confidence in Russia's economic prospects, with foreign direct
investment rising from $14.6 billion in 2005 to approximately $45
billion in 2007. In 2007, Russia's GDP grew 8.1%, led by
non-tradable services and goods for the domestic market, as opposed
to oil or mineral extraction and exports. Rising inflation returned
in the second half of 2007, driven largely by unsterilized capital
inflows and by rising food costs, and approached 12% by year-end. In
2006, Russia signed a bilateral market access agreement with the US
as a prelude to possible WTO entry, and its companies are involved
in global merger and acquisition activity in the oil and gas,
metals, and telecom sectors. Despite Russia's recent success,
serious problems persist. Oil, natural gas, metals, and timber
account for more than 80% of exports and 30% of government revenues,
leaving the country vulnerable to swings in world commodity prices.
Russia's manufacturing base is dilapidated and must be replaced or
modernized if the country is to achieve broad-based economic growth.
The banking system, while increasing consumer lending and growing at
a high rate, is still small relative to the banking sectors of
Russia's emerging market peers. Political uncertainties associated
with this year's power transition, corruption, and lack of trust in
institutions continue to dampen domestic and foreign investor
sentiment. PUTIN has granted more influence to forces within his
government that desire to reassert state control over the economy.
Russia has made little progress in building the rule of law, the
bedrock of a modern market economy. The government has promised
additional legislative amendments to make its intellectual property
protection WTO-consistent, but enforcement remains problematic.

Rwanda
Rwanda is a poor rural country with about 90% of the
population engaged in (mainly subsistence) agriculture. It is the
most densely populated country in Africa and is landlocked with few
natural resources and minimal industry. Primary foreign exchange
earners are coffee and tea. The 1994 genocide decimated Rwanda's
fragile economic base, severely impoverished the population,
particularly women, and eroded the country's ability to attract
private and external investment. However, Rwanda has made
substantial progress in stabilizing and rehabilitating its economy
to pre-1994 levels, although poverty lev