hallenges, including
developing a market economy, improving educational facilities,
facing up to environmental problems, dealing with the rapidly
growing problem of HIV/AIDS, and satisfying foreign donors that
fiscal discipline is being tightened. In 2005, President MUTHARIKA
championed an anticorruption campaign. Malawi's recent fiscal policy
performance has been very strong, but a serious drought in 2005 and
2006 heightened pressure on the government to increase spending.

Malaysia
Malaysia, a middle-income country, transformed itself from
1971 through the late 1990s from a producer of raw materials into an
emerging multi-sector economy. Growth was almost exclusively driven
by exports - particularly of electronics. As a result, Malaysia was
hard hit by the global economic downturn and the slump in the
information technology (IT) sector in 2001 and 2002. GDP in 2001
grew only 0.5% because of an estimated 11% contraction in exports,
but a substantial fiscal stimulus package equal to US $1.9 billion
mitigated the worst of the recession, and the economy rebounded in
2002 with a 4.1% increase. The economy grew 4.9% in 2003,
notwithstanding a difficult first half, when external pressures from
Severe Acute Respiratory Syndrome (SARS) and the Iraq War led to
caution in the business community. Growth topped 7% in 2004 and 5%
per year in 2005-06. As an oil and gas exporter, Malaysia has
profited from higher world energy prices, although the rising cost
of domestic gasoline and diesel fuel forced Kuala Lumpur to reduce
government subsidies, contributing to higher inflation. Malaysia
"unpegged" the ringgit from the US dollar in 2005 and the currency
appreciated 6% against the dollar in 2006. Healthy foreign exchange
reserves and a small external debt greatly reduce the risk that
Malaysia will experience a financial crisis over the near term
similar to the one in 1997. The economy remains dependent on
continued growth in the US, China, and Japan - top export
destinations and key sources of foreign investment.

Maldives
Tourism, Maldives' largest industry, accounts for 28% of
GDP and more than 60% of the Maldives' foreign exchange receipts.
Over 90% of government tax revenue comes from import duties and
tourism-related taxes. Fishing is the second leading sector.
Agriculture and manufacturing continue to play a lesser role in the
economy, constrained by t