Hungary



PROFILE

OFFICIAL NAME:
Republic of Hungary

Geography
Area: 93,030 sq. km. (35,910 sq. mi.); about the size of Indiana.
Cities: Capital--Budapest (est. pop. 2 million). Other cities--Debrecen (220,000); Miskolc (208,000); Szeged (189,000); Pecs (183,000).
Terrain: Mostly flat, with low mountains in the north and northeast and north of Lake Balaton.
Climate: Temperate.

People
Nationality: Noun and adjective--Hungarian(s).
Population (July 2007 est.): 9,956,108.
Ethnic groups: Magyar 89.9%, Romany 4% (est.), German 2.6%, Serb 2%, Slovak 0.8%, Romanian 0.7%.
Religions (2001 census): Roman Catholic 51.9%, Calvinist 15.9%, Lutheran 3%, Greek Catholic 2.6%, Jewish 1%, others, including Baptist Adventist, Pentecostal, Unitarian 3%.
Languages: Magyar 98.2%, other 1.8%.
Education: Compulsory to age 16. Attendance--96%. Literacy--99.4%.
Health (2007 est.): Infant mortality rate--8.21/1,000. Life expectancy--men 68.73 yrs., women 77.38 yrs.
Work force (2006 est. 4.21 million): Agriculture--5.5%; industry and commerce--33.3%; services--61.2%.

Government
Type: Republic.
Constitution: August 20, 1949. Substantially rewritten in 1989, amended in 1990.
Branches: Executive--president of the Republic (head of state), prime minister (head of government), Council of Ministers. Legislative--National Assembly (386 members, 4-year term). Judicial--Supreme Court and Constitutional Court.
Administrative regions: 19 counties plus capital region of Budapest.
Principal political parties: Fidesz-Hungarian Civic Party--center-right; Hungarian Socialist Party (MSZP)--center-left; Alliance of Free Democrats (SZDSZ)--center-left; Hungarian Democratic Forum (MDF)--center-right; Christian Democratic People’s Party (KDNP)--center-right.

Economy
GDP (2007 est.): $118.4 billion.
Annual growth rate (2007 est.): 2.1%
Per capital GDP (PPP 2007 est.): $19,500.
Natural resources: bauxite, coal, natural gas, fertile soils, arable land.
Agriculture/forestry (2006 est., 3.4% of GDP): Products--meat, corn, wheat, sunflower seeds, potatoes, sugar beets, dairy products.
Industry and construction (2007 est., 32.415% of GDP): Types--machinery, vehicles, chemicals, precision and measuring equipment, computer products, medical instruments, pharmaceuticals, textiles.
Trade (2007 est.): Exports ($85.7373.51 billion)--machinery, vehicles, food, beverages, tobacco, crude materials, manufactured goods, fuels and electric energy. Imports ($85.9974.02 billion)--machinery, vehicles, manufactured goods, fuels and electric energy, food, beverages, and tobacco. Major markets--EU (Germany, Austria, Italy, France, UK, Romania, Poland). Major suppliers--EU (Germany, Austria, Italy, France, Netherlands, Poland), Russia, China.

PEOPLE AND HISTORY
Ethnic groups in Hungary include Magyar (nearly 90%), Romany, German, Serb, Slovak, and others. The majority of Hungary's people are Roman Catholic; other religions represented are Calvinist, Lutheran, Jewish, Baptist, Adventist, Pentecostal, and Unitarian. Magyar is the predominant language.

Hungary has long been an integral part of Europe. It converted to Western Christianity before AD 1000. Although Hungary was a monarchy for nearly 1,000 years, its constitutional system preceded by several centuries the establishment of Western-style governments in other European countries. Following the defeat of the Austro-Hungarian Dual Monarchy (1867-1918) at the end of World War I, Hungary lost two-thirds of its territory and nearly as much of its population. It experienced a brief but bloody communist dictatorship and counterrevolution in 1919, followed by a 25-year regency under Adm. Miklos Horthy. Although Hungary fought in most of World War II as a German ally, it fell under German military occupation following an unsuccessful attempt to switch sides on October 15, 1944. Under occupation, the Hungarian Government deported or executed and seized the property of hundreds of thousands of its minority citizens, mostly members of the Jewish community. On January 20, 1945, a provisional government concluded an armistice with the Soviet Union and established the Allied Control Commission, under which Soviet, American, and British representatives held complete sovereignty over the country. The Commission's chairman was a member of Stalin's inner circle and exercised absolute control.

Communist Takeover
The provisional government, dominated by the Hungarian communist party (MKP), was replaced in November 1945 after elections which gave majority control of a coalition government to the Independent Smallholders' Party. The government instituted a radical land reform and gradually nationalized mines, electric plants, heavy industries, and some large banks. The communists ultimately undermined the coalition regime by discrediting leaders of rival parties and through terror, blackmail, and framed trials. In elections tainted by fraud in 1947, the leftist bloc gained control of the government. Postwar cooperation between the U.S.S.R. and the West collapsed, and the Cold War began. With Soviet support, Moscow-trained Matyas Rakosi began to establish a communist dictatorship.

By February 1949, all opposition parties had been forced to merge with the MKP to form the Hungarian Workers' Party. In 1949, the communists held a single-list election and adopted a Soviet-style constitution, which created the Hungarian People's Republic. Rakosi became Prime Minister in 1952. Between 1948 and 1953, the Hungarian economy was reorganized according to the Soviet model. In 1949, the country joined the Council for Mutual Economic Assistance (CMEA, or Comecon), a Soviet-bloc economic organization. All private industrial firms with more than 10 employees were nationalized. Freedom of the press, religion, and assembly were strictly curtailed. The head of the Roman Catholic Church, Cardinal Jozsef Mindszenty, was sentenced to life imprisonment.

Forced industrialization and land collectivization soon led to serious economic difficulties, which reached crisis proportions by mid-1953, the year Stalin died. The new Soviet leaders blamed Rakosi for Hungary's economic situation and began a more flexible policy called the "New Course." Imre Nagy replaced Rakosi as prime minister in 1953 and repudiated much of Rakosi's economic program of forced collectivization and heavy industry. He also ended political purges and freed thousands of political prisoners. However, the economic situation continued to deteriorate, and Rakosi succeeded in disrupting the reforms and in forcing Nagy from power in 1955 for "right-wing revisionism." Hungary joined the Soviet-led Warsaw Pact Treaty Organization the same year. Rakosi's attempt to restore Stalinist orthodoxy then foundered as increasing opposition developed within the party and among students and other organizations after Khrushchev's 1956 denunciation of Stalin. Fearing revolution, Moscow replaced Rakosi with his deputy, Erno Gero, in order to contain growing ideological and political ferment.

1956 Revolution
Pressure for change reached a climax on October 23, 1956, when security forces fired on Budapest students marching in support of Poland's confrontation with the Soviet Union. The ensuing battle quickly grew into a massive popular uprising. Gero called on Soviet troops to restore order on October 24. Fighting did not abate until the Central Committee named Imre Nagy as prime minister on October 25, and the next day Janos Kadar replaced Gero as party first secretary. Nagy dissolved the state security police, abolished the one-party system, promised free elections, and negotiated with the U.S.S.R. to withdraw its troops.

Faced with reports of new Soviet troops pouring into Hungary despite Soviet Ambassador Andropov's assurances to the contrary, on November 1 Nagy announced Hungary's neutrality and withdrawal from the Warsaw Pact. He appealed to the United Nations and the Western powers for protection of its neutrality. Preoccupied with the Suez Crisis, the UN and the West failed to respond, and the Soviet Union launched a massive military attack on Hungary on November 3. Some 200,000 Hungarians fled to the West. Nagy and his colleagues took refuge in the Yugoslav Embassy. Kadar, after delivering an impassioned radio address on November 1 in support of "our glorious revolution" and vowing to fight the Russians with his bare hands if they attacked Hungary, defected from the Nagy cabinet; he fled to the Soviet Union and on November 4 announced the formation of a new government. He returned to Budapest and, with Soviet support, carried out severe reprisals; thousands of people were executed or imprisoned. Despite a guarantee of safe conduct, Nagy was arrested and deported to Romania. In June 1958, the government announced that Nagy and other former officials had been executed.

Reform Under Kadar
In the early 1960s, Kadar announced a new policy under the motto of "He who is not against us is with us." He declared a general amnesty, gradually curbed some of the excesses of the secret police, and introduced a relatively liberal cultural and economic course aimed at overcoming the post-1956 hostility toward him and his regime. In 1966, the Central Committee approved the "New Economic Mechanism," through which it sought to overcome the inefficiencies of central planning, increase productivity, make Hungary more competitive in world markets, and create prosperity to ensure political stability. However, the reform was not as comprehensive as planned, and basic flaws of central planning produced economic stagnation. Over the next two decades of relative domestic quiet, Kadar's government responded to pressure for political and economic reform and to counterpressures from reform opponents. By the early 1980s, it had achieved some lasting economic reforms and limited political liberalization and pursued a foreign policy which encouraged more trade with the West. Nevertheless, the New Economic Mechanism led to mounting foreign debt incurred to shore up unprofitable industries.

Transition to Democracy
Hungary's transition to a Western-style parliamentary democracy was the first and the smoothest among the former Soviet bloc, inspired by nationalism that long had encouraged Hungarians to control their own destiny. By 1987, activists within the party and bureaucracy and Budapest-based intellectuals were increasing pressure for change. Some of these became reform socialists, while others began movements which were to develop into parties. Young liberals formed the Federation of Young Democrats (Fidesz); a core from the so-called Democratic Opposition formed the Association of Free Democrats (SZDSZ), and the neopopulist national opposition established the Hungarian Democratic Forum (MDF). Civic activism intensified to a level not seen since the 1956 revolution.

In 1988, Kadar was replaced as General Secretary of the MKP, and reform communist leader Imre Pozsgay was admitted to the Politburo. That same year, the Parliament adopted a "democracy package," which included trade union pluralism; freedom of association, assembly, and the press; a new electoral law; and a radical revision of the constitution, among others. A Central Committee plenum in February 1989 endorsed in principle the multiparty political system and the characterization of the October 1956 revolution as a "popular uprising," in the words of Pozsgay, whose reform movement had been gathering strength as communist party membership declined dramatically. Kadar's major political rivals then cooperated to move the country gradually to democracy. The Soviet Union reduced its involvement by signing an agreement in April 1989 to withdraw Soviet forces by June 1991.

National unity culminated in June 1989 as the country reburied Imre Nagy, his associates, and, symbolically, all other victims of the 1956 revolution. A national roundtable, comprising representatives of the new parties and some recreated old parties--such as the Smallholders and Social Democrats--the communist party, and different social groups, met in the late summer of 1989 to discuss major changes to the Hungarian constitution in preparation for free elections and the transition to a fully free and democratic political system.

In October 1989, the communist party convened its last congress and re-established itself as the Hungarian Socialist Party (MSZP). In a historic session on October 16-20, 1989, the Parliament adopted legislation providing for multiparty parliamentary elections and a direct presidential election. The legislation transformed Hungary from a people's republic into the Republic of Hungary; guaranteed human and civil rights; and created an institutional structure that ensures separation of powers among the judicial, executive, and legislative branches of government. But because the national roundtable agreement was the result of a compromise between communist and noncommunist parties and societal forces, the revised constitution still retained vestiges of the old order. It championed the "values of bourgeois democracy and democratic socialism" and gave equal status to public and private property. Such provisions were erased in 1990 as the need for compromise solutions was obviated by the poor performance of the MSZP in the first free elections.

Free Elections and a Democratic Hungary
The first free parliamentary election, held in May 1990, was a plebiscite of sorts on the communist past. The revitalized and reformed communists performed poorly despite having more than the usual advantages of an "incumbent" party. Populist, center-right, and liberal parties fared best, with the Democratic Forum (MDF) winning 43% of the vote and the Free Democrats (SZDSZ) capturing 24%. Under Prime Minister Jozsef Antall, the MDF formed a center-right coalition government with the Independent Smallholders' Party (FKGP) and the Christian Democratic People's Party (KDNP) to command a 60% majority in the parliament. Parliamentary opposition parties included SZDSZ, the Socialists (MSZP), and the Alliance of Young Democrats (Fidesz). Peter Boross succeeded as Prime Minister after Antall died in December 1993. The Antall/Boross coalition governments achieved a reasonably well-functioning parliamentary democracy and laid the foundation for a free market economy.

In May 1994, the socialists came back to win a plurality of votes and 54% of the seats after an election campaign focused largely on economic issues and the substantial decline in living standards since 1990. A heavy turnout of voters swept away the right-of-center coalition but soundly rejected extremists on both right and left. Despite its neocommunist pedigree, the MSZP continued economic reforms and privatization, adopting a painful but necessary policy of fiscal austerity (the "Bokros plan") in 1995. The government pursued a foreign policy of integration with Euro-Atlantic institutions and reconciliation with neighboring countries. But neither an invitation to join NATO nor improving economic indicators guaranteed the MSZP's re-election; dissatisfaction with the pace of economic recovery, rising crime, and cases of government corruption convinced voters to propel center-right parties into power following national elections in May 1998. The Federation of Young Democrats (renamed Fidesz-Hungarian Civic Party (MPP) in 1995) captured a plurality of parliamentary seats and forged a coalition with the Smallholders and the Democratic Forum. The new government, headed by 35-year-old Prime Minister Viktor Orban promised to stimulate faster growth, curb inflation, and lower taxes. Although the Orban administration also pledged continuity in foreign policy, and continued to pursue Euro-Atlantic integration as its first priority, it was a more vocal advocate of minority rights for ethnic Hungarians abroad than the previous government.

In April 2002, the country voted to return the MSZP-Free Democrat coalition to power. The new government, led by Prime Minister Peter Medgyessy, had a very slim majority in Parliament following the closest elections of the post-communist era. The Medgyessy government placed special emphasis on solidifying Hungary's Euro-Atlantic course, which culminated in Hungary’s accession to the European Union on May 1, 2004. Prime Minister Medgyessy resigned in August 2004 after losing coalition support following an attempted cabinet reshuffle. Ferenc Gyurcsany was selected by the governing coalition to succeed Medgyessy, and he was confirmed by the Parliament on September 29, 2004.

In the April 2006 election, Prime Minister Ferenc Gyurcsany and his Socialist-liberal coalition were re-elected, the first time since communism that a sitting government has renewed its mandate. The current coalition between MSZP and SZDSZ makes up the parliamentary majority with 210 seats. However, it does not have the “super majority” to produce the two-thirds vote necessary to enact constitutional, legal, and procedural changes. The present configuration of Parliament includes MSZP with 190 seats, SZDSZ with 20 seats, Fidesz and KDNP with 161 seats total, MDF with 11 seats, and 3 independent Members of Parliament. The Prime Minister has reduced the number of ministries in the cabinet from 17 to 12. The new cabinet has nine ministers from the MSZP party and three ministers from the SZDSZ party.

ECONOMY
The Hungarian economy prior to WWII was primarily oriented toward agriculture and small scale manufacturing. Hungary's strategic position in Europe and its relative lack of natural resources also have dictated a traditional reliance on foreign trade. In the early 1950s, the communist government forced rapid industrialization after the standard Stalinist pattern in an effort to encourage a more self-sufficient economy. Most economic activity was conducted by state-owned enterprises or cooperatives and state farms. In 1968, Stalinist self-sufficiency was replaced by the "New Economic Mechanism," which reopened Hungary to foreign trade, gave limited freedom to the workings of the market, and allowed a limited number of small businesses to operate in the services sector.

Although Hungary enjoyed one of the most liberal and economically advanced economies of the former Eastern bloc, both agriculture and industry began to suffer from a lack of investment in the 1970s, and Hungary's net foreign debt rose significantly--from $1 billion in 1973 to $15 billion in 1993--due largely to consumer subsidies and unprofitable state enterprises. In the face of economic stagnation, Hungary opted to try further liberalization by passing a joint venture law, adopting an income tax, and joining the International Monetary Fund (IMF) and the World Bank. By 1988, Hungary had developed a two-tier banking system and had enacted significant corporate legislation which paved the way for the ambitious market-oriented reforms of the post-communist years.

The Antall government of 1990-94 began market reforms with price and trade liberation measures, a revamped tax system, and a nascent market-based banking system. By 1994, however, the costs of government overspending and hesitant privatization had become clearly visible. Since that time, the government sector has been prone to high deficit spending, often preceding national elections. A series of reforms has helped bring this under control, and Hungary's early openness to foreign direct investment (FDI) led to a sustained period of high growth and made Hungary a magnet for FDI in the late 1990's and early parts of this century.

Hungary rapidly integrated into the European economy, with the value of exports and imports both growing to well over 70% of GDP. This close relationship with the economies of the European Union (EU) helped pave the way for Hungary's accession to the EU in 2004. An open economy with sophisticated financial markets, Hungary has progressed well beyond the early stages of privatization. In recent years, Hungary has been a leader in per capita FDI in the region, and the private sector is the dominant engine of growth in an economy saddled down with heavy government debt and a substantial fiscal deficit. Many analysts and international organizations note the marked success of export-oriented manufacturing companies, but see room for substantial structural reform to reduce government spending and increase efficiencies in areas such as taxation, health care, education, and social benefits.

As part of its EU membership agreement, Hungary agreed to meet the economic criteria necessary to join adopt the euro. In 2005 and 2006, it became clear that not only was a high budget deficit (at one point in danger of surpassing 10% of GDP in 2006) hurting the economy, but that Hungary would have to endure EU scrutiny and possible sanctions associated. Against this backdrop, Prime Minister Gyurcsany proposed and launched a sweeping austerity program to attack Hungary’s budget deficit, by raising taxes, decreasing subsidies, and streamlining the public sector. Businesses have complained that the increased taxes and greater enforcement costs have decreased Hungary's competitiveness, but the positive affects of the deficit are clear. With a goal of cutting the deficit from over 9% if GDP in 2006 to 6.8% of GDP in 2007, the government has exceeded its targets and attained a deficit of 5.7% of GDP for the year. With an official target approaching 3% in 2009, Hungary may yet attain success in controlling government spending. However, this has come at a cost, as Hungary has returned to relatively high inflation approaching 8% and its GDP growth in 2007 will be well below the EU and regional average, under 2%.

In 1995 Hungary's currency, the forint (HUF), became convertible for all current account transactions, and subsequent to OECD membership in 1996, for almost all capital account transactions as well. In 2001, the Orban government lifted remaining currency controls and broadened the band around the exchange rate, allowing the forint to appreciate by more than 12% in a year. Conflicting fiscal and monetary policy in the summer of 2002 caused confusion briefly in the market, with the forint surging against the euro for several months. Prior to the change of regime in 1989, 65% of Hungary's trade was with Comecon countries. By the end of 1997, Hungary had shifted much of its trade to the West. Trade with EU countries and the OECD now comprises over 75% and 85% of the total, respectively. Germany is Hungary's single-most important trading partner. The United States has become Hungary's sixth-largest export market, while Hungary is ranked as the 72nd largest export market for the United States. Bilateral trade between the two countries has increased to more than $1 billion per year. The United States has Normal Trade Relations with Hungary and has extended to it Overseas Private Investment Corporation insurance, and access to the Export/Import Bank.

Foreign investment was the key to Hungary's success. With more than $60 billion in FDI since 1989, Hungary has been a leading destination for FDI in central and eastern Europe--including the former Soviet Union. Of this, a little less than one-third has come from U.S. companies. The largest U.S. investors include GE, Alcoa, General Motors, Coca-Cola, Ford, IBM, and Pepsico. Foreign companies modernized Hungary's industrial sector and created thousands of new, high-skilled, high-paying jobs. As a result of extensive and continuing liberalization, the private sector produces about 80% of Hungary’s output. Currently, foreign firms control two-thirds of manufacturing, 90% of telecommunications, and 60% of the energy sector. Inflation declined from 14% in 1998 to 3.7% in 2005, and is expected to return to low levels by 2008. Policy challenges include cutting the public sector deficit and taking concrete measures on transparency and tax reform to retain its competitive position in attracting investment.

Hong Kong





PROFILE

OFFICIAL NAME:
Hong Kong Special Administrative Region

Geography
Area: 1,104 sq. km.; Hong Kong comprises Hong Kong Island, Kowloon, the New Territories, and numerous small islands.
Terrain: Hilly to mountainous, with steep slopes and natural harbor.
Climate: Tropical monsoon. Cool and humid in winter, hot and rainy from spring through summer, warm and sunny in fall.

People
Population (mid-2007): 6.92 million.
Population growth rate (2006): 0.6%.
Ethnic groups: Chinese 95%; other 5%.
Religions: About 43% participate in some form of religious practice. Christian, about 9.6%.
Languages: Cantonese (a dialect of Chinese) and English are official.
Education: Literacy--97.1% (98.7% male, 95.4% female).
Health (2006): Infant mortality rate--1.8/1,000. Life expectancy--82.6 yrs. (overall); 79.5 yrs. males, 85.6 yrs. females.
Work force (2007): 3.65 million. Wholesale, retail, and import/export trades and restaurants and hotels--28.8%; finance, insurance, real estate, and business services--13.8%; manufacturing--4.3%.

Government
Type: Special Administrative Region (SAR) of China, with its own constitution (the Basic Law).
Branches: Executive--Administration: Chief Executive selected in March 2007; Executive Council, serving in an advisory role for the Chief Executive. Legislative--Legislative Council (Legco) elected in September 2004. Judicial--Court of Final Appeal is highest court, other lower courts.
Subdivisions: Hong Kong, Kowloon, New Territories.
Suffrage: Permanent residents, at 18 years or over, living in Hong Kong for the past seven years are eligible to vote in certain local elections and for Legco members.

Economy (2006)
GDP (2006): $188.8 billion.
GDP real growth rate (2006): 6.8%.
Per capita GDP (2006): $27,600.
Natural resources: Outstanding deepwater harbor.
Industry: Types--textiles, clothing, electronics, plastics, toys, watches, clocks.
Trade: Exports--$315.5 billion: clothing, electronics, textiles, watches and clocks, office machinery. Imports--$333.3 billion: consumer goods, raw materials and semi-manufactures, capital goods, foodstuffs, fuels.

PEOPLE
Hong Kong's population has increased steadily over the past decade, reaching about 6.92 million in 2007. Hong Kong is one of the most densely populated areas in the world, with an overall density of some 6,250 people per square kilometer. Cantonese, the official Chinese language in Hong Kong, is spoken by most of the population. English, also an official language, is widely understood, being spoken by more than one-third of the population. Every major religion is practiced freely in Hong Kong. All children are required by law to be in full-time education between the ages of 6 and 15. Preschool education for most children begins at age 3. Primary school begins normally at the age of 6 and lasts for 6 years. At about age 12, children progress to a 3-year course of junior secondary education. Most stay on for a 2-year senior secondary course, while others join full-time vocational training. More than 90% of children complete upper secondary education or equivalent vocational education.

HISTORY
According to archaeological studies, human activity on Hong Kong dates back over five millennia. Excavated neolithic artifacts suggest an influence from northern Chinese stone-age cultures. The territory was settled by Han Chinese during the seventh century, A.D., evidenced by the discovery of an ancient tomb at Lei Cheung Uk in Kowloon. The first major migration from northern China to Hong Kong occurred during the Sung Dynasty (960-1279). The British East India Company made the first successful sea venture to China in 1699, and Hong Kong's trade with British merchants developed rapidly soon after. After the Chinese defeat in the First Opium War (1839-42), Hong Kong was ceded to Britain in 1842 under the Treaty of Nanking. Britain was granted a perpetual lease on the Kowloon Peninsula under the 1860 Convention of Beijing, which formally ended hostilities in the Second Opium War (1856-58). The United Kingdom, concerned that Hong Kong could not be defended unless surrounding areas also were under British control, executed a 99-year lease of the New Territories in 1898, significantly expanding the size of the Hong Kong colony.

In the late 19th century and early 20th centuries, Hong Kong developed as a warehousing and distribution center for U.K. trade with southern China. After the end of World War II and the communist takeover of Mainland China in 1949, hundreds of thousands of people fled from China to Hong Kong. Hong Kong became an economic success and a manufacturing, commercial, finance, and tourism center. High life expectancy, literacy, per capita income, and other socioeconomic measures attest to Hong Kong's achievements over the last five decades.

On July 1, 1997, China resumed the exercise of sovereignty over Hong Kong, ending more than 150 years of British colonial rule. Hong Kong is a Special Administrative Region of the People's Republic of China with a high degree of autonomy in all matters except foreign and defense affairs. According to the Sino-British Joint Declaration (1984) and the Basic Law, Hong Kong will retain its political, economic, and judicial systems and unique way of life for 50 years after reversion and will continue to participate in international agreements and organizations under the name, "Hong Kong, China."

GOVERNMENT AND POLITICAL CONDITIONS
The Hong Kong Special Administrative Region (SAR) is headed by Chief Executive Donald Tsang, who first took office in 2005 and whose current term ends in 2012. The Election Committee that votes on the Chief Executive (CE) is made up of approximately 800 Hong Kong residents from four constituency groups: commercial, industrial, and financial interests; professionals; labor, social services, and religious interests; and the legislature, the Chinese People's Political Consultative Conference, and the P.R.C. National People's Congress.

In December 2006, pro-democracy Civic Party legislator Alan Leong garnered 134 nominations from the Election Committee, enabling Leong to challenge incumbent CE Tsang's bid for a new five-year term in 2007. Tsang, with solid support from the pro-government and pro-business sectors, won the March 25, 2007 Election Committee vote with 649 of the 795 votes. Leong garnered 123 votes.

In July 2002, the Hong Kong Government implemented the Principal Officials Accountability System, which was designed to make the government more responsive to public concerns. Twelve political appointees, directly responsible to the Chief Executive, run the 12 policy bureaus. Three other senior civil service positions--the Chief Secretary, Financial Secretary, and Justice Secretary--are also filled by political appointments.

While Hong Kong remains a free and open society where human rights are respected, courts are independent, and there is well-established respect for the rule of law, residents are limited in their ability to change their government, and the legislature is limited in its power to affect government policies. The September 12, 2004 Legislative Council (Legco) elections were seen as generally free, open, and widely contested, although Hong Kong groups have alleged voter intimidation, manipulation, or pressure in connection with them.

In December 2005 the Legco rejected a Hong Kong Government-proposed package of incremental reforms to the mechanisms for choosing the CE in 2007 and forming the Legco in 2008. In July 2007, the Hong Kong Government's Commission on Strategic Development issued a Green Paper on Constitutional Development, which set out a myriad of options to reform the CE and Legco electoral mechanisms, with the "ultimate aim" of universal suffrage as prescribed by the Basic Law.

On December 12, 2007, Chief Executive Donald Tsang submitted a report on the Green Paper to the central government. The report said more than half of local people wanted universal suffrage by 2012, but 2017 might be a more realistic date. In December 2007, the P.R.C. National People's Congress Standing Committee (NPCSC) issued a decision on Hong Kong's constitutional development which, while ruling out universal suffrage in 2012, appears to open the way for Hong Kong to achieve full universal suffrage for the CE in 2017, and full universal suffrage for Legco sometime thereafter. Any amendments to the Basic Law will require approval by the CE, at least two-thirds of Legco, and then the NPCSC.

ECONOMY
Hong Kong is one of the world's most open and dynamic economies. Hong Kong per capita GDP is comparable to other developed countries. Real GDP expanded by 6.8% in 2006 year-on-year, driven by thriving exports, vibrant inbound tourism and strong consumer spending. Severe acute respiratory syndrome (SARS) caused the Hong Kong economy to shrink during the first half of 2003, and property prices had fallen 66% from their late 1997 peak, but have since rebounded by about 84% from that lower base. The unemployment rate declined to 3.6% in September-November 2007, the lowest level since mid-1998. The surplus for fiscal year 2007-08 was $7.5 billion or 4.0% of GDP, attributed to the robust economy, increased corporate profits and salaries, the buoyant stock market, and a stable property market.

Hong Kong enjoys a number of economic strengths, including accumulated public and private wealth from decades of unprecedented growth, a sound banking system, virtually no public debt, a strong legal system, and an able and rigorously enforced anti-corruption regime. The need for economic restructuring poses difficult challenges and choices for the government. Hong Kong is endeavoring to improve its attractiveness as a commercial and trading center, especially after China's entry into the World Trade Organization (WTO), and continues to refine its financial architecture. The government is deepening its economic interaction with the Pearl River Delta in an effort to maintain Hong Kong's position as a gateway to China. These efforts include the conclusion of a free trade agreement with China, the Closer Economic Partnership Arrangement (CEPA), which applies zero tariffs to all Hong Kong-origin goods and preferential treatment in 27 service sectors. Hong Kong, along with the Macau SAR, is also participating in a new pan-Pearl River Delta trade block with nine Chinese provinces, which aims to lower trade barriers among members, standardize regulations, and improve infrastructure. U.S. companies have a generally favorable view of Hong Kong's business environment, including its legal system and the free flow of information, low taxation, and infrastructure. The American Chamber of Commerce's annual business confidence survey, released in December 2007, showed 99% of respondents had a "good" or "satisfactory" outlook for 2008. Survey results indicated a positive economic outlook through 2010.

On the international front, Hong Kong is a separate and active member of the WTO and the Asia Pacific Economic Cooperation (APEC) forum, where it is an articulate and effective champion of free markets and the reduction of trade barriers. Hong Kong residents across the political spectrum supported China's accession to the WTO, believing this would open new opportunities on the mainland for local firms and stabilize relations between Hong Kong's two most important trade and investment partners, the United States and China.




http://www.state.gov/r/pa/ei/bgn/2747.htm

OFFICIAL NAME

Republic of Iceland

Geography

Area: 103,000 sq. km. (39,600 sq. mi.); about the size of Virginia or slightly larger than Ireland.
Cities: Capital--Reykjavík (pop. 117,721). Other towns--Kópavogur (28,561), Hafnarfjörður (24,839), Akureyri (17,253).
Terrain: Rugged.
Climate: Maritime temperate.
Highest elevation: Hvannadalshnjúkur at Vatnajökull Glacier, at 2,110 meters (6,923 ft.).

People

Nationality: Noun--Icelander(s). Adjective--Icelandic.
Population (December 1, 2007): 312,872.
Annual growth rate (2006): 2.6%.
Ethnic group: Relatively homogenous mixture of descendants of Norwegians and Celts.
Religion: Evangelical Lutheran, 86%.
Language: Icelandic.
Education: Compulsory up to age 16. Attendance--99%. Literacy--99.9%.
Health: Infant mortality rate (2001-2006 average)--2.4/1,000. Life expectancy (2006)--men 79.4 years, women 83 years.
Work force (2007, 176,300): Commerce--32.6%; manufacturing--13.2%; fishing/fish processing--4.2%; construction--8.9%; transport and communications--6.3%; agriculture--3.4%; government, education, and health--27.5%; other services--7.1%. Unemployment (2007): 1.9%.

Government

Type: Semi-presidential, parliamentary.
Independence: 1918 (became "sovereign state" under Danish Crown); 1944 (establishment of republic).
Constitution: 1874.
Branches: Executive--president (head of state), prime minister (head of government), cabinet (12 ministers). Legislative--63-member unicameral parliament (Althingi). Judicial--Supreme Court, district courts, special courts.
Subdivisions: 26 administrative districts and 79 municipalities.
Major political parties: Independence (IP), Progressive (PP), Social Democratic Alliance (SDA), Left-Green Party (LGP), Liberal Party (LP).
Suffrage: Universal 18 years and above.
National holiday: June 17, anniversary of the establishment of the republic.

Economy

GDP (2007): $18.8 billion.
GDP growth rate (2006): 4.2%.
Per capita GDP (2006): $54,764.
Inflation rate (2007): 4%.
Budget (2007): $6 billion.
Annual budget surplus (2006): 1.4% of GDP.
Net public debt (2007): 17% of GDP.
Foreign aid as part of 2006 budget: 0.27% of GDP.
Natural resources: Marine products, hydroelectric and geothermal power.
Agriculture: Products--potatoes, tomatoes, cucumbers, turnips, livestock.
Industry: Types--aluminum smelting, fishing and fish processing technology, ferro-silicon alloy production, hydro and geothermal power, tourism, information technology.
Trade: Exports of goods (2006)--$3.9 billion: marine products 51.2%, industrial products 38.3%, agriculture 1.8%, and miscellaneous 8.7%. Partners--EU 74.8% (U.K. 18%, Germany 17%, Netherlands 11%, Spain 6%, Denmark 5%); U.S. 10.8% ($421 million); Japan 2.1%. Imports (2006)--$6.9 billion: industrial supplies 27%; capital goods, parts, accessories 23%; consumer goods 20%; transport equipment 21.1%; food and beverages 9%; fuels and lubricants 8%. Partners--EU 64.7% (Germany 13%, Denmark 9%, U.K. 8%, Sweden 7%, Netherlands 7%); U.S. 12.8% ($208 million); EFTA 9%; Japan 4.1%.

GEOGRAPHY

Iceland is a volcanic island in the North Atlantic Ocean east of Greenland and immediately south of the Arctic Circle. It lies about 4,200 kilometers (2,600 mi.) from New York and 830 kilometers (520 mi.) from Scotland. About 79% of Iceland's land area, which is of recent volcanic origin, consists of glaciers, lakes, a mountainous lava desert (highest elevation 2,000 meters--6,590 ft.--above sea level), and other wasteland. About 28% of the land is used for grazing, and 1% is cultivated. The inhabited areas are on the coast, particularly in the southwest where about 60% of the population lives. Because of the Gulf Stream's moderating influence, the climate is characterized by damp, cool summers and relatively mild but windy winters. In Reykjavík, the average temperature is 11°C (52°F) in July and -1°C (30°F) in January.

PEOPLE

Most Icelanders are descendants of Norwegian settlers and Celts from the British Isles, and the population is remarkably homogeneous. According to Icelandic Government statistics, 93% of the nation's inhabitants live in urban areas (localities with populations greater than 200) and about 60% live in the Reykjavík metropolitan area. Of the Nordic languages, the Icelandic language is closest to the Old Norse language and has remained relatively unchanged since the 12th century. About 91% of the population belongs to the state church, the Evangelical Lutheran Church, or other Lutheran Churches. However, Iceland has complete religious liberty, and about 20 other religious congregations are present.

Most Icelandic surnames are based on patronymy, or the adoption of the father's first given name. For example, Magnus and Anna, children of a man named Pétur, would hold the surname Pétursson and Pétursdóttir, respectively. Magnus' children, in turn, would inherit the surname Magnusson, while Anna's children would claim their father's first given name as their surname. Women normally maintain their original surnames after marriage. This system of surnames is required by law, except for the descendants of those who had acquired family names before 1913. Most Icelanders, while reserved by nature, rarely call each other by their surnames, and even phone directories are based on first names. Because of its small size and relative homogeneity, Iceland holds all the characteristics of a very close-knit society.

Cultural Achievements

The Sagas, almost all written between 1180 and 1300 A.D., remain Iceland's best-known literary accomplishment, and they have no surviving counterpart anywhere in the Nordic world. Based on Norwegian and Icelandic histories and genealogies, the Sagas present views of Nordic life and times up to 1100 A.D. The Saga writers sought to record their heroes' great achievements and to glorify the virtues of courage, pride, and honor, focusing in the later Sagas on early Icelandic settlers. The best-known Icelandic writer of the 20th century is the 1955 Nobel Prize winner Halldór Kiljan Laxness. The literacy rate is 99.9%, and literature and poetry are a legendary passion with the population. Per capita publication of books and magazines is the highest in the world.

Unlike its literature, Iceland's fine arts did not flourish until the 19th century because the population was small and scattered. Iceland's most famous painters are Ásgrímur Jónsson, Jón Stefánsson, and Jóhannes Kjarval, all of whom worked during the first half of the 20th century. The best-known modern sculptor, Ásmundur Sveinsson (1893-1982), drew his inspiration from Icelandic folklore and the Sagas for many of his works. Today, Kristján Jóhannsson is Iceland's most famous opera singer, while pop singer Björk and progressive rock band Sigur Rós are well known internationally.

HISTORY

Iceland was settled in the late 9th and early 10th centuries, principally by people of Norse origin. In 930 A.D., the ruling chiefs established a republican constitution and an assembly called the Althingi (Alþingi) the oldest parliament in the world. Iceland remained independent until 1262, when it entered into a treaty establishing a union with the Norwegian monarchy. Iceland passed to Denmark in the late 14th century when Norway and Denmark were united under the Danish crown.

In the early 19th century, national consciousness revived in Iceland. The Althingi had been abolished in 1800 but was reestablished in 1843 as a consultative assembly. In 1874, Denmark granted Iceland limited home rule, which was expanded in scope in 1904. The constitution, written in 1874, was revised in 1903, and a minister for Icelandic affairs, residing in Reykjavík, was made responsible to the Althingi. The Act of Union, a 1918 agreement with Denmark, recognized Iceland as a fully sovereign state united with Denmark under a common king. Iceland established its own flag, but Denmark continued to represent Icelandic foreign affairs and defense interests.

German occupation of Denmark in 1940 severed communications between Iceland and Denmark. Consequently, Iceland moved immediately to assume control over its own territorial waters and foreign affairs. In May 1940, British military forces occupied Iceland. In July 1941, responsibility for Iceland's defense passed to the United States. Following a plebiscite, Iceland formally became an independent republic on June 17, 1944. In October 1946, the Icelandic and U.S. Governments agreed to terminate U.S. responsibility for the defense of Iceland, but the United States retained certain rights at Keflavík. Iceland became a charter member of the North Atlantic Treaty Organization (NATO) in 1949. After the outbreak of hostilities in Korea in 1950, and pursuant to the request of NATO military authorities, the United States and Iceland agreed that the United States should again make arrangements for Iceland's defense. A bilateral defense agreement signed on May 5, 1951, remains in force, even though the U.S. military forces are no longer permanently stationed in Iceland. Iceland is the only NATO country with no standing military of its own.

GOVERNMENT

The president, elected to a 4-year term, has limited powers. When Iceland became a republic in 1944, the post of president was created to fill the void left by the Danish king. Although the president is popularly elected and has limited veto powers (he can force a public referendum on a proposed law by refusing to sign it--a power that has only once been exercised), the expectation is that the president should play the same limited role as a monarch in a traditional parliamentary system.

The prime minister and cabinet exercise most executive functions. The parliament is composed of 63 members, elected every 4 years unless it is dissolved sooner. Suffrage for presidential and parliamentary elections is universal for those 18 and older, and members of the parliament are elected on the basis of parties' proportional representation in six constituencies. The judiciary consists of the Supreme Court, district courts, and various special courts. The constitution protects the judiciary from infringement by the other two branches.

POLITICAL CONDITIONS

Iceland's current government coalition was formed after the May 2007 parliamentary elections by the conservative Independence Party (IP) and the center-left Social Democratic Alliance. The two parties hold a large majority in parliament, with 43 out of 63 seats.

The current government replaced a coalition of the Independence Party and the Progressive Party (PP) that had been in power since 1995. Longtime IP leader Davíð Oddsson was Prime Minister 1991-2004, making him the longest-serving prime minister in Europe (from 1991 to 1995, the IP was in coalition with the Social Democratic Party). IP Vice Chair Geir Haarde succeeded Oddsson as party chair when the latter retired from politics in 2005. At the same time, Haarde took over as Foreign Minister, and on June 15, 2006 he became Prime Minister when the PP leader and Prime Minister Halldór Ásgrímsson also left the political scene. In May 2007 the Independence Party and the Social Democratic Alliance formed a new government after an abysmal showing by the Progressive Party. Geir Haarde continued as Prime Minister, and Ingibjörg Sólrún Gísladóttir, chairman of the Social Democratic Alliance took over as Foreign Minister.

The centrist agrarian Progressive Party has been a party to government for over 30 years in the past 4 decades. Its support dropped from 23% in the 1995 parliamentary election to 12% in 2007. The party has dealt with internal instability in the past few years, and power struggles have lead to frequent change in the party's leadership. Chairman Jón Sigurðsson stepped down after the 2007 elections and was replaced by the deputy chairman, Guðni Águstsson.

Three left-wing parties--the Social Democratic Party, the People's Alliance, and the Women's List--formed an electoral coalition prior to the 1999 parliamentary election in the hope of mounting a credible challenge to the long-dominant Independence Party. But the dream of creating a united left coalition failed when disaffected leftists formed a new splinter party called the Left Green Movement, led by former deputy People's Alliance leader Steingrímur Sigfusson. With this defection, the left coalition won a disappointing 27% of the vote (17 seats) in the 1999 election, four percentage points below what the three parties had won running separately in 1995. Their 31% (20 seats) showing in 2003 recaptured this ground but did not suffice to topple the government. The Left Greens won a respectable 9% of the vote (5 seats) in 2003, but in the 2007 election they improved significantly, with 14% of the total vote (9 seats). Another new faction, the Liberal Party, won just over 7% (4 seats) in 2003 based on its strong opposition to the current fishing management system, and clung to roughly 6% in 2007.

Despite the poor electoral showing in 1999, the three left-wing parties decided to merge formally in 2000, creating a new party, the Social Democratic Alliance, led by Ingibjörg Sólrún Gísladóttir. The party has found it difficult to reconcile the widely varying foreign policy views of its members, which range from strong support for NATO membership to pacifism and a desire for neutrality.

Iceland's current President is Ólafur Ragnar Grímsson, a former political science professor who led the far-left People's Alliance in 1987-95 and served as Finance Minister in 1988-91. Although Grímsson won office with only a 41% plurality in 1996, he was not challenged for re-election in 2000. This follows a well-established tradition of giving deference to sitting presidents. He was re-elected again on June 26, 2004. Once in office, a president can generally count on serving as many terms as he or she likes, assuming good behavior. Reflecting the belief that the president is "above politics," presidential candidates run for election as individuals--since 1952, political parties have played no role in nominating or endorsing candidates. President Grímsson has occasionally drawn criticism that he breaches the bounds of presidential etiquette by being too outspoken on sensitive political issues.

__________________
~Time owns each and everything~
~Useless youth if not useful for Pakistan~

ECONOMY

Marine products account for the majority of Iceland's exports of goods. Other important exports include aluminum, ferro-silicon alloys, equipment and electronic machinery for fishing and fish processing, and pharmaceuticals. Information technology and life sciences and related services are important growth areas. The vast majority of Iceland's exports go to the European Union (EU) and the European Free Trade Association (EFTA) countries, followed by the United States and Japan. The U.S. is by far the largest foreign investor in Iceland, and the country's largest supplier of imported services (e.g., financial and franchise services, movies/TV programs/music, tourism). Iceland's relatively liberal trading policy was strengthened by accession to the European Economic Area in 1994 and by the Uruguay Round agreement, which also brought significantly improved market access for Iceland's exports, particularly seafood products. However, the agricultural sector remains heavily subsidized and protected.

In recent decades, Iceland's economy has been prone to inflation due to periods of rapid growth and its dependence on just a few key export sectors (i.e., fish, and increasingly tourism and aluminum production), which can fluctuate significantly from one year to the next. The 1970s oil shocks hit Iceland hard. Inflation rose to 43% in 1974 and 59% in 1980, falling to 15% in 1987 but rising to 30% in 1988. Since 1990, due to economic reforms and deregulation, inflation has dramatically fallen, averaging around 4% in the 1990s. Due to several years of strong economic growth, Iceland experienced the most positive economic period in its history during that decade. However, as with many advanced countries, Iceland's economy experienced a mild recession during 2002 due to global conditions. That recession was short-lived, and healthy growth of 3% was registered during 2003. In 2005 the economy boomed, growing 5.8%, and inflation was close to the Central bank's upper limit (4%) at 3.95%, while unemployment decreased to about 3.2%. The economy suffered a setback in spring 2006 when credit rating agencies and other international financial firms released a number of reports raising questions about the state of the Icelandic economy and the activities and stability of Iceland's major banks. These reports were widely covered in the international financial press, causing a marked drop in the value of the Icelandic krona and of shares listed on the Icelandic stock exchange. Since then the situation has calmed down, but there is no question that certain imbalances have emerged in the Icelandic economy, including a high current account deficit, high inflation and high private sector debt levels. It remains an open question whether these imbalances render Iceland particularly vulnerable to an economic crisis. Foreign confidence in the Icelandic economy is important to maintain the country's skillful use of foreign capital. Icelandic businessmen have become well known for risk taking, decisiveness, and swiftness in their investments. Wealthy Icelanders have successfully invested overseas, especially in the retail and real estate markets in Denmark and U.K. and telecom, pharmaceutical, banking, and financial sectors in Eastern Europe. This recent success has for the first time created a "super-rich" elite in Icelandic society.

Iceland has few proven mineral resources. Abundant hydroelectric and geothermal power sources provide for nearly 100% of electricity generation and home heating. The Kárahnjúkar hydroelectric project is the largest single station, with capacity of 690 megawatts (mw). The other major hydroelectric stations are at Búrfell (270 mw), Hrauneyjarfoss (210 mw), Sigalda (150 mw) and Blanda (150 mw). Iceland is exploring the feasibility of exporting hydroelectric energy via submarine cable to mainland Europe and also actively seeks to expand its power-intensive industries, particularly aluminum smelting plants. Iceland-based Nordural Aluminum is a wholly owned investment by Century Aluminum of Monterey, California. The plant employs more than 450 people and recently expanded to a production capacity of 220,000 tons per year. A new smelter owned by Alcoa, another U.S.-owned aluminum company, began operations in June 2007. The smelter will have a production capacity of 346,000 tons per year when fully operational. The Kárahnjúkar hydroelectric power plant, completed in early 2007, was built in connection with Alcoa's smelter. A total of over $2 billion has been invested in the power plant and smelter, the largest economic project in Icelandic history.

Iceland has no railroads. Organized road building began about 1900 and has greatly expanded in the past decade. The current national road system connecting most of the population centers is largely in the coastal areas and consists of about 13,000 kilometers (8,125 mi.) of roads with about 4,330 kilometers (2,706 mi.) paved. Regular air and sea service connects Reykjavík with the other main population centers. The national airline, Icelandair, flies from Iceland to Europe and North America, and is one of the country's largest employers. Iceland became a full member of the European Free Trade Association in 1970 and entered into a free trade agreement with the European Community in 1973. Under the European Economic Area agreement, which took effect January 1, 1994, there is basically free cross-border movement of capital, labor, goods, and services between Iceland, Norway, and the EU countries.

DEFENSE

The U.S. and Iceland signed a bilateral agreement in 1951 stipulating that the U.S. would make arrangements for Iceland's defense on behalf of NATO and providing for basing rights for U.S. forces in Iceland. In March 2006 the U.S. announced it would continue to provide for Iceland's defense but without permanently basing forces in the country; Naval Air Station Keflavik closed in September 2006 after 55 years. The Government of Iceland expressed disappointment, and even opposition politicians opposed to the U.S. military presence criticized the manner of the closing, but bilateral discussions ensued to explore new ways of ensuring the country's security, with an emphasis on a "visible defense." Negotiations concluded with a Technical Agreement on base closure issues (e.g., facilities return, environmental cleanup, residual value) signed on September 29, 2006, and a "Joint Understanding" on future bilateral security cooperation (focusing on defending Iceland and the North Atlantic region against emerging threats such as terrorism and trafficking) signed by the Secretary of State, Prime Minister Haarde, and Foreign Minister Valgerdur Sverrisdóttir in Washington on October 11, 2006. The United States also cooperated with local officials to mitigate the impact of job losses at the Air Station, notably by encouraging U.S. investment in industry and tourism development in the Keflavík area. The Government of Iceland announced in spring 2007 that a large portion of the former base site would be converted into the university-level "Atlantic Center of Excellence" with operations scheduled to begin in fall 2007.

Cooperative activities in the context of the new agreements began almost immediately, with the arrival of the amphibious ship USS Wasp in Reykjavík on October 12, 2006 (the first U.S. Navy port visit since 2002) to demonstrate the Navy's rapid reaction capability and to support counterterrorism training by units of Iceland's Coast Guard and police. In November 2006 a U.S. Navy P-3 patrol aircraft arrived at Keflavík for joint search and rescue, disaster surveillance, and maritime interdiction training. Northern Viking 2007, a U.S.-led air defense exercise, took place in August 2007, and planning for subsequent joint endeavors is underway.

The 2008 budget for the Government of Iceland is the first in the country's history to include funding for defense ($8.2 million); the money is earmarked for support of cooperative defense activities, military exercises in Iceland, and maintenance of defense-related facilities. This funding is in addition to roughly $12 million in new expenditures for the operation of the Iceland Air Defense System radar sites, which the United States handed over to Iceland on August 15, 2007.

The Government of Iceland contributes financially to NATO's international overhead costs and recently has taken a more active role in NATO deliberations, planning, and peacekeeping. Iceland hosted the NATO Foreign Ministers' Meeting in Reykjavík in June 1987 and again in May 2002. Iceland hosted the NATO Military Committee in April 2007 and hosted the NATO Parliamentary Assembly in October 2007.

FOREIGN RELATIONS

Iceland maintains diplomatic and commercial relations with practically all nations, but its ties with other Nordic states, with the United States, and with the other NATO member states are particularly close. Icelanders remain especially proud of the role Iceland played in hosting the historic 1986 summit in Reykjavík between President Reagan and Soviet leader Gorbachev, which set the stage for the end of the Cold War.

Iceland has greatly increased its international profile since the early 1990s. Since the mid-1990s, Iceland has opened a number of missions overseas for a total of 22, including an embassy in Beijing, giving Iceland a diplomatic presence in all five permanent member countries of the UN Security Council. Not coincidentally, it has announced its candidacy to serve on the UN Security Council in 2009-2010. In the past few years, Iceland has also established missions to the Council of Europe in Strasbourg and to the Organization for Security and Cooperation in Vienna. In 1998, it bolstered its delegation to NATO, assigning a permanent representative to the military committee for the first time ever.

Notwithstanding its status as an unarmed nation, Iceland has been eager to do its part to contribute to the maintenance of international peace and security. One of the niches it is helping to fill is in civilian peacekeeping and crisis management. It took a significant step forward in this area in 2001 by launching its Icelandic Crisis Response Unit (ICRU). In setting up the ICRU, the Ministry for Foreign Affairs established a roster of over 100 experts in various occupations (police officers, nurses, doctors, lawyers, engineers, journalists, etc.) who will be specially trained and prepared to deploy to trouble spots abroad on short notice.

Peacekeeping has been a permanent item in the Icelandic state budget since 1994, and Iceland has been an active member of the UN Peacekeeping Committee since 1997. With the formal establishment of the ICRU, the government decided to increase the number of deployed peacekeepers to 50, though the timeline for that goal has shifted. The key emerging niche capability of the ICRU is airport administration following the successful management of the airport in Pristina, Kosovo, in 2003 and of the airport in Kabul, Afghanistan, in 2004-2005.

Icelanders have a strong emotional bond with the Baltic states, and Iceland prides itself on being the first country to have recognized these countries' claim for independence in 1991.

Membership in International Organizations

Iceland is a member of the following organizations: Arctic Council, Barents Euro-Arctic Council; Council of Baltic Sea States; Council of Europe; European Economic Area; European Free Trade Organization; EFTA Court; EFTA Surveillance Authority; North Atlantic Treaty Organization; Organization for Security and Cooperation in Europe; Organization for Economic Cooperation and Development; International Criminal Police Organization; International Council for the Exploration of the Sea; International Hydrographic Organization; International Maritime Satellite Organization; International Union for the Publication of Custom Tariffs; Nordic Council; North-East Atlantic Fisheries Commission; North Atlantic Salmon Conservation Organization; the International Whaling Commission; and the North Atlantic Marine Mammal Commission.

It also is a member of the United Nations and most of its related organizations, specialized agencies, and commissions, including the International Monetary Fund, World Trade Organization, World Tourism Organization, Food and Agricultural Organization, International Atomic Energy Agency, International Civil Aviation Organization, International Fund for Agricultural Development; Industrial Development Organization; International Labor Organization, International Maritime Organization, International Telecommunications Union, UN Educational, Scientific, and Cultural Organization, Universal Postal Union, World Health Organization, and World Meteorological Organization; World Intellectual Property Organization; International Bank for Reconstruction and Development; International Development Association; International Finance Corporation Multilateral Investment Guarantee Agency and International Center for Settlement of Investment Disputes; UN Conference on Disarmament; Economic Commission for Europe; UN High Commissioner for Refugees; Office for the High Commissioner for Human Rights; Commission of Human Rights; UN Conference on Trade and Development.

U.S.-ICELANDIC RELATIONS

U.S. policy aims to maintain close, cooperative relations with Iceland, both as a NATO ally and as a friend interested in the shared objectives of enhancing world peace; respect for human rights; economic development; arms control; and law enforcement cooperation, including the fight against terrorism, narcotics, and human trafficking. Moreover, the United States endeavors to strengthen bilateral economic and trade relations.

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Country Specific Information, Travel Alerts, and Travel Warnings. Country Specific Information exists for all countries and includes information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Travel Alerts are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

http://www.state.gov/r/pa/ei/bgn/3396.htm

__________________
~Time owns each and everything~
~Useless youth if not useful for Pakistan~

OFFICIAL NAME

Republic of India

Geography

Area: 3.29 million sq. km. (1.27 million sq. mi.); about one-third the size of the U.S.
Cities: Capital--New Delhi (pop. 12.8 million, 2001 census). Other major cities--Mumbai, formerly Bombay (16.4 million); Kolkata, formerly Calcutta (13.2 million); Chennai, formerly Madras (6.4 million); Bangalore (5.7 million); Hyderabad (5.5 million); Ahmedabad (5 million); Pune (4 million).
Terrain: Varies from Himalayas to flat river valleys and deserts in the west.
Climate: Alpine to temperate to subtropical monsoon.

People

Nationality: Noun and adjective--Indian(s).
Population (2007): 1.12 billion; urban 27.8%.
Annual growth rate: 1.3%
Density: 324/sq. km.
Ethnic groups: Indo-Aryan 72%, Dravidian 25%, others 3%. While the national census does not recognize racial or ethnic groups, it is estimated that there are more than 2,000 ethnic groups in India.
Religions: Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9%, other groups including Buddhist, Jain, Parsi.
Languages: Hindi, English, and 16 other official languages.
Education: Years compulsory--none. Literacy--61%.
Health: Infant mortality rate--34.61/1,000. Life expectancy--68.59 years (2007 est.).
Work force (est.): 450 million. Agriculture--60%; industry and commerce--18%; services and government--22%

Government

Type: Federal republic.
Independence: August 15, 1947.
Constitution: January 26, 1950.
Branches: Executive--president (chief of state), prime minister (head of government), Council of Ministers (cabinet). Legislative--bicameral parliament (Rajya Sabha or Council of States, and Lok Sabha or House of the People). Judicial --Supreme Court.
Political parties: Indian National Congress (INC), Bharatiya Janata Party (BJP), Communist Party of India-Marxist, and numerous regional and small national parties.
Political subdivisions: 28 states,* 7 union territories.
Suffrage: Universal over 18.

Economy

GDP (FY 2007): $1 trillion ($1,000 billion).
Real growth rate (2006-2007 est.): 9.4%.
Per capita GDP (FY 2006-2007): $909.
Natural resources: Coal, iron ore, manganese, mica, bauxite, chromite, thorium, limestone, barite, titanium ore, diamonds, crude oil.
Agriculture: 18% of GDP. Products--wheat, rice, coarse grains, oilseeds, sugar, cotton, jute, tea
Industry: 27% of GDP. Products--textiles, jute, processed food, steel, machinery, transport equipment, cement, aluminum, fertilizers, mining, petroleum, chemicals, and computer software.
Services and transportation: 55% of GDP.
Trade: Exports (FY 2006-2007)--$127 billion; engineering goods, petroleum products, precious stones, cotton apparel and fabrics, gems and jewelry, handicrafts, tea. Software exports--$22 billion. Imports (FY 2006-2007)--$192 billion; petroleum, machinery and transport equipment, electronic goods, edible oils, fertilizers, chemicals, gold, textiles, iron and steel. Major trade partners--U.S., China, EU, Russia, Japan.

PEOPLE

Although India occupies only 2.4% of the world's land area, it supports over 15% of the world's population. Only China has a larger population. India's median age is 25, one of the youngest among large economies. About 70% live in more than 550,000 villages, and the remainder in more than 200 towns and cities. Over the thousands of years of its history, India has been invaded from the Iranian plateau, Central Asia, Arabia, Afghanistan, and the West; Indian people and culture have absorbed and modified these influences to produce a remarkable racial and cultural synthesis.

Religion, caste, and language are major determinants of social and political organization in India today. However, with more job opportunities in the private sector and better chances of upward social mobility, India has begun a quiet social transformation in this area. The government has recognized 18 official languages; Hindi, the national language, is the most widely spoken, although English is a national lingua franca. Although 81% of its people are Hindu, India also is the home of more than 138 million Muslims--one of the world's largest Muslim populations. The population also includes Christians, Sikhs, Jains, Buddhists, and Parsis.

The Hindu caste system reflects Indian occupational and socially defined hierarchies. Ancient Sanskrit sources divide society into four major categories, priests (Brahmin), warriors (Kshatriya), traders (Vaishya) and farmers/laborers (Shudra). Although these categories are understood throughout India, they describe reality only in the most general terms. They omit, for example, the tribes and those once known as "untouchables." In reality, Indian society is divided into thousands of jatis--local, endogamous groups based on occupation--and organized hierarchically according to complex ideas of purity and pollution. Discrimination based on caste is officially illegal, but remains prevalent, especially in rural areas. Nevertheless, the government has made strong efforts to minimize the importance of caste through active affirmative action and social policies. Moreover, caste has been diluted if not subsumed in the economically prosperous and heterogeneous cities, where an increasing percentage of India's population lives. In the countryside, expanding education, land reform and economic opportunity through access to information, communication, transport, and credit have lessened the harshest elements of the caste system.

HISTORY

The people of India have had a continuous civilization since 2500 B.C., when the inhabitants of the Indus River valley developed an urban culture based on commerce and sustained by agricultural trade. This civilization declined around 1500 B.C., probably due to ecological changes.

During the second millennium B.C., pastoral, Aryan-speaking tribes migrated from the northwest into the subcontinent, settled in the middle Ganges River valley, and adapted to antecedent cultures.

The political map of ancient and medieval India was made up of myriad kingdoms with fluctuating boundaries. In the 4th and 5th centuries A.D., northern India was unified under the Gupta Dynasty. During this period, known as India's Golden Age, Hindu culture and political administration reached new heights.

Islam spread across the subcontinent over a period of 700 years. In the 10th and 11th centuries, Turks and Afghans invaded India and established sultanates in Delhi. In the early 16th century, Babur, a Turkish adventurer and distant relative of Timurlane, established the Mughal Dynasty, which lasted for 200 years. South India followed an independent path, but by the 17th century large areas of South India came under the direct rule or influence of the expanding Mughal Empire. While most of Indian society in its thousands of villages remained untouched by the political struggles going on around them, Indian courtly culture evolved into a unique blend of Hindu and Muslim traditions.

The first British outpost in South Asia was established by the English East India Company in 1619 at Surat on the northwestern coast. Later in the century, the Company opened permanent trading stations at Madras (now Chennai), Bombay (now Mumbai), and Calcutta (now Kolkata), each under the protection of native rulers.

The British expanded their influence from these footholds until, by the 1850s, they controlled most of present-day India, Pakistan, Sri Lanka, and Bangladesh. In 1857, an unsuccessful rebellion in north India led by Indian soldiers seeking the restoration of the Mughal Emperor caused the British Parliament to transfer political power from the East India Company to the Crown. Great Britain began administering most of India directly, while controlling the rest through treaties with local rulers.

In the late 1800s, the first steps were taken toward self-government in British India with the appointment of Indian councilors to advise the British Viceroy and the establishment of Provincial Councils with Indian members; the British subsequently widened participation in Legislative Councils. Beginning in 1920, Indian leader Mohandas K. Gandhi transformed the Indian National Congress political party into a mass movement to campaign against British colonial rule. The party used both parliamentary and nonviolent resistance and non-cooperation to agitate for independence. During this period, however, millions of Indians served with honor and distinction in the British armed forces, including service in both World Wars and countless other overseas actions in service of the Empire.

With Indians increasingly united in their quest for independence, a war-weary Britain led by Labor Prime Minister Clement Attlee began in earnest to plan for the end of its suzerainty in India. On August 15, 1947, India became a dominion within the Commonwealth, with Jawaharlal Nehru as Prime Minister. Strategic colonial considerations, as well as political tensions between Hindus and Muslims, led the British to partition British India into two separate states: India, with a Hindu majority; and Pakistan, which consisted of two "wings," East and West Pakistan--currently Bangladesh and Pakistan--with Muslim majorities. India became a republic within the Commonwealth after promulgating its Constitution on January 26, 1950.

After independence, the Indian National Congress, the party of Mohandas K. Gandhi and Jawaharlal Nehru, ruled India under the leadership first of Nehru and then his daughter (Indira Gandhi) and grandson (Rajiv Gandhi), with the exception of brief periods in the 1970s and 1980s, during a short period in 1996, and the period from 1998-2004, when a coalition led by the Bharatiya Janata Party governed.

Prime Minister Nehru governed the nation until his death in 1964. Nehru was succeeded by Lal Bahadur Shastri, who also died in office. In 1966, power passed to Nehru's daughter, Indira Gandhi, Prime Minister from 1966 to 1977. In 1975, beset with deepening political and economic problems, Mrs. Gandhi declared a state of emergency and suspended many civil liberties. Seeking a mandate at the polls for her policies, she called for elections in 1977, only to be defeated by Morarji Desai, who headed the Janata Party, an amalgam of five opposition parties.

In 1979, Desai's Government crumbled. Charan Singh formed an interim government, which was followed by Mrs. Gandhi's return to power in January 1980. On October 31, 1984, Mrs. Gandhi was assassinated, and her son, Rajiv, was chosen by the Congress (I)--for "Indira"--Party to take her place. His Congress government was plagued with allegations of corruption resulting in an early call for national elections in 1989.

Although Rajiv Gandhi's Congress Party won more seats than any other single party in the 1989 elections, he was unable to form a government with a clear majority. The Janata Dal, a union of opposition parties, then joined with the Hindu-nationalist Bharatiya Janata Party (BJP) on the right and the Communists on the left to form the government. This loose coalition collapsed in November 1990, and the Janata Dal, supported by the Congress (I), came to power for a short period, with Chandra Shekhar as Prime Minister. That alliance also collapsed, resulting in national elections in June 1991.

While campaigning in Tamil Nadu on behalf of Congress (I), Rajiv Gandhi was assassinated on May 27, 1991, apparently by Tamil extremists from Sri Lanka, unhappy with India's armed intervention to try to stop the civil war there. In the elections, Congress (I) won 213 parliamentary seats and returned to power at the head of a coalition, under the leadership of P.V. Narasimha Rao. This Congress-led government, which served a full 5-year term, initiated a gradual process of economic liberalization and reform, which opened the Indian economy to global trade and investment. India's domestic politics also took new shape, as the nationalist appeal of the Congress Party gave way to traditional caste, creed, regional, and ethnic alignments, leading to the founding of a plethora of small, regionally based political parties.

The final months of the Rao-led government in the spring of 1996 were marred by several major corruption scandals, which contributed to the worst electoral performance by the Congress Party in its history. The Hindu-nationalist BJP emerged from the May 1996 national elections as the single-largest party in the Lok Sabha but without a parliamentary majority. Under Prime Minister Atal Bihari Vajpayee, the subsequent BJP coalition lasted only 13 days. With all political parties wishing to avoid another round of elections, a 14-party coalition led by the Janata Dal formed a government known as the United Front, under the former Chief Minister of Karnataka, H.D. Deve Gowda. His government collapsed after less than a year, when the Congress Party withdrew its support in March 1997. Inder Kumar Gujral replaced Deve Gowda as the consensus choice for Prime Minister at the head of a 16-party United Front coalition.

In November 1997, the Congress Party again withdrew support from the United Front. In new elections in February 1998, the BJP won the largest number of seats in Parliament--182--but fell far short of a majority. On March 20, 1998, the President approved a BJP-led coalition government with Vajpayee again serving as Prime Minister. On May 11 and 13, 1998, this government conducted a series of underground nuclear tests, spurring U.S. President Clinton to impose economic sanctions on India pursuant to the 1994 Nuclear Proliferation Prevention Act.

In April 1999, the BJP-led coalition government fell apart, leading to fresh elections in September. The National Democratic Alliance--a new coalition led by the BJP--won a majority to form the government with Vajpayee as Prime Minister in October 1999. The NDA government was the first in many years to serve a full five year term, providing much-needed political stability.

The Kargil conflict in 1999 and an attack by terrorists on the Indian Parliament in December 2001 led to increased tensions with Pakistan.

Hindu nationalists supportive of the BJP agitated to build a temple on a disputed site in Ayodhya, destroying a 17th century mosque there in December 1992, and sparking widespread religious riots in which thousands, mostly Muslims, were killed. In February 2002, 57 Hindu volunteers returning from Ayodhya were burnt alive when their train caught fire. Alleging that the fire was caused by Muslim attackers, anti-Muslim rioters throughout the state of Gujarat killed over 900 people and left 100,000 homeless. This led to accusations that the BJP-led Gujarat state government had not done enough to contain the riots, or arrest and prosecute the rioters.

The ruling BJP-led coalition was defeated in a five-stage election held in April and May of 2004, and a Congress-led coalition, known as the United Progressive Alliance (UPA), took power on May 22 with Manmohan Singh as Prime Minister. The UPA's victory was attributed to dissatisfaction among poorer rural voters that the prosperity of the cities had not filtered down to them, and rejection of the BJP's Hindu nationalist agenda.

The Congress-led UPA government has continued many of the BJP's foreign policies, particularly improving relations with the U.S. Prime Minister Singh and President Bush concluded a landmark U.S.-India strategic partnership framework agreement on July 18, 2005. In March 2006, President Bush visited India to further the many initiatives that underlie the new agreement. The strategic partnership is anchored by a historic civil nuclear cooperation initiative and includes cooperation in the fields of space, high-technology commerce, health issues, democracy promotion, agriculture, and trade and investment.

__________________
~Time owns each and everything~
~Useless youth if not useful for Pakistan~

GOVERNMENT

According to its Constitution, India is a "sovereign, socialist, secular, democratic republic." Like the United States, India has a federal form of government. However, the central government in India has greater power in relation to its states, and has adopted a British-style parliamentary system.

The government exercises its broad administrative powers in the name of the president, whose duties are largely ceremonial. A special electoral college elects the president and vice president indirectly for 5-year terms. Their terms are staggered, and the vice president does not automatically become president following the death or removal from office of the president.

Real national executive power is centered in the Council of Ministers (Cabinet), led by the prime minister. The president appoints the prime minister, who is designated by legislators of the political party or coalition commanding a parliamentary majority in the Lok Sabha (lower house). The president then appoints subordinate ministers on the advice of the prime minister.

India's bicameral Parliament consists of the Rajya Sabha (Council of States) and the Lok Sabha (House of the People). The Council of Ministers is responsible to the Lok Sabha.

The legislatures of the states and union territories elect 233 members to the Rajya Sabha, and the president appoints another 12. The members of the Rajya Sabha serve 6-year terms, with one-third up for election every 2 years. The Lok Sabha consists of 545 members, who serve 5-year terms; 543 are directly elected, and two are appointed.

India's independent judicial system began under the British, and its concepts and procedures resemble those of Anglo-Saxon countries. The Supreme Court consists of a chief justice and 25 other justices, all appointed by the president on the advice of the prime minister.

India has 28 states* and 7 union territories. At the state level, some legislatures are bicameral, patterned after the two houses of the national parliament. The states' chief ministers are responsible to the legislatures in the same way the prime minister is responsible to Parliament.

Each state also has a presidentially appointed governor, who may assume certain broad powers when directed by the central government. The central government exerts greater control over the union territories than over the states, although some territories have gained more power to administer their own affairs. Local governments in India have less autonomy than their counterparts in the United States. Some states are trying to revitalize the traditional village councils, or panchayats, to promote popular democratic participation at the village level, where much of the population still lives. Over half a million panchayats exist throughout India.

POLITICAL CONDITIONS

Emerging as the nation's single largest party in the April/May 2004 Lok Sabha election, Congress currently leads a coalition government under Prime Minister Manmohan Singh. Party President Sonia Gandhi was re-elected by the Party National Executive in May 2005. Also a Member of Parliament, she heads the Congress Lok Sabha delegation. Congress prides itself as a secular, left of center party, with a long history of political dominance. Although its performance in national elections had steadily declined during the last 12 years, its surprise victory in 2004 was a result of recruiting strong allies into the UPA, the anti-incumbency factor among voters, and its courtship of India's many poor, rural and Muslim voters. Congress political fortunes suffered badly in the 1990s, as many traditional supporters were lost to emerging regional and caste-based parties, such as the Bahujan Samaj Party and the Samajwadi Party, but have rebounded since its May 2004 ascension to power. It currently rules either directly or in coalition with its allies in 9 states. In November 2005, the Congress regained the Chief Ministership of Jammu and Kashmir state, under a power-sharing agreement.

The Bharatiya Janata Party (BJP), led by Rajnath Singh, holds the second-largest number of seats in the Lok Sabha. Former Prime Minister Atal Bihari Vajpayee serves as Chairman of the BJP Parliamentary Party, and former Deputy Prime Minister L.K. Advani is Leader of the Opposition. The Hindu-nationalist BJP draws its political strength mainly from the "Hindi Belt" in the northern and western regions of India.

The party holds power in the states of Gujarat, Madhya Pradesh, Rajasthan, Chhattisgarh, and Orissa--in coalition with the Biju Janata Dal. Popularly viewed as the party of the northern upper caste and trading communities, the BJP made strong inroads into lower castes in recent national and state assembly elections. The party must balance the competing interests of Hindu nationalists, (who advocate construction of a temple on a disputed site in Ayodhya, and other primarily religious issues), and center-right modernizers who see the BJP as a party of economic and political reform.

Four Communist and Marxist parties are united in a bloc called the "Left Front," which controls 57 parliamentary seats. The Left Front rules the states of West Bengal and Kerala. Although it has not joined the government, Left Front support provides the crucial seats necessary for the UPA to retain power in New Delhi; without its support, the UPA government would fall. It advocates a secular and Communist ideology and opposes many aspects of economic liberalization and globalization, resulting in dissonance with Prime Minister Singh's liberal economic approach.

The next general election is scheduled for 2009.

ECONOMY

India's population is estimated at more than 1.1 billion and is growing at 1.3% a year. It has the world's 12th largest economy--and the third largest in Asia behind Japan and China--with total GDP of around $1 trillion ($1,000 billion). Services, industry, and agriculture account for 55%, 27%, and 18% of GDP respectively. Nearly two-thirds of the population depends on agriculture for its livelihood. 700 million Indians live on $2 per day or less, but there is a large and growing middle class of 325-350 million with disposable income for consumer goods.

India is continuing to move forward with market-oriented economic reforms that began in 1991. Recent reforms include liberalized foreign investment and exchange regimes, industrial decontrol, significant reductions in tariffs and other trade barriers, reform and modernization of the financial sector, significant adjustments in government monetary and fiscal policies, and safeguarding intellectual property rights.

Real GDP growth for the fiscal year ending March 31, 2007 was 9.4%, up from 9.0% growth in the previous year. Growth for the year ending March 31, 2008 was expected to be between 8.5-9.0%. Foreign portfolio and direct investment inflows have risen significantly in recent years. They contributed to $255 billion in foreign exchange reserves by June 2007. Government receipts from privatization were about $3 billion in fiscal year 2003-2004, but the privatization program has stalled since then.

Economic growth is constrained by inadequate infrastructure, a cumbersome bureaucracy, corruption, labor market rigidities, regulatory and foreign investment controls, the "reservation" of key products for small-scale industries, and high (although declining) fiscal deficits. The outlook for further trade liberalization is mixed. India eliminated quotas on 1,420 consumer imports in 2002 and has incrementally lowered non-agricultural customs duties in recent successive budgets. However, the tax structure is complex, with compounding effects of various taxes.

The United States is India's largest trading partner. Bilateral trade in 2006 was $32 billion. Principal U.S. exports are diagnostic or lab reagents, aircraft and parts, advanced machinery, cotton, fertilizers, ferrous waste/scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, Internet-enabled services, agricultural and related products, gems and jewelry, leather products, and chemicals.

The rapidly growing software sector is boosting service exports and modernizing India's economy. Software exports crossed $28 billion in FY 2006-2007, while business process outsourcing (BPO) revenues hit $8.3 billion in 2006-2007. Personal computer penetration is 14 per 1,000 persons. The cellular/mobile market surged to 140 million subscribers by November 2006. The country has 54 million cable TV customers.

The United States is India's largest investment partner, with a 13% share. India's total inflow of U.S. direct investment was estimated at more than $9 billion through 2006. Proposals for direct foreign investment are considered by the Foreign Investment Promotion Board and generally receive government approval. Automatic approvals are available for investments involving up to 100% foreign equity, depending on the kind of industry. Foreign investment is particularly sought after in power generation, telecommunications, ports, roads, petroleum exploration/processing, and mining.

India's external debt was $155 billion in 2006-2007, up from $126 billion in 2005-2006. Foreign assistance was approximately $3 billion in 2006-2007, with the United States providing about $126 million in development assistance. The World Bank plans to double aid to India to almost $3 billion a year, with focus on infrastructure, education, health, and rural livelihoods.

DEFENSE

The supreme command of the Indian armed forces is vested in the President of India. Policies concerning India's defense, and the armed forces as a whole, are formulated and confirmed by the Cabinet.

The Indian Army numbers over 1.1 million strong and fields 34 divisions. Its primary task is to safeguard the territorial integrity of the country against external threats. The Army has been heavily committed in the recent past to counterterrorism operations in Jammu and Kashmir, as well as the in the Northeast. Its current modernization program focuses on obtaining equipment to be used in combating terror. The Army often provides aid to civil authorities and assists the government in organizing relief operations.

The Indian Navy is by far the most capable navy in the region. The Navy's primary missions are the defense of India and of India's vital sea lines of communication. India relies on the sea for 90% of its oil and natural gas and over 90% of its foreign trade. The Navy currently operates one aircraft carrier with two on order, 14 submarines, and 15 major surface combatants. It is capable of projecting power within the Indian Ocean basin and occasionally operates in the South China Sea, the Mediterranean Sea and the Arabian Gulf. Fleet introduction of the Brahmos cruise missile and the possible lease of nuclear submarines from Russia will add significantly to the Indian Navy's flexibility and striking power.

Although small, the Indian Coast Guard has been expanding rapidly in recent years. Indian Navy officers typically fill top Coast Guard positions to ensure coordination between the two services. India's Coast Guard is responsible for control of India's huge exclusive economic zone.

The Indian Air Force is becoming a 21st century force through modernization, new tactics and the acquisition of modern aircraft, such as the SU-30MKI, a new advanced jet trainer (BAE Hawk) and the indigenously produced advanced light helicopter (Dhruv). In June 2007, the Indian Government announced intentions to release a request for proposals for 126 multi-role combat aircraft for the Indian Air Force.

FOREIGN RELATIONS

India's size, population, and strategic location give it a prominent voice in international affairs, and its growing economic strength, military prowess, and scientific and technical capacity give it added weight. The end of the Cold War dramatically affected Indian foreign policy. India remains a leader of the developing world and the Non-Aligned Movement (NAM). India is now strengthening its political and commercial ties with the United States, Japan, the European Union, Iran, China, and the Association of Southeast Asian Nations. India is an active member of the South Asian Association for Regional Cooperation (SAARC).

Always an active member of the United Nations, India now seeks a permanent seat on the UN Security Council. India has a long tradition of participating in UN peacekeeping operations.

Bilateral and Regional Relations

Pakistan. India and Pakistan have been locked in a tense rivalry since the partition of the subcontinent upon achieving independence from Great Britain in 1947. The principal source of contention has been Kashmir, whose Hindu Maharaja at that time chose to join India, although a majority of his subjects were Muslim. India maintains that his decision and subsequent elections in Kashmir have made it an integral part of India. This dispute triggered wars between the two countries in 1947 and 1965 and provoked the Kargil conflict in 1999.

Pakistan and India fought a war in December 1971 following a political crisis in what was then East Pakistan and the flight of millions of Bengali refugees to India. The brief conflict left the situation largely unchanged in the west, where the two armies reached an impasse, but a decisive Indian victory in the east resulted in the creation of Bangladesh.

Since the 1971 war, Pakistan and India have made slow progress toward normalization of relations. In July 1972, Indian Prime Minister Indira Gandhi and Pakistani President Zulfikar Ali Bhutto met in the Indian hill station of Simla. They signed an agreement by which India would return all personnel and captured territory in the west and the two countries would "settle their differences by peaceful means through bilateral negotiations." Diplomatic and trade relations were re-established in 1976.

The 1979 Soviet invasion of Afghanistan caused new strains between India and Pakistan. Pakistan supported the Afghan resistance, while India implicitly supported the Soviet occupation. In the following eight years, India voiced increasing concern over Pakistani arms purchases, U.S. military aid to Pakistan, and Pakistan's nuclear weapons program. In an effort to curtail tensions, the two countries formed a joint commission. In December 1988, Prime Ministers Rajiv Gandhi and Benazir Bhutto concluded a pact not to attack each other's nuclear facilities and initiated agreements on cultural exchanges and civil aviation.

In 1997, high-level Indo-Pakistani talks resumed after a three-year pause. The Prime Ministers of India and Pakistan met twice, and the foreign secretaries conducted three rounds of talks. In June 1997 at Lahore, the foreign secretaries identified eight "outstanding issues" around which continuing talks would be focused. The dispute over the status of Jammu and Kashmir, an issue since partition, remains the major stumbling block in their dialogue. India maintains that the entire former princely state is an integral part of the Indian union, while Pakistan insists upon the implementation of UN resolutions calling for self-determination for the people of the state.

In September 1997, the talks broke down over the structure of how to deal with the issues of Kashmir and peace and security. Pakistan advocated that separate working groups treat each issue. India responded that the two issues be taken up along with six others on a simultaneous basis. In May 1998 India, and then Pakistan, conducted nuclear tests. Attempts to restart dialogue between the two nations were given a major boost by the February 1999 meeting of both Prime Ministers in Lahore and their signing of three agreements. These efforts were stalled by the intrusion of Pakistani-backed forces into Indian-held territory near Kargil in May 1999 (that nearly turned into full scale war), and by the military coup in Pakistan that overturned the Nawaz Sharif government in October the same year. In July 2001, Mr. Vajpayee and General Pervez Musharraf, leader of Pakistan after the coup, met in Agra, but talks ended after two days without result.

After an attack on the Indian Parliament in December 2001, India-Pakistan relations cooled further as India accused Pakistan of involvement. Tensions increased, fueled by killings in Jammu and Kashmir, peaking in a troop buildup by both sides in early 2002.

__________________
~Time owns each and everything~
~Useless youth if not useful for Pakistan~

Prime Minister Vajpayee's April 18, 2003 speech in Srinagar (Kashmir) revived bilateral efforts to normalize relations. In November 2003, Prime Minister Vajpayee and President Musharraf agreed to a ceasefire, which still holds, along the Line-of-Control in Jammu and Kashmir. After a series of confidence building measures, Prime Minister Vajpayee and President Musharraf met on the sidelines of the January 2004 SAARC summit in Islamabad and agreed to commence a Composite Dialogue addressing outstanding issues between India and Pakistan, including Kashmir.

In February 2004, India and Pakistan agreed to restart the "2+6" Composite Dialogue formula, which provides for talks on Peace and Security and Jammu and Kashmir, followed by technical and Secretary-level discussions on six other bilateral disputes: Siachen Glacier, Wuller Barrage/Tulbul Navigation Project, Sir Creek estuary, Terrorism and Drug Trafficking, Economic and Commercial cooperation, and the Promotion of Friendly Exchanges in various fields. The restart of the Composite Dialogue process was especially significant given the almost six years that had transpired since the two sides agreed to this formula in 1997-1998. The UPA government continued the Composite Dialogue with Pakistan. Following the October 2005 earthquake in Kashmir, the two governments coordinated relief efforts and opened access points along the Line-of-Control to allow relief supplies to flow from India to Pakistan and to allow Kashmiris from both sides to visit one another.

The Foreign Secretary talks resumed in November 2006, after a three-month delay following the July 11, 2006 terrorist bombings in Mumbai. The meeting generated modest progress, with the two sides agreeing to establish a joint mechanism on counter-terrorism. Since 2006, India and Pakistan have continued to take part in the Composite Dialogue process in an effort to maintain the peace process and strengthen bilateral relations. Most recently, the Indian Minister of External Affairs and the Indian Foreign Secretary met in May 2008 with their new counterparts in Islamabad to close the fourth round of talks, reaffirming a commitment to maintain the ceasefire along the Line-of-Control as well as increasing people-to-people connections through improving cross-border bus services.

SAARC. Certain aspects of India's relations within the subcontinent are conducted through the South Asian Association for Regional Cooperation (SAARC). Its members are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, with the People's Republic of China, Iran, Japan, European Union, Republic of Korea, and the U.S. as observers. Established in 1985, SAARC encourages cooperation in agriculture, rural development, science and technology, culture, health, population control, narcotics, and terrorism.

SAARC has intentionally stressed these "core issues" and avoided those which could prove divisive, although political dialogue is often conducted on the margins of SAARC meetings. In 1993, India and its SAARC partners signed an agreement gradually to lower tariffs within the region. Forward movement in SAARC had slowed because of tension between India and Pakistan, and the SAARC summit scheduled for 1999 was not held until January 2002. In addition, to boost the process of normalizing India's relationship with Pakistan, the January 2004 SAARC summit in Islamabad produced an agreement to establish a South Asia Free Trade Area (SAFTA). All the member governments have ratified SAFTA, which was slated to come into force on January 1, 2006, with a series of graduated tariff cuts through 2015. As of December 2006, however, the FTA partners were still negotiating sensitive product lists, rules of origin, and technical assistance. India hosted the 2007 SAARC summit, which called for greater regional cooperation on trade, environmental, social, and counterterrorism issues.

China. Despite suspicions remaining from a 1962 border conflict between India and China and continuing territorial/boundary disputes, Sino-Indian relations have improved gradually since 1988. Both countries have sought to reduce tensions along the frontier, expand trade and cultural ties, and normalize relations. Their bilateral trade reached $24 billion in 2006. China is India's second-largest trading partner behind the U.S.

A series of high-level visits between the two nations has improved relations. In December 1996, Chinese President Jiang Zemin visited India on a tour of South Asia. While in New Delhi, he and the Indian Prime Minister signed a series of confidence-building measures along the disputed border, including troop reductions and weapons limitations.

Chinese Premier Wen Jiabao invited Prime Minister Vajpayee to visit China in June 2003. They recognized the common goals of both countries and made the commitment to build a "long-term constructive and cooperative partnership" to peacefully promote their mutual political and economic goals without encroaching upon their good relations with other countries. In Beijing, Prime Minister Vajpayee proposed the designation of special representatives to discuss the border dispute at the political level, a process that is still under way.

In November 2006, President Hu Jintao made an official state visit to India, further cementing Sino-Indian relations. India and China are building on growing economic ties to improve other aspects of their relationship such as counter-terrorism, energy, and trade. In another symbol of improved ties, the two countries opened the Nathu La Pass to bilateral trade in July 2006 for the first time in 40 years. Though it is the first direct land trade route in decades, trade is expected to be local and small since the pass is open only four months a year.

Prime Minister Manmohan Singh met Chinese President Hu Jintao in January 2008 in Beijing in an effort to reinforce their confidence to further develop ties, vowing to promote their relations to a higher level. The meetings cemented a shared vision for the 21st century, agreeing to raise the annual volume of bilateral trade to $60 billion by 2010.

Former Soviet Union. The collapse of the Soviet Union in 1991 and the emergence of the Commonwealth of Independent States (CIS) had major repercussions for Indian foreign policy. India's substantial trade with the region plummeted after the Soviet collapse and has yet to recover. Longstanding military supply relationships were similarly disrupted due to questions over financing. Russia nonetheless remains India's largest supplier of military systems and spare parts.

Russia and India have not renewed the 1971 Indo-Soviet Peace and Friendship Treaty and follow what both describe as a more pragmatic, less ideological relationship. The visit of Russian President Boris Yeltsin to India in January 1993 helped cement this new relationship. The pace of high-level visits has since increased, as has discussion of major defense purchases. UPA leader Sonia Gandhi and Prime Minister Singh visited Russia in July 2005. President Vladimir Putin traveled to India in January 2007 to attend an Indo-Russia Summit and was the guest of honor at India's Republic Day celebrations.

U.S.-INDIA RELATIONS

Recognizing India as a key to strategic U.S. interests, the United States has sought to strengthen its relationship with India. The two countries are the world's largest democracies, both committed to political freedom protected by representative government. India is also moving gradually toward greater economic freedom. The U.S. and India have a common interest in the free flow of commerce and resources, including through the vital sea lanes of the Indian Ocean. They also share an interest in fighting terrorism and in creating a strategically stable Asia.

There were some differences, however, including over India's nuclear weapons programs and the pace of India's economic reforms. In the past, these concerns may have dominated U.S. thinking about India, but today the U.S. views India as a growing world power with which it shares common strategic interests. A strong partnership between the two countries will continue to address differences and shape a dynamic and collaborative future.

In late September 2001, President Bush lifted sanctions imposed under the terms of the 1994 Nuclear Proliferation Prevention Act following India's nuclear tests in May 1998. The nonproliferation dialogue initiated after the 1998 nuclear tests has bridged many of the gaps in understanding between the countries. In a meeting between President Bush and Prime Minister Vajpayee in November 2001, the two leaders expressed a strong interest in transforming the U.S.-India bilateral relationship. High-level meetings and concrete cooperation between the two countries increased during 2002 and 2003. In January 2004, the U.S. and India launched the Next Steps in Strategic Partnership (NSSP), which was both a milestone in the transformation of the bilateral relationship and a blueprint for its further progress.

In July 2005, President Bush hosted Prime Minister Singh in Washington, DC. The two leaders announced the successful completion of the NSSP, as well as other agreements which further enhance cooperation in the areas of civil nuclear, civil space, and high-technology commerce. Other initiatives announced at this meeting include: an U.S.-India Economic Dialogue, Fight Against HIV/AIDS, Disaster Relief, Technology Cooperation, Democracy Initiative, an Agriculture Knowledge Initiative, a Trade Policy Forum, Energy Dialogue and CEO Forum. President Bush made a reciprocal visit to India in March 2006, during which the progress of these initiatives were reviewed, and new initiatives were launched.

In December 2006, Congress passed the historic Henry J. Hyde United States-India Peaceful Atomic Cooperation Act, which allows direct civilian nuclear commerce with India for the first time in 30 years. U.S. policy had opposed nuclear cooperation with India because the country had developed nuclear weapons in contravention of international conventions and never signed the Nuclear Non-Proliferation Treaty. The legislation clears the way for India to buy U.S. nuclear reactors and fuel for civilian use.

In July 2007, the United States and India reached a historic milestone in their strategic partnership by completing negotiations on the bilateral agreement for peaceful nuclear cooperation, also known as the "123 agreement." This agreement will govern civil nuclear trade between the two countries and open the door for American and Indian firms to participate in each other's civil nuclear energy sector.

The U.S. and India seek to elevate the strategic partnership further to include cooperation in counter-terrorism, defense cooperation, education, and joint democracy promotion.

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Country Specific Information, Travel Alerts, and Travel Warnings. Country Specific Information exists for all countries and includes information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Travel Alerts are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

http://www.state.gov/r/pa/ei/bgn/3454.htm

__________________
~Time owns each and everything~
~Useless youth if not useful for Pakistan~

Official Name

Republic of Indonesia

Geography

Area: 2 million sq. km. (736,000 sq. mi.), about three times the size of Texas; maritime area: 7,900,000 sq. km.
Cities: Capital--Jakarta (est. 8.8 million). Other cities--Surabaya 3.0 million, Medan 2.5 million, Bandung 2.5 million.
Terrain: More than 17,500 islands; 6,000 are inhabited; 1,000 of which are permanently settled. Large islands consist of coastal plains with mountainous interiors.
Climate: Equatorial but cooler in the highlands.

People

Nationality: Noun and adjective--Indonesian(s).
Population (2006): 231.8 million.
Annual population growth rate (2006): 1.3%.
Ethnic groups: Javanese 45%, Sundanese 14%, Madurese 7.5%, coastal Malays 7.5%, others 26%.
Religions: Muslim 88%, Protestant 5%, Catholic 3%, Hindu 2%, Buddhist and other 1%.
Languages: Indonesian (official), local languages, the most prevalent of which is Javanese.
Education: Years compulsory--9. Enrollment--94% of eligible primary school-age children. Literacy--90% (2005).
Health: Infant mortality rate--28/1,000 (2005). Life expectancy at birth--68 years (2005).
Work force: 94.2 million (2005 est.). Agriculture--46.5%, industry--11.8%, services--41.7%.

Government

Type: Independent republic.
Independence: August 17, 1945 proclaimed.
Constitution: 1945. Embodies five principles of the state philosophy, called Pancasila, namely monotheism, humanitarianism, national unity, representative democracy by consensus, and social justice.
Branches: Executive--president (head of government and chief of state) elected by direct popular vote. Legislative--The People's Consultative Assembly (MPR), which includes the 550-member House of Representatives (DPR) and the 128-member Council of Regional Representatives (DPD), both elected to five-year terms. Judicial--Supreme Court.
Suffrage: 17 years of age universal and married persons regardless of age.

Economy

GDP (2006): $364.5 billion; (2007 est.): $418.7 billion.
Annual growth rate (2006): 5.5%; (2007 est.): 6.2%.
Inflation (2006): 13.1%; (2007 est.): 6.3%.
Per capita income (2007): $3,573 (est., PPP).
Natural resources (9.1% of GDP): Oil and gas, bauxite, silver, tin, copper, gold, coal.
Agriculture (14.1% of GDP): Products--timber, rubber, rice, palm oil, coffee. Land--17% cultivated.
Manufacturing (27.8% of GDP): Garments, footwear, electronic goods, furniture, paper products.
Trade: Exports (2006)--$100.7 billion including oil, natural gas, appliances, textiles. Major exporters--Japan, U.S., Singapore, Republic of Korea, China. Imports (2006)--$61.1 billion including food, chemicals, capital goods, consumer goods. Major importers--Singapore, Japan, China.

PEOPLE

Indonesia's approximately 245.5 million people make it the world's fourth-most populous nation. The island of Java, roughly the size of New York State, is the most populous island in the world (124 million, 2005 est.) and one of the most densely populated areas in the world. Indonesia includes numerous related but distinct cultural and linguistic groups, many of which are ethnically Malay. Since independence, Bahasa Indonesia (the national language, a form of Malay) has spread throughout the archipelago and has become the language of most written communication, education, government, business, and media. Local languages are still important in many areas, however. English is the most widely spoken foreign language. Education is compulsory for children through grade 9. In primary school, 94% of eligible children are enrolled whereas 57% of eligible children are enrolled in secondary school.

Constitutional guarantees of religious freedom apply to the six religions recognized by the state, namely Islam (88%), Protestantism (5%), Catholicism (3%), Buddhism (2%), Hinduism (1%) and Confucianism (less than 1%). In the resort island of Bali, over 90% of the population practices Hinduism. In some remote areas, animism is still practiced.

HISTORY

By the time of the Renaissance, the islands of Java and Sumatra had already enjoyed a 1,000-year heritage of advanced civilization spanning two major empires. During the 7th-14th centuries, the Buddhist kingdom of Srivijaya flourished on Sumatra. At its peak, the Srivijaya Empire reached as far as West Java and the Malay Peninsula. Also by the 14th century, the Hindu Kingdom of Majapahit had risen in eastern Java. Gadjah Mada, the empire's chief minister from 1331 to 1364, succeeded in gaining allegiance from most of what is now modern Indonesia and much of the Malay archipelago as well. Legacies from Gadjah Mada's time include a codification of law and an epic poem. Islam arrived in Indonesia sometime during the 12th century and, through assimilation, supplanted Hinduism by the end of the 16th century in Java and Sumatra. Bali, however, remains overwhelmingly Hindu. In the eastern archipelago, both Christian and Islamic proselytizing took place in the 16th and 17th centuries, and, currently, there are large communities of both religions on these islands.

Beginning in 1602, the Dutch slowly established themselves as rulers of present-day Indonesia, exploiting the weakness of the small kingdoms that had replaced that of Majapahit. The only exception was East Timor, which remained under Portugal's control until 1975. During 300 years of rule, the Dutch developed the Netherlands East Indies into one of the world's richest colonial possessions.

During the first decade of the 20th century, an Indonesian independence movement began and expanded rapidly, particularly between the two World Wars. Its leaders came from a small group of young professionals and students, some of whom had been educated in the Netherlands. Many, including Indonesia's first president, Soekarno (1945-67), were imprisoned for political activities.

The Japanese occupied Indonesia for three years during World War II (1942-1945). On August 17, 1945, three days after the Japanese surrender to the Allies, a small group of Indonesians, led by Soekarno and Mohammad Hatta, proclaimed independence and established the Republic of Indonesia. They set up a provisional government and adopted a constitution to govern the republic until elections could be held and a new constitution written. Dutch efforts to reestablish complete control met strong resistance. After four years of warfare and negotiations, the Dutch transferred sovereignty to a federal Indonesian Government. In 1950, Indonesia became the 60th member of the United Nations.

Shortly after hostilities with the Dutch ended in 1949, Indonesia adopted a new constitution, providing for a parliamentary system of government in which the executive was chosen by and accountable to parliament. Parliament was divided among many political parties before and after the country's first nationwide election in 1955, and stable governmental coalitions were difficult to achieve. The role of Islam in Indonesia became a divisive issue. Soekarno defended a secular state based on Pancasila, five principles of the state philosophy--monotheism, humanitarianism, national unity, representative democracy by consensus, and social justice--codified in the 1945 constitution, while some Muslim groups preferred either an Islamic state or a constitution which included a preambular provision requiring adherents of Islam to be subject to Islamic law. At the time of independence, the Dutch retained control over the western half of New Guinea (known as Irian Jaya in the Soekarno and Soeharto eras and as Papua since 2000) and permitted steps toward self-government and independence.

Negotiations with the Dutch on the incorporation of Irian Jaya into Indonesia failed and armed clashes broke out between Indonesian and Dutch troops in 1961. In August 1962, the two sides reached an agreement and Indonesia assumed administrative responsibility for Irian Jaya on May 1, 1963. The Indonesian Government conducted an "Act of Free Choice" in Irian Jaya under UN supervision in 1969 in which 1,025 Papuan representatives of local councils agreed by consensus to remain a part of Indonesia. A subsequent UN General Assembly resolution confirmed the transfer of sovereignty to Indonesia. Opposition to Indonesian administration of Papua gave rise to small-scale guerrilla activity in the years following Jakarta's assumption of control. In the more open atmosphere since 1998, there have been more explicit expressions within Papua calling for independence from Indonesia.

Unsuccessful rebellions on Sumatra, Sulawesi, West Java, and other islands beginning in 1958, plus a failure by the constituent assembly to develop a new constitution, weakened the parliamentary system. Consequently, in 1959, when President Soekarno unilaterally revived the provisional 1945 constitution that gave broad presidential powers, he met little resistance. From 1959 to 1965, President Soekarno imposed an authoritarian regime under the label of "Guided Democracy." He also moved Indonesia's foreign policy toward nonalignment, a foreign policy stance supported by other prominent leaders of former colonies who rejected formal alliances with either the West or Soviet bloc. Under Soekarno's auspices, these leaders gathered in Bandung, West Java in 1955 to lay the groundwork for what became known as the Non-Aligned Movement. In the late 1950s and early 1960s, President Soekarno moved closer to Asian communist states and toward the Indonesian Communist Party (PKI) in domestic affairs. Though the PKI represented the largest communist party outside the Soviet Union and China, its mass support base never demonstrated an ideological adherence typical of communist parties in other countries.

By 1965, the PKI controlled many of the mass civic and cultural organizations that Soekarno had established to mobilize support for his regime and, with Soekarno's acquiescence, embarked on a campaign to establish a "Fifth Column" by arming its supporters. Army leaders resisted this campaign. Under circumstances that have never been fully explained, on October 1, 1965, PKI sympathizers within the military, including elements from Soekarno's palace guard, occupied key locations in Jakarta and kidnapped and murdered six senior generals. Major General Soeharto, the commander of the Army Strategic Reserve, rallied army troops opposed to the PKI to reestablish control over the city. Violence swept throughout Indonesia in the aftermath of the October 1 events and unsettled conditions persisted through 1966. Right-wing gangs killed tens of thousands of alleged communists in rural areas. Estimates of the number of deaths range between 160,000 and 500,000. The violence was especially brutal in Java and Bali. During this period, PKI members by the tens of thousands turned in their membership cards. The emotions and fears of instability created by this crisis persisted for many years as the communist party remains banned from Indonesia.

Throughout the 1965-66 period, President Soekarno vainly attempted to restore his political stature and shift the country back to its pre-October 1965 position. Although he remained President, in March 1966, Soekarno transferred key political and military powers to General Soeharto, who by that time had become head of the armed forces. In March 1967, the Provisional People's Consultative Assembly (MPRS) named General Soeharto acting President. Soekarno ceased to be a political force and lived under virtual house arrest until his death in 1970.

President Soeharto proclaimed a "New Order" in Indonesian politics and dramatically shifted foreign and domestic policies away from the course set in Soekarno's final years. The New Order established economic rehabilitation and development as its primary goals and pursued its policies through an administrative structure dominated by the military but with advice from Western-educated economic experts. In 1968, the People's Consultative Assembly (MPR) formally selected Soeharto to a full five-year term as President and he was re-elected to successive 5-year terms in 1973, 1978, 1983, 1988, 1993, and 1998. In mid-1997, Indonesia suffered from the Asian financial and economic crisis, accompanied by the worst drought in 50 years and falling prices for oil, gas, and other commodity exports. As the exchange rate changed from a fixed to a managed float to fully floating, the rupiah depreciated in value, inflation increased significantly, and capital flight accelerated. Demonstrators, initially led by students, called for Soeharto's resignation. Amid widespread civil unrest, Soeharto resigned on May 21, 1998, three months after the MPR had selected him for a seventh term. Soeharto's hand-picked Vice President, B.J. Habibie, became Indonesia's third President. President Habibie reestablished International Monetary Fund (IMF) and donor community support for an economic stabilization program. He released several prominent political and labor prisoners, initiated investigations into the unrest, and lifted controls on the press, political parties, and labor unions.

In January 1999, Habibie and the Indonesian Government agreed to a process, with UN involvement, under which the people of East Timor would be allowed to choose between autonomy and independence through a direct ballot held on August 30, 1999. Some 98% of registered voters cast their ballots, and 78.5% of the voters chose independence over continued integration with Indonesia. Many people were killed by Indonesian military forces and military-backed militias in a wave of violence and destruction after the announcement of the pro-independence vote.

Indonesia's first elections in the post-Soeharto period were held for the national, provincial, and sub-provincial parliaments on June 7, 1999. Forty-eight political parties participated in the elections. For the national parliament, Partai Demokrasi Indonesia Perjuangan (PDI-P, Indonesian Democratic Party of Struggle led by Megawati Soekarnoputri) won 34% of the vote; Golkar ("Functional Groups" party) 22%; Partai Kebangkitan Bangsa (PKB, National Awakening Party linked to the conservative Islamic organization Nadhlatul Ulama headed by former President Abdurrahman Wahid) 13%; and Partai Persatuan Pembangunan (PPP, United Development Party led by Hamzah Haz) 11%. The MPR selected Abdurrahman Wahid as Indonesia's fourth President in November 1999 and replaced him with Megawati Soekarnoputri in July 2001.

The constitution, as amended in the post-Soeharto era, provides for the direct election by popular vote of the president and vice president. Under the 2004 amendment, only parties or coalitions of parties that gained at least 3% of the House of Representatives (DPR) seats or 5% of the vote in national legislative elections were eligible to nominate a presidential and vice presidential ticket, though that threshold is undergoing revision in advance of the 2009 election. The 2004 legislative elections took place on April 5 and were considered to be generally free and fair. PDI-P lost its plurality in the House of Representatives, dropping to under 19% of the total vote, while Golkar remained near 1999 levels with 21% of the vote. Five other parties won between 6 and 11% of the national vote. Of the 18 other parties that participated, nine won small numbers of seats in the DPR. The first direct presidential election was held on July 5, 2004, contested by five tickets. As no candidate won at least 50% of the vote, a runoff election was held between the top two candidates, President Megawati Sukarnoputri and retired General Susilo Bambang Yudhoyono, on September 20, 2004. In this final round, Yudhoyono won 60.6% of the vote. Approximately 76.6% of the eligible voters participated, a total of roughly 117 million people, making Indonesia's presidential election the largest single-day election in the world. The Carter Center, which sent a delegation of election observers, issued a statement congratulating "the people and leaders of Indonesia for the successful conduct of the presidential election and the peaceful atmosphere that has prevailed throughout the ongoing democratic transition."

Natural disasters have devastated many parts of Indonesia over the past few years. On December 26, 2004 a 9.1 to 9.3 magnitude earthquake took place in the Indian Ocean, and the resulting tsunami killed over 130,000 people in Aceh and left more than 500,000 homeless. On March 26, 2005, an 8.7 magnitude earthquake struck between Aceh and northern Sumatra, killing 905 people and displacing tens of thousands. After much media attention of the seismic activity on Mt. Merapi in April and May 2006, a 6.2 magnitude earthquake occurred 30 miles to the southwest. It killed over 5,000 people and left an estimated 200,000 people homeless in the Yogyakarta region.

GOVERNMENT AND POLITICAL CONDITIONS

Indonesia is a republic based on the 1945 constitution providing for a separation of executive, legislative, and judicial power. Substantial restructuring has occurred since President Soeharto's resignation in 1998 and the short, transitional Habibie administration in 1998 and 1999. The Habibie government established political reform legislation that formally set up new rules for the electoral system, the House of Representatives (DPR), the People's Consultative Assembly (MPR), and political parties without changing the 1945 Indonesian constitution. After these reforms, the constitution now limits the president to two terms in office.

The president, elected for a five-year term, is the top government and political figure. The president and the vice president were elected by popular vote for the first time on September 20, 2004. Previously, the MPR selected Indonesia's president. In 1999, the MPR selected Abdurrahman Wahid, also known as Gus Dur, as the fourth President. The MPR removed Gus Dur in July 2001, immediately appointing then-Vice President Megawati Soekarnoputri as the fifth President. Megawati brought a certain amount of stability to Indonesia, yet there were concerns over progress on combating corruption and encouraging economic growth. In 2004, Susilo Bambang Yudhoyono was elected to succeed Megawati.

The president, assisted by an appointed cabinet, has the authority to conduct the administration of the government. President Yudhoyono's Democratic Party (PD), holds 55 of the 550 seats in the House of Representatives (DPR), making it the fourth-largest political party represented in the legislature as of 2008. Yudhoyono, however, also had the support of other political parties that combined to hold a majority of the seats in the DPR. The People's Consultative Assembly (MPR) has 678 members, consisting of the 550 members of the DPR and the 128 representatives of the House of Regional Representatives (DPD), which includes four members from 32 of Indonesia's 33 provinces. Since 2004, all seats in the DPR and DPD have been held by legislators elected by the citizenry. Previously, some seats had been reserved for representatives of the armed forces. The military has been a significant political force throughout Indonesian history, though it had ceded its formal political role by 2004.

The armed forces shaped the political environment and provided leadership for Soeharto's New Order from the time it came to power in the wake of the abortive 1965 uprising. Military officers, especially from the army, were key advisers to Soeharto and Habibie and had considerable influence on policy. Under the dual function concept ("dwifungsi"), the military asserted a continuing role in socio-political affairs. This concept was used to justify placement of officers to serve in the civilian bureaucracy at all government levels and in regional and national legislatures. Although the military retains influence and is one of the only truly national institutions, the wide-ranging democratic reforms instituted since 1999 abolished "dwifungsi" and ended the armed forces' formal involvement in government administration. The police have been separated from the military, further reducing the military's direct role in governmental matters. Control of the military by the democratically elected government has been strengthened.

As a reaction to Soeharto's centralization of power and reflecting historically independent sentiment, Hasan di Tiro established the Free Aceh Movement (Gerakan Aceh Merdeka, GAM) in December 1976 to seek independence for Aceh. Some 15,000 died in military conflict in Aceh over the following three decades. Through peace talks led by former Finnish president Martti Ahtisaari, a peace agreement between GAM and the Indonesian Government that provided wide-ranging autonomy for Aceh was signed on August 15, 2005. By December 2005, GAM declared that they had disbanded the military wing of their organization, and the Indonesian Government had withdrawn the bulk of its security forces down to agreed levels. On December 11, 2006, Aceh held gubernatorial and district administrative elections, the first democratic elections in over half a century in Aceh, resulting in the election of a former separatist leader as governor.

__________________
~Time owns each and everything~
~Useless youth if not useful for Pakistan~

ECONOMY

Indonesia has a market-based economy in which the government plays a significant role. There are 158 state-owned enterprises and the government administers prices on several basic goods, including fuel, rice, and electricity.

In the mid-1980s, the government began eliminating regulatory obstacles to economic activity. The steps were aimed primarily at the external and financial sectors and were designed to stimulate employment and growth in the non-oil export sector. Annual real gross domestic product (GDP) growth averaged nearly 7% from 1987-97 and most analysts recognized Indonesia as a newly industrializing economy and emerging major market. The Asian financial crisis of 1997 altered the region's economic landscape. With the depreciation of the Thai currency, the foreign investment community quickly re-evaluated its investments in Asia. Foreign investors dumped assets and investments in Asia, leaving Indonesia the most affected in the region. In 1998, Indonesia experienced a negative GDP growth of 13.1% and unemployment rose to 15-20%. In the aftermath of the 1997-98 financial crisis, the government took custody of a significant portion of private sector assets via debt restructuring, but subsequently sold most of these assets, averaging a 29% return. Indonesia has since recovered, albeit slower than some of its neighbors, by recapitalizing its banking sector, improving oversight of capital markets, and taking steps to stimulate growth and investment, particularly in infrastructure. GDP growth has steadily risen this decade, achieving an estimated 6.2% in 2007.

Economic Policy: After he took office on October 20, 2004, President Yudhoyono moved quickly to implement a "pro-growth, pro-poor, pro-employment" economic program. He appointed a respected group of economic ministers who announced a "100-Day Agenda" of short-term policy actions designed to energize the bureaucracy. President Yudhoyono also announced an ambitious anti-corruption plan in December 2004. The State Ministry of National Development Planning (BAPPENAS) released in early 2005 a Medium Term Plan focusing on four broad objectives: creating a safe and peaceful Indonesia; creating a just and democratic Indonesia; creating a prosperous Indonesia; and establishing a stable macroeconomic framework for development. President Yudhoyono reshuffled his cabinet in December 2005, appointing former Finance Minister Boediono as Coordinating Minister for Economic Affairs, and moving Sri Mulyani Indrawati from the National Development Planning Agency to the Finance Ministry. In early 2006, the Government of Indonesia announced new policy packages for stimulating investment and infrastructure.

The Yudhoyono administration targeted average growth of 6.6% from 2004-2009 to reduce unemployment and poverty significantly. Indonesia's overall macroeconomic picture is stable and improving. By 2004, real GDP per capita returned to pre-financial crisis levels. In 2006, domestic consumption continued to account for the largest portion of GDP, at 62.6%, followed by investment at 24%, government consumption at 8.6%, and net exports at 4.8%. By all measures, investment realization has climbed in each of the past several years.

The government raised fuel prices by an average of 126% on October 1, 2005 in an effort to reduce Indonesia's fuel subsidy burden, which had been projected to reach Rp 89.2 trillion in 2005, or 3.3% of GDP. The fuel price hikes led to a surge in inflation as consumer price inflation reached 10.5% for 2005 and 13.1% for 2006, before returning to an estimated 6.3% in 2007. The Indonesian Government implemented a quarterly cash compensation package for low-income families and an extra range of benefits including subsidized rice, improved health and social services, housing subsidies, micro credit, and family planning programs.

Banking Sector: Indonesia currently has 130 banks, of which 11 are majority foreign-owned and 28 are foreign joint venture banks. The top 10 banks control about 67% of assets in the sector. Four state-owned banks (Bank Mandiri, BNI, BRI, BTN) continue to dominate the sector with approximately 40% of assets. The Indonesian central bank, Bank Indonesia (BI), announced plans in January 2005 to strengthen the banking sector by encouraging consolidation and improving prudential banking and supervision. BI hopes to encourage small banks with less than Rp 100 billion (about U.S. $11 million) in capital to either raise more capital or merge with healthier "anchor banks" before 2009, announcing the criteria for anchor banks in July 2005. In October 2006, BI announced a single presence policy to further prompt consolidation. The policy stipulates that a single party can own a controlling interest in only one banking organization. Controlling interest is defined as 25% or more of total outstanding shares or having direct or indirect control of the institution. BI plans to adopt Basel II standards beginning in 2008 and to improve operations of its credit bureau to centralize data on borrowers. Another important banking sector reform was the decision to eliminate the blanket guarantee on bank third-party liabilities. BI and the Indonesian Government completed the process of replacing the blanket guarantee with a deposit insurance scheme run by the independent Indonesian Deposit Insurance Agency (also known by its Indonesian acronym, LPS) in March 2007. The removal of the blanket guarantee did not produce significant deposit outflows from or among Indonesian banks. Sharia banking has grown considerably in Indonesia in recent years, representing 1.4% of the banking sector, about $2.2 billion in assets at the end of 2005.

Exports and Trade: Indonesia's exports grew to a record $100.7 billion in 2006, an increase of 17.5% from 2005. The largest export commodities for 2006 were oil and gas (21.2%), minerals (15.7%), electrical appliances (14.7%), rubber products (6.9%), and textiles (3.4%). The top four destinations for exports for 2006 were Japan (15.4%), the U.S. (13.4%), Singapore (9.8%), and China (6.9%). Meanwhile, total imports were $61.1 billion in 2006, including: raw materials and intermediaries ($47.2 billion), capital goods ($9.1 billion), and consumer goods ($4.6 billion). The U.S. trade deficit with Indonesia decreased by 16.5% in 2006 to $7.2 billion ($4.0 billion in exports versus $11.2 billion in imports).

Oil and Minerals Sector: Indonesia, the only Asian member of the Organization of Petroleum Exporting Countries (OPEC), ranked 20th among world oil producers in 2006, with about 1.3% of world production. Crude and condensate output averaged 1.07 million barrels per day (b/d) in 2006. In 2006, the oil and gas sector, including refining, contributed $23 billion, or 24% of government revenues. U.S. companies have invested heavily in the petroleum sector. Due to limited refining capacity and growing domestic demand for petroleum fuels, Indonesia became a net oil importer in 2004 and continued to be a net oil importer through 2007. Indonesia ranks eighth in world gas production. In early 2007, Qatar passed Indonesia as the world's number one exporter of liquefied natural gas (LNG). Despite the declining trends, Indonesia's oil and gas trade balance remained positive at $1.8 billion in 2005 and $2.3 billion for 2006, according to unofficial statistics.

Although minerals production traditionally centered on bauxite, silver, and tin, Indonesia is expanding its copper, nickel, gold, and coal output for export markets. In mid-1993, the Energy Ministry reopened the coal sector to foreign investment. Total coal production reached 159 million metric tons in 2006, including exports of 119.8 million tons. Two U.S. firms operate two copper/gold mines in Indonesia, with a Canadian and U.K. firm holding significant investments in nickel and gold, respectively. In 2006 Indonesia ranked eighth among the world's top gold concentrate producers. Indonesian gold production in 2006 was 85.4 tons, down about 50% compared with 167 tons in 2005. Indonesia achieved its peak output in 2001 with 180 tons. Production mainly came from Freeport's Grasberg mine, the world's biggest gold-producing mine. Indonesia's share of global hard rock mining exploration spending has dropped from 3% to 1%. Since 1998, only three new gold mines have opened. This decline does not reflect Indonesia's mineral prospects, which are high; rather the decline reflects uncertainty over mining laws and regulations, low competitiveness in the tax and royalty system, and investor concerns over divestment policies and the sanctity of contracts.

Investment: Since the late 1980s, Indonesia has made significant changes to its regulatory framework to encourage investment and economic growth. This growth was financed largely from private investment, both foreign and domestic. U.S. investors provided a majority of the investment in the oil and gas sector and undertook some of Indonesia's largest mining projects. In addition, the presence of U.S. banks, manufacturers, and service providers expanded, especially after the industrial and financial sector reforms of the 1980s. While many petroleum and mining investors remained after the 1997 financial crisis, the number of U.S. investors in other sectors declined. Other major foreign investors include Japan, the United Kingdom, Singapore, the Netherlands, Hong Kong, Taiwan, and South Korea. Infrastructure investment declined steadily after the financial crisis and has not yet recovered. In November 2006, however, the Indonesian Government announced that it is opening up 110 infrastructure projects valued at $16.5 billion and is working on 120 regulations to encourage infrastructure investment.

President Yudhoyono and his economic ministers have stated repeatedly their intention to improve the climate for private sector investment in order to raise the level of GDP growth and reduce unemployment. In addition to general corruption and legal uncertainty, businesses have cited a number of specific factors that have reduced the competitiveness of Indonesia's investment climate, including: corrupt and inefficient customs services; non-transparent and arbitrary tax administration; inflexible labor markets that have reduced Indonesia's advantage in labor-intensive manufacturing; increasing infrastructure bottlenecks; and uncompetitive investment laws and regulations. A February 2006 policy package to improve the investment climate in Indonesia for both domestic and foreign investors--Presidential Instruction (INPRES) No. 3/2006--was designed to strengthen investment services, harmonize central and regional regulations (Perda), improve customs, excise, and taxation services, create jobs, and support small and medium enterprises; it has not been fully implemented. A new investment law was enacted in 2007, which contains provisions to restrict the share of foreign ownership in a range of industries. Long-planned tax and labor reforms have been delayed.

The passage of a new copyright law in July 2002 and accompanying optical disc regulations in 2004 greatly strengthened Indonesia's intellectual property rights (IPR) regime. Despite the government's significantly expanded efforts to improve enforcement, IPR piracy remains a major concern to U.S. intellectual property holders and foreign investors, particularly in the high-technology sector. In March 2006, President Yudhoyono issued a decree establishing a National Task Force for IPR Violation Prevention. The IPR Task Force was intended to formulate national policy to prevent IPR violations and determine additional resources needed for prevention, as well as to help educate the public through various activities and improve bilateral, regional, and multilateral cooperation to prevent IPR violations. It has yet to fully realize these aims. In 2007, Indonesia was removed from the U.S. Trade Representative's "Priority Watch" list and placed on the "Watch" list.

NATIONAL SECURITY

Indonesia's armed forces (Tentara Nasional Indonesia, or TNI) total approximately 350,000 members, including the army, navy, marines, and air force. The army is the largest branch with about 280,000 active-duty personnel. Defense spending in the national budget accounts for 1.8% of GDP, but is supplemented by revenue from many military businesses and foundations.

The Indonesian National Police were a branch of the armed forces for many years. The police were formally separated from the military in April 1999, a process that was completed in July 2000. With 250,000 personnel, the police represent a much smaller portion of the population than in most nations.

Indonesia has peaceful relations with its neighbors. Without a credible external threat in the region, the military historically viewed its prime mission as assuring internal security. Military leaders have said that they wish to transform the military to a professional, external security force, providing domestic support to civilian security forces as necessary.

Throughout Indonesian history, the military maintained a prominent role in the nation's political and social affairs. A significant number of cabinet members have had military backgrounds, while active duty and retired military personnel occupied a large number of seats in the parliament. Commanders of the various territorial commands played influential roles in the affairs of their respective regions. With the inauguration of the newly-elected national parliament in October 2004, the military no longer has a formal political role, although it retains important political influence.

FOREIGN RELATIONS

Since independence in 1945, Indonesia has espoused a "free and active" foreign policy, seeking to play a role in regional affairs commensurate with its size and location but avoiding involvement in conflicts among major powers. Indonesian foreign policy under the "New Order" government of President Soeharto moved away from the stridently anti-Western, anti-American posturing that characterized the latter part of the Soekarno era. Following Soeharto's ouster in 1998, Indonesia's Presidents have preserved the broad outlines of Soeharto's independent, moderate foreign policy. The traumatic separation of East Timor from Indonesia after an August 1999 East Timor referendum, and subsequent events in East and West Timor, strained Indonesia's relations with the international community.

A cornerstone of Indonesia's contemporary foreign policy is its participation in the Association of Southeast Asian Nations (ASEAN), of which it was a founding member in 1967 with Thailand, Malaysia, Singapore, and the Philippines. Since then, Brunei, Vietnam, Laos, Burma, and Cambodia also have joined ASEAN. While organized to promote common economic, social, and cultural goals, ASEAN acquired a security dimension after Vietnam's invasion of Cambodia in 1979. The security policy aspect of ASEAN expanded with the establishment of the ASEAN Regional Forum in 1994, in which 22 countries participate, including the United States. At ASEAN's Singapore Summit in November 2007, the organization's members signed a new charter, a small step toward the agreed goal of creating an ASEAN Community to propel greater integration in the areas of political and security affairs, economics, and socio-cultural affairs. Indonesia was a strong proponent of further integration. Indonesia also was one of the founders of the Non-Aligned Movement (NAM) and has taken moderate positions in its councils. As NAM Chairman in 1992-95, Indonesia led NAM positions away from the rhetoric of North-South confrontation, advocating instead the broadening of North-South cooperation in the area of development. Indonesia continues to be a prominent leader of the Non-Aligned Movement.

A secular state, Indonesia has the world's largest Muslim population and is a member of the Organization of the Islamic Conference (OIC). It carefully considers the interests of Islamic solidarity in its foreign policy decisions while providing a moderating influence in the OIC. President Wahid, for example, pursued better relations with Israel; Foreign Minister Wirajuda participated in the November 2007 Middle East peace conference in Annapolis.

After 1966, Indonesia welcomed and maintained close relations with the donor community, particularly the United States, Western Europe, Australia, and Japan, through the Intergovernmental Group on Indonesia (IGGI) and its successor, the Consultative Group on Indonesia (CGI), which have provided substantial foreign economic assistance. Donors in recent years have expanded assistance to Indonesia, due to its rapid democratic consolidation.

Indonesia has been a strong supporter of the Asia-Pacific Economic Cooperation (APEC) forum. Largely through the efforts of President Soeharto at the 1994 meeting in Bogor, Indonesia, APEC members agreed to implement free trade in the region by 2010 for industrialized economies and 2020 for developing economies.

Indonesia often supports Non-Aligned Movement (NAM) and Group of 77 (G-77) foreign policy views, taking positions regarding human rights contrary to the United States. In May 2005, the Yudhoyono administration, in a major effort to reinvigorate its leadership of the NAM and reset the movement's future course, hosted an Asia-Africa Summit to commemorate the founding of the NAM in Bandung, Indonesia in 1955.

President Yudhoyono has sought a higher international profile for Indonesia. In March 2006, Yudhoyono traveled to Burma to discuss democratic reform and visited several Middle Eastern countries in April and May 2006. Yudhoyono delivered a major speech in Saudi Arabia, encouraging the Muslim world to embrace globalization and technology for greater social and economic progress. In November 2006, Indonesia sent about 1,000 peacekeeping troops to southern Lebanon to be part of the UN Interim Force in Lebanon (UNIFIL) and replaced those troops with a second contingent a year later. In 2007 and 2008, Indonesia holds a non-permanent seat on the UN Security Council.

__________________
~Time owns each and everything~
~Useless youth if not useful for Pakistan~