e
every year since. Negotiation of production-sharing arrangements
(PSAs) with foreign firms, which have thus far committed $60 billion
to long-term oilfield development, should generate the funds needed
to spur future industrial development. Oil production under the
first of these PSAs, with the Azerbaijan International Operating
Company, began in November 1997. Azerbaijan shares all the
formidable problems of the former Soviet republics in making the
transition from a command to a market economy, but its considerable
energy resources brighten its long-term prospects. Baku has only
recently begun making progress on economic reform, and old economic
ties and structures are slowly being replaced. One obstacle to
economic progress is the need for stepped up foreign investment in
the non-energy sector. A second obstacle is the continuing conflict
with Armenia over the Nagorno-Karabakh region. Trade with Russia and
the other former Soviet republics is declining in importance while
trade is building with Turkey and the nations of Europe. Long-term
prospects will depend on world oil prices, the location of new
pipelines in the region, and Azerbaijan's ability to manage its oil
wealth.

Bahamas, The
The Bahamas is a stable, developing nation with an
economy heavily dependent on tourism and offshore banking. Tourism
alone accounts for more than 60% of GDP and directly or indirectly
employs half of the archipelago's labor force. Steady growth in
tourism receipts and a boom in construction of new hotels, resorts,
and residences had led to solid GDP growth in recent years, but the
slowdown in the US economy and the attacks of 11 September 2001 held
back growth in these sectors in 2001-03. Financial services
constitute the second-most important sector of the Bahamian economy,
accounting for about 15% of GDP. However, since December 2000, when
the government enacted new regulations on the financial sector, many
international businesses have left The Bahamas. Manufacturing and
agriculture together contribute approximately a tenth of GDP and
show little growth, despite government incentives aimed at those
sectors. Overall growth prospects in the short run rest heavily on
the fortunes of the tourism sector, which depends on growth in the
US, the source of more than 80% of the visitors. In addition to
tourism and banking, the government supports the development