1.2 2.8 2.5 8.0 0.0 Botswana 8.1 4.1 7.7 8.9 2.3 3.5 8.5 0.0 Brazil 0.2 0.8 4.4 4.4 1.5 1.6 7.0 -0.5 Brunei 2.0 2.5 3.0 2.7 3.8 3.9 8.5 0.0 Bulgaria 3.5 2.5 4.0 4.0 4.8 4.2 9.0 0.0 Burkina Faso 5.5 6.4 1.6 4.6 4.6 2.6 8.0 0.0 Cameroon 5.0 4.4 4.2 5.3 4.4 4.5 9.0 0.0 Canada 3.6 4.6 4.7 1.5 3.4 2.4 7.5 0.0 Chile 9.9 -0.9 4.4 2.8 2.4 3.2 8.5 0.0 China, Peoples' Rep. 7.8 7.2 8.0 7.3 8.0 6.9 10.0 0.0 Colombia 0.6 -4.2 2.9 1.3 1.5 2.8 8.0 0.0 Congo, Dem. Republic -1.8 -4.2 -6.9 0.9 3.0 4.2 9.0 0.0 Congo, Republic 3.8 -3.2 8.1 3.6 3.5 -0.5 4.5 0.0 Costa Rica 8.5 8.2 1.8 1.1 2.7 2.0 7.5 0.0 Cote d'Ivoire 5.8 1.6 -2.3 -0.9 0.0 1.0 6.5 0.0 Croatia 2.5 -0.4 3.7 4.1 3.5 3.5 8.5 0.0 Cuba 1.3 6.2 5.5 2.5 1.1 0.5 6.0 0.0 Cyprus 5.0 4.5 4.8 3.4 2.5 2.5 8.0 0.0 Czech Republic -1.1 0.5 3.2 3.1 2.0 2.7 8.0 0.0 Denmark 2.5 2.6 2.9 1.5 1.6 1.3 6.5 -0.5 Dominican Republic 7.4 8.0 7.4 3.2 4.2 -2.0 3.0 0.0 Ecuador 0.5 -7.3 2.3 5.6 3.0 2.8 8.0 0.0 Egypt 4.5 6.3 5.1 3.5 2.9 1.8 7.0 0.0 El Salvador 3.8 3.5 2.2 1.8 2.1 2.5 8.0 0.0 Estonia 5.0 -0.7 6.9 5.4 4.1 4.1 9.0 0.0 Ethiopia -1.4 6.0 5.4 7.7 5.0 6.0 10.0 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Finland 5.3 3.6 5.6 0.6 1.6 1.8 7.0 -1.0 France 3.5 3.1 3.7 1.8 1.6 1.1 6.5 0.0 Gabon 3.5 -9.6 -1.9 1.5 1.0 1.5 7.0 0.0 Gambia 3.5 6.4 5.6 6.0 6.0 6.0 10.0 0.0 Germany 1.9 2.1 2.8 0.6 0.2 0.1 5.5 0.0 Ghana 4.7 4.4 3.7 4.2 4.5 4.7 9.0 0.0 Greece 3.3 3.6 4.1 4.1 4.0 3.7 8.5 0.0 Guatemala 5.0 3.9 3.6 2.3 2.3 2.5 8.0 0.0 Guinea 4.5 3.9 1.8 3.5 3.8 4.0 9.0 0.0 Guinea-Bissau -28.1 7.8 9.3 8.5 8.2 8.2 10.0 0.0 Guyana -1.7 3.0 -1.4 1.4 1.9 1.9 7.0 0.0 Haiti 2.2 2.7 0.9 -1.2 -0.9 -0.5 4.5 0.0 Honduras 2.9 -1.9 5.7 2.6 2.6 2.0 4.5 0.0 Hong Kong -4.9 3.4 10.2 0.6 2.3 2.1 7.5 0.0 Hungary 4.8 4.2 5.2 3.8 3.3 3.3 8.5 -0.5 Iceland 5.0 3.6 5.5 3.0 -0.5 2.1 7.5 0.0 India 6.0 7.1 4.0 5.5 4.4 5.5 9.5 0.0 Indonesia -13.1 0.7 5.0 3.3 3.7 3.4 8.5 0.0 Iran 3.8 1.7 5.1 5.0 5.8 4.6 9.0 0.0 Iraq 1.5 1.0 2.0 2.3 -3.0 -3.0 2.0 0.0 Ireland 8.8 11.1 10.0 5.7 6.3 3.5 8.5 0.0 Israel 3.0 2.7 7.4 -0.9 -1.0 0.5 6.0 1.0 Italy 1.8 1.6 3.2 1.8 0.4 0.6 6.0 -0.5 Jamaica -0.3 -0.4 0.6 1.8 1.0 1.5 7.0 0.0 Japan -1.0 0.8 2.3 0.4 0.1 0.9 6.0 0.0 Jordan 3.0 3.1 4.0 4.2 5.1 5.1 9.5 0.0 Kazakhstan -1.9 2.7 9.8 13.5 9.5 7.8 10.0 0.0 Kenya 0.8 1.4 -0.2 1.2 0.9 2.0 7.5 0.0 Korea, D.P.R. -7.0 6.2 1.3 3.7 3.2 1.8 7.0 0.0 Korea, Republic -6.7 10.9 9.3 3.1 6.4 2.7 8.0 -1.0 Kuwait 3.1 -1.7 3.9 -1.1 -0.7 2.5 8.0 0.5 Latvia 4.8 2.8 6.6 7.9 6.1 6.0 10.0 0.0 Lebanon 7.3 8.8 9.0 -1.6 1.6 3.3 8.5 0.0 Liberia 28.5 22.9 22.4 4.9 3.3 -2.0 3.0 -2.0 Libya -1.0 0.7 4.4 0.6 2.0 3.0 8.5 0.0 Lithuania 5.1 -3.9 3.3 3.6 4.3 4.3 9.0 0.0 Luxembourg 5.8 6.0 7.5 3.5 2.7 2.7 8.0 0.0 Madagascar 3.9 4.7 4.8 6.0 1.0 1.0 6.5 0.0 Malawi 6.6 2.6 4.0 3.2 3.0 1.0 6.5 0.0 Malaysia -7.4 6.1 8.4 0.4 4.1 3.9 8.5 0.0 Mali 4.9 6.6 4.3 -1.2 0.0 0.0 5.5 0.0 Malta 3.4 4.1 3.5 3.5 3.5 3.5 8.5 0.0 Mexico 5.0 3.6 6.5 -0.2 0.7 2.4 7.5 0.0 Moldova -6.5 -3.4 2.1 6.1 4.8 4.8 9.0 0.0 Mongolia 4.0 3.5 3.2 1.1 1.4 3.0 6.5 0.0 Morocco 7.7 -0.1 1.0 6.4 4.5 4.1 9.0 0.0 Mozambique 11.3 11.9 7.3 3.8 8.0 6.0 10.0 0.0 Myanmar 5.8 10.9 6.2 4.8 4.2 2.0 7.5 0.0 Namibia 4.2 3.3 3.4 3.3 2.7 2.8 8.0 0.0 Netherlands 3.6 3.9 3.3 1.3 0.2 0.5 6.0 0.0 New Zealand -0.4 4.1 2.0 4.4 4.8 2.6 8.0 0.0 Nicaragua 4.1 7.4 5.9 3.1 1.0 2.2 7.5 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Niger 2.4 10.4 -0.6 -1.4 5.1 4.0 9.0 0.0 Nigeria 2.3 2.7 3.6 4.2 2.8 3.1 8.5 0.0 Norway 2.6 2.2 2.8 1.9 1.1 1.0 6.5 0.0 Oman 2.7 -0.3 5.5 9.3 1.8 1.7 7.0 0.0 Pakistan 2.6 3.6 4.3 2.7 4.4 4.9 9.0 0.0 Panama 8.7 4.3 3.3 0.4 0.7 1.3 6.5 0.0 Papua New Guinea -1.1 4.7 -1.3 -3.4 -3.1 0.2 5.5 -0.5 Paraguay -0.4 0.5 -0.4 2.7 -4.4 -1.2 4.0 0.0 Peru -0.5 1.0 3.1 0.5 5.3 3.6 8.5 0.0 Philippines -0.5 3.4 3.9 3.4 4.6 3.8 8.5 0.0 Poland 4.9 4.0 4.0 1.0 1.3 2.5 8.0 0.0 Portugal 4.6 3.8 3.7 1.7 0.4 -0.1 5.0 -1.0 Qatar 6.2 5.3 11.6 7.2 6.0 6.0 10.0 0.0 Romania -4.8 -1.2 2.2 5.6 4.9 4.8 9.0 -0.5 Russian Federation. -4.9 5.4 9.0 5.0 4.3 5.1 9.5 0.0 Saudi Arabia 2.9 -0.8 4.9 1.2 0.7 2.5 8.0 0.0 Senegal 5.7 5.1 5.5 5.6 5.0 5.0 9.5 0.0 Serbia & Montenegro 1.9 -15.7 5.0 5.0 5.0 5.0 9.5 0.0 Sierra Leone -6.6 0.1 -11.6 3.8 5.0 5.0 9.5 0.0 Singapore -0.2 6.9 10.8 -2.3 2.2 1.8 7.0 0.0 Slovak Republic 3.9 1.4 2.2 3.3 4.4 4.2 9.0 0.0 Slovenia 3.8 5.2 4.6 3.1 2.5 2.5 8.0 0.0 Somalia 0.0 0.0 0.0 0.0 0.0 0.0 5.5 0.0 South Africa 0.7 2.0 3.5 2.8 3.0 2.4 7.5 -1.0 Spain 3.9 4.8 4.2 2.7 2.0 1.9 7.0 -0.5 Sri Lanka 4.7 4.3 6.1 -1.5 2.9 5.1 9.5 0.0 Sudan 5.0 6.9 6.9 5.3 5.0 6.0 10.0 0.0 Suriname 4.1 -4.8 -5.7 1.3 1.2 1.9 7.0 0.0 Sweden 3.6 4.7 4.4 1.1 1.9 1.5 7.0 0.0 Switzerland 2.4 1.5 3.2 0.9 0.1 0.2 5.5 0.0 Syria 7.6 -2.0 0.6 2.0 2.2 2.1 7.5 0.0 Taiwan 4.3 5.6 6.4 -1.6 4.1 3.0 8.5 0.0 Tanzania 3.5 -4.6 4.7 5.1 5.0 5.0 9.5 0.0 Thailand -10.4 4.4 4.6 1.9 5.2 4.1 9.0 0.0 Togo -2.1 2.7 -0.5 3.0 3.0 3.0 8.5 0.0 Trinidad & Tobago 7.8 4.4 6.1 3.3 2.7 4.0 9.0 0.0 Tunisia 4.8 6.0 4.7 4.8 1.7 4.5 9.0 0.0 Turkey 3.0 -4.7 7.2 -7.3 7.8 3.5 8.5 0.0 Uganda 5.4 7.8 7.0 7.0 6.0 6.0 10.0 0.0 Ukraine -1.9 -0.4 5.9 9.2 4.8 5.3 9.5 0.5 United Arab Emirates 1.4 4.4 12.3 3.5 1.8 3.8 8.5 0.0 United Kingdom 2.9 2.4 3.0 2.2 1.8 1.8 7.0 0.0 United States 4.3 4.1 3.7 0.2 2.5 2.2 7.5 0.0 Uruguay 4.5 -2.8 -1.4 -3.3 -10.8 -2.0 3.0 0.0 Venezuela -0.1 -6.0 3.2 2.8 -8.9 -12.0 0.0 0.0 Vietnam 5.7 4.7 6.8 6.9 7.0 6.5 10.0 0.0 Yemen, Republic 4.9 3.7 5.1 3.3 4.1 4.1 9.0 0.0 Zambia -2.0 2.4 4.0 4.9 3.0 3.4 8.5 0.0 Zimbabwe 2.9 -0.7 -4.9 -8.4 -13.5 -15.5 0.0 0.0

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TABLE 9

ANNUAL INFLATION RATE

This table shows the estimated annual inflation rate for the current month and for the preceding five years as an unweighted average of the Consumer Price Index. Risk points are awarded in proportion to the rate of inflation as outlined in the Guide to ICRG. The final columns in the table show the risk points assessed for the current estimated annual inflation rate and the change, if any, from the preceding month’s risk points.

Current Country Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania 20.9 0.4 0.0 3.1 5.6 5.3 8.5 0.0 Algeria 5.0 2.6 0.3 4.2 1.4 2.9 9.5 0.0 Angola 107.2 248.2 325.0 152.6 110.0 125.0 0.5 0.0 Argentina 0.9 -1.2 -0.9 -1.1 25.9 20.0 5.0 0.0 Armenia 8.7 0.7 -0.8 4.5 4.5 3.5 9.0 0.5 Australia 0.8 1.5 4.5 4.4 3.0 2.7 9.5 0.0 Austria 0.9 0.6 2.4 2.6 1.8 1.4 10.0 0.0 Azerbaijan -0.7 -8.6 1.8 1.5 2.5 3.0 9.0 0.0 Bahamas 1.3 1.3 1.6 2.0 2.0 2.0 9.5 0.0 Bahrain -0.4 1.5 1.5 2.5 2.1 2.1 9.5 0.0 Bangladesh 6.9 8.9 4.0 1.1 4.9 5.1 8.5 0.0 Belarus 72.9 251.2 107.5 46.1 34.8 30.0 4.0 0.0 Belgium 1.0 1.1 2.5 2.5 1.6 1.3 10.0 0.0 Bolivia 7.7 2.1 4.6 1.5 0.9 1.7 10.0 0.0 Botswana 6.7 7.7 8.7 6.6 8.1 8.5 7.5 0.0 Brazil 3.2 4.9 7.1 6.8 8.4 11.9 7.0 0.5 Brunei -3.0 -6.7 -0.6 2.3 1.0 1.0 10.0 0.0 Bulgaria 18.7 2.5 10.3 7.4 5.8 3.9 9.0 0.0 Burkina Faso 5.0 -1.1 -0.3 4.9 2.3 4.5 8.5 0.0 Cameroon 3.2 1.5 -2.1 4.6 2.7 4.5 8.5 0.0 Canada 1.0 1.7 2.7 2.6 2.2 3.0 9.0 0.0 Chile 5.3 3.3 3.8 3.6 2.5 2.9 9.5 0.0 China, Peoples' Rep. -0.8 -1.4 0.3 0.5 -0.4 0.2 10.0 0.0 Colombia 30.7 10.9 9.2 8.0 6.3 7.5 8.0 0.0 Congo, Dem. Republic 29.1 284.9 513.9 359.9 31.5 15.0 6.0 0.0 Congo, Republic 13.1 1.1 5.4 -0.8 5.8 4.9 8.5 0.0 Costa Rica 1.1 5.4 -0.8 0.1 4.3 7.5 8.0 -1.0 Cote d'Ivoire 4.5 0.7 2.4 4.3 3.1 4.7 8.5 0.0 Croatia 5.4 4.4 7.4 2.6 3.0 3.0 9.0 0.0 Cuba 2.9 -2.9 -3.0 0.5 2.5 2.5 9.5 0.0 Cyprus 2.2 1.7 5.0 4.5 2.5 2.5 9.5 0.0 Czech Republic 10.7 2.1 3.9 4.7 1.8 2.0 9.5 0.0 Denmark 1.8 2.4 2.9 2.3 2.4 2.0 9.5 0.0 Dominican Republic 4.5 6.4 7.7 8.9 10.0 20.3 5.0 0.0 Ecuador 36.1 52.3 96.1 37.7 12.5 10.5 7.0 0.0 Egypt 4.2 3.1 2.7 2.3 2.7 5.1 8.5 0.0 El Salvador 2.5 0.5 2.3 3.8 1.8 2.1 9.5 0.0 Estonia 8.1 3.3 4.0 3.5 3.0 3.0 9.0 0.0 Ethiopia 2.6 7.9 0.7 -8.1 -5.0 -2.0 10.0 0.0 Finland 1.4 1.2 3.4 2.5 1.6 1.5 10.0 0.5

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Current Country Current Risk 1998 1999 2000 2001 2002 09/03 Points France 0.7 0.6 1.7 1.6 1.9 1.6 10.0 0.0 Gabon 2.3 -0.7 0.5 2.1 2.7 2.8 9.5 0.0 Gambia 1.1 3.8 0.9 4.0 3.0 3.0 9.0 0.0 Germany 1.0 0.6 2.0 2.4 1.3 0.9 10.0 0.0 Ghana 14.6 12.4 25.2 32.9 14.8 15.0 6.0 0.0 Greece 4.7 2.7 3.1 3.4 3.6 2.8 9.5 0.0 Guatemala 7.0 4.9 6.0 7.6 8.1 8.0 7.5 0.0 Guinea 5.1 4.6 6.8 7.0 7.0 7.5 8.0 0.0 Guinea-Bissau 8.0 -2.1 9.1 2.2 3.5 3.5 9.0 0.0 Guyana 4.6 7.5 6.2 2.6 6.1 5.5 8.5 0.0 Haiti 10.6 8.7 13.7 14.2 9.9 18.0 5.5 0.0 Honduras 13.7 11.6 11.1 9.7 7.7 7.5 8.0 0.0 Hong Kong 2.8 -4.0 -3.8 -1.6 -3.0 -1.5 10.0 0.0 Hungary 14.2 10.0 9.8 9.2 5.3 5.3 8.5 0.0 Iceland 1.7 3.4 5.0 6.7 5.2 5.2 8.5 0.0 India 13.2 4.7 4.0 3.7 4.4 4.2 8.5 0.0 Indonesia 57.7 20.3 4.5 12.0 11.4 8.0 7.5 0.0 Iran 17.8 20.1 14.5 11.3 14.3 13.0 6.5 0.0 Iraq 50.0 40.0 40.0 38.0 40.0 55.0 2.5 0.0 Ireland 2.4 1.6 5.6 4.9 4.7 4.6 8.5 0.0 Israel 5.4 5.2 1.2 1.1 5.6 1.8 10.0 0.5 Italy 2.0 1.7 2.5 2.7 2.5 2.5 9.5 0.0 Jamaica 8.7 5.9 8.2 7.0 7.1 8.5 7.5 0.0 Japan 0.7 -0.3 -0.7 -0.7 -1.0 -0.3 10.0 0.0 Jordan 3.1 0.6 0.7 1.8 3.2 3.2 9.0 0.0 Kazakhstan 7.1 8.3 13.2 8.3 5.9 6.0 8.0 0.0 Kenya 6.8 5.7 10.0 5.7 1.9 5.3 8.5 0.0 Korea, D.P.R. 30.0 -0.1 9.7 2.5 4.1 4.1 8.5 0.0 Korea, Republic 7.5 0.8 2.3 4.0 2.8 4.0 8.5 0.0 Kuwait 0.2 3.0 1.9 1.6 1.3 2.3 9.5 0.5 Latvia 4.7 2.4 2.7 2.3 3.0 1.5 10.0 0.0 Lebanon 10.0 8.0 12.0 1.5 3.0 3.5 9.0 0.0 Liberia 20.0 2.0 5.3 12.1 14.2 20.0 5.0 0.0 Libya 24.2 2.6 -2.9 -8.5 5.0 6.0 8.0 0.0 Lithuania 5.1 0.8 1.0 0.6 2.2 2.2 9.5 0.0 Luxembourg 1.0 1.0 3.2 2.7 2.0 2.0 9.5 0.0 Madagascar 6.2 9.9 11.9 5.0 8.0 8.0 7.5 0.0 Malawi 9.1 29.7 44.9 30.7 20.0 25.0 4.0 0.0 Malaysia 5.3 2.8 1.6 1.4 1.9 2.2 9.5 0.0 Mali 4.1 -1.2 -0.7 4.5 4.5 4.5 8.5 0.0 Malta 2.4 2.1 3.3 3.0 3.0 3.0 9.0 0.0 Mexico 15.9 16.6 9.5 6.3 5.1 4.3 8.5 0.0 Moldova 7.7 13.8 17.8 20.8 23.2 23.2 4.5 0.0 Mongolia 36.6 9.4 7.6 11.6 8.8 8.8 7.5 0.0 Morocco 2.9 0.7 1.9 0.6 2.8 2.4 9.5 0.0 Mozambique 5.5 0.6 3.1 12.3 7.0 7.0 8.0 0.0 Myanmar 51.5 18.4 -0.1 21.1 57.1 50.0 3.0 0.0 Namibia 8.8 6.2 8.6 9.3 9.3 8.0 7.5 0.0 Netherlands 2.0 2.2 2.6 4.5 3.5 2.5 9.5 0.0 New Zealand 1.3 -0.1 2.6 2.7 2.6 1.8 10.0 0.0 Nicaragua 13.0 11.2 11.5 7.3 4.0 5.0 8.5 0.0 Niger 2.9 4.5 -2.3 2.9 3.9 3.4 9.0 0.0

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Current Country Current Risk 1998 1999 2000 2001 2002 09/03 Points Nigeria 10.3 4.8 14.5 13.0 12.9 13.5 6.5 0.0 Norway 2.2 2.4 3.0 3.0 1.3 2.5 9.5 0.0 Oman -0.8 0.4 -1.1 -1.0 -0.7 1.0 10.0 0.0 Pakistan 6.3 4.1 4.3 3.2 1.6 4.5 8.5 0.0 Panama 0.7 1.3 1.4 0.3 1.0 1.7 10.0 1.5 Papua New Guinea 13.6 14.9 15.6 9.3 11.8 13.5 6.5 0.0 Paraguay 11.5 6.8 8.9 7.3 10.5 17.8 5.5 0.0 Peru 7.3 3.5 3.7 2.0 0.1 2.8 9.5 0.0 Philippines 9.7 6.7 4.4 6.1 3.1 4.0 8.5 0.0 Poland 11.7 7.3 10.2 5.5 1.9 1.1 9.5 0.0 Portugal 2.8 2.3 2.9 4.4 3.5 3.0 9.0 -0.5 Qatar 2.9 3.0 3.0 3.0 2.5 2.5 9.5 0.0 Romania 59.1 45.8 45.7 34.5 22.5 18.0 5.5 0.0 Russian Federation. 27.7 85.7 20.8 21.5 15.8 14.5 6.0 0.0 Saudi Arabia -0.4 -1.6 -0.8 -0.4 -0.5 1.3 10.0 0.0 Senegal 1.1 0.8 0.7 3.0 2.3 2.3 9.5 0.0 Serbia & Montenegro 29.8 42.4 71.8 87.0 87.0 87.0 1.5 0.0 Sierra Leone 14.9 35.5 34.1 36.7 30.0 30.0 4.0 0.0 Singapore -0.3 0.1 1.4 1.0 -0.4 0.6 10.0 0.0 Slovak Republic 6.7 10.6 12.0 7.3 3.3 8.4 7.5 0.0 Slovenia 6.5 8.0 8.9 7.0 5.8 5.8 8.5 0.0 Somalia 50.0 40.0 30.0 30.0 30.0 30.0 4.0 0.0 South Africa 6.9 5.3 5.3 4.8 8.9 5.0 8.5 0.5 Spain 1.8 2.3 3.5 3.6 3.1 3.0 9.0 0.0 Sri Lanka 9.4 4.7 6.2 14.2 9.5 8.3 7.5 -0.5 Sudan 17.1 16.0 8.0 4.9 6.0 9.0 7.5 0.0 Suriname 19.0 98.9 70.9 16.0 23.0 15.0 6.0 0.0 Sweden -0.3 0.5 0.9 2.4 2.2 2.2 9.5 0.0 Switzerland 0.1 0.8 1.6 1.0 0.7 0.8 10.0 0.0 Syria -0.8 -1.9 -0.5 0.5 0.9 2.7 9.5 0.0 Taiwan 1.7 0.2 1.3 0.0 -0.2 0.5 10.0 0.0 Tanzania 16.1 12.8 7.9 6.3 5.8 5.8 8.5 0.0 Thailand 8.1 0.2 1.6 1.7 0.6 1.4 10.0 0.0 Togo -1.4 4.5 -2.5 1.0 1.0 1.0 10.0 0.0 Trinidad & Tobago 5.6 3.4 3.5 5.5 4.1 4.0 8.5 0.0 Tunisia 3.2 2.7 2.9 2.0 2.8 2.8 9.5 0.0 Turkey 84.6 64.9 54.9 54.4 45.0 26.0 4.0 0.0 Uganda 6.9 -0.2 6.4 7.2 6.0 6.0 8.0 0.0 Ukraine 10.6 22.7 28.2 12.0 0.8 7.4 8.0 0.0 United Arab Emirates 2.0 2.1 1.4 2.2 2.8 2.6 9.5 0.0 United Kingdom 3.4 1.6 2.9 1.8 1.6 2.6 9.5 0.0 United States 1.6 2.1 3.4 2.8 1.5 2.1 9.5 0.0 Uruguay 10.8 5.6 4.8 4.3 14.0 21.0 5.0 0.0 Venezuela 35.8 23.6 16.2 12.5 22.4 32.0 3.5 0.0 Vietnam 7.2 4.1 -1.7 -0.4 3.9 4.2 8.5 0.0 Yemen, Republic 11.5 8.0 10.9 11.9 15.8 15.8 6.0 0.0 Zambia 24.5 26.8 30.0 18.7 23.8 20.5 5.0 0.0 Zimbabwe 31.8 58.5 55.9 76.7 140.1 380.0 0.0 0.0

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TABLE 10

BUDGET BALANCE AS A PERCENTAGE OF GDP

This table shows the estimated general government budget balance for the current month and for the preceding five years as percentage of the estimated GDP for the year in question. Risk points are awarded in proportion to percentage budget balance as outlined in the Guide to ICRG. The final column in the table shows the risk points assessed for the percentage budget balance and the change, if any, from the previous month’s risk points.

Current Country Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania -10.4 -11.4 -9.1 -8.5 -7.5 -7.0 4.0 0.0 Algeria -3.8 -0.5 9.8 3.4 -0.9 0.5 8.0 0.0 Angola -14.1 -15.1 0.3 2.8 -5.2 -4.0 5.5 0.0 Argentina -1.4 -2.9 -2.4 -3.3 -1.1 -1.9 7.0 0.0 Armenia -4.8 -7.2 -6.4 -4.0 -3.0 -0.3 7.5 1.5 Australia 0.2 0.7 1.9 0.7 -0.6 0.5 8.0 0.0 Austria -2.7 -2.4 -1.4 -0.7 -1.6 -0.9 7.5 0.0 Azerbaijan -4.1 -2.4 -1.0 -0.4 -0.3 -0.5 7.5 0.0 Bahamas -1.7 -1.6 -0.8 -0.4 -3.4 -2.8 6.5 0.0 Bahrain -6.5 -6.6 -4.0 -3.0 -3.0 -3.0 6.0 0.0 Bangladesh -3.4 -4.6 -6.1 -5.5 -4.4 -4.2 5.5 0.0 Belarus -0.3 -2.2 -1.0 -3.1 -1.9 -2.0 6.5 0.0 Belgium -1.8 -0.7 0.0 0.2 -0.3 0.2 8.0 0.0 Bolivia -4.1 -4.1 -4.4 -7.5 -9.7 -6.5 4.5 0.0 Botswana 4.8 -6.0 6.1 9.0 -2.8 -2.0 6.5 0.0 Brazil -7.8 -9.9 -4.3 -4.2 -3.8 -3.8 6.0 0.5 Brunei 0.5 0.4 0.6 0.4 0.1 -0.2 6.5 0.0 Bulgaria 2.7 1.5 0.6 1.9 -0.1 -1.0 7.0 0.0 Burkina Faso -9.8 -12.7 -1.4 -2.6 -3.8 -4.5 5.5 0.0 Cameroon 1.5 0.1 1.4 2.4 1.9 1.5 8.5 0.0 Canada 0.3 0.9 1.3 1.3 0.5 0.3 8.0 0.0 Chile 0.4 -1.4 0.1 -0.3 -0.8 -1.0 7.0 0.0 China, Peoples' Rep. -1.6 -2.5 -3.1 -4.4 -3.0 -3.0 6.0 0.0 Colombia -4.9 -5.9 -6.8 -5.9 -5.6 -5.0 5.0 0.0 Congo, Dem. Republic -7.4 -3.0 -2.4 -1.1 -1.6 -3.0 6.0 0.0 Congo, Republic -20.0 -5.5 1.2 5.4 -8.2 -6.0 4.5 -4.0 Costa Rica -2.5 -2.2 -2.9 -2.7 -5.1 -4.0 5.5 0.0 Cote d'Ivoire -1.2 -0.2 -1.3 0.9 1.1 0.5 8.0 0.0 Croatia 0.6 -0.8 -6.3 -6.6 -6.6 -6.6 4.5 0.0 Cuba -2.2 -2.2 -2.2 -2.5 -3.8 -3.8 6.0 0.0 Cyprus -5.6 -4.5 -4.8 -2.9 -2.2 -2.2 6.5 0.0 Czech Republic -1.6 -1.6 -2.3 -3.1 -2.0 -2.2 6.5 0.0 Denmark 1.7 0.5 1.6 1.7 -0.1 0.5 8.0 -0.5 Dominican Republic 0.9 -0.5 1.1 0.3 0.1 -0.5 7.5 0.0 Ecuador 0.4 -0.7 0.6 0.6 0.8 0.6 8.0 0.0 Egypt -0.9 -0.1 -1.2 -2.2 -2.5 -2.5 6.5 0.0 El Salvador -1.8 -2.2 -2.3 -3.6 -3.2 -2.8 6.5 0.0 Estonia -0.3 -4.6 -0.3 0.0 0.0 0.0 8.0 0.0 Ethiopia -4.3 -5.2 -8.3 -7.6 -8.3 -8.2 3.5 0.0 Finland -0.3 2.7 3.5 0.7 0.0 0.2 8.0 0.0

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Current Country Current Risk 1998 1999 2000 2001 2002 09/03 Points France -3.0 -2.5 -2.4 -2.5 -3.1 -3.5 6.0 0.0 Gabon -14.5 1.1 11.8 7.5 0.0 2.0 9.0 0.0 Gambia -2.4 -3.5 -1.4 -7.6 -2.2 -2.2 6.5 0.0 Germany -2.2 -1.5 1.1 -2.8 -3.1 -3.0 6.0 0.0 Ghana -6.0 -6.5 -8.6 -7.2 -5.0 -4.5 5.5 -1.0 Greece -5.9 -5.0 -4.3 -4.0 -3.5 -3.2 6.0 0.0 Guatemala -2.2 -2.8 -1.8 -1.9 -0.7 -1.0 7.0 0.0 Guinea -2.9 -1.5 -5.5 -0.2 -2.9 -2.9 6.5 0.0 Guinea-Bissau -19.4 -14.4 -17.9 -22.7 -20.9 -20.9 1.0 0.0 Guyana -8.3 -2.9 -7.1 -9.5 -7.8 -6.5 4.5 0.0 Haiti -1.1 -2.4 -2.2 -2.3 -2.5 -3.0 6.0 0.0 Honduras -0.4 -1.5 -4.3 -6.4 -4.0 -4.0 5.5 0.0 Hong Kong -1.8 0.8 -0.6 -5.0 -4.8 -2.5 6.5 0.0 Hungary -6.3 -3.7 -3.4 -3.0 -7.5 -6.0 4.5 0.0 Iceland 0.5 2.4 2.4 -0.1 -0.5 -0.5 7.5 0.0 India -5.3 -5.8 -5.3 -4.7 -5.9 -5.9 5.0 0.0 Indonesia -3.0 -1.2 -5.2 -1.2 -1.7 -1.5 7.0 0.0 Iran -5.2 -0.2 -0.6 -0.5 -5.2 -3.0 6.0 0.0 Iraq -8.0 -8.0 -8.0 -8.0 -8.0 -10.0 2.5 0.0 Ireland 2.0 1.7 3.1 1.8 -0.2 -0.3 7.5 0.0 Israel -1.4 -2.0 0.9 -3.7 -4.0 -3.0 6.0 0.0 Italy -2.3 0.0 -1.3 -3.3 -2.6 -2.8 6.5 0.0 Jamaica -7.6 -6.5 -3.8 -0.9 -5.6 -5.0 5.0 0.0 Japan -7.9 -7.1 -8.3 -9.2 -8.0 -8.0 3.5 0.0 Jordan -6.0 -3.5 -4.7 -3.7 -4.1 -4.1 5.5 0.0 Kazakhstan -4.4 -3.3 -0.2 -0.4 0.0 -0.4 7.5 0.0 Kenya -0.7 -0.7 0.9 -1.7 -2.8 -3.0 6.0 0.0 Korea, D.P.R. -10.0 -10.0 -10.0 -10.0 -10.0 -10.0 2.5 0.0 Korea, Republic -3.8 -2.7 1.3 1.3 2.1 1.5 8.5 0.0 Kuwait -6.0 4.3 26.9 37.6 22.3 25.0 10.0 0.0 Latvia -0.8 -3.9 -3.2 -2.2 -2.7 -2.5 6.5 0.0 Lebanon -35.8 -29.0 -26.8 -23.6 -19.2 -14.7 2.0 0.0 Liberia -0.4 -0.4 -0.6 -0.7 -1.3 -5.0 5.0 0.0 Libya -0.7 3.4 -3.4 2.1 2.0 2.0 9.0 0.0 Lithuania -5.9 -8.5 -2.8 -1.4 -1.4 -1.4 7.0 0.0 Luxembourg 3.2 3.8 5.8 5.2 1.0 1.0 8.5 0.0 Madagascar -6.3 -2.5 -4.0 -6.5 -6.0 -6.0 4.5 0.0 Malawi -8.1 -5.5 -5.0 0.0 0.0 -3.0 6.0 0.0 Malaysia -1.3 -3.2 -5.7 -5.5 -5.6 -5.0 5.0 0.0 Mali -8.1 -8.7 -9.8 -13.0 -13.0 -13.0 2.0 0.0 Malta -8.9 -8.6 -7.6 -6.0 -6.0 -6.0 4.5 0.0 Mexico -1.5 -1.6 -1.3 -0.7 -1.8 -1.8 7.0 0.0 Moldova -10.6 -5.3 -2.0 -0.7 -2.3 -2.3 6.5 0.0 Mongolia -4.1 -14.3 -12.2 -6.8 -7.4 -7.4 4.0 0.0 Morocco -2.1 -2.4 -5.9 -5.8 -4.5 -4.0 5.5 0.0 Mozambique -11.9 -10.6 -13.4 -16.7 -17.7 -17.7 1.5 0.0 Myanmar 0.5 -0.1 0.4 -0.3 -1.0 -1.0 7.0 0.0 Namibia -2.5 -3.9 -3.2 -1.5 -5.2 -4.0 5.5 0.0 Netherlands -0.6 -1.6 -0.1 -0.8 -1.6 -0.5 7.5 0.0 New Zealand 0.5 1.9 -0.4 1.6 1.1 1.3 8.5 0.0 Nicaragua -1.9 -5.0 -7.8 -11.3 -9.5 -10.0 2.5 0.0 Niger -3.0 -8.2 -9.0 -7.6 -7.2 -7.9 4.0 0.0

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Current Country Current Risk 1998 1999 2000 2001 2002 09/03 Points Nigeria -13.0 -5.1 6.5 -3.3 -5.9 -4.9 5.5 0.0 Norway -2.9 -3.8 10.5 15.8 9.4 8.0 10.0 0.0 Oman -7.0 -7.8 -4.7 -4.3 0.9 0.9 8.0 0.0 Pakistan -6.4 -6.9 -5.5 -4.7 -4.6 -3.5 6.0 0.0 Panama -0.7 0.4 0.3 -2.3 -1.4 -1.5 7.0 0.0 Papua New Guinea -1.6 -2.9 -1.8 -3.8 -4.0 -3.0 6.0 0.0 Paraguay -0.4 -3.4 -4.0 -0.9 -3.3 -3.5 6.0 0.0 Peru -0.2 -2.3 -1.8 -1.8 -2.3 -2.0 6.5 0.0 Philippines -1.9 -3.8 -4.1 -4.0 -5.3 -5.0 5.0 0.0 Poland -1.0 -0.8 0.3 -3.9 -5.5 -5.0 5.0 0.0 Portugal -1.3 -2.5 -1.8 -4.2 -2.7 -2.3 6.5 0.0 Qatar -10.4 -4.3 8.4 0.1 0.8 0.8 8.0 0.0 Romania -3.0 -1.7 -3.7 -2.9 -3.2 -3.0 6.0 -1.0 Russian Federation. -4.7 -1.2 2.4 3.0 1.7 1.0 8.5 0.0 Saudi Arabia -3.3 -7.3 -4.0 -3.5 -3.0 -3.0 6.0 0.0 Senegal -3.3 -3.5 -2.9 -3.8 -2.6 -2.6 6.5 0.0 Serbia & Montenegro -8.0 -7.0 -7.0 -6.0 -6.0 -6.0 4.5 0.0 Sierra Leone -7.0 -10.4 -10.3 -14.1 -10.0 -10.0 2.5 0.0 Singapore 16.8 10.4 11.5 -0.3 -1.2 -0.9 7.5 0.0 Slovak Republic -3.7 -3.2 -3.0 -3.2 -4.0 -4.0 5.5 0.0 Slovenia -0.6 -0.6 -1.4 -1.3 -2.6 -2.6 6.5 0.0 Somalia 0.0 0.0 0.0 0.0 0.0 0.0 8.0 0.0 South Africa -2.6 -1.8 -1.8 -1.0 -0.6 -1.0 7.0 0.0 Spain -0.9 -1.1 -0.3 -0.8 -0.7 0.2 8.0 0.0 Sri Lanka -8.0 -6.9 -9.5 -9.9 -8.9 -9.0 3.0 0.0 Sudan -0.6 -0.9 -1.0 -1.0 -2.3 -2.0 6.5 0.0 Suriname -13.4 -10.2 -12.9 0.0 -4.9 -4.9 5.5 0.0 Sweden 0.4 3.1 5.7 3.6 1.9 1.8 8.5 0.0 Switzerland 0.1 -0.6 0.9 0.3 -1.0 0.3 8.0 0.0 Syria -0.7 0.7 -0.7 -1.8 -3.3 -2.5 6.5 0.0 Taiwan 2.1 0.1 -0.5 -2.3 -2.7 -2.5 6.5 0.0 Tanzania 1.7 1.7 0.5 0.9 0.8 0.8 8.0 0.0 Thailand -2.8 -3.3 -2.2 -2.4 -1.5 -1.5 7.0 0.0 Togo -7.1 -3.9 -5.8 -4.0 -4.0 -4.0 5.5 0.0 Trinidad & Tobago -2.0 -3.4 1.6 1.8 -0.3 -0.5 7.5 0.0 Tunisia -0.9 -2.6 -3.7 -3.5 -3.1 -2.8 6.5 0.0 Turkey -8.4 -13.0 -11.5 -19.6 -14.2 -12.0 2.0 0.0 Uganda -0.7 -1.3 -1.4 -1.7 -2.0 -2.0 6.5 0.0 Ukraine -2.8 -2.4 -1.3 -0.7 -1.9 -2.0 6.5 0.0 United Arab Emirates -0.3 0.0 -0.2 -0.1 -0.8 0.0 8.0 0.0 United Kingdom 0.6 0.0 1.8 0.5 -1.9 -2.0 6.5 0.0 United States 0.6 1.7 2.6 0.9 -2.2 -3.0 6.0 0.0 Uruguay -0.8 -3.7 -3.4 -4.7 -4.6 -4.0 5.5 -0.5 Venezuela -3.8 -1.6 -1.7 -4.3 -3.8 -3.8 6.0 0.0 Vietnam -0.1 -1.6 -2.8 -2.9 -2.6 -2.7 6.5 0.0 Yemen, Republic -6.4 -0.2 8.5 2.8 0.4 0.4 8.0 0.0 Zambia -5.4 -3.6 -6.7 -4.6 -3.4 -7.0 4.0 0.0 Zimbabwe -4.4 -9.8 -30.2 -40.9 -29.1 -29.0 0.5 0.0

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TABLE 11

CURRENT ACCOUNT AS A PERCENTAGE OF GDP

This table shows the estimated annual balance of the current account of the balance of payments for the current month and for the preceding five years as percentage of the estimated GDP for the year in question. Risk points are awarded in proportion to percentage current account balance as outlined in the Guide to ICRG. The final column in the table shows the risk points assessed for the percentage current account balance and the change, if any, from the previous month’s risk points.

Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania -6.1 -7.3 -7.2 -6.3 -8.7 -7.7 9.5 0.0 Algeria -1.8 0.0 16.8 13.0 8.0 12.1 15.0 0.0 Angola -29.0 -28.1 9.0 -15.9 -6.5 -5.2 10.0 0.0 Argentina -4.9 -4.2 -3.1 -1.7 2.0 3.4 13.0 0.0 Armenia -27.1 -21.7 -19.9 -18.9 -18.9 -18.9 6.0 0.0 Australia -5.0 -5.9 -4.0 -2.4 -3.1 -4.3 10.0 0.0 Austria -2.5 -3.2 -2.5 -2.2 0.7 -0.2 11.5 0.0 Azerbaijan -35.1 -13.2 -3.2 -0.9 -12.6 -12.8 8.0 0.0 Bahamas -27.2 -10.5 -10.2 -8.0 -8.2 -10.9 8.5 0.0 Bahrain -17.0 -15.5 3.7 2.9 -2.7 -2.7 10.5 0.0 Bangladesh -0.1 -0.8 -0.7 -1.2 0.5 0.1 15.0 0.0 Belarus -6.1 -1.6 -2.5 -2.3 -2.0 -2.0 10.5 0.0 Belgium 4.9 5.6 5.0 4.1 4.7 4.9 13.5 0.0 Bolivia -7.9 -5.9 -5.4 -3.6 -4.0 -4.0 10.0 0.0 Botswana 3.6 11.2 11.2 12.2 9.9 7.4 14.0 0.0 Brazil -4.3 -4.7 -4.0 -4.6 -1.7 -0.5 11.5 0.5 Brunei 35.0 39.0 34.8 32.9 29.7 26.3 15.0 0.0 Bulgaria -0.5 -5.3 -5.6 -6.2 -4.4 -4.8 10.0 0.0 Burkina Faso -14.5 -16.0 -15.0 -13.6 -12.9 -14.2 7.5 0.0 Cameroon -2.5 -4.3 -1.7 -1.7 -4.1 -3.3 10.5 0.0 Canada -1.3 0.2 2.6 2.8 1.5 1.9 12.5 0.0 Chile -5.1 -0.4 -1.4 -1.9 -0.9 -0.2 11.5 0.0 China, Peoples' Rep. 3.3 2.1 1.9 1.5 1.2 0.5 12.0 0.0 Colombia -4.9 0.8 0.8 -1.5 -2.0 -2.0 10.5 0.0 Congo, Dem. Republic -11.1 -8.0 -1.3 -3.3 -3.6 -9.6 9.0 0.0 Congo, Republic -12.3 -9.8 20.2 -1.0 -0.9 -53.6 0.0 -12.5 Costa Rica -3.7 -4.3 -4.8 -4.3 -5.6 -4.9 10.0 0.0 Cote d'Ivoire -2.5 -1.1 -2.6 -0.7 -1.9 -1.9 11.0 0.0 Croatia -7.1 -6.9 -2.3 -3.1 -2.8 -2.8 10.5 0.0 Cuba -2.1 -2.2 -3.2 -2.1 -2.7 -2.6 10.5 0.0 Cyprus -0.1 1.2 1.1 -3.1 -3.1 -3.1 13.0 0.0 Czech Republic -2.3 -2.7 -5.2 -4.6 -5.3 -4.4 10.0 0.0 Denmark -1.2 1.7 1.6 2.5 2.9 2.4 13.0 0.5 Dominican Republic -2.2 -2.5 -5.3 -3.9 -4.2 -3.1 10.5 0.0 Ecuador -10.6 6.7 6.6 -4.7 -6.6 -3.1 10.5 0.0 Egypt -3.1 -1.8 -1.1 -0.5 0.0 -1.0 11.0 0.0 El Salvador -0.8 -1.9 -3.3 -1.3 -2.7 -2.7 10.5 0.0 Estonia -9.2 -4.7 -6.4 -6.5 -6.8 -6.8 9.5 0.0 Ethiopia -1.6 -7.9 0.2 -7.4 -6.1 -4.9 9.5 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Finland 5.7 6.3 7.5 7.1 7.5 6.6 14.0 0.0 France 2.6 2.4 1.6 1.6 1.8 1.8 12.5 0.0 Gabon -13.4 8.5 3.2 -0.9 -4.7 -5.9 10.0 0.0 Gambia -3.0 -4.4 -4.7 -6.7 -5.0 -5.0 10.0 0.0 Germany -0.3 -0.9 -1.1 0.1 2.3 1.8 12.5 0.0 Ghana -5.9 -12.1 -8.2 -5.3 0.7 -2.3 10.5 0.0 Greece -3.0 -5.8 -8.7 -8.0 -7.8 -6.5 9.5 0.0 Guatemala -5.4 -5.6 -5.4 -5.9 -5.1 -4.6 10.0 0.0 Guinea -3.5 -2.8 -2.8 -1.5 -0.7 -1.2 11.0 0.0 Guinea-Bissau -13.2 -12.4 -18.2 -22.7 -18.9 -18.9 6.0 0.0 Guyana -13.9 -11.8 -15.7 -17.6 -14.3 -16.6 7.0 0.0 Haiti -1.1 -1.5 -2.2 -2.9 -1.6 -6.4 9.5 0.0 Honduras -7.4 -11.4 -9.3 -10.5 -7.6 -6.7 9.5 0.0 Hong Kong 2.7 7.5 5.5 7.2 10.8 8.4 14.5 0.0 Hungary -4.9 -4.4 -2.9 -2.1 -4.0 -4.3 10.0 0.0 Iceland -7.0 -6.9 -10.1 -4.4 -2.0 -2.0 10.5 0.0 India -1.6 -0.7 -0.9 0.2 0.7 0.1 12.0 1.0 Indonesia 4.3 4.1 5.3 4.8 4.2 3.7 13.0 0.0 Iran -1.1 2.7 3.9 1.6 0.9 0.8 12.0 0.0 Iraq -1.1 -2.1 -1.0 -1.0 0.0 1.4 12.5 1.5 Ireland 1.2 0.4 0.6 -1.0 -0.1 -0.5 11.5 0.0 Israel -1.4 -2.0 -1.0 -2.1 -2.1 -0.5 11.5 1.0 Italy 1.7 0.7 -0.5 -0.1 -0.6 0.1 12.0 0.5 Jamaica -4.4 -2.9 -5.1 -10.2 -13.3 -1.0 11.0 0.0 Japan 3.0 2.6 2.5 2.1 2.7 2.8 13.0 0.0 Jordan 0.3 5.0 0.7 -0.1 -0.4 -0.4 11.5 0.0 Kazakhstan -5.8 -1.0 3.7 -5.8 -2.5 -2.3 10.5 0.0 Kenya -4.2 -0.9 -1.9 -2.8 -1.9 -2.1 10.5 0.0 Korea, D.P.R. -10.0 -0.1 0.2 0.2 -0.3 -0.3 11.5 0.0 Korea, Republic 12.7 6.0 2.7 1.9 1.3 0.2 12.0 0.5 Kuwait 8.8 17.3 39.7 25.0 22.9 22.1 15.0 0.0 Latvia -10.6 -9.7 -6.9 -9.6 -7.8 -7.0 9.5 0.0 Lebanon -40.2 -33.9 -33.0 -23.2 -22.8 -22.0 4.0 0.0 Liberia -11.5 -28.6 -15.9 -20.6 -5.1 -12.0 8.0 0.0 Libya -1.2 7.0 -3.5 6.6 8.4 7.6 14.0 0.0 Lithuania -12.1 -11.2 -6.0 -6.7 -5.8 -5.8 10.0 0.0 Luxembourg 8.8 6.5 8.2 4.6 4.1 4.1 13.5 0.0 Madagascar -7.4 -5.4 -7.5 -7.5 -6.6 -6.5 9.5 0.0 Malawi -9.3 -2.5 -8.3 -7.8 -7.7 -7.7 9.5 0.0 Malaysia 13.2 15.9 9.4 8.3 7.6 5.6 13.5 0.0 Mali -7.5 -9.3 -9.8 -13.0 -13.0 -13.0 8.0 0.0 Malta -4.7 -5.0 -4.9 -4.5 -4.5 -4.5 10.0 0.0 Mexico -3.8 -2.9 -3.1 -2.9 -2.2 -1.9 11.0 0.0 Moldova -16.7 -3.6 -8.4 -7.4 -7.2 -7.0 9.5 0.0 Mongolia 5.9 -13.2 -13.7 -17.2 -16.7 -16.7 7.0 0.0 Morocco -0.4 -0.5 -1.5 4.8 4.1 1.5 12.5 0.0 Mozambique -17.8 -21.3 -30.1 -28.5 -18.8 -18.8 6.0 0.0 Myanmar -0.2 -0.1 -0.1 -0.1 0.1 -0.1 11.5 0.0 Namibia 2.3 2.4 3.8 5.1 4.4 4.6 13.5 0.0 Netherlands 3.4 4.0 2.5 2.3 2.8 2.9 13.0 0.0 New Zealand -3.9 -6.3 -5.3 -2.8 -3.9 -3.2 10.5 0.0 Nicaragua -24.2 -31.2 -20.2 -21.9 -26.6 -23.3 3.5 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Niger -10.0 -9.5 -7.8 -7.8 -8.4 -8.1 9.0 0.0 Nigeria -9.0 1.4 5.0 2.8 -2.4 -2.0 10.5 0.0 Norway 0.0 5.3 15.5 15.6 13.8 11.4 15.0 0.0 Oman -20.9 -1.8 17.2 11.6 7.4 4.9 13.5 0.0 Pakistan -3.8 -1.5 -0.2 3.4 -0.7 6.9 14.0 0.0 Panama -11.5 -12.5 -8.5 -4.5 -1.5 -2.7 10.5 -0.5 Papua New Guinea -0.8 2.6 10.3 9.7 -2.6 0.7 12.0 0.0 Paraguay -1.9 -2.2 -3.8 -3.6 5.4 2.3 13.0 0.0 Peru -5.9 -2.9 -2.9 -2.0 -2.0 -1.9 11.0 0.0 Philippines 2.4 10.4 11.3 5.8 5.7 3.5 13.0 0.0 Poland -4.3 -8.1 -6.1 -2.9 -3.5 -3.8 10.5 0.0 Portugal -7.3 -8.5 -10.4 -9.4 -7.5 -5.8 10.0 0.0 Qatar -20.7 7.1 22.2 16.7 13.1 12.4 15.0 0.0 Romania -6.9 -3.7 -3.7 -5.6 -3.4 -4.1 10.0 -0.5 Russian Federation. 0.1 12.7 18.0 11.3 9.5 7.1 14.0 0.0 Saudi Arabia -9.0 0.3 7.6 7.8 4.8 5.6 13.5 0.0 Senegal -2.3 -2.3 -7.0 -4.3 -6.7 -6.7 9.5 0.0 Serbia & Montenegro -5.0 -7.5 -8.3 -17.7 -17.7 -17.7 6.5 0.0 Sierra Leone -1.0 -6.3 -2.8 -8.0 -6.0 -6.0 9.5 0.0 Singapore 24.0 20.0 17.4 21.1 21.6 17.5 15.0 0.0 Slovak Republic -9.7 -5.7 -3.5 -8.9 -8.2 -5.7 10.0 0.0 Slovenia -0.8 -3.9 -3.4 -0.4 -0.3 -0.3 11.5 0.0 Somalia -1.0 -1.0 -1.0 -1.0 -1.0 -1.0 11.0 0.0 South Africa -1.6 -0.5 -0.5 -0.3 0.3 -1.0 11.0 -0.5 Spain -0.5 -2.3 -3.4 -2.8 -2.4 -3.0 10.5 0.0 Sri Lanka -1.5 -3.6 -6.4 -1.7 -2.5 -2.8 10.5 0.0 Sudan -8.9 -4.7 -5.1 -5.2 -7.3 -5.4 10.0 -0.5 Suriname -18.3 -3.4 3.5 -10.1 -2.4 -2.4 10.5 0.0 Sweden 1.9 2.4 2.8 3.1 2.8 3.6 13.0 0.0 Switzerland 10.2 11.5 14.0 9.2 11.9 11.5 15.0 0.0 Syria 0.1 0.3 1.3 0.6 1.0 -0.1 11.5 0.0 Taiwan 1.3 2.9 2.9 6.4 9.1 7.7 14.0 0.0 Tanzania -12.0 -14.8 -15.9 -11.3 -11.0 -11.0 8.5 0.0 Thailand 12.7 10.1 7.6 5.4 6.0 2.8 13.0 0.0 Togo -16.1 -12.5 -14.1 -14.5 -14.5 -14.5 7.5 0.0 Trinidad & Tobago -10.6 0.5 6.7 4.7 1.1 3.6 13.0 0.0 Tunisia -3.4 -2.1 -4.2 -4.3 -3.6 -3.1 10.5 0.0 Turkey 1.0 -0.7 -4.9 2.3 -1.0 -2.5 10.5 0.0 Uganda -8.4 -8.9 -9.5 -7.9 -8.0 -8.0 9.0 0.0 Ukraine -3.1 5.4 4.7 3.7 7.7 3.9 13.0 0.0 United Arab Emirates 0.3 6.4 19.6 12.6 5.8 10.2 15.0 0.0 United Kingdom -0.6 -2.2 -2.0 -1.3 -0.8 -1.3 11.0 0.0 United States -2.3 -3.1 -4.2 -3.9 -4.6 -5.2 10.0 0.0 Uruguay -2.1 -2.4 -2.8 -2.6 2.1 1.2 12.5 0.0 Venezuela -3.4 3.5 10.8 3.1 8.0 12.4 15.0 0.0 Vietnam -3.9 4.1 3.5 2.1 -3.1 -2.7 10.5 -0.5 Yemen, Republic -2.8 2.8 14.1 6.8 4.0 4.0 13.5 0.0 Zambia -17.0 -13.4 -16.3 -19.8 -17.4 -19.3 5.5 0.0 Zimbabwe -5.7 0.5 -1.5 -1.4 -4.0 -9.7 9.0 0.0

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TABLE 12

FOREIGN DEBT AS A PERCENTAGE OF GDP

This table shows the estimated total foreign debt for the current month and for the preceding five years as percentage of the estimated GDP for the year in question. Risk points are awarded in proportion to the percentage foreign debt as outlined in the Guide to ICRG. The final column in the table shows the current risk points assessed for the percentage foreign debt and the change, if any from the previous month’s risk points.

Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania 31.8 64.1 72.1 69.6 64.4 64.5 4.5 0.0 Algeria 62.0 57.5 46.6 40.8 47.6 45.4 5.5 0.0 Angola 131.2 121.3 121.9 111.0 111.3 114.0 2.0 0.0 Argentina 46.5 52.6 43.5 49.1 39.0 45.0 5.5 0.0 Armenia 41.4 46.3 45.1 46.3 46.3 46.3 5.5 0.0 Australia 59.0 57.6 61.2 57.3 51.8 55.0 5.0 0.0 Austria 10.6 10.7 11.2 10.9 10.2 10.2 9.0 0.0 Azerbaijan 13.1 21.1 23.0 20.6 24.0 22.6 8.0 0.0 Bahamas 34.2 33.1 30.8 32.9 35.7 37.0 6.5 0.0 Bahrain 3.5 3.5 3.5 3.5 3.5 3.5 10.0 0.0 Bangladesh 37.8 38.7 34.7 35.7 35.5 35.2 6.5 0.0 Belarus 33.2 5.5 5.2 6.8 7.0 7.5 9.5 0.0 Belgium 18.5 18.5 20.2 17.5 16.2 16.1 8.5 0.0 Bolivia 55.3 55.5 52.6 44.0 47.6 47.0 5.5 0.0 Botswana 30.8 29.5 26.4 26.7 25.1 26.0 7.5 0.0 Brazil 26.2 41.0 38.6 41.1 51.3 50.5 5.0 0.0 Brunei 2.0 2.0 3.0 2.0 2.0 2.0 10.0 0.0 Bulgaria 79.6 79.1 88.9 78.1 70.2 69.8 4.5 0.0 Burkina Faso 54.7 59.9 62.1 63.0 63.0 63.0 4.5 0.0 Cameroon 83.7 81.1 70.2 75.6 67.5 67.0 4.5 0.0 Canada 34.7 28.0 22.9 19.9 16.1 16.0 8.5 0.0 Chile 39.9 46.7 48.3 57.2 60.8 60.0 4.5 0.0 China, Peoples' Rep. 15.7 14.8 14.4 13.0 13.2 13.6 9.0 0.0 Colombia 40.5 45.3 46.4 47.8 46.1 43.0 6.0 0.0 Congo, Dem. Republic 250.2 122.3 107.2 201.2 278.0 250.0 0.0 0.0 Congo, Republic 268.2 224.3 158.1 196.3 192.8 195.6 0.5 0.0 Costa Rica 40.3 38.2 40.0 41.0 40.6 39.8 6.5 0.5 Cote d'Ivoire 166.4 170.2 196.2 194.1 140.0 140.0 1.0 0.0 Croatia 40.3 44.5 53.1 51.9 49.3 49.3 5.5 0.0 Cuba 43.3 39.9 39.7 42.5 45.5 45.7 5.5 0.0 Cyprus 1.0 0.9 0.9 1.0 1.0 1.0 10.0 0.0 Czech Republic 42.7 41.4 42.0 38.1 33.7 33.0 7.0 0.0 Denmark 24.2 20.9 22.6 20.5 20.7 20.4 8.0 0.0 Dominican Republic 31.7 29.5 27.1 28.3 29.4 28.5 7.5 0.0 Ecuador 82.2 159.1 97.1 80.2 75.2 75.0 4.0 0.0 Egypt 34.2 31.8 30.3 33.0 33.3 35.0 6.5 0.0 El Salvador 22.1 22.4 21.6 22.9 28.0 32.0 7.0 0.0 Estonia 14.3 14.0 13.6 13.5 13.5 13.5 9.0 0.0 Ethiopia 78.8 82.4 85.7 90.1 102.3 102.3 2.5 0.0 Finland 110.8 112.9 113.3 106.0 102.4 101.3 2.5 -3.0

Reproduction without permission of the Publisher is strictly forbidden S-71 International Country Risk Guide September 2003

Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points France 26.9 27.2 27.9 24.9 23.4 23.2 8.0 0.0 Gabon 107.1 105.6 88.6 65.0 64.9 65.0 4.5 0.0 Gambia 97.5 101.6 110.0 126.9 130.7 130.7 1.0 0.0 Germany 15.3 15.7 17.3 14.2 13.1 13.5 9.0 0.0 Ghana 74.8 109.9 169.8 131.5 112.4 107.3 2.5 -0.5 Greece 38.0 35.8 41.5 32.5 32.8 32.0 7.0 0.0 Guatemala 18.7 20.9 20.4 18.6 17.1 18.0 8.5 0.0 Guinea 60.6 59.2 56.9 56.0 55.9 56.0 5.0 0.0 Guinea-Bissau 365.0 350.0 350.0 320.0 320.0 320.0 0.0 0.0 Guyana 220.8 235.3 234.3 206.8 211.7 212.0 0.0 0.0 Haiti 30.9 31.5 32.8 36.6 38.4 34.0 7.0 0.0 Honduras 77.9 81.0 70.4 74.4 78.4 78.0 4.0 0.0 Hong Kong 23.0 23.1 23.0 21.9 21.6 20.0 8.0 0.0 Hungary 50.3 59.4 62.7 64.9 55.1 53.7 5.0 0.5 Iceland 72.4 84.5 108.9 124.3 130.0 120.0 1.5 0.0 India 23.4 22.1 21.8 22.0 22.0 21.0 8.0 0.0 Indonesia 158.1 105.8 98.7 103.0 82.3 93.0 3.0 0.0 Iran 6.1 4.3 2.4 1.9 1.8 2.0 10.0 0.0 Iraq 82.1 80.9 81.4 122.9 486.0 501.1 0.0 -1.5 Ireland 17.3 15.5 17.3 15.8 14.2 14.4 9.0 0.0 Israel 40.5 42.1 54.2 49.8 55.2 55.2 5.0 0.0 Italy 5.8 6.1 6.7 8.1 7.4 7.4 9.5 0.0 Jamaica 50.9 46.3 41.5 41.1 49.0 49.0 5.5 0.0 Japan 0.2 0.2 0.2 0.2 0.2 0.2 10.0 0.0 Jordan 29.5 94.0 79.5 81.5 83.0 78.5 3.5 0.0 Kazakhstan 47.0 68.8 69.3 70.8 73.8 75.0 4.0 0.0 Kenya 55.5 60.7 57.4 50.6 46.7 50.0 5.0 0.0 Korea, D.P.R. 100.0 100.0 100.0 100.0 100.0 100.0 2.5 0.0 Korea, Republic 46.9 33.8 28.5 28.1 34.2 34.3 7.0 0.5 Kuwait 35.4 27.9 23.3 24.0 24.1 23.8 8.0 0.5 Latvia 31.3 29.3 27.6 27.0 27.0 27.0 7.5 0.0 Lebanon 176.3 188.3 173.6 153.0 170.7 189.0 0.5 0.0 Liberia 550.0 550.0 442.8 486.9 498.2 535.7 0.0 0.0 Libya 20.6 19.2 18.2 20.0 29.7 25.0 7.5 0.0 Lithuania 34.8 42.5 43.2 44.8 44.8 44.8 6.0 0.0 Luxembourg 1.0 1.0 1.0 1.0 1.0 1.0 10.0 0.0 Madagascar 91.9 92.0 92.0 92.0 92.0 92.0 3.0 0.0 Malawi 90.4 142.7 143.3 156.5 180.4 180.4 0.5 0.0 Malaysia 47.4 46.4 41.9 44.9 42.8 41.6 6.0 0.0 Mali 113.9 114.0 114.0 114.0 114.0 114.0 2.0 0.0 Malta 83.6 83.7 82.3 81.0 81.0 81.0 3.5 0.0 Mexico 38.4 34.7 25.7 22.1 22.0 21.5 8.0 0.0 Moldova 56.4 71.8 73.9 74.2 66.5 66.5 4.5 0.0 Mongolia 68.4 77.4 93.9 88.0 89.4 89.4 3.5 0.0 Morocco 54.2 56.7 45.9 52.6 48.8 48.0 5.5 0.0 Mozambique 109.1 99.6 93.1 91.6 91.0 91.0 3.0 0.0 Myanmar 2.6 1.9 4.1 7.0 7.0 7.0 9.5 0.0 Namibia 6.0 6.0 6.2 6.2 6.5 6.5 9.5 0.0 Netherlands 32.8 32.0 34.8 30.4 28.7 31.0 7.0 0.0 New Zealand 98.6 100.4 101.4 110.6 96.5 94.9 3.0 0.0 Nicaragua 309.2 298.6 296.3 274.6 284.5 280.0 0.0 0.0 Niger 44.0 76.2 83.8 90.3 86.0 85.0 3.5 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Nigeria 62.5 82.0 69.5 55.2 62.9 60.0 4.5 0.0 Norway 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Oman 44.8 43.1 35.0 29.5 30.5 30.0 7.0 0.0 Pakistan 53.7 63.5 65.3 68.9 59.4 59.0 5.0 0.0 Panama 63.4 55.3 61.4 56.7 58.0 57.3 5.0 0.0 Papua New Guinea 67.5 76.6 52.4 53.8 56.6 57.5 5.0 0.5 Paraguay 19.3 28.9 40.2 41.0 59.4 42.5 6.0 0.0 Peru 46.7 51.1 41.1 47.6 49.9 48.0 5.5 0.0 Philippines 73.4 67.0 74.8 68.1 67.5 66.0 4.5 0.0 Poland 37.1 42.2 42.4 39.2 43.5 42.0 6.0 0.0 Portugal 65.8 62.4 67.7 61.3 56.3 56.3 5.0 0.0 Qatar 98.7 95.8 86.5 91.7 93.0 93.0 3.0 0.0 Romania 22.1 26.1 27.5 30.1 34.2 32.7 7.0 0.0 Russian Federation. 66.1 89.4 71.3 55.1 44.3 42.5 6.0 0.0 Saudi Arabia 13.9 13.2 13.4 13.3 13.8 14.0 9.0 0.0 Senegal 66.9 65.1 61.3 61.0 61.0 61.0 4.5 0.0 Serbia & Montenegro 53.0 53.0 53.0 56.0 56.0 56.0 5.0 0.0 Sierra Leone 134.6 175.7 178.2 206.6 200.0 200.0 8.0 0.0 Singapore 15.2 18.2 18.0 15.4 14.4 13.5 9.0 0.0 Slovak Republic 54.1 52.0 54.7 55.6 55.7 56.0 5.0 0.0 Slovenia 10.7 11.2 9.8 10.0 10.0 10.0 9.0 0.0 Somalia 100.0 100.0 100.0 100.0 60.0 60.0 4.5 0.0 South Africa 27.9 29.7 28.8 33.3 31.8 31.9 7.0 0.0 Spain 16.8 16.4 18.3 16.0 15.4 15.1 8.5 0.0 Sri Lanka 61.0 63.2 60.8 61.8 60.9 58.2 5.0 0.5 Sudan 218.8 206.3 185.5 179.6 171.7 164.1 0.5 0.0 Suriname 25.6 29.5 28.2 43.0 43.9 43.6 6.0 0.0 Sweden 45.2 43.8 39.3 36.4 32.5 32.0 7.0 0.0 Switzerland 0.2 0.2 0.0 0.2 0.2 0.2 10.0 0.0 Syria 32.5 31.7 34.5 29.6 31.9 32.0 7.0 0.0 Taiwan 12.0 13.4 11.2 12.2 15.1 15.0 8.5 0.0 Tanzania 482.0 439.3 426.5 426.5 425.0 425.0 0.0 0.0 Thailand 94.0 77.6 65.0 58.5 47.1 46.0 5.5 0.0 Togo 85.5 85.0 82.9 82.0 82.0 82.0 3.5 0.0 Trinidad & Tobago 24.3 24.2 20.8 18.3 17.2 16.6 8.5 0.0 Tunisia 56.5 60.1 59.7 60.2 61.0 58.7 5.0 0.0 Turkey 48.5 55.8 60.0 81.6 56.5 55.0 5.0 0.0 Uganda 63.0 69.1 61.7 57.5 57.0 57.0 5.0 0.0 Ukraine 26.3 40.6 33.1 27.2 32.1 31.0 7.0 0.0 United Arab Emirates 39.0 33.7 25.9 20.4 20.0 20.0 8.0 0.0 United Kingdom 5.6 5.5 5.8 5.5 5.3 5.4 9.5 0.0 United States 9.3 8.8 8.8 8.5 8.6 8.6 9.5 0.0 Uruguay 36.7 40.8 44.3 48.1 83.3 85.3 3.5 -0.5 Venezuela 37.1 30.4 26.0 24.7 31.3 33.0 7.0 0.0 Vietnam 39.7 38.7 44.3 43.8 40.3 37.9 6.5 0.0 Yemen, Republic 85.3 80.4 63.7 66.8 66.8 66.8 4.5 0.0 Zambia 194.3 163.8 177.0 197.6 185.2 172.9 0.5 0.0 Zimbabwe 77.8 92.5 89.1 94.6 105.3 124.9 1.5 -1.0

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TABLE 13

DEBT SERVICE AS A PERCENTAGE OF TOTAL EXPORTS

This table shows the estimated foreign debt servicing costs for the current month and for the preceding five years as percentage of the estimated total value of exports of goods and services for the year in question. Risk points are awarded in proportion to the percentage debt service as outlined in the Guide to ICRG. The final columns in the table show the risk points assessed for the percentage debt service and the change from the preceding month.

Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania 50.0 45.0 45.0 45.0 30.0 30.0 6.5 0.0 Algeria 46.3 40.3 20.3 22.8 20.8 20.0 8.0 0.0 Angola 28.7 18.7 15.1 15.0 12.0 12.0 9.0 0.0 Argentina 56.7 75.8 71.3 69.0 77.0 77.0 1.0 0.0 Armenia 44.8 39.6 30.0 25.0 25.0 25.0 7.0 0.0 Australia 9.9 10.1 10.0 10.0 10.0 10.0 9.0 0.0 Austria 1.9 1.9 1.9 2.0 2.0 1.9 10.0 0.0 Azerbaijan 5.3 6.5 8.0 8.9 3.4 6.8 9.5 0.0 Bahamas 5.5 5.5 5.5 5.5 5.5 5.5 9.5 0.0 Bahrain 15.0 16.0 16.0 12.0 12.0 12.0 9.0 0.0 Bangladesh 8.0 9.2 9.5 8.8 9.3 9.1 9.0 0.0 Belarus 20.0 12.7 10.6 12.9 12.4 12.5 9.0 0.0 Belgium 3.1 3.2 3.3 3.3 3.0 2.8 10.0 0.0 Bolivia 28.6 19.0 18.4 14.0 12.0 15.0 8.5 0.0 Botswana 3.1 3.1 0.6 3.2 3.2 3.2 10.0 0.0 Brazil 55.9 56.3 55.9 56.2 55.0 53.3 3.5 0.0 Brunei 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Bulgaria 13.1 18.0 16.7 20.1 18.8 18.8 8.0 0.0 Burkina Faso 16.9 11.9 24.5 26.5 26.4 24.8 7.5 0.0 Cameroon 16.1 24.3 20.5 26.3 28.7 28.0 7.0 0.0 Canada 5.2 4.8 4.5 4.4 3.0 3.0 10.0 0.0 Chile 21.4 24.0 26.0 28.0 28.0 28.0 7.0 0.0 China, Peoples' Rep. 8.7 9.0 7.4 8.7 8.7 8.7 9.5 0.0 Colombia 17.9 41.5 28.6 20.0 20.0 20.0 8.0 0.0 Congo, Dem. Republic 2.0 1.2 3.0 5.0 3.5 5.0 9.5 0.0 Congo, Republic 39.1 33.2 23.6 23.1 21.9 22.4 7.5 -1.5 Costa Rica 12.2 12.6 13.0 13.0 13.0 12.5 9.0 0.5 Cote d'Ivoire 24.9 26.8 22.4 20.6 38.0 38.0 5.5 0.0 Croatia 12.5 12.5 12.5 12.0 12.0 12.0 9.0 0.0 Cuba 40.0 40.0 40.0 40.0 40.0 40.5 5.5 0.0 Cyprus 13.2 13.8 14.0 14.0 14.0 14.0 8.5 0.0 Czech Republic 15.4 12.7 12.3 8.6 9.6 10.0 9.0 0.0 Denmark 15.0 14.9 14.7 14.5 14.5 14.4 8.5 0.0 Dominican Republic 5.8 3.9 4.8 5.8 6.0 6.0 9.5 0.0 Ecuador 28.2 26.2 17.3 18.6 19.0 19.0 8.0 0.0 Egypt 8.5 7.2 8.0 7.4 12.3 12.0 9.0 0.0 El Salvador 10.4 8.5 7.2 6.8 8.8 10.0 9.0 0.0 Estonia 32.3 33.4 33.4 33.0 33.0 33.0 6.0 0.0 Ethiopia 57.7 63.3 52.2 23.2 22.4 22.4 7.5 0.0 Finland 16.0 16.0 16.0 16.0 16.0 16.1 8.5 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points France 21.7 22.0 21.0 20.0 20.0 19.8 8.0 0.0 Gabon 13.9 18.8 15.0 14.5 12.0 12.0 9.0 0.0 Gambia 11.4 11.4 8.5 16.0 11.9 11.9 9.0 0.0 Germany 8.8 8.8 9.0 8.6 8.8 8.5 9.5 0.0 Ghana 22.1 21.1 23.3 18.9 18.4 18.1 8.0 1.0 Greece 27.8 28.0 20.0 20.0 20.0 20.0 8.0 0.0 Guatemala 15.0 10.3 9.4 10.2 16.0 16.0 8.5 0.0 Guinea 19.5 15.6 15.3 19.0 19.0 19.0 8.0 0.0 Guinea-Bissau 18.0 18.0 18.0 20.0 20.0 20.0 8.0 0.0 Guyana 14.6 10.4 11.8 10.3 11.0 11.0 9.0 0.0 Haiti 17.8 15.8 14.0 8.3 8.5 8.0 9.5 0.0 Honduras 20.0 18.7 15.5 12.9 20.0 15.0 8.5 0.0 Hong Kong 1.7 1.5 1.4 1.5 1.5 1.5 10.0 0.0 Hungary 28.7 26.6 17.3 18.5 18.5 17.7 8.0 0.0 Iceland 19.3 18.9 19.0 19.0 19.0 19.0 8.0 0.0 India 19.1 18.1 16.3 12.3 12.4 12.8 9.0 0.0 Indonesia 31.5 30.4 25.3 43.8 49.7 30.0 6.5 0.0 Iran 9.3 23.8 12.5 7.8 3.7 6.7 9.5 0.0 Iraq 65.0 62.0 60.0 65.0 65.0 117.6 0.0 -2.5 Ireland 2.3 2.6 2.5 2.5 4.5 3.4 10.0 0.0 Israel 16.2 16.1 15.5 15.6 15.6 16.3 8.5 0.0 Italy 4.8 5.0 5.0 4.9 4.5 4.2 10.0 0.0 Jamaica 18.0 13.8 14.1 14.1 18.4 18.4 8.0 0.0 Japan 0.0 0.0 0.1 0.1 0.1 0.1 10.0 0.0 Jordan 18.0 18.0 18.0 20.0 20.0 20.00 8.0 0.0 Kazakhstan 14.7 19.3 16.8 15.0 15.0 15.0 8.5 0.0 Kenya 23.6 25.9 17.3 17.6 20.4 20.4 8.0 0.0 Korea, D.P.R. 60.0 60.0 60.0 60.0 60.0 60.0 3.0 0.0 Korea, Republic 12.1 11.9 17.0 10.8 10.8 10.7 9.0 0.0 Kuwait 0.0 0.0 0.0 3.0 3.0 2.7 10.0 0.0 Latvia 10.0 10.0 10.0 8.0 8.0 8.0 9.5 0.0 Lebanon 12.0 7.0 6.0 7.0 8.0 8.0 9.5 0.0 Liberia 70.0 70.0 70.0 70.0 70.0 70.0 2.0 0.0 Libya 6.0 6.0 6.0 5.0 5.2 5.0 9.5 0.0 Lithuania 18.3 20.0 20.9 13.5 13.5 13.5 8.5 0.0 Luxembourg 1.0 1.0 1.0 1.0 1.0 1.0 10.0 0.0 Madagascar 26.5 17.5 15.4 17.2 16.0 16.0 8.5 0.0 Malawi 14.8 18.2 17.7 20.6 20.0 20.0 8.0 0.0 Malaysia 7.0 6.3 5.6 6.2 6.2 7.1 9.5 0.0 Mali 11.4 12.5 13.0 9.8 9.8 9.8 9.0 0.0 Malta 10.0 12.0 12.0 12.0 12.0 12.0 9.0 0.0 Mexico 47.9 43.8 41.8 39.4 39.7 32.0 6.5 0.0 Moldova 39.4 37.0 37.0 37.0 37.0 37.0 5.5 0.0 Mongolia 9.8 10.0 12.0 13.0 13.0 13.0 8.5 0.0 Morocco 23.9 20.8 20.1 16.2 17.3 17.0 8.0 0.0 Mozambique 24.9 33.5 15.3 12.2 8.2 8.2 9.5 0.0 Myanmar 14.9 14.8 15.0 18.0 15.6 15.0 8.5 0.0 Namibia 3.0 3.0 4.0 4.0 4.0 4.0 10.0 0.0 Netherlands 6.0 5.9 5.9 5.8 4.7 5.0 9.5 0.0 New Zealand 39.0 39.2 39.0 38.7 38.7 36.9 6.0 0.0 Nicaragua 16.4 11.8 12.6 10.8 11.0 25.0 7.0 0.0 Niger 24.6 23.8 23.2 30.8 36.4 36.4 6.0 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Nigeria 12.3 29.8 15.3 11.1 6.0 7.0 9.5 0.0 Norway 0.0 0.0 0.0 0.0 5.0 5.0 9.5 0.0 Oman 10.9 12.7 7.3 7.0 11.0 10.0 9.0 0.0 Pakistan 19.0 29.4 26.8 28.9 28.9 28.9 7.0 0.0 Panama 21.5 24.5 23.8 26.8 26.8 27.1 7.0 0.0 Papua New Guinea 22.5 27.3 15.5 16.8 16.8 15.9 8.5 0.0 Paraguay 8.7 6.3 9.9 10.6 8.9 9.0 9.0 0.0 Peru 28.6 54.4 50.2 39.4 35.5 35.0 6.0 0.0 Philippines 11.9 13.6 13.6 13.8 13.8 13.8 8.5 0.0 Poland 9.2 20.4 20.9 20.5 13.8 13.8 8.5 0.0 Portugal 16.7 16.8 17.0 17.0 17.0 16.8 8.5 0.5 Qatar 21.2 23.4 23.0 23.0 23.0 23.0 7.5 0.0 Romania 21.0 26.6 14.4 16.8 16.8 20.6 7.5 0.0 Russian Federation. 13.4 14.1 10.1 11.7 11.7 11.7 9.0 0.0 Saudi Arabia 5.1 6.1 5.0 5.0 5.0 5.0 9.5 0.0 Senegal 12.4 10.9 10.7 9.1 7.2 7.2 9.5 0.0 Serbia & Montenegro 45.0 45.0 45.0 45.0 45.0 45.0 4.5 0.0 Sierra Leone 30.7 47.8 58.3 58.2 56.0 56.0 3.5 0.0 Singapore 1.4 1.0 1.1 1.5 1.5 1.5 10.0 0.0 Slovak Republic 12.0 13.7 18.0 18.0 15.7 15.0 8.5 0.0 Slovenia 10.0 10.0 10.0 10.0 10.0 10.0 9.0 0.0 Somalia 30.0 30.0 30.0 30.0 10.0 10.0 9.0 0.0 South Africa 13.7 13.1 11.0 12.0 11.8 11.9 9.0 0.0 Spain 22.0 21.8 21.5 21.0 21.0 20.4 8.0 0.5 Sri Lanka 13.3 15.2 14.7 13.2 13.2 12.7 9.0 0.5 Sudan 1.5 4.4 4.8 3.7 9.2 9.0 9.0 0.0 Suriname 9.2 9.2 9.3 9.3 9.3 9.3 9.0 0.0 Sweden 14.5 15.1 14.9 14.7 14.3 14.5 8.5 0.0 Switzerland 1.9 1.9 2.0 2.0 2.0 2.0 10.0 0.0 Syria 6.0 6.4 4.6 3.5 3.6 4.0 10.0 0.0 Taiwan 2.9 3.0 2.0 2.7 2.0 2.0 10.0 0.0 Tanzania 37.9 37.3 28.9 33.6 30.0 30.0 6.5 0.0 Thailand 21.8 19.8 15.8 20.8 17.5 16.3 8.5 0.0 Togo 12.3 11.5 11.5 11.0 11.0 11.0 9.0 0.0 Trinidad & Tobago 9.9 8.0 7.9 3.7 4.3 4.3 10.0 0.0 Tunisia 19.2 18.5 22.6 15.6 17.2 17.1 8.0 -0.5 Turkey 26.8 35.3 36.1 33.5 33.5 33.5 6.0 0.0 Uganda 26.4 18.4 13.5 12.5 12.4 12.4 9.0 0.0 Ukraine 12.5 16.6 10.4 6.7 5.4 5.6 9.5 1.0 United Arab Emirates 3.4 3.4 3.5 3.5 3.5 3.5 10.0 0.0 United Kingdom 2.7 2.7 2.6 2.7 2.8 3.0 10.0 0.0 United States 27.0 27.0 26.0 26.0 26.0 26.0 7.0 0.0 Uruguay 32.6 33.0 33.5 33.5 53.9 48.6 4.5 -1.5 Venezuela 25.5 23.6 15.7 18.8 18.8 18.8 8.0 0.0 Vietnam 13.2 14.5 6.0 10.3 14.0 13.7 8.5 0.0 Yemen, Republic 26.1 26.5 27.0 27.0 27.0 27.0 7.0 0.0 Zambia 16.0 16.2 14.8 15.2 13.9 13.9 8.5 0.0 Zimbabwe 21.2 21.8 21.9 6.8 5.0 5.4 9.5 0.0

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TABLE 14

CURRENT ACCOUNT AS A PERCENTAGE OF TOTAL EXPORTS

This table lists the estimated balance of the current account of balance of payments, for the current month and for the preceding five years, as percentage of the estimated total value of exports of goods and services for the year in question. Risk points are awarded in proportion to the percentage current account balance as outlined in the Guide to ICRG. The final columns in the table show the risk points assessed for the percentage current account balance and the change from the preceding month.

Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania -19.9 -23.7 -18.7 -15.8 -24.1 -21.1 10.0 0.0 Algeria -8.1 0.2 40.3 34.6 22.0 33.7 15.0 0.0 Angola -47.6 -31.2 9.6 -20.5 -8.8 -6.9 11.5 0.0 Argentina -38.2 -34.3 -22.6 -12.2 18.3 23.6 14.5 0.0 Armenia -52.1 -63.6 -60.8 -53.0 -53.0 -53.0 7.0 0.0 Australia -22.2 -27.6 -16.1 -9.6 -13.5 -18.8 10.5 0.0 Austria -5.0 -6.0 -4.4 -3.6 1.1 -0.4 12.0 0.0 Azerbaijan -113.3 -42.0 -7.3 -1.9 -26.3 -28.8 9.5 0.0 Bahamas -28.5 -28.2 -28.2 -29.0 -29.0 -29.0 9.5 0.0 Bahrain -11.7 -10.6 -5.1 -4.0 -4.0 -4.0 12.0 0.0 Bangladesh -0.5 -4.1 -3.2 -5.7 2.5 0.7 12.5 0.0 Belarus -10.5 -10.6 -10.3 -10.7 -14.0 -14.0 11.0 0.0 Belgium 4.6 4.9 3.8 3.1 4.7 4.2 12.5 0.0 Bolivia -36.6 -26.1 -22.2 -14.0 -14.5 -14.5 11.0 0.0 Botswana 5.0 13.2 15.4 17.7 15.5 11.9 13.5 0.0 Brazil -51.7 -41.6 -34.6 -31.9 -10.1 -2.8 12.0 0.5 Brunei 76.5 78.1 69.0 64.6 59.9 54.6 15.0 0.0 Bulgaria -0.9 -10.6 -9.1 -9.9 -7.3 -7.8 11.5 0.0 Burkina Faso -105.9 -139.4 -167.1 -144.3 -1061.6 -150.4 0.0 0.0 Cameroon -10.2 -18.6 -5.8 -5.4 -14.3 -11.3 11.0 0.0 Canada -2.8 0.4 5.2 5.9 3.4 3.9 12.5 0.0 Chile -17.9 -1.3 -4.3 -5.1 -2.5 -0.7 12.0 0.0 China, Peoples' Rep. 14.5 9.0 6.9 5.5 3.9 1.6 12.5 0.0 Colombia -31.6 4.2 3.4 -6.6 -9.0 -9.4 11.5 0.0 Congo, Dem. Republic -55.6 -103.0 -20.4 -25.5 -15.9 -41.7 8.0 0.0 Congo, Republic -16.0 -13.1 24.3 -1.3 -1.2 -68.0 5.5 -7.0 Costa Rica -7.2 -7.9 -9.3 -9.0 -11.2 -9.8 11.5 0.0 Cote d'Ivoire -5.2 -2.2 -5.2 -1.3 -4.2 -3.5 12.0 0.0 Croatia 16.0 -19.4 -20.5 -20.0 -20.0 -20.0 10.0 0.0 Cuba -28.8 -34.6 -46.4 -33.1 -49.0 -45.3 7.5 -1.0 Cyprus -0.2 2.3 2.3 -4.0 -4.0 -4.0 12.0 0.0 Czech Republic -3.6 -4.0 -6.9 -6.0 -7.6 -6.3 11.5 0.0 Denmark -2.6 3.5 2.8 4.4 5.0 4.3 12.5 0.0 Dominican Republic -3.5 -4.2 -9.1 -7.8 -8.0 -5.9 11.5 0.0 Ecuador -34.7 13.9 12.3 -10.9 -15.5 -7.7 11.5 0.0 Egypt -13.0 -7.8 -4.2 -1.8 0.0 -4.1 12.0 0.0 El Salvador -1.9 -4.9 -7.6 -2.9 -6.0 -6.2 11.5 0.0 Estonia -10.7 -11.6 -12.0 -10.0 -10.0 -10.0 11.0 0.0 Ethiopia -16.2 -31.5 1.1 -13.6 -21.0 -21.0 10.0 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Finland 13.1 14.4 14.8 14.7 15.9 14.2 13.5 0.0 France 7.9 7.5 4.4 4.6 5.2 5.2 13.0 0.0 Gabon -26.9 13.4 4.3 -1.6 -8.3 -10.0 11.0 0.0 Gambia -13.2 -12.9 -12.9 -12.5 -12.5 -12.5 11.0 0.0 Germany -0.8 -2.6 -2.7 0.3 5.5 4.2 12.5 0.0 Ghana -13.3 -29.6 -13.4 -9.1 1.2 -4.5 12.0 0.0 Greece -15.4 -22.4 -27.0 -25.7 -28.5 -24.9 10.0 0.0 Guatemala -24.1 -23.9 -21.0 -23.7 -23.8 -21.7 10.0 0.0 Guinea -19.4 -17.6 -18.8 -10.8 -5.0 -8.2 11.5 0.0 Guinea-Bissau -71.3 -117.0 -112.5 -100.0 -80.0 -80.0 4.0 0.0 Guyana -13.3 -10.8 -14.9 -18.1 -14.9 -15.9 10.5 0.0 Haiti -4.0 -5.0 -6.7 -8.3 -4.3 -15.9 10.5 0.0 Honduras -14.3 -23.2 -18.2 -21.8 -16.6 -14.6 11.0 0.0 Hong Kong 1.7 4.7 3.1 4.2 6.0 4.6 12.5 0.0 Hungary -8.2 -7.3 -4.0 -2.9 -5.9 -6.2 10.5 -1.0 Iceland -4.4 -4.1 -27.3 -25.0 -25.0 -25.0 9.5 0.0 India -11.9 -4.9 -5.4 -8.5 -3.3 0.5 12.5 1.0 Indonesia 7.1 9.7 10.7 10.4 11.0 9.7 11.5 0.0 Iran -13.7 28.7 41.2 22.4 12.1 10.7 13.5 0.0 Iraq -7.9 -8.7 -2.6 -3.2 -4.2 4.7 12.5 1.0 Ireland 0.8 0.3 -0.5 -0.8 -0.1 -0.4 12.0 0.0 Israel -3.5 -4.3 -1.9 -4.6 -4.4 -1.0 12.0 0.5 Italy 5.3 2.3 -1.6 -0.2 -1.8 0.3 12.5 0.5 Jamaica -7.7 -5.0 -8.2 -17.1 -23.1 -1.7 12.0 0.0 Japan 21.9 20.4 18.9 15.8 20.0 19.9 15.0 0.0 Jordan 0.8 2.8 6.8 -23.0 -6.7 -6.7 11.5 0.0 Kazakhstan -17.4 -2.4 6.2 -11.3 -4.9 -5.0 11.5 0.0 Kenya -13.8 -2.6 -5.3 -8.3 -5.5 -6.0 11.5 0.0 Korea, D.P.R. 0.0 -3.0 4.9 3.6 -8.8 -10.5 11.0 0.0 Korea, Republic 24.2 13.5 5.6 4.3 3.0 0.5 12.5 0.5 Kuwait 11.9 25.3 51.1 36.4 36.6 32.7 15.0 0.0 Latvia -16.9 -20.3 -19.3 -17.0 -19.0 -19.0 10.5 0.0 Lebanon -526.2 -529.4 -542.9 -542.9 -422.2 -422.2 0.0 0.0 Liberia -50.0 -45.0 -45.0 -50.0 -50.0 -50.0 7.0 0.0 Libya -5.9 27.1 -10.9 20.0 17.5 15.1 14.0 0.0 Lithuania -23.9 -26.4 -12.4 -13.7 -10.5 -10.5 11.0 0.0 Luxembourg 4.7 3.2 3.9 4.0 4.0 4.0 12.5 0.0 Madagascar -9.0 -10.0 -10.0 -9.0 -28.4 -28.4 9.5 0.0 Malawi -29.9 -17.4 -22.5 -22.5 -22.0 -22.0 10.0 0.0 Malaysia 11.1 12.8 7.4 7.0 6.5 4.9 12.5 0.0 Mali -28.7 -28.1 -28.1 -30.0 -30.0 -30.0 9.0 0.0 Malta -4.4 -4.7 -4.6 -5.0 -5.0 -5.0 11.5 0.0 Mexico -11.5 -8.8 -9.4 -9.7 -7.5 -6.5 11.5 0.0 Moldova -30.9 -5.5 -12.4 -10.5 -10.5 -10.5 11.0 0.0 Mongolia 11.0 -24.0 -27.9 -31.8 -26.0 -26.0 9.5 0.0 Morocco -1.2 -1.3 -3.8 10.6 6.8 3.5 12.5 0.0 Mozambique -32.0 -45.6 -41.5 -41.5 -38.0 -38.0 8.5 0.0 Myanmar -20.9 -12.6 -8.6 -10.2 7.4 -9.6 11.5 0.0 Namibia 6.3 6.7 10.6 13.4 10.2 10.9 13.5 0.0 Netherlands 4.5 5.3 3.0 3.0 3.8 4.0 12.5 0.0 New Zealand -12.0 -18.8 -14.0 -7.2 -11.1 -8.9 11.5 0.0 Nicaragua -36.2 -43.9 -28.3 -33.3 -41.1 -35.3 8.5 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Niger -56.2 -59.3 -54.7 -49.5 -58.8 -57.1 6.5 0.0 Nigeria -36.1 3.3 10.9 6.7 -6.3 -5.1 11.5 0.0 Norway 0.0 12.0 30.1 30.6 28.9 23.7 14.5 0.0 Oman -47.4 -3.7 28.4 19.8 12.7 8.3 13.0 0.0 Pakistan -18.5 -7.2 -0.6 11.6 -2.6 25.3 15.0 0.0 Panama -11.7 -15.0 -9.8 -5.4 -1.7 -3.2 12.0 0.0 Papua New Guinea -1.4 4.0 14.5 12.7 -3.5 0.9 12.5 0.0 Paraguay -3.5 -5.2 -4.6 -5.5 2.9 3.5 12.5 0.0 Peru -36.1 -15.8 -15.2 -10.7 -10.5 -9.8 11.5 0.0 Philippines 3.5 16.6 17.0 9.9 9.5 5.8 13.0 0.0 Poland -14.1 -28.9 -19.4 -9.3 -10.7 -11.6 11.0 0.0 Portugal -17.4 -21.9 -25.4 -23.1 -18.9 -14.5 11.0 0.0 Qatar -43.3 11.1 33.2 25.3 20.7 20.7 14.5 0.0 Romania -27.3 -12.0 -10.1 -14.6 -8.5 -10.0 11.0 -0.5 Russian Federation. 0.2 27.4 39.0 29.2 25.8 20.0 14.5 0.0 Saudi Arabia -26.6 0.7 16.7 17.6 9.5 11.3 13.5 0.0 Senegal -11.3 -12.9 -12.9 -10.0 -10.0 -10.0 11.0 0.0 Serbia & Montenegro -65.0 -65.0 -65.0 -58.0 -58.0 -58.0 6.5 0.0 Sierra Leone -13.0 0.2 -129.1 -129.1 -100.0 -100.0 2.0 0.0 Singapore 13.9 10.6 8.7 10.9 10.8 8.7 13.0 0.0 Slovak Republic -15.1 -9.0 -4.7 -11.7 -10.8 -7.4 11.5 0.0 Slovenia 0.0 -26.7 -18.8 -9.0 -9.0 -9.0 11.5 0.0 Somalia -100.0 -100.0 -100.0 -100.0 -1.0 -1.0 12.0 0.0 South Africa -6.0 -1.8 -1.5 -0.8 0.8 -2.9 12.0 0.0 Spain -1.7 -7.2 -9.8 -7.9 -7.2 -8.8 11.5 0.0 Sri Lanka -3.3 -8.2 -13.5 -3.5 -3.5 -6.1 11.5 0.0 Sudan -70.6 -29.1 -22.5 -25.2 -30.9 -22.6 10.0 -1.0 Suriname -34.9 -7.0 6.0 -15.7 -3.6 -3.5 12.0 0.0 Sweden 3.8 4.6 5.1 5.6 5.4 6.8 13.0 0.0 Switzerland 15.8 16.6 17.6 12.4 17.4 16.7 14.0 0.0 Syria 1.1 3.2 13.8 6.7 10.8 -1.0 12.0 0.0 Taiwan 2.5 5.6 5.0 11.7 15.7 12.9 13.5 0.0 Tanzania -56.1 -83.5 -85.7 -77.2 -75.0 -75.0 4.5 0.0 Thailand 20.3 16.5 10.7 7.7 8.9 4.2 12.5 0.0 Togo -18.0 -13.8 -13.8 -12.0 -12.0 -12.0 11.0 0.0 Trinidad & Tobago -21.0 0.6 10.9 10.4 0.4 7.2 13.0 0.0 Tunisia -7.2 -4.5 -8.6 -8.1 -7.0 -6.1 11.5 0.0 Turkey 3.1 -2.5 -16.6 6.0 -3.0 -7.6 11.5 0.0 Uganda -27.7 -20.8 -19.3 -19.3 -20.0 -20.0 10.0 0.0 Ukraine -7.0 9.3 7.2 6.1 12.4 6.3 13.0 0.0 United Arab Emirates 0.4 8.8 26.2 17.5 8.9 15.2 14.0 0.0 United Kingdom -1.4 -5.6 -4.6 -2.9 -2.1 -3.4 12.0 0.0 United States -17.0 -23.0 -28.8 -30.4 -38.7 -42.3 8.0 0.0 Uruguay -9.9 -11.7 -12.7 -11.8 8.0 4.2 12.5 0.0 Venezuela -15.0 14.5 34.9 12.8 25.4 31.8 15.0 0.0 Vietnam -8.1 7.7 5.8 3.5 -5.1 -4.6 12.0 0.0 Yemen, Republic 5.3 -3.1 1.0 2.0 2.0 2.0 12.5 0.0 Zambia -52.3 -44.1 -56.9 -65.8 -53.5 -63.6 6.0 0.0 Zimbabwe -13.6 1.1 -3.3 -2.7 -9.7 -21.1 10.0 -0.5

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TABLE 15

INTERNATIONAL LIQUIDITY AS MONTHS OF IMPORT COVER

This table lists estimated annual net liquidity, expressed as months of import cover, for the current month and the preceding five years. Net liquidity is calculated as the official reserves of the individual countries, including their official gold reserves calculated at current free market prices, but excluding the use of IMF credits and the foreign liabilities of the monetary authorities. Risk points are assigned to the number of months of import cover as outlined in the Guide to ICRG. The final columns in the table show the risk points assessed for the current months of import cover and the change from the preceding month.

Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania 0.2 4.0 5.2 5.5 5.7 5.6 3.0 0.0 Algeria 6.5 3.3 13.3 21.0 24.4 24.2 5.0 0.0 Angola -3.4 1.2 3.3 1.4 0.8 0.9 1.0 0.0 Argentina 7.9 10.9 10.1 0.4 -8.5 0.0 0.0 0.0 Armenia 1.9 2.6 2.5 2.8 2.8 2.8 1.5 0.0 Australia 3.0 4.0 3.3 3.6 3.9 3.5 2.0 0.0 Austria 4.5 3.0 3.0 2.6 2.2 2.1 1.5 0.0 Azerbaijan 0.8 1.8 2.6 4.9 2.9 3.2 1.5 0.0 Bahamas 3.0 3.8 3.8 3.8 3.8 3.8 2.0 0.0 Bahrain 4.0 4.5 4.3 5.0 5.0 5.0 3.0 0.0 Bangladesh 2.2 1.8 1.7 1.3 2.3 2.3 1.5 0.0 Belarus 0.0 0.1 0.2 0.4 0.4 0.4 0.0 0.0 Belgium 1.7 0.4 0.8 0.9 1.0 1.0 1.0 0.5 Bolivia 4.0 5.1 4.8 5.6 5.1 4.5 2.5 0.0 Botswana 31.3 32.3 39.0 38.9 34.1 30.8 5.0 0.0 Brazil 6.3 5.3 6.1 5.7 1.8 1.7 1.0 -0.5 Brunei 16.0 16.0 16.0 16.0 16.0 16.0 5.0 0.0 Bulgaria 5.3 4.5 4.3 4.4 6.3 5.0 3.0 0.0 Burkina Faso 4.2 3.3 3.3 3.2 3.2 3.2 2.0 0.0 Cameroon -3.1 -3.2 -0.5 0.2 2.2 2.1 1.5 0.0 Canada 1.4 1.6 1.6 1.8 2.0 2.0 1.5 0.0 Chile 10.6 12.0 10.8 10.5 11.6 10.0 4.0 0.0 China, Peoples' Rep. 12.9 11.6 9.2 11.0 12.4 12.3 4.5 0.0 Colombia 7.3 9.2 9.5 9.8 10.6 10.0 4.0 0.0 Congo, Dem. Republic -82.7 -65.9 -12.5 -5.1 -8.1 -7.4 0.0 0.0 Congo, Republic -1.5 -0.5 3.9 0.2 -0.3 -0.2 0.0 0.0 Costa Rica -0.2 0.8 0.7 1.0 1.3 1.4 1.0 0.0 Cote d'Ivoire 1.0 -0.1 0.7 2.7 8.5 4.0 2.5 0.0 Croatia 3.2 3.7 4.2 4.3 4.3 4.3 2.5 0.0 Cuba 1.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cyprus 5.1 6.0 6.0 5.8 5.8 5.8 3.0 0.0 Czech Republic 5.1 5.1 4.7 4.6 6.9 7.1 3.5 0.0 Denmark 4.3 6.2 4.2 4.7 6.9 6.7 3.5 0.0 Dominican Republic -0.7 -0.3 -0.4 0.3 -0.4 -0.2 0.0 0.0 Ecuador 2.8 4.8 2.0 1.1 1.0 1.0 1.0 0.0 Egypt 5.6 2.9 2.0 2.4 1.6 2.6 1.5 0.0 El Salvador 4.6 5.7 4.5 4.0 3.5 3.5 2.0 0.0 Estonia 2.5 2.4 2.4 2.5 2.5 2.5 1.5 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Ethiopia 0.0 0.0 0.0 0.0 2.1 2.1 1.5 0.0 Finland 3.9 3.3 3.0 3.3 3.7 3.5 2.0 0.0 France 3.2 2.5 2.5 2.3 2.4 2.4 1.5 0.0 Gabon -1.2 -1.6 0.8 -1.3 0.4 0.0 0.0 0.0 Gambia 5.1 4.9 4.9 5.0 5.0 5.0 3.0 0.0 Germany 1.9 2.2 2.0 1.9 2.0 1.9 1.0 0.0 Ghana 0.3 0.3 -1.0 0.2 0.9 1.0 1.0 0.0 Greece 9.4 8.2 5.5 2.2 3.4 3.4 2.0 0.0 Guatemala 3.4 3.0 4.2 5.2 4.8 5.2 3.0 0.0 Guinea 2.1 1.9 0.4 1.1 0.4 1.0 1.0 0.0 Guinea-Bissau -0.9 -0.2 -0.1 0.0 0.0 0.0 0.0 0.0 Guyana -2.6 -1.3 -0.2 0.2 2.4 0.5 0.0 0.0 Haiti 2.6 1.9 0.8 0.3 -0.4 0.5 0.0 0.0 Honduras 2.0 3.6 3.6 4.0 4.8 4.2 2.5 0.0 Hong Kong 5.9 6.5 6.0 6.4 6.5 6.0 3.5 0.0 Hungary -1.3 0.2 1.1 1.7 1.9 1.7 1.0 0.0 Iceland 1.6 1.8 1.5 1.4 1.4 1.4 2.5 0.0 India 7.9 9.2 8.7 11.4 14.2 14.0 4.5 0.0 Indonesia 5.1 5.8 4.3 5.7 7.2 6.0 3.5 0.0 Iran -0.7 2.0 6.9 6.5 6.1 6.3 3.5 0.0 Iraq 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Ireland 2.2 1.1 1.2 1.4 1.3 1.2 1.0 0.0 Israel 10.4 9.0 8.2 9.1 9.3 9.0 4.0 0.5 Italy 3.1 2.2 2.4 2.3 2.7 2.6 1.5 0.0 Jamaica 2.9 2.4 4.1 7.4 6.3 6.0 3.5 0.0 Japan 10.3 12.3 12.5 15.2 18.4 15.0 5.0 0.0 Jordan 5.1 7.1 6.9 6.0 6.0 6.0 3.5 0.0 Kazakhstan 2.2 3.1 3.7 3.8 4.9 5.0 3.0 0.0 Kenya 2.3 2.9 3.0 3.6 3.8 3.5 2.0 0.0 Korea, D.P.R. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Korea, Republic 5.0 7.0 6.7 8.5 9.2 8.9 3.5 -0.5 Kuwait 6.3 8.8 13.4 17.3 15.8 14.1 4.5 0.0 Latvia 2.8 3.3 3.2 3.4 3.4 3.4 2.0 0.0 Lebanon 20.8 18.4 21.8 20.2 15.0 12.0 5.0 0.0 Liberia 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Libya 15.1 17.6 33.5 36.5 35.8 30.0 5.0 0.0 Lithuania 2.6 2.7 2.7 3.0 3.0 3.0 2.0 0.0 Luxembourg 0.0 0.0 0.0 1.0 1.0 1.0 1.0 0.0 Madagascar 1.1 2.0 2.8 2.7 1.0 1.0 1.0 0.0 Malawi 0.1 1.9 2.9 3.0 3.0 3.0 2.0 0.0 Malaysia 5.7 6.0 4.6 5.3 5.2 5.4 3.0 0.0 Mali 5.4 3.1 3.4 3.2 3.2 3.2 2.0 0.0 Malta 7.0 6.8 6.5 6.0 6.0 6.0 3.5 0.0 Mexico 2.1 2.3 2.4 3.2 3.6 3.6 2.0 0.0 Moldova -1.5 0.0 0.0 0.5 0.5 0.5 0.0 0.0 Mongolia 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Morocco 5.8 7.0 5.5 10.1 11.5 11.4 4.0 0.0 Mozambique 5.1 4.9 5.4 5.5 5.5 5.5 3.0 0.0 Myanmar 0.0 -0.3 -0.6 -0.6 -0.5 0.0 0.0 0.0 Namibia 1.8 2.1 2.4 2.4 2.5 2.5 1.5 0.0 Netherlands 1.9 1.2 1.1 1.1 1.2 1.5 1.0 0.0 New Zealand 4.0 3.7 2.5 2.6 2.6 2.6 1.5 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Nicaragua -16.0 -12.2 -13.7 -12.0 -12.5 0.0 0.0 0.0 Niger -0.3 -0.7 -0.8 -0.7 0.0 0.0 0.0 0.0 Nigeria 7.1 7.4 11.8 8.9 6.0 6.5 3.5 0.0 Norway 5.8 7.0 7.1 5.7 7.1 7.0 3.5 0.0 Oman 2.6 7.9 6.4 5.5 6.3 5.5 3.0 0.0 Pakistan 0.0 -0.1 -0.1 2.6 8.1 6.0 3.5 0.0 Panama 1.0 1.0 0.9 1.7 1.9 1.5 1.0 0.0 Papua New Guinea 1.0 2.1 2.4 1.4 0.2 -0.2 0.0 0.0 Paraguay 2.5 4.1 3.0 2.9 2.5 2.3 1.5 0.0 Peru 12.2 13.4 11.8 12.9 14.1 13.0 4.5 0.0 Philippines 1.7 2.2 1.4 1.6 1.6 1.6 1.0 0.0 Poland 7.2 6.7 6.7 6.3 7.0 6.0 3.5 0.0 Portugal 6.1 3.2 3.4 3.8 4.6 4.6 2.5 0.0 Qatar 1.6 1.8 2.7 2.7 2.5 2.5 1.5 0.0 Romania 1.4 2.5 3.3 4.5 5.2 5.0 3.0 0.0 Russian Federation. -6.0 -1.4 4.3 6.0 7.9 7.0 3.5 0.0 Saudi Arabia 6.3 8.0 8.6 7.5 8.4 7.5 3.5 0.0 Senegal 0.4 0.8 0.9 1.0 1.0 1.0 1.0 0.0 Serbia & Montenegro 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Sierra Leone -21.3 -12.1 -8.4 -6.1 0.0 0.0 0.0 0.0 Singapore 9.4 8.8 7.5 8.3 8.1 8.0 3.5 0.0 Slovak Republic 1.0 2.7 3.5 3.0 6.3 5.0 3.0 0.0 Slovenia 5.0 4.1 3.6 3.7 3.7 3.7 2.0 0.0 Somalia 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 South Africa 0.9 2.0 2.0 0.8 2.5 2.1 1.5 0.0 Spain 5.5 3.1 2.8 2.7 2.9 2.8 1.5 -0.5 Sri Lanka 3.1 2.5 1.1 1.9 2.6 2.6 1.5 -0.5 Sudan -25.9 -29.8 -25.8 -26.1 -10.8 -13.0 0.0 0.0 Suriname 1.9 -0.8 -2.4 4.4 4.5 1.0 1.0 0.0 Sweden 2.5 2.5 2.4 2.7 3.1 3.0 1.5 0.0 Switzerland 6.4 5.8 6.9 6.6 7.8 7.0 3.5 0.0 Syria -2.9 -2.6 -1.4 -1.0 -1.0 0.0 0.0 0.0 Taiwan 11.4 12.6 10.0 14.9 19.0 18.0 5.0 0.0 Tanzania 0.1 0.0 0.3 0.7 0.8 0.8 0.5 0.0 Thailand 6.4 6.2 4.1 5.1 7.1 5.0 3.0 0.0 Togo 0.7 1.0 1.1 1.4 1.4 1.4 1.0 0.0 Trinidad & Tobago 3.1 4.1 5.4 6.4 6.6 6.6 3.5 0.0 Tunisia 2.6 3.2 2.4 2.5 3.0 2.9 1.5 0.0 Turkey 1.3 2.8 1.7 -3.0 -2.7 0.0 0.0 0.0 Uganda 2.5 3.2 4.0 4.2 2.3 2.3 1.5 0.0 Ukraine -2.5 -2.5 -0.6 0.8 1.6 1.5 1.0 0.0 United Arab Emirates 3.4 4.0 4.6 4.5 5.2 5.0 3.0 0.0 United Kingdom 1.3 1.0 1.4 1.3 1.1 1.1 1.0 0.0 United States 1.1 0.8 0.7 0.7 0.8 0.8 0.5 0.0 Uruguay 5.0 6.4 7.0 9.9 -13.7 -10.9 0.0 0.0 Venezuela 10.6 12.8 12.0 8.3 11.6 8.0 3.5 0.0 Vietnam 1.8 3.3 2.6 2.6 2.3 2.2 1.5 0.0 Yemen, Republic 2.0 1.7 1.6 1.7 1.7 1.7 1.0 0.0 Zambia -18.3 -17.9 -16.3 -9.0 -7.0 0.0 0.0 0.0 Zimbabwe -6.5 -1.6 -1.9 -1.7 -1.4 -1.5 0.0 0.0

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TABLE 16

EXCHANGE RATE STABILITY

This table lists the annual percentage change in exchange rate of the national currency against the US dollar (against the German mark in the case of the USA) for the current month and for the preceding five years. Risk points are assigned to the current percentage change as outlined in the Guide to ICRG. The final column in the table shows the risk points assessed for the current percentage change in the exchange rate and the change, if any, from the previous month’s risk points.

Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Albania -1.1 8.6 -4.4 0.2 5.8 14.3 9.5 0.0 Algeria -1.8 -13.3 -13.0 -2.6 -3.2 2.6 10.0 0.0 Angola -71.5 -610.4 -259.8 -119.7 -97.3 -65.6 2.0 0.0 Argentina 0.0 0.0 0.0 0.0 -206.3 20.7 8.5 0.5 Armenia -2.9 -6.0 -0.8 -2.9 1.3 0.0 10.0 0.0 Australia -18.2 2.5 -10.8 -12.5 4.8 17.8 9.0 0.0 Austria -1.4 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 Azerbaijan 2.9 -6.5 -8.6 -4.1 -4.4 -0.6 10.0 0.0 Bahamas 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Bahrain 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Bangladesh -6.9 -4.6 -6.2 -7.0 -3.7 -1.0 10.0 0.0 Belarus -77.3 -439.3 -252.4 -58.5 -27.5 -12.1 8.5 0.0 Belgium -1.5 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 Bolivia -4.9 -5.5 -6.4 -6.8 -8.5 -5.2 9.5 0.0 Botswana -1.1 -4.4 -15.6 -3.0 4.7 22.8 8.0 -0.5 Brazil -7.7 -56.3 -0.8 -28.9 -23.9 15.3 9.0 -1.0 Brunei -1.0 0.0 -1.2 -3.9 5.3 1.9 10.0 0.0 Bulgaria -4.7 -3.8 -15.6 -2.9 4.9 11.6 9.5 0.0 Burkina Faso -1.1 -4.4 -15.6 -3.0 4.7 11.5 9.5 0.0 Cameroon -1.1 -4.4 -15.6 -3.0 4.9 11.5 9.5 0.0 Canada -7.1 -0.1 0.1 -4.3 -1.3 11.5 9.5 0.0 Chile -9.8 -10.5 -5.2 -18.6 -8.5 6.4 10.0 0.0 China, Peoples' Rep. 0.1 0.0 0.0 0.0 0.0 -0.1 10.0 0.0 Colombia -25.0 -23.2 -18.9 -10.1 -8.9 -2.5 10.0 1.0 Congo, Dem. Republic -22.9 -149.7 -442.8 -846.9 -67.7 -19.5 7.0 0.5 Congo, Republic -1.1 -4.4 -15.6 -3.0 4.9 11.5 9.5 0.0 Costa Rica -10.6 -11.1 -7.9 -6.7 -9.4 -9.9 9.0 0.0 Cote d'Ivoire -1.1 -4.4 -15.6 -3.0 4.9 11.5 9.5 0.0 Croatia -4.3 -11.8 -16.4 -0.7 16.4 9.5 10.0 0.5 Cuba 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Cyprus -0.7 -4.9 -16.3 -1.9 15.1 9.7 10.0 0.5 Czech Republic -1.8 -7.1 -11.7 1.5 13.9 5.4 10.0 0.5 Denmark -1.5 -4.1 -15.9 -3.0 5.1 11.5 9.5 0.0 Dominican Republic -7.0 -5.0 -2.4 -3.3 -9.8 -83.6 1.0 0.0 Ecuador -36.2 -116.4 -112.0 0.0 0.0 0.0 10.0 0.0 Egypt 0.0 -0.5 -8.4 -21.7 -0.2 -32.6 5.0 0.0 El Salvador 0.0 0.0 0.0 0.1 0.0 -0.1 10.0 0.0 Estonia -1.4 -7.4 -12.3 -4.2 14.6 11.5 9.5 0.0 Ethiopia -6.1 -11.6 -3.5 -2.9 -1.4 -1.0 10.0 0.0

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Finland -2.9 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 France -1.1 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 Gabon -1.1 -4.4 -15.6 -3.0 4.9 11.5 9.5 0.0 Gambia -4.5 -10.7 -12.2 -23.4 -13.3 -32.6 5.0 -0.5 Germany -1.5 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 Ghana -12.9 -15.3 -104.4 -31.5 -10.6 -5.8 10.0 0.0 Greece -8.2 -3.4 -19.5 0.0 4.9 11.5 9.5 0.0 Guatemala -5.4 -15.5 -5.1 -1.2 0.5 -1.3 10.0 0.0 Guinea -12.9 -6.1 -30.6 -11.7 -1.3 -1.2 10.0 0.0 Guinea-Bissau -1.1 -3.8 -13.2 -2.9 4.8 11.5 9.5 0.0 Guyana -5.7 -18.3 -2.5 -2.7 -1.8 0.0 10.0 0.0 Haiti -0.7 -1.0 -25.0 -15.4 -19.7 -37.9 4.5 1.0 Honduras -2.9 -6.2 -4.4 -4.3 -6.2 -4.4 10.0 0.5 Hong Kong 0.0 -0.2 -0.4 -0.1 0.0 0.0 10.0 0.0 Hungary -14.8 -10.6 -19.0 -1.5 10.0 5.6 10.0 0.0 Iceland -0.1 -1.2 -21.6 -15.7 17.8 7.8 10.0 0.0 India -13.6 -4.4 -4.4 -5.0 -3.0 5.3 10.0 0.0 Indonesia -244.2 21.6 -7.2 -21.8 9.3 7.2 10.0 0.0 Iran 0.1 -0.1 -0.7 0.6 -293.9 -4.6 10.0 0.0 Iraq 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Ireland -6.4 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 Israel -10.2 -8.9 1.5 -3.2 -12.6 8.1 10.0 0.0 Italy -1.9 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 Jamaica -3.2 -6.8 -9.4 -7.7 -5.3 -19.6 7.0 0.5 Japan -8.2 13.0 5.4 -12.8 -3.2 4.4 10.0 0.0 Jordan 0.0 0.0 -0.1 0.0 -0.1 0.0 10.0 0.0 Kazakhstan -3.8 -52.6 -18.9 -3.2 -4.5 5.3 10.0 0.0 Kenya -2.8 -16.5 -8.3 -3.1 -0.2 2.9 10.0 0.0 Korea, D.P.R. 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Korea, Republic -47.3 15.2 4.9 -14.1 3.1 3.7 10.0 0.0 Kuwait -0.7 0.3 -1.0 0.0 1.0 0.9 10.0 0.0 Latvia -1.5 1.5 -6.5 -3.2 7.7 5.0 10.0 0.0 Lebanon -1.7 3.5 2.6 -0.4 0.0 0.0 10.0 0.0 Liberia 0.0 0.0 0.0 0.0 0.0 -5.2 9.5 -0.5 Libya 4.3 -2.7 -16.9 -20.4 -86.2 -12.5 8.0 -2.0 Lithuania 0.0 0.0 0.0 0.0 14.2 11.5 9.5 0.0 Luxembourg -1.5 0.0 -15.6 -3.0 16.0 11.5 9.5 0.0 Madagascar -6.9 -13.4 -7.1 2.7 -4.4 8.0 10.0 0.5 Malawi -7.4 -89.0 -40.2 -71.0 0.0 -34.8 5.0 -2.0 Malaysia -39.5 3.2 0.0 0.0 0.0 0.0 10.0 0.0 Mali -1.1 -3.8 -12.4 -3.0 4.8 11.5 9.5 0.0 Malta 0.0 -2.9 -9.6 -2.8 10.7 8.8 10.0 0.5 Mexico -15.4 -4.6 1.1 1.2 -3.4 -4.6 10.0 0.5 Moldova -16.2 -95.8 -18.2 -3.4 -6.7 -3.0 10.0 0.0 Mongolia -44.1 -6.4 -25.1 -2.6 0.0 -0.9 10.0 0.0 Morocco -0.8 -2.1 -8.4 -6.4 2.5 9.1 10.0 0.5 Mozambique -2.2 -2.9 -8.3 -28.5 0.0 -0.2 10.0 0.0 Myanmar -1.6 0.9 -3.7 -3.6 1.6 3.9 10.0 0.0 Namibia -7.2 -20.0 -10.3 -25.4 0.0 31.0 6.5 -0.5 Netherlands -1.7 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 New Zealand -23.5 -1.4 -15.7 -8.8 9.4 20.5 8.5 -0.5 Nicaragua -12.0 -11.6 -7.5 -5.4 -6.6 -5.1 9.5 -0.5

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Current COUNTRY Current Risk 1998 1999 2000 2001 2002 09/03 Points Niger -14.1 -1.1 -3.8 -12.4 0.0 11.5 9.5 0.0 Nigeria 0.0 -321.9 -10.1 -9.4 -8.4 -1.3 10.0 0.0 Norway -6.7 -3.4 -12.9 -2.2 11.2 0.3 10.0 0.0 Oman 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Pakistan -9.8 -9.3 -9.2 -15.4 3.6 2.3 10.0 0.0 Panama 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Papua New Guinea -43.5 -23.4 -8.9 -22.0 -15.2 15.3 9.0 -0.5 Paraguay -25.2 -14.4 -11.8 -17.8 -39.2 2.9 10.0 0.0 Peru -10.0 -15.5 -3.2 -0.5 -0.3 4.2 10.0 0.0 Philippines -38.8 4.4 -13.1 -15.4 -1.2 -5.4 9.5 -0.5 Poland -6.0 -14.1 -9.6 5.8 0.3 5.2 10.0 0.0 Portugal -2.7 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 Qatar 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Romania -23.8 -72.8 -41.6 -33.9 -13.7 -0.4 10.0 0.0 Russian Federation. -67.8 -153.7 -14.3 -3.7 -7.5 4.2 10.0 0.0 Saudi Arabia 0.0 0.0 0.0 0.0 0.0 0.0 10.0 0.0 Senegal -1.1 -4.4 -15.6 -3.0 4.8 11.5 9.5 0.0 Serbia & Montenegro -15.1 -12.0 -4.8 -192.0 8.7 5.6 10.0 0.0 Sierra Leone -6.6 -59.3 -24.2 -109.8 0.0 -15.0 7.5 0.0 Singapore -12.7 -1.3 -1.7 -3.9 0.1 1.9 10.0 0.0 Slovak Republic -4.8 -17.4 -11.3 -5.0 6.3 13.2 9.5 0.5 Slovenia -4.0 -9.4 -33.5 -2.6 11.8 8.8 10.0 0.5 Somalia 0.0 0.0 0.0 -2.5 0.0 0.0 10.0 0.0 South Africa -20.0 -10.5 -13.6 -24.0 -22.4 31.0 6.5 -0.5 Spain -2.0 0.0 -15.5 -3.0 4.9 11.5 9.5 0.0 Sri Lanka -9.2 -9.6 -9.0 -16.1 -7.0 -0.6 10.0 0.0 Sudan -27.4 -25.8 -1.8 -0.6 -1.8 -1.0 10.0 0.0 Suriname 0.0 -114.3 -53.9 -64.7 -7.7 -15.4 7.5 0.0 Sweden -4.1 -3.9 -10.9 -12.7 5.7 9.9 10.0 0.5 Switzerland 0.1 -3.6 -12.5 0.1 7.6 6.8 10.0 0.0 Syria 0.0 0.0 0.0 0.0 0.0 5.8 10.0 0.0 Taiwan -16.6 3.5 3.2 -8.3 -2.3 1.6 10.0 0.0 Tanzania -5.5 -8.6 -19.9 -0.6 0.0 -6.7 9.5 0.5 Thailand -31.9 8.6 -6.1 -10.8 3.3 4.0 10.0 0.0 Togo -1.1 -4.4 -15.6 -3.0 4.8 11.5 9.5 0.0 Trinidad & Tobago -0.7 0.0 0.0 1.1 -0.3 -1.3 10.0 0.0 Tunisia -3.0 -4.2 -15.6 -5.0 1.2 6.3 10.0 0.0 Turkey -71.7 -60.6 -49.3 -96.0 -23.0 15.9 9.0 0.0 Uganda -3.5 -14.5 -21.6 -16.1 0.0 -10.3 8.5 0.0 Ukraine -31.6 -68.6 -31.7 1.3 0.8 0.0 10.0 0.0 United Arab Emirates -0.1 0.0 0.0 0.0 0.0 0.0 10.0 0.0 United Kingdom 1.1 -2.4 -6.8 -5.2 4.0 2.1 10.0 0.0 United States 1.5 0.0 13.4 3.0 -5.4 -13.0 8.0 0.5 Uruguay -10.9 -8.3 -6.7 -10.1 -59.6 2.9 10.0 0.0 Venezuela -12.1 -10.6 -12.3 -6.4 -60.4 -9.3 9.0 1.0 Vietnam -13.6 -5.1 -1.6 -3.9 -3.8 -1.2 10.0 0.0 Yemen, Republic -37.3 -14.6 -3.9 -4.3 -4.1 -0.9 10.0 0.0 Zambia -41.7 -28.2 -30.3 -16.1 -21.8 -4.4 10.0 0.5 Zimbabwe -80.1 -78.9 -13.0 -26.9 0.0 -1386.0 0.0 0.0

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TABLE 17

FOREIGN EXCHANGE RATES

This table presents the average monthly exchange rate for the countries listed against the US dollar (against Euro in the case of the USA) for the month one year ago and for the six months preceding the current issue.

COUNTRY Currency 09/02 03/03 04/03 05/03 06/03 07/03 08/03 Albania Lek 139.30 129.47 130.22 120.12 118.885 122.29 119.34 Algeria Dinar 79.10 79.74 79.69 79.51 78.56 78.01 77.01 Angola Kwanza 48.15 66.55 69.46 72.47 75.30 78.25 79.76 Argentina Peso 3.67 3.14 2.97 2.97 2.80 2.79 2.91 Armenia Dram 558.14 558.14 558.14 558.14 558.14 558.14 558.14 Australia Dollar 1.84 1.68 1.65 1.52 1.49 1.53 1.51 Austria Schilling 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Azerbaijan Manat 4886.00 4903.00 4908.00 4914.00 4921.00 4921.00 4915.00 Bahamas Dollar 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Bahrain Dinar 0.38 0.38 0.38 0.38 0.38 0.38 0.38 Bangladesh Taka 57.85 58.20 58.20 58.10 58.35 58.36 58.40 Belarus Ruble 1866.50 1989.50 2011.00 2035.00 2059.25 2071.50 2092.75 Belgium Franc 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Bolivia Boliviano 7.34 7.59 7.61 7.62 7.65 7.68 7.72 Botswana Pula 6.34 5.27 5.07 5.04 5.08 5.03 4.89 Brazil Real 3.55 3.39 3.13 2.97 2.88 2.86 3.01 Brunei Dollar 1.78 1.76 1.78 1.73 1.73 1.76 1.75 Bulgaria Lev 1.98 1.81 1.80 1.67 1.66 1.74 1.75 Burkina Faso CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Cameroon CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Canada Dollar 1.58 1.48 1.45 1.36 1.34 1.40 1.40 Chile Peso 750.80 740.15 718.75 708.95 705.65 698.25 702.95 China, Peoples' Rep. Ren.Yuan 8.27 8.28 8.28 8.28 8.28 8.28 8.28 Colombia Peso 2792.25 2959.47 2919.60 2861.50 2826.15 2889.07 2863.15 Congo, Dem. Republic Franc 361.50 418.00 415.50 416.00 317.88 430.00 432.00 Congo, Republic CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Costa Rica Colon 367.92 386.62 389.99 393.86 397.36 400.75 404.24 Cote d'Ivoire CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Croatia Kuna 7.45 7.12 6.96 6.43 6.45 6.69 6.74 Cuba Peso 21.00 21.00 21.00 21.00 21.00 21.00 21.00 Cyprus Pound 0.58 0.54 0.54 0.50 0.50 0.53 0.53 Czech Republic Koruna 30.84 29.38 29.21 26.86 26.87 28.53 29.16 Denmark Krone 7.55 6.90 6.88 6.35 6.35 6.65 6.68 Dominican Republic Peso 17.10 22.85 22.00 25.80 27.10 32.10 31.40 Ecuador Sucre 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Egypt Pound 4.63 5.69 5.86 5.96 5.99 6.15 6.15 El Salvador Colon 8.75 8.75 8.75 8.75 8.75 8.75 8.75 Estonia Kroon 15.90 14.54 14.51 13.39 13.38 13.99 14.07 Ethiopia Birr 8.46 8.30 8.75 8.58 8.45 8.45 8.55 Finland Markka 1.02 0.93 0.93 0.86 0.86 0.89 0.90 France Franc 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Gabon CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Gambia Dalasi 22.25 24.50 25.00 25.00 26.00 26.00 29.50 Germany D.mark 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Ghana Cedi 8150.00 8340.00 8635.00 8635.00 8650.00 8685.00 8625.00 Greece Drachma 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Guatemala Questzal 7.82 7.89 7.85 7.91 7.94 7.93 7.93 Guinea Franc 1976.50 1980.00 1980.00 1980.00 1985.00 1987.50 2000.00 Guinea-Bissau CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Guyana Dollar 179.00 179.00 179.00 179.00 179.00 179.00 179.00 Haiti Gourde 28.00 40.50 40.50 38.75 38.15 40.00 38.60 Honduras Lempira 16.65 17.08 17.17 17.23 17.30 17.37 17.39 Hong Kong Dollar 7.80 7.80 7.80 7.80 7.80 7.80 7.80 Hungary Forint 247.23 227.10 227.35 209.76 228.59 236.84 233.28 Iceland Krona 87.13 78.29 77.08 73.03 73.37 78.07 80.37

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COUNTRY Currency 09/02 03/03 04/03 05/03 06/03 07/03 08/03 India Rupee 48.39 47.65 47.34 46.94 46.59 46.22 45.82 Indonesia Rupiah 9075.00 8917.50 8842.50 8410.00 8232.00 8258.50 8418.00 Iran Rial 7948.00 8033.00 8150.00 8146.00 8157.00 8230.00 8311.00 Iraq Dinar 0.31 0.31 0.31 0.31 0.31 0.31 0.31 Ireland Punt 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Israel Shekel 4.85 4.81 4.59 4.52 4.39 4.43 4.45 Italy Lira 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Jamaica Dollar 48.70 53.20 56.25 64.00 58.20 58.34 58.26 Japan Yen 123.78 118.54 120.22 116.59 118.52 118.76 118.28 Jordan Dinar 0.71 0.71 0.71 0.71 0.71 0.71 0.71 Kazakhstan Tenge 154.66 150.92 151.80 151.15 148.47 146.41 146.47 Kenya Shilling 78.85 76.47 75.70 71.50 73.90 74.75 76.55 Korea, D.P.R. Won (N) 2.20 2.20 2.20 2.20 2.20 2.20 2.20 Korea, Republic Won (S) 1220.65 1241.35 1217.45 1192.90 1184.95 1179.00 1175.55 Kuwait Dinar 0.30 0.30 0.30 0.30 0.30 0.30 0.30 Latvia Lats 0.60 0.58 0.58 0.56 0.56 0.57 0.57 Lebanon Pound 1514.00 1513.62 1509.00 1514.00 1513.50 1514.00 1514.12 Liberia Dollar 71.30 71.30 71.30 75.00 80.00 80.00 75.00 Libya Dinar 1.24 1.20 1.21 1.21 1.21 1.21 1.39 Lithuania Litas 3.51 3.21 3.20 2.95 2.95 3.09 3.10 Luxembourg Franc 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Madagascar Franc 6480.00 5900.00 6050.00 6200.00 5750.00 5900.00 5960.00 Malawi Kwacha 79.80 89.80 90.30 90.70 89.60 89.60 107.60 Malaysia Ringgit 3.80 3.80 3.80 3.80 3.80 3.80 3.80 Mali CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Malta Lira 0.42 0.39 0.39 0.37 0.37 0.38 0.38 Mexico Peso 10.36 10.83 10.64 10.34 10.56 10.35 10.84 Moldova Leu 13.58 14.39 14.77 14.15 14.16 14.01 13.99 Mongolia Tugrik 1116.00 1126.00 1135.00 1126.00 1126.00 1126.00 1126.00 Morocco Dirham 10.67 9.96 9.95 9.33 9.32 9.66 9.70 Mozambique Metical 23285.50 23435.00 23352.00 23352.50 23346.50 23332.50 23330.50 Myanmar Kyat 6.45 6.25 6.20 6.20 6.20 6.20 6.20 Namibia Dollar 10.66 8.22 7.68 7.90 7.93 7.73 7.35 Netherlands Guilder 1.02 0.93 0.93 0.86 0.86 0.89 0.90 New Zealand Dollar 2.13 1.82 1.82 1.71 1.71 1.72 1.70 Nicaragua Cordoba 14.43 14.74 14.79 14.79 14.95 15.04 15.16 Niger CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Nigeria Naira 128.70 129.60 131.25 129.85 131.50 129.85 130.35 Norway Krone 7.47 7.22 7.27 6.81 7.00 7.48 7.45 Oman Rial 0.39 0.39 0.39 0.39 0.39 0.39 0.39 Pakistan Rupee 59.19 57.81 57.77 57.79 57.75 57.75 57.83 Panama Balboa 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Papua New Guinea Kina 4.01 3.53 3.77 3.59 3.51 3.45 3.40 Paraguay Guarani 6255.00 6900.00 6855.00 6150.00 6230.00 5820.00 6075.00 Peru Sol 3.63 3.48 3.46 3.48 3.47 3.47 3.48 Philippines Peso 52.33 54.83 52.38 52.43 53.43 53.58 55.18 Poland Zloty 4.14 4.01 3.93 3.72 3.77 4.01 3.92 Portugal Escudo 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Qatar Riyal 3.64 3.64 3.64 3.64 3.64 3.64 3.64 Romania Leu 33205.00 32934.00 33885.50 32262.50 32717.50 32742.50 33327.50 Russian Federation. Ruble 31.65 31.39 31.19 30.89 30.38 30.45 30.32 Saudi Arabia Riyal 3.75 3.75 3.75 3.75 3.75 3.75 3.75 Senegal CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Serbia & Montenegro Dinar 62.18 58.51 59.59 56.61 55.57 58.25 58.72 Sierra Leone Leone 2045.00 2270.00 2295.00 2250.00 2250.00 2352.50 2352.50 Singapore Dollar 1.78 1.76 1.78 1.73 1.73 1.76 1.75 Slovak Republic Koruna 43.43 38.74 37.95 35.13 35.63 37.40 37.70 Slovenia Tolar 231.94 210.50 215.40 199.50 199.95 209.67 211.46 Somalia Shilling 2620.00 2620.00 2620.00 2620.00 2620.00 2620.00 2620.00 South Africa Rand 10.66 8.22 7.68 7.90 7.93 7.73 7.35 Spain Peseta 1.02 0.93 0.93 0.86 0.86 0.89 0.90 Sri Lanka Rupee 96.23 96.93 97.03 97.23 97.19 97.13 96.86 Sudan Dinar 258.70 263.55 263.55 258.70 258.70 258.70 261.30 Suriname Guilder 2178.50 2515.00 2515.00 2515.00 2515.00 2515.00 2515.00 Sweden Krona 9.22 8.55 8.49 7.85 7.76 8.26 8.31 Switzerland Franc 1.49 1.36 1.39 1.30 1.32 1.37 1.39 Syria Pound 48.85 46.00 46.00 46.00 46.00 46.00 46.00

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COUNTRY Currency 09/02 03/03 04/03 05/03 06/03 07/03 08/03 Taiwan Dollar 34.82 34.70 34.81 34.61 34.54 34.43 34.25 Tanzania Shilling 977.00 1040.00 1047.00 1050.50 1049.50 1046.00 1042.50 Thailand Baht 43.38 42.75 42.92 42.04 41.61 41.68 41.65 Togo CFA Fr 666.79 609.42 607.96 561.29 561.05 586.54 589.81 Trinidad & Tobago Dollar 6.07 6.13 6.15 6.14 6.14 6.14 6.15 Tunisia Dinar 1.39 1.32 1.33 1.27 1.26 1.30 1.30 Turkey Lira 1659250.00 1635500.00 1621000.00 1505000.00 1419500.00 1378000.00 1395750.00 Uganda Shilling 1814.00 1915.00 1967.50 2003.00 1990.00 1994.25 2001.50 Ukraine Hryvna 5.33 5.34 5.33 5.33 5.34 5.33 5.33 United Arab Emirates Dirham 3.67 3.67 3.67 3.67 3.67 3.67 3.67 United Kingdom Pound 0.64 0.63 0.64 0.61 0.60 0.63 0.63 United States Dollar 0.98 1.08 1.08 1.17 1.17 1.12 1.11 Uruguay Peso 28.50 28.68 28.48 29.43 26.39 26.72 27.68 Venezuela Bolivar 1461.76 1598.00 1598.00 1598.00 1598.00 1598.00 1598.00 Vietnam Dong 15339.50 15440.00 15462.50 15467.00 15483.50 15515.00 15520.50 Yemen, Republic Rial 176.39 177.89 177.89 178.01 178.01 178.01 178.01 Zambia Kwacha 4500.00 5025.00 4857.50 4790.00 4767.50 4755.00 4700.00 Zimbabwe Dollar 55.45 824.00 824.00 824.00 824.00 824.00 824.00

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BRIEF GUIDE TO THE RATINGS SYSTEM

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International Country Risk Guide September 2003

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International Country Risk Guide September 2003

THE RATING SYSTEM

The ICRG Risk Rating System assigns a numerical value (risk points) to a predetermined range of risk components, according to a preset weighted scale, for each country covered by the system. Each scale is designed to award the highest value to the lowest risk and the lowest value to the highest risk. All countries are assessed on the same basis to allow for comparability.

The risk components are grouped into three Risk Categories – Political, Economic, and Financial. Each Risk Category is made up of a number of Risk Components. The sum of the Risk Points assigned to each Risk Component within each Risk Category determines the overall risk rating for that Risk Category.

The total Risk Points for each Risk Category are further combined, according to a formula, to produce a Composite Risk Rating for the country in question. In every case, the higher the number of Risk Points awarded, the lower the perceived risk, while the lower the number of Risk Points awarded, the higher the perceived risk.

The risk ratings are produced as a current situation (the current month) assessment, and as one- year and five-year forecasts.

THE POLITICAL RISK RATING

The aim of the political risk rating is to provide a means of assessing the political stability of the countries covered by ICRG on a comparable basis. This is done by assigning risk points to a pre- set group of factors, termed political risk components. The minimum number of points that can be assigned to each component is zero, while the maximum number of points depends on the fixed weight that component is given in the overall political risk assessment. In every case the lower the risk point total, the higher the risk, and the higher the risk point total the lower the risk.

To ensure consistency, both between countries and over time, points are assigned by ICRG editors on the basis of a series of pre-set questions for each risk component.

THE POLITICAL RISK COMPONENTS – Table 3B

The following risk components, weights, and sequence are used to produce the political risk rating:

POLITICAL RISK COMPONENTS Sequence Component Points (max.) A Government Stability 12 B Socioeconomic Conditions 12 C Investment Profile 12 D Internal Conflict 12 E External Conflict 12 F Corruption 6 G Military in Politics 6 H Religion in Politics 6

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International Country Risk Guide September 2003

POLITICAL RISK COMPONENTS Sequence Component Points (max.) I Law and Order 6 J Ethnic Tensions 6 K Democratic Accountability 6 L Bureaucracy Quality 4 Total 100

Government Stability – 12 Points This is an assessment both of the government’s ability to carry out its declared program(s), and its ability to stay in office. The risk rating assigned is the sum of three subcomponents, each with a maximum score of four points and a minimum score of 0 points. A score of 4 points equates to Very Low Risk and a score of 0 points to Very High Risk.

The subcomponents are:

• Government Unity • Legislative Strength • Popular Support

Socioeconomic conditions – 12 Points This is an assessment of the socioeconomic pressures at work in society that could constrain government action or fuel social dissatisfaction. The risk rating assigned is the sum of three subcomponents, each with a maximum score of four points and a minimum score of 0 points. A score of 4 points equates to Very Low Risk and a score of 0 points to Very High Risk.

The subcomponents are:

• Unemployment • Consumer Confidence • Poverty

Investment Profile – 12 Points This is an assessment of factors affecting the risk to investment that are not covered by other political, economic and financial risk components. The risk rating assigned is the sum of three subcomponents, each with a maximum score of four points and a minimum score of 0 points. A score of 4 points equates to Very Low Risk and a score of 0 points to Very High Risk.

The subcomponents are:

• Contract Viability/Expropriation • Profits Repatriation • Payment Delays

Internal Conflict – 12 Points This is an assessment of political violence in the country and its actual or potential impact on governance. The highest rating is given to those countries where there is no armed opposition to the government and the government does not indulge in arbitrary violence, direct or indirect,

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International Country Risk Guide September 2003

against its own people. The lowest rating is given to a country embroiled in an on-going civil war.

The risk rating assigned is the sum of three subcomponents, each with a maximum score of four points and a minimum score of 0 points. A score of 4 points equates to Very Low Risk and a score of 0 points to Very High Risk.

The subcomponents are:

• Civil War • Terrorism/Political Violence • Civil Disorder

External Conflict – 12 Points The external conflict measure is an assessment both of the risk to the incumbent government from foreign action, ranging from non-violent external pressure (diplomatic pressures, withholding of aid, trade restrictions, territorial disputes, sanctions, etc) to violent external pressure (cross-border conflicts to all-out war).

External conflicts can adversely affect foreign business in many ways, ranging from restrictions on operations, to trade and investment sanctions, to distortions in the allocation of economic resources, to violent change in the structure of society.

The risk rating assigned is the sum of three subcomponents, each with a maximum score of four points and a minimum score of 0 points. A score of 4 points equates to Very Low Risk and a score of 0 points to Very High Risk.

The subcomponents are:

• War • Cross-Border Conflict • Foreign Pressures

Corruption – 6 Points This is an assessment of corruption within the political system. Such corruption is a threat to foreign investment for several reasons: it distorts the economic and financial environment, it reduces the efficiency of government and business by enabling people to assume positions of power through patronage rather than ability, and, last but not least, introduces an inherent instability into the political process.

The most common form of corruption met directly by business is financial corruption in the form of demands for special payments and bribes connected with import and export licenses, exchange controls, tax assessments, police protection, or loans. Such corruption can make it difficult to conduct business effectively, and in some cases my force the withdrawal or withholding of an investment.

Although our measure takes such corruption into account, it is more concerned with actual or potential corruption in the form of excessive patronage, nepotism, job reservations, 'favor-for- favors', secret party funding, and suspiciously close ties between politics and business. In our view these insidious sorts of corruption are potentially of much greater risk to foreign business in

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that they can lead to popular discontent, unrealistic and inefficient controls on the state economy, and encourage the development of the black market.

The greatest risk in such corruption is that at some time it will become so overweening, or some major scandal will be suddenly revealed, as to provoke a popular backlash, resulting in a fall or overthrow of the government, a major reorganizing or restructuring of the country's political institutions, or, at worst, a breakdown in law and order, rendering the country ungovernable.

Military in Politics – 6 Points The military is not elected by anyone. Therefore, its involvement in politics, even at a peripheral level, is a diminution of democratic accountability. However, it also has other significant implications.

The military might, for example, become involved in government because of an actual or created internal or external threat. Such a situation would imply the distortion of government policy in order to meet this threat, for example by increasing the defense budget at the expense of other budget allocations.

In some countries, the threat of military take-over can force an elected government to change policy or cause its replacement by another government more amenable to the military’s wishes. A military takeover or threat of a takeover may also represent a high risk if it is an indication that the government is unable to function effectively and that the country therefore has an uneasy environment for foreign businesses.

A full-scale military regime poses the greatest risk. In the short term a military regime may provide a new stability and thus reduce business risks. However, in the longer term the risk will almost certainly rise, partly because the system of governance will be become corrupt and partly because the continuation of such a government is likely to create an armed opposition.

In some cases, military participation in government may be a symptom rather than a cause of underlying difficulties. Overall, lower risk ratings indicate a greater degree of military participation in politics and a higher level of political risk.

Religious Tensions – 6 Points Religious tensions may stem from the domination of society and/or governance by a single religious group that seeks to replace civil law by religious law and to exclude other religions from the political and/or social process; the desire of a single religious group to dominate governance; the suppression off religious freedom; the desire of a religious group to express its own identity, separate from the country as a whole.

The risk involved in these situations range from inexperienced people imposing inappropriate policies through civil dissent to civil war.

Law and Order – 6 Points Law and Order are assessed separately, with each sub-component comprising zero to three points. The Law sub-component is an assessment of the strength and impartiality of the legal system, while the Order sub-component is an assessment of popular observance of the law. Thus, a country can enjoy a high rating – 3 – in terms of its judicial system, but a low rating - 1 – if it suffers from a very high crime rate of if the law is routinely ignored without effective sanction (for example, widespread illegal strikes).

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Ethnic Tensions – 6 Points This component is an assessment of the degree of tension within a country attributable to racial, nationality, or language divisions. Lower ratings are given to countries where racial and nationality tensions are high because opposing groups are intolerant and unwilling to compromise. Higher ratings are given to countries where tensions are minimal, even though such differences may still exist.

Democratic Accountability – 6 Points This is a measure of how responsive government is to its people, on the basis that the less responsive it is, the more likely it is that the government will fall, peacefully in a democratic society, but possibly violently in a non-democratic one.

The points in this component are awarded on the basis of the type of governance enjoyed by the country in question. For this purpose, we have defined the following types of governance:

Alternating Democracy The essential features of an alternating democracy are:

• A government/executive that has not served more than two successive terms. • Free and fair elections for the legislature and executive as determined by constitution or statute; • The active presence of more than one political party and a viable opposition; • Evidence of checks and balances among the three elements of government: executive, legislative and judicial; • Evidence of an independent judiciary; • Evidence of the protection of personal liberties through constitutional or other legal guarantees.

Dominated Democracy The essential features of a dominated democracy are:

• A government/executive that has served more than two successive terms. • Free and fair elections for the legislature and executive as determined by constitution or statute; • The active presence of more than one political party • Evidence of checks and balances between the executive, legislature, and judiciary; • Evidence of an independent judiciary; • Evidence of the protection of personal liberties.

De-facto One-Party State The essential features of a de-facto one-party state are:

• A government/executive that has served more than two successive terms, or where the political/electoral system is designed or distorted to ensure the domination of governance by a particular government/executive. • Holding of regular elections as determined by constitution or statute • Evidence of restrictions on the activity of non-government political parties (disproportionate media access between the governing and non-governing parties, harassment

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of the leaders and/or supporters of non-government political parties, the creation impediments and obstacles affecting only the non-government political parties, electoral fraud, etc).

De jure One-Party state The identifying feature of a one-party state is:

• A constitutional requirement that there be only one governing party. • Lack of any legally recognized political opposition.

Autarchy The identifying feature of an autarchy is: • Leadership of the state by a group or single person, without being subject to any franchise, either through military might or inherited right.

In an autarchy, the leadership might indulge in some quasi-democratic processes. In its most developed form this allows competing political parties and regular elections, through popular franchise, to an assembly with restricted legislative powers (approaching the category of a de jure or de facto one party state). However, the defining feature is whether the leadership, i.e. the head of government, is subject to election in which political opponents are allowed to stand.

In general, the highest number of risk points (lowest risk) are assigned to Alternating Democracies, while the lowest number of risk points (highest risk) are assigned to autarchies.

Bureaucracy Quality – 4 Points The institutional strength and quality of the bureaucracy is another shock absorber that tends to minimize revisions of policy when governments change. Therefore, high points are given to countries where the bureaucracy has the strength and expertise to govern without drastic changes in policy or interruptions in government services. In these low-risk countries, the bureaucracy tends to be somewhat autonomous from political pressure and to have an established mechanism for recruitment and training. Countries that lack the cushioning effect of a strong bureaucracy receive low points because a change in government tends to be traumatic in terms of policy formulation and day-to-day administrative functions.

ASSESSING POLITICAL RISK In general terms if the points awarded are less than 50% of the total, that component can be considered as very high risk. If the points are in the 50-60% range as high risk, in the 60%-70% range as moderate risk, in the 70-80% range as low risk and in the 80-100% range as very low risk. However, this is only a general guideline as a better rating in other components can compensate for a poor risk rating in one component.

Overall, a political risk rating of 0.0% to 49.9% indicates a Very High Risk; 50.0% to 59.9% High Risk; 60.0% to 69.9% Moderate Risk; 70.0% to 79.9% Low Risk; and 80.0% or more Very Low Risk. Once again, however, a poor political risk rating can be compensated for by a better financial and/or economic risk rating.

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THE ECONOMIC RISK RATING

The overall aim of the Economic Risk Rating is to provide a means of assessing a country’s current economic strengths and weaknesses. In general terms where its strengths outweigh its weaknesses it will present a low economic risk and where its weaknesses outweigh its strengths it will present a high economic risk.

These strengths and weaknesses are assessed by assigning risk points to a pre-set group of factors, termed economic risk components. The minimum number of points that can be assigned to each component is zero, while the maximum number of points depends on the fixed weight that component is given in the overall economic risk assessment. In every case the lower the risk point total, the higher the risk, and the higher the risk point total the lower the risk.

To ensure comparability between countries the components are based on accepted ratios between measured data within the national economic/financial structure. It is the ratios that are compared, not the data themselves. The points assigned to each component (ratio) are taken from a fixed scale.

ASSESSING ECONOMIC RISK As noted above, points are awarded to each risk component on a scale from zero up to a pre-set maximum. In general terms if the points awarded are less than 50% of the total, that component can be considered as very high risk. If the points are in the 50-60% range as high risk, in the 60%-70% range as moderate risk, in the 70-80% range as low risk, and in the 80-100% range as very low risk. However, this is only a general guideline as a better rating in other components can compensate for a poor risk rating in one component.

Overall, an economic risk rating of 0.0% to 24.5% indicates a Very High Risk; 25.0% to 29.9% High Risk; 30.0% to 34.9% Moderate Risk; 35.0% to 39.9% Low Risk; and 40.0% or more Very Low Risk. Once again, however, a poor economic risk rating can be compensated for by a better political and/or financial risk rating.

THE ECONOMIC RISK COMPONENTS – TABLE 5B

GDP Per Head – Table 7 The estimated GDP per head for a given year, converted into US dollars at the average exchange rate for that year, is expressed as a percentage of the average of the estimated total GDP of all the countries covered by ICRG. The risk points are then assigned according to the following scale:

GDP Per Head % of average Points 250.0 plus 5.0 200.0 to 249.9 4.5 150.0 to 199.9 4.0 100.0 to 149.9 3.5 75.0 to 99.9 3.0 50.0 to 74.9 2.5 40.0 to 49.9 2.0 30.0 to 39.9 1.5

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GDP Per Head % of average Points 20.0 to 29.9 1.0 10.0 to 19.9 0.5 Up to 9.9 0.0

Real GDP Growth – Table 8 The annual change in the estimated GDP, at constant 1990 prices, of a given country is expressed as a percentage increase or decrease. The risk points are then assigned according to the following scale:

Real GDP Growth Change (%) Points 6.0 plus 10.0 5.0 to 5.9 9.5 4.0 to 4.9 9.0 3.0 to 3.9 8.5 2.5 to 2.9 8.0 2.0 to 2.4 7.5 1.5 to 1.9 7.0 1.0 to 1.4 6.5 0.5 to 0.9 6.0 0.0 to 0.4 5.5 -0.1 to -0.4 5.0 -0.5 to -0.9 4.5 -1.0 to -1.4 4.0 -1.5 to -1.9 3.5 -2.0 to -2.4 3.0 -2.5 to -2.9 2.5 -3.0 to -3.4 2.0 -3.5 to -3.9 1.5 -4.0 to -4.9 1.0 -5.0 to -5.9 0.5 -6.0 plus 0.0

Annual Inflation Rate – Table 9 The estimated annual inflation rate (the unweighted average of the Consumer Price Index) is calculated as a percentage change. The risk points are then assigned according to the following scale:

Annual Inflation Rate Change (%) Points 0.0 to 1.9 10.0 2.0 to 2.9 9.5 3.0 to 3.9 9.0 4.0 to 5.9 8.5 6.0 to 7.9 8.0 8.0 to 9.9 7.5 10.0 to 11.9 7.0

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Annual Inflation Rate Change (%) Points 12.0 to 13.9 6.5 14.0 to 15.9 6.0 16.0 to 18.9 5.5 19.0 to 21.9 5.0 22.0 to 24.9 4.5 25.0 to 30.9 4.0 31.0 to 40.9 3.5 41.0 to 50.9 3.0 51.0 to 65.9 2.5 66.0 to 80.9 2.0 81.0 to 95.9 1.5 96.0 to 110.9 1.0 111.0 to 129.9 0.5 130.0 plus 0.0

Budget Balance as a Percentage of GDP – Table 10 The estimated general government budget balance (excluding grants) for a given year in the national currency is expressed as a percentage of the estimated GDP for that year in the national currency. The risk points are then assigned according to the following scale:

Budget Balance % GDP Points 4.0 plus 10.0 3.0 to 3.9 9.5 2.0 to 2.9 9.0 1.0 to 1.9 8.5 0.0 to 0.9 8.0 -0.1 to -0.9 7.5 -1.0 to -1.9 7.0 -2.0 to -2.9 6.5 -3.0 to -3.9 6.0 -4.0 to -4.9 5.5 -5.0 to -5.9 5.0 -6.0 to -6.9 4.5 -7.0 to -7.9 4.0 -8.0 to -8.9 3.5 -9.0 to -9.9 3.0 -10.0 to -11.9 2.5 -12.0 to -14.9 2.0 -15.0 to -19.9 1.5 -20.0 to -24.9 1.0 -25.0 to -29.9 0.5 -30.0 plus 0.0

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Current Account as a Percentage of GDP – Table 11 The estimated balance on the current account of the balance of payments for a given year, converted into US dollars at the average exchange rate for that year, is expressed as a percentage of the estimated GDP of the country concerned, converted into US dollars at the average rate of exchange for the period covered. The risk points are then assigned according to the following scale:

Current Account % GDP % GDP Points 10.0 plus 15.0 8.0 to 9.9 14.5 6.0 to 7.9 14.0 4.0 to 5.9 13.5 2.0 to 3.9 13.0 1.0 to 1.9 12.5 0.0 to 0.9 12.0 -0.1 to -0.9 11.5 -1.0 to -1.9 11.0 -2.0 to -3.9 10.5 -4.0 to -5.9 10.0 -6.0 to -7.9 9.5 -8.0 to -9.9 9.0 -10.0 to -11.9 8.5 -12.0 to -13.9 8.0 -14.0 to -15.9 7.5 -16.0 to -16.9 7.0 -17.0 to -17.9 6.5 -18.0 to -18.9 6.0 -19.0 to -19.9 5.5 -20.0 to -20.9 5.0 -21.0 to -21.9 4.5 -22.0 to -22.9 4.0 -23.0 to -23.9 3.5 -24.0 to -24.9 3.0 -25.0 to -26.9 2.5 -27.0 to -29.9 2.0 -30.0 to -32.5 1.5 -32.5 to -34.9 1.0 -35.0 to -39.9 0.5 -40.0 plus 0.0

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THE FINANCIAL RISK RATING

The overall aim of the Financial Risk Rating is to provide a means of assessing a country’s ability to pay its way. In essence, this requires a system of measuring a country’s ability to finance its official, commercial, and trade debt obligations.

This is done by assigning risk points to a pre-set group of factors, termed financial risk components. The minimum number of points that can be assigned to each component is zero, while the maximum number of points depends on the fixed weight that component is given in the overall financial risk assessment. In every case the lower the risk point total, the higher the risk, and the higher the risk point total the lower the risk.

To ensure comparability between countries the components are based on accepted ratios between measured data within the national economic/financial structure. It is the ratios that are compared, not the data themselves. The risk points assigned to each component (ratio) are taken from a fixed scale.

ASSESSING FINANCIAL RISK As noted above, points are awarded to each risk component on a scale from zero up to a pre-set maximum. In general terms if the points awarded are less than 50% of the total, that component can be considered as very high risk. If the points are in the 50-60% range as high risk, in the 60%-70% range as moderate risk, in the 70-80% range as low risk and in the 80-100% range as very low risk. However, this is only a general guideline as a better rating in other components can compensate for a poor risk rating in one component.

Overall, a financial risk rating of 0.0% to 24.5% indicated a Very High Risk; 25.0% to 29.9% High Risk; 30.0% to 34.9% Moderate Risk; 35.0% to 39.9% Low Risk; and 40.0% or more Very Low Risk. Once again, however, a poor financial risk rating can be compensated for by a better political and/or economic risk rating.

THE FINANCIAL RISK COMPONENTS – TABLE 4B

Foreign Debt as a Percentage of GDP – Table 12 The estimated gross foreign debt in a given year, converted into US dollars at the average exchange rate for that year, is expressed as a percentage of the gross domestic product converted into US dollars at the average exchange rate for that year. The risk points are then assigned according to the following scale:

Foreign Debt % GDP Ratio (%) Points 0.0 to 4.9 10.0 5.0 to 9.9 9.5 10.0 to 14.9 9.0 15.0 to 19.9 8.5 20 to 24.9 8.0 25.0 to 29.9 7.5 30.0 to 34.9 7.0 35.0 to 39.9 6.5

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Foreign Debt % GDP Ratio (%) Points 40.0 to 44.9 6.0 45.0 to 49.9 5.5 50.0 – 59.9 5.0 60.0 to 69.9 4.5 70.0 to 79.9 4.0 80.0 to 89.9 3.5 90.0 to 99.9 3.0 100.0 to 109.9 2.5 110.0 to 119.9 2.0 120.0 to 129.9 1.5 130.0 to 149.9 1.0 150.0 to 199.9 0.5 200.0 plus 0.0

Foreign Debt Service as a Percentage of Exports of Goods and Services – Table 13 The estimated foreign debt service, for a given year, converted into US dollars at the average exchange rate for that year, is expressed as a percentage of the sum of the estimated total exports of goods and services for that year, converted into US dollars at the average exchange rate for that year.

The risk points are then assigned according to the following scale:

Debt Service % XGS Ratio (%) Points 0.0 to 4.9 10.0 5.0 to 8.9 9.5 9.0 to 12.9 9.0 13.0 to 16.9 8.5 17.0 to 20.9 8.0 21.0 to 24.9 7.5 25.0 to 28.9 7.0 29.0 to 32.9 6.5 33.0 to 36.9 6.0 37.0 to 40.9 5.5 41.0 to 44.9 5.0 45.0 to 48.9 4.5 49.0 to 52.9 4.0 53.0 to 56.9 3.5 57.0 to 60.9 3.0 61.0 to 65.9 2.5 66.0 to 70.9 2.0 71.0 to 75.9 1.5 76.0 to 79.9 1.0 80.0 to 84.9 0.5 85.0 plus 0.0

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Current Account as a Percentage of Exports of Goods and Services – Table 14 The balance of the current account of the balance of payments for a given year, converted into US dollars at the average exchange rate for that year, is expressed as a percentage of the sum of the estimated total exports of goods and services for that year, converted into US dollars at the average exchange rate for that year.

The risk points are then assigned according to the following scale:

Current Account as % XGS Ratio (%) Points 25.0 plus 15.0 20.0 to 24.9 14.5 15.0 to 19.9 14.0 10.0 to 14.9 13.5 5.0 to 9.9 13.0 0.0 to 4.9 12.5 -0.1 to –4.9 12.0 -5.0 to –9.9 11.5 -10.0 to -14.9 11.0 -15.0 to –19.9 10.5 -20.0 to –24.9 10.0 -25.0 to –29.9 9.5 -30.0 to –34.9 9.0 -35.0 to –39.9 8.5 -40.0 to –44.9 8.0 -45.0 - to –49.9 7.5 -50.0 to –54.9 7.0 -55.0 to –59.9 6.5 -60.0 to –64.9 6.0 -65.0 to –69.9 5.5 -70.0 to –74.9 5.0 -75.0 to –79.9 4.5 -80.0 to –84.9 4.0 -85.0 to –89.9 3.5 -90.0 to –94.9 3.0 -95.0 to –99.9 2.5 -100.0 to –104.9 2.0 -105.0 to –109.9 1.5 -110.0 to –114.9 1.0 -115.0 to –119.9 0.5 Below –120.0 0.0

Net International Liquidity as Months of Import Cover – Table 15 The total estimated official reserves for a given year, converted into US dollars at the average exchange rate for that year, including official holdings of gold, converted into US dollars at the free market price for the period, but excluding the use of IMF credits and the foreign liabilities of the monetary authorities, is divided by the average monthly merchandise import cost, converted into US dollars at the average exchange rate for the period.

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This provides a comparative liquidity risk ratio that indicates how many months of imports can be financed with reserves. The risk points are then assigned according to the following scale:

Net Liquidity in Months Months Points 15 plus 5.0 12.0 to 4.9 4.5 9.0 to 11.9 4.0 6.0 to 8.9 3.5 5.0 to 5.9 3.0 4.0 to 4.9 2.5 3.0 to 3.9 2.0 2.0 to 2.9 1.5 1.0 to 1.9 1.0 0.6 to 0.9 0.5 0.0 to 0.5.9 0.0

Exchange Rate Stability – Table 16 The appreciation or depreciation of a currency against the US dollar (against the German mark in the case of the USA) over a calendar year or the most recent 12-month period is calculated as a percentage change. The risk points are then assigned according to the following scale:

Exchange Rate Stability Appreciation Depreciation Points Change, plus Change, minus 0.0 to 9.9 -0.1 to –4.9 10.0 10.0 to 14.9 -5.0 to -7.4 9.5 14.5 to 19.9 -7.5 to -9.9 9.0 20.0 to 22.4 -10.0 to -12.4 8.5 22.5 to 24.9 -12.5 to -14.9 8.0 24.9 to 27.4 -15.0 to -17.4 7.5 27.5 to 29.9 -17.5 to -19.9 7.0 30.0 to 34.9 -20.0 to -22.4 6.5 35.0 to 39.9 -22.5 to -24.9 6.0 40.0 to 49.9 -25.0 to -29.9 5.5 50 plus -30.0 to -34.9 5.0 -35.0 to -39.9 4.5 -40.0 to -44.9 4.0 -45.0 to -49.9 3.5 -50.0 to -54.9 3.0 -55.0 to -59.9 2.5 -60.0 to -69.9 2.0 -70.0 to -79.9 1.5 -80.0 to -89.9 1.0 -90.0 to -99.9 0.5 -100 plus 0.0

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THE COMPOSITE RISK RATING – TABLE 2B

The method of calculating the Composite Political, Financial, and Economic Risk Rating remains unchanged. The political risk rating contributes 50% of the composite rating, while the financial and economic risk ratings each contribute 25%.

The following formula is used to calculate the aggregate political, financial and economic risk:

CPFER (country X) = 0.5 (PR + FR + ER) where CPFER = Composite political, financial and economic risk ratings PR = Total political risk indicators FR = Total financial risk indicators ER = Total economic risk indicators

The highest overall rating (theoretically 100) indicates the lowest risk, and the lowest rating (theoretically zero) indicates the highest risk.

As a general guide to grouping countries on the basis of comparable risk, the individual risk of individual countries can be estimated using the following fairly broad categories of Composite Risk.

Very High Risk 00.0 to 49.5 points High Risk 50.0 to 59.5 points Moderate Risk 60.0 to 69.5 points Low risk 70.0 to 79.5 points Very Low Risk 80.0 to 100 points

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RISK FORECASTS

In addition to the current forecasts of Political, Financial, Economic, and Composite Risk, the ICRG team also produces one- and five-year forecasts for each of the risk categories, produced using the same methodology that is used for the current risk forecasts.

Two forecasts are produced for each time period – a Worst Case Forecast (WCF) and a Best Case Forecast (BCF).

The WCF is produced by extrapolating the worst-case trend for each risk component in each risk category to produce a WCF for Political, Economic, and Financial Risk.

The BCF is produced by extrapolating the best-case trend for each risk component in each risk category to produce a BCF for Political, Economic, and Financial Risk.

The WCF and BCF do not represent the possible extremes of risk, but a “reasonably possible” outcome.

However, negative and positive trends can be identified and a reasonable supposition made as to their outcome, presuming action is not taken to avert such an outcome. Such trends could be an accelerating build-up of debt, political fragmentation, worsening ethnic or religious tensions, in adequate arrangements for government takeover in the case of the death or assassination of a leader, and so on. In approaching the forecasting exercise we make a judgment as to the “reasonableness” of the trend or event identified and the ability of the government to counteract such trends. This is the basis on which the WC and BC forecasts are determined.

Thus, it is possible for a country to produce a worse performance than our WC forecast or a better performance than our BC forecast, but we do not see such an outcome as likely.

Analyzing the Forecasts The forecasts lend themselves to a variety of analyses. We think the following are probably the most useful – Risk Stability, Downside Risk, and Upside Risk.

Risk Stability A country can appear to present a solid basis for investment on the basis of an acceptable level of risk in terms of its current CRR and its forecast MP Forecast CRR. However, these numbers give no indication of how stable that assessed situation is – i.e. to what degree that risk assessment might vary.

We have made an attempt to measure this stability or instability by introducing the concept of Risk Stability.

In our forecasting system the Risk Stability of an individual country is the difference between the WCF and the BCF and represents the volatility or stability of risk for that country. The greater the difference, the greater the volatility or the less the stability.

Downside Risk This is a measure of the degree to which a Risk Category could reasonably be expected to deteriorate if the negative trends noted in the risk components are not compensated for, and is

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expressed as the difference between the MP forecast and the WC Forecast. The greater the difference, the greater the downside risk.

Upside Risk This is a measure of the positive potential of the country that could be realized if the positive trends identified in the risk components are fully exploited in conjunction with a generally favorable environment. It is expressed as the difference between the MP Forecast and the BC Forecast. The greater the difference, the greater the downside risk.

Presentation The risk forecasts are presented in the following tables.

• Table 2C: One- and Five-year forecast of the Composite Risk (WCF and BCF) and their Risk Stability. • Table 3C: One- and Five-year forecasts of Political Risk (WCF and BCF) and their Risk Stability. • Table 4C: One- and five-year forecasts of Financial Risk (WCF and BCF) and their Risk Stability. • Table 5C: One- and five-year forecasts of Economic Risk (WCF and BCF) and their Risk Stability.

In addition, the one- and five-year WCF and BCF for the Composite Risk are presented in Table 2B, along with the current CRR.

* * *

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