sened
over the past decade with increasing privatization, simplification
of the tax structure, and a prudent approach to debt. Real growth
averaged 5.5% in the past four years, and inflation is slowing.
Growth in tourism and increased trade have been key elements in this
steady growth. Tunisia's association agreement with the European
Union entered into force on 1 March 1998, the first such accord
between the EU and Mediterranean countries to be activated. Under
the agreement Tunisia will gradually remove barriers to trade with
the EU over the next decade. Broader privatization, further
liberalization of the investment code to increase foreign
investment, and improvements in government efficiency are among the
challenges for the future.

Turkey:
Turkey's dynamic economy is a complex mix of modern industry
and commerce along with traditional agriculture that still accounts
for nearly 40% of employment. It has a strong and rapidly growing
private sector, yet the state still plays a major role in basic
industry, banking, transport, and communication. The most important
industry - and largest exporter - is textiles and clothing, which is
almost entirely in private hands. In recent years the economic
situation has been marked by erratic economic growth and serious
imbalances. Real GNP growth has exceeded 6% in most years, but this
strong expansion was interrupted by sharp declines in output in 1994
and 1999. Meanwhile the public sector fiscal deficit has regularly
exceeded 10% of GDP - due in large part to the huge burden of
interest payments, which now account for more than 40% of central
government spending - while inflation has remained in the high
double digit range. Perhaps because of these problems, foreign
direct investment in Turkey remains low - less than $1 billion
annually. Prospects for the future are improving, however, because
the ECEVIT government since June 1999 has been implementing an
IMF-backed reform program, including a tighter budget, social
security reform, banking reorganization, and accelerated
privatization. As a result, the fiscal situation is greatly improved
and inflation has dropped below 40% - the lowest rate since 1987.
The country experienced a financial crisis in late 2000, including
sharp drops in the stock market and foreign exchange reserves, but
is recovering rapidly, thanks to additional IMF support and the
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