controlling its substantial fiscal
deficit, virtually balancing revenues and expenditures in 2006. The
government and international financial institutions have been
engaged in a comprehensive medium-term poverty reduction and
economic growth strategy; in 2005 Bishkek agreed to pursue
much-needed tax reform and in 2006 became eligible for the heavily
indebted poor countries (HIPC) initiative. Progress fighting
corruption, further restructuring of domestic industry, and success
in attracting foreign investment are keys to future growth.

Laos
The government of Laos, one of the few remaining official
Communist states, began decentralizing control and encouraging
private enterprise in 1986. The results, starting from an extremely
low base, were striking - growth averaged 6% per year in 1988-2006
except during the short-lived drop caused by the Asian financial
crisis beginning in 1997. Despite this high growth rate, Laos
remains a country with a primitive infrastructure. It has no
railroads, a rudimentary road system, and limited external and
internal telecommunications, though the government is sponsoring
major improvements in the road system with possible support from
Japan. Electricity is available in only a few urban areas.
Subsistence agriculture, dominated by rice, accounts for about half
of GDP and provides 80% of total employment. The economy will
continue to benefit from aid by the IMF and other international
sources and from new foreign investment in hydropower and mining.
Construction will be another strong economic driver, especially as
hydroelectric dam and road projects gain steam. Several policy
changes since 2004 may help spur growth. In late 2004, Laos gained
Normal Trade Relations status with the US, allowing Laos-based
producers to benefit from lower tariffs on exports. Laos is taking
steps to join the World Trade Organization in the next few years;
the resulting trade policy reforms will improve the business
environment. On the fiscal side, a value-added tax (VAT) regime,
slated to begin in 2008, will streamline the government's
inefficient tax system.

Latvia
Latvia's transitional economy recovered from the 1998 Russian
financial crisis, largely due to the government's budget stringency
and a gradual reorientation of exports toward EU countries,
lessening Latvia's trade dependency on Russia. The majority of
companies, banks,