to the government's debt because of slow
progress on privatization. Credit rating agencies have at times
expressed concern about the Philippines' ability to service the
debt, though central bank reserves appear adequate and large
remittance inflows appear stable. The implementation of the expanded
Value Added Tax (VAT) in November 2005 boosted confidence in the
government's fiscal capacity and helped to strengthen the peso,
making it East Asia's best performing currency in 2005-06. Investors
and credit rating institutions will continue to look for effective
implementation of the new VAT and continued improvement in the
government's overall fiscal capacity in the coming year.

Pitcairn Islands
The inhabitants of this tiny isolated economy exist
on fishing, subsistence farming, handicrafts, and postage stamps.
The fertile soil of the valleys produces a wide variety of fruits
and vegetables, including citrus, sugarcane, watermelons, bananas,
yams, and beans. Bartering is an important part of the economy. The
major sources of revenue are the sale of postage stamps to
collectors and the sale of handicrafts to passing ships. In October
2004, more than one-quarter of Pitcairn's small labor force was
arrested, putting the economy in a bind, since their services were
required as lighter crew to load or unload passing ships.

Poland
Poland has steadfastly pursued a policy of economic
liberalization since 1990 and today stands out as a success story
among transition economies. Even so, much remains to be done,
especially in bringing down the unemployment rate - still the
highest in the EU despite recent improvement. The privatization of
small- and medium-sized state-owned companies and a liberal law on
establishing new firms has encouraged the development of the private
business sector, but legal and bureaucratic obstacles alongside
persistent corruption are hampering its further development.
Poland's agricultural sector remains handicapped by surplus labor,
inefficient small farms, and lack of investment. Restructuring and
privatization of "sensitive sectors" (e.g., coal, steel, railroads,
and energy), while recently initiated, have stalled. Reforms in
health care, education, the pension system, and state administration
have resulted in larger-than-expected fiscal pressures. Further
progress in public finance depends mainly on reducing losses in
Polish