ile long-term prospects remain uncertain, given
Pakistan's low level of development, medium-term prospects for job
creation and poverty reduction are the best in nearly a decade.
Islamabad has raised development spending from about 2% of GDP in
the 1990s to 4% in 2003, a necessary step towards reversing the
broad underdevelopment of its social sector. GDP growth, spurred by
double-digit gains in industrial production over the past year, has
become less dependent on agriculture. Foreign exchange reserves
continued to reach new levels in 2004, supported by robust export
growth and steady worker remittances.

Palau
The economy consists primarily of tourism, subsistence
agriculture, and fishing. The government is the major employer of
the work force, relying heavily on financial assistance from the US.
Business and tourist arrivals numbered 63,000 in 2003. The
population enjoys a per capita income twice that of the Philippines
and much of Micronesia. Long-run prospects for the key tourist
sector have been greatly bolstered by the expansion of air travel in
the Pacific, the rising prosperity of leading East Asian countries,
and the willingness of foreigners to finance infrastructure
development.

Palmyra Atoll
no economic activity

Panama
Panama's dollarised economy rests primarily on a
well-developed services sector that accounts for four-fifths of GDP.
Services include operating the Panama Canal, banking, the Colon Free
Zone, insurance, container ports, flagship registry, and tourism. A
slump in Colon Free Zone and agricultural exports, the global
slowdown, and the withdrawal of US military forces held back
economic growth in 2000-03; growth picked up in 2004 led by
export-oriented services and a construction boom stimulated by tax
incentives. The government has been backing tax reforms, reform of
the social security program, new regional trade agreements, and
development of tourism. Unemployment remains high.

Papua New Guinea
Papua New Guinea is richly endowed with natural
resources, but exploitation has been hampered by rugged terrain and
the high cost of developing infrastructure. Agriculture provides a
subsistence livelihood for 85% of the population. Mineral deposits,
including oil, copper, and gold, account for 72% of export earnings.
The economy has improved over the past two years, following a
prolonged period of instability. Form