Argentina



PROFILE

OFFICIAL NAME:
Argentine Republic

Geography
Area: 2.8 million sq. km. (1.1 million sq. mi.); about the size of the U.S. east of the Mississippi River; second-largest country in South America.
Climate: Varied; predominantly temperate, with extremes ranging from subtropical in the north to arid/sub-Antarctic in far south.

People
Nationality: Noun and adjective--Argentine(s).
Population (July 2007 est.): 40.3 million.
Annual population growth rate (2001): 1.05%.
Ethnic groups: European 97%, mostly of Spanish and Italian descent; Mestizo, Amerindian, or other nonwhite groups 3%.
Religions: Roman Catholic 70%, Protestant 9%, Muslim 1.5%, Jewish 0.8%, other 2.5%.
Language: Spanish.
Education: Compulsory until age 18. Adult literacy (2001)--97%.
Health: Infant mortality rate--16.16/1,000. Life expectancy (2000 est.)--75.48 yrs.
Work force: Industry and commerce--35.8%; agriculture--9.5%; services--54.7%.

Government
Type: Republic.
Constitution: 1853; revised 1994.
Independence: 1816.
Branches: Executive--president, vice president, cabinet. Legislative--bicameral Congress (72-member Senate, 257-member Chamber of Deputies). Judicial--Supreme Court, federal and provincial trial courts.
Administrative subdivisions: 23 provinces and one autonomous district (Federal Capital).
Political parties: Justicialist (Peronist), Radical Civic Union (UCR), numerous smaller national and provincial parties.
Suffrage: Universal adult.

Economy (2007)
GDP: $255 billion (estimated).
Annual real growth rate: +8.5%.
Per capita GDP: $6,540 (estimated).
Natural resources: Fertile plains (pampas); minerals--lead, zinc, tin, copper, iron, manganese, oil, and uranium.
Agriculture (8% of GDP; including agribusiness, about 55% of exports by value): Products--grains, oilseeds and by-products, livestock products.
Industry (22.3% of GDP): Types--food processing, oil refining, machinery and equipment, textiles, chemicals and petrochemicals.
Trade: Exports ($55.4 billion)--oilseed by-products, vegetable oils, cars, fuels, grains. Major markets--MERCOSUR 22%; EU 18%; NAFTA 11%. Imports ($44.8 billion)--machinery, vehicles and transport products, chemicals. Major suppliers--MERCOSUR 36%; EU 17%, NAFTA 16%. Imported goods from the United States totaled approx. 13% of Argentine imported goods.

PEOPLE
Argentines are a fusion of diverse national and ethnic groups, with descendants of Italian and Spanish immigrants predominant. Waves of immigrants from many European countries arrived in the late 19th and early 20th centuries. Syrian, Lebanese, and other Middle Eastern immigrants number about 500,000 to 600,000, mainly in urban areas. Argentina's population is overwhelmingly Catholic, but it also has the largest Jewish population in Latin America, estimated at between 280,000 and 300,000. In recent years, there has been a substantial influx of immigrants from neighboring countries, particularly Paraguay, Bolivia, and Peru. The indigenous population, estimated at 700,000, is concentrated in the provinces of the north, northwest, and south. The Argentine population has one of Latin America's lowest growth rates. Eighty percent of the population resides in cities or towns of more than 2,000, and over one-third lives in the greater Buenos Aires area.

HISTORY
Europeans arrived in the region with the 1502 voyage of Amerigo Vespucci. Spanish navigator Juan Diaz de Solias visited what is now Argentina in 1516. Spain established a permanent colony on the site of Buenos Aires in 1580, although initial settlement was primarily overland from Peru. The Spanish further integrated Argentina into their empire by establishing the Vice Royalty of Rio de la Plata in 1776, and Buenos Aires became a flourishing port. Buenos Aires formally declared independence from Spain on July 9, 1816. Argentines revere Gen. Jose de San Martin--who campaigned in Argentina, Chile, and Peru--as the hero of their national independence. Following the defeat of the Spanish, centralist and federalist groups waged a lengthy conflict between themselves to determine the future of the nation. A modern constitution was promulgated in 1853, and a national unity government was established in 1861.

Two forces combined to create the modern Argentine nation in the late 19th century: the introduction of modern agricultural techniques and integration of Argentina into the world economy. Foreign investment and immigration from Europe aided this economic revolution. Investment, primarily from Britain, came in such fields as railroads and ports. As in the United States, the migrants who worked to develop Argentina's resources--especially the western pampas--came from throughout Europe.

From 1880 to 1930, Argentina became one of the world's ten wealthiest nations as a result of the rapid expansion of agriculture and foreign investment in infrastructure. Conservative forces dominated Argentine politics until 1916, when their traditional rivals, the Radicals, won control of the government. The Radicals, with their emphasis on fair elections and democratic institutions, opened their doors to Argentina's rapidly expanding middle class as well as to groups previously excluded from power. The Argentine military forced aged Radical President Hipolito Yrigoyen from power in 1930 and ushered in another decade of Conservative rule. Using fraud and force when necessary, the governments of the 1930s attempted to contain the currents of economic and political change that eventually led to the ascendance of Juan Domingo Peron (b. 1897). New social and political forces were seeking political power, including a modern military and labor movements that emerged from the growing urban working class.

The military ousted Argentina's constitutional government in 1943. Peron, then an army colonel, was one of the coup's leaders, and he soon became the government's dominant figure as Minister of Labor. Elections carried him to the presidency in 1946. He created the Partido Unico de la Revolucion, which became more commonly known as the Peronist or Justicialista party (PJ). He aggressively pursued policies aimed at empowering the working class and greatly expanded the number of unionized workers. In 1947, Peron announced the first five-year plan based on the growth of industries he nationalized. He helped establish the powerful General Confederation of Labor (CGT). Peron's dynamic wife, Eva Duarte de Peron, known as Evita (1919-52), played a key role in developing support for her husband. Peron won reelection in 1952, but the military sent him into exile in 1955. In the 1950s and 1960s, military and civilian administrations traded power, trying, with limited success, to deal with diminished economic growth and continued social and labor demands. When military governments failed to revive the economy and suppress escalating terrorism in the late 1960s and early 1970s, the way was open for Peron's return.

On March 11, 1973, Argentina held general elections for the first time in ten years. Peron was prevented from running, but voters elected his stand-in, Dr. Hector Campora, as President. Peron's followers also commanded strong majorities in both houses of Congress. Campora resigned in July 1973, paving the way for new elections. Peron won a decisive victory and returned as President in October 1973 with his third wife, Maria Estela Isabel Martinez de Peron, as Vice President. During this period, extremists on the left and right carried out violent acts with a frequency that threatened public order. The government resorted to a number of emergency decrees, including the implementation of special executive authority to deal with violence. This allowed the government to imprison persons indefinitely without charge.

Peron died on July 1, 1974. His wife succeeded him in office, but a military coup removed her from office on March 24, 1976, and the armed forces formally exercised power through a junta composed of the three service commanders until December 10, 1983. The armed forces applied harsh measures against those they considered extremists and many suspected of being their sympathizers. While they were able to gradually restore basic order, the human costs of what became known as "El Proceso," or the "Dirty War," were high. Conservative counts list between 10,000 and 30,000 persons as "disappeared" during the 1976-83 period. Serious economic problems, mounting charges of corruption, public revulsion in the face of human rights abuses and, finally, the country's 1982 defeat by the United Kingdom in an unsuccessful attempt to seize the Falklands/Malvinas Islands all combined to discredit the Argentine military regime. The junta lifted bans on political parties and gradually restored basic political liberties.

Democracy returned to Argentina in 1983, with Raul Alfonsin of the country's oldest political party, the Radical Civic Union (UCR), winning the presidency in elections that took place on October 30, 1983. He began a six-year term of office on December 10, 1983. In 1985 and 1987, large turnouts for mid-term elections demonstrated continued public support for a strong and vigorous democratic system. The UCR-led government took steps to resolve some of the nation's most pressing problems, including accounting for those who disappeared during military rule, establishing civilian control of the armed forces, and consolidating democratic institutions. However, failure to resolve endemic economic problems and an inability to maintain public confidence undermined the effectiveness of the Alfonsin government, which left office six months early after Justicialista Party (PJ) candidate Carlos Saul Menem won the 1989 presidential elections.

President Menem imposed peso-dollar parity (convertibility) in 1992 to break the back of hyperinflation and adopted far-reaching market-based policies. Menem's accomplishments included dismantling a web of protectionist trade and business regulations and reversing a half-century of statism by implementing an ambitious privatization program. These reforms contributed to significant increases in investment and growth with stable prices through most of the 1990s. Unfortunately, widespread corruption in the administrations of President Menem and his successor President Fernando De la Rua, who won election in 1999 at the head of a UCR-led coalition of center and center-left parties known as the "Alianza", shook confidence and weakened the recovery. Also, while convertibility defeated inflation, its permanence undermined Argentina's export competitiveness and created chronic deficits in the current account of the balance of payments, which were financed by massive borrowing. The contagion effect of the Asian financial crisis of 1998 precipitated an outflow of capital that gradually mushroomed into a four-year depression that culminated in a financial panic in November 2001. In December 2001, amidst bloody riots, President De la Rua resigned.

A legislative assembly on December 23, 2001, elected Adolfo Rodriguez Saa (PJ) to serve as President and called for general elections to choose a new president within three months. Rodriguez Saa announced immediately Argentina's default on $88 billion in debt (the largest sovereign debt default in history), but expressed his commitment to maintain the currency board and the peso's 1-to-1 peg to the dollar. Rodriguez Saa, however, was unable to rally support from within his own party for his temporary administration and this, combined with renewed violence in the Federal Capital, led to his resignation on December 30. Yet another legislative assembly elected Eduardo Duhalde (PJ) President on January 1, 2002 to complete the term of former President De la Rua. Duhalde assumed office in the midst of a widespread public rejection of the "political class" in Argentina. Duhalde--differentiating himself from his three predecessors--quickly abandoned the peso's ten-year-old link with the dollar, a move that was followed by a sharp currency depreciation and rising inflation. In the face of increasing poverty and continued social unrest, Duhalde moved to bolster the government's social programs and to contain inflation. He was able to stabilize the social situation, but advanced presidential elections by six months in order to pave the way for a president elected with a popular mandate.

In the first round of the presidential election on April 27, 2003, former President Carlos Menem (PJ) won 24.3% of the vote, Santa Cruz Governor Nestor Kirchner (PJ) won 22%, followed by RECREAR candidate Ricardo Lopez Murphy with 16.4% and Affirmation for an Egalitarian Republic (ARI) candidate Elisa Carrio with 14.2%. Menem withdrew from the May 25 runoff election after polls showed overwhelming support for Kirchner in the second round of elections. President Kirchner assumed the presidency on May 25, 2003. He took office following the immense social and economic upheaval stemming from the financial crisis caused by a failed currency convertibility regime. Despite widespread concern, democracy and democratic institutions survived the crisis, and Nestor Kirchner took firm control as President. After taking office, Kirchner focused on consolidating his political strength and alleviating social problems. He pushed for changes in the Supreme Court and military and undertook popular measures, such as raising government salaries, pensions, and the minimum wage. On October 23, 2005, President Kirchner, bolstered by Argentina's rapid economic growth and recovery from its 2001/2002 crisis, won a major victory in the midterm legislative elections, giving him a strengthened mandate and control of a legislative majority in both the Senate and Chamber of Deputies. Many experts considered President Kirchner to be the most powerful Argentine president since democracy was restored in 1983.

Although Kirchner enjoyed approval ratings of over 60%, he announced in July 2007 that he would not seek reelection and declared his wife, then-Senator Cristina Fernández de Kirchner, to be a candidate to succeed him. With the Peronist party under a trustee's control, President Kirchner smoothed the way for Fernández de Kirchner to compete under the Victory Front's (Frente para la Victoria, or FpV) banner in general elections in October. She won 45% of the vote and defeated her closest competitor, Elisa Carrió of the Civic Coalition, by 22.25 points. Thus, Cristina Fernández de Kirchner became the first Argentine woman elected to the presidency. "Cristina," as Argentines often refer to her, was sworn into office on December 10, 2007.

GOVERNMENT AND POLITICAL CONDITIONS
Argentina's constitution of 1853, as revised in 1994, mandates a separation of powers into executive, legislative, and judicial branches at the national and provincial level. Each province also has its own constitution, roughly mirroring the structure of the national constitution. The president and vice president are directly elected to four-year terms. Both are limited to two consecutive terms; they are allowed to stand for a third term or more after an interval of at least one term. The president appoints cabinet ministers, and the constitution grants him considerable power, including authority to enact laws by presidential decree under conditions of "urgency and necessity" and the line-item veto.

Since 2001, senators have been directly elected, with each province and the Federal Capital represented by three senators. Senators serve six-year terms. One-third of the Senate stands for reelection every two years. Members of the Chamber of Deputies are directly elected to four-year terms. Voters elect half the members of the lower house every two years. Both houses are elected via a system of proportional representation. Female representation in Congress--at nearly one-third of total seats--ranks among the world's highest, with representation comparable to European Union (EU) countries such as Austria and Germany.

The constitution establishes the judiciary as an independent government entity. The president appoints members of the Supreme Court with the consent of the Senate. The president on the recommendation of a magistrates' council appoints other federal judges. The Supreme Court has the power to declare legislative acts unconstitutional.

Political Parties
The two largest traditional political parties are the Justicialist Party (PJ--also called Peronist), founded in 1945 by Juan Domingo Peron, and the Union Civica Radical (UCR), or Radical Civic Union, founded in 1891. Traditionally, the UCR has had more urban middle-class support and the PJ more labor support, but both parties have become more broadly based. Although both parties are currently undergoing a process of dramatic change and restructuring, they have maintained their nationwide structures. New emerging political forces, like the Civic Coalition (CC) and the National Proposal (PRO) parties, are concentrated in the urban centers and are working to build national party structures.

The PJ does not currently have a recognized national committee or leader, and is under the temporary control of a trustee, due to internal differences. A Peronist by origin, former President Kirchner is nominally the head of the Victory Front (Frente para la Victoria, or FpV), but has indicated that he intends to rebuild and lead the Peronist party. The FpV is a coalition that includes Peronists and non-Peronists aligned with President Cristina Fernández de Kirchner and Nestor Kirchner.

The UCR's serious fragmentation and poor electoral performance since 2003 has seriously eroded its role as the main opposition party, and many analysts warn that the party is on the verge of extinction. While the national UCR leadership opposes the Fernández de Kirchner government, its governors, several mayors, and many other representatives have aligned themselves with the Kirchners. In October 2007, several Radical deputies ran under the FpV ballot, and the Vice Presidential candidate with Cristina Fernandez de Kirchner, Julio Cobos, was a "Radical-K," as pro-Kirchner Radicals are called. Although the "Radical-K" representatives formed a separate bloc in the Lower House, they are still supportive of the FpV's policies. In the last presidential elections, the UCR did not run its own candidate and aligned itself with a former Peronist Economic Minister, Roberto Lavagna, who came in third with less than 17% of the national vote. Although seriously weakened, the UCR continues to retain some strength in a few provinces and several municipalities. The UCR is the only opposition political party with a nationwide structure.

The Civic Coalition (CC) is a political alliance led by the traditionally left-leaning Affirmation for an Egalitarian Republic (Afirmación por una República Igualitaria, or ARI) party, in conjunction with the Socialist party and the Union for All (Unión Por Todos) party. The CC came in second in the October 2007 presidential elections, positioning itself as the second largest political force. The CC's leader, Elisa Carrió, was a fierce critic of then-President Nestor Kirchner and continues to oppose Fernandez de Kirchner's policies. The Civic Coalition's electoral base is concentrated in large, urban centers, and has governors in the province of Santa Fe and the southern province of Tierra del Fuego.

The center-right Republican Proposal (Propuesta Republicana, or PRO) party represents another emerging political force with a larger representation in the Lower House than in the past. PRO is mostly based in the city of Buenos Aires, where its leader, Mauricio Macri, won the mayoral elections in June 2007 in a run-off with 60% of the vote, defeating then-Education Minister Daniel Filmus, who ran on the FpV ticket supported by then-President Kirchner.

Historically, organized labor--largely tied to the Peronist Party--and the armed forces also have played significant roles in national life. However, the Argentine military's public standing suffered as a result of its perpetration of human rights abuses, economic mismanagement, and defeat by the United Kingdom during the period of military rule (1976-83). The Argentine military today is a downsized, volunteer force fully subordinate to civilian authority.

ECONOMY
Argentina's economy has sustained a robust recovery following the severe 2001/2002 economic crisis, with five consecutive years of over 8% real growth in gross domestic product (GDP). Argentine GDP reached an estimated U.S. $255 billion in 2007, approximately U.S. $6,540 per capita, with investment increasing an estimated 13.5% for the year and representing approximately 23% of GDP. Economic expansion is creating jobs, with unemployment down from over 21% in 2002 to 8.8% in the third quarter of 2007. Poverty levels have also dropped dramatically. According to government statistics, 23.4% of the population in the 28 largest urban areas remained below the poverty line in the first half of 2007, down from over 50% in the immediate aftermath of the economic crisis.

Argentina benefits from rich natural resources, a highly educated population, a globally competitive agricultural sector, and a diversified industrial base. Argentina's post-crisis move to a flexible exchange rate regime, along with sustained global and regional growth, a boost in domestic aggregate demand via monetary, fiscal, and income distribution policies, and favorable international commodity prices and interest rate trends were catalytic factors in supporting renewed growth. This economic resurgence has also enabled the government to accumulate substantial official reserves (over $46 billion as of January 2008) to help insulate the economy from external shocks. A higher tax burden, improved tax collection efforts, and the recovery's strong impact on tax revenues have supported the government's successful efforts to maintain primary fiscal surpluses since 2003.

Argentina is expected to continue to perform well in 2008 with GDP growth projected at 6.9%, according to the Argentine Central Bank's consensus survey. A range of economic experts have identified challenges to sustaining high levels of economic growth in the future, including capacity constraints; the need for substantial new investment in primary infrastructure; potential energy shortages in the face of high growth and energy prices maintained by the government below international market levels. Other challenges include the increasing scarcity of skilled labor, inflation (8.5% in 2007 according to official statistics, but estimated by independent analysts to be significantly higher), and the heterodox policies employed to contain inflation. These include pressure on the private sector to limit price increases via "price stabilization" agreements, delays in addressing the post-crisis renegotiation of public service contracts, export trade taxes, and export bans.

Argentina's exchange rate policy is based on a managed float that appears to be targeting a nominal exchange rate in the 3.15-3.20 Argentine pesos (ARP) per U.S. dollar range. Market analysts consider the peso's real exchange rate broadly undervalued. This, along with historically high global commodity prices, has helped lift export volumes and value to record levels, resulting in a $12 billion trade surplus in 2006, falling to $11.2 billion in 2007 due to a strong increase in imports. Foreign trade equaled approximately 39% of GDP in 2007 (up from only 11% in 1990) and plays an increasingly important role in Argentina's economic development. Exports totaled approximately 22% of GDP in 2007 (up from 14% in 2002), and key export markets included MERCOSUR (22% of exports), the EU (18%), and NAFTA countries (11%). Two-way trade in goods with the U.S. in 2006 totaled almost $9 billion (according to both U.S. and Argentine government statistics). Total two-way trade in services in 2006 exceeded $3.2 billion (according to the Bureau of Economic Analysis, U.S. Department of Commerce). The production of grains, cattle, and other agricultural goods continues to be the backbone of Argentina's export economy. Energy products, high technology goods, and services are emerging as significant export sectors.

Over 450 U.S. companies are currently operating in Argentina and employ over 150,000 Argentine workers. U.S. investment in Argentina is concentrated in the manufacturing, information, and financial sectors. Other major sources of investment include Spain, Chile, Italy, France, Canada, Japan, and Brazil. Continuing Argentine arrears to international creditors (including over $20 billion in default claims by international bondholders and over $6 billion owed to official creditors) and a large number of arbitration claims filed by foreign companies are legacies of the 2001/2002 economic crisis that remain to be resolved and adversely impact Argentina's investment climate.

Armenia



PROFILE

OFFICIAL NAME:
Republic of Armenia

Geography
Area: 29,800 sq. km. (11,500 sq. mi.); slightly larger than Maryland.
Cities: Capital--Yerevan.
Terrain: High plateau with mountains, little forest land.
Climate: Highland continental, hot summers, cold winters.

People
Nationality: Noun--Armenian(s). Adjective--Armenian.
Population (official est.): 3,213,011 de jure (3,002,594 de facto). These figures represent the final results of the October 2001 census, as announced in January 2003.
Ethnic groups: Armenian 98%; Yezidi 1.2%; Russian, Greek, and other 0.8%.
Religion: Armenian Apostolic Church (more than 90% nominally affiliated).
Languages: Armenian (96%), Russian, other.
Education: Literacy--99%.
Health: Infant mortality rate--20/1,000. Life expectancy--66.6 years.
Work force (1.24 million; 10.5% unemployed): Industry and construction--24.5%; agriculture and forestry--24.6%; trade--17.3%; education--13.4%; other--22.2%.

Government
Type: Republic.
Constitution: Approved in November 2005 referendum.
Independence: 1918 (First Armenian Republic); 1991 (from Soviet Union).
Branches: Executive--president (head of state) with wider powers relative to other branches, prime minister (head of cabinet), Council of Ministers (cabinet). Legislative--unicameral National Assembly (parliament). Judicial--Constitutional Court.
Administrative subdivisions: 10 marzes (provinces) in addition to the city of Yerevan, which has the status of a province. A reform of Yerevan's status, to that of a community as required by the 2005 constitutional referendum, is currently underway and expected to occur in 2008. Once the parliament enacts legislation to change the capital's status, the mayor will no longer be appointed by the president but instead be chosen by elected city councilors.
Political parties represented in the National Assembly: Republican Party of Armenia, Prosperous Armenia, Armenian Revolutionary Federation (ARF) Dashnaktsutyun, Country of Law (Orinats Yerkir), and the Heritage Party. Other parties include: People's Party of Armenia, National Accord Party, Republic Party, New Times Party, United Labor Party, Dashink Party, National Democratic Union, and the Armenian National Movement. In addition, there are dozens of other registered parties, many of which become active only during national campaigns, if at all.
Suffrage: Universal at 18.

Economy (2007)
GDP: $9.18 billion.
GDP growth rate: 13.8%.
Per capita GDP (2006): $1,989.
Inflation: 6.6%.
Natural resources: Copper, molybdenum, zinc, gold, silver, lead, marble, granite, mineral spring water.
Agriculture: Products--fruits and vegetables, wines, dairy, some livestock.
Industry: Types--mining, information technology (IT), processed food, chemicals, synthetic rubber, textiles.
Trade: Exports--$1,218.5 million: precious and semi-precious stones and metals, mining products, foodstuffs, brandy. Export partners (2006)--Germany 14.7%, Netherlands 12.6%, Russia 12.1%, Israel 10.6%, Switzerland 7.2%, U.S. 6.5%. Imports--$3,281.8 million: natural gas, petroleum, precious stones and metals, tobacco products, foodstuffs, textiles. Import partners (2006)--Russia 13.9%, Ukraine 7.5%, Turkmenistan 7.7%, Germany 6.6%, Belgium 5.5%, Iran 5.2%.

PEOPLE AND HISTORICAL HIGHLIGHTS
Ethnic groups in Armenia include Armenians (95%), Kurds, Russians, Greeks, and others. More than 90% of the population is nominally affiliated with the Armenian Apostolic Church, which is considered to be the national church of Armenia. Languages are Armenian (96%), Russian, and others.

Armenia first emerged around 800 BC as part of the Kingdom of Urartu or Van, which flourished in the Caucasus and eastern Asia Minor until 600 BC. After the destruction of the Seleucid Empire, the first Armenian state was founded in 190 BC. At its zenith, from 95 to 65 BC, Armenia extended its rule over the entire Caucasus and the area that is now eastern Turkey, Syria, and Lebanon. For a time, Armenia was the strongest state in the Roman East. It became part of the Roman Empire in 64 BC and adopted a Western political, philosophical, and religious orientation.

In 301 AD, Armenia became the first nation to adopt Christianity as a state religion, establishing a church that still exists independently of both the Roman Catholic and the Eastern Orthodox churches. During its later political eclipses, Armenia depended on the church to preserve and protect its unique identity. From around 1100 to 1350, the focus of Armenian nationalism moved south, as the Armenian Kingdom of Cilicia, which had close ties to European Crusader states, flourished in southeastern Asia Minor until it was conquered by Muslim states.

Between the 4th and 19th centuries, Armenia was conquered and ruled by, among others, Persians, Byzantines, Arabs, Mongols, and Turks. For a brief period from 1918 to 1920, it became an independent republic. In late 1920, local communists came to power following an invasion of Armenia by the Soviet Red Army, and in 1922, Armenia became part of the Trans-Caucasian Soviet Socialist Republic. In 1936, it became the Armenian Soviet Socialist Republic. Armenia declared its independence from the Soviet Union on September 21, 1991.

GOVERNMENT AND POLITICAL CONDITIONS
Armenians voted overwhelmingly for independence in a September 1991 referendum, followed by a presidential election in October 1991 that gave 83% of the vote to Levon Ter-Petrossian. Ter-Petrossian had been elected head of government in 1990, when the Armenian National Movement defeated the Communist Party. Ter-Petrossian was re-elected in 1996 in a disputed election. Following public demonstrations against Ter-Petrossian's policies on the predominantly ethnic Armenian enclave of Nagorno-Karabakh that is located within Azerbaijan, the President resigned under pressure in January 1998 and was replaced by Prime Minister Robert Kocharian, who was subsequently elected President in March 1998. Following the October 27, 1999 assassination in Parliament of Prime Minister Vazgen Sargsian, Parliament Speaker Karen Demirchian, and six other officials, a period of political instability ensued during which an opposition headed by elements of the former Armenian National Movement government attempted unsuccessfully to force Kocharian to resign. Riding out the unrest, Kocharian was later reelected in March 2003 in a contentious election that the Organization for Security and Cooperation in Europe (OSCE) and the U.S. Government deemed to have fallen short of international standards.

As a result of the May 2007 parliamentary elections, 103 seats out of the 131 in the National Assembly (90 are elected on a proportional basis and 41 on a district-by-district majoritarian basis) are members of pro-government parties. The Republican Party and Prosperous Armenia formed a coalition with which the ARF Dashnaksutyun Party signed a cooperation agreement. The Heritage and Country of Law parties remain opposition parties. While in the past opposition parties tended to vote together on key legislative issues despite their philosophical differences, there has been no formal agreement among the opposition parties to date to do so.

Armenia is set to elect a new president on February 19, 2008, who will assume office in April 2008. After serving two consecutive 5-year terms, President Kocharian is constitutionally barred from seeking office a third term, and is stepping down. His hand-picked successor, Prime Minister Serge Sargsyan of the Republican Party, is widely viewed as the frontrunner in the presidential race. Former president Levon Ter-Petrossian is also a candidate. During the presidential election campaign, some opposition parties and presidential candidates have accused the government of harassing their supporters and denying them equal access to TV media.

The Government of Armenia's stated aim is to build a Western-style parliamentary democracy as the basis of its form of government. However, international observers have questioned the inherent fairness of parliamentary and presidential elections during each of the previous nationwide elections (1995, 1999, and 2003) as well as during the 2005 constitutional referendum, citing polling deficiencies, lack of cooperation by the electoral commission, poor maintenance of electoral lists, and access to polling places. The 2007 parliamentary elections, however, demonstrated an improvement over previous elections, though shortcoming remained in the procedural conduct of the elections campaign and the performance of election commissions during the vote count and tabulation. The new constitution in 2005 increased the power of the legislative branch and allows for more independence of the judiciary; in practice, however, both branches remain subject to political pressure from the executive branch, which retains considerably greater power than its counterparts in most European countries.

The government's human rights record remained poor in 2007; while there were some improvements in a few areas, serious problems remained. Security forces beat pretrial detainees. Impunity and corruption remained a problem. There were reports of arbitrary arrest and detention, and incarceration of individuals for political reasons. Lengthy pretrial detention remained a problem. There were limits on press freedom, as well as incidents of violence, intimidation, and self-censorship in the press. The law places some restrictions on religious freedom. Societal violence against women continued to be a problem. Trafficking of persons was a problem, which the government took only limited measures to address.

ECONOMY
Armenia is the second most densely populated of the former Soviet republics. It is a landlocked country between the Black and the Caspian Seas, bordered on the north by Georgia, to the east by Azerbaijan, on the south by Iran, and to the west by Turkey. Up until independence, Armenia's economy was based largely on industry--chemicals, electronic products, machinery, processed food, synthetic rubber, and textiles--and highly dependent on outside resources. Agriculture accounted for only 20% of net material product and 10% of employment before the breakup of the Soviet Union in 1991. In recent years, the construction sector has taken off, fueled by an ambitious government-backed construction project in the capital, and remittances to relatives by ethnic Armenians living in Russia and the United States.

Like other New Independent States of the former Soviet Union, Armenia's economy still suffers from the legacy of a centrally planned economy and the breakdown of former Soviet trading networks. While investment from these states in support of Armenian industry has virtually disappeared, and few major enterprises are still able to function, Russian entities have nevertheless increased their exposure in the mining, energy, telecommunications, and transportation sectors. In addition, the effects of the 1988 earthquake, which killed more than 25,000 people and made 500,000 homeless, are still being felt, though international donors and diaspora Armenian groups continue to fund reconstruction efforts in the earthquake zone. Although a cease-fire has held since 1994, the 20-year-old conflict with Azerbaijan over Nagorno-Karabakh has not been resolved, in spite of intensive efforts by the OSCE Minsk group to reach a settlement. The consequent closure of both the Azerbaijani and Turkish borders resulting from the war has prevented Armenian from realizing its economic potential, because of Armenia's dependence on outside supplies of energy and most raw materials. Land routes through Azerbaijan and Turkey are closed, though air connections to Turkey exist; land routes through Georgia and Iran are inadequate or unreliable. In 1992-93, GDP fell nearly 60% from its 1989 level. The national currency, the dram, suffered hyperinflation for the first few years after its introduction in 1993. Since 2005, however, the dram has continued to appreciate versus the dollar, going from an annual average of 458 drams in 2005 to 342 in 2007. The currency's appreciation stems largely from growing remittances by diaspora Armenians in Russia and the United States, a weakening dollar, and gradual increase in the productivity of Armenian industry.

In spite of the Nagorno-Karabakh conflict, where a cease-fire has been in effect since 1994, the Government of Armenia has been able to carry out wide-ranging economic reforms that have paid off in dramatically lower inflation and steady growth. Armenia has registered strong economic growth since 1995, with double-digit growth rates in the past 6 years.

The structure of Armenia's economy has changed substantially since 1991, with sectors such as construction and services replacing agriculture and industry as the main contributors to the economic growth. The diamond processing industry, which was one of the leading export sectors in 2000-2004 and also a major recipient of foreign investment, faced a dramatic decrease in output since 2005 due to raw material supply problems with Russia and overall decline in international diamond markets. Other industrial sectors driving industrial growth include energy, metallurgy, and food processing.

Armenia maintains a floating exchange rate regime with no explicit exchange rate target. The nominal exchange rate of the Armenian dram with major currencies was fairly stable between 1998 and 2003; however, it has strengthened sharply starting in 2004, recording around 46% nominal appreciation against the U.S. dollar compared to January 2004. The main causes of the appreciation of the dram are the global weakening of the U.S. dollar, a large inflow of foreign currency to Armenia from remittances, as well as increases in domestic productivity and incomes. The sharp appreciation of the dram has already affected negatively the external competitiveness of the Armenian products.

Armenia is highly dependent on import of energy fuel, mainly from Russia. The Armenia Nuclear Power Plant (ANPP) provides around 40% of electricity generation for the country, and hydro and thermal plants provide roughly 30% each.

Steady economic progress has earned Armenia increasing support from international institutions. The International Monetary Fund (IMF), World Bank, European Bank for Reconstruction and Development (EBRD), as well as other international financial institutions (IFIs) and foreign countries are extending considerable grants and loans. These loans are targeted at reducing the budget deficit, stabilizing the local currency; developing private businesses; energy; the agriculture, food processing, transportation, and health and education sectors. In December 2005, the U.S. Millennium Challenge Corporation approved a 5-year $235 million Compact with the Government of Armenia, which focuses on rehabilitation of irrigation networks and upgrading of rural transport infrastructure.

Continued progress will depend on the ability of the government to strengthen its macroeconomic management, including increasing revenue collection, improving the investment climate, and making strides against corruption. A liberal foreign investment law was approved in June 1994, and a Law on Privatization was adopted in 1997, as well as a program on state property privatization. The government joined the World Trade Organization on February 5, 2003.

Australia



PROFILE

OFFICIAL NAME:
Commonwealth of Australia

Geography
Area: 7.7 million sq. km. (3 million sq. mi.); about the size of the 48 contiguous United States.
Cities (2006): Capital--Canberra (pop. 323,000). Other cities--Sydney (4.3 million), Melbourne (3.6 million), Brisbane (1.8 million), Perth (1.5 million), Adelaide (1.1 million), Darwin (114,000), Hobart (48,808).
Terrain: Varied, but generally low-lying.
Climate: Relatively dry and subject to drought, ranging from temperate in the south to tropical in the far north.

People
Nationality: Noun and adjective--Australian(s).
Population (2007 est.): 21 million.
Annual population growth rate: 1.3%.
Ethnic groups: European 92%, Asian 6%, Aboriginal 2%.
Religions (2006): Catholic 26%, Anglican 19%, other Christian 19%, other non-Christian 5%, no religion 19% and not stated 12%.
Languages: English.
Education: Years compulsory--to age 15 in all states except Tasmania, where it is 16. Literacy--over 99%.
Health: Infant mortality rate--4.63/1,000. Life expectancy--males 78 yrs., females 83 yrs.
Work force (10.4 million): Agriculture--3.0%; mining--4.9%; manufacturing--10.3%; services--72.4%; public administration and defense--3.8%.

Government
Type: Democratic, federal-state system recognizing British monarch as sovereign.
Constitution: Passed by the British Parliament on July 9, 1900.
Independence (federation): January 1, 1901.
Branches: Head of state is the British monarch, who is also the Australian sovereign, represented by an appointed governor general. Legislative--bicameral Parliament (76-member Senate, 150-member House of Representatives). The House of Representatives selects as head of government the Prime Minister, who then appoints his cabinet. Judicial--independent judiciary.
Administrative subdivisions: Six states and two territories.
Political parties: Australian Labor, Liberal, the Greens, the Nationals, and Family First. The Australian Labor Party currently forms the government.
Suffrage: Universal and compulsory over 18.
Central government budget (revenue): FY 2007-2008 $219.4 billion; FY 2008-2009 $231.8 billion (2006 US$/$A = 1.32).
Defense: $19.9 billion or 1.81% of GDP for FY 2007-2008. (2006 US$/$A = 1.32).

Economy
GDP (year to March 2007): $714.1 billion.
Inflation rate (year to September 2007): 3.2% per annum.
Reserve Bank official interest rate: 6.50%.
Trade: Exports ($114 billion, 2005-2006)--coal, iron ore, non-monetary gold, crude petroleum, and bovine meat. Major markets--China, Japan, South Korea, U.S. ($7.3 billion), and New Zealand. Imports ($125 billion, 2005-2006)--passenger motor vehicles, crude petroleum, computers, medicaments, and telecommunications equipment. Major suppliers--China, U.S. ($17.1 billion), Japan, Singapore, and Germany.

PEOPLE
Australia's aboriginal inhabitants, a hunting-gathering people generally referred to today as Aboriginals and Torres Straits Islanders, arrived more than 40,000 years ago. Although their technical culture remained static--depending on wood, bone, and stone tools and weapons--their spiritual and social life was highly complex. Most spoke several languages, and confederacies sometimes linked widely scattered tribal groups. Aboriginal population density ranged from one person per square mile along the coasts to one person per 35 square miles in the arid interior. When Capt. James Cook claimed Australia for Great Britain in 1770, the native population may have numbered 300,000 in as many as 500 tribes speaking many different languages. The aboriginal population currently numbers approximately 517,200, representing about 2.5% of the population. Since the end of World War II, the government and the public have made efforts to be more responsive to aboriginal rights and needs.

Immigration has been a key to Australia's development since the beginning of European settlement in 1788. For generations, most settlers came from the British Isles, and the people of Australia are still predominantly of British or Irish origin, with a culture and outlook similar to those of Americans. However, since the end of World War II, the population has more than doubled; non-European immigration, mostly from the Middle East, Asia, and Latin America, has increased significantly since 1960 through an extensive, planned immigration program. From 1945 through 2000, nearly 5.9 million immigrants settled in Australia, and about 80% have remained; nearly three out of every 10 Australians are foreign-born. Britain, Ireland, Italy, Greece, New Zealand, and the former Yugoslavia were the largest sources of post-war immigration, but New Zealand has now overtaken Britain as the largest source country for permanent migrants to Australia, with India, China, and the Philippines making up the rest of the top five.

Australia's humanitarian and refugee admissions of about 13,000 per year are in addition to the normal immigration program. In recent years, refugees from Africa, the Middle East, and Southwest Asia have comprised the largest element in Australia's refugee program.

Although Australia has scarcely more than three people per square kilometer, it is one of the world's most urbanized countries. Less than 2.5% of the population lives in remote or very remote areas.

Cultural Achievements
Much of Australia's culture is derived from European roots, but distinctive Australian features have evolved from the environment, aboriginal culture, and the influence of Australia's neighbors. The vigor and originality of the arts in Australia--film, opera, music, painting, theater, dance, and crafts--are achieving international recognition.

Australian actors such as Nicole Kidman, Rachel Griffiths, Cate Blanchett, Geoffrey Rush, Paul Hogan, Hugh Jackman, and Heath Ledger have achieved enormous popularity in the United States. Australian movies and directors such as Peter Weir and Philip Noyes, the conductor Sir Charles Mackerras, and singers such as Olivia Newton-John, children's musicians The Wiggles, AC/DC, Dame Joan Sutherland, Dame Nellie Melba, and Kylie Minogue, also are well known.

Australia has had a widely respected school of painting since the early days of European settlement, and Australians with international reputations include Sidney Nolan, Russell Drysdale, Pro Hart, and Arthur Boyd. Writers who have achieved world recognition include Thomas Keneally, Colleen McCullough, Nevil Shute, Morris West, Jill Ker Conway, Peter Carey, Robert Hughes, Germaine Greer, and Nobel Prize winner Patrick White.

HISTORY
Australia was uninhabited until stone-culture peoples arrived, perhaps by boat across the waters separating the island from the Indonesia archipelago more than 40,000 years ago. Portuguese, Spanish, Dutch, and English explorers observed the island before 1770, when Captain Cook explored the east coast and claimed it for Great Britain (three American colonists were crew members aboard Cook's ship, the Endeavour).

On January 26, 1788 (now celebrated as Australia Day), the First Fleet under Capt. Arthur Phillip landed at Sydney, and formal proclamation of the establishment of the Colony of New South Wales followed on February 7. Many but by no means all of the first settlers were convicts, many condemned for offenses that today would often be thought trivial. The mid-19th century saw the beginning of government policies to emancipate convicts and assist the immigration of free persons. The discovery of gold in 1851 led to increased population, wealth, and trade.

The six colonies that now constitute the states of the Australian Commonwealth were established in the following order: New South Wales, 1788; Tasmania, 1825; Western Australia, 1830; South Australia, 1836; Victoria, 1851; and Queensland, 1859. Settlement had preceded these dates in most cases. Discussions between Australian and British representatives led to adoption by the British Government of an act to constitute the Commonwealth of Australia in 1900. Since Federation, the Commonwealth Government has established two self-governing territories: the Northern Territory, 1978; and the Australian Capital Territory (where the national capital, Canberra, is located), 1989.

The first federal Parliament was opened at Melbourne in May 1901 by the Duke of York (later King George V). In May 1927, the seat of government was transferred to Canberra, a planned city designed by an American, Walter Burley Griffin. The first session of Parliament in that city was opened by another Duke of York (later King George VI). Australia passed the Statute of Westminster Adoption Act on October 9, 1942, which officially established Australia's complete autonomy in both internal and external affairs. Its passage formalized a situation that had existed for years. The Australia Act (1986) eliminated almost all remaining vestiges of British legal authority.

GOVERNMENT
The Commonwealth government was created with a Constitution patterned partly on the U.S. Constitution, although it does not include a "bill of rights". The powers of the Commonwealth are specifically defined in the Constitution, and the residual powers remain with the states. Proposed changes to the Constitution must be approved by the Parliament and the people, via referendum, in order to take effect.

Australia is an independent nation within the Commonwealth. Queen Elizabeth II is the head of state and since 1973 has been officially styled "Queen of Australia." The Queen is represented throughout Australia by a governor general and in each state by a governor. The governor general retains reserve powers of the Queen, including the power to dismiss ministers, last exercised in 1975.

The federal Parliament is bicameral, consisting of a 76-member Senate and a 150-member House of Representatives. Twelve senators from each state are elected for 6-year terms, with half elected every 3 years. Each territory has two senators who are elected for 3-year terms. The members of the House of Representatives are allocated among the states and territories roughly in proportion to population. In ordinary legislation, the two chambers have parallel powers, but all proposals for appropriating revenue or imposing taxes must be introduced in the House of Representatives. Under the prevailing Westminster parliamentary system, the leader of the political party or coalition of parties that wins a majority of the seats in the House of Representatives is named prime minister. The prime minister and the cabinet wield actual power and are responsible to the Parliament, of which they must be elected members. General elections are held at least once every 3 years; the last general election was in November 2007.

Each state is headed by a premier, who is the leader of the party with a majority or a working minority in the lower house of the state legislature (Queensland is an exception, with a unicameral parliament). Australia's two self-governing territories have political systems similar to those of the states, with unicameral assemblies. Each territory is headed by a Chief Minister who is the leader of the party with a majority or a working minority in the territory's legislature. Australia's 673 local councils assist in the delivery of services such as road maintenance, sewage treatment, and the provision of recreational facilities.

At the apex of the court system is the High Court of Australia. It has general appellate jurisdiction over all other federal and state courts and possesses the power of constitutional review.

POLITICAL CONDITIONS
Three political parties dominate the center of the Australian political spectrum. The Liberal Party (LP), nominally representing urban business interests, and the Nationals, nominally representing rural interests, are the more conservative parties. The Australian Labor Party (ALP) nominally represents the trade unions and left-of-center groups. The ALP, founded by labor unions, traditionally had been moderately socialist in its policies and approaches to social issues. Today, it is a best described as a social democratic party. All political groups are tied by tradition to domestic welfare policies offering extensive social welfare programs. Over the last decade, Australia's social welfare system has increased assistance to families while imposing obligations on those receiving unemployment benefits and disability pensions. There is strong bipartisan sentiment on many international issues, including Australia's commitment to its alliance with the United States.

The ALP, under the leadership of Kevin Rudd, defeated the Liberal/National coalition, led by former Prime Minister John Howard, in an election on November 24, 2007. The ALP now holds 84 seats in the House of Representatives, against 64 for the Liberal/National coalition, and 2 independents. Currently, in the Senate, the coalition holds a majority with 39 seats in the 76-seat chamber, but with the election--which was also for half the upper house--a new Senate will be seated in July 2008 in which no party will have a majority. The composition of the Senate is likely to be 37 seats for the coalition, 32 for the ALP, five seats for the Green Party, one for the Family First Party, and one independent.

Rudd and the ALP won the election with a message promising new leadership after 11 years of the Howard government. They campaigned on a conservative platform that mimicked coalition polices in key policy areas such as tax cuts and economic management, while differentiating themselves on unpopular Howard government policies on workplace relations reform and climate change. The Rudd government has ratified the Kyoto Protocol and will work with the international community on combating climate change. It will also seek to undo some of the labor market reforms instituted by the Howard government after the 2004 election. The reforms, which eliminated some worker protections in the name of labor-market flexibility, were never accepted by many working families in Australia, and they deserted Howard in the election. The new Australian government's foreign policy is likely to show strong continuity with that of its predecessors, stressing relations with four key countries: the United States, Japan, China, and Indonesia. The Rudd government strongly supports U.S. engagement in the Asia-Pacific region and has pledged to maintain Australian troops in Afghanistan. It will withdraw Australia's combat troops from Iraq in 2008, however, leaving air, naval, and training assets in and around Iraq.

ECONOMY
Australia's advanced market economy is dominated by its services sector (72% of GDP), yet it is the agricultural and mining sectors (8% of GDP combined) that account for the bulk (52%) of Australia's exports. Australia's comparative advantage in the export of primary products is a reflection of the natural wealth of the Australian continent and its small domestic market; 21 million people occupy a continent the size of the contiguous United States. The relative size of the manufacturing sector has been declining for several decades, but has now steadied at around 10% of GDP. Australia currently enjoys a record-high terms-of-trade (TOT) that is 30% above its long-run average, reflecting the rise in global commodity prices created by booming demand in China and the drop in prices for imports for manufactured goods, mainly from China.

Since the 1980s, Australia has undertaken significant structural reform of its economy and has transformed itself from an inward-looking, highly protected and regulated marketplace to an open, internationally competitive, export-oriented economy. Key economic reforms included unilaterally reducing high tariffs and other protective barriers to free trade, floating the Australian dollar, deregulating the financial services sector, including liberalizing access for foreign banks, increasing flexibility in the labor market, reducing duplication and increasing efficiency between the federal and state branches of government, privatizing many government-owned monopolies, and reforming the taxation system, including introducing a broad-based Goods and Services Tax (GST) and large reductions in income tax rates.

Australia is now in its 17th year of uninterrupted economic expansion and enjoys a higher standard of living than any G7 country other than the United States. Australia's economic standing in the world is a result of a commitment to best-practice macroeconomic policy settings including the delegation of the conduct of monetary policy to the independent Reserve Bank of Australia, and a broad acceptance of prudent fiscal policy where the government aims for fiscal balance over the economic cycle. The Australian Government has zero net debt and, through the "Future Fund," is building a net asset position to deal with future liabilities resulting from an aging population. The Australian economy is expected to grow at around 3.5% in 2007.

Two issues, national infrastructure and climate change, currently dominate thinking about economic policy in Australia. The Australian economy is booming and is operating at close to capacity with unemployment near a 32-year low of 4.3%. Both the federal and state governments have recognized the need to invest heavily in water, transport, ports, telecommunications, and education infrastructure to expand Australia's supply capacity. Australia may be coming out of the severe drought conditions it has experienced over the last 5 years, and received above-average rainfall in many areas during the last half 2007. This should somewhat reduce the intense economic and political pressure on governments to build dams, water-recycling facilities, and desalination plants in drought-affected cities such as Brisbane, Canberra, and Perth.

The second significant issue is climate change. A report commissioned by then-Prime Minister John Howard recommended a domestic carbon emissions trading scheme. It also recommended that Australia take an active role in developing a future global carbon emissions trading system. Under new Prime Minister Kevin Rudd, Australia is committed to adopting a domestic carbon trading system by 2010.

The Australia-U.S. Free Trade Agreement (AUSFTA) entered into force on January 1, 2005. The AUSFTA marks the first FTA the U.S. has concluded with a developed economy since the U.S.-Canada FTA in 1988. Australia has also completed FTAs with Singapore and Thailand and is pursuing other FTAs, including with China and Japan. A burgeoning trade relationship marked by ongoing, multi-billion dollar resource export contracts and rising manufactured imports has driven FTA negotiations with China. Parallel efforts are underway with Malaysia and the Association of Southeast Asian Nations (ASEAN). The new Rudd government has restated its commitment to achieving high-quality FTAs with economies in the Asia-Pacific.

FOREIGN RELATIONS
Australia has been active participant in international affairs since World War I and since then has fought beside the United States and other Allies in every significant conflict to the present day. In 1944, it concluded an agreement with New Zealand dealing with the security, welfare, and advancement of the people of the independent territories of the Pacific (the ANZAC pact). After the war, Australia played a role in the Far Eastern Commission in Japan and supported Indonesian independence during that country's revolt against the Dutch (1945-49). Australia was one of the founders of both the United Nations and the South Pacific Commission (1947), and in 1950, it proposed the Colombo Plan to assist developing countries in Asia. In addition to contributing to UN forces in Korea--it was the first country to announce it would do so after the United States--Australia sent troops to assist in putting down the communist revolt in Malaya in 1948-60 and later to combat the Indonesian-supported invasion of Sarawak in 1963-65. The U.S., Australia and New Zealand signed the ANZUS Treaty in 1951, which remains Australia's only formal security treaty alliance. Australia also sent troops to assist South Vietnamese and U.S. forces in Vietnam and joined coalition forces in the Persian Gulf conflict in 1991, in Afghanistan in 2002, and in Iraq in 2003.

Australia has been active in the Australia-New Zealand-U.K. agreement and the Five-Power Defense Arrangements--successive arrangements with Britain and New Zealand to ensure the security of Singapore and Malaysia.

One of the drafters of the UN Charter, Australia has given firm support to the United Nations and its specialized agencies. It was a member of the Security Council in 1986-87, a member of the Economic and Social Council for 1986-89, and a member of the UN Human Rights Commission for 1994-96 and 2003-2005. Australia takes a prominent part in many other UN activities, including peacekeeping, nonproliferation and disarmament negotiations, and narcotics control. Australia also is active in meetings of the Commonwealth Regional Heads of Government and the Pacific Islands Forum, and has been a leader in the Cairns Group--countries pressing for agricultural trade reform in World Trade Organization (WTO) negotiations--and in founding the APEC forum. In 2002, Australia joined the International Criminal Court.

Australia has devoted particular attention to relations between developed and developing nations, with emphasis on the ten countries of the Association of Southeast Asian Nations (ASEAN) and the island states of the South Pacific. Australia is an active participant in the ASEAN Regional Forum (ARF), which promotes regional cooperation on security issues, and has been a member of the East Asia Summit since its inauguration in 2005. In September 1999, acting under a UN Security Council mandate, Australia led an international coalition to restore order in East Timor upon Indonesia's withdrawal from that territory. In 2006, Australia participated in an international peacekeeping operation in Timor-Leste (formerly East Timor). Australia led a regional mission to restore law and order in Solomon Islands in 2003 and again in 2006.

In 2006, the government committed to doubling Australia's official development assistance to $4 billion a year by 2010. Australia budgeted $2.48 billion ($A2.95 billion) as official development assistance in FY 2006-2007, and has budgeted $2.66 billion ($A3.16 billion) in 2007-2008. The Australian aid program is currently concentrated in Southeast Asia (Papua New Guinea--PNG--is the largest-single recipient) and the Pacific Islands. In 2004, Australia commenced a 5-year $0.8 billion ($A1.1 billion) Enhanced Cooperation Program (ECP), which involved government officials working alongside their PNG counterparts. The future of the program was called into question in 2005, however, when ECP immunity provisions for Australian officials were successfully challenged in the PNG high court. Selected aid flows are allocated to Africa, South Asia, and reconstruction in Afghanistan and Iraq. Contributions to multilateral organizations and other expenses account for about one-third of the foreign assistance budget.

Austria



PROFILE

OFFICIAL NAME:
Republic of Austria

Geography
Area: 83,857 sq. km. (32,377 sq. mi.); slightly smaller than Maine.
Cities: Capital--Vienna (2005 pop. 1.63 million). Other cities--Graz, Linz, Salzburg, Innsbruck, Klagenfurt.
Terrain: Alpine (64%), northern highlands that form part of the Bohemian Massif (10%), lowlands to the east (26%).
Climate: Continental temperate.

People
Nationality: Noun and adjective--Austrian(s).
Population (2006): 8,281,948.
Annual growth rate (2006): 0.4%.
Ethnic groups: Germans 91%, Turks, Serbs, Croats, Slovenes, and Bosniasns; other recognized minorities include Hungarians, Czechs, Slovaks, and Roma.
Religions: Roman Catholic 73.6%, Lutheran 4.7%, Muslim 4.2%, other 5.5, no confession 12.0%.
Language: German 92%.
Education: Years compulsory--9. Attendance--99%. Literacy--98%.
Health (2006): Infant mortality rate--3.6 deaths/1,000. Life expectancy--men 77.1 years, women 82.7 years.
Work force (2006, 4.12 million): Services--67%; agriculture and forestry--5%, industry--28%.

Government
Type: Federal Parliamentary democracy.
Constitution: 1920; revised 1929 (reinstated May 1, 1945).
Branches: Executive--federal president (chief of state), chancellor (head of government), cabinet. Legislative--bicameral Federal Assembly (Parliament). Judicial--Constitutional Court, Administrative Court, Supreme Court.
Political parties: Social Democratic Party, People's Party, Freedom Party, Greens, Alliance--Future-Austria.
Suffrage: Universal over 18.
Administrative subdivisions: Nine Bundeslander (federal states).
Defense (2007): 0.8% of GDP.

Economy
GDP (2006): $322.4 billion
Real GDP growth rate (2006): 3.3%.
Per capita income (2006): $38,925.
Natural resources: Iron ore, crude oil, natural gas, timber, tungsten, magnesite, lignite, cement.
Agriculture (1.7% of 2006 GDP): Products--livestock, forest products, grains, sugarbeets, potatoes.
Industry (30.7% of 2006 GDP): Types--iron and steel, chemicals, capital equipment, consumer goods.
Services: 67.6% of 2006 GDP.
Trade (2006): Exports--$129.7 billion: iron and steel products, timber, paper, textiles, electrotechnical machinery, chemical products, foodstuffs. Imports--$130.3 billion: machinery, vehicles, chemicals, iron and steel, metal goods, fuels, raw materials, foodstuffs. Principal trade partners--European Union, Switzerland, U.S., and China.

PEOPLE AND HISTORY
Austrians are a homogeneous people; 91% are native German speakers. However, there has been a significant amount of immigrants, particularly from former Yugoslavia and Turkey, over the last two decades. Only two numerically significant autochthonous minority groups exist--18,000 Slovenes in Carinthia (south central Austria) and about 19,400 Croats in Burgenland (on the Hungarian border). The Slovenes form a closely-knit community. Their rights as well as those of the Croats are protected by law and generally respected in practice. Some Austrians, particularly near Vienna, still have relatives in the Czech Republic, Slovakia, and Hungary. About 74% of all Austrians are Roman Catholic. The church abstains from political activity. Small Lutheran minorities are located mainly in Vienna, Carinthia, and Burgenland. Small Islamic (immigrant) communities have arisen in Vienna and Vorarlberg.

Austrian history dates back nearly 2,000 years, when Vindobona (Vienna) was an important Roman military garrison along the Danube. The city grew through the Middle Ages and in 788, the territory that is present-day Austria was conquered by Charlemagne, who encouraged the adoption of Christianity. In 976, Leopold von Babenberg became the first in his family to rule the territory; the Babenberg line of succession lasted until the death of Frederick II in 1246. There was a brief interregnum when the territory was ruled by Otakar II of Bohemia, but in 1276 Rudolf I defeated Otakar II at Durnkrut and became the first Habsburg to ascend to the throne.

The Habsburg Empire
Although never unchallenged, the Habsburgs ruled Austria for nearly 750 years. Through political marriages, the Habsburgs were able to accumulate vast land wealth encompassing most of Central Europe and stretching even as far as the Iberian Peninsula. During the 16th Century, the Ottoman Empire gained strength and in 1529, the Ottoman army surrounded Vienna. The Habsburgs held their ground and the Ottomans retreated, to return again in 1683. This time, Vienna was successfully defended by Polish King Jan Sobieski III. To this day Austrians are still proud of defending their territory from the invading Ottomans.

Habsburg rule in Europe was particularly unsettled in the 18th and 19th Centuries, when various wars were fought over their landholdings. Emperor Charles VI (1711-1740) and his daughter Maria Theresa (1740-1780) ruled the Empire during these tumultuous times. Maria Theresa was only able to take the throne as a result of the Pragmatic Sanction, which allowed a female to ascend when there was no male heir. She became a great reformer within the Empire, advocating many changes, most notably in the educational system. Maria Theresa’s son Josef II (1780-1790) continued many of her reforms and he himself has been described as an enlightened absolutist.

In 1848 Franz Josef I ascended to the throne and remained in power until his death in 1916. With a reign spanning from the Revolutions of 1848 to World War I, Franz Josef saw many milestones in Austrian history. The Compromise of 1867 allowed some minor sovereignty to the territory of Hungary and created what became known as the Dual Monarchy. Under the new system, Franz Josef remained the head of state (Emperor of Austria/King of Hungary), but the Hungarians were now permitted to have a parliament and legislate on their own.

The old Habsburg Empire slowly began to deteriorate in the beginning of the 20th Century. This deterioration culminated in the June 28, 1914, assassination of Archduke (and heir to the throne) Franz Ferdinand and his wife Sophia. This incident sparked the beginning of World War I and assured the end to the Habsburg domination of Central Europe. In 1919, the Treaty of St. Germain officially ended Habsburg rule and established the Republic of Austria.

Political Turmoil During the Inter War Years Leads to Anschluss
In the years leading up to the Nazi period, Austria experienced sharpening political strife among the traditional parties, which since 1918 had created their own paramilitary organizations. By the late 1920s and early 1930s, these organizations were engaged in strikes and violent conflicts. Unemployment rose to an estimated 25%. In line with similar trends among other Central European countries, a corporatist and authoritarian government came into power in Austria under Engelbert Dollfuss, who abolished existing political parties and Austria’s Constitutional Court. The Social Democrats, now excluded from the political process, took up arms, and a brief civil war ensued in February 1934. Austrian National Socialists (NS) launched an unsuccessful coup d’etat in July 1934 and murdered Dollfuss. The Nazi leaders were, however, arrested, tried, and received death sentences. Following this unsuccessful coup, the Austrian President asked an ultra-conservative Christian Social leader, Kurt Schuschnigg, to form a government. Like Dollfuss, Schuschnigg sought to appease his neighbors and, at the same time, obtain support from Britain and France against pressures from Hitler’s Germany, but without success due to the authoritarian trends in Austria and Austria’s poor image in the West. In February 1938, under renewed threats of military intervention from Germany, Schuschnigg was forced to accept Austrian National Socialists (Nazis) in his government. On March 12, Germany sent its military forces into Austria, an action that received enthusiastic support among most Austrians, and Schuschnigg was forced to resign. He and many other political leaders were arrested and imprisoned until 1945.

The Holocaust in Austria
The dissolution of the Austrian Empire and consequent loss of territory following World War I, as well as the political strife of the 1930s, set the stage on March 13, 1938, for Germany’s Anschluss (“Annexation”) of Austria and the beginning of the Nazi period, the darkest chapter in Austria’s history, during which most of the Jewish population of the country was murdered or forced into exile. Other minorities, including the Sinti and Roma, homosexuals, and many political opponents of the Nazis also received similar treatment. Prior to 1938, Austria’s Jewish population constituted 200,000 persons, or about 3 to 4 percent of the total population. Most Jews lived in Vienna, where they comprised about 9 percent of the population. Following Anschluss, the Germans rapidly applied their anti-Jewish laws in Austria. Jews were forced out of many professions and lost access to their assets. In November 1938, the Nazis launched the Kristallnacht pogrom in Austria as well as in Germany. Jewish businesses were vandalized and ransacked. Thousands of Jews were arrested and deported to concentration camps. Jewish emigration increased dramatically. Between 1938 and 1940, over half of Austria’s Jewish population fled the country. Some 35,000 Jews were deported to the Ghettos in Eastern Europe. Some 67,000 Austrian Jews (or one-third of the total 200,000 Jews residing in Austria) were sent to concentration camps. Those in such camps were murdered or forced into dangerous or severe hard labor that accelerated their death. Only 2,000 of those in the death camps survived until the end of the war.

Azerbaijan



PROFILE

OFFICIAL NAME:
Republic of Azerbaijan

Geography
Location: South Caucasus; bordered by Russia to the north, the Caspian Sea to the east, Iran to the south, and Georgia and Armenia to the west.
Area: 33,774 sq. mi. (includes Nakhchivan and Nagorno-Karabakh); slightly smaller than Maine.
Cities: Capital--Baku.
Terrain: Caucasus Mountains to the north, lowland in the central area through which the Kura River flows.
Climate: Dry, subtropical with hot summers and mild winters; forests, meadows, and alpine tundra in the mountains.

People
Nationality: Noun--Azerbaijani(s), Azeri. Adjective--Azerbaijani, Azeri.
Population (January 2008): 8,629,900. (Government of Azerbaijan)
Population growth rate (2007): 1.1%. (Government of Azerbaijan)
Net migration rate (2006 est.): -4.38 migrant(s)/1,000 population.
Ethnic groups (1999 census): Azeri 90.6%, Dagestani 2.2%, Russian 1.8%, Armenian 1.5%, other 3.9%. Note: the separatist Nagorno-Karabakh region is populated almost entirely by ethnic Armenians.
Religion: Muslim 93.4% (majority Shi'a), Russian Orthodox 2.5%, Armenian Orthodox Church 2.3%, and other 1.8%.
Languages: Azerbaijani 89%, Russian 3%, Armenian 2%, and other 6%.
Education: Literacy--97%.
Health: Infant mortality rate--83.41/1,000 live births (2000 est.). Life expectancy (2007 est.)--65.96 years.
Work force (3 million): Agriculture and forestry--42.3%; industry--6.9%; construction--4.2%; other--46.6%.

Government
Type: Republic.
Constitution: Approved in November 1995 referendum.
Independence: August 30, 1991 (from Soviet Union).
Branches: Executive--president (chief of state), prime minister (head of government), Council of Ministers (cabinet). Legislative--unicameral National Assembly (parliament). Judicial--Supreme Court.
Administrative subdivisions: 78 rayons, 11 cities, and 1 autonomous republic.
Political parties: New Azerbaijan Party, Musavat Party, Popular Front Party, Liberal Party, Democratic Party, National Independence Party, Democratic Reforms Party, Civil Solidarity Party, Hope Party, Justice Party, others. There are more than 40 registered political parties in Azerbaijan and many small, unregistered parties.
Suffrage: 18 years of age; universal.

Economy
GDP (2007): $28.94 billion.
GDP real growth rate (2007): 24.7%; (2008 est.): 16.1% (International Monetary Fund, Government of Azerbaijan).
Per capita GDP (2007 est.): $3,862.
Inflation rate (2007): 28.96% (Economic Research Center); 16.5% (Government of Azerbaijan).
Unemployment rate (est.): 15%-20%.
Natural resources: Petroleum, natural gas, iron ore, nonferrous metals, alumina.
Agriculture: Products--cotton, tobacco, grain, rice, grapes, fruit, vegetables, tea, cattle, pigs, sheep, goats.
Industry: Types--petroleum and natural gas, petroleum products, oilfield equipment, steel, iron ore, cement, chemicals, petrochemicals.
Trade: Exports--$1.557 billion (2008, first quarter), $6.1 billion (2007): oil and gas, chemicals, oilfield equipment, textiles, cotton. Imports--$1.214 billion (2008, first quarter), $5.1 billion (2007): machinery and parts, consumer durables, foodstuffs, textiles. Major trade partners--Italy, Russia, Turkey, Israel, U.S., Iran, other EU, and other countries formerly part of the Soviet Union. (Government of Azerbaijan)

HISTORICAL HIGHLIGHTS
Azerbaijan combines the heritage of two venerable civilizations--the Seljuk Turks of the 11th century and the ancient Persians. Its name is thought to be derived from the Persian phrase "Land of Fire," referring both to its petroleum deposits, known since ancient times, and to its status as a former center of the Zoroastrian faith. The Azerbaijani Republic borders the Iranian provinces of East and West Azerbaijan, although they have not been united into a single state in modern times.

Little is known about Azerbaijan's history until its conquest and conversion to Islam by the Arabs in 642 AD. Centuries of prosperity as a province of the Muslim caliphate followed. After the decline of the Arab Empire, Azerbaijan was ravaged during the Mongol invasions but regained prosperity in the 13th-15th centuries under the Mongol II-Khans, the native Shirvan Shahs, and under Persia's Safavid Dynasty.

Due to its location astride the trade routes connecting Europe to Central Asia and the Near East and on the shore of the Caspian Sea, Azerbaijan was fought over by Russia, Persia, and the Ottomans for several centuries. Finally, the Russians split Azerbaijan's territory with Persia in 1828 by the Treaty of Turkmenchay, establishing the present frontiers and extinguishing the last native dynasties of local Azerbaijani khans. The beginning of modern exploitation of the oil fields in the 1870s led to a period of unprecedented prosperity and growth in the years before World War I.

At the collapse of the Russian Empire in 1917, an independent republic was proclaimed in 1918 following an abortive attempt to establish a Transcaucasian Republic with Armenia and Georgia. Azerbaijan received de facto recognition by the Allies as an independent nation in January 1920, an independence terminated by the arrival of the Red Army in April. Incorporated into the Transcaucasian Federated Soviet Socialist Republic in 1922, Azerbaijan became a union republic of the U.S.S.R. (Soviet Union) in 1936. The late 1980s were characterized by increasing unrest, eventually leading to a violent confrontation when Soviet troops killed 190 nationalist demonstrators in Baku in January 1990. Azerbaijan declared its independence from the U.S.S.R. on August 30, 1991.

GOVERNMENT AND POLITICAL CONDITIONS
Although the Government of Azerbaijan consists of three branches, Azerbaijan has a strong presidential system in which the legislative and judicial branches have only limited independence. The executive branch is made up of a president, his apparat, a prime minister, and the cabinet of ministers. The legislative branch consists of the 125-member parliament (Milli Majlis). Members, all of whom are elected from territorial districts, serve 5-year terms. The judicial branch, headed by a Constitutional Court, is nominally independent.

Azerbaijan declared its independence from the former Soviet Union on August 30, 1991, with Ayaz Mutalibov, former First Secretary of the Azerbaijani Communist Party, becoming the country's first President. Following a March 1992 massacre of Azerbaijanis at Khojali in Nagorno-Karabakh (a predominantly ethnic Armenian region within Azerbaijan), Mutalibov resigned and the country experienced a period of political instability. The old guard returned Mutalibov to power in May 1992, but less than a week later his efforts to suspend scheduled presidential elections and ban all political activity prompted the opposition Popular Front Party (PFP) to organize a resistance movement and take power. Among its reforms, the PFP dissolved the predominantly Communist Supreme Soviet and transferred its functions to the 50-member upper house of the legislature, the National Council.

Elections in June 1992 resulted in the selection of PFP leader Abulfez Elchibey as the country's second President. The PFP-dominated government, however, proved incapable of either credibly prosecuting the Nagorno-Karabakh conflict or managing the economy, and many PFP officials came to be perceived as corrupt and incompetent. Growing discontent culminated in June 1993 in an armed insurrection in Ganja, Azerbaijan's second-largest city. As the rebels advanced virtually unopposed on Baku, President Elchibey fled to his native province, the Azerbaijani exclave of Nakhchivan. The National Council conferred presidential powers upon its new Speaker, Heydar Aliyev, former First Secretary of the Azerbaijani Communist Party (1969-81) and member of the U.S.S.R. Politburo and U.S.S.R. Deputy Prime Minister (until 1987). Elchibey was formally deposed by a national referendum in August 1993, and Aliyev was elected to a 5-year term as President in October with only token opposition. Aliyev won re-election to another 5-year term in 1998, in an election marred by serious irregularities. Presidential elections that took place on October 15, 2003 resulted in the election of Ilham Aliyev, the son of Heydar Aliyev. The election did not meet international standards. Ilham Aliyev assumed the office of president on October 31, 2003. Heydar Aliyev died December 12, 2003. The next presidential elections will take place on October 15, 2008.

Azerbaijan's first parliament was elected in 1995. The present 125-member unicameral parliament was elected in November 2005 in an election that showed improvements in democratic processes, but still did not meet international standards. A majority of parliamentarians are from the President's "New Azerbaijan Party," although the 2005 elections brought in a much more diverse parliament, with up to 10 opposition members and a sizeable number of independents. Many of these independents may have close ties to government, while as many as 20 others are business leaders whose political affiliations are not clear. According to the constitution, the speaker of parliament stands next in line to the president. The parliament, however, is historically a weak body with little real influence. The current Speaker is Oktay Asadov, and the next parliamentary elections will take place in 2010.

ECONOMY
Azerbaijan is an economy in transition in which the state continues to play a dominant role. It has important oil reserves and a significant agronomic potential based on a wide variety of climatic zones. During the late 1990s, in cooperation with the International Monetary Fund (IMF), Azerbaijan pursued a successful economic stabilization program, with annual growth exceeding 10% since 2000. In 2007 Azerbaijan's gross domestic product increased by 24.7%, with growth in 2008 estimated at 16.1%. Increases in oil production have largely driven this rapid growth as the oil sector accounted for 52.8% of GDP in 2007. Output expansion has been largely driven by oil-sector foreign direct investment (FDI) and related spillover effects in the construction and transportation sectors, although there have also been substantial gains in agriculture. Inflation officially reached nearly 17% in 2007, while unofficial consumer price index (CPI) calculations indicate inflation in excess of 28%. In the first quarter of 2008, inflation reached 9.61% and is a major risk that could accelerate in the context of further increases in fiscal spending, high oil prices, and an inflexible exchange rate. Importantly, the higher inflation also reflects customs restrictions that are in place due to supply constraints that limit import competition and monopolies that continue to control many sectors of the economy. The national currency, the manat, is stable and was allowed to appreciate against the dollar by 6.1% in 2005, 5.4% in 2006, and 3.4% in 2007. The IMF has warned that significantly more appreciation (roughly 10%) will be necessary to prevent inflation from increasing.

The 2008 budget increased government expenditures by about 80% over the 2007 budget, with significant increases in military spending, social assistance, wage increases, and capital spending. Part of the increase in expenditures was financed by revenues from the oil fund. The IMF has expressed concern about the impact on inflation and macroeconomic stability as well as governance if the capital budget is not well managed. The State Oil Fund (SOFAZ) was established as an extra-budgetary fund to ensure macroeconomic stability, transparency in the management of oil revenue, and the safeguarding of resources for future generations. All oil revenue profits from the development of new oil fields now flow into SOFAZ, and are held offshore. SOFAZ assets amounted to $3.34 billion by April 2008. Nevertheless, SOFAZ's sterilization effect is limited since it does not cover SOCAR, the State Oil Company. Both the IMF and the World Bank continue to emphasize the need to coordinate the budget planning process to integrate a medium-term spending framework with financing plans and the government's broader oil-revenue management strategy.

Progress on economic reform has generally lagged. The government has undertaken regulatory reforms in some areas, including substantial opening of trade policy, but inefficient public administration, in which commercial and regulatory interests are co-mingled, limits the impact of these reforms. The government has largely completed privatization of agricultural lands and small and medium-sized enterprises. Azerbaijan is still plagued by an arbitrary tax and customs administration, a weak court system, monopolistic regulation of the market, and corruption.

For more than a century the backbone of the Azerbaijani economy has been petroleum. Now that Western oil companies are able to tap deepwater oilfields untouched by the Soviets because of poor technology, Azerbaijan is considered one of the most important spots in the world for oil exploration and development. Proven oil reserves in the Caspian Basin, which Azerbaijan shares with Russia, Kazakhstan, Turkmenistan, and Iran are comparable in size to the North Sea, although exploration is still in the early stages.

Azerbaijan has concluded 21 production-sharing agreements with various oil companies. Azerbaijan celebrated first oil for the Baku-Tbilisi-Ceyhan (BTC) pipeline in May 2005, and the official completion ceremony was held in Turkey in July 2006. The BTC pipeline is now operational and has a maximum capacity of one million barrels per day. A parallel Baku-Tbilisi-Erzurum gas export pipeline opened in September 2006, but, due to technical issues in the offshore Shah Deniz gas field, has operated only intermittently. Eastern Caspian producers in Kazakhstan also have expressed interest in accessing this pipeline to transport a portion of their production

Bahamas, The




PROFILE

OFFICIAL NAME:
Commonwealth of The Bahamas

Geography
Area: 13,939 sq. km. (5,382 sq. mi.); slightly larger than Connecticut and Rhode Island combined.
Cities: Capital--Nassau, New Providence. Second-largest city--Freeport, Grand Bahama.
Terrain: Low and flat.
Climate: Semitropical.

People
Nationality: Noun and adjective--Bahamian(s).
Population (2005): 323,000.
Annual growth rate (2005): 1.2%.
Ethnic groups: African 85%, European 12%, Asian and Hispanic 3%.
Religions: Baptist (32%), Roman Catholic, Anglican, Evangelical Protestants, Methodist, Church of God, Rastafarian, Traditional African.
Language: English (official); Creole.
Education (2003): Years compulsory--through age 16. Attendance--92%. Literacy--95.5%.
Health (2005): Infant mortality rate--19.0/1,000. Life expectancy--70.5 years.
Work force (2004): 176,330; majority employed in the tourism, government, and financial services sectors.

Government
Type: Constitutional parliamentary democracy.
Independence: July 10, 1973.
Branches: Executive--British monarch (nominal head of state), governor general (representative of the British monarch), prime minister (head of government), and cabinet. Legislative--bicameral Parliament (40-member elected House of Assembly, 16-member appointed Senate). Judicial--Privy Council in U.K., Court of Appeal, Supreme Court, and magistrates' courts.
Political parties: Free National Movement (FNM), Progressive Liberal Party (PLP), Bahamas Democratic Movement (BDM).
Suffrage (2007): Universal over 18; 150,689 registered voters.

Economy
GDP (2005): $5.8 billion.
Growth rate (2005): 2.7%.
Per capita GDP (2005): $18,062.
Natural resources: Salt, aragonite, timber.
Tourism (2004): 40% of GDP.
Government spending (2004): 20% of GDP.
Financial services (2004): 15% of GDP.
Construction (2004; 10% of GDP): Products--largely tourism related.
Manufacturing (2004; 8% of GDP): Products--plastics, pharmaceuticals, rum.
Agriculture and fisheries (2004; 3% of GDP): Products--fruits, vegetables, lobster, fish.
Trade (2005): Exports ($450.8 million)--plastics, fish, salt, rum, chemicals. Markets by main destination--U.S. (66.6%), EU (18.3%), Canada (5.1%), South Africa (1%). Imports ($2.57 billion)--foodstuffs and animals, machinery and transport equipment, chemicals, mineral fuels. Suppliers by main origin--U.S. (84%), Curacao (7.2%), Puerto Rico (1.9%), EU (1.2%), Japan (1.2%).

PEOPLE
Eighty-five percent of the Bahamian population is of African heritage. About two-thirds of the population resides on New Providence Island (the location of Nassau). Many ancestors arrived in the Bahamas when the islands served as a staging area for the slave trade in the early 1800s. Others accompanied thousands of British loyalists who fled the American colonies during the Revolutionary War.

Haitians form the largest immigrant community in The Bahamas. 30,000 - 50,000 are estimated to be resident legally or illegally, concentrated on New Providence, Abaco and Eleuthera islands.

School attendance is compulsory between the ages of 5 and 16. The government fully operates 158 of the 210 primary and secondary schools in The Bahamas. The other 52 schools are privately operated. Enrollment for state primary and secondary schools is 50,332, with more than 16,000 students attending private schools. The College of The Bahamas, established in Nassau in 1974, provides programs leading to bachelors and associates degrees. Several non-Bahamian colleges also offer higher education programs in The Bahamas.

HISTORY
In 1492, Christopher Columbus made his first landfall in the Western Hemisphere in The Bahamas. Spanish slave traders later captured native Lucayan Indians to work in gold mines in Hispaniola, and within 25 years, all Lucayans perished. In 1647, a group of English and Bermudan religious refugees, the Eleutheran Adventurers, founded the first permanent European settlement in The Bahamas and gave Eleuthera Island its name. Similar groups of settlers formed governments in The Bahamas until the islands became a British Crown Colony in 1717.

The late 1600s to the early 1700s were the golden age for pirates and privateers. Many famous pirates--including Sir Francis Drake and Blackbeard--used the islands of The Bahamas as a base. The numerous islands and islets with their complex shoals and channels provided excellent hiding places for the plundering ships near well-traveled shipping lanes. The first Royal Governor, a former pirate named Woodes Rogers, brought law and order to The Bahamas in 1718 when he expelled the buccaneers.

During the American Revolution, American colonists loyal to the British flag settled in The Bahamas. These Loyalists and new settlers from Britain brought Colonial building skills and agricultural expertise. Until 1834, when Britain abolished slavery, they also brought slaves, importing the ancestors of many modern Bahamians from Western Africa.

Proximity to the U.S. continued to provide opportunity for illegal shipping activity. In the course of the American Civil War, The Bahamas prospered as a center of Confederate blockade-running. During Prohibition, the islands served as a base for American rumrunners. Today, the Bahamas is a major transshipment point for narcotics on the way to the U.S.

Bahamians achieved self-government through a series of constitutional and political steps, attaining internal self-government in 1964 and full independence within the Commonwealth on July 10, 1973. Since independence, The Bahamas has continued to develop into a major tourist and financial services center.

GOVERNMENT AND POLITICAL CONDITIONS
The Bahamas is an independent member of the Commonwealth of Nations. It is a parliamentary democracy with regular elections. As a Commonwealth country, its political and legal traditions closely follow those of the United Kingdom. The Bahamas recognizes the British monarch as its formal head of state, while an appointed Governor General serves as the Queen's representative in The Bahamas. A bicameral legislature enacts laws under the 1973 constitution.

The House of Assembly consists of 41 members, elected from individual constituencies for 5-year terms. As under the Westminster system, the government may dissolve the Parliament and call elections at any time. The House of Assembly performs all major legislative functions. The leader of the majority party serves as prime minister and head of government. The Cabinet consists of at least nine members, including the prime minister and ministers of executive departments. They answer politically to the House of Assembly.

The Senate consists of 16 members appointed by the Governor General, including nine on the advice of the prime minister, four on the advice of the Leader of the Opposition, and three on the advice of the prime minister after consultation with the Leader of the Opposition.

The Governor General appoints the Chief Justice of the Supreme Court on the advice of the prime minister and the Leader of the Opposition. The Governor General appoints the other justices with the advice of a judicial commission. The Privy Council of the United Kingdom serves as the highest appellate court.

Local government districts elect councils for town planning, business licenses, traffic issues and maintaining government buildings. In some large districts, lower level town councils also have minor responsibilities.

For decades, the white-dominated United Bahamian Party (UBP) ruled The Bahamas, then a dependency of the United Kingdom, while a group of influential white merchants, known as the "Bay Street Boys," dominated the local economy. In 1953, Bahamians dissatisfied with UBP rule formed the opposition Progressive Liberal Party (PLP). Under the leadership of Lynden Pindling, the PLP won control of the government in 1967 and led The Bahamas to full independence in 1973.

A coalition of PLP dissidents and former UBP members formed the Free National Movement (FNM) in 1971. Former PLP cabinet minister and member of Parliament Hubert Ingraham became leader of the FNM in 1990, upon the death of Sir Cecil Wallace-Whitfield. Under the leadership of Ingraham, the FNM won control of the government from the PLP in the August 1992 general elections . The PLP regained power in 2002 under the leadership of Perry Christie, but the FNM, again led by Ingraham, returned to government by capturing 23 of the 41 seats in the House of Assembly during the May 2007 election. The next election must be held no later than May 2012.

ECONOMY
The Bahamas is driven by tourism and financial services. Tourism provides an estimated 40% of the gross domestic product (GDP), with an additional 10% of GDP resulting from tourist-driven construction. Tourism employs about half the Bahamian work force. In 2005, more than 5 million tourists visited The Bahamas, 87% from the United States. There are about 110 U.S.-affiliated businesses operating in The Bahamas, and most are associated with tourism and banking. With few domestic resources and little industry, The Bahamas imports nearly all its food and manufactured goods from the United States. American goods and services tend to be favored by Bahamians due to cultural similarities and heavy exposure to American advertising. The Bahamian economy, due to its heavy dependence on U.S. tourism and trade, is deeply affected by U.S. economic performance.

Following economic struggles in 2001-02 fueled by a drop in tourism after September 11, 2001, The Bahamas has enjoyed a period of economic recovery and an upturn in large-scale private sector investments in tourism, which will boost construction and provide long-term employment. Future goals include continued development of tourism properties, including increased Bahamian ownership, redevelopment of the Grand Bahama economy following major hurricane losses in 2004, and the expansion of the robust Bahamian financial sector.

Economic challenges facing the Bahamas include meeting continued employment demands, jumpstarting a lagging privatization process, and monitoring increasing levels of government debt. Another major challenge for Bahamians will be to prepare for hemispheric free trade. Currently, Bahamians do not pay income or sales taxes. Most government revenue is derived from high tariffs and import fees. Reduction of trade barriers will probably require some form of taxation to replace revenues when the country becomes a part of the Free Trade Area of the Americas (FTAA). As evident by domestic opposition to the Caribbean Single Market Economy (CSME), the advantages of free trade may be hard for the government to sell.

Two major hotel projects promise to increase economic growth and create short- and long-term employment. The Atlantis Resort and Casino on Paradise Island is in the third phase of a billion-dollar expansion expected to create 3,000 new jobs. A second hotel resort development project costing nearly $2 billion is planned for the Cable Beach area of Nassau. The Baha Mar Company has negotiated purchase of three major hotels and a development site, including the last assets of the state-owned Hotel Corporation. As a condition of these large-scale investments, the government promises to expand Nassau International Airport and has turned over management to private operators. The Bahamian Government also has adopted a proactive approach to courting foreign investors and has conducted major investment missions to the Far East, Europe, Latin America, India and Canada. The government continues to pay particular attention to China to encourage tourism and investment. For their part, the Chinese are funding the construction of a new $30 million sports stadium in New Providence. While the new FNM government has express a desire to increase Bahamian ownership interests in developments, The Bahamas dependence on foreign investment is unlikely to change.

Financial services constitute the second-most important sector of the Bahamian economy, accounting for up to 15% of GDP, due to the country's status as a tax haven and offshore banking center. As of 2005, the government had licensed 262 banks and trust companies in The Bahamas. The Bahamas promulgated the International Business Companies (IBC) Act in January 1990 to enhance the country's status as a leading financial center. The act served to simplify and reduce the cost of incorporating offshore companies in The Bahamas. Within 9 years, more than 84,000 IBC-type companies had been established. In February 1991, the government also legalized the establishment of Asset Protection Trusts in The Bahamas. In 2000, in response to multilateral organizations' concerns, the government passed a legislative package of stronger measures to better regulate the financial sector and prevent money laundering in the country's banking sector, including creation of a Financial Intelligence Unit and enforcement of "know-your-customer" rules. Some of these measures have been challenged in Bahamian courts, and the number of offshore banks registered in the Bahamas has declined substantially since 2002. As many as half of the IBCs have also closed shop. As a result, the government is considering additional legislation to keep the industry competitive while complying with international standards, including possible reform of the regulatory structure.

Agriculture and fisheries together account for 3% of GDP. The Bahamas exports lobster and some fish but does not raise these items commercially. There is no large-scale agriculture, and most agricultural products are consumed domestically. Following an outbreak of citrus canker on Abaco in 2005, The Bahamas lost a main agricultural export, and the Ministry of Agriculture banned the export of plant materials from Abaco. The Bahamas imports more than $250 million in foodstuffs per year, representing about 80% of its food consumption.

The Bahamian Government maintains the value of the Bahamian dollar on a par with the U.S. dollar. The Bahamas is a beneficiary of the U.S.-Caribbean Basin Trade Partnership Act (CBTPA), Canada's CARIBCAN program, and the European Union's Lome IV Agreement. Although The Bahamas participates in the political aspects of the Caribbean Community (CARICOM), it has not entered into joint economic initiatives, like the CSME, with other Caribbean states.

The Bahamas has a few notable industrial firms: the Freeport pharmaceutical firm, PFC Bahamas (formerly Syntex); the BORCO oil facility, also in Freeport, which transships oil in the region; the Commonwealth Brewery in Nassau, which produces Heineken, Guinness, and Kalik beers; and Bacardi Corp., which distills rum in Nassau for shipment to U.S. and European markets. Other industries include sun-dried sea salt in Great Inagua, a wet dock facility in Freeport for repair of cruise ships, and mining of aragonite--a type of limestone with several industrial uses--from the sea floor at Ocean Cay.

The Hawksbill Creek Agreement established a duty-free zone in Freeport, The Bahamas' second-largest city, with a nearby industrial park to encourage foreign industrial investment. The Hong Kong-based firm Hutchison Whampoa operates the container port in Freeport. The Bahamian Parliament approved legislation in 1993 that extended most Freeport tax and duty exemptions through 2054.

Bahrain



PROFILE

OFFICIAL NAME:
Kingdom of Bahrain

Geography
Area: 727 sq. km. (274 sq. mi.); approximately four times the size of Washington, DC. Bahrain is an archipelago of 36 islands located off the eastern coast of Saudi Arabia. The four main islands are joined by causeways, and make up about 95% of the total land area.
Cities: Capital--Manama, pop. (2002 est.) 148,000. Other cities--Al Muharraq.
Terrain: Low desert plain (highest elevation point--122 m).
Climate: Hot and humid from May-September, with average highs ranging from 30o-40o C (86o-104o F). Maximum temperatures average 20o-30o C (68o-86o F) the remainder of the year.

People
Nationality: Noun and adjective--Bahraini(s).
Population (July 2007 est.): 708,535, including about 235,108 non-nationals.
Annual growth rate (2007 est.): 1.39%.
Ethnic groups: Bahraini 63%, Asian 19%, other Arab 10%, Iranian 8%.
Religions: 98% Muslim (approximately Shi'a 70%, Sunni 30%), with small Christian, Jewish and Hindu communities.
Languages: Arabic (official), English, Farsi, and Urdu are also widely spoken.
Education: Education is not compulsory, but is provided free to Bahrainis and non-nationals at all levels, including higher education. Estimated net primary school attendance (1991-2001)--84%. Adult literacy, age 15 and over (2003 est.)--89.1% for the overall population (male 91.9%, female 85%).
Health: Infant mortality rate (2007 est.)--16.18 deaths/1,000 live births. Life expectancy--72 yrs. males, 77 yrs. females.
Work force (2006 est.): 352,000 of which 44% are foreigners.

Government
Type: Constitutional hereditary monarchy.
Independence: August 15, 1971 (from the United Kingdom).
Constitution: Approved and promulgated May 26, 1973; suspended on August 26, 1975; the National Action Charter was approved by a national popular referendum on February 14-15, 2001, and a new constitution was issued on February 14, 2002.
Branches: Executive--King (chief of state); Prime Minister (head of government); Council of Ministers (cabinet) is appointed by the King and headed by the Prime Minister. Legislative--The bicameral parliament (al-Majlis al-Watani) consists of a 40-member elected Council of Representatives (elected in December 2006; next election scheduled for 2010) and a 40-member Shura (Consultative) Council appointed by the King. Members of both chambers serve four-year terms. Judicial--High Civil Appeals Court. The judiciary is independent with right of judicial review.
Administrative subdivisions: 12 municipalities (manatiq): Al Hidd, Al Manamah, Al Mintaqah al Gharbiyah, Al Mintaqah al Wusta, Al Mintaqah ash Shamaliyah, Al Muharraq, Ar Rifa' wa al Mintaqah al Janubiyah, Jidd Hafs, Madinat Hamad, Madinat 'Isa, Juzur Hawar, Sitrah.
Political societies represented in parliament: al Wifag, al Asala, al Minbar, al Mustaqbil.
Suffrage: Universal at age 18.

Economy
GDP (2006 est.): $12.07 billion.
Real GDP growth rate (2006 est.): 7.1%.
Per capita GDP (2006 est.): $20,600.
Natural resources: Oil, aluminum, textiles, natural gas, fish, pearls.
Agriculture (less than 1% of GDP): Products--fruit, vegetables, poultry, dairy products, shrimp, fish.
Industry: Types--oil and gas (13.1% of GDP), manufacturing (12.4% of GDP), aluminum.
Services: Finance (24.2% of GDP), transport and communications (8.9% of GDP), real estate (9.2% of GDP); government services (14.8% of GDP).
Trade (2006 est.): Exports--$12.62 billion: oil and other mineral products, aluminum, textiles. Major markets-- Saudi Arabia (3.2%), U.S. (3%), Japan (2.3%). Imports--$9.04 billion: crude oil, machinery and appliances, transport equipment, foodstuffs. Major suppliers--Saudi Arabia (37.3%), Japan (6.8%), U.S. (6.2%), U.K. (6.2%), Germany (5%), U.A.E. (4.2%).

PEOPLE
Bahrain is one of the most densely populated countries in the world; about 89% of the population lives in the two principal cities of Manama and Al Muharraq. Approximately 66% of the indigenous population is originally from the Arabian Peninsula and Iran. Bahrain currently has a sizeable foreign labor force (about 34% of the total population). The government's policies on naturalization remain controversial. In June 2002, the King issued a decree allowing citizens of the Gulf Cooperation Council (GCC) to take up dual Bahraini nationality. Opposition political groups charge that the government is granting citizenship to foreign nationals who have served in the Bahraini armed forces and security services to alter the demographic balance of the country, which is primarily Shi'a. According to passport officials, about 40,000 individuals have been naturalized over the past 50 years (about 10% of the total population).

The indigenous population is 98% Muslim. Although some two-thirds of the indigenous population is Shi'a Muslim, the ruling family and the majority of government, military, and corporate leaders are Sunni Muslims. The small indigenous Christian and Jewish communities make up the remaining 2% of the population. Roughly half of foreign resident community are non-Muslim, and include Christians, Hindus, Baha'is, Buddhists and Sikhs.

Bahrain has invested its oil revenues in developing an advanced educational system. The first public schools for girls and boys were opened in the 1920s. The government continues to pay for all schooling costs. Although school attendance is not compulsory, primary and secondary attendance rates are high, and literacy rates are currently among the highest in the region. Higher education is available for secondary school graduates at the Bahrain University, Arabian Gulf University and specialized institutes including the College of Health Sciences--operating under the direction of the Ministry of Health--which trains physicians, nurses, pharmacists, and paramedics. The government has identified providing educational services to the Gulf Cooperation Council as a potential economic growth area, and is actively working to establish Bahrain as a regional center for higher education.

HISTORY
The site of the ancient Bronze Age civilization of Dilmun, Bahrain was an important center linking trade routes between Mesopotamia and the Indus Valley as early as 5,000 years ago. The Dilmun civilization began to decline about 2,000 B.C. as trade from India was cut off. From 750 B.C. on, Assyrian kings repeatedly claimed sovereignty over the islands. Shortly after 600 B.C., Dilmun was formally incorporated into the new Babylonian empire. There are no historical references to Bahrain until Alexander the Great's arrival in the Gulf in the 4th century B.C. Although Bahrain was ruled variously by the Arab tribes of Bani Wa'el and Persian governors, Bahrain continued to be known by its Greek name Tylos until the 7th century, when many of its inhabitants converted to Islam. A regional pearling and trade center, Bahrain came under the control of the Ummayad Caliphs of Syria, the Abbasid Caliphs of Baghdad, Persian, Omani and Portuguese forces at various times from the 7th century until the Al Khalifa family, a branch of the Bani Utbah tribe that have ruled Bahrain since the 18th century, succeeded in capturing Bahrain from a Persian garrison controlling the islands in 1783.

In the 1830s the Al Khalifa signed the first of many treaties establishing Bahrain as a British Protectorate. Similar to the binding treaties of protection entered into by other Persian Gulf principalities, the agreements entered into by the Al Khalifa prohibited them from disposing of territory and entering into relationships with any foreign government without British consent in exchange for British protection against the threat of military attack from Ottoman Turkey. The main British naval base in the region was moved to Bahrain in 1935 shortly after the start of large-scale oil production.

In 1968, when the British Government announced its decision (reaffirmed in March 1971) to end the treaty relationships with the Persian Gulf sheikdoms, Bahrain initially joined the other eight states (Qatar and the seven Trucial Sheikhdoms now the United Arab Emirates) under British protection in an effort to form a union of Arab emirates. The nine sheikhdoms still had not agreed on terms of union by 1971, however, prompting Bahrain to declare itself fully independent on August 15, 1971.

Bahrain promulgated a constitution and elected its first parliament in 1973, but just two years later, in August 1975, the Amir disbanded the National Assembly after it attempted to legislate the end of Al-Khalifa rule and the expulsion of the U.S. Navy from Bahrain. In the 1990s, Bahrain suffered from repeated incidents of political violence stemming from the disaffection of the Shi'a majority. In response, the Amir instituted the first Bahraini cabinet change in 20 years in 1995 and also and increased the membership of the Consultative Council, which he had created in 1993 to provide advice and opinion on legislation proposed by the cabinet and, in certain cases, suggest new laws on its own, from 30 to 40 the following year. These steps led to an initial decline in violent incidents, but in early 1996 a number of hotels and restaurants were bombed, resulting in several fatalities. Over 1,000 people were arrested and held in detention without trial in connection with these disturbances. The government has since released these individuals (see Government and Political Conditions Section below for details).

GOVERNMENT AND POLITICAL CONDITIONS
Shaikh Hamad bin Isa Al Khalifa succeeded the throne in March 1999, after the death of his father Shaikh Isa bin Hamad Al Khalifa, Bahrain's ruler since 1961. He championed a program of democratic reform shortly after his succession. In November 2000, Shaikh Hamad established a committee to create a blueprint to transform Bahrain from a hereditary emirate to a constitutional monarchy within 2 years. The resulting "National Action Charter" was presented to the Bahraini public in a referendum in February 2001. In the first comprehensive public vote in Bahrain since the 1970s, 94.8% of voters overwhelmingly endorsed the charter. That same month, Shaikh Hamad pardoned all political prisoners and detainees, including those who had been imprisoned, exiled or detained on security charges. He also abolished the State Security Law and the State Security Court, which had permitted the government to detain individuals without trial for up to 3 years.

On February 14, 2002, one year after the referendum endorsing his National Action Charter, Shaikh Hamad pronounced Bahrain a constitutional monarchy and changed his status from Amir to King. He simultaneously announced that the first municipal elections since 1957 would be held in May 2002, and that a bicameral parliament, with a representative lower house, would be reconstituted with parliamentary elections in October 2002. As part of these constitutional reforms, the government also created an independent financial watchdog empowered to investigate cases of embezzlement and violations of state expenditure in July 2002.

Turnout for the May 2002 municipal elections was 51%, with female voters making up 52% percent of voters. Turnout for the 2002 parliamentary elections--the first in almost three decades--was 53% in the first round and 43% in the second round, despite the fact that four political societies, including the largest Shi'a society, organized a boycott to protest constitutional provisions enacted by the King that gave the appointed upper chamber of parliament voting rights equal to the elected lower chamber. The new parliament held its first joint sitting in December 2002. Bahrain held its second set of parliamentary and municipal elections in November and December 2006. All registered political societies participated in the elections and a Shia society, Al Wifaq, now represents the largest single bloc inside the Council of Representatives. Thirty-two of the Council's 40 members represent Sunni and Shia Islamist societies. One woman, Lateefah Al-Qauod, ran uncontested and became the first woman elected to parliament in Bahrain.

Bahrain has a complex system of courts, based on diverse legal sources, including Sunni and Shi'a Sharia (religious law), tribal law, and other civil codes and regulations created with the help of British advisers in the early 20th century. In 2001, Shaikh Hamad created the Supreme Judicial Council to regulate these courts and separate the administrative and judicial branches of government.

ECONOMY
The first Gulf state to discover oil, Bahrain's reserves are expected to run out in 10-15 years. Accordingly, Bahrain has worked to diversify its economy over the past decade and has stabilized its oil production at about 40,000 barrels per day (b/d). Revenues from oil and natural gas currently account for 11.1% of GDP yet currently provide about 76% of government income. The state-owned Bahrain Petroleum Company refinery built in 1935, the first in the Gulf, has a capacity of about 260,000 b/d. Saudi Arabia provides most of the crude for refinery operation via pipeline. Through an agreement with Saudi Arabia, Bahrain also receives half of the net output and revenues from Saudi Arabia's Abu Saafa offshore oilfield.

The Bahrain National Gas Company operates a gas liquefaction plant that utilizes gas piped directly from Bahrain's oilfields. Gas reserves should last about 50 years at present rates of consumption. However, rising domestic demand spurred by a recent development boom has highlighted the need to increase gas supplies. The Gulf Petrochemical Industries Company is a joint venture of the petrochemical industries of Kuwait, the Saudi Basic Industries Corporation, and the Government of Bahrain. The plant, completed in 1985, produces ammonia and methanol for export. Growth in the hydrocarbons sector will be contingent upon new discoveries--Bahrain awarded exploration rights to Malaysia's Petronas and the U.S.'s Chevron Texaco after the resolution of Bahrain's long-standing territorial dispute with Qatar, but no meaningful finds have been announced to date. Bahrain's other industries include the majority state-owned Aluminum Bahrain (Alba)--which operates the largest aluminum smelter in the world outside Eastern Europe with an annual production of about 843,000 metric tons (mt) in 2005 after the completion of an expansion program--and related factories, such as the Aluminum Extrusion Company and the Gulf Aluminum Rolling Mill. Other plants include the Arab Iron and Steel Company's iron ore pelletizing plant (4 million tons annually) and a shipbuilding and repair yard.

Bahrain's development as a major financial center has been the most widely heralded aspect of its diversification effort. Bahrain is a regional financial and business center; international financial institutions operate in Bahrain, both offshore and onshore, without impediments, and the financial sector is currently the largest contributor to GDP at 27.6%. Some 370 offshore banking units and representative offices are located in Bahrain, as well as 65 American firms. Bahrain has also made a concerted effort to become the leading Islamic finance center in the Arab world, standardizing regulations of the Islamic banking industry. It currently has 32 Islamic commercial, investment and leasing banks as well as Islamic insurance (takaful) companies--the largest concentration of Islamic financial institutions in the Middle East.

Bahrain is working to develop other service industries such as information technology, healthcare and education. The government has used its oil revenues to build an advanced infrastructure in transportation and telecommunications. The state monopoly--Batelco--was broken in April 2003 following the establishment of the Telecommunications Regulatory Authority (TRA). Since that time, the TRA has granted some 63 licenses in the interest of promoting healthy industry competition.

Bahrain plans to expand its airport, one of the busiest in the Gulf. More than 4.8 million passengers transited Bahrain International Airport in 2005. A modern, busy port offers direct and frequent cargo shipping connections to the U.S., Europe, and the Far East. To boost its competitiveness as a regional center, Bahrain is building a new port and has privatized port operations.

The government of Bahrain moved toward privatizing the production of electricity and water by licensing Al Ezzal to construct an independent power plant at a cost of $500 million. The company commenced operations in May 2006. In January 2006, the government announced the sale of the Al Hidd Power Plant for $738 million to Hidd Power Company, a consortium of British, Japanese, and Belgian companies.

Regional tourism is also a significant source of income. The government continues to favor large-scale tourism projects. It opened the only Formula One race track in the Middle East in 2004, and has awarded tenders for several tourist complexes. New hotel and spa projects are progressing within the context of broader real estate development, much of which is geared toward attracting increased tourism.

Government revenues continue to be largely dependent on the oil industry. Bahrain has received significant budgetary support and project grants from Saudi Arabia, Kuwait, and the United Arab Emirates. Buoyed by rising oil revenues, the 2007-2008 budget approved by the parliament in July 2006 provides for sizable increases in urban development, education, and social spending. Ministry of Defense spending will account for 13% of current spending in 2007 and 2008 based on the new budget. The Ministry of Education and Ministry of the Interior also receive substantial budget allocations. Significant capital outlays have been allocated to improving housing and infrastructure in line with government efforts to raise the standard of living of the Shi'a population and to attract foreign investment.

The government has also started to extend protections to workers. Private sector employees won permission to form unions in late 2002; King Hamad has given his tentative approval for the formation of unions in government departments. In June 2006, Bahrain passed laws legalizing the existence of multiple trade federations and codifying several protections for workers engaged in union activity. As part of the government's labor reform program, it has formed a Labor Market Regulatory Authority and established a fund to support the training of Bahraini workers

In 2006, bilateral trade exceeded $1 billion for the first time, representing almost 50% growth over 2005. The U.S.-Bahrain Free Trade Agreement took effect on August 1, 2006 and is generating increased U.S. commercial interest in Bahrain.

Bahrain



PROFILE

OFFICIAL NAME:
Kingdom of Bahrain

Geography
Area: 727 sq. km. (274 sq. mi.); approximately four times the size of Washington, DC. Bahrain is an archipelago of 36 islands located off the eastern coast of Saudi Arabia. The four main islands are joined by causeways, and make up about 95% of the total land area.
Cities: Capital--Manama, pop. (2002 est.) 148,000. Other cities--Al Muharraq.
Terrain: Low desert plain (highest elevation point--122 m).
Climate: Hot and humid from May-September, with average highs ranging from 30o-40o C (86o-104o F). Maximum temperatures average 20o-30o C (68o-86o F) the remainder of the year.

People
Nationality: Noun and adjective--Bahraini(s).
Population (July 2007 est.): 708,535, including about 235,108 non-nationals.
Annual growth rate (2007 est.): 1.39%.
Ethnic groups: Bahraini 63%, Asian 19%, other Arab 10%, Iranian 8%.
Religions: 98% Muslim (approximately Shi'a 70%, Sunni 30%), with small Christian, Jewish and Hindu communities.
Languages: Arabic (official), English, Farsi, and Urdu are also widely spoken.
Education: Education is not compulsory, but is provided free to Bahrainis and non-nationals at all levels, including higher education. Estimated net primary school attendance (1991-2001)--84%. Adult literacy, age 15 and over (2003 est.)--89.1% for the overall population (male 91.9%, female 85%).
Health: Infant mortality rate (2007 est.)--16.18 deaths/1,000 live births. Life expectancy--72 yrs. males, 77 yrs. females.
Work force (2006 est.): 352,000 of which 44% are foreigners.

Government
Type: Constitutional hereditary monarchy.
Independence: August 15, 1971 (from the United Kingdom).
Constitution: Approved and promulgated May 26, 1973; suspended on August 26, 1975; the National Action Charter was approved by a national popular referendum on February 14-15, 2001, and a new constitution was issued on February 14, 2002.
Branches: Executive--King (chief of state); Prime Minister (head of government); Council of Ministers (cabinet) is appointed by the King and headed by the Prime Minister. Legislative--The bicameral parliament (al-Majlis al-Watani) consists of a 40-member elected Council of Representatives (elected in December 2006; next election scheduled for 2010) and a 40-member Shura (Consultative) Council appointed by the King. Members of both chambers serve four-year terms. Judicial--High Civil Appeals Court. The judiciary is independent with right of judicial review.
Administrative subdivisions: 12 municipalities (manatiq): Al Hidd, Al Manamah, Al Mintaqah al Gharbiyah, Al Mintaqah al Wusta, Al Mintaqah ash Shamaliyah, Al Muharraq, Ar Rifa' wa al Mintaqah al Janubiyah, Jidd Hafs, Madinat Hamad, Madinat 'Isa, Juzur Hawar, Sitrah.
Political societies represented in parliament: al Wifag, al Asala, al Minbar, al Mustaqbil.
Suffrage: Universal at age 18.

Economy
GDP (2006 est.): $12.07 billion.
Real GDP growth rate (2006 est.): 7.1%.
Per capita GDP (2006 est.): $20,600.
Natural resources: Oil, aluminum, textiles, natural gas, fish, pearls.
Agriculture (less than 1% of GDP): Products--fruit, vegetables, poultry, dairy products, shrimp, fish.
Industry: Types--oil and gas (13.1% of GDP), manufacturing (12.4% of GDP), aluminum.
Services: Finance (24.2% of GDP), transport and communications (8.9% of GDP), real estate (9.2% of GDP); government services (14.8% of GDP).
Trade (2006 est.): Exports--$12.62 billion: oil and other mineral products, aluminum, textiles. Major markets-- Saudi Arabia (3.2%), U.S. (3%), Japan (2.3%). Imports--$9.04 billion: crude oil, machinery and appliances, transport equipment, foodstuffs. Major suppliers--Saudi Arabia (37.3%), Japan (6.8%), U.S. (6.2%), U.K. (6.2%), Germany (5%), U.A.E. (4.2%).

PEOPLE
Bahrain is one of the most densely populated countries in the world; about 89% of the population lives in the two principal cities of Manama and Al Muharraq. Approximately 66% of the indigenous population is originally from the Arabian Peninsula and Iran. Bahrain currently has a sizeable foreign labor force (about 34% of the total population). The government's policies on naturalization remain controversial. In June 2002, the King issued a decree allowing citizens of the Gulf Cooperation Council (GCC) to take up dual Bahraini nationality. Opposition political groups charge that the government is granting citizenship to foreign nationals who have served in the Bahraini armed forces and security services to alter the demographic balance of the country, which is primarily Shi'a. According to passport officials, about 40,000 individuals have been naturalized over the past 50 years (about 10% of the total population).

The indigenous population is 98% Muslim. Although some two-thirds of the indigenous population is Shi'a Muslim, the ruling family and the majority of government, military, and corporate leaders are Sunni Muslims. The small indigenous Christian and Jewish communities make up the remaining 2% of the population. Roughly half of foreign resident community are non-Muslim, and include Christians, Hindus, Baha'is, Buddhists and Sikhs.

Bahrain has invested its oil revenues in developing an advanced educational system. The first public schools for girls and boys were opened in the 1920s. The government continues to pay for all schooling costs. Although school attendance is not compulsory, primary and secondary attendance rates are high, and literacy rates are currently among the highest in the region. Higher education is available for secondary school graduates at the Bahrain University, Arabian Gulf University and specialized institutes including the College of Health Sciences--operating under the direction of the Ministry of Health--which trains physicians, nurses, pharmacists, and paramedics. The government has identified providing educational services to the Gulf Cooperation Council as a potential economic growth area, and is actively working to establish Bahrain as a regional center for higher education.

HISTORY
The site of the ancient Bronze Age civilization of Dilmun, Bahrain was an important center linking trade routes between Mesopotamia and the Indus Valley as early as 5,000 years ago. The Dilmun civilization began to decline about 2,000 B.C. as trade from India was cut off. From 750 B.C. on, Assyrian kings repeatedly claimed sovereignty over the islands. Shortly after 600 B.C., Dilmun was formally incorporated into the new Babylonian empire. There are no historical references to Bahrain until Alexander the Great's arrival in the Gulf in the 4th century B.C. Although Bahrain was ruled variously by the Arab tribes of Bani Wa'el and Persian governors, Bahrain continued to be known by its Greek name Tylos until the 7th century, when many of its inhabitants converted to Islam. A regional pearling and trade center, Bahrain came under the control of the Ummayad Caliphs of Syria, the Abbasid Caliphs of Baghdad, Persian, Omani and Portuguese forces at various times from the 7th century until the Al Khalifa family, a branch of the Bani Utbah tribe that have ruled Bahrain since the 18th century, succeeded in capturing Bahrain from a Persian garrison controlling the islands in 1783.

In the 1830s the Al Khalifa signed the first of many treaties establishing Bahrain as a British Protectorate. Similar to the binding treaties of protection entered into by other Persian Gulf principalities, the agreements entered into by the Al Khalifa prohibited them from disposing of territory and entering into relationships with any foreign government without British consent in exchange for British protection against the threat of military attack from Ottoman Turkey. The main British naval base in the region was moved to Bahrain in 1935 shortly after the start of large-scale oil production.

In 1968, when the British Government announced its decision (reaffirmed in March 1971) to end the treaty relationships with the Persian Gulf sheikdoms, Bahrain initially joined the other eight states (Qatar and the seven Trucial Sheikhdoms now the United Arab Emirates) under British protection in an effort to form a union of Arab emirates. The nine sheikhdoms still had not agreed on terms of union by 1971, however, prompting Bahrain to declare itself fully independent on August 15, 1971.

Bahrain promulgated a constitution and elected its first parliament in 1973, but just two years later, in August 1975, the Amir disbanded the National Assembly after it attempted to legislate the end of Al-Khalifa rule and the expulsion of the U.S. Navy from Bahrain. In the 1990s, Bahrain suffered from repeated incidents of political violence stemming from the disaffection of the Shi'a majority. In response, the Amir instituted the first Bahraini cabinet change in 20 years in 1995 and also and increased the membership of the Consultative Council, which he had created in 1993 to provide advice and opinion on legislation proposed by the cabinet and, in certain cases, suggest new laws on its own, from 30 to 40 the following year. These steps led to an initial decline in violent incidents, but in early 1996 a number of hotels and restaurants were bombed, resulting in several fatalities. Over 1,000 people were arrested and held in detention without trial in connection with these disturbances. The government has since released these individuals (see Government and Political Conditions Section below for details).

GOVERNMENT AND POLITICAL CONDITIONS
Shaikh Hamad bin Isa Al Khalifa succeeded the throne in March 1999, after the death of his father Shaikh Isa bin Hamad Al Khalifa, Bahrain's ruler since 1961. He championed a program of democratic reform shortly after his succession. In November 2000, Shaikh Hamad established a committee to create a blueprint to transform Bahrain from a hereditary emirate to a constitutional monarchy within 2 years. The resulting "National Action Charter" was presented to the Bahraini public in a referendum in February 2001. In the first comprehensive public vote in Bahrain since the 1970s, 94.8% of voters overwhelmingly endorsed the charter. That same month, Shaikh Hamad pardoned all political prisoners and detainees, including those who had been imprisoned, exiled or detained on security charges. He also abolished the State Security Law and the State Security Court, which had permitted the government to detain individuals without trial for up to 3 years.

On February 14, 2002, one year after the referendum endorsing his National Action Charter, Shaikh Hamad pronounced Bahrain a constitutional monarchy and changed his status from Amir to King. He simultaneously announced that the first municipal elections since 1957 would be held in May 2002, and that a bicameral parliament, with a representative lower house, would be reconstituted with parliamentary elections in October 2002. As part of these constitutional reforms, the government also created an independent financial watchdog empowered to investigate cases of embezzlement and violations of state expenditure in July 2002.

Turnout for the May 2002 municipal elections was 51%, with female voters making up 52% percent of voters. Turnout for the 2002 parliamentary elections--the first in almost three decades--was 53% in the first round and 43% in the second round, despite the fact that four political societies, including the largest Shi'a society, organized a boycott to protest constitutional provisions enacted by the King that gave the appointed upper chamber of parliament voting rights equal to the elected lower chamber. The new parliament held its first joint sitting in December 2002. Bahrain held its second set of parliamentary and municipal elections in November and December 2006. All registered political societies participated in the elections and a Shia society, Al Wifaq, now represents the largest single bloc inside the Council of Representatives. Thirty-two of the Council's 40 members represent Sunni and Shia Islamist societies. One woman, Lateefah Al-Qauod, ran uncontested and became the first woman elected to parliament in Bahrain.

Bahrain has a complex system of courts, based on diverse legal sources, including Sunni and Shi'a Sharia (religious law), tribal law, and other civil codes and regulations created with the help of British advisers in the early 20th century. In 2001, Shaikh Hamad created the Supreme Judicial Council to regulate these courts and separate the administrative and judicial branches of government.