Indonesia's
debt-to-GDP ratio has been declining steadily, its foreign exchange
reserves are at an all-time high of over $50 billion, and its stock
market has been one of the three best performers in the world in
2006 and 2007, as global investors sought out higher returns in
emerging markets. The government has introduced significant reforms
in the financial sector, including tax and customs reforms, the
introduction of Treasury bills, and improved capital market
supervision. Indonesia's new investment law, passed in March 2007,
seeks to address some of the concerns of foreign and domestic
investors. Indonesia still struggles with poverty and unemployment,
inadequate infrastructure, corruption, a complex regulatory
environment, and unequal resource distribution among regions.
Indonesia has been slow to privatize over 100 state-owned
enterprises, several of which have monopolies in key sectors. The
non-bank financial sector, including pension funds and insurance,
remains weak. Capital markets are underdeveloped. The high global
price of oil in 2007 increased the cost of domestic fuel and
electricity subsidies, and are contributing to concerns about higher
food prices. Located on the Pacific "Ring of Fire" Indonesia remains
vulnerable to volcanic and tectonic disasters. Significant progress
has been made in rebuilding Aceh after the devastating December 2004
tsunami, and the province now shows more economic activity than
before the disaster. Unfortunately, Indonesia suffered new disasters
in 2006 and early 2007 including: a major earthquake near
Yogyakarta, an industrial accident in Sidoarjo, East Java that
created a "mud volcano," a tsunami in South Java, and major flooding
in Jakarta, all of which caused additional damages in the billions
of dollars. Donors are assisting Indonesia with its disaster
mitigation and early warning efforts.

Iran
Iran's economy is marked by an inefficient state sector,
reliance on the oil sector (which provides 85% of government
revenues), and statist policies that create major distortions
throughout. Most economic activity is controlled by the state.
Private sector activity is typically small-scale workshops, farming,
and services. President Mahmud AHMADI-NEJAD failed to make any
notable progress in fulfilling the goals of the nation's latest
five-year plan. A combination of price controls and subsidies,
partic